Q1 2020 Earnings Call

Please standby.

[music].

Greetings and welcome to cease to use first quarter 2020 earnings Conference call. Today's conference is being recorded a good cost I'd like to turn the call colonial era head of Investor Relations. Please go ahead Sir.

Thank you.

Everywhere I think it Brooks I think you first quarter 2000, a 20 girlfriend school to bear with me are what did you put that chief Executive officer could be good would admit chief financial officer, Uncollectable, setting us up running on Investor Relations manager.

Well received a copy of the company's consolidated first quarter from talking to coordinate Russell.

But it wouldn't know review all girls performance and we will then move on to a question I know for sure.

People would you please take note cautionary statement.

Statements made in the school, but we need.

Superform I prefer not to sell our forward looking statement, which you both known and unknown risk.

The <unk> that could cause actual performance, where we sold to materially differ these statements should be taken in conjunction with additional information about risks and uncertainties support if you could use on a report in form 20-F, five whether you execute extinct I'm Exchange Commission I mean do on or before somebody to do that.

On available on our website. It's now my pleasure to introduce properties you called out [laughter] Greenfield said all of your.

Thank you all for joining us today.

Before moving more people well into the performance in the quarter would like to meet got statement about how are you.

See you could be like being pumping.

The company has grown a comprehensive contingency plan in order to achieve pool.

Correct.

Sure. The shows on says Hey, Steve well on a workers <unk> direct wheat.

Second we couldn't be lives of our operations, we don't see that implementation of this blend, peaking ordinary shoes protocols to maintain a safe environment or is it the strong commitment or would you have allowed us to continue serving producing distributing our workforce.

In terms of whole performer, but first what's the split between the Youve caused some David's Walgreens computers.

Trend like something exports for person.

Despite the challenging social and economic you Barb I know dropping over boardroom late March you do get been big.

Before we did close probably get divorced even world was named by 10.4% jump into TV operations segment.

We didn't grow the wind or bring operating segment was international business <unk> dropped 1.7%.

It is part of her boardrooms DHL very important 7%.

Did you see margin constructed by 331 basis point to 17.7%.

The week your friend and should be sold was mainly explained by police fix.

First the strong they got these external fig from of evaluation of the children based ones yards and think baseball games to you in Florida.

Shifting our U.S. dollar denominated cost on the transformation of all this was partially compensated by wine exports.

Oh, you mean.

It's it's really shows Didnt agree to the mid of failure on seaborne it's been married to the fit well 15000 644 million children's business wouldn't be did.

Excluding this is you'd be beauty would have exposure.

5.9%.

Second yeah, [laughter] pricing, we've seen Argentina local governments gains this quarter, not allowing us to catch up weve for their hard information in this country.

It's important to mention that big time compensated the sharp devaluation of the conference you, Brian inefficiencies due impart to put a job challenging the loss quotas, where we have based on the celebrates its fixed utilization, especially into July.

Jordan for permit you go we agreed 30, 33.6% mostly explained by the recent described above and by the hardest mid summer financial expenses.

Versus last year, mainly due to the cash cash equivalent sales in the first quartile wouldn't be thinking.

[laughter].

The company operated segment or what top line was 8.7% supported by a robust boarding school, which expanded 10.4%, allowing us to gain market share. You know were mainly because it was partially compensated with 1.6% lower average price is mainly due to promotion.

Activity or negative mix effect in March was margin dropped 300 basis points, mostly caused by the harder U.S. dollar denominated costs from the sharp depreciation of the children Pearsall against the U.S. dollar parts are you all sit with lower cost enrollment to be outside the features.

Related we view so let's just see you program. It is your name express worker sensor to commit sort of reporting structure no.

<unk> decreased 5.9%.

Good good margins, but they were raised its we'd have to 34 basis points from.

25% to 21.6 discipline.

The international business operating segment, which includes Argentina, Bolivia front I Wonder why report that people would be broken that food.

By a 4.6% increase and creates an average prices incident. So fortunately opposite by a 1.7% decrease in volume would have construction market share in Argentina, even though prices since you've been fistful Serbs grew this quarter in local currencies ours to below inflation.

