Q2 2025 Compania Cervecerias Unidas SA Earnings Call
Speaker #3: Good day, Yone, and welcome to CCU's second quarter 2025 earnings conference call on the 7th of August, 2025. Please note that today's call is being recorded.
Speaker #3: At this time, I'd like to turn the conference call over to Claudio Heras, the head of Investor Relations. Please go ahead, sir.
Speaker #4: Welcome. And thank you for attending CCU's second quarter, 2025 conference call. Today with me are Mr. Felipe Dubernet, Chief Financial Officer; Mr. Joaquin Trejo, Financial Planning and Investor Relations Manager; and Ms. Carolina Burgos, Senior Investor Relations Analyst.
Speaker #4: You have received a copy of the company's consolidated second quarter, 2025 earnings release. The call will start by reviewing our overall results and then we will move on to a Q&A session.
Speaker #4: As usual, before we begin, please take note of the following statement. The statement may, in this call, relate to CCU's future financial results or forward-looking statements.
Speaker #4: Which, of course, involves known and unknown risks and uncertainties that could cause actual performance or results to materially differ. This statement should be taken in conjunction with the additional information about risk and uncertainties set forth in CCU's annual report in Form 20F, filed with the US Securities and Exchange Commission, and in the annual report submitted to the CMF and available on our website.
Speaker #4: For today's conference, as we stated in our second quarter 2025 financial report, annual variations and references regarding EBITDA and net income exclude the non-recurring gain from the sale of a portion of land in Chile in the second quarter of 2024.
Speaker #4: Also, organic variation to which we will refer next excludes the consolidation of avo in Argentina and ave in Paraguay. For more details to this, see footnote 3 of our second quarter, 25 financial report.
Speaker #4: It is now my pleasure to introduce our CFO, Mr. Felipe Dubernet.
Speaker #5: Thank you, Claudio, and thank you, you all, for joining the call today. In the second quarter of 2025, CCU delivered higher financial results and increased profitability versus last year, despite the volatile and challenging business environment.
Speaker #5: Consolidated EBITDA nearly doubled versus last year, mainly driven by our main operating segment, Chile, which expanded EBITDA 59.1%. And to a lesser extent, by the 8.3% growth in the wine operating segment.
Speaker #5: On the other hand, we keep facing a challenging scenario in Argentina, impacting the international business operating segments' results. Higher consolidated EBITDA improved BITDA margins, were driven by volume growth, revenue management efforts, and efficiency.
Speaker #5: More than offsetting costs and expenses, with pressure from inflation. In line with the higher operating results, net income posted a lower loss versus last year.
Speaker #5: Our first half results show that we are taking the right actions to keep delivering higher financial results and profitability in a context of soft volume trends for the beverage industry in the region.
Speaker #5: For the second half, we will keep executing our 2025-2027 strategic plan and its three pillars: profitability, growth, and sustainability, with a special focus on profitability supported by both revenue management efforts, backed by strong and diversified portfolio of brands, and efficiencies across all our operating segments.
Speaker #5: Regarding our main consolidated figures, in the second quarter, organic net sales were up 4.8%, explained by 4.7% higher organic volumes, while organic average prices were flat.
Speaker #5: Gross profit grew 6.7% organically, and gross margin expanded 73 basis points. In addition, consolidated MS and DNA expenses grew 5.8%. Mainly due to the consolidation of Aguas de Origen in Argentina although, as a percentage of net sales, improved 197 basis points.
Speaker #5: Without the consolidation of Aguas de Origen, that we started the consolidation 1st of July last year, MS and DNA expenses would have increased 0.5%.
Speaker #5: In all, EBITDA expanded 97.1% and EBITDA margin expanded 150 basis points. In terms of our segments, in the Chile operating segment, top line expanded 9.4%, as a result of 6% increase in average prices and 3.2% higher volumes, where all categories posted positive yield growth.
Speaker #5: With a better seasonally adjusted volume space than previous quarters, increased average prices were explained mainly by revenue management efforts, which more than offset negative mix effects. These efforts were key to expanding gross profit and gross margin by 12.5% and 115 basis points, respectively, in a context of cost pressure related to an unfavorable packaging mix and higher manufacturing costs, mainly associated with our PET recycling plant, Circular.
