Q3 2025 Compania Cervecerias Unidas SA Earnings Call

Speaker #3: Good day everyone , and welcome to CSU's third Quarter 2025 earnings Conference call . On the 6th of November , 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 , the head of Investor Relations . Please go ahead , sir .

Speaker #4: Welcome and thank you for attending CU's third quarter 2025 conference call today with me are Mr. Felipe Dubernet , chief Financial Officer , Mr. Joaquin Trejo .

Speaker #4: Financial Planning and Investor Relations manager , and Carolena Burgos , senior investor relations . You have received a copy of the company's consolidated third quarter 2025 earnings release .

Speaker #4: The call will start by reviewing our overall results , and then we will move into a Q&A session . As every quarter . Before we begin , please take note of the following statement .

Speaker #4: The statements made in this conference call that relate to CSU's future financial results are forward looking statements , which of course , involve known and unknown risks and uncertainties that could cause actual performance or results to materially differ .

Speaker #4: These statements should be taken in conjunction with the additional information about risk and uncertainties set forth in CU's annual report on Form 20 F filed with the US Securities and Exchange Commission and in the annual report submitted to the CMF and available on our website .

Speaker #4: It is now my pleasure to introduce our CFO , Mr. Felipe Dubernet . Thank you . Claudio , and thanks to you all for joining the call today .

Speaker #4: In the third quarter 2025 , CCU posted higher operating results and increased profitability versus last year in a volatile and uncertain business scenario .

Speaker #4: Consolidated EBITDA grew 4.6% versus last year , mainly driven by our main operating segment . Chile , which in the context of soft industries expanded EBITDA margin through gross margin improvement , efficiencies , maintaining the positive trend in financial results throughout the year .

Speaker #4: The international business operating segment also expanded EBITDA versus last year , with the segment we are facing a very challenging scenario in Argentina , where the beer industry contracted mid single digit during the quarter .

Speaker #4: On the other hand , the wine operating segment posted a lower driven by weaker domestic markets in Chile and Argentina , together with a higher cost of wine .

Speaker #4: Our year to date results show that our path to recovery profitability remains on track , supported by our 2025 2027 strategic plan , which prioritizes profitability through revenue management efforts and efficiencies .

Speaker #4: Regarding our main consolidated figures in the third quarter of 2025 , net sales were down 1.1% , explained by 2.2% lower average prices in Chile and pesos partially compensated by 1.2% volume growth .

Speaker #4: Gross profit decreased 2.9% and gross margin was down 79 basis points . In addition , consolidated Edison expenses in Chilean pesos dropped 4.7% due to efficiencies and a favorable transaction on currency effect from Argentina .

Speaker #4: In oil EBITDA expanded 4.6% and a Vita margin expanded 60 basis points for the first first nine months of the year , and excluding the non-recurring gain from the sale of a portion of land in Chile in the second quarter of 2024 .

Speaker #4: Consolidated EBITDA expanded 9.9% . In terms of our segments in the Chile operating segment , top line expanded 1.8% as a result of a 2.4% increase in average prices , partially offset by 0.6% lower volumes .

Speaker #4: Higher average prices were explained by revenue management efforts in all categories. This was offset by mixed effects between alcoholic and non-alcoholic categories.

Speaker #4: Volumes were below last year due to soft industries , mainly in alcoholic categories . Gross profit and gross margin expanded 3.6% and 75 basis points , respectively , due to lower cost pressures .

Speaker #4: Cost pressures related to favorable prices in some raw materials , which compensated higher costs from our recycling plant . Circular expenses grew 3.2% below inflation .

Speaker #4: In spite of higher marketing expenses and as a percentage of net sales increased by 46 basis points altogether a big increase 4.8% and a better margin expanded expanded 41 basis points .

Speaker #4: Isolating costs and expenses associated to circular EBITDA would have expanded 10.2% and EBITDA margin by 117 . Basis points in international business operating segment volumes posted a 5.3% expansion , although net sales contracted 8.9% , driven by 13.5% lower average prices in Chile and pesos .

Speaker #4: The decline in average prices in Chilean pesos was mainly due to the 42.2% devaluation of the Argentine peso against the US dollar , and a very challenging pricing scenario in Argentina , where prices prices grew below inflation and negative mixed effects within the beer category , the volume expansion , excluding AB , the recent acquisition in Paraguay was mainly explained by Argentina , fully driven by the water category , while beer volumes contracted in line with the industry .

