Q2 2024 Compañía Cervecerías Unidas SA Earnings Call
For more information, visit www.casagrandeaz.gov
Operator: Good afternoon, everyone, and welcome to CCU's second quarter 2024 earnings presentation call on the 8th of August. Do you know that this code is being recorded, and all lines are listening only to most of the presentation? After the presentation is completed, there will be no opportunity to ask questions. So without further ado, I would now like to pass the line over to Claudio Las Heras-Olivares, Head of Investor Relations at TCU
Speaker Change: Good afternoon, everyone, and welcome to CCU's second quarter 2024 earnings presentation call on the 8th of August .
Speaker Change: Please note that this call is being recorded and all participant lines are on listen-only mode. After the presentation is completed, there will be an opportunity to ask questions. So without further ado, I would now like to pass the line over to Claudio Las Heras-Olivares, Head of Investor Relations at TCU. Please go ahead, sir.
Speaker Change: Welcome everyone and thank you for attending CCU's second quarter 2024 conference call.
Claudio Las Heras-Olivares: Today with me are Mr. Patricio Jota, Chief Executive Officer, Mr. Felipe Dubernet, Chief Financial Officer, Mr. Joaquin Trejo, Financial Planning and Investor Relations Manager, and Carolina Burgos, Senior Investor Relations Analyst. You have received a copy of the company's consolidated second quarter 2024 results. TUCHO!
Speaker Change: Today with me are Mr. Patricio Jota, Chief Executive Officer, Mr. Felipe Dubernet, Chief Financial Officer, Mr. Joaquin Trejo, Financial Planning and Investor Relations Manager, and Carolina Burgos, Senior Investor Relations Analyst.
Speaker Change: You have received a copy of the company's consolidated second quarter 2024 results. As usual,
Claudio Las Heras-Olivares: Patricia will now review our overall performance, and we will then move on to our Q&A session. Before we begin..., as you should be taking notes on precautionary steps. The 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
Speaker Change: Patricia will now review our overall performance and we will then move on to our Q&A session.
Speaker Change: Before we begin, as usual, please take note of a cautionary statement.
Speaker Change: Statements made in this call that relate to CCU 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.
Claudio Las Heras-Olivares: This statement should be taken in conjunction with the additional information about risk and uncertainty set forth in CCU's Anna report. In form 28 filed with the U.S. Security and Exchange Commission, and in the annual report submitted to the C-
Speaker Change: This statement should be taken in conjunction with the additional information about risk and uncertainty set forth in CCU's annual report.
Speaker Change: In Form 20-F filed with the U.S. Security and Exchange Commission and in the annual report submitted to the CMF.
Claudio Las Heras-Olivares: and on the Honor website. It's my pleasure to introduce Mr. Patricio Jota. Thank you, Claudio, and thank you.
Patricio Jota: Thank you, Claudio, and thank you all for joining us today. In the second quarter of 2024, CCDU's financial results were much weaker than last year, as they were heavily impacted by Tufo, a particularly difficult context for the men in Chile and Argentina, and the deprecation of our main local government. In Chile, the industries of our core categories, particularly beer, decreased, largely explained by adverse weather conditions with unusually low temperatures and record rainfall during the quarter, particularly in May and June. In Argentina, we faced a sharp contraction in the economy and in the beer industry, associated with a challenging context for consumption. It's important to mention that we maintain the overall architecture in both cans.
Speaker Change: and available on our website. It is now my pleasure to introduce Mr. Patricio Jota.
Patricio Jota: Thank you, Claudio, and thank you all for joining us today. In the second quarter of 2024, CCDU's financial results were much weaker than last year, as they were heavily impacted by two effects.
Speaker Change: A particularly difficult context for demand in Chile and Argentina.
Speaker Change: and the depreciation of our main local currencies.
Speaker Change: In Chile, the industries of our core categories, particularly beer, decreased, largely explained by adverse weather conditions, with unusual low temperatures and record rainfall during the quarter.
Speaker Change: particularly in May and June . In Argentina, we faced a sharp contraction in the economy and in the beer industry, associated with a challenging context for consumption.
Speaker Change: It's important to mention that we maintained overall market share in both countries.
Patricio Jota: In terms of our main local currency, the vegan peso, an Argentine peso, depreciated 16.8% and 255.1% against the U.S. dollar, respectively, increasing our U.S. dollar denominated cost, impacting our operating results in the scenario and the original plant aircolors. Further actions in terms of revenue management and costs and expenses control are currently in place. These actions, in a more normalized context of volume growth, should help us to return to the profitability path.
Speaker Change: in terms of our main local currencies.
Speaker Change: The Chilean peso and Argentine peso depreciated 16.8% and 255.1% against the U.S. dollar, respectively.
Speaker Change: increasing our U.S. dollar denominated costs, impacting our operating results.
Speaker Change: In this scenario, under original plan Hercules, further actions in terms of revenue management and costs and expenses control are currently in place. These actions, in a more normalized context of volumes growth, should help us to return to the profitability path.
Patricio Jota: During the second quarter of 2024, our revenues contracted 8.6 percent, fully explained by a 12.7 percent volume drop, partially compensated by 4.6 percent higher average prices in clean and fresh. Now we're going for a lively course by a week-at-demand in Chile and Argentina, as I explained before. Other devices were hired due to revenue-marketing initiatives in all operating sites.
Speaker Change: In the second quarter of 2024, our revenues contracted 8.6%.
Speaker Change: Fully explained by 12.7% volume flux, partially compensated by 4.6% higher average prices in clean sources.
Speaker Change: Lower volumes were largely caused by a weaker demand in Chile and Argentina, as I explained before. Average prices were higher due to revenue management initiatives in all operating segments.
Patricio Jota: Gross profit was down 15.8%, and as a percentage of net sales, it deteriorated by 338 basis points due to higher cost pressures, mainly coming from the depreciation of the Chilean peso and the Argentine peso, as mentioned above. MSDNA expenses expanded 1.7%, and as a percentage of net sales, they deteriorated by 464 basis points, mainly as a consequence of lower volumes and its In all, EVDA reached 10,053 million Chilean pesos, a 78.7% decrease, and EVDA margin contracted 629 basis points. Nettingham, which resulted in a loss of 15,088 million students there. This city is the not-considered, they're not, they're not, they're not with caring.
Speaker Change: Gross profit was down 15.8% and as a percentage of net sales
Speaker Change: Did you erase it?
