Q4 2023 Compañía Cervecerías Unidas SA Earnings Call

Operator: Ladies and gentlemen, good day and welcome to CCU's fourth quarter 2023 earnings conference call on the 28th of February. Today's conference call is being recorded. At this time, I would like to turn the conference call over to Claudio Las Haras, the Head of Investor Relations. Please go ahead.

Ladies and gentlemen, good day and welcome to Ccu's fourth quarter 2020 earnings conference call on the 28 of February.

Today's conference call is being recorded.

I would like to turn the conference call over to cloud you lost how does the head of Investor Relations. Please go ahead Sir.

Claudio Heras: Welcome everyone and thank you for attending CCU's four-quarter 2023 conference call. Today with me are Mr. Felipe Dubernet, Chief Financial Officer, and Mr. Joaquin Trejo, Financial Planning and Investor Relations Manager. You have received a copy of the company's consolidated fourth quarter 2023 results.

Welcome everyone and thank you for attending Ccu's fourth quarter 2023 conference call.

Today with me are Mr. Felipe <unk> Chief Financial Officer.

Mr.

Flagging.

Trey Hall financial planning and Investor relation manager.

Have you seen a copy of the company's consolidated fourth quarter 2023 result Phillip.

Claudio Heras: Felipe will review our overall results, and we will then move on to a Q&A session. But before we begin, please take note of our cautionary statement. Statements made in this goal that relate to CCU's future performance or financial results are forward-looking statements, which involve known and unknown risks and uncertainties that could cause actual performance or results to materially... This statement should be taken in conjunction with the additional information about risks and uncertainties set forth in CCU's annual report on Form 20-F filed with the U.S. Security and Exchange Commission and in the annual report submitted to the CMF and available on our website. It is now my pleasure to introduce our CFO, Mr. Felipe Dubernet. Thank you, Claudio, and thank you all for joining us today.

I will review our overall results and we will then move onto a Q&A session.

Before we begin please take note of our cautionary statement.

Statements made in this call that relate to Ccu's future performance or financial results are forward looking statements.

Which involve known and unknown risks and uncertainties that could cause actual performance or results to materially differ.

Statements should be taken in conjunction with the additional information about risk and uncertainties set forth in Ccu's annual report in form 20-F filed with the U S Securities and Exchange Commission.

And in the annual report submitted to the E L F and available on our website.

It is now my pleasure to introduce our CFO Mr. Philippe <unk>.

Thank you and thank you all for joining us today.

Felipe Dubernet: During 2023, we posted a recovery in our operating results and profitability in spite of a volatile business environment, a particularly difficult year for the wine export business, and Argentina's macroeconomic conditions. Our consolidated EBITDA for the year grew 6%, and the EBITDA margin improved 159 basis points driven by our main operating segment, Chile, which expanded EBITDA by 24.8%, more than offsetting a 37.4% drop in the wine operating segment and a 16% contraction in international business. Consolidated with Income contracted 10.6% versus 2020. The driver for the better operational result was the execution of our regional plan, Hercules, which encompasses six pillars.

During 2023, we posted a recovery in our operating results and profitability in spite of the volatile business environment, a particularly difficult year for the wine export business and Argentina macroeconomic conditions, our consolidated EBITDA in the year.

Year grew 6% and EBITDA margin improved 159 basis points, driven by our main operating secular Chile, which expanded EBITDA by 24, 8% more than offsetting a 37, 4% drop in the wine operating segment.

16% contraction in international business operating segment, which includes Argentina.

Consolidated net income contracted 10, 6% versus 2022.

The driver for the better operational result was the execution of our regional politically which encompasses six pillars.

Felipe Dubernet: Number one, maintain business scale. Number two, strengthen revenue management efforts. Number three, deliver efficiency gains through our transformation program.

But one maintain business of scale number two strengthening revenue manage and efforts number three delivery efficiency gains through our transformation program number four optimizing capex and working capital number safe.

Felipe Dubernet: Number four, optimizing CapEx and working capital. Number five, focusing on core brands and high volume margin innovations. And number six, continue investing in our branding. I would like to briefly mention some of the highlights of the year for Italy.

Focusing on core brands have high volume margin innovations and number six continue investing in our brand name.

I would like to briefly mention some of the highlights highlights of the year for each pillar.

Felipe Dubernet: In terms of pillar number one, consolidated volumes in 2023 were 3.4% below last year, mainly driven by lower consumption in Argentina throughout the year, a tough scenario for Chilean oil exports, and a deceleration in volumes in Chile during the second. Nonetheless, we maintain relative scale by keeping increasing market shares in our main categories. As for pillar number two, we executed revenue management initiatives in all our geographies, especially noticeable in Chile, where average prices increased 7.9 percent, being key to recovering margins, offsetting costs and expenses, and pressures, and negative migration rates. Regarding Pillar 3, we were able to deliver efficiencies during the year, as total expenses, including manufacturing costs and MSMDNA as a percentage of net sales, were stable at 47.7% in 2020-2022 and 2020-2021. In terms of pillar number four, we recovered our cash generation, mainly due to a reduction in working capital versus 2022, CapEx optimization, and a higher EBITDA. Finally, in line with Bill No.