Speaker #4: Regarding our other operations , Bolivia and Paraguay posted higher volumes and Uruguay contracted low single digit gross profit , decreased 16.6% and gross margin contracted 382 basis points .

Speaker #4: Msdna expenses were down 19.2% , and a spectrum of net sales decreased 552 basis points in all , Abita grew 73.1% , driven by all geographies .

Speaker #4: In this international segment . The wide operating segment posted a top line expansion of 1.6% , mainly driven by a 4.8% rise in average prices , while volumes were 3% lower , higher , the higher average prices were mostly explained by a weaker Chilean peso and its favorable impact on export revenues and revenue management initiatives .

Speaker #4: In the domestic markets . Volumes contracted due to a 6.3% decrease in Chile , domestic market , in line with the industry partially offset by 4.5% growth in exports .

Speaker #4: Gross profit decreased 1.6% and gross margin deteriorated by 128 basis points due to cost pressures from a higher cost of wine and higher US dollar linked packaging cost .

Speaker #4: MSDNA expenses rose 4.5%, and as a percentage of net sales increased 78 basis points due to higher marketing expenses. Overall, EBITDA decreased 12%, and the margin was down 224 basis points.

Speaker #4: Finally , regarding our main joint venture and associated business in Colombia , we delivered low double digit volume growth , outperforming the industry we continue to build a robust brand portfolio and sales execution , which is the path to the long term volume and financial growth .

Speaker #4: Now I will be glad to answer any questions you may have . Okay .

Speaker #3: Thank you very much . We'll now move to the Q&A part of the call . If you'd like to ask a question , please press star two on your phone .

Speaker #3: That is star two from the phone . And if you're connected from the web , you can type your question in the box provided or request to ask a voice question .

Speaker #3: We'll give it a few moments for the questions to come in . Just a reminder , it's star two . If you're connected from the phone and if you're connected from the web , you can also send a text or voice question .

Speaker #3: Okay , our first question is from Constanza Gonzalez from Quest Capital . Your line is now open . Please go ahead .

Speaker #5: Hello , Philippe . And the rest of the team . Thank you for taking my question . I have a question regarding the international segment specifically in Argentina .

Speaker #5: Are you expecting a recovery in prices for the fourth quarter of this year? And also, what are you expecting for 2026?

Speaker #5: Are you expecting a recovery in prices and volume ? And secondly , could you tell us more about the environment that you are seeing and consumption in that country ?

Speaker #5: Thank you .

Speaker #4: Okay . Good morning . Constanza and practically good afternoon here in Chile . And thank you for your question regarding Argentina . Yeah .

Speaker #4: In the second semester we are facing a much more challenging scenario in Argentina with . Let's say , decline , especially in the third quarter of the volumes , especially in the while the water business is growing mid-teens , let's say .

Speaker #4: The point of that , as you indicated , is that is with prices that are below inflation , in fact , we are practically 9% below the inflation this year .

Speaker #4: Year to date , we have increased prices in our side , but the scenario is , is competitive . The market share are rather stable .

Speaker #4: But we expect in the near future because everybody needs to recover profitability . Prices increases and that's key in order to recover the the profitability of the regarding volumes .

Speaker #4: Let's say . We have maybe a more stable scenario in Argentina after the elections where the government would is expected to to to , to , let's say , to decrease the uncertainty .

Speaker #4: And its financial issues regarding especially the US dollar . Right . On the other hand , it is expected to do some reforms in this new Congress .

Speaker #4: And regarding the near future , we expect an increase in private consumption . But more than that , in the this increase in private consumption , that is expected to be next year , 3% , it would be different among different consumption categories , maybe , as you know , many Argentinians change their car at the beginning of the year .

Speaker #4: So they have had some records in car sales and normal , normal people . But I'm considering myself normal . I do not change the car every year .

Speaker #4: It's a very bad business. So mainly, some of these resources from the consumers would come back to our categories, especially categories that are more linked to having fun.

Speaker #4: As the beer responsible for fund responsible consumption of beer and to regain momentum in the industry in the near future , along with we , we hope , recovery of the overall economy so we have had a bad third .