Speaker Change: by 338 basis points due to higher cost pressures.
Speaker Change: mainly coming from depreciation of the Chilean peso and the Argentine peso mentioned above. MSDNA expenses...
Speaker Change: expanded 1.7%, and as a percentage net sales deteriorated 464 BPP, mainly as a consequence of lower volumes and its negative impact in fixed expenses deletion.
Speaker Change: In all, EVDA reached 10,053 million Chilean Pesos, a 78.7% decrease, and EVDA margin contracted 629 basis points.
Speaker Change: Net income with a loss of 15,888 million Chilean pesos.
Speaker Change: These figures do not consider the non-recurring...
Speaker Change: gained from the sale of a portion of land in Chile, with a favorable effect before taxes of 28,669 million Chilean pesos.
Speaker Change: and after tax a 20,928,000,000,000,000 pesos
Speaker Change: Including this non-recurring effect, EVDA totalized 38,722 million Chilean pesos and net income reached a gain of 5,040 million Chilean pesos.
Patricio Jota: The following analysis also does not consider this non-recurring event. We receive a very insegment, stop line, contractive 5.5%, given by an 8.4% volume drop, partially offset by 3.1% growth in other spines. Volume contraction was caused by weaker demand due to unfavorable weather conditions in the quarter, particularly in the beer business. Nonetheless, we saw a much better performance in July, which is a good sign for volumes looking ahead. Average prices were higher given revenue management efforts in all our categories, partially offset by negative mixed effects in the portfolio in this regard.
Speaker Change: The following analysis also does not consider these non-recurring events.
Speaker Change: In the steel operating segment, top line contracted 5.5%, driven by 8.4% volume drop, partially offset by 3.1% growth in average prices.
Speaker Change: volume construction was course
Speaker Change: by wicked demand due to unfavorable weather conditions in the quarters, particularly in the beer business.
Speaker Change: Nonetheless, we saw a much better performance in July , being a good sign for volumes looking ahead.
Speaker Change: Average prices were higher given by revenue management efforts in all our categories, partially offset by negative mixed effects in the portfolio. In this regard, in July , we implemented additional price actions.
Patricio Jota: In July, we implemented additional price actions. Gross margin decreased as a result of higher cost pressures, largely coming from our U.S. dollar denominated costs. MSDNA expenses were flat due to efficiencies that failed to compensate for higher U.S. dollar denominated expenses.
Speaker Change: Gross margin decreased as a result of higher cost pressures, larger coming from our U.S. dollar denominated costs.
Patricio Jota: Consequently, EBGA totalized 26,587 million pesos, contracting 39.7 percent. In the national business operating segment, which includes Argentina, Bolivia, Paraguay, and Uruguay, net save recorded 22.1% crops, as a result of a 27.2% reduction in volumes, partially offset by 7% rise in average prices in trillion pesos. Winter volumes were mostly concentrated in Argentina; on the other hand, Paraguay and Bolivia extended volumes, while little did wide drops due to a high comparison base explained by an uncommon dust in 2023, which posted a package of water consumption in that year.
Speaker Change: MSDNA expenses were flat due to efficiencies that failed to compensate higher U.S. dollar-denominated expenses. Consequently, EBGA totalized 26,587 million Chilean pesos, contracting 39.7%.
Speaker Change: and the International Business Operating Segment.
Speaker Change: which includes Argentina, Bolivia, Paraguay and Uruguay, net sales recorded 22.1% drops.
Speaker Change: as a result of 37.2% reduction in volumes, partially offset by 7% rise in average prices in Chilean pesos.
Speaker Change: Weaker volumes were mostly concentrated in Argentina. On the other hand, Paraguay and Bolivia expanded volumes while Uruguay dropped due to a high comparison base explained by an uncommon draft in 2023.
Patricio Jota: The better average price in Chile and pesos was given by very many management efforts in all the countries, part of the Upset of the team, and strong cost pressures, mostly coming from the short depreciation of the Argentine peso against the US dollar and its impact on the US dollar in the United States. Consequently, Ross Margin, the day rated from 46% to 37.56%, and as the MA expense increased 3.3%, and as a percentage from net safety, the rate is mainly due to the lower business gain in Argentina.
Speaker Change: which boosted package water consumption in that year.
Speaker Change: The better average price in Chilean pesos was driven by revenue management efforts in all the countries, partially offsetting strong cost pressures, mostly coming from the sharp depreciation of the Argentine peso against the U.S. dollar and its impact in U.S. dollar denominated costs.
Speaker Change: Consequently, Roth's margin deteriorated from 46% to 37.5%.
Speaker Change: NSDMA expenses increased 3.3%, and as a percentage net sales deteriorated mainly due to the lower business scale in Argentina. Altogether, it will reach a loss of 24,372 million Chilean pesos.
Speaker Change: The wine operating segment continued in a recovery trend, with revenues expanding 12%, driven by 11.9% higher average prices.
Speaker Change: Bolin showed a strong recovery in exports from Chile, which expanded 9.1%, while the Chile domestic market was down 5.4%.
Speaker Change: The better average prices were boosted by the weekly ceiling peso and its fairer impact on export revenues and revenue management initiatives in our domestic markets.
Speaker Change: Gross profit rose 28.5% and gross margin improved 511 basis points. MSDNA expenses increased 12.4% mainly due to higher marketing expenses related to exports which are denominated in U.S. dollars.
Speaker Change: And as a percentage-connected series, we made floods. In all, EVPA increased 59.2%.
Speaker Change: regarding our main joint ventures and associated business in Colombia, Bolivia, and Crimea.
Speaker Change: guiding better financial results. In Argentina, our water business with an owner recorded a contraction in volumes due to the challenging scenario for consumption. Nonetheless,
Speaker Change: Financial results improved versus last year due to efficiencies from a successful root-to-market and back-office integration with CCU Argentina. Now I will be glad to answer any questions you may have.
Operator: Thank you very much for the presentation. We'll now be moving to the Q&A part of the call. If you have any questions and are doubted by the telephone, please first start to, that is, ask funny questions. You may also ask a voice or a text question if you are doubted via the web. Okay, we'll now give a moment or so for questions to come in. The first question comes from Mr. Felipe Ucros from Scotiabank. Please go ahead, sir; your line is open.
Speaker Change: Thank you very much for the presentation. We'll now be moving to the Q&A part of the call.
Speaker Change: If you have any questions and are dialed in via the telephone, please press star 2. That's star 2 for any questions. You may also ask a voice or a text question if you are dialed in via the web.