Speaker #5: MS and DNA expenses grew below inflation, expanding 2.1%, and as a percentage of net sales, improved 265 basis points due to efficiencies. Altogether, EBITDA increased 59.1%, and EBITDA margin expanded 339.
Speaker #5: In international business operating segments, organic volumes posted a 9.8% expansion. Although net sales recorded an 11.4% contraction, driven by a 19.3% lower organic average prices in Chilean pesos.
Speaker #5: The decline in organic average prices was mainly due to the devaluation of the Argentine peso against the US dollar, and also due to a challenging pricing scenario in Argentina.
Speaker #5: The volume expansion was mainly explained by a low comparison base in the second quarter, 2024, in Argentina, while volumes seasonally adjusted continued in a recovery trend for the fourth consecutive quarter.
Speaker #5: Organic gross profit increased 11.6%, and organic gross margin was flat. MS and DNA expenses were up 10.5%, mainly due to the consolidation of Avo and higher marketing expenses.
Speaker #5: As a percentage of net sales, MS and DNA expenses decreased 331. Without the consolidation of avo, MS and DNA expenses would have decreased 5.9%.
Speaker #5: In all, in spite of volume growth, given the effects mentioned above, EBITDA loss was similar to last year. The wine operating segment posted a top line expansion of 6%, mainly driven by a 4.2% rising volumes and 1.7% higher average prices.
Speaker #5: Larger volumes were led by a 17.4% growth in exports, partially offset by 4.1% decrease in the Chilean domestic market, while the industry posted a larger decline.
Speaker #5: The higher average prices were mostly explained by a weaker CLP and its favorable impact on export revenues, as well as revenue management initiatives in domestic markets.
Speaker #5: Compensated by negative mix effects in the portfolio. Gross profit was flat, and gross margin deteriorated by 222 basis points due to cost pressures from a higher cost of wine due to a lower harvest and higher USD-linked packaging costs.
Speaker #5: MS and DNA expenses dropped 3.7% due to efficiencies and, as a percentage of net sales, improved 274 basis points. Altogether, EBITDA increased 8.3% and EBITDA margin was up 32 basis points.
Speaker #5: Regarding our main JV and associated business in Colombia, we delivered low single-digit volume growth in a soft industry context. We continue working on strengthening our brand portfolio and our sales execution to deliver sustainable growth in volumes and results in Colombia.
Speaker #5: Now, I will be glad to answer any questions you may have.
Speaker #3: Thank you. We'll now be moving to the Q&A part of the call. If you'd like to ask a question, please press Star 2 on your phone.
Speaker #3: That is Star 2. And if you're dialed in by the web, you can type your estion in the box provided or request to ask a voice question.
Speaker #3: We'll wait a few moments for the questions to come in. Okay. So our first question is from Felipe Ukros from Scotiabank; your line is now open.
Speaker #3: Please go head.
Speaker #6: Financial Operator: Good morning, everyone, and thanks for the space. A couple on my end. So the first one is on the pricing in Argentina.
Speaker #6: Can you delve a little deeper into your pricing comments? You know, you talk about a difficulty in pricing. So just wondering if you can talk whether this comes from the competitive environment, with lack of discipline, or perhaps it's just the state of the consumer that's keeping you from increasing prices faster and on pace with inflation.
Speaker #6: And then the second one is on SG&A in Argentina. Operating leverage seemed to drop pretty strongly this quarter, particularly when you compare it to the last three quarters since you acquired Aguas de Origen.
Speaker #6: So, you know, third quarter of last year, which was, you know, seasonally speaking, kind of similar, also winter, your SG&A was close to 50% of sales, but this quarter it was closer to 66.
Speaker #6: So, there's a pretty stark difference from one year to another. Perhaps the pricing issue has to do with it, but I'm just wondering what the drivers are on that deleveraging pace.
Speaker #6: Thank you.
Speaker #5: Hello, Felipe. Good to hear about you. So, the first thing is, that was key, the pricing. Because at the end of the day, pricing has been very difficult in Argentina, especially in the last, I would say, six months.
Speaker #5: To give you a reference, last year, deer prices in Argentina were compared to inflation in 2024, above inflation by 4.4%. However, this year, year to date, they are below inflation by 10.5%.