Speaker #4: Quarter . However , we expect recovery next year . I would say . And also more price adjustment to be at least in the near future , in line with inflation .

Speaker #5: Thank you . For your answer .

Speaker #3: Thank you . Our next question is from Shagu Bartolucci from Goldman Sachs . Your line is now open . Please go ahead .

Speaker #6: Yes , thank you very much . Hola , Felipe . Good morning everyone . Thank you very much for taking our questions . Always a pleasure to talk to you guys .

Speaker #6: I'd like to turn the conversation back to Chile . Right . Obviously there are different dynamics playing out there , but what I see from the consolidated numbers is your pricing growth moderating , actually printing even a little bit below inflation .

Speaker #6: While I wouldn't call it for material decline in volumes , but volumes is slightly down , meaning now probably these efforts to be less aggressive on pricing .

Speaker #6: I'd say , are not necessarily resulting in a stronger demand . Could you please elaborate more how you're seeing , you know , pricing versus volume , growth versus competition , market share across the different categories soft and beer , please .

Speaker #6: And more importantly than that , how much space you see for eventually more pricing to be implemented in each one of those going forward .

Speaker #6: Thank you very much .

Speaker #4: Thank you . Good to hear about you . Thank you for your question regarding Chile . Let me make very clear on price because I showed you a report and then commentary .

Speaker #4: Now price in general per category are in line with inflation or above inflation . The think that you are seeing is the the entire segment .

Speaker #4: Chile that is showing a price of 2.7% , 2.4% quarter on quarter . But because there is a big mix effect between alcoholic categories and non-alcoholic categories , as the industry in alcoholic categories is declining , I have a negative mixed effect in price .

Speaker #4: Excluding that mixed effect mix effect prices are are increasing 4% , which is above inflation . So I need to make this this precision because I read your report .

Speaker #4: The competitive dynamic I would say is very competitive . Chile , as you know , in terms of market share in the overall beverage industry , I would say we gain slightly share compared to previous quarter and quarter on quarter compared to same quarter last year .

Speaker #4: Also , we gained some share in both alcoholic and non-alcoholic categories because now we see the market as alcoholic and non-alcoholic , especially when you have industries that are declining and they are shifting between industries .

Speaker #4: Right . So I would say is , is a is a very competitive competitive , but thanks to our brand equity , our revenue management strategies , our execution while we are , we have increased prices in alcoholic and non-alcoholic categories .

Speaker #4: We have been able even to slightly gain share the the . Point regarding going forward in price . Always we have an aim of optimizing our revenue management in all the categories .

Speaker #4: Of course , to regain , you know , profitability . Of course there is competition , alcoholic categories , especially wine , but also beer .

Speaker #4: The industries are very soft , are declining . The one that is declining the more is wine . But beer is also a decline in the in the third quarter , the industry , the only one that is growing low , single digit in alcoholic , is spirits .

Speaker #4: Thanks to the ready-to-drink options available where we live, we lead the investigation that will push the market in this fast-growing category, which is the spirits ready to drink.

Speaker #4: Also , we have , you know , low alcohol or non-alcohol beer and and and you know , all the , the shandies and the and the flavored beer such as , as an example , the lemon stones brand in Chile , where we let the market and is also growing .

Speaker #4: Innovation is key in this scenario . Okay , that's the answer . Yeah .

Speaker #6: That's helpful . Philippe , thank you very much . And if I may , I follow up in Chile . Right . Obviously , I know this is a harder answer , but would love to pick her brains on that .

Speaker #6: I guess across the world we are seeing in general , declining volumes in beer . Right ? 2025 has been a typical year in some regions .

Speaker #6: You have adverse weather . You have obviously volatile macro , particularly across South America . What's your assessment of this weakness in beer , particularly for Chile ?

Speaker #6: Would you say something more temporary ? Would you say there is a structural component related to the consumption occasions ? New generations , preferences ?

Speaker #6: And what is CCU doing itself to try to , you know , reverse this trend ?

Speaker #4: Thiago is not useful to in alcoholic prefer to talk about alcoholic categories rather than a specific because we have different pictures in different segments .

Speaker #4: Let's say , as I said in my previous answer , the one that the industry is declining , the more is wine . This is a global trend and has been for many years , and also Chilean trend in the last ten years .