Speaker Change: Okay, we'll now give a moment or so for questions to come in. First question comes from Mr. Felipe Ucros from Scotiadoc. Please go ahead, sir, your line is open.
Felipe Ucros: Thanks, Operator. Good morning, Patricia and team. Thanks for the space.
Felipe Ucros: Thanks, Apoedoa. Good morning, Patricio and team. Thanks to the space.
Patricio Jota: A few questions on my side, maybe start with the first one on weather. You discuss in your release and in your remarks that weather had a little bit to do with the poor volume performance of beer and non-alcoholic beverages. But in my mind, when it's cold and the consumer drinks less beer and non-alcoholic beverages, maybe the consumer drinks more red wine. But the results locally show that in terms of wine, Chile was also negative. So just wondering if you could comment on how those weather effects move the portfolio and whether we should consider that there's more pressure from generalized consumption rather than weather, or if you think weather was a bigger effect here. And then I'll do a follow-up. Thank you.
Felipe Ucros: A few questions on my side, maybe start with the first one on weather.
Felipe Ucros: You discuss in your release and your remarks that weather had a little bit to do with the poor volume performance in beer and non-alcoholic beverages, but in my mind, when it's cold and the consumer drinks less beer and non-alcoholics...
Speaker Change: Maybe the consumer drinks more red wine, but the results locally show that in wine Chile was also negative.
Speaker Change: So just wondering if you could comment on how those weather effects move the portfolio and whether we should consider that there's more pressure from generalized consumption rather than weather, or if you think weather was a bigger effect here. And then I'll do a follow-up. Thank you.
Patricio Jota: Thank you, Felipe, for your question. Look, if we double-click the volumes in the domestic industry, feel this, we find differences among the different categories. In fact, why we are keeping market share in terms of different categories, so the figures of CCU represent and the figures of the industry. In the case of beer, I mean, the whole Chilean segment decreased by 8.4% its volumes, as I mentioned before. But there are different.
Speaker Change: Thank you, Felipe, for your question. Look, if we double-click the volumes in the...
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Speaker Change: the figures of the industry. In the case of beer, the whole Chilean segment decreased by 8.4 percentage volumes as I mentioned before. But there are differences. In the case of beer,
Speaker Change: The decrease was in the mid-teens, while in the case of non-alcoholics,
Speaker Change: The decrease was mid-single digit, so something like 5% in the case of non-alcoholics, something like 14% in the case of alcoholics. So as you could see, there is a strong difference in both cases.
Patricio Jota: You will write when there is not a good wine and spirits benefit from this. In fact, the volume of speed is by something like 5%, and the volume of wine in the domestic market, I mentioned it in my introduction, by 5% poll. Nunez and Yunez were extremely, extremely bad in terms of temperature and in terms of weight. In fact, the temperatures in the second quarter, particularly in Nunez and Yunez, were the worst in the last 20 years, and weight by far the worst in the last 20 years.
Speaker Change: We are keeping marketers. You're right. When the weather is not good, wine and spirits...
Speaker Change: Benefits from this. In fact, the volumes of speed decreased by something like 5% and the volumes of wine domestic market, I mentioned it in my introduction, something like 5% also.
Speaker Change: May and June were extremely, extremely bad in terms of temperature and in terms of rain. In fact, the temperatures...
Speaker Change: on the second quarter, particularly May and June were the worst in the last 20 years and rain by far the worst in the last 20 years.
Speaker Change: Thank you.
Speaker Change: in other words, structure of the bedo has changed so much and now it is not the top thrift on the market anymore. The most important thing is that bedo is oil.
Speaker Change: July was a very normal month in terms of temperature and in terms of rain.
Speaker Change: on the last 20 years and volumes resumed some growth, not too much, a single digit, 2%, something like this, 2 to 3%.
Speaker Change: which is normal in an economy which is not performing well as the economy of Chile.
Speaker Change: So, we feel comfortable regarding the future, regarding volumes, and again, we think that
Speaker Change: May and June , particularly, and Q2 2024 were extremely, extremely extreme because of the conditions I just mentioned.
Patricio Jota: Great, thanks for the clarity on that. And my second question is about competition. Last quarter, I asked about the rationality in the market and asked if your competitors were moving prices with inflation. And it seemed that they were not moving at the speed, or at least not at the same magnitude as a CCU. You announced in your release that you increased prices in July. Have you seen your competition follow you this time around?
Speaker Change: Thanks for the clarity on that. My second question is on competition. Last quarter I asked about the rationality in the market.
Speaker Change: and asked if your competitors were moving prices with inflation and it seemed that they were not moving at the speed or at least not the same magnitude as a CCU. You announced in your release that you increased prices in July . Have you seen your competition follow you this time around?
Patricio Jota: Look, Felipe, I think that there is a lot of... Fashionability in our market and there. But it happens that the pressure on the records has been tremendous. I mean, if you take a long period of time, let's say 2019-2000, 24. Our direct cost has increased in beer and in non-alcoholic by 6668%, and we have been able to increase prices in line with inflation a little bit, a little bit less in the case of beer, a little bit more in the case of non-alcoholic, but we have not been able to catch up with the enormous pressure on our direct cost. So we need to continue making efforts to improve prices to recuperate, and we are moving in that direction, and the industry, as a whole, is moving in this direction.
Speaker Change: upthis
Speaker Change: Look for it, I think that there is a lot of...
Speaker Change: questionality in our markets
Speaker Change: And it happens that the pressure on the rate costs have been tremendous. I mean, if you take a longer period of time, let's say 2019, 2000...
Speaker Change: twenty four
Speaker Change: Our direct costs have increased in beer and non-alcoholic by 66-68%, and we have been able to increase price in line of inflation a little bit less in the case of beer, a little bit less in the case of non-alcoholic.
Speaker Change: I'm more in the case of non-alcoholic.
Speaker Change: that we have not been able to catch up.
Speaker Change: with enormous pressure on direct cost. So we need to continue making efforts to improve prices, to recuperate margins, and we are moving in that direction, and the industry as a whole is moving in this direction.
Patricio Jota: Okay, that's clear. Any indication that your competitors have followed after your increase in July?
Speaker Change: Okay, that's clear. Any indication that your competitors have followed after your increase in July ?