In terms of pillar number one consolidated volumes in 2023 were three 4% below last year, mainly driven by lower consumption in Argentina. So the year, a tough scenario for julianna when export.

Is this acceleration in volumes in Chile during the second center stuff.

Nonetheless, we maintained relative scale by keeping increasing market shares in our main categories.

So as for pillar number two we executed revenue manage any revenue management initiatives in all our geographies, especially noticeable in Chile, where average prices increased seven 9% being key to recover margins offsetting cost unexpected pressures and negative mix.

Yes.

Regarding pillar number three we were able to deliver efficiency during the year total expenses, including manufacturing costs. Some DNA sufficient sales were stable at 47, 7% in 'twenty 'twenty through 'twenty and.

In 2023.

In terms of speed and number four we don't cover our cash generation, mainly due to a reduction in working capital versus 2022 capex optimization.

Hi.

Finally in language Beeler number five and six we reduced the number of Skus following us to focus in coal.

Felipe Dubernet: 5 of the United Nations Convention on the Rights of Persons with Disabilities, We reduced the number of SKUs, following us to focus on core brands and profitable innovation, reducing the complexity of our operation, and we posted solid levels of running time. From a quarterly perspective, consolidated EBITDA dropped 9.9%, and EBITDA margin was up from 16% to 19.3%. In this quarter, it is important to mention that the sharp devaluation of the Argentine peso against the U.S. dollar generated a material impact on our results in quarter 4, 2021. The Argentinian currency jumped 131% in exchange rates from 350 Argentinian pesos per dollar as of September 30, 2023, to 880 Argentinian pesos.

And profitable innovation, reducing the complexity of our operation and we posted.

Solid 11th so friendly.

From a quarterly perspective consolidated EBITDA dropped nine 9% and EBITDA margin was up from 16% to 19, 3%.

And this quarter it is important to mention that.

The devaluation of the Argentine peso against the U S dollar generated in material impact in our results in quarter four 2023.

Yeah, I didn't think currency jump at 131% the exchange rate from 350, and 50 Argentinean peso spitball at September 32023 to eight gigabit on eight.

Felipe Dubernet: 0.5 Argentinian pesos per dollar as of December 31, 2023. Thus, as Argentina is under hyperinflation accounting, according to the IAS 29, accumulated results in Argentina as of September 30, 2023, are updated to prices and exchange rate levels at the end of the peak. These generated a loss, in the quarter of 24,018 million Chilean pesos in consolidated EBITDA, of which 22,804 million Chilean pesos are accounted for in the international business operating segment and 1,215 million Chilean pesos are accounted for in the wine operating segment. Excluding this effect, consolidated a bit, in the quarter, would have expanded 3.4%, versus 10 quarter of Lafayette. Lower volumes were mostly related to weakening demand, which was especially affected by weather conditions, while prices were driven by revenue management.

<unk>.

0.5, Argentinian peso spit ball that as of December 30, 31 2023.

I'll start Jim vena, he's under hyperinflation.

Hyperinflation accounting according to the yes 29.

Accumulated results in Argentina as of September 32023, and updated to prices and exchange rate levels to the end of the period.

This generated a loss in the quarter split at the 4000 18 million Chilean pesos in consolidated EBITDA of which 22800.

And 4 million Chilean pesos are accounted in the international business operating segment and 1200 50 million Chilean pesos are accounted in the wine operating segment.

Excluding these effects consolidated EBITDA in the quarter, what kind of expanded three 4% versus second quarter of last year.

In terms of the segments in the key operating segment topline decreased two 2% in the last question.

Due to a seven 3% contractual volumes, partially compensated with five 5% higher average prices and lower volumes were mostly related to a weakening demand, which was especially affected by weather conditions.

While prices were driven by revenue management initiatives, EBITDA increased 29% and EBITDA margin improved and expanded from 14, 2% to 17.

Felipe Dubernet: EBITDA increased 20.9% and EBITDA margin improved and expanded from 14.2% to 17.5%. The segment, which includes Argentina, Bolivia, Paraguay, and Uruguay, net sales dropped 90%, mainly as a result of a contraction of 80-89.4% in average prices in Chilean pesos due to the impact of hyperinflation accounting above as prices in local currency evolved in line with inflation. Volumes contracted 8.3%, fully explained EBITDA contracted 53.7%. In the wine operating segment, revenues were down 11.7%, mainly explained by an 8.8% decrease in volumes, driven by a 10.2% decrease in the Chile domestic market and a 5.6% contraction in exports from Chile. Average prices contracted by 3.1 percent, also due to the impact of hyperinflation accounting rules above, in our wine business in Argentina, and a stronger Chilean peso against the U.S. dollar Partially offset by revenue management initiatives in our domestic markets, EBITDA decreased by 21.3%.