Speaker #5: So, if we're taking into account where the new government took office in Argentina, let's say a period of 18 months, since January 1, 2024, our prices in Argentina are 6% below inflation.
Speaker #5: As you know, wages are lagging; real wages in Argentina are lagging below inflation. This is expected because, at the end, the main target of the government is to reduce inflation.
Speaker #5: So consumers have less Argentinian pesos in its wallet, Argentina is expensive right , and it's in this change that at the end of the day, for the future, it's for good to reduce inflation in Argentina.
Speaker #5: Also, the good news in Argentina after the announcement of the government, mid-April, is that we have a new exchange rate policy, let's say. So this is what is affecting overall the industry.
Speaker #5: Also, competition is aggressive because when volumes are difficult to recover. So maybe the good sign is that for the fourth consecutive quarter, seasonally adjusted our volumes are growing.
Speaker #5: However, we have also observed mixed effects as the participation of value brands has increased compared to before. This trend is also related to the deflationary pressure, I would say, in Argentina.
Speaker #5: So, it's very clear that our prices in this period are below inflation. As far as the economy recovering in Argentina in the future, maybe also further reduction on inflation; our prices would be in a more healthy perspective, let's say.
Speaker #5: Regarding the synergies of the water business, no, the synergies are there because at the end, if at the end, of course, at total expenses level, of course, we have in our P&L the expenses of avo.
Speaker #5: There are marketing expenses, because these are completely allocated to the category. There is more distribution cost, of course, but also we have, let's say, we are only owners of 51% of the company.
Speaker #5: So we have a benefit there because we charge avo with so there is a minoritary interest that you need to look. But at the end, you have more marketing expenses because at the same quarter last year, we didn't this.
Speaker #5: But the good indicator—and this is why we did the pro forma—is that if you exclude AVO, the consolidation AVO, our MS and DNA expenses have decreased 5.9%.
Speaker #5: And as a percentage of not of net sales, and this is what is very important, because in a ario where you have high inflation and difficulties to prices, our MS and DNA expenses organically decreased 3300 basis points.
Speaker #5: This is the key indicator. So, of course, the volumes were disappointing in terms of what we expected as recovery. But what was more difficult was the pricing scenario, Felipe.
Speaker #6: Now, I understood. That's very clear. And if I can do a follow-up, you ow, on the other side, on Chile, you had very good results on gross margins.
Speaker #6: Wondering if you can discuss what was the key driver here on the expansion of gross margins in Chile?
Speaker #5: Of course. I think, okay, Felipe, yes, Chile. Thank you for noticing that in Chile we have had good results. In fact, we think we have had good results in Chile, not only overall, but in all categories, let's say, beer, non-alcoholic, and also spirits.
Speaker #5: This is first of all, this is as always we did the commentary on that, our brand equity is very strong in Chile. So our pricing power, so because increasing in this context, the prices 6%, this is real average prices.
Speaker #5: It's not mixed effect; it's real average prices. This is much above inflation. At the same time, we have maintained overall market share and are recovering market share, especially in alcoholic products, compared to the previous quarter.
Speaker #5: So this sounds a good equation I would say. Increasing prices, recovering market share in alcoholic products, we posted in overall alcoholic products low single-digit growth, where competition have had negative growth.
Speaker #5: So, in a very difficult industry, as I mentioned, last quarter in alcoholic beverages, and this is based on a sound brand equity. So, I, along with this good equation in top line, would like to say also a good effort in efficiencies.
Speaker #5: Especially in logistics. So overall, it's a good quarter in our core operating segment, which is Chile.
Speaker #6: Thanks. Thanks a lot for that.
Speaker #3: Thank you very much. Our next question is from Vidi Vira from Goldman Sachs. Can you give guidance for the second half of 2025 regarding profitability and revenue expectations?
Speaker #3: Can you share color on the free cash flow you expect to generate this year after interest, tax, net working capital, CAPEX, etc.?
Speaker #5: Okay. Thank you, Vidi, for your question. First of all, we don't do forward-looking estimates, so I cannot answer your question. On top of that, it's very volatile.
