Compañía Cervecerías Unidas S.A. (CCU) Earnings Call Transcript & Summary

Good day, everyone, and welcome to CCU's Second Quarter 2026 Earnings Conference Call on August 5, 2026. Please note that today's call is being recorded. At this time, I would like to turn the conference over to Claudio Heras, the Head of Investor Relations. Please go ahead, sir.

Welcome, and thank you for attending CCU's Second Quarter 2026 Conference Call. Today with me are Mr. Eduardo Ffrench-Davis, Chief Executive Officer; Mr. Felipe Dubernet, Chief Financial Officer; and Mr. Diego Munizaga, Financial Planning and Investor Relations Manager. You have received a copy of the company's consolidated second quarter 2026 earnings release. As usual, the call will start by reviewing our overall results, and then we will move on to a question-and-answer session. Before we begin, please take note of the following statements. The statements made in this call that relate to CCU's future financial results are forward-looking statements, which involve known and unknown risks and uncertainties that could cause our actual performance or results to materially differ. These statements should be taken in conjunction with the additional information about risks and uncertainties set forth in CCU's annual report submitted to the CMF and in our Form 20-F filed with the U.S. Securities and Exchange Commission, both documents available on our website. It is now my pleasure to introduce our CEO, Mr. Eduardo Ffrench-Davis.

Thank you very much, Claudio, and thank you all for joining us today. It is my pleasure to share with you our second quarter '26 financial results for the first time as CEO of CCU, company in which I have worked for more than 20 years, and I am proud to lead at a time that we need to look to the future with a strength and conviction that has always characterized us as we face a particularly challenging context. Nonetheless, we have always shown a long-standing track record of adaptability and for sure, execution. Therefore, to continue successfully shaping our future, I would like to mention some relevant changes that we have defined. We have designed the strategy Vamos por Más, which is built on our 4 main pillars: First, the first pillar, increase our focus on businesses. The second one, boost operational synergies; the third one, act with greater agility; and fourth one, accelerate our transformation. These pillars are oriented to generate growth and to respond to the new demands and challenges of the market. To support this strategy, we will execute changes in our organizational structure as well as strengthening our internal processes and capabilities to remain at the cutting edge of new trends while enhancing our technological transformation. This transition will be implemented gradually throughout this year with our main focus being to ensure operational continuity and for sure, performance. I am confident in the commitment that has always characterized all the CCU employees. And together, we will prepare CCU to successfully navigate current and future challenges. Regarding our second quarter performance, CCU delivered a solid 59.4% consolidated EBITDA expansion, mostly driven by a robust set of results in our main operating segment, Chile, which expanded EBITDA 26.2%. The international business operating segment also contributed to a higher EBITDA by posting a 25.8% lower EBITDA loss. As we continue facing a soft consumption environment in Argentina. On the other hand, the wine operating segment contracted EBITDA by 61.9%, sharply impacted by unfavorable trends for the wine category globally and a higher cost of wine. I will now pass the call to our CFO, Felipe Dubernet, who will give you further details about our performance by operating segment during this quarter. Felipe?