5%.

In international operating.

Which includes something novel, you've got Paraguay, and Uruguay net sales dropped 90%.

Mainly as a result of the contraction of 18, 80 89, 4% in average prices in Chilean pesos due to the impact of hyperinflation accounting stay stable above us prices in local currency evolve in line with inflation.

Volumes contracted eight 4% eight 3% fully explained by Argentina as all the other geographies geographies posted positive volume growth EBITDA contracted 53, 7%.

In the wine operating segment revenues were down 11, 7% mainly explained by <unk>.

Eight 8% decrease in volumes driven by a 10, 2% decrease in the Chile domestic market and a five 6% contraction in exports from China.

Average prices contracted by three 1% also due to the impact of hyperinflation accounting as stated above.

Our wind business in Argentina.

And a stronger Chilean peso against the U S dollar which impacted negatively.

Export revenues, partially offset by revenue management initiatives in our domestic markets.

The decreased 21, 3% regarding our main JV and associated business from a yearly perspective in Colombia volumes contracted low single digit in 2023 in a scenario of weaker consumption.

Felipe Dubernet: Regarding our main JVs and associated business from a yearly perspective, in Colombia, volumes contracted low single-digits in 2023 in a scenario of weaker consumption. In Argentina, our water business recorded mid-single-digit growth in volumes despite the complex economic environment explained by the strength of the brands and a successful route to market integration of this business into our operation. I will be glad to answer any questions you may have. Thank you very much for the presentation. We will now be moving to the Q&A part of the call. If you have a question, please press star two on your keypad. That's star two on your keypad for any voice questions.

<unk>, our water business recorded mid single digit growth in volumes. Despite the complex economic environment explained by the strength of the brands unless our successful go to market integration of this business into our operations.

Now I will be glad to answer any question you may have.

Thank you very much for the presentation I will now be moving to the Q&A part of the call.

If you have a question. Please press star two when you keep up that start to on your keypad plenty voice questions.

We will get a minute or so for any questions to come in.

Okay. The first question we have is from Mr. Philippe <unk> from Scotiabank. Please go ahead, Sir your line is open.

Thanks, operator, good morning, Philippe Hockey 19 law tax for this space. So my first question is on Argentina, obviously, a messy quarter all the Hyperinflationary accounting effects are you now kind of muddy up the quarter.

Operator: We will give a minute or so for any questions to come in. Okay, the first question we have is from Mr. Felipe Ucros from Scotiabank. Please go ahead, sir; your line is open.

But how did the quarter start for Argentina in 2020 for hard things looking better.

Felipe Dubernet: Thanks, operator. Good morning, Felipe, Joaqun, and team. Thanks for the space.

And then if I can I'll do a follow up thanks.

Felipe Dubernet: So my first question is on Argentina. Obviously, a messy quarter, all the hyperinflationary accounting effects, you know, kind of muddy up the quarter. [inaudible] Thank you Felipe for your question regarding Argentina. The quarter maintains exactly the same trend as we had in quarter four, so we continue to increase prices in line with inflation. The inflation level during January was 20.5% in Argentina. This is public data.

Yeah.

Thank you Felipe two.

Two questions regarding <unk>.

<unk> now two quarters exact maintain exactly the same train and at the same the same trend as we had in quarter. Four so we continue to increase prices in line with inflation inflation level. During January was 25% in Argentina. This is public data.

We are.

We are experiencing in the CCAR.

Industry contraction of a let's say a high single digit, let's say doing gathering for the time being.

Felipe Dubernet: And we are experiencing industry contraction of, let's say, high single digits, let's say during January for the time being. It is expected that we will have a lower level of inflation in Argentina in February, according to official data. But we will continue our revenue management efforts there in order to keep profitability in Algeciras. Great, great. Before I move to the next question, Felipe, great comments on how the consumer is doing. Let me ask you, what kind of margins do you expect to deteriorate as you eventually have to adjust employees in Argentina, or what type of margin environment do you expect as the year starts? Look, I will not give you a forward look, but in Argentina, all the pillars of Hercules are completely valid, let's say.

It is expected that we would have a lower level of inflation in Argentina.

Argentina in February because we don't we don't we do not have.

Official data.

But we will continue our revenue management efforts there in order to keep profitability even in a choppy.

Great Great and just before I move to the next question off and it's a great great comments on how the consumer is doing let me ask you what do you expect.

<unk>.

Kind of margins to deteriorate as you as you eventually have to adjust employees in Argentina, or what type of margin environment do you expect as the year starts.