Speaker #5: US dollar is volatile. Exchange rate. So we have had at the beginning of a month ago, US dollar was at 940, we experienced 5% devaluation.
Speaker #5: So it's very volatile. Consumption, as I mentioned in my previous answer, especially for Chile, it seems to be low single-digit. But we need to wait.
Speaker #5: Pricing scenario has been favorable so far, but we don't know of course, we don't know how competition would seem to be. So I cannot give you a guidance on a more precise guidance.
Speaker #5: Regarding free cash flow, yeah, we have had a good equation on operating cash flow. Not only because we increased our EBITDA, but also in working capital, thanks to inventory reduction, thanks to initiative because efficiencies you can look at efficiencies on the one hand in expenses, in costs, but also in working capital.
Speaker #5: So, we are implementing a new planning platform. We do have a new logistics and planning process, which is delivering its fruits. Consequently, we are experiencing a reduction in inventory days, as well as improvements in accounts receivables, thanks to the efforts of our team.
Speaker #5: Also, in this particular quarter, we changed our operating model with Red Bull, which allow us to free up extra cash flow. In terms of CAPEX, we are a little bit behind the facing of the estimate we published in the 20F that we could find in the 20F.
Speaker #5: But that was more than compensated by this excellent working capital result.
Speaker #3: Thank you. Our next question is from Kevin Cheng from Western Asset Management. Your line is now open. Please go ahead. Hello, Kevin. Your line is now open.
Speaker #3: Perhaps you can okay. Looks like Kevin dropped. We'll move to the next question. Our next question is from Lucas Tejeda from JP Morgan. Your line is now open.
Speaker #3: Please go head.
Speaker #7: Hello, everyone. Hope you can hear me. My first question is on, yeah, perfect. My first question is on your expectations for COGS for the rest of the year.
Speaker #7: There was an important drop in aluminum prices, right, in the beginning of the second quarter? I'm wondering if some of these already were reflected in the quarter's results, or if you expect that drop to be something in favor of the company in the third quarter.
Speaker #7: And then, you know, if you can comment a little bit, especially in Chile, how you see your expectations. So, you had an important improvement in margins year-over-year in Tokyo.
Speaker #7: If that's still the case for the second half, particularly in the fourth quarter of last year, the company had a good improvement in profitability.
Speaker #7: If you think this is offering tough comps for you, or if you're comfortable to once again, especially in the fourth quarter, reach the near 20% margin in Chile.
Speaker #7: Thank you very ch.
Speaker #5: So, we are seeing more data optimality. Yeah, we are seeing a little bit higher aluminum prices, as you mentioned, 5% more than last year.
Speaker #5: So at $2,500 per ton, we are not seeing so, and as we don't have, we prefer to be a bit cautious on that.
Speaker #5: Especially given the trade discussions that the U.S. government is having with China, Brazil, and other countries, there are other raw materials that are in a better shape. For example, sugar is reducing 14% compared to last year.
Speaker #5: So far, and somewhat also barely reducing 16% compared to last year. So we are seeing more of a stable aluminum price going forward. On the other hand, we are a little bit worried about, as I mentioned in my previous answer, the US dollar, because it's around 970 last so is and for the quarter was 933.
Speaker #5: For the entire quarter too. So now we are facing US dollar pressure. Of course, towards the end of the year, you know margin would depend a lot on how we sustain our prices.
Speaker #5: And I would say that finance is positive. Because the second quarter was very, very encouraging. We are at our best ever brand equity levels in all categories. Our surveys show that consumers are preferring our products despite the prices.
Speaker #5: So at the end, at the end of the day, this is a sound foundation of the business. So what will happen, as I mentioned in my previous answer, I will not give you a forward-looking view.
Speaker #5: But if we sustain this level of prices, we have, of course, some pressures on given the recent devaluation of the Chilean peso this week.
Speaker #5: But the volumes that we maintain—what I the commentary I made this quarter—I think we are growing low single digits in volumes. So we could have a good second half.
Speaker #3: Perfect. Thank you, y ch. Thank you. Our next question is from Horacio Herrera from MBI Inversiones. How do you see the situation in Argentina?
Speaker #3: Is there any green shoot in terms of profitability?
Speaker #5: Thank you, Horacio. I think I know I prefer to have an interaction, but it seems that I have answered the question. So we are facing a difficult pricing scenario.