Speaker #4: Wine per capita consumption in 2014 was 13.5 liters per capita, and in 2024 it is projected to be 10.5 liters. This is in contrast to beer.

Speaker #4: In 2014, per capita consumption was 44 liters per capita, and last year it was 54 liters per capita. There is no single explanation.

Speaker #4: We carried out very scientific or very based on data and on , on on quantitative and qualitative . What are the reasons ? Maybe this year , in 2025 , we saw a further .

Speaker #4: A further decline from where we were in 2021 or what we have experienced in previous years. There are a high number of factors that came from this.

Speaker #4: And you you pointed out correctly is how much money has the consumer right . The economist has not been brilliant in the last years in Chile , growing 2% on average or less than 2% .

Speaker #4: Huge adjustment , interest rate , interest rates are declining now . The perspective of the Chilean economy should be better in the next 2 or 3 years .

Speaker #4: Copper prices are on the roof thanks to the climate change and all of this . There are a number of projects that Chile will enhance GDP .

Speaker #4: So we are positive about the economy in Chile in the near future . And this if we have this , maybe we will see a better perspective for overall categories , not only alcoholic but also non-alcoholic categories .

Speaker #4: But there are other reasons that are linked to alcohol consumption . One example is security . People feel feel very unsecure in Chile that it was ten years ago .

Speaker #4: You know , the sense of going out to on premise , having a beer or having a cup of wine and let's say the on premise was in Chile , 10% .

Speaker #4: And nowadays is 5 to 6% . So and this is linked to security all presidential candidates in ten days there will be presidential elections in Chile .

Speaker #4: The number one priority is security . And when you ask the consumer why you are not consuming so much alcohol or why are you not going out and and having a as you said in Brazil , a shopping or , you know , a beer with friends ?

Speaker #4: No , because I feel unsecure to go in the night . So I prefer to stay home and not meet my friends . So there are many reasons , but we expect because we have a study other reality , such as the US market , the US market is declining a lot to be a consumption , but however , there has been some period of history where we have seen rebounds on consumption in a specific categories , and the category that is performing very well because it is linked to trends , is the ready to drink category in spirits .

Speaker #4: But also, you know, variants of beer where you have flavor, you have low alcohol content, and beers that are more seasonable.

Speaker #4: So innovation is key because we led the categories , especially in Chile . They are called category and innovation is key to , let's say , the key pillar of our strategic plan to overcome the situation .

Speaker #4: Let's say .

Speaker #6: Those are all fair points , Felipe , thank you very much . Very helpful . Thank you very much .

Speaker #3: Thank you . Our next question is from Fernando Olvera from Bank of America . Your line is now open . Please go ahead .

Speaker #7: Hi . Thank you . Can you hear me ?

Speaker #3: Yes , we can hear you .

Speaker #7: Great . Perfect . Thank you for taking my question . The first one is related to cost . If you can comment . Felipe , regarding the outlook on cost for for the fourth quarter and and 2026 would be great .

Speaker #7: And my second question is related to CapEx . Also for next year . I mean , considering the soft demand that we are seeing overall in alcoholic beverages , what is your your initial thoughts on CapEx for 2026 ?

Speaker #7: Thank you .

Speaker #4: Fernando , I think it's a good morning for you . You are in Mexico . I think so .

Speaker #7: Thank you . Yes .

Speaker #4: Yeah , it's it's in the morning . It's already afternoon . Fernando . Yeah . Good question about the cost . On commodities .

Speaker #4: You know , I will give you a medium term , let's say 2026 . As our cautionary statement , I don't do forecast .

Speaker #4: Yeah . But what we are seeing , we are doing the budget right now . We are seeing favorable news in practically all the the commodities except aluminum compared to 2025 .

Speaker #4: And also compared to 2024 . Not yet at the level of prices of commodities that we had pre-pandemic . 2019 . But we are seeing better news in barley sugar , virgin PT resins pulps .

Speaker #4: That was a big hit , especially orange juice in the next two years . So we are we are seeing in material , let's say , better commodity prices with exception of aluminum .

Speaker #4: We are talking about a projection about $10 million of better commodity price prices in US dollar . As I said , my number one commodity is the US dollar .

Speaker #4: And it seems stable in Chile at least Chile , which is account for 70% of the exchange rate , seems stable going forward .