Look I will not give you a call we're looking at in Argentina, all the pillars of air cool less.

Ill completely value, let's say.

Felipe Dubernet: Of course, we would like to maintain the scale, but it would be difficult given the macro environment. At least relative scale, we are maintaining, thanks to our portfolio, ended up last year in a very strong way, let's say. So the relative scale would be maintained.

And of course, we will like to what I'm, saying.

Okay.

Given the macro environment.

That's at least relative to the scale, we are maintaining thanks to this cause.

Our our portfolio ended up getting it in a very strong way, let's say so.

The relative scale would be maintained they began so it would be let's say how much the industry will suffer.

Felipe Dubernet: The big answer would be, let's say, how much the industry would suffer. The good news is, if the government plan works in terms of having lower levels of inflation, maybe we could experience, let's say, some relief in terms of the contraction of volumes.

The good news is if the government plans works in terms of having lower levels of inflation, maybe we could.

We could experience some let's say some relief in terms of the contraction of the of the volumes, but all in all the pillars are towards let's say.

Felipe Dubernet: But all the pillars are towards, let's say, not suffering in profitability terms. Let's say we will continue revenue management efforts there. Efficiencies are key, as I pointed out.

Not suffering in profitability terms lets say, we will continue for many many months.

In an effort there.

I'll take pointed out.

Felipe Dubernet: A number of projects in several areas, logistics, manufacturing, in terms of expense control, are very valid in that. Also, taking care of the cash is important, working capital, inventory reduction. We have, in fact, reduced our inventory levels, let's say, to work with less safety, in terms of reacting, of course, maintaining flexibility towards the market, but in a more efficient way.

<unk> a number of projects in several areas well geez the amount of factoring in in terms of our expense control a very valuable that also taking care of the cash.

It is important to offer of working capital inventory reduction.

We have in fact reduce our inventory levels, let's say to work with less safety in.

First off are reacting.

It's called maintaining flexibility to watch the market, but in a more efficient way and also portfolio.

Felipe Dubernet: Also, portfolio rationalization is important. Enhancing investing behind returnable packaging is also a way to..., protect our profitability. And, of course, because all of this should be, need to be possible, thanks to our good levels of brand equity to continue to invest behind the brands. Because without a stronger brand, it would be very difficult to maintain our relative scale. Very clear. Thanks very much.

Something important enhancing also investing.

Heine Returnable packaging also is a way to.

To protect our profitability.

Of course, because all of these should be for <unk>.

Need to be possible.

Thanks to all of our high level solve or good levels of brand equity to continue to invest behind the brands because without a stronger brand you don't have.

It would be very difficult to maintain our relative escape.

Felipe Dubernet: Thanks very much for that. Maybe I can do a second one on Chile. Weather seems to have been a factor in the quarter, and I think your peers reported exactly the same thing. So I'm wondering, how would results look if you kind of didn't have the weather effects?

Very clear thanks for much of our potentially much for that maybe if I can do.

Second one on Chile.

Weather seems to have been a factor in the quarter and I think your peers reported exactly the same thing. So I'm wondering how did results look.

If you kind of didn't have the weather affects them and what I mean is I'm trying to gauge.

Felipe Dubernet: And what I mean is I'm trying to gauge how the consumer is doing if you put aside the weather factors. Oh, that's very difficult. I asked for a... we need an algorithm for that, you know.

How the consumer is doing if you put aside the the the.

The weather factor.

That's very helpful. I guess, what we didn't know now getting for that you know of course, we have some internal allowed to go to them but.

Felipe Dubernet: Of course, we have some internal algorithm, but it's... how much? So, I think there is a weaker demand from the consumer itself. The consumer is not in the same shape as it used to be in 2021 and the beginning of 22, period, not good weather conditions for selling, you know, refrigerated drinks, let's say. The majority of our portfolio needs to be drinks, of course. It was unfavorable in terms of rain and temperature.

He said yes.

How much.

I think that he said we get the mine itself in the consumer the consumer is not in the same state.

Used to be.

In 2021, and beginning of 'twenty two period, we know that.

We have had two bad quarters.

One three and I'm falling types of and not <unk>.

Not good weather conditions for selling you know a refrigerated dreams, let's say all the majority of our portfolio needs to be.

Drink.

In Oh of course.

It was unfavorable in terms of rain in terms of temperatures.

Felipe Dubernet: So factoring out the weather, we decreased by 7.3%. I will not attribute 100% to the weather. But I don't have a number to provide to you; an exact number to provide to you, how much the weather would influence this decreasing volume, would be difficult. Maybe an indicator could be quarter one, that we have had more stable weather in terms of temperatures, but still, it's too early to call it quarter one. January has started in good shape with low single-digit growth because we have more normalized weather. But certainly, as I mentioned in the previous conference call, without giving you a future forecast, because it's difficult to do that, because there are several factors, risk, and uncertainty. I think low single digits, between mid and low single digits, should be the growth if you take out the weather.