Speaker #5: Argentina is in a deflation mode. If it continues this trend, I think it's something that Argentina has to do: let's say, reduce inflation levels.
Speaker #5: Because I don't know. Two, three years ago, we had hyperinflation. We increased prices; volume didn't suffer. But we couldn't get a dividend from this operation.
Speaker #5: And now we are in a moment of change. So the green spots, as I think you asked me your question, if this new macroeconomic program achieves a good end, it would be good.
Speaker #5: In the long term, for our business, we have a solid foundation in Argentina in terms of brand preference, completely aligned with our market share position.
Speaker #5: We have a good operation that is making efficiencies. We incorporate a new, more scaled adding the water to the Aguas de Origen water business. So for the long term, I saw if the macroeconomic plan in Argentina works, and the country has more investment, I'm seeing a better future.
Speaker #5: Now we are in the middle of the transition from a hyperinflation economy to deflation. And of course, our P&L is suffering because it's difficult with the consumer, where the salaries are lagging inflation, to further increase prices.
Speaker #5: Also, competition is aggressive. But, as I said, the things that are under our control are the brand equity and the good work we are doing there.
Speaker #3: Thank you. Our next question is from Evald Stark from BICE Inversiones. Your line is now open. Please go ahead.
Speaker #8: Hello, everyone. Thanks for taking my question. I saw that in exploitation volumes in being accentuated Barabaga, increased by 14% year over year.
Speaker #8: So I was wondering, what do you expect going forward? Do you still expect volumes to increase by double digits, given that you are taking an active approach on opening distribution channels?
Speaker #8: Hello?
Speaker #5: Hello, Evald. We are pushing the mute/unmute button, which is why I didn't answer quickly. So yes, regarding why our main priority in the export business was to recover scale.
Speaker #5: Remember, we had a challenging 2023 with global discussions about inventory. However, I would say this has been a very encouraging quarter, where our volumes grew by 17.4%.
Speaker #5: With very good performance in Japan, Brazil, and South America, while the U.S. market continued to be very complicated. Going forward, we expect, let's say, for the overall year, to continue the recovery.
Speaker #5: We did in 2024, and let's say something like mid-single digit growth in our exports. But the second quarter was very good. Also, above our expectations somewhat.
Speaker #5: As I mentioned, other business was below our expectation. The volume in Argentina was below our expectation, but on the other hand, the export of wine was above our expectation.
Speaker #5: This is the multi-category. As I said, there are some businesses where we perform well, some quarters, and some businesses where we do not. This is why CCU is a leading multi-category company.
Speaker #5: In order to have good diversification.
Speaker #9: Okay, perfect. Thanks.
Speaker #3: Thank you. Our next question is from Alvaro Garcia from BTG. Can you comment on the dynamics of beer versus soft drinks in Chile? Thanks.
Speaker #5: No. Both categories have practically the same growth, low single-digit growth, I would say, beer and non-alcoholic. In the case of spirits, we have very solid growth because we have the market leaders in the new trendy categories.
Speaker #5: Such as red to drink with our Mistral Ice brand. We are a sound leader there. So both were in line in terms of low single-digit growth.
Speaker #5: In the case of beer, we are also outpacing our market share in Q2 compared to what we had in Q1. This shows a good market share recovery in beer across all the brands.
Speaker #5: So, that was good. In the case of non-alcoholic beverages, we grew low single digits despite an unfavorable mix for us, as cola continued to take more of the whole non-alcoholic beverage market. Within soft drinks, colas are where we are not the market leaders.
Speaker #5: I'm taking a larger portion of the mix. However, this has been a trend since the pandemic. Nevertheless, our Pepsi brand continued to gain brand equity.
Speaker #5: Which is important to compete against the market leader in colas. But despite all of this, we experienced this low single-digit growth in a very competitive, by the way, scenario.
Speaker #5: In non-alcoholic. Also in beer. But in non-alcoholic, that usually is sometimes more rational. It has been very competitive in the last quarters.
Speaker #3: Thank you. Our next question is from Constanza Gonzalez from Quest Capital. Your line is now open. Please go ahead.
