Good day, everyone. Welcome to CCU's Fourth Quarter 2024 Earnings Conference Call on the 26th of February 2025. Please note that today's 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.

Welcome everyone and thank you for attending CCU's fourth quarter 2024 conference call. Today with me are Mr. Felipe Dubernet, Chief Financial Officer; Joaquín Trejo, Financial Planning and Investor Relations Investor Relations Manager; and Carolina Burgos, Senior Investor Relation Analyst. You have received a copy of the company's consolidated fourth quarter earnings release. Felipe will now review our overall results, and we will then move into a Q&A session. As usual, before we begin, please take note of our cautionary statement. 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. This statement 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's my pleasure now to introduce Mr. Felipe Dubernet.

Thank you, Claudio and thank you all for joining us today. Before moving into the quarter, I would mention some highlights of the full year 2024. In 2024, CCU delivered higher financial results versus 2023 after a strong turnaround during the second half. Also, we continue to advance in our strategy in a particularly challenging and volatile business environment. Through the year, we faced a low 20s contraction in the beer and water industries in Argentina and a modest economic growth in Chile that led to flat volumes in the Chile operating segment. In addition, we experienced cost and expense pressures coming from the depreciation of our local currencies against the U.S. dollar. In this context, and excluding the non-recurring effect of the sale of a portion of land in Chile, in quarter two 2024, full year consolidated EBITDA reached CLP 387,267 million, increasing 2.1%. When including the nonrecurring gain, EBITDA increased 9.6% versus last year. At the same time, and also excluding the nonrecurring gain, full year consolidated net income expanded 32.5%. When including the nonrecurring gain, net income increased 52.3% versus last year. The strong turnaround in the second half of the year where consolidated EBITDA surged by 27.7% was mainly explained by a solid performance in the quarter four in all our operating segments more than offsetting a challenging first half where we posted a 26.5% decline in EBITDA as of June 2024. This upward trend was driven by effective initiatives in revenue management and efficiencies in all our operating segments, enabling us to more than offset the negative impact in our results from the challenging scenario described above. The initiatives mentioned above were executed under the regional plan, HerCCUles, which we started in 2022 and ended in 2024, being key to align the company under six…

Thank you. So we will now move to the question-and-answer session. [Operator Instructions] So our first question comes from Fernando Olvera from Bank of America. Please go ahead sir. Your line is now open.

Great. Good morning or good afternoon. Thanks for taking my questions. I have two. My first question is if you can comment what was the performance in Chile between premium and mainstream beer and how much represents premium of your beer volume now? How do you expect the mix to behave this year? And my second question is how are you thinking about the price elasticity in Chile? Thank you.

Yeah. So I understood -- in your first question, I understood the first part of the question. We have some communication problems in the second part. So let me answer the first part of your question, what is premium and mainstream, so how was the mix? This is your first question regarding that?

Yes. And basically, what is your outlook for this year, in these two categories? Thank you, Felipe.

So I would say between premium and mainstream is rather stable, the mix in the comparing quarter four 2024 and quarter four 2023. The outlook in Chile, so quarter four, the industry was, I would say, soft because although we have a mid single-digit growth in Chile. During the quarter, 4.7%, we grew the volumes. It's worth to say that the comparison base of last year, as we mentioned in our press release at that that time, due to weather conditions was a low comparison base. So if we exclude that, we could conclude the industry is rather flat. So I would say, soft. What we expect in the future, it's too early to call, because only we have one month, but what we – it was slightly positive, I would say, compared to the first quarter of last year, but it's too early to call, but it would be a soft industry for sure. I would say the economic growth in Chile is expected to be 2% in the long-term. So I do not expect a big jump in the industries. I would say, a similar year in terms of growth of what we experienced a little bit more growth, maybe, but low single-digit growth would be something reasonable. Okay?

Okay. And regarding the second question, how are you thinking about price elasticity, thinking about that soft volume?

