Yahoo Finance Compañía Cervecerías Unidas S.A. (NYSE:CCU) Q4 2023 Earnings Call Transcript
Compañía Cervecerías Unidas S.A. (NYSE:CCU) Q4 2023 Earnings Call Transcript February 28, 2024
Compañía Cervecerías Unidas S.A. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Ladies and gentlemen, good day, and welcome to CCU’s Fourth Quarter 2023 Earnings Conference Call on the 28th of February. Today’s conference call is being recorded. At this time, I would like to turn the conference call over to Claudio Las Heras, the Head of Investor Relations. Please go ahead, sir.
Claudio Las Heras: Welcome, everyone, and thank you for attending CCU’s fourth quarter 2023 conference call. Today with me are Mr. Felipe Dubernet, Chief Financial Officer; and Mr. Joaquín Trejo, Financial Planning and Investor Relations Manager. You have received a copy of the company’s consolidated fourth quarter 2023 results. Felipe will review our overall results, and we will then move on to a Q&A session. Before we begin, please take note of our cautionary statement. 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 cause 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 in Form 20-F filed with the U.S. Securities and Exchange Commission and in the annual report submitted to the CMF and available on our website. It is now my pleasure to introduce our CFO, Mr. Felipe Dubernet.
Felipe Dubernet: Thank you, Claudio, and thank you to all for joining us today. During 2023, we posted a recovery in our operating results and profitability in spite of the volatile business environment, a particularly difficult year for the wine export business and Argentina’s macroeconomic conditions. Our consolidated EBITDA in the year grew 6% and the EBITDA margin improved 159 basis points, driven by our main operating segment, Chile, which expanded EBITDA by 24.8% more than offsetting a 37.4% drop in the Wine Operating segment and a 16% contraction in International Business Operating segment, which includes Argentina. Consolidated net income contracted 10.6% versus 2022. The driver for the better operational result was the execution of our regional plan HerCCUles, which encompasses six pillars: Number one, maintain business scale; number two, strengthen revenue management efforts; number three, deliver efficiency gains through our transformation program; number four, optimizing CapEx and working capital; number five, focusing on core brands and high-volume margin innovations; and number six, continue investing in our brand equity.
I would like to briefly mention some of the highlights of the year for each pillar. In terms of pillar number one, consolidated volumes in 2023 were 3.4% below last year, mainly driven by lower consumption in Argentina for the year, a tough scenario for Chilean wine export and a deceleration in volumes in Chile during the second semester. Nonetheless, we maintained relative scale by keeping increasing market shares in our main categories. As for pillar number two, we executed revenue management initiatives in all our geographies, especially noticeable in Chile, where average prices increased 7.9% being key to recover margins, offsetting cost and expense pressures and negative mix effects. Regarding pillar number three, we were able to deliver efficiency during the year, as total expenses, including manufacturing cost of MSD&A as a percentage of net sales were stable at 47.7% in 2020 through [ph] 2022 and 2023.
In terms of pillar number four, we recovered our cash generation, mainly due to a reduction in working capital versus 2022, CapEx optimization and a higher EBITDA. Finally, in line with pillar number five and pillar number six, we reduced the number of SKUs following us to focus in core brands and profitable innovation, reducing the complexity of our operations, and we posted solid levels of running [ph]. From a quarterly perspective, consolidated EBITDA dropped 9.9% and EBITDA margin was up from 16% to 19.3%. In this quarter, it is important to mention that the charge devaluation of the Argentine peso against the U.S. dollar generated a material impact in our results in quarter four, 2023. The Argentine currency jumped at 131%, the exchange rate from CLP350 and CLP50 per dollar as of September 30, 2023, to CLP808.5 per dollar as of December 31, 2023.
Thus, Argentina is under hyperinflation accounting according to the IAS 29, accumulated results in Argentina as of September 30, 2023 are updated to prices and exchange rate levels to the end of the period. This generated a loss in the quarter CLP24,018 million in consolidated EBITDA, of which CLP22,804 million are accounted in International Business Operating segment and CLP1,250 million are accounted in the Wine Operating segment. Excluding these effects, consolidated EBITDA in the quarter would have expanded 3.4% versus same quarter of last year. In terms of the segment, in the key operating segment, top-line decreased 2.2% in the last quarter due to a 7.3% contraction in volumes, partially compensated with 5.5% higher average prices. Lower volumes were mostly related to a weakening demand, which was especially affected by weather conditions.
While prices were driven by revenue management initiatives, EBITDA increased 20.9% and EBITDA margin improved and expanded from 14.2% to 17.5%. In International Operating segment, which includes Argentina, Bolivia, Paraguay and Uruguay, net sales dropped 90%, mainly as a result of a contraction of 89.4% in average prices in Chilean pesos due to the impact of hyperinflation accounting stated above as prices in local currency evolves in line with inflation. Volumes contracted 8.3%, fully explained by Argentina as all the other geographies posted positive volume growth. EBITDA contracted 53.7%. In the Wine Operating segment, revenues were down 11.7%, mainly explained by an 8.8% decrease in volumes driven by a 10.2% decrease in the Chile domestic market and a 5.6% contraction in exports from Chile.
Average prices contracted by 3.1%, also due to the impact of hyperinflation accounting stated above in our wine business in Argentina and a stronger Chilean peso against the U.S. dollar, which impacted negatively our export revenues. Partially offset by revenue management initiatives in our domestic markets, EBITDA decreased 21.3% [ph]. Regarding our main JV and associated business from a yearly perspective, in Colombia volumes contracted low-single digit in 2023, in a scenario of weaker consumption. In Argentina, our water business recorded mid-single digit growth in volumes, despite the complex economic environment, explained by the strength of the brands and a successful route-to-market integration of this business into our operations. Now I will be glad to answer any question you may have.
Operator: Thank you very much for the presentation. We'll now be moving to the Q&A part of the call. [Operator Instructions] The first question we have is from Mr. Felipe Ucros from Scotiabank. Please go ahead, sir. Your line is open.
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