Urgent PC.

Gross margin construct for 40 years seeks to 45% mostly explained by how are you with order denominated cost from depreciation of the Argentine peso against the U.S. dollar, partially compensated with local well lucky real and efficiency.

<unk> expenses up a since mid thirtys begin to raise rates, we have them since before the fourth impacted by the higher venture in Argentina.

Yes sales force you to people 1%.

The margins at the people who are ready to from 14.48%.

Winds up into its operations segment, both 10.8% increase in Britain.

Given by a 7.9 persons likes you never its prices.

Seven quote involved the higher prices, which isn't there. So we're mainly as a close it bodes well for a strong U.S. dollar an expert Britain's was a higher volume was explained by exports somebody's yard imparting domestic market related to the recently acquired brought seemed to do that more than compensated seemed to be grief that you're going to make.

Mark at the operating segments gross margin for 979 basis points for 34.1 full 43.9% boasted by a lower cost of wine and by the Boston impact on revenues from the weakest you didn't fit for us mentioned above.

I missed your name expenses for supper since its mid Thirtys increased by 293 basis points, mainly associated with higher marketing expenses. You know you didn't expand that 89, 1% I need to getting margin pools, but you have got six basis points from 11.42 monkey.

45%.

In Colombia, where we have a joint venture with post aboard.

First quarter with both the most important gold mostly due to the concentration of devoted trend of our beer brands. You know I know most states that rich not be mother's day launch in February and delighting. The sentiment respectively. Also during the quarter. We continue gaining scale on slug would start to compete alike.

Our most recent be a brand to launch the fourth quarter, reflecting thinking in terms you can't do we expect to continue focusing on that they never scale I'm getting marketshare now we'll be glad to answer any questions you may kind of.

[noise]. Thank you just signal for question. Please press star one on your telephone keypad and of course on your phone mind will indicate when your line is open to ask your question again not to start when the signal, whereas would you. Please state your name and company before posing a question.

<unk>.

No question about this time, but again that is start when if you would like to say it's again.

And we have a couple of questions in queue again, please state your name and company.

Well thanks first.

Yes.

Hi, and have always from them that from bank of America.

Good morning, everyone. Good can you hear only.

Yeah, it's perfectly.

Great. Thank you and I hope everyone phase unhealthy.

And thanks for taking my questions I, absolutely Fine me the first one regarding volumes and how old you seem to performance.

Second quarter, and what are your expectation that causes it hungry and ultimately you can comment.

What are you seeing times for me.

That's the first one and the second one is related to five here.

I mean, you can you comment wasn't what will feature pricing strategy. It causes a deterrent issue.

Oh peacekeeping help you need to get FX pressure.

Thank you.

Thank you for another four.

For your two questions.

Plus you know we.

Never make a what I hope everybody so okay.

Indeed of course, but you know but.

No not to make up.

Well antipathy predictions for the future. So our policy not to do that so wasn't going to give you some seeking those and transferring my understood.

Volumes.

Definitely are going to decrease even.

In Q2.

We don't know what did.

What is going to happen in Q3 in Q4, we are expecting them to what degree to a little by little him ideally to do the to recuperate told that they were born studies in the fourth quarter of Twentytwenty and good ideally in the first quarter for instance, one but the do it depends on on many things would you say.

Not every dollar has two components it perfectly I see perfectly no I didn't fit.

Your meeting this before we begin to one we are doing do think due to.

Give me doing these the viewing the year in keeping all increasing our market jurors Brent they could you hold brands onto suffered the list, possibly even oh volumes.

We are we are deteriorating or margins.

That's very clear, but its explained mainly by the body. The fix you fix the cost of how lucky with expressed on a dollar terms and also by the.

James you seem to be defaults in Canada, So we'll discuss it.

Yes.

But we prefer to be put focus on keeping our commercial dean has been HM.

It.

Because of the time to recuperate margins, we've got my sort of waste hub game.

The either.

It takes time to recuperate margins when you have a show in terms of Safeway fixes. We have had about degree a show them. So yeah mix. The politics challenges that you take to recuperate margins can you get the LIBOR ones are going to suffer a lot of volumes are for the longer term.