Patricio Jota: C-de-de-de-de-de-de-de I mean... I prefer not to double-click on the extremely short term, but I would like to say that the industry as a whole is facing the same pressures on direct costs and is moving in the direction of recuperating margin. In fact, it's not just in Chile, it's all over the world, but I prefer not to discuss what is happening today in the market, but they remain positive about our ability to recuperate margins. Well, let me say this.
Speaker Change: Thank you.
Speaker Change: Hey
Speaker Change: I'm in...
Speaker Change: I prefer not to double-click on the extremely short term, but I would like to say that the industry as a whole...
Speaker Change: is facing the same pressures on direct costs and is moving in the direction of recuperating margin. In fact, it's not just in Chile, it's all over the world, but I prefer not to discuss what is happening today.
Speaker Change: in the market, but they remain positive on our ability to recuperate margins. Let me say this.
Patricio Jota: Got it. Yeah, it's a very short term to kind of gauge that. Last question on Argentina and shifting to other topics. It's been a few quarters since you left the Coke distribution system in Argentina and started using your own. Just wondering if you can give us an idea of how smooth the transition has been and whether you're happy where you are on that distribution today.
Speaker Change: Got it. Yeah, it's a very short term to kind of gauge that last question on Argentina and shifting to other topics It's been a few quarters
Speaker Change: since you left the Coke distribution system in Argentina and you started using your own. Just wondering if you can give us an idea of how smooth the transition has been and whether you're happy where you are on that distribution today.
Patricio Jota: Look, we are extremely happy, we made all the... or we needed all the integration of the distributions on August the 10th of October, 2022, and it was very important for us because, as you probably know,
Speaker Change: Look, we're extremely happy. We made all the...
Speaker Change: We made all the integration of the distributions in August , September , October .
Speaker Change: 2023. That was very important for us because as you probably know...
Patricio Jota: 22% of our beer volumes in Argentina were distributed by the Coca-Cola system, and we wanted to have control of 100% of our distribution. We were very cooperative. The Anonymous Water Products, in our distribution, we created enough critical mass to have our own distribution system in all the territory, and today we do not depend on the distribution of Coca-Cola in the south and in some parts of the north of Argentina. It was very smooth.
Speaker Change: 22% of our beer volumes in Argentina were distributed by the Coca-Cola system, and we wanted to have control of our 100% of our distribution. By incorporating...
Speaker Change: The non-water products in our distribution, we created enough critical mass to have our own distribution system in all the territory. And today we do not depend on the distribution of Coca-Cola in the south and in some parts of the north.
Speaker Change: of Argentina.
Patricio Jota: We reduced a lot of full-time employees. We reduced a lot of distributors. This is 100% paid. In our DNA of 23, and the results are extremely good and satisfactory, we are very happy with our ability to win a young distribution, putting together today you Beer, Wine, Sider, and Water.
Speaker Change: in our P&L of 2023, and the results are extremely good and satisfactory. We are very happy on our ability to run a joint distribution. Putting together today...
Patricio Jota: And we'll be happy about that. In particular, in the case of water, we are running at a positive BDA and positive net profit for the water business this year, but not consolidating this; we expect to consolidate it in the beginning of August of 2024. I mean, this month or next month, we're not consolidating this, but why do we consolidate? We expect to have positive BDA, and I'm positive net profit, mainly because we transform all the fixed costs of the water operation into viable costs by incorporating them in our platform.
Speaker Change: beer, wine, cider, and water. And we're extremely happy with this, particularly in the case of water.
Speaker Change: We are running at a positive BDA and positive net profit.
Speaker Change: In the year, the water business, we are not consolidating this. We expect to consolidate it beginning August or September 2024, I mean, in this month or in next month. We are not consolidating this, but while we consolidate, we expect to.
Speaker Change: to have positive EVDA and positive net profits, mainly because we transform all the fixed costs of the water operation into viable costs by incorporating it in our platform.
Speaker Change: It happens that the year 2024, in terms of volumes for the categories, in Argentina it's extremely poor. I mean, the beer category is decreasing its volumes by 30%, the water business or the water category, same thing. We are keeping...
Speaker Change: Rafael is speaking, our market shares there, but when volumes decrease by 30 percent...
Speaker Change: Everything in terms of results becomes very strange, and this is what we are facing. We don't know when the consumption patterns are going to change.
Speaker Change: In Argentina, hopefully in 2024, this is what we expect. We don't know, but in the meanwhile, we are capturing again all the efficiencies of having just one distribution network.
Patricio Jota: That's very clear. Thanks so much for that, Carlos. Thank you, Felipe.
Speaker Change: That's very clear. Thanks so much for that, Carlos.
Operator: Okay, thank you very much. The next question is for Mr. Pedro Seixas from Nuremberg, Berman. Please go ahead, sir. Hi, Mr. Pedro, your line is open, in case you are muted. Okay, we'll come back to Mr. Pedro Sasia's in a moment. In the meantime, we'll take Mr. Alvaro Garcia from BTG Pactual. Please go head to your line in the
Felipe Ucros: Thank you, Felipe.
Speaker Change: Okay, thank you very much. Next question is for Mr. Pedro Seixas from Nuremberg, Berman. Please go ahead, sir.
Speaker Change: Hi Mr. Pedro, your line is open in case you are muted.
Speaker Change: Okay we'll come back to Mr. Pedro Seixas in a moment. In the meantime we'll take Mr. Alvaro Garcia from BTG Pactual. Please go ahead sir, your line is open.
Alvaro Garcia: Now I patricio thank you for... the space for questions. I really appreciate it.
Alvaro Garcia: Hi Patricio, thanks for the space for questions, I really appreciate it.
Patricio Jota: A question on Colombia; the volumes there were quite strong relative to how the economy is doing. I was wondering if you could comment on initiatives in Colombia for that, JV. And then just to follow up on Argentina, you mentioned the share was stable. I was wondering if that was volume share or value share. My sense is that if you maybe lag on pricing now and Gain Volume Share, you could be in a much better position coming out of the crisis, but any clarity there would be very helpful. Thank you.
Alvaro Garcia: A question on Colombia, the volumes there were quite strong relative to how the economy is doing. I was wondering if you can comment on initiatives in Colombia for that JV. And then just to follow up on Argentina, you mentioned share was stable. I was wondering if...
Speaker Change: You can comment if that was volume share, value share. You know, my sense is if you maybe lag on pricing now.
Speaker Change: and gain volume share, you could be in a much better position coming out of the crisis, but any clarity there would be very helpful. Thank you.