Speaker #4: And along with a lot of initiatives in terms of efficiencies in Chile that are linked to procurement , let's say strategic sourcing also a designed to value , we always see us at our packaging or our formulations in order without affecting at all quality .

Speaker #4: However, we are looking at doing it in a more valuable or more cost-effective way to deliver the same benefits to the consumer. The consumer is first.

Speaker #4: However, we always look and work on new material, new specifications to reduce costs, and third is what we call nearshoring.

Speaker #4: That is to have , you know , closer production of our raw materials and packaging materials to our viewings or factories , let's say , to decrease logistic costs .

Speaker #4: And in that side also , we have a strong efficiency program . So . We saw a better scenario with the exception of aluminum for next year , that is increasing practically in our projection .

Speaker #4: 5%. On the other hand, what we have highlighted this year is that we have had higher costs and expenses linked to the circular.

Speaker #4: Circular is about introducing recycled packaging in our bottles up to 15% . And so far this has has had a significant impact in our EBITA about 10,000 million Chilean pesos , roughly $12 million of extra costs and expenses year to date in on a yearly basis .

Speaker #4: This cost this year would cost us something like 15 billion Chilean pesos , but overall . A the aluminum is increasing , but all the rest is in better shape .

Speaker #4: We have efficiencies , so we expect a better scenario for raw materials and packaging materials going forward . That's .

Speaker #7: No , that's a great . And what about CapEx ? Felipe ?

Speaker #4: Are CapEx . I will hand over this question to my colleague , Mr. Joaquin Trejo . Financial planning manager . Thanks , thank you , Fernando , for for your question .

Speaker #4: Regarding Caps , we actually estimate to close the year slightly below what we published in our annual report , between 10% and 15% below the published figure for 2025 .

Speaker #4: And looking ahead , we don't actually see major CapEx needs for for capacity as as the volume trend is what Felipe mentioned earlier .

Speaker #4: But rather focusing on technology . We are changing our IT system for sales and distribution and also innovation to address these new consumer trend that Felipe also mentioned in previous questions and also regulatory requirements , the ratio we we like to look at is the CapEx over sales .

Speaker #4: And we forecasted to be below 6% going forward . And also this is why the CapEx over depreciation ratio should be at some point below one going forward , where the new projects are actually a smaller amount compared to to previous years , where we had , for example , the the CapEx for the circular plant .

Speaker #4: But this is also offset by some CapEx carryover from 2025 . That is going to be transferred to 2026 , but in general terms , Fernando , that the the trend we we foresee .

Speaker #7: Great . Thank you so much .

Speaker #3: Thank you . Just a reminder , if you'd like to ask a question , it's star two on your phone . Star two from the phone .

Speaker #3: And if you're connected from the web, you can send a text or ask a voice question. Our next question is from Claudia Raggio from Providence AFP.

Speaker #3: Thank you for the presentation . Could you give us some color on the sales volumes of beer in Argentina on October ?

Speaker #4: Yeah , yeah , I would anticipate that . We have had in both alcoholic and non-alcoholic . We saw decline also in in October .

Speaker #4: So we , we have maintained in , in , in alcoholic trend . We have water . And water practically flat small decline in in in water in water resistance .

Speaker #3: Thank you . We'll give it a few more moments for , for any further questions to come in . Okay . Looks like we we have no no further questions .

Speaker #3: I'll now hand it back to the team for the closing remarks .

Speaker #4: Thank you all for for attending today . In summary , in the third quarter of 2025 , our main operating segment , Chile , continued in a trend of higher financial results on profitability in a context of soft industries and higher costs from circular .

Speaker #4: The latter was boosted by gross margin improvements , efficiencies and lower prices in raw materials . The international business operating segment posted higher EBITDA , although results were negatively affected by challenging scenario in Argentina .

Speaker #4: In Argentina . Due to a sharp deceleration in consumption , the when operating segment contracted the Vita due to a higher cost of wine and scenario in domestic markets , while exports grew mid-single digits .

Speaker #4: We will keep executing our 2025 2027 strategy , strategic plan and three pillars profitability , growth enhancing innovation and sustainability with special , special focus on profitability supported by both revenue management efforts .

Speaker #4: Backed by our strong and diversified portfolio of brands and efficiencies across all operating segments and functions . Thank you very , very much for attending today , and I wish you a wonderful end of day .