Good day, and welcome to the CCU's Fourth Quarter 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Claudio Las Heras, Head of Investor Relations. Please go ahead.

Welcome, everyone, and thank you for attending CCU's fourth quarter 2020 conference call. Today with me are Felipe Dubernet, Chief Financial Officer; and Nicolás Novoa, Financial Planning and Investor Relations Manager. You have received a copy of the company's consolidated fourth quarter 2020 results. Felipe will now review our overall performance, 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. Security and Exchange Commission and in the annual report submitted to the CMF and available on our website. It is now my pleasure to introduce Felipe Dubernet.

, : In 2020, we faced a particularly challenging year due to the COVID-19 pandemic. To handle these, we implemented a regional firm with three priorities, the safety of our people and the community we interact with, secondly, operation continuity, and thirdly financial health. These allow us to continue operating and supply our products to all our clients and consumers. According to these, we put in place a strategy which aims to maintain business scale and then gradually recover profitability over time by implementing revenue management initiatives and efficiencies. In terms of volumes, in 2020, we grew 2.2%, reaching 30.7 million hectoliters, in spite of the strong negative impact in our volumes from the pandemic between April and August, showing a v-shaped recovery throughout the year as follows; an expansion of 6.4% in the first quarter, a drop of 12% in the second quarter, a slight contraction of 1.8% in the third quarter, and a strong growth of 10.6% during the fourth quarter of the year. Regarding financial results, EBITDA dropped 11.7%, and EBITDA margin decreased from 18.4% to 16%, mainly due to negative external effects from the sharp depreciation of the Chilean peso and Argentine peso against the U.S. dollar, and the impact from the pandemic in high margin consumer occasions. These effects were partially compensated with revenue management initiatives, efficiencies from the ExCCelencia CCU program and lower cost in raw materials. At Net income level we decreased 26.1%. In regards to financial health, we kept our net financial debt under control decreasing against last year. During the fourth quarter, the expansion of 10.6% in consolidated volumes was driven by an 11.7% jump into Chile operating segment, 8.3% increase in international business operating segment, and 10.9% rise in the Wine Operating segments. The higher volumes were the result of…

[Operator Instructions] And we will take our first question. Please go ahead.

Lucas Ferreira from JPMorgan.

Hello, Lucas.

Hi, good morning, everybody, good afternoon. Thanks for taking my question. I would like to understand the first of all a bit better the scenario and the market in Chile. So if you guys could provide us more details on the beer market. You guys gained market share, which were the segments of the market that grew the most during the fourth quarter? And where I mean, you gained most of these market share in any specific channel that was no stronger in the fourth quarter? And what can we expect for 2021 for the beer market considering in one hand, Chile is vaccinating superfast, right. So the reopening of the economy could be also fast. On the other hand, there are no more, let's say EFB withdrawals. So what was in your view the effect of these withdrawals in the end of last year? So how do you see the market growing in 2021? And my second question guy is on cost front. So you're seeing I guess, most of the commodities skyrocketing, I would say aluminum and sugar, most likely PET considering oil prices. So, wondering if you guys can give us also an outlook of what's your expectation, your budget for average cost in 2021? Thank you very much.

Hello, Lucas for your questions. First of all about the market in Chile specifically you asked about beer. Yes, in fact, we experienced a very good growth during the fourth quarter and I would say along the year, the beer category has been very resilient but this resiliency was also a trade-off between consumer occasions and packaging. Answer is specifically your question in terms of segment grow, definitively one-way packaging grew more than return of the packaging, and this has to do with the closure of the on-premise channel. And so, we experienced high growth in cans, and also in one-way longneck bottles. Also at the end of the year, we saw a good performance in premium growing all the premium brands. So, also put a little bit pressure on supply, but this is to give you more or less what happened in terms of the segments. In terms of channels, of course, the on-premise channel was reused and gradually recovered towards the end of the year, once the restriction eased. But it's not fully recovered, because still there are restrictions especially on weekends - and during December in Chile, and also because of the curfew. So the on-premise didn't recover at the level it has a year ago. In terms of other channels, I would say that the off-premise channel has a tremendous growth compared to all the other channels, grew more than supermarkets. And this trend - has been continued throughout the year, but especially in the last quarter. So in all, we saw a very bullish industry in beer in Chile which is good. However, to give you an outlook for 2021, first of all, we don't do forward-looking, but still we have uncertainties. You mentioned that the vaccination and we are very happy about that. And…

We will take our next question. Please go ahead. Caller, you may be on mute.