Patricio Jota: Thank you, Alvaro, for your questions. Regarding Colombia, yes, it's true. We're growing our volumes by 50%. We're gaining a little bit of market share. And I mean, we make public the results in terms of net profits.
Speaker Change: Thank you, Alvaro, for your questions.
Speaker Change: We are growing our volume by 50%, we are gaining a little bit of market share, and we make public the results in terms of net profit.
Patricio Jota: But TVDA is being positive year to date, and we expect to have a much better result in the last part of the year, because most of the volume comes from October and November. I mean, it's tough, it has been tough, our project in Colombia, but we're moving in the right direction. We're very happy about that.
Speaker Change: for being positive year to date and we expect to have a much better result in the last part of the year because most of the volume comes from October, November and December.
Speaker Change: It has been a tough project in Colombia, but we are moving in the right direction and we are very happy on this.
Patricio Jota: Regarding Argentina, yes, I mean, our volumes and... Our market share in terms of volumes and in terms of value are in the same direction. Look, in 2023, our prices will increase by... 11% more than inflation, 10 or 11. I mean, inflation is 200%. It's very difficult to know exactly or to tell exactly your price is inflation, but let's say that we gain a little bit, we took a little bit of an advantage on inflation. In 2020, 4, we are losing.
Speaker Change: Regarding Argentina, yes, our, I mean, our volumes and, and, and...
Speaker Change: our market in terms of volume in terms of value are in the same in the same direction looking twenty in two thousand and twenty three our prices will increaseed by
Speaker Change: eleven percent more than inflation pten or eleven i mean faciious two hundred percent is very difficult to know exactly or to the very exactly your price with inflation but let's say that we gain a little bit
Patricio Jota: If you put together 23 and 24, we are at three points above inflation. The industry as a whole is moving in the same direction, but it's not a good idea to decrease prices in order not to lose volumes because if you do this, at the end of the day, it's going to be extremely difficult to recover prices. I prefer to move prices in line with inflation and do our best to keep our scale and trust that the economy will resume normality and growth sooner rather than later, but it's really very difficult to know when it will go. Thank you.
Speaker Change: fiaks or seven points compared to inflation so if you put together twenty three and twenty four we three points
Speaker Change: of our inflation and then bership is moving in the same direction that
Speaker Change: but it's not that would idea to to decrease prices in order not to lose volumes because
Speaker Change: If you do this, at the end of the day, it's going to be extremely difficult to recuperate prices. I prefer to move prices in line with...
Speaker Change: in line with inflation and do our best efforts to keep our scale and trust that the economy will resume normality and growth. We expect sooner rather than later, but it's really very difficult to know when it's going to happen.
Speaker Change: Thank you very much. Thank you.
Operator: Okay, thank you very much. We'll go to Mr. Pedro Sassas, Nunez, and Bergman. He has this question. I was wondering if you could elaborate on how much exactly the FX fluctuation impact the 78% drop in EBDAC, how much of the 78% was to do with the FX depreciation and how much was to do with the volume decline. Thank you.
Speaker Change: Thank you very much. We'll go to Mr. Pedro Seixas-Nuremberg-Berman. He typed his question. I was wondering if you could elaborate on how much exactly did the FX fluctuation impact the 78% drop in EBITDA?
Pedro Seixas-Nuremberg-Berman: How much of the 78% was to do with the FX depreciation and how much was to do with the volume decline? Thank you
Felipe Dubernet: We have the precise calculation, we have Felipe Dubernet, Felipe Dubernet, Felipe Dubernet, Felipe Dubernet, Felipe Cervecerias, Felipe Dubernet, Thank you, Pedro, for your question. At the consolidated level, our EBDTA reduced from 47 billion pesos last year's second quarter to 10 billion pesos the second quarter of this year. So the difference is 37 billion Chilean pesos, of this, the external effect as we call, so that's the combination of exchange rate in Chile, so the Chilean peso depreciation against the US dollar, offset some work for due to some positive effect on raw material cost in US dollar, these affected in total about 16 billion pesos in negative direction, so this was the seat of our results in quarter 2, by exchange rate, somewhat compensated with better prices in P.T., aluminum cost and malt cost.
Speaker Change: We have the precise calculation. I will ask Felipe to give you the right figures, Pedro.
Felipe Ucros: Thank you, Pedro, for your question. At a consolidated level, our EBDTA reduced from 47 billion pesos last year's second quarter to 10 billion pesos the second quarter of this year.
Speaker Change: So, the difference is 37 billion Chilean pesos.
Speaker Change: of these
Speaker Change: The external effect, as we call it, so that's the combination of exchange rate in Chile, so the Chilean peso depreciation against the US dollar, offset somewhat due to some positive effect on raw material cost in US dollar.
Speaker Change: This affected in total about 16 billion pesos in a negative direction.
Speaker Change: So this was the heat of our results in Quarter 2. Buyer's generate somewhat compensated with better prices in PEP, aluminum cost, and mold cost.
Felipe Dubernet: On the other hand, all I would operate in variables such as strife that was positive, was positive, but not enough to compensate for being too fast, and volume, very negative. We reduced the volume overall at the consolidated level by 13%, and compensated with some efficiencies, especially in logistics. The impact of this operating result was about 21 billion pesos negative. So, the main process of the EBITDA decline is what you do first: external effects About 16 billion pesos. Unvolume of the somewhat by price and efficiency of about 21 billion pesos negative, thus is the breach of the edit.
Speaker Change: On the other hand, all our operating variables, such as price, that was positive, but not enough to compensate the input cost.
Speaker Change: And volume, very negative. We reduced the volume overall at the consolidated level by 13%.
Speaker Change: and compensated with some efficiencies, especially in logistics.
Speaker Change: The impact of this operating result was about 21 billion pesos negative. So the main causes of the EBITDA decline were due to, first, external effects.
Speaker Change: about 16 billion pesos and volume offset somewhat by price and efficiencies of about 21 billion pesos negative. That is the breach of the EDIPTA.
Felipe Dubernet: Okay, thank you very much. Once again, dial two for any additional questions. We'll open the line to Nicolás D'Onozo. We did notice a question from your line. In case you have a question, your line is open. Nicolás D'Onozo, from Compass Group Asset Management.
Speaker Change: Okay, thank you very much. Once again, star two for any additional questions. We'll open Nicolas D'Onozo. We did notice your question from your line. In case you have a question, your line is open. Nicolas D'Onozo from Compass Group Asset Management.
Speaker Change: You know, you learn, yeah.