Speaker #10: Hello, everyone. Thank you, Felipe, for taking my question. I have two. The first one is in relation to Argentina. You said before that you cannot give us guidance for the year, but could you give us more details about the trends in inflation for the month of July?
Speaker #10: And also, just for clarification, in the short term, the priority of the company is to keep the market share in Argentina instead of increasing profitability?
Speaker #10: Thanks.
Speaker #5: Yeah. Thank you, Constanza, for this. Yeah, I mentioned to you that the gap in the last 18 months of beer prices in Argentina compared to inflation in the previous question I answered that was 6% below.
Speaker #5: We expect that towards the end of the year, we will reduce this gap. It would be difficult in the 18 months leading up to December this year to be in line with inflation.
Speaker #5: Especially looking at the salaries' evolution in Argentina. Without losing volume and scale, Argentina for us is a mature business. We don't want to gain share through aggressive promotions.
Speaker #5: As I mentioned in a previous question, I think we have our fair share compared to our brand equity, let's say. So, answering you, if we maintain our brand equity, we will maintain our share.
Speaker #5: I think, what else? No, I think this was your answer. So that's it. On the other hand, the water business presents a better opportunity. I didn't mention, but in the cumulative 18 months, water is just 3% below inflation.
Speaker #5: This is why soft drinks and non-alcoholic beverages are suffering less in their P&L compared to alcoholic beverages: because alcoholic beverages, in the past, have had more exposure to devaluation in the country.
Speaker #5: Also, remember another thing: we had a big chunk in terms of devaluation in April. So, if everything continues in the crawling peg—let's say that the government announced it—this is already predicted, let's say.
Speaker #5: And we expect that inflation levels continue to lower in Argentina. This is the plan of the government, and for the long term, as I said, this is good.
Speaker #5: Argentina is a special country. Argentina is getting out. It's not here. Argentina is getting out from a hyperinflationary economy to a normal standard economy.
Speaker #5: And this is the price we are somewhat paying as consumers in order to have a better future.
Speaker #10: Thank you, Felipe.
Speaker #3: Thank you. Our next question is from Martin Caldente from BTG. He has a few questions. Thank you for taking my question. I wanted to ask how the implementation of the REP law has impacted your operations so far, and how you're preparing for the upcoming more demanding targets.
Speaker #3: What kinds of operational and financial implications have you seen? And to what extent have you passed these additional costs through to consumer prices? Secondly, how are you currently seeing the outlook of key raw materials such as sugar, fruit pulp, PET, aluminum, and other relevant inputs across your main categories?
Speaker #5: Yeah. Okay, thank you. Again, we have difficulties unmuting the platform. But here we go. I think the second part of the question I already answered.
Speaker #5: We saw better prices in sugar fruit pulp, especially in sugar. PP is, I would say, stable. Very DPA, PP. The PP we import from China.
Speaker #5: Aluminum, I said, we are seeing a $2,500 price, stable, let's say. So, but as I mentioned, input costs are subject to the US dollar.
Speaker #5: And, and, and this is not a good week for us regarding the U.S. dollar going forward. The first part of the question regarding circular and red law regarding packaging recycling or PP recycling or PP bottle recycling, I will hand over this question to Joaquin Trejo to give you some color on that.
Speaker #5: Thank you, Felipe. And thanks, Martin, for your question. Yeah, the impact of the red law can be seen in the cost and expenses associated with our PP recycling plan.
Speaker #5: Circular. To give you more color on that, in the second quarter, the impact is approximately $3 billion pesos. It is mainly due to two factors.
Speaker #5: One, the manufacturing expenses, and second, the additional cost of the recycled we've seen over the building we see. And on a year-to-date basis, it's about $7 billion pesos more.
Speaker #5: And obviously, this is a significant impact considering our total scale. Because we are talking more or less about 7% of the EBITDA of the Chile operating segment in the quarter.
Speaker #5: So yeah, definitely. And regarding prices, we think it's difficult to pass this on to consumers. In fact, the prices of the non-alcoholic categories in the second quarter grew in line with inflation.
Speaker #5: I would say that passing on this cost to prices is difficult to do. So, as long as consumers actually don't, or do, value that.
Speaker #5: So I would say that, yeah, it's a challenge because prices in non-alcoholic categories in Chile grew in line with inflation in the second quarter.