Thank you, Eduardo, and good morning, everyone. Consolidated net sales grew 4.8%, almost fully explained by 6.4% higher average prices in CLP as volume declined 1.5%. Higher prices in Chilean pesos were mostly a consequence of revenue management initiatives in all our operating segments. And in terms of volumes, the 2.5% increase in the Chile operating segment was offset by decreases of 7.4% and 13.7% in international business and wine operating segments, respectively. Gross profit grew 6.8% and gross margin improved 76 basis points. MSD&A expenses rose 3.3% due to higher distribution expenses associated with higher oil prices during the quarter and restructuring expenses in Argentina and in the wine operating segment. This was partially offset through ongoing efficiency initiatives, mainly in logistics. As a percentage of net sales, MSD&A expenses decreased 62 basis points. In all, EBITDA grew 59.4%. Regarding net income, we recorded a higher loss from second quarter of 2025, mostly due to a nonrecurring negative effect of CLP 6,068 million from an impairment loss related to our business in Bolivia and lower income taxes in second quarter of 2025 coming from a nonrecurring positive tax effect in Argentina. In terms of our segment, the Chile operating segment expanded top line by 1.5%, explained by 2.5% higher volumes gaining overall market share versus same quarter of last year, partially offset by 1% decrease in average prices in Chilean pesos. During the quarter, the nonalcoholic categories grew mid-single digits, outweighing the low single-digit decline in alcoholic categories, which encompasses beer and spirits. Flavored low alcohol ready-to-drink products led by brands such as Stones in beer, Mistral and Kantal in spirits continue to show excellent results with volume growing double digits in the quarter and representing 8.3% of total alcohol in this segment as of June 2026. Average prices contracted due to mix effect in the portfolio, partially offset by revenue management initiatives in all categories. Gross profit increased 9.4%, mainly driven by lower direct costs, mostly coming from the 5% appreciation of the Chilean pesos against the U.S. dollar, impacting favorably our U.S. dollar-denominated costs, partially offset by higher aluminum prices. MSD&A expenses grew 3.5% below inflation, although as a percentage of net sales increased 71 basis points due to expenses pressures coming from higher distribution costs, partially offset by efficiencies. Altogether, EBITDA recorded a 26.2% increase and EBITDA margin expanded to 264 basis points. I would like to mention that during the quarter, CCU acquired a 49% equity interest that Nestlé Chile held in our subsidiary, Aguas Nestlé. After this acquisition, CCU reached 100% ownership in this subsidiary, allowing us to further consolidate our leadership in a steadily growing water industry in Chile, which is expanding low double digit as of June 2026. Following the transaction, we will maintain our strategic relationship with Nestlé, continuing the distribution of the ready-to-drink coffee-based beverage products and water brands in Chile. In International business operating segment, net sales increased 15.7%, driven by 24.9% higher average prices in Chilean pesos, partially offset by a 7.4% contraction in volumes. Higher average prices in Chilean pesos was due to revenue management initiatives, mainly with price actions in Argentina in line with inflation. Volumes in these segments were below last year, mainly explained by Argentina due to a high single-digit contraction in beer and water industries and a difficult business scenario in Bolivia, marked by social unrest and [ loans growth ] that disrupted our operations. Gross profit increased 20.8% expenses grew 7.6% as a percentage of net sales decreased 460 basis points. EBITDA resulted in a 25.8% lower loss versus second quarter 2025. During the quarter, we incurred in restructuring expenses in Argentina by CLP 1,408 million. The wine operating segment posted a top line drop of 14.1%, mostly driven by the 13.7% decrease in volumes as average prices contracted 0.5%. Lower volumes were driven by industry contraction in export and domestic market in Chile. The decline in average prices were lower due to a negative mix effect in the portfolio and a stronger Chilean peso against the U.S. dollar, which impacted negatively export revenues. These effects were partially offset by revenue management initiatives. Gross profit fell 26.9%, mostly due to cost pressures from a higher cost of wine, partially offset by efficiencies in manufacturing. MSD&A expenses dropped 3.7%, mostly due to the lower business scale. Altogether, EBITDA decreased 61.9%. During the quarter, we incurred in restructuring expenses amounting CLP 1,633 million. To navigate the difficult scenario in the wine business, we will continue pursuing efficiencies and keep developing a strategy of accelerating high-margin innovation. In this regard, as of June 2023, flavored low alcohol ready-to-drink products based on wine almost doubled versus last year, mostly driven by the launch of the single-serve can version of our brand [indiscernible], among other brands backed by our multi-category production capabilities. Regarding our main joint venture and associated business in Colombia, we posted mid-teens volume growth during the quarter. We are focused on that country on building brand equity and scale to enhance profitable growth in the future. Now we will be glad to answer any questions you may have.

Our first question comes from Alejandro Fuchs from Itaú BBA.

I have 2 very quick ones, if I may. The first one, I wanted to see if maybe you could elaborate a little bit on how you see the competitive environment in Chile, especially on the soft drink market. Anything that has changed in the last couple of months? And maybe how do you see the rest of the year? And then the second one, in terms of alcoholic, especially beer in Argentina, we saw volumes continue to be pressured despite the sporting events this quarter. So I wanted to see if you could break down for us what do you expect for the rest of the year and if there was a positive impact or not given the sporting event in the country?

Alejandro. I will take the first question from Chile. In terms of competitive environment in Chile, especially in the soft drinks, always this is a very mature category compound by different segments. Actually, we operate 9 segments within that micro category. And it has always been very competitive. But we believe that the trends will continue. All the better-for-you products, all the healthy products such as waters, flavored waters, juices, functional products are growing, and we will see that they are continue growing. We have a strong position in terms of market shares in those categories, and we will invest in those categories in order to get more innovations and to push the mix on those category. Within the CSD categories, we are doing a great job with Pepsi within the cola segment and with strong brands in the flavor subsegment as well. But we believe that the soft drinks will continue growing mainly through better-for-you products, which we believe that we have a very, very strong position. The second question, the beer in Argentina, I will pass that question to Felipe.