Speaker Change: Okay, so just once again, star two for any additional questions.
Operator: Okay, so just once again, start to for any additional questions. We'll give a moment or so for any additional questions or any follow-up. Okay, we have a question from Fernando Olvera from Bank of America. Please go ahead, sir. Your line is open.
Speaker Change: Okay, we have a question from Fernando Olvera from Bank of America. Please go ahead sir, your line is open.
Fernando Olvera: Hi, good morning, and thanks for taking my question. My question is related to cost, so if you can share what your outlook for the remaining of the year is, given that packaging and sugar costs are down, although chili and pepper prices have depreciated, you know, versus the US dollar. And I have another question, but I'll wait.
Fernando Olvera: Hi, good morning and thanks for taking my question.
Fernando Olvera: My question is related to cost. If you can share what is your outlook for the remaining of the year, you know, given that packaging and sugar costs are down, although the Chilean peso has depreciated, you know, versus the US dollar. And I have another question, but I'll wait.
Patricio Jota: Yes, thank you, Fernando. We'll also ask Felipe to discuss the cost of raw materials and what we expect for the rest of the year. Thank you, Fernando.
Fernando Olvera: Cheers!
Speaker Change: Thank you, Fernando. We'll ask also Felipe to discuss on cost of raw materials.
Felipe Dubernet: Tens of Roma, Tens of Roma, Tens of some water. You are right; the sugar has been soft enough to do so.
Speaker Change: and what we expect for the rest of the year. Thank you, Fernando. Thank you. In terms of raw materials and some water, you are right, the sugar has been softened a little bit, but still...
Felipe Dubernet: You are right, the sugar has been softened a little bit, but it still is higher than last year, so we continue to be higher, and we saw a better outlook on the futures last time. The others, the downsides that we have in Roma Piedel, so the higher cost is palpable. There are two similar projects, but we made both of them together, those of the European Union and the European egalitarian Front in 2000.
Felipe Ucros: is higher than last year, so we continue to be higher and we saw a better outlook in the future in the last time.
Felipe Ucros: The other downside that we have in raw materials of higher cost is pulp.
Speaker Change: You know, orange juices are at a record highest cost, especially due to Brazil. For the rest, it's the same trend that we have. I think they would be stable.
Speaker Change: So what is more unstable, and it's very difficult to give you an outlook, because, I don't know, in the last two months, the Chilean pesos moved from high $900, let's say close to $1000, to below $900.
Speaker Change: So, this week also was especially volatile in line with the overall markets, so it's difficult to predict. So, I prefer not to give an outlook. We're using our projections.
Felipe Dubernet: So, this week also was especially volatile, in line with the overall market. So it's very difficult to predict. So, I prefer not to give an outlook. 900-40. But at the end, if you're going to bloom, you will find a full array of projections.
Speaker Change: 940 but at the end if you if you go to Bloomberg you'll find
Speaker Change: a full array of projections. Also, remind that E.T. is very sensible.
Speaker Change: to copper.
Speaker Change: to cut the prices.
Speaker Change: So, not only how the financial markets move, or how the Fed rates would move going forward, but also on capital prices. So, difficult to predict. So, this is the reason why we took actions in terms of prices.
Speaker Change: because all the markets, all the players, we are facing the same input cost pressures.
Speaker Change: and we think that would continue towards the end of the year. We don't see nothing better of what we have seen.
Speaker Change: in the last quarter. So, that's important to...
Speaker Change: to work on revenue management and price.
Patricio Jota: Highlighted in the press release that recovering profitability is your short-term priority. So, can you share what additional measures you have already implemented or are about to implement to recover margins, and how do you envisage all this recovery on margins?
Speaker Change: highlighted in the press release that recovering profitability is your short term priority so can you share what additional measures are you already implemented or are you are or you are about to implement
Patricio Jota: Making a strong effect because India, which is very sensible to temperature and weather, and creating, creating, or producing an effect also in the other categories, but not as much as in the case of beer. Looking forward, we don't know what's going to happen with the weather, but, of course, we assume that the weather is going to be normal, not hot, not cold. July was a very normal month in terms of temperature and in terms of rain, average for the last 20 years, and volumes resumed some growth, not too much, a single digit, 2%, something like this, 2 to 3%, which is normal in an economy which is not performing well such as Chile's. So we feel comfortable regarding the future, regarding volumes, and again, we think that May and June, particularly and Q2 2024, were extremely, extremely extreme because of the conditions I just mentioned.
Speaker Change: to recover margins and how do you envision all this recovery on margins?
Speaker Change: Indeed, it's our short-term priority, I mean, long-term, we need to move three pillars to build up.
Speaker Change: a good business in the long term, we need to move the pillar or to work in the pillar of profitability, growth and sustainability. And of course we put emphasis on these three pillars.
Patricio Jota: Thank you very much. For the next six months, the Sunday, for you, to today. It's handy.
Speaker Change: for the growth, profitability and sustainability. Having said that, the priority for...
Speaker Change: The next six months, and the priority today is...
Speaker Change: Thank you very much.
Patricio Jota: Because expenses number one, we have our elical plan devoted to being much more efficient and way ahead. Revenue management in Asia Tics, on the other hand. Control on full-time employees and some efficiencies regarding full-time employees, control on SKUs and some efficiencies regarding SKUs, and some big, little transformation programs, particularly in terms of the way we sell and the way we distribute. If you want to collaborate more on this, we could, we could, we could, we could.
Speaker Change: Expenses, number one, we have our Hercules plan devoted to be much more efficient on one hand.
Speaker Change: Revenue Management Initiatives, on the other.
Speaker Change: one of their jobs.
Speaker Change: the way we distribute. If you want us to elaborate more on this, we could do this.
Patricio Jota: But those are the main elements, and we are fully focused on this. That's our first priority for tomorrow, and it was our first priority yesterday, and we're working on... And we expect to improve our financial results in the second half of the year significantly. I mean, this is our number one priority.
Speaker Change: But those are the main elements and we are fully focused on this.
Felipe Ucros: That's our first priority for tomorrow.
Felipe Ucros: a twenty first
Speaker Change: and it was our first priority yesterday and we're working on this.
Fernando Olvera: Great! Thank you so much.
Speaker Change: Great. Thank you so much.
Speaker Change: Okay, thank you very much. Our next...
Operator: Thank you very much. Our next question comes from Ms. Constanza Gonzalez from Quest Capital. Please go ahead, Manuel. The line is open.