Speaker #5: Now, above or well above inflation.
Speaker #3: Thank you. Our next question is from Fernando Olvera from Bank of America. Your line is now open. Please go ahead.
Speaker #11: Hi. Thanks for taking my question. The two are related to Chile, no? Regarding the volume performance that we have seen year-to-date, I was just wondering how this compares versus your initial expectation at the beginning of the year?
Speaker #11: And my second question, also related to Chile, is based on the strong pricing that we have seen. How has your market share performed in beer so far this year?
Speaker #11: Thank you.
Speaker #5: Hello, Fernando. Nice to hear from you. Regarding Chile's volume performance, as I said, we grew low single digits. Year to date, I would say we are flat in terms of volumes.
Speaker #5: Also, because the company was in one of the first quarters of last year, it was a little bit high, also the second quarter. But we are on a good seasonally adjusted trend, I would say, or a stable one.
Speaker #5: Because it stabilized in the case of beer. So in the last, I would say, in the last three quarters, let's say, seasonally adjusted industry volumes in Argentina were stable.
Speaker #5: So, of course, we have less volume of per capita consumption compared to 2021. Remember the French reform withdrawal and the consumption party in Chile, let's say.
Speaker #5: But so we are seeing a stabilization on the beer volumes. Non-alcoholic, on the other hand, we are seeing a positive trend. Seasonally adjusted. With a very good because seasonally so the quarter was much better than the same quarter last year.
Speaker #5: Even seasonally adjusted, we continue to see better volumes in the last, let's say, four quarters in non-alcoholic beverages. So, in conclusion.
Speaker #5: I think it's possible to have low single-digit growth in beer towards the year. And in the case of non-alcoholic, between, let's say, low single-digit and mid-single-digit.
Speaker #5: A little bit higher, but this is in the overall equation. On the other hand, we are doing very well in spirits, especially because of the ready-to-drink products.
Speaker #5: I don't know if I answered your question.
Speaker #3: No, yes, that's that's great.
Speaker #11: And Felipe, regarding the market share on beer, no, I already mentioned.
Speaker #5: in the previous question the market share. So at the end.
Speaker #11: Sorry. Sorry I missed .
Speaker #5: Overall, it's stable compared to last year. I would say stable. What's very encouraging is that it's not just stable—it's growing. It's our brand equity in beer.
Speaker #5: This is why the pricing power we are having.
Speaker #11: Okay. Awesome. Thank you.
Speaker #3: Thank you. Our next question is from Thiago Bertolucci from Goldman Sachs. Your line is now open. Please go ahead.
Speaker #12: Hola, Felipe. Hola, Claudio. Thank you very much for taking our questions. Great to talk to you. I have two, but let me start with Chile, right?
Speaker #12: When I put together, Felipe, a few of the things that you said: you mentioned stable market share in beer, consolidated prices moving above inflation, and non-alcoholic beverages growing at inflation, right?
Speaker #12: Which implies you are growing maturity above inflation on beer, right? What is driving this momentum for beer in your view, right? You are growing real prices.
Speaker #12: Still keeping market share. Is this about to do with, you know, competition moderating? Is this to do with channel mix? What is your assessment on this?
Speaker #12: I'll pause here, and then I'll have another one in international. Thank you very much.
Speaker #5: Yeah, hola, Thiago. Nice to hear from all of you. As you know, the beer business all over the world has suffered from very high inflation in the last three years.
Speaker #5: The driver is our priority in recovering profitability in our businesses. The category that suffered the most after the pandemic because of raw materials and the exchange rate is beer, particularly beer.
Speaker #5: So, the driver is that we have solid brand equity. This is an internal driver at the end. In order to increase prices, we need to recover the profitability we had before the pandemic.
Speaker #5: And that's clear. So we continue our revenue management efforts, working on our mixes. The good news is that the mixes have not deteriorated in beer.
Speaker #5: In the last two years, despite having a more soft industry, mixes remain the same. And of course, we have a higher market share in mainstream and a lower market share in premium.
Speaker #5: But despite this, our market share is almost stable. Of course, in the first quarter, we lost a little bit of market share. But we recovered then in quarter two.