Yes. At the end of the day, if you look at the overall quarter -- excuse me, in the overall Chile Operating segment, we grew the volumes and volumes are, let's say, running at a very similar rate. So I would say that, the price elasticity, of course, we aim -- we increased prices by 4.9%. This is in part as we have discussed in many phone calls that we need to recover our margins due to this big jump after the pandemics of the input cost because we still have a lower gross margin compared to 2019. For example, that is the year previous to the pandemic. So we need to continue to do revenue management efforts and price elasticity, I think there is something -- but at the end, it's exactly same we have. So remember, in 2019, for example, we used to sell in the last quarter, 6 million hectoliters, just as a data. And in the 2024 last quarter, we sold 6.6 million hectoliters, while we have increased the prices in line with inflation, so it's not the same price. So there is so we could increase price while increasing the industry. Because if you see the numbers, we are, against 2019, 15% above in terms of volumes. So the first pillar HerCCUles was to maintain the scale and still we are more than maintaining the scale despite the price increases. These price increases were not enough to compensate the input cost. But we have increased the prices while increasing the volumes.

Okay. Great. Thank you, Felipe.

Thank you. Our next question comes from Ewald Stark from BICE Inversiones. Please go ahead, sir. Your line is open.

Felipe, thanks for taking my question. I have a question regarding Argentina. So far in 2025, how have you seen Argentina performing, and what are your expectations going forward? Thanks.

Thank you, Ewald, for your question regarding Argentina. In Argentina, after the big decrease in volumes occurred in quarter two and quarter three, where we saw high 20s decrease in decrease in volumes between 25% to 28% volumes compared to the second quarter of the previous year. In quarter four, we saw an improvement. So we were -- we decreased our volumes in a much lesser extent, the volumes. So, we saw gradual improvements in Argentina. Just to give you a flavor on that, this is seasonally adjusted volumes in quarter one 2024, our seasonally adjusted volume, this is not including the inorganic volumes of -- were 5.8 million hectoliters. So, in quarter four, it was 5.6 million. So, we haven't yet recovered the quarter one volumes. However, in quarter two, which was the bottom was 5.2 million. So, we continue to see some improvement in January, but as I like to mention, it's too early to call. But we think it would gradually recover a higher scale Argentina. Would Argentina recover the scale we had in 2023? No. But certainly, we will -- the industry as inflation is more controlled. And as it is projected a higher economic growth, should continue to recover in the way to recover the scale we had previous to the macro adjustment in Argentina.

Okay, perfect. And do you have any sense about when 2023 volumes could be achieved going forward, maybe 2026, 2027?

It's difficult to predict. I would say, maybe. But you mentioned exactly what could be reasonable between two to three years. It would depend on many factors. Because in Argentina, you have still many macro challenges. Would the government release the cepo at the end of the day? So, we are in a good path in the -- with sequential improvements, I would like to say, but to predict when we would recover the scale in Argentina because at the end, Argentina today manage a completely different micro and macroeconomic reality. It's a country that -- maybe the first question, you may ask me or we may think is when hyperinflation would end in accounting -- for accounting purposes. Because yes, we saw very good results in inflation, with improvements. But salaries need to recover, employment need to recover, so the macros need to recover. And then we could answer the question regarding when would we recover the scale in Argentina. But we are in the past, quarter four results showed that, early January results show that we continue with the sequential improvement that we are saying that is happening since quarter three. Quarter three more moderate, quarter four better and we expect quarter one to be a little bit better and continue to recover the scale.

Okay, perfect. Thanks. Have a nice day.

Okay. Thank you. [Operator Instructions] So we have a question from Martin Zach [ph] from Fundamental Capital [ph].

Should we expect margin recovery during 2025 and 2026? Would that recovery come on the back of price increases going ahead of cost inflation?