Speaker Change: Question comes from Ms. Constanza Gonzalez from Quest Capital, please go ahead ma'am, your line is open.
Constanza González: Good morning and thank you for the call. I have a question regarding Argentina. Could you clarify what you are expecting in volume and prices in the next quarter or if you are expecting some recovery at the end of this year or the beginning of 2025?
Constanza González: Good morning and thank you for the call. I have a question regarding Argentina. Could you clarify about what are you expecting in volume and prices in the next quarter?
Speaker Change: Or if you are expecting some recovery at the end of this year or the beginning of 2025?
Speaker Change: Thanks.
Speaker Change: Thank you Constance, extremely difficult to know exactly, look.
Speaker Change: if our volumes were handed before the beginning of the crisis.
Patricio Jota: [inaudible] If our volumes were handed before the beginning of Christ and today at 70, we expect to keep them at the level of 70 during Q3 and we expect to start them at the level of 85 in Q4. But this is just an expectation because we really don't know. And if we do this, we could establish maybe five; we could make a profitable end of the year. But again, this was expected; we don't know exactly. Regarding price, as I explained before, we expect to move in the line within 3.
Speaker Change: and today at 7pm.
Speaker Change: We expect to keep in the level of 70 during Q3, and we expect to establish in the level of 85 in Q4. But this is just an expectation because we really don't know. And if we do this, if we're able to establish in 85, we could make a...
Speaker Change: a profitable end of the year. But again, this is what we expect. We don't know exactly. Regarding prices, as I explained before, we expect to move in line with inflation.
Felipe Dubernet: Felipe.
Operator: Okay, thank you. Okay, thank you very much. Next question comes from Mr. Fia, the girl also from Compat. Good, please go ahead now. Yes, can you hear me? Yes, Cervecerias Unidas SA
Constanza González: yeah
Speaker Change: Okay, thank you.
Speaker Change: Okay, thank you very much.
Speaker Change: Next question comes from Ms. Sofia Figuera Ossa from Compass Group. Please go ahead now.
unknown: Thank you for the call. My question is if you have another non-recruiting asset that you could use.
Speaker Change: Yes, can you hear me?
Speaker Change: Thank you for the call. My question is if you have another non-recurring asset that can be put on sale as the land that we saw this quarter?
Patricio Jota: No, we expect not to have something like this in the second half of the year. Okay, thank you very much.
Speaker Change: No, we expect not to have something like this in the second half of the year.
Speaker Change: Okay, thank you very much.
Operator: Thank you very much. The next question comes from Lucas from J.P. Morgan. Please go ahead, sir; your line is open.
Speaker Change: Thank you very much, next question comes from Lucas from J.P. Morgan, please go ahead sir, your line is open.
Lucas: Thank you.
Speaker Change: Yeah.
Speaker Change: Hello.
Lucas: Hello, I hope you hear me well. My first question is...
Lucas: So, my first question is, in light of this very uncertain scenario for commodities, if the company wouldn't be able to reconsider its policy not to hedge commodities in effect. So how do you see the benefits and the cost of hedges versus the ability to have a bit more, let's say, predictability on these lines? So that's the first question. The second question is just to clarify.
Lucas: My first question is, in light of this very uncertain scenario for commodities, if the company wouldn't be able to reconsider its policy not to hedge commodities and facts,
Speaker Change: So, how do you see the benefits of and the cost of hedges versus the?
Speaker Change: You know, the ability of having a bit more, let's say, predictability on these lines. So, that's the first question. The second question is just to clarify.
Patricio Jota: In the third quarter, the company is seeing improvements in volumes. If you can give us more information on how the premium segments performed in these bad weather situations in the second quarter, And if you see sort of a premium accelerating more now in the third quarter versus the whole industry. In other words, if on top of the price increases, you're implementing if you believe that mix should also be helpful. For to improve your average price. Thank you.
Alvaro Garcia: Yeah, none of the table, thank you very much.
Speaker Change: Third quarter the company is seeing an improvement in volumes if you can
Speaker Change: Give us more information on how the premium segments performed in this bad weather situation in the second quarter and if you see...
Speaker Change: serve a premium, accelerating more now in the third quarter versus the whole industry. In other words, if on top of the price increases you're implementing, if you believe that MIX should also be helpful to improve your average price. Thank you.
Patricio Jota: Thank you, Luca, for your question. Regarding hedging, we have a very clear policy, and we do not hedge raw materials. I mean, because you have two alternatives. Or you hedge, or you do not hedge. If you do not hedge, you face the spot curve of prices. If you hedge, you face the future curve of prices. And if you say the spot price, if you want to face the future, Cervecerias, you have to pay the cost of the intermediaries.
Speaker Change: Thank you, Luca, for your question. Regarding hedging, we have a very clear policy, and we do not hedge raw materials. I mean, because you have two alternatives. Or you hedge, or you do not hedge. If you do not hedge...
Speaker Change: You face the spot curve of prices. If you hit, you face the future curve of prices.
Speaker Change: And if you face the spot price with the price, if you want to face the future curve of price, you have to pay the cost of intermediaries.
Speaker Change: So at the end of the day, you lose money. And if you ask me, hey, but if you hedge when it's a good idea and if you do not hedge when it's a bad idea, I think if I would be able to do this indeed.
Speaker Change: We would do it, but we do not have this ability, indeed. So we are very clear on this. We do not hedge, and we will not hedge. Regarding premium, it's very...
Speaker Change: It's very strange what has happened, because let me take the beer category in Chile, for example. Before the pandemic, in 2019,
Speaker Change: premium was 25 to 27 percent of our volumes
Patricio Jota: After the pandemic, the premium is at the level of 50%. At the best moment, it was something like 60% in 2021. When the withdrawals of money from the pension funds started, people had a lot of money in their pockets, and the premium jumped to 60%. Now, the premium is decreasing to 50%. That's still much better than it was in 2019, and we have decreased the percentage of premium in the last month from 53 to 50 and 49, and we expect it to stay at that level. I prefer to assume that no major changes are going to happen during the rest of the year.
Speaker Change: After pandemic, premium is in the level of 50%. In the best moment, it was something like 60% in 2021.
Speaker Change: When there were withdrawals of money from the pension funds, people had a lot of money in their pockets, and the premium jumped to 60%.
Speaker Change: Now, a preeminent...
Speaker Change: Decreasing to 50%, that's still much better than...
Speaker Change: much better than it was in 2019.
Speaker Change: And we have a...