Marcella Rechia at Credit Suisse.

Hello, Marcella, how are you?

Hi yes, I'm good here. Thank you for taking my question. I have two questions about Colombia if I may. First, could you comment if the 1.5 million hectoliters volume in the country is all beer? And if not, how much is beer only? And if you could tell us what market share this volume represent? I understand that you almost double your share in the region throughout 2020. But could you give us some perspective what is your current share level there? And finally, you are already delivering positive EBITDA in Colombia, right. So do you have any visibility about the net income breakeven? Thank you very much.

Thank you, Marcella for your question. Yes, we are - although 2020 was a very difficult year in Colombia especially in quarter two due to the heavy restriction. What we saw is a favorable, let's say channel conversion that helps us a lot. And as a consequence, we were able to expand our volumes more than 20%, reaching 1.5 million hectoliters. Although the base of 2019 was the first year of the launch of our mainstream brand, Andina. Regarding in Colombia, we sell beer and malt through the brand, Natumalta, but about 90% of the volumes is beer. But we were especially delighted with the success of our Andina brand that contributes a lot to gain market share. And also a very good growth in Heineken [ph] especially empowered by the launch of Heineken returnable bottles in the middle of the year. So regarding in share, we don't disclose the numbers. But we are talking about mid-single digit a little bit more than mid-single digit in terms of market share what we reach on average during the year, but every month growing. Regarding the financial, you mentioned correctly that we delivered positive EBITDA in the second semester. At the end, in terms of net income, it depends on many factors such as exchange rate, commodity costs, and also competition. But we think this year in the big month. We will be approaching the net - the breakeven on net income. But we don't give you know guidance on specifically in at which time, but we are moving in the positive direction I would say.

[Operator Instructions] We will take our next question. Please go ahead.

Hi, guys, this is [Mohammad Foyston], thank you very much for taking my question. Nicolás Novoa: Hello, Mohammad.

Hi, hope you guys are all well. I have two questions. One is on COGS inflation specifically in Chile. And the number I see here is I think almost mid 12% or 13% 14% for the year. Let me see 12% COGS per hectoliter increase in the year last year. Can you give us any color on how much of it was mixed versus FX? And then the second question I have is on CapEx, how much was the CapEx in 2020 and what should we expect in 2021? Hello?

Thank you Mohammad I hope you are well. So let me touch on the cost inflation question and then I will ask Nic Novoa to answer the CapEx question. So in regarding cost inflation, you were right. It was influenced by two main effects, one effect was the exchange rate. As you know, the Chilean peso throughout the year faced a devaluation of the currency. So of about, let's say 13% and our raw material costs are I would say 80% linked to the U.S. dollar. So that's the first effect. Also you pointed out correctly, the mix also has an effect, because as I mentioned in the previous question, we are switched from returnable packaging that has less cost of goods to one way packaging where you have a higher cost of goods. So this also has an influence, but the main influence was certainly exchange rate that started to ease very positively in quarter four, where the exchange rate compared to the same quarter of last year was practically flat only minus 1%. On the other side, what also we mentioned in the previous question, we have rising commodity costs, but in all, it was more favorable, and especially I hope this quarter would be better. So, that was the reason of cost inflation. Now I hand over to Nico, your question regarding CapEx. Nicolás Novoa: Hi Mohammad, how are you? Regarding to CapEx this year, we have our CapEx around CLP 122,000 million, which is pretty much our maintenance CapEx. If you look our depreciation is around CLP 110,000 million. So it's more like maintaining CapEx related with the investment that we need to keep selling and the trade. Also that includes, include obviously investment in capacity especially, the investment in capacity that we started in Argentina. If we look forward for the next year and related with this volume growth that we are seeing in Argentina, and especially in Chile. At the end of the year, we are seeing a little more CapEx than the CapEx that we saw this year, more related with this means that we are going to need a little more investment in capacity in Chile and Argentina. We are going to disclose those numbers in our annual report on 20th. But that is, it's pretty much the thing that we are seeing regarding to CapEx.

We'll take our next question. Please go ahead. Caller you may have us on mute.

Yes, this is Carlos Laboy.

Hello, Carlos. How are you?

Hi, how are you? I was hoping that you could give us some more insight on Colombia, maybe around three areas. What is - are you done with your geographic coverage rollout in Colombia? Another question was what can you tell us about repeat consumption for your core brand? And lastly, what can you tell us about channel mix and the price for your brands? You had said that you'd had a positive channel conversion? What does that mean, what is your channel mix look like right now and the pricing?