Speaker #5: While increasing prices, so that's good news, I would say. Did I answer your question?
Speaker #11: Clearly. Thank you very much, Felipe. And then, if I may, a follow-up in international. We all understand quite well what's happening in Argentina, right?
Speaker #11: We know the activity momentum with inflation and all the volatility there. But none of this is new to the story, right? Everything was already in place.
Speaker #11: In the beginning of the year, with one exception that is clearly the effects, right? That moved a lot. Now, this is more of a conceptual question, right, rather than getting the number.
Speaker #11: What changed from the first quarter to the second quarter for us to see a shift from a mid-teens EBITDA margin in the first quarter to a negative 20s EBITDA margin in the second quarter?
Speaker #11: Again, I know. I understand the effects part of this equation. But apart from this, how should we think about the underlying momentum, right? Particularly when I compare your performance on a quarter-over-quarter basis.
Speaker #11: Thank you.
Speaker #5: No. Our pricing, when you compare it with inflation, deteriorated in the second quarter, along with the evaluation of the currency. Let me first start with the devaluation.
Speaker #5: Because there is something in the second quarter you need to take into account. And we disclosed this in our press release, if you saw.
Speaker #5: There is a table which is the exhibit seven, which is the impact of the hyperinflation accounting. And this impacted us a lot. Impacted us around $3 million dollars as EBITDA level.
Speaker #5: The impact of IAS 29, which is the update in the quarter of the first quarter. So, the first quarter result is adjusted into the second quarter result.
Think in the coming months.
Maybe with this good trend in terms of inflation in Argentina.
Along with consumer recovery, there is purchasing power.
There would be a more favorable scenario.
In order to start to close this gap in terms of pricing against inflation.
Well understood, Philippine. Thank you very much.
Thank you very much.
Just a reminder: if you'd like to ask a question, press star 2 on your phone; and if you're joining by the web, you can type your question in the box provided or request to ask a voice question.
We have a follow-up question from Vid Vida from Goldman Sachs.
Can you share insights on the health of the consumer in Chile? How are you seeing volumes and pricing evolve in July 2025? Are you in a position to increase prices in the second half of 2025 to maintain and improve profitability?
Yeah, I think, uh, the health of the consumer in Chile, as I mentioned, uh, alcoholic beverages, especially, have stabilized.
Um, so, uh, it's too early to call.
How would be the volume, you know?
We believe our business is very strong.
It's a very seasonal business, okay? So it's difficult to answer 4, which is very important.
The increase in July was due to price increases from last year, but seasonally adjusted volumes for July were better than in Q2. This is the only thing I can mention; let's say seasonally adjusted beer volumes.
was uh,
In line of in quarter 2. So, we, we will continue to see, let's say this loaded low middle digit growth in, um, in nonalcoholic.
Okay, regarding the Pisces scenario. T is a very competitive market.
I cannot forecast, but if there are opportunities for everything management, believe me, we will take that.
We take them along, see other kpis, our brand Equity, you know, it's not just to say, okay, price? How is volume July 2025? When stable, we haven't seen, you know, uh, something changing or sustaining our prices already achieved. Uh, so a good thing would be uh, let's say to further enhance our Revenue management but uh I cannot comment on that because it's it would be, it's a very competitive market.
Thank you. It looks like we have no further questions. I'll now hand it back to the CCU team for the closing remarks.
Hello everyone to attend this uh conference call in summary. In quarter to 2025, we almost double Consolidated, the visa for robust expansion in our core operating segment, which is p
And a high single-digit bit expansion in the wine operating segments.
As I mentioned.
Uh, we still face a very challenging scenario in Argentina. That's for the future, and it is for good, as I said.
Revenue management and efficiencies were key to achieving this Q2.
Moreover, we were able to deliver volume growth in all operating segments and core categories in a context of soft industries.
To conclude, I would like to mention that at the end of this call.
Uh, this is a very symbolic year for CCU as we are celebrating her 75 years of history.
We will continue implementing in this year. Our 2025-2027 strategic plan is supported by our multi-category strategy and our best business experience to ensure sustainable and profitable growth for our company.
I wish you a wonderful afternoon. Thank you all.
of you.
That concludes the call for today. Thank you. And have a nice day.