Alejandro, yes, the second quarter, as you noticed, we decreased our -- the beer industry contraction was high single digit. However, we are comparing particularly, let's say, high comparison base in the second quarter of last year. you know in quarter 3 volume collapsed as this is in line with a significant rise on interest rates in Argentina, unemployment due to all the macroeconomic adjustment that were done in Argentina last year. So we should look or see a recovery in volumes in second half of 2026. One, because of the company base in quarter 3 on the one hand. But also what we are seeing now is a continuous improvement in volume trends in Argentina since March. if we adjust seasonally adjust the volumes in Argentina, we are seeing a recovery month-on-month since March. A more stable macroeconomic scenario in terms of inflation and devaluation in Argentina, yet has not translated into a more dynamic consumption environment. However, everything is volatile, and this is a forward-looking that I cannot make sure to you, we should see a more robust consumption environment towards the end of the year as we have seen, let's say, some good signs in March in terms of improvement of volumes.

Our next question comes from Fernando Olvera from Bank of America.

My first question is related to the strategic plan that you mentioned in your initial remarks. Maybe if you can give some color of what are some of the targets that you are planning to achieve with this new strategic plan in the medium term? That would be great. And my second question is related to Chile. How do you expect consumption to behave in the remaining of the year? And maybe if you could share some initial thoughts about 2027 considering the mega reform approved by the government?

I am very optimistic for the future. So I will ask you both questions. The first one around the new strategy. For sure, this new strategy will be part of our new strategic plan. We are going to create a new strategic plan based on 2 main things. The first one is going to be a 4-year plan looking forward to the 2030 and setting some KPIs for that year. And the second thing is we are going to interrupt the current strategic plan to create a new one -- and this new strategic plan is based on the strategy format that I talked on the beginning of this presentation. This strategy is based basically in 4 main pillars, and I will explain a little bit more further on these pillars. The first one is to focus on businesses, which is not mean that we haven't had focus on business, but we will strengthen our focus in our businesses, separating or differentiating our core businesses with our high potential businesses. We are going to go deep in our multi-category strategy with focus on each single category. leading distinct consumption occasions and growing volume and margin across all our operations. We are going to be very focused on consumer occasions and to go deeper in those occasions and satisfy consumers in different places, times with our multi-category portfolio, which is something that we really believe that is very strong. The second one is operational synergies. We will reach greater productivity and efficiencies, leveraging our multi-category strengths and the reduction of redundancies. We are looking for the whole company. We have done a first single act like synergy in wines and liquors especially in the domestic Chilean market. But we have several more things to come in order to get more synergies, leveraging our multi-category spirit and occasion. The third one is agility. We will implement a greater autonomy to respond to the market. We are living in a very volatile market with accelerated changes, and we want to be more agile in order to respond those changes. Less operational friction we have called or[ toolbox ] and a real-time control in our operation with leaner and more connected structures. And the fourth one is transformation. We have been very -- we are doing some transformation, especially with digital tools in sales, for example, with in our logistics and planning, integrating new tools, people and tools, structures and processes and industrial in our facilities as well. But we will go big on that with an architecture based on new processes and technologies, putting the digital transformation as the #1 enabler of synergies and mainly growth. So that's answering your first question. Fernando, obviously, more is coming in our strategic plan. And for sure, I cannot say anymore. But this is the main mindset that we are creating in order to have a new strategic plan focused on profitable growth based on our main capabilities. The second question is about per capita consumption or volumes trends in Chile. Of course, we received the yesterday actually, and was a good thing. But obviously, we cannot say that we are -- as a country, we are ready to grow as we have done in the past. But we still believe that our categories are facing a new trend. For sure, we cannot avoid the downtrend that we are facing with alcohol. But we believe that our categories with innovation and certain things we can turn around that situation. The wine situation is basically -- it's a global one, but we have seen some early stages of early green -- how do you say, the green graphs with, for example, [ gleces ] ready-to-drink products -- we launched our new wine ready-to-drink products, I don't know, 1 month ago, and it has been very, very successful. So we believe that we can turn around this alcohol down trade in the domestic market. And on the nonalcoholic business, as I mentioned before, we see that our portfolio, better-for-you portfolio based on waters, flavored waters, juices and nectars and functional, we are #1 in all of those categories. We believe that we'll continue growing, integrating new consumer occasions and satisfying consumer needs that are eager for more alternatives and not only based on CSDs. So we believe that in terms of per capita consumption will be a second semester in order to see how the economy is turning around in a positive way, but we believe that our portfolio, it's prefer to turn around the that we faced on the first semester.