Yes. Yes. Thank you, Martin, for the question. Yes. At the end, we are -- so the last quarter results are encouraging, especially in the case of tile. As you compare, we recovered our margin path. So for example, in 2024, we have exactly the same margin as we had in 2021 when we had an extremely high volume. In general terms, it's a tough scenario. It's very volatile. So it would depend a lot on external factors, especially the exchange rate. So if you ask me that question at beginning of the year with the Chilean peso at CLP 1,000 per U.S. dollar would be very difficult to improve EBITDA margin. But we will continue our revenue management efforts as well as our efficiencies effort in order to show sequential improvement in margins. These are key. As you mentioned in your question, revenue management is key, not only increasing prices, but also rationalizing promotions is key in that sense. So certainly, the improvement of margin will not come from volumes, so it should come from revenue management, but also from efficiencies. But we should be seeing an improvement. And this -- I'm talking regarding Chile. In the case of Argentina, if part as -- we as I mentioned in the previous question, we continue with the sequential improvement. We should be we recover margin certainly.

Okay. Thank you. It looks like we have a follow-up question from Fernando Olvera from Bank of America. Your line is now open. Please go ahead.

Hello, guys. Thank you for taking my question again. Maybe if you can comment about the wine division. I mean, your volume is still far from the peak reached in 2021. So how do you expect volumes to behave this year? And what is your outlook on export and the corresponding domestic markets? And also, if you can comment about Colombia, about volumes in Colombia, how are you seeing the behavior this year given the solid growth that we saw in 2024? Thank you.

Okay. Regarding the Wine division, I would maybe divide your question in three answers. Because we operate in different markets. So first of all, exports. Exports as we haven't yet recovered the scale we had previous to the pandemic, we are below the 2019 volumes by 13% in exports from Chile. 2024 was the first step in terms of recovering that as we grew 4%, 3.9%. Speed is moderate. We think we will continue to recover, especially by the implementation of our commercial offices in China, US and UK. This initiative certainly will improve our execution in these three key markets, along with the recovery of other markets such as Korea. So in general times, we should be recovering growing this year and in the way to recover this market. It’s tough. It's a very competitive market. We have experienced this destocking in 2023 of all our clients. And going forward, 2024 show growth, and we -- but we need to -- but we are still far from recovering the scale we had previous to the pandemic. So another important lever is innovation, innovation is key in a category that globally doesn't grow. So innovation is key. Jumping now to Chile domestic. In that case, it's the opposite to export market because we have a higher scale than previous to the pandemic, so we have preserved the scale, despite an improvement in margins as we have increased prices. So -- but in that sense, we are -- this is a very good business that we are in very good shape. We are the market leaders and innovation has been key in that. Argentina, suffering from what's happening in Argentina in terms of volume. This year, we suffered in the domestic Argentinian market in 2024. So overall, the perspective is growing exports, maintaining our leading position in Chile. So but essentially the recovery of export volume is key going forward.

Excellent. And regarding Colombia...

Regarding Colombia, we grew high-single digits, gaining share with an excellent performance of Andina Light, also an excellent performance of Tecate. There is still job to be done in our execution. The team in Colombia is working hard. Also with our partner, Postobón, in improving our -- especially our sales execution and also while increasing our brand preference there. But we are very happy about the performance of Andina Light.

Okay. So do you expect the good performance to continue?

And as I mentioned, we reached a positive EBITDA, which is very important to continue to invest behind the brands.

Okay. Perfect. Just a quick one about the massive blackout from yesterday in Chile. I mean I was just wondering if that blackout affecting, some way, your operation, if it was highly affected or not?

No, not significantly. So first of all, the only -- we lost one shift of production, because production, you don't have back ups for the full production, only for the essentials, for example, to keep the beer in the fermentation plants, you have backups. All the distribution is not a heavy user of electricity. So you have full backup. So we completely delivered our customer orders without any disruption. We lost one shift of production is not significantly -- as we could extend some shift going forward and completely recover this shift that we lost. But our contingency plans worked perfectly in the IT side, in our data centers and also in the distribution to completely deliver the products to our clients.