So factoring out the weather would be we decreased seven 3% I would not attribute the cabinet pursuant to the weather, but I don't have a number to provide to you.

Exact number to provide to you how much the weather would have influence on this decrease in volume.

It would be.

It would be difficult.

Maybe I can indicate it could be quite a bit of one that we have got more and.

More stable whether in terms of cause temperatures, but still it's too early to call the quarter one.

January has started a cape with low single digit growth.

Because we have a more normalized weather.

But.

Certainly I think mention previous conference call.

Without giving you a future forecast because it's difficult on that because we have several factories kind of uncertainties I think.

Low single BG BP need a low single digit should be due but also if you take out the weather.

Felipe Dubernet: That's super helpful, especially the comments on January. That helps us a lot. So thanks for that, Felipe. I'll hand it back to you.

Aligned with GDP.

Chip.

That's super helpful, especially the comments on January back that helps us a lot. So thanks for that.

Operator: Thank you. Thank you very much. We also acknowledge the text question from Mr. Pablo Bello from BTG, which we believe was answered in this answer about Argentina. The next voice question comes from Mr. Fernando Olvera from Bank of America. Please go ahead, sir. Your line is open. Hi, good morning, good afternoon. Thanks for taking my questions. I have two.

I'll hand, it back to you. Thanks.

Thank you. Thank you very much.

We also have the knowledge. The next question from Mr. Pablo Bellows from BTG, which we believe was asset.

This question and it's also about Argentina.

The next voice question comes from Mr. Fernando Olvera from Bank of America. Please go ahead, Sir your line is open.

Hi, good morning, good afternoon and.

Thanks for taking my questions I have two the first one is related to Chile.

Fernando Olvera Espinosa de los Monteros: The first one is related to Chile. If you can comment, what is your outlook on cost and how effects will play out in the coming quarters? And if you can share some color on how margins should behave this year, particularly in Chile, that's my first question, and I have a second one. Thanks.

So if you can comment what is your outlook on cost and and how effects will play in coming quarters.

And if you can share some color of how margins should behave this year, particularly in Chile. That's my my first first question then I have a second one.

Felipe Dubernet: First of all, Pablo, I already answered the question regarding Argentina to Felipe. Anyway, thank you for your question. Fernando, yeah, I would say, of course, you pointed out the main risk that we are facing nowadays in terms of effects. Today, the U.S. dollar is $980, which is much higher than what we had in the previous quarter, and we have, you know, pressure on that in terms of cost. For example, last year, the US dollar's average selling rate in Chile was 839.

First of all Pablo I already answered the question regarding Argentina to Philippe anyway. Thank you for your question.

I'm putting them though.

I will of course, you pointed out the main risk that we are facing nowadays in terms of FX today.

980, which is a much higher than what we thought in previous floods dead on.

Have a as you know our freshly on that in terms of.

Of course.

Last year, our U S. Dollar what was the average generating Chile was a.

Felipe Dubernet: Now we are, let's say, more than 100 Chilean pesos more, more than 10%. And this would certainly have an impact on our P&L, on our cost structure. Although commodities are stable, with the exception of sugar, let's say, but commodities are stable, what we need to do at the end is to compensate for that in order to have more stable EBITDA margins. And to do that, we need to enhance our revenue management efforts, enhance our efficiency efforts also, to speed up some projects that we have, in terms of efficiency, and Improved Mix also is a way to compensate for this pressure in terms of the U. And this is fully aligned with FDIC, but you pointed out that this is one of the risks that we are facing. Okay, great Felipe.

At Cagny 30, now now we are let's say more than 100 Chilean pesos more so this is more than 10%.

And discussing with fab, certainly and impacting our AR in our P&L in our cost structure.

Although commodity piece had a stable with the exception of sugar asking let's say almost stable.

What do we need to do or the aim is to compensate that in order to have more stable.

EBITDA margins.

We need to enhance our revenue management efforts.

Our efficiency efforts.

Also to speed up some projects that we have.

In terms of efficiencies.

Improved mix also is a way to compensate this pressure in terms of the of the U S. Dollar at least is fully aligned with.

Yes.

But you pointed out that he said he said he's one of the risks that we're facing.

Okay great.

Felipe Dubernet: And my second question is related to your SKU reduction. If you can comment on that to give us an idea of how many SKUs you eliminated in 2023. Any idea of how this affects your profitability and if you are going to continue with the SKU reduction this year? Thank you.

And my second question is related to your Skus reduction you can comment about that.

To give us an idea of how many skus you eliminated in 2023.

Any idea of how these favor Europe.

Profitability and if you're going to continue with the SKU reduction this year.

Thank you.