Speaker Change: We have decreased the percentage of premium in the last month from 53 to 50, 49, and we expect it to...
Speaker Change: We expect it to stay in that level. We assume that no major changes are going to happen in the rest of the year.
Lucas: Okay, thank you very much, very clear. Thank you.
Speaker Change: sky
Operator: Okay, thank you very much. We have a question from Nicole Helm from MetLife Investment Management. Please go ahead, ma'am. Your line is open. Thanks for watching. We have a question from Nicole Helm from MetLife in Dessa Management. Your line is open in case you have a question. Okay, we'll come back later. The next question is a follow-up question from Alvaro Garca, from BTG Pactu. Please go ahead. The line is open.
Speaker Change: Okay, thank you very much. We have a question from Nicole Helm from MetLife Investment Management. Please go ahead, ma'am. Your line is open.
Speaker Change: © 2012 University of Georgia College of Agricultural and Environmental Sciences UGA Extension Office of Communications and Creative Services
Speaker Change: Felipe Dubernet, Felipe Dubernet, Felipe Dubernet
Speaker Change: Once again, we have a question from Nicole Helm from MetLife Investment Management. Your line is open in case you have a question.
Speaker Change: Okay, we'll come back later. Next question, this is a follow-up question from Alvaro Garcia from BTG Pactual. Please go ahead, your line is open.
Alvaro Garcia: Hey, sorry about that. I meant to ask about Cogs and then I meant to ask about... Chile Volumes, but both of those questions have been answered.
Alvaro Garcia: Hey, sorry about that. I meant to ask about cogs and then I meant to ask about, uh...
Alvaro Garcia: Thank you, Alvaro. Thank you very much. Okay, thank you. Once again, start with number two for any final questions. We'll wait for another moment or so for any additional questions. Okay, it looks like we have no further questions at this point. I'll be passing the line back to the management team for the concluding remarks.
Patricio Jota: Thank you very much. I would like to reiterate that there was a second quarter of 2012 when the four results were very weak and were negatively impacted by a particular vehicle context for demand in China and in China and the depreciation for the main local governments, which resulted in higher cost pressure. Given this scenario, we are confident that our multi-category beverage strategy, based on focus and synergy, should help us to return to the profitability path, which is our short-term priority going forward, as I mentioned during the conference call. Thank you very much for attending.
Alvaro Garcia: at Chile Volumes, but both of those questions have been answered, so thanks very much.
Operator: Thank you very much. This concludes today's conference call; we'll now be closing all the lines. Thank you and goodbye.
Speaker Change: Thank you, Alvaro. Thank you very much.
Alvaro Garcia: Okay, thank you. We'll once again start to for any final questions.
Speaker Change: Okay, it looks like we have no further questions at this point. I'll be passing the line back to the management team for the concluding remarks.
Speaker Change: Thank you very much, to conclude.
Speaker Change: I would like to reiterate that our second quarter of 2024 results were very weak and were negatively impacted by a particular difficult context for demand in China and Argentina.
Speaker Change: and the depreciation of our main local currencies, which resulted in higher cost pressures.
Speaker Change: Given this scenario, we are confident that our multi-category beverage strategy, based on focus and synergy,
Speaker Change: Should help us to return to the profitability path, which is our short-term priority going forward, as I mentioned during the conference call. Thank you very much for attending.
Speaker Change: Thank you very much. This concludes today's conference call. We'll now be closing all the lines. Thank you and goodbye.
Patricio Jota: In this, our short-term priority, and long-term, we need to move three years to build out, and go business in the long term. We need to move the pillar or work on the pillar of profitability, growth, and sustainability. And, of course, we put them on these three pillars. Yo!
Lucas: Hello, I hope you hear me well. My first question. Yes, thank you.
Felipe Dubernet: Also, I would remind you that it is very sensible to cover, to cover prices. So, not only how the financial market is moving, or how the Fed rights would move going forward, but also on cover prices. Difficult to predict. So, this is the reason why we took action in terms of price, because all the market, all the players, are facing the same input cost pressures, and we think that will continue towards the end of the year. We don't see anything better than what we have seen in the last quarter, so it's important to work on revenue management and price.
Patricio Jota: In the case of beer, the decrease was in the mid-team, while in the case of non-alcoholic, the decrease was a mid-team, so something like 5% in the case of non-alcoholic, something like 14% in the case of beer. So, as you can see, there are strong differences in both cases. We are keeping marketers.
Patricio Jota: So at the end of the year, you lose money. And if you let me in, but if you hate to end it, it's a good idea. And if you don't hate to end it, it's a bad idea.
Patricio Jota: And as a percentage of that sales, we made flat in all of D&G-59.2%, regarding our main joint ventures and associated business in Colombia, Bolivia, and Christianity. Guiding Bachelor Financial results. In Argentina, our water business with an army recorded a complexion volume due to the time scenario for consumption. Nonetheless, financial results improved in the last year due to efficiency from a successful new to market and that office integration with CCU Argentina. Now, I will be glad to answer any questions you may have.
Patricio Jota: I mean, if I were able to do this in debt, we'd do it, but we do not have this ability. And so we are very clear on this: we do not hate, and we will not hate. We can't, we can't in opinion. It's very, it's very strange what has happened because, let me take the Bianca Tego in Chile, for example. Before the pandemic in 2019, premium was 25 to 27 percent of our volumes.
Patricio Jota: Also, together, it is a rate of $0.24,373 million per cent. The wine operating segment continues in a recovery trend, with revenues expanding 12% driven by an 11.9% higher average price. Only Chile showed a strong recovery and exports from Chile, which expanded 9.1% while the Chilean domestic market was down 5.4%. The way they are described as boasted by the wicked feeling face, so I'm sure of the next sport revenues and very new management initiatives in our domestic market, profit rose 28.5% and the margin was crude, 511 basis goals, and as the MA expenses increased 12.40%, mainly due to higher margin expenses related to exports which are denominated in US dollars.
Patricio Jota: How is it the year 2020 before in terms of volumes for the categories? In fact, the dean is extremely poor in the category secretions, volumes by 30 percent. The water business or the water category, same thing; we are keeping roughly speaking our market shirts there, but when volumes decrease by 30 percent, everything in terms of results becomes very strained, and this is what we are facing. We don't know when the consumption patterns are going to change in Argentina, hopefully, in Q4 2024. This is what we expect. We don't know, but in the meantime, we are capturing again all the efficiencies of having just one distribution network.