Great. Thank you, Felipe.

Okay. Thank you. Our next question comes from Constanza Gonzalez from Quest Capital. Your line is now open. Please go ahead.

Good afternoon, Felipe, and team. Thank you for taking my questions. I have two. The first one regarding CapEx, what is the CapEx that you are expecting for this year? And I appreciate if you can make the separation between investment and maintenance. And the second one is just regarding CapEx, too. Do you have any targets regarding the EBITDA that you prepared to invest in the near future? Thank you.

Hello, Constanza, thank you for your question regarding CapEx. Yeah, what we can say is that CapEx against depreciation would be going forward a little bit above inflation above depreciation our CapEx would be a little bit depreciation. So -- but much lower than what we saw in previous year, let's say, 2019, 2022, where was a period of big expansion in terms of volume capacity. So we moved from 1 point -- between 1.4% on average, 1.3% to 1.7% was the peak in 2022. We are moving to ranges between 1.1% and 1.2% going forward. So because as I mentioned, we saw a soft industry at least in 2025 and maybe in two years, we need to recover, as I mentioned, we need to recover the scale in Argentina. So we saw a more moderate CapEx going forward. So CapEx, as percentage of sales were in ranges between 7% to 7.5%, on average 2019, 2022, 2023, 2025, we saw something around 5.5%. That's for CapEx. Could you repeat your second part of the question?

Of course. Do you have any target regarding CapEx versus EBITDA? Or it's not a measure that you follow?

The metrics I mentioned are the metrics we use. CapEx as a percentage of net sales, as I mentioned, we don't have -- because CapEx, you need to be flexible enough if we have a jump in industries, you need to invest in capacity. Main CapEx, the mix of CapEx now is moving to efficiencies, is moving to regulation. As I mentioned, a big jump in CapEx last year was due to the construction of Circular [ph], which is a plant to recycle PET bottles, okay? So it's more linked to environmental and efficiencies rather than capacity. So I think our level of CapEx should be in the average of the industry what we have seen is between 5% to 8% depending on what are the needs. But there is no specific, but I think this would be the level of the CapEx that's a little bit above inflation between 1.5 times depreciation -- excuse me -- not inflation, depreciation.

Thank you, Felipe. I have another question. Regarding net financial debt over EBITDA. Are you evaluating some range in the next year? Or are you comfortable with where your current levels?

Yeah. In general terms, we are within the range. We don't have a public target on that, but I think it's -- when we compare with the industry, comparing with other sectors, I think we have a reasonable level as far as we kept our investment grade, which is key. That's important for us. We still are keeping our investment-grade level, we need to be in that range. As I mentioned, we have maybe less CapEx the next three years because we are moving from 1.5 times inflation to 1.2 times -- excuse me -- depreciation, again, I said inflation, depreciation, or moving from above 7%, especially dominant saving CapEx. This indicator will continue to improve. In fact, in the last quarter, we moved from net financial debt-to- EBITDA from 2.2 times to -- 2 times to 1.8 times. So, we are in the good path. But it's key for us, is having our investment-grade.

Thank you so much for your answers.

Okay. Thank you. Our next question is from Alvaro Garcia from BTG Pactual.

Can I ask about Chile cost inflation outlook specifically and your outlook on how this might impact the rationality of pricing in Chile over the next year? Thank you.