Felipe Dubernet: Now, we took out about 100 SKUs from our offers, but this does not represent, it should be in terms of percentage, about 5%. But the idea is not to reduce all the time you tackle the tailing, let's say, SKU reduction. But the incentive of that is to really, if we need to launch something of UN innovation, should be relevant, should have better margins, should improve the brand equity of the category, of the portfolio, improve brand equity, deliver higher margins, and also improve volume. So, in the end, it's an exercise that we should do. It's about discipline and doubt. OK. Great.

Oh, well, we took out about of firewood all sorts of about the kind of the skus, but they stuck with a small set of it should be in terms of person, but about 5%.

But what you're seeing all the time you do a.

Talking detailing let's say a SKU.

Our SKU reduction.

But the the incentive will start east really if we need to launch something with winning innovation shouldn't be relevant should be should have better margins should.

Bruce.

The brand equity of the category of the fall off of the portfolio.

I think we'd be deliver higher margins and also improved volumes.

At the end some exercise that we should ease somewhat disciplined on that.

Okay.

Operator: Thank you, Felipe. Okay, thank you very much. It's a reminder once again, slide two for any additional questions. Our next question comes from Mr. Ulises Bolio from JP Morgan. Please go ahead, sir.

Great. Thank you Felipe.

Okay. Thank you very much. So reminder, once again start to for any additional questions. Our next question comes from Mr. When he says volume from J P. Morgan. Please go ahead Sir.

Ulises Bolio: Hi guys, thanks so much for the space for questions. A couple of follow-ups on my side. First, on the Chile volumes, can you provide a little bit of detail on how the performance there was for alcoholic versus non-alcoholic? And maybe a double-click on how those more premium beer categories continue to perform there.

Hi, guys. Thanks, so much for the space for questions. A couple of follow ups on my side. So first on the Chile volumes can you provide a little bit of detail how was the performance there on the alcoholic versus non alcoholic and maybe a double click there on how those more premium beer categories continued to perform there and then the other.

Felipe Dubernet: And then the other one on FX, I just wanted to hear your thoughts, more or less what is kind of embedded in your budget in terms of FX for the year? And what are you thinking in terms of the pricing that you need to do to kind of offset this pressure? Thanks so much.

One on FX I just wanted to.

To hear your thoughts are more or less what is kind of being embedded in your budget in terms of FX for the year and what are you thinking in terms of the pricing that you need to do to kind of offset this pressure. Thanks so much.

Yes.

Felipe Dubernet: Yes, regarding your first question, volumes in quarter four were exactly very similar for both non-alcoholic and beer. There was no big difference in terms of decrease for both. So we are talking about because the overall decrease in volumes in Chile was 7%, so it was very similar across the country. Regarding effects, yes, we will have a significant effect on this. More or less 70% or 75% of our direct costs, raw material costs, packaging material costs, and also energy costs are linked to the U.S. dollar.

<unk>.

Regarding the.

Your first question volumes being Watson for where exactly.

Very similar in both the normal call it got it.

No big difference in terms of decrease.

For both of them.

So we are talking about.

Between.

Mid to high single digit, let's say it goes.

Overall decrease in volumes in Chile was 7% so was very similar across the board.

Regarding the fixed yeah, we may have a significant.

If you go into effect on on on these more or less 70% or 75%.

And although we didn't get to the two biggest dollar of our data cost raw material costs packaging material costs and also energy cost.

Felipe Dubernet: So we need to make efforts in revenue management certainly to compensate because every, let's say, 10 pesos of devaluation, more or less 2,000 million pesos affecting our EBITDA, being compensated by, that is already compensated by the export business. So this is net of the export that we have in wine, especially, that compensates somewhat at the consolidated level. So if you have a sustained 100 pesos, so we need to deliver in our P&L, you know, an extra 20, 25,000, between 20, 25,000 million pesos. So this is a significant number if you look at the total EBITDA of Chile. So it should be a combination of tools, let's say, whether it's management or efficiency. Okay, thank you.

So we need to do EF 14 revenue management certainly to compensate because.

Every let's say.

Hey.

<unk> peso devaluation more or less is about 2000, a million specials affecting our EBITDA being compensated by a bus out already compensated by the export business. So this is net of the exports having widened especially.

But that compensate some water at the consolidated level.

So if you have a kind of sustaining.

Sustaining hungry baseless, so we need to deliver in our P&L you know extra.

2025, south between 2025.

7 million patients. So this is a significant number if you look at the other.

Thought it would be south of cheap Hum.

It should be a combination of tools, let's say revenue management efficiencies.

Yeah.

Cost on expense control.

No.

To.

Kind of a stable market, let's say.

Ulises Bolio: That is very clear. And then just on that FX question, are you able to share more or less what you are budgeting in terms of that, like for your plan for 2024? What kind of FX are you using?