On margins are much easier to do that typically that's so well start to do.

So far I need to keep this started use the rest of the rest of a year will be to put focus and keeping our market facetious keeping the value the brand. They could you follow brands and our portfolio and we've tried to put the scale of our business.

Much as possible and not to suffer too much in in volumes regarding exceptionally good perfect imagine premium brands are suffering on we're selling more in a world Cup. It typically products with less margin at same time was really more and more feasible.

No grabbed me second we are increasing.

Hey, I will say is not as China's with the lower profitability. So the combination of number one next fixed rate than the tool.

Chief from a premium products to low priced products and number three g. from on premise to well spread and this is the pay rating is significantly our margins.

That's it I would probably start to do.

We don't want to know exactly what is going to happen, but probably well we're going to make our best afford to keep the price is in line with that Weve inflation. That's had mentioned before we're not going to boot to match on our crisis or to recuperate margins in the short term because if we do these.

We're losing market share we lose the scale of our business and it's not good for the long run off for the business I prefer to lose a little bit of profitability you put 20, but to have a his kids business, beginning 2021, rather than to the table rate the long.

Sure.

So so oh forgive me rating a perfect switches seller scale, our volume celebrant.

Our market shares.

Great. Thank you so much.

And again not a star one if you'd like to signal for question at this time.

Next question Q.

Hi, guys.

Thank you for taking my call.

A question on.

Or supply chain, particularly.

Resellers, whether its point of sale.

Can you give me any color on given that sub.

Shutdown of demand.

How is inventory knowledge, how is you know receivables mothers and their.

Fire, but I mean do you how that list of losing inventory do you have risk of bad debt.

But at the same time, I mean, if you're too tight top.

Do you lose partners and the supply just can you give me a little color on how you would not have stuck in this environment.

Thank you Mohammed for for your question I mean did it.

A tough environment and they will discuss a little bit what would have been doing first before.

First are you repeat it oh, what people, but there's a whole people I didn't see any because there's not that paid gulf between it keeping the health of our people and keeping the again keeping the continuity in our operations because to keep the continuing operations we must.

Well the first priority that shows the full of people because if people are not was protected in the company they will not come to work.

Very it's very easy on so far we have been able to do to do these having said that we have four main finishes.

But that shouldn't distribution phase I have enough.

These cities the.

Function, So let me discuss a little bit each one of them regarding.

After a week.

Well, we are operating the goal the factories in.

He's the region all of them there have been operating of course, we have adjusted.

ER visit the number of far worse, where we operate the different lines that fit the ticked up all of them.

Operating and our people in the east are supporting the look and then they and they are they got everyday making our plans to operate second our distribution system. Our warehouses. So I could sit there et cetera, the operating goals, 400% with no we didn't know with fixed.

Yes.

It comes mortgage fiction.

I've never stops or logistical breach wouldn't know wonderful its success over the six countries, where we operate regarding phase viewing eight three we were operating hundred percent of wholesalers.

Phil telephone I mean, our sales force would not be 15 are playing.

Beginning March our leases Bailey, who we are.

We are beginning to.

To settle in the point of sale our phase people are beginning to drive to the difference.

Going to phase this is changing every day, but today the that is speaking.

It is a 20% the fourth Salesforce is beginning to be six clients every day with all their protections and the protocols.

For of course.

This is regarding say then we'd like to move to the normality of course, it really depends.

So many things, but but that was tends to move to thereby regarding a I've used to be booth Marina and marketing people, an accounting people in management viewing them a produced 100% there was a working from their homes, but we are moving slower.

Only to the her money to keeping again all that multiples of he has done today, we have a 15% to 20% also working in our offices. So I would say that the supply chain, they separating and our people, it's where people are well.

But that we are making up he can't foresee north to keep it. They said this palace, which is key for the future of follow business.

Then I can understand that the regarding then police excuse me I guess regarding you've been three you're producing.

All right well just supposed to look to produce I mean typically your regular times. We have is suddenly be are we produce exactly what do we need to put into warehouses to say led to the peak inventors. It says it said that is not the case no. We have the ability to produce even if the don't do not have the demand that we produce and we put to the problem.