Okay, Alvaro. Thank you for your question. Regarding cost inflation, as I mentioned in the previous question, it's very volatile because it's very different in this business. With CLP1,000 per dollar exchange rate, is very different than CLP940. These are CLP60, and you know it's 1% of devaluation, is a lot of money in our P&L that we need to compensate with efficiencies or with pricing. Because, as I mentioned, we will not have great news from volumes. So, at the end, that's key for us. If the dollar going forward is maintained in a range of CLP940, every price increase we do, at least in line with inflation, would be a good news in terms of overall margin. And this is the aim. Usually, in the long-term, CCU is aiming to increase price in line with inflation. Our ability to increase prices would depend in several factors. And one of the factors is competition, of course, but more than thinking about the competition, we need to think about ourselves, and this is -- what is key, and it was a big pillar in HerCCUles and continue to be a very important KPI for us is brand itself. The stronger our brands are, the more our brands are in the heart of the consumer, the better -- the better price we can get for our brands. Even if the competition does promotions or discounts, we need to rely in our brand equity in order to sell at better prices. Of course, is key, as I mentioned, the volatility in the market. But if we have a scenario of CLP940, I would say it is reasonable to increase the prices in line with inflation a little bit above inflation.

Okay. Thank you. Our next question comes from Francisca Taverne from LarrainVial.

Have you seen competition regarding price increases in the beer market in Chile? Have they followed in the last months?

Yes. We have been the last quarter, increasing prices in some specific packages. So -- because we have some packages that are less profitable than others. So we have touched these packages, especially the large size packages, and this has been implemented, especially in the beer category in Chile. So as still, I think every company has suffered a lot in terms of margins of the levels we had before the pandemic, we need to continue to recover profitability. Usually, competition or the whole industry has increased the prices along the path. So -- and this is what I said. At the end, it's a combination of overall industry price, but also brand equity matter in not only in the price list, but also in rationalizing promotions. This is key in a very competitive market as Chile.

Okay. Thank you. [Operator Instructions] So our -- we have a question from Sergio Winter from Falcom Capital. In your press release, you mentioned that HerCCUles is already concluded, is there any other plan or measure to continue working on efficiencies in 2025?

Sergio, thank you for your question. Maybe we haven't been very clear in the press release, but we are mentioning that, of course, HerCCUles as a name, as an idea, as a brand ended in 2024. It was a three-year plan in order to recover our results against 2022 that was, in fact, a very disappointing year in terms of results. And in fact, we recover EBITDA growth we -- and especially net income growth that was above inflation in that period. So now going forward, as we mentioned, our focus will be on developing our 2025-2027 strategic plan, reinforcing our three pillars: profitability, growth and sustainability. So HerCCUles ended. But many elements of HerCCUles are still present and will be still present in our in our 2025-2027 strategic plan. In the upcoming annual report that we will issue according to the regulation going forward, we will be more specific and give more color on different KPIs of that new strategic plan 2025-2027. But many elements of the plan would continue, especially in terms of profitability, where we need to continue to recover gross margin because this is what suffered the industry, as well, reducing our expenses as a percentage of net sales in, let's say, kind of efficiencies at gross margin level and efficiencies also at expenses level in order to protect our bottom line going forward. But it is worth to say that HerCCUles was a successful plan in order to recover to some extent, despite the external effects we had, the contraction in Argentina at the HerCCUles [ph] path in the delivery of the results that are shown especially in the last quarter.

Okay. Thank you. We are not seeing any further questions. Thank you, everyone, who asked questions. I'll be handing the line back to the CCU team for closing remarks.

Thank you, all for attending this conference call. To conclude, in 2024, we posted a strong turnaround in our financial results during the second half of the year, expanding EBITDA and net income versus 2023 in a challenging business scenario, at the same time, we strengthened our regional footprint. Looking ahead, we are cautious about 2025 as the business scenario will remain volatile and uncertain. Our focus will be on developing our 2025-2027 strategic plan, reinforcing our three strategic pillars: profitability, growth and sustainability, with a special focus on profitability through revenue management efforts and efficiencies. Finally, I would like to extend my gratitude to all our employees, the dedication and commitment has been key to navigate challenging times. We will continue to work to ensure sustainable and profitable growth for CCU. I wish you a wonderful afternoon today. Thank you.

That concludes the call. Thank you, and have a nice day.