Okay. Thank you that that is a that is very clear and then just on that fixed question are you able to share more or less what you are budgeting in terms of that like for your for your plan for for 2024, what what kind of FX or are you you're seeing and then just to add to that is maybe a kind of a benchmark of what we should be thinking about it.

Felipe Dubernet: And then just to have that as maybe a kind of a benchmark of what we should be thinking about in that sense and the impact on cost. Oh, I'm not an economist, I'm not a meteorologist, so I cannot predict weather, nor exchange rates. I would not like to do a prediction on the exchange rate. I can give you the current exchange rate, okay? This is the best projection you have, the current one, and maybe you could look at Bloomberg for the future of the Chilean peso.

In that sense in there and the impacts on our own cost.

Oh.

Well I'm not panel columnist another methodology, so I cannot predict whether neither taking rate I would not like to do it.

I can't give you current exchange rate Okay got it this is the best prediction.

And maybe you could look at Bloomberg to the futures of the Chilean peso.

Felipe Dubernet: So the current exchange rate is 960. I will ask Joaquin now, how are the projections for the U.S. dollar, how much? Yeah, it's like that. Today's pot price is 960. A year ago, or no, the average for last year was 840.

So current exchange rate is nine negative 60, I will ask why he now or how are the prediction of a you know.

The U S dollar.

Yeah.

It's like that.

Today's spot prices Niagara six.

A year ago or no average of last year was 840, so it's a pressure right.

Ulises Bolio: So it's pressure we're staying right under. And it's a pressure that has increased since January. Yeah, all right, no, I think that's, uh, that's, that's fair enough, so, uh, yeah, I was kind of putting you in a tough position there, but, uh, but understood.

I mean, it's a picture that pass has increased since you got it.

Hum.

Now right now I think that's something that that's fair.

So yeah I was kind of push you in a tough position there, but what I understood. Thanks, so much for the color there guys.

Operator: Thank you very much. We have a follow-up question from Mr. Felipe Uclos from Scotiabank. Please go ahead, sir.

Thank you very much I.

I have a follow up question from Mr. Feedback of course from Scotiabank. Please go ahead Sir.

Felipe Dubernet: Thanks, Operator. Since it seemed there wasn't anybody else in the queue, I thought I'd take advantage and ask another one, Felipe. So, thanks. I know wine is not the largest segment, so it might be unusual to ask about this one. But strategically speaking, it's the segment that seems more challenged in the long term because volumes have been falling for the larger part of the last few years. And I know it's not a CCU problem; it's an industry problem. We've seen it across wine throughout the world.

Thanks, operator.

It seems there wasn't anybody else on the queue I thought I'd take advantage and ask another one off and he picks up banks.

No one is not the largest segment.

So it might be unusual to ask about this one put out but strategically speaking it's the supplement that seems more challenged in the long term.

Volumes have been falling for the larger part of the last few years and I know, it's not a CCU problem. It's an industry problem, we've we've seen little crosswise throughout the world.

Felipe Dubernet: But just wondering if there's a plan to kind of turn around that dynamic or kind of offset that decline in wine consumption. Anything you guys are thinking of to improve performance in that sector? Yeah, thank you Felipe for your question. Of course, we suffered a terrible 2023 in the wine export industry, not only in Chile but also Argentina, and we saw some numbers yesterday of the decrease in Australia's exports and Chile's exports. So, I think there are factors that are related to the carrying inventory units of places that are far from consumption centers. So, there is something of the economics of export that has an influence, and even the interest rate, which, especially in the U.S., has not. We feel we are less competitive in terms of carrying out inventory costs. So, we experienced this in 2023. Now, I would say we are seeing, you know, some greens, let's say, green grass, or some embryonary good finals.

But just wondering if there's a plan to kind of turnaround that dynamic or kind of offset that decline in wine consumption.

Anything you guys are thinking off to to improve performance in that segment.

Yeah. Thank you Felipe <unk> for your question of course, we suffered a terrible 2023.

Exports to industry.

Not all Chile, Argentina, and saw some numbers yesterday, some numbers yesterday or degrees of Austin.

Striving to exports.

Chile exports.

I think that five talks about that makes it all the starring invented units all place to start.

Far.

From an assumption set of southern something of the economics of the exports.

So anything even the interest rate.

Especially in the U S has not.

We use.

Yes, the fed interest rate steel, we are less competitive in terms of of scarring.

Carrying out inventory cost.

We experienced this in 2023 now what I would say we are seeing.

No.

And some Greens, let's say.

Russ.

And we are not a good sign those.

Felipe Dubernet: In terms of the growth that we expect..., at least in the first quarter, to have some growth in terms of the export volume. As you pointed out, there is a global industry. We are innovating a lot, especially in the domestic market in Chile, through brand extensions, you know, sweet wine, in order to keep and maintain the scale, especially in the domestic market. Also, sparkling wine is doing very well. Exports are more complicated because you have, as I mentioned, we have some constraints there because it's difficult to have global branding. No one has, a few, that have really global branding in terms of wines, country by country, region by region, so it's difficult.