You never warehouses to be wouldn't be good.

Just in case, we have to drop to the production of one or more fall at plans.

Okay, and what about other receivables and bad debts in in your channels.

I see a I will ask a fairly stable with me I want to see it [noise].

Did you sell so.

It's really [noise].

Yeah.

We don't significant.

Essentially the on premise channel stuff rates are up 10% of our today, how Scott some problems. So we have agreed with them postponement M flown in Europe to help our customers you know what are the because right because you know them today.

Right.

So we are we are working then with some postpone implants and helping them supporting them.

However, I I want to say doesn't carry showed us for crazy.

In our company so these reducing figure out.

I would exposure or risk off you will understand.

So in summary, we are supporting our clients because there we have here for the long term and we want them.

I'll take it recovered as soon as these will be sold so we're supporting Weve especial plans of portfolio there the thing too.

Oh, you're right on time.

I'm showing the insured OS.

Reducing michigan or what.

Okay.

Thank you.

Well that answer and I might've missed it a little bit already I was just two minutes late on the call or did you mention your volumes in Chile and say April.

Like a about a company that sort of giving color on you know what the April was involved and whether it's bottoming or is it could you give you got worse.

Actually at the beginning of the conference Mohammed do we I mentioned this but as I thought they could repeat it as we know we do not meet a.

Once the predictions for the future, but they will give you a local sometimes.

We are I mean.

Two main 11 volumes and margins and he spent daily care P. or do we are putting our volumes also our reporting or as fortson, keeping volumes marketshare underground equity or power brands I know power portfolio the age.

Of course said, but volumes are going to two decreasing in twoq in Q2, despite the fall or if for some this it's impossible to well good but do we are trying to protect the volumes marketshare and underground they could your portfolio again as much as possible you're losing margins for two reasons number one.

For effects, because most of our raw materials.

Related to the U.S. dollar number two because you're reducing the sale of our premium products, increasing the sale of our.

Mainstream and discounts politics, and finally, because you're losing volumes will all our volumes Shimon pennies, where margins are very good increasing volumes, United China's where margins I'm talking about two good but do we assure that when that time.

Times with a more normal sometimes comes with recuperate to recuperate the margins, but go we doldrums wants to use the scale.

And the commercial denialism follower of our different there, particularly so you should expect that increasing volumes.

Both for the Christine margins in <unk>.

In Q2, but our focus this.

Protect the volumes more than more than margins.

Fair enough. Thank you very much.

Thank you guys.

And at this time, we have no further questions on the Q.

Actually we just had a couple more questions come it will take the next one.

I Didnt that Anthony.

But thanks for taking my question I just had any.

Follow up on the pricing dynamics and going on in Argentina, and you know my understanding was that you guys, even another 15% to 20%.

Increasing prices just a catch up with the cost inflation.

But that's been limited by.

The actions of and so maybe if you can just give us an update on what that at times Japanese in order to close the cost inflation gap and you know your expectation around timing and whether or not you think that there's going to fall you on that.

Second ticket the cabinet I.

Taking the prices thanks.

Thank you Anthony for your question look, let's take a longer period of time, let's begin on January 2019, I lived signature on March 2020.

15 month in 15 months because.

Inflation has been 25% more than a price increases seem to be hearing the physical disaster I mean to dilute can decide to defend against inflation is.

Good night.

During the first quarter of Ah.

During the during the March was not possibly can keep prices because of a lot of restriction setting.

Being arguing time related with the price increases so yeah, I mean governmental.

Guidelines and and then 15th regarding piece, but the key to recuperate prices said.

No I didn't see enough for the profitability of corporate business and we expect to do it into the future. We don't do know quaint and hope, but indeed, we expect to to do this.

Thank you.

Thank you.

I will take your next question.

[noise] I wish I think I mean, as Tim mentioned it. So I guess your question totaling again in the Argentine side, but only by breaking but actually the in Japan and she in any given if you can make some colors in what has been.

Yes reaction in terms of demand within the couple of weeks and months.

And essentially what are your expectations for the rest of the year on secondly, I was I would like to understand indie chicken side.