Yes. So, first of all, we are in other country, but we have a core area around Brunei [ph] where we have all the portfolio, which is the Bogotá region. So we have a higher shedding in Bogotá. However, remember our beer business in Colombia is a joint venture with Postobón, which is the main non-alcoholic beverage operator. So we do - we use the distribution of Postobón to distribute our products. So we have a full coverage of the country. However, we have a core area that is especially with returnable packaging, which is, because Colombia the proportion of returnable is much higher than one-way. So, but in the Bogotá, we have higher presence. And answering channel mix, I would say that during the pandemic, the on-premise channel fall down but started to recover this - my comment was on that sense, and as we are new in the market, we are a stronger presence in supermarket that increase more the sales, I would say. However being said that, we are increasing our distribution day-by-day in the on-premise channel, but specifically in the pandemic supermarkets grew more. That's a little bit, the answer.

Please, we will take our next question. Please go ahead.

Hello, thanks for taking my question. And I have a couple of questions. And the first one is regarding transport expenses, which was one of the - one important saving that you showed in your present results and expense both side there is also a variable. But I would like to know if there's maybe in any commodity impact or maybe a strategy impact on your logistics? Also, can you give us a little bit of outlook in Argentina, you are showing more stable margins in these results after having very important decreases in margins and you have been having a catch-up on that front. So I'll be glad if you can give us some explanation on that and maybe an outlook on whether you're expecting in the coming months? And also finally regarding the wine business, also there was a negative impact on cost and so, it will be good to know if you'll try to manage this by revenue management and if you are seeing possibilities of countering this profitability pressures in different - in your market? Thank you.

Thank you. Can you give me your name please because…

Thiago Duarte, from BTG.

Thiago, hello how are you, hope you are well? Okay, thank you Thiago. Okay Thiago, yes you asked specifically - I think about transport expenses in the distribution - domestic distribution side, right, or you ask about worldwide transport expenses, because it's a….

Regarding your businesses as we see the…

Okay, okay on one hand, you have the inbound transport of raw materials on things that are experiencing, higher cost and this is particularly with China, okay. So in terms of domestic, we are linked to variables such as oil price in Chile, that on one hand, we do have, you know, during quarter four, relatively good prices in oil compared to the same quarter of 2019 and also decreasing exchange rate. So, it was somewhat favorable. However now, oil prices would certainly increase given this bullish commodity scenario I would say. So, but along with - this helps us a lot specifically because we have a higher volume so we needed to hire more fleet, especially in the last quarter. Jumping to Argentina now, yes you are right, we experienced that big change in Argentina in results. We had a very tough year, especially in second and third quarter with negative EBITDA non-cash generation. So at the end of the year, it started to improve a lot. And I would say this is very encouraging towards 2021. We did a lot of revenue management initiatives, while the volume has not collapsed. In fact, we have had a very good volume in quarter four. And we had a very good start in 2020, in January 2021 also that, where we were able to increase prices, so which is good news for Argentina. So we are more optimistic, let's say nowadays in Argentina as we were last year ago. Wine, in terms of wine, we are suffering from cost pressures, of the cost of wine given the 2020 harvest that was not famous. So, and then now we had especially bad weather during February that affected also - also that would certainly affect the 2021 harvest that now is starting. So - the only way to compensate that is through revenue management, it's more easy in the domestic side of the business. Let's say in Chile, rather than the export markets, and also the business is - this business would be on the other side of the other business by a weaker U.S. dollar. So, the only way to compensate that is through revenue management wherever we can and also efficiencies.

[Operator Instructions] We will take our next question. Please go ahead.

Hi, Felipe, Nicolás, this is Felipe Ucros from Scotiabank. Most of my questions have been asked. So a couple of follow-ups really, you talked a little bit about Colombia. I was wondering, if you could give us some color, about how brands are doing? How Andina is doing versus Heineken, and how receptive the consumer has been to each one of those? I see you've gained market share as well, not really expanded the region. Can you talk a little bit about how much you think that's because of the channel changes and how much it gains within that same channel? And then my second question, you also talked a little bit on Argentina? Can you talk a little bit about how price controls have evolved? And how conversations with the government are going? What do you expect for 2021? Should you be able to increase prices with inflation or above or do you expect a little more government intervention on that side? Thank you.