In terms of that.

We expect.

At least in the first quarter due to perhaps some growth in terms of the exports volume.

As you pointed out, but it's a global industry.

Volume decreased but there are some tools that you need to look at so of course for immunization something innovation you pick up any innovation.

We are innovating a lot, especially in the domestic market in Chile.

It's a new brand extensions you know sweet wine.

In order to to keep interest to maintain the scale, especially in the domestic markets also sparkling wine.

Doing very well.

And in the export side, a more complicated because you've come off as I mentioned, we have some strength there because it's difficult global branding.

No one house.

But yes, we do.

Global branding in terms of why it's country by country region by region, obviously so.

Felipe Dubernet: So what we are working on in order to make it more profitable and to sustain the scale, even growing in some markets, is to improve our execution. And it's all about execution, especially in some key markets. We opened a commercial office in China, also in the U.S., and in the U.K.

What we are working in order to make it more profitable.

Staying just gaining even growing in some markets east through improve I would execution and it's all about execution, especially in some key markets. We opened a commercial office in China.

Also in the U S and the U K.

Felipe Dubernet: So with these three, let's say, new endeavors, we think we could significantly improve the execution in those markets. That's very clear. Thanks so much for the call. Okay, thank you.

So with these three let's say.

And <unk>.

<unk> seen we would significantly improve the execution in those months.

That's very clear thanks, so much for the color.

Felipe Dubernet: Thank you very much. Our final question is a text question from Mr. Alessandro Conti from Jefferies. Are you planning on initiating cost-cutting initiatives, especially in Chile? Do you see any foreseeable improvement in margins? Cost-cutting seems a little bit aggressive, let's say. I would say cost control to make more with the same resources better and more.

Okay. Thank you. Thank you very much.

Our final question is a next question from Mr. Alessandro <unk> from Jefferies.

Are you planning on initiating cost cutting initiatives, especially in Chile, do you see any foreseeable improvement in margins.

Yeah.

Scott.

It seems a little bit aggressive, let's say I would say cost control.

Nick can make with the same resources better and more.

Operator: But, of course, our efficiency plan is in place in terms of improving expenses. The key indicator is expenses over revenues, and thus, we need to reduce that in the long term or in the medium term and also this year. So we have plans for that, especially at the expense level. On costs themselves, a lot depends on the market, the exchange rate, the direct cost of the raw materials and packaging materials.

But of course, our efficiency plan is in place.

In terms of improving expenses is.

A key indicator.

Over our revenue.

But we need to do to reduce that.

Even the in the long term loan in the medium term. It holds for the year. So we have plans for that.

Especially <unk> expense level.

<unk> costs, so it depends a lot on the market.

The direct cost of exciting roadmap Ive got a question.

I think Matthew videos so.

Felipe Dubernet: Of course, it's a key pillar, pillar number three in terms of efficiency, in order to keep up with these games. If this would be reflected or not in the bottom line, it would depend on other factors, let's say, but the priority is one key pillar of Hercules is efficiency. Thank you very much for the answer. We see no further questions at this point. I'll pass the line back to the management team for their concluding remarks. In 2024, we will continue working under our three strategic pillars, growth, profitability, and sustainability, and we will keep..., and we will keep implementing... We know that the environment in the region will continue to be challenging, especially in Argentina. Nonetheless, we expect to be able to continue on the recovery path of our financial results and profitability.

Of course.

A key pillar.

Pillar number three in terms of efficiency.

In order to to keep the pace with these games.

This would be reflected or not I think the bottom line.

It will depend on other factors lets say Ah but.

The priorities when QP laterals at a full list.

Yes.

Thank you very much for the answer we see no further questions at this point I'll pass the line back to the management team for their concluding remarks.

In 2024, we will continue working under our three strategic pillars growth profitability and sustainability and we will keep.

We can.

Keep implementing anyways.

No doubt the environment in the region will continue to be challenging, especially in Argentina. Nonetheless, we expect to be able to continue on the recovery path of our financial results.

Felipe Dubernet: Finally, I would like to thank all our employees. Given the hard work and commitment to CCU, we have been able to navigate challenging years. We will continue working united to sustain a path of profitable and sustainable growth. Thank you, and have a wonderful end to the day. Thank you very much. This concludes today's conference call. We'll now be closing all the lines. Thank you, and goodbye.

Great.

Finally, I would like to thank all our employees given their hard work and commitment with CCU, we have been able to navigate challenging years.

We will continue working United to sustain.

Profitable and sustainable growth.

I have a wonderful end of the day.

Thank you very much. This concludes today's conference call will not be closing all the lines. Thank you and goodbye.

Okay.

Yeah.

Yeah.