Going forward, what should we expect that that should be youre actually strategies regarding.

And then alcoholic beverages in Chile, They that division show no marching erosion. During the last couple of years that even though with the volumes have not been able to capitalize fully.

Leasing results. So it would be interesting to see they spent then Nick is on.

For Tenda Jared you can just keep pushing prices up as they go out on a franchisee city.

Thanks for your account for your two questions for you we regarding regarding minutes restriction seen it passed is where we operate and they impact on volumes. The restart direct correlation between house here is the pardon Stein and a child match volumes.

Oh.

We have face today, we see the fine thank him for countries, Argentina, Colombia wholly on satellite and our volumes are suffering a lot.

We are facing not to see the at par in time seem to live and all the way I know avoidance of performing much better they thought they make the co relation regarding prices. They mention I say many trimble before of course, we have the goal or recuperating.

If prices and margins.

When how much it's difficult to say the course effect nation before we are putting a lot of focus and not to go thing.

James not loosing market to know where this is no different businesses, but we don't perfectly with our margins are very poor no perfectly that we must recuperate could margins I'm going to do these what I mentioned before that in the middle if it hadn't been weak.

Hey, good Super food to put a focus on the T. operating margins in the next to do three four months to losing scaling losing market facetious multiple idea.

But as far as we move to a more normal scenario hopefully as soon as possible of course, we don't know they sort of look on certain here, we will boost our focus on record breaking Mark. This is not the first time, but it happens in in our history I mean.

Many times, we have faced shopped on on raw materials for mistakes and our Sean I know a margin socrate on short term, but long term. We also we always.

Luke for Oh parlance begin growing the scale of our business market, you're going to put the sort of my hand and margins and profitability on the other by doing this we have been able to grow in a very profitable and sustainable way for many years and we have not changed.

It's a medium and long term strategy.

The short term affect mission before why we are leading depend they need our focus is not going to be in.

Margins were situation like in keeping their kids or for that business.

This too for all the categories, where we participate but indeed.

As soon as possible and as soon as the pandemic allows her to return to more multi woo.

We'll try to what degree to margins.

That's right very clear as just if.

I understand that that's the approach weekend day whole it sort of countries that you up her age body indicates of cheating or will you have seen a much rational behavior if your competitors.

Do you see that there should still.

And when do you keep only bike aching keep prices really aging inching.

Data I mean, there who we are going to be created a very very very rational.

I mean, how does oh.

Most rational behavior.

If you put focus on for take title market positions.

And to protect our volume as much as possibly why were leaving the been dynamic on people focus on the Twoq rating margin for Sonus there.

And then.

So if I'm not going to say that I've been exalgo because it is to take it to here for three years to deal with the phone us there.

Dan Nicolaus faster moving to more normal.

Scenario, but having said that if I understand you mentioned before of course, we expect to move our prices in line for the line with is inflation and the probably the field turbo and ideally more than more than historically break margins, but it would depend the independent many things.

Of course, it will depend on the competitive environment.

[noise] anything.

At this time, we have no further questions.

[noise] Okay. Thank you very much for for your questions I'll say said before in the first quarter of 2026, you faced are very tight in the environment in the region, mainly related to the valuations provinces are weak economic scenario and the bigger.

Gaming surveys, but from the opinion, Nevertheless, we're able to deliver strong volume expansion and gains in market share.

I mean, typically sincerely supported by a cost of growth is conducted using a kid into twentytwenty or most in need its focused dramatic because we didnt.

The only type thing as I said before first the health and safety of our people and second we continue to solve our operation Center. So she said before boosting SAR.

Perfect Elite you know businesses, we are facing I mean, certainly scenario, therefore were taking actions to deal with a weaker demand for projects in a shifting conflicts in decision times before the end consumer occasions, we continue executing our long term strategy and keep investing in the regions development projects that will.

I want to Delever profitable and sustainable growth on the call him to consolidate them a regional leadership, that's a multi category beverage company.

Thank you remarks anytime and hopefully you are you and your finally for okay or is this a pandemic or not wanting to future weeks and months.

[noise] and that does conclude today's call. We appreciate everyone's participation.

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Category.

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