Tax reform. Let me complement what Eduardo has said regarding tax reform. I think it's a good news for the country, the approval of the new tax reform reducing corporate taxes in Chile. When will this come to more consumption is something that we cannot predict. But however, in the long term, it's a good news for the country to boost investment in the country, to boost employment. Of course, this could boost the consumption for our products. But as you know, there are many variables or many other inputs that are key for the level of consumption.

Our next question comes from Felipe Ucros from Scotiabank.

Perhaps a few follow-ups on the new strategy and the upcoming midterm plan that you're still working on. And I realize that you're still working on the plan, so it's probably a little too early to have definitive answers on this, but perhaps you can give us some initial thoughts on 3 things that I'm curious about. The first one is hedging. CCU has stood out within the publicly traded industry as one of the only companies that doesn't hedge, right? And there's some chatter in the market that this generates different pricing needs than your competitors. So just wondering if within your strategy, there are any changes that you plan to make around this or perhaps bring to the Board for potential changes. The second side is wine. Obviously, it seems like you're already doing some restructuring there and you're innovating quite a bit. But wondering if there's like a bigger transformation around the approach and the strategy that you guys have had towards the wine segment. perhaps whether you'll try to accelerate premiumization or any other things that you plan to change there? And then the last one is for Colombia, where you guys have had a decent performance this quarter. Just wondering if there are any changes that you plan on that side of the business?

Three main questions. I will pass the first one to Felipe and the second one to Felipe Dubernet and the second one, third one, I'm going to respond directly.

No, our policy regarding hedging of commodities for exchange rate remain unchanged. This is a policy that is reviewed every year by the Board of CCU. But as of today, remain unchanged. So now Eduardo will answer you the question regarding the 2 important business of wine and Colombia.

Yes. Regarding wine, for sure, we are facing an important trend globally. We are an important player in Chile for sure. But -- and at the same time, we are an important player outside in the export. So we are doing, I think, 2 main things. The third one is not only integrating liquors, which we have an important ammunition or power in Chile with the wines in order to get synergies, but also we are doing this in order to fulfill consumer needs that we believe that are coming together. Today, the consumer is not only choosing product by product, it's choosing based on consumer occasions. And we believe that together in Chile with a portfolio combining wines and spirits, we can satisfy better to our consumer and for sure, increase volumes through that strategy. In terms of global export, we are focusing our main capabilities on BSP on exports, on exports, increase our footprint outside, getting more markets within the company and basically strengthen our position in terms of production, getting synergies and efficiencies from there. So we believe that wine could -- we are just in some place, some pieces. For sure, we are facing a very important global trend. But we believe that we can start in turning around that situation with this strategy. For sure, we have to see how it evolves, but we are taking decisions around that business now. In Colombia, we still believe that we have a very, very important or plenty of space to grow over there. Colombia is an interesting country. It's facing a change in his government now. For sure, it's -- we are leaving a very, very good, good momentum in Colombia. We are double-digit growth with beer and Manta over there. And we are plenty of innovation and a new strategy setting up to Colombia in order to get more of this country. Colombia for us in this strategy, Vamos por Más is a core country for us. We are there to grow, and we are there to win some battles. So we are going to strengthen our position in Colombia, and we believe that we can create momentum of -- continue the momentum that we are facing on that.

Great color. Maybe if I can do one follow-up on the cost decline, less strategic, but -- you did mention that the cost of wine had increased, and I thought that kind of stood out in stark contrast to what [indiscernible] reported where they're having much lower cost of wine and a very strong harvest. So just wondering why you think there's a difference. Perhaps it has to do with the regions, different climate in different regions, maybe with the suppliers of grades that you guys use. Just wondering if you can comment a little about that differential?

I pass this to Felipe. Yes, I pass this question to Felipe. I pass this to Felipe Dubernet.

Okay. Yes, Felipe, regarding the wine cost, as you know, this year, we are facing a particularly unfavorable input cost in terms of wine cost in our P&L as the whole industry. As you mentioned and as you mentioned, a competitor also, we have had a positive wine harvest this year. That will reduce going forward, our cost of wine as we reduce, of course, inventory levels that are depending on how we evolve in the volumes. So we see in the business that is suffering a lot, not only in consumption, but also in the input cost side, in the exchange rate side for our export business this year a lot. So at least we are seeing some green grass in the horizon now with the input cost of wine going forward. But as I said, will depend on how we deplete our inventories going forward.

Our next question comes from Thiago Bortoluci from Goldman Sachs.