Thank you, Nicolás for the two questions. Regarding Colombia as I mentioned, we saw very good performance on Heineken especially on the premium side. This was a - lot thanks to that we have expanded the - our portfolio by being only in one-way packaging, we expanded to being one-way packaging and returnable bottles. And also Andina is a brand where we are building brand equity also expanded very well. Some of the explanation is channel, but also, it's a business where we are building a new brand such Andina, and this also has an effort in terms of gain, a lot of potential in gaining share by our brand equity so is not only channel. And in terms of Heineken, as I mentioned is the expansion of the portfolio that help a lot us to gain market share. So, that is related to Colombia. Argentina as I mentioned, we were able to increase prices in January. We were de-listed from the precious [Maximos] program beer was de-listed from this program. And it was announced until end of March. And this is the reason why also we were able to increase prices in January, which means that we are step-by-step recovering the past profitability we had in the business. And you saw the numbers where as a whole because we published international business, but is mainly Argentina is a significant portion of that. We were able to have our first of all positive EBITDA. And secondly, a nice margin, EBITDA margin expansion from 16.1% to 18.5%. And add to this also, the price increasing in January, it means that we are starting in a very good shape the year.

And we'll take our next question. Please go ahead.

Hi, this is Barbara Angerstein with Itaú. Hi, Felipe, hi Nicolás everybody there. Just wanted to see if you could comment on the news published last week that some smaller mom and pop stores presented a complaint with Fiscalía Nacional Económica on disruptions on supply and low inventory levels in their channel versus supermarkets? It caught my attention because as you have commented in previous occasions, the profitability of supermarkets and mom and pop is quite different. And therefore - it doesn't - it seems a little bit surprising that there is a lack of inventory there. Can you comment on this please? Thank you.

Hello Barbara, I hope you are well. Yes, I will not refer specifically to that claim because we do not have at the moment any detail or an inquiry from the antitrust or the Fiscalía Nacional Económica at the end and it was a complaint against the whole industry not only us. What I can say is, you know, her data the off-premise channel during the last quarter, the quarter four grew three times the supermarket channel. However, we need to recognize we had supply issues because we grew in the year double-digit. Secondly, the mix has been throughout the year very affected by the pandemic as I mentioned before, by you know, a switch from returnable bottles to one-way packaging. And maybe if you saw international reports on the industry, there is a worldwide shortage on cans everywhere. This was one of the consequences of the pandemic. So a tight supply combined with higher growth in all the channels, in all the channels during the fourth quarter, but we don't have any - sold product we have is that the product we have for every channel without any - without any discrimination. And in fact the off-premise channel grew three times the supermarket channel.

Okay. So it seems to be more an issue that they are selling so much that it's impossible to keep up with the volumes that they sell?

Yes, we had a strong volume during quarter four along with supply issues that are being evolving positively, but you know it's very violent change of mix along with very high size.

[Operator Instructions] We will take our next question. Please go ahead.

This is Santiago Petri from Templeton. Hope you are all well? Thanks for the call. My question is, I know, I apologize if it has been already answered, had some communication problems. But I would like to know your assessment of the agreement between Colombia and Andina? If you have any, pressure on competition there or any new developments from that agreement? Thank you.

Hello, Santiago, I hope you too are well. Yes, it's very public that there is a distribution agreement between Andina and ABI. First of all, it validates our category, multi-category business model that CCU has been empowering or let's say in that model for many, many, many years. We think we need to continue doing what we have been doing focusing on sales, execution and brand equity. But it's too early to give any comment on that, because the distribution has started in November. And in terms of market share or we haven't suffered in quarter for 2020. But we are prepared to do that. And we don't have any specific commentary on what they are doing.

[Operator Instructions] Felipe, we have no further questions at this time. I would like to turn the conference back to your host for any additional or closing remarks.

Okay, thank you very much to you all for attending this conference call. In 2020, we were able to protect our people, support the community and continue operating in all the countries we operate, while keeping the financial sales of our company. At the same time, we protected our businesses scale by delivering volume growth and set the ground to recuperate profitability gradually over time, through revenue management initiatives and efficiencies. Looking ahead during 2021, we will continue to face a challenging and uncertain scenario. However, we are optimistic on that. In this context, we will keep focusing on the three objectives set for the pandemic, and we will double our efforts to recover profitability in the coming quarters. Finally, I would like to thank the effort and commitment of all CCU employees, which allow us to overcome a particularly challenging year in 2020. I am convinced that if we take care of each other, and work united, we will emerge stronger from this difficult time to share together a better life. Thank you very much and have a very good afternoon.

And that concludes today's presentation. Thank you for your participation. You may now disconnect.