pania Cervecerias Unidas S.A.(CCU) - 2025 Q1 - Quarterly Report

Interim Consolidated Financial Statements Interim Consolidated Statements of Financial Position As of March 31, 2025, the company reported total assets of Ch$ 3,914.1 billion, a slight decrease from Ch$ 3,989.7 billion at year-end 2024. Total liabilities also decreased to Ch$ 2,237.9 billion from Ch$ 2,317.2 billion, while total shareholders' equity saw a marginal increase to Ch$ 1,676.2 billion Consolidated Statement of Financial Position (Ch$ in thousands) | Account | As of March 31, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | 1,719,202,357 | 1,771,266,840 | | Total Non-Current Assets | 2,194,908,943 | 2,218,450,150 | | Total Assets | 3,914,111,300 | 3,989,716,990 | | Total Current Liabilities | 796,886,225 | 860,006,211 | | Total Non-Current Liabilities | 1,441,016,643 | 1,457,195,469 | | Total Liabilities | 2,237,902,868 | 2,317,201,680 | | Total Shareholders' Equity | 1,676,208,432 | 1,672,515,310 | | Total Liabilities and Equity | 3,914,111,300 | 3,989,716,990 | Interim Consolidated Statements of Income For the three months ended March 31, 2025, the company achieved net sales of Ch$ 817.7 billion, a 9.6% increase year-over-year. Gross margin improved to Ch$ 382.2 billion. However, operating income slightly decreased to Ch$ 84.4 billion from Ch$ 90.0 billion in the prior year period. Net income for the period rose to Ch$ 61.5 billion, compared to Ch$ 55.0 billion in Q1 2024, resulting in a basic EPS of Ch$ 156.37 Q1 2025 vs Q1 2024 Income Statement Highlights (Ch$ in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Sales | 817,670,591 | 746,023,982 | | Gross Margin | 382,181,409 | 352,126,656 | | Income from Operational Activities | 84,438,794 | 89,978,543 | | Income Before Taxes | 65,202,240 | 69,648,531 | | Net Income of Period | 61,487,966 | 55,027,607 | | Basic Earnings Per Share (Ch$) | 156.37 | 141.28 | Interim Consolidated Statements of Comprehensive Income For the first quarter of 2025, the company reported a total comprehensive income of Ch$ 40.6 billion. This was significantly lower than the Ch$ 239.3 billion in the same period of 2024, primarily due to a large negative impact from foreign currency translation differences in the current period, compared to a large positive impact in the prior year Q1 2025 Comprehensive Income Breakdown (Ch$ in thousands) | Component | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income of Period | 61,487,966 | 55,027,607 | | Gains (losses) on exchange differences on translation | (21,245,701) | 182,607,608 | | Total Other Comprehensive Income (Loss) | (20,932,490) | 184,277,049 | | Comprehensive Income | 40,555,476 | 239,304,656 | Interim Consolidated Statements of Changes in Equity Shareholders' equity increased from Ch$ 1,672.5 billion at the start of 2025 to Ch$ 1,676.2 billion by March 31, 2025. The increase was driven by net income of Ch$ 57.8 billion attributable to parent holders, which was partially offset by dividend payments of Ch$ 28.9 billion and a negative other comprehensive income of Ch$ 19.0 billion Q1 2025 Changes in Equity (Ch$ in thousands) | Item | Amount | | :--- | :--- | | Balance as of January 1, 2025 | 1,672,515,310 | | Total Comprehensive Income (Loss) | 40,555,476 | | Interim Dividends | (28,888,804) | | Other Changes | (8,003,547) | | Balance as of March 31, 2025 | 1,676,208,432 | Interim Consolidated Statements of Cash Flows In Q1 2025, the company generated Ch$ 130.4 billion in net cash from operating activities, an increase from Ch$ 121.3 billion in Q1 2024. Cash used in investing activities was Ch$ 28.1 billion, primarily for property, plant, and equipment purchases. Financing activities resulted in a net cash outflow of Ch$ 10.2 billion. Overall, cash and cash equivalents increased by Ch$ 64.3 billion during the quarter Q1 2025 vs Q1 2024 Cash Flow Summary (Ch$ in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | 130,429,751 | 121,280,183 | | Net Cash from Investing Activities | (28,078,407) | (53,975,799) | | Net Cash from Financing Activities | (10,158,794) | (40,071,609) | | Increase (Decrease) in Cash | 64,312,224 | 74,232,224 | Notes to the Interim Consolidated Financial Statements Note 1: General Information Compañía Cervecerías Unidas S.A. (CCU) is a diversified beverage company with primary operations in Chile, Argentina, Uruguay, Paraguay, Colombia, and Bolivia. It is controlled by Inversiones y Rentas S.A. (IRSA), a joint venture between Quiñenco S.A. and Heineken. The note details the company's extensive portfolio of owned and licensed brands across beer, soft drinks, water, wine, and spirits. It also outlines significant recent corporate activities, including gaining control of Aguas de Origen S.A. in Argentina and forming a new partnership with Vierci Group in Paraguay - CCU is a diversified beverage company operating mainly in Chile, Argentina, Uruguay, Paraguay, Colombia, and Bolivia[26] - The company is controlled by Inversiones y Rentas S.A. (IRSA), which is a 50/50 joint venture between Quiñenco S.A. and Heineken Chile SpA[27] - On July 1, 2024, CCU acquired a controlling 50.1% stake in Aguas de Origen S.A. in Argentina, which is now consolidated[75] - On October 14, 2024, CCU entered into a partnership with Vierci Group in Paraguay, consolidating their beverage businesses and giving CCU a 51% ownership stake in the combined entity[61][62] Note 2: Summary of Material Accounting Policies The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). Key policies include the consolidation of subsidiaries using the acquisition method, accounting for joint ventures via the equity method, and revenue recognition upon transfer of control of goods. The company's functional and presentation currency is the Chilean peso. Notably, due to hyperinflation, the financial statements of Argentine subsidiaries are restated per IAS 29 before consolidation - The interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS)[84] - Argentina has been classified as a hyperinflationary economy since July 1, 2018, requiring the application of IAS 29 for its subsidiaries, which involves restating financial statements to the purchasing power at the reporting date before translation to Chilean pesos[107][108][110] - Revenue from the sale of goods is recognized when the company transfers control of the goods to the buyer, which is generally upon delivery, in accordance with IFRS 15[187] Note 5: Risk Administration The company actively manages financial risks including exchange rates, interest rates, inflation, raw material prices, and credit. Exchange rate risk is mitigated through derivative contracts like currency forwards. Interest rate risk is managed by maintaining 100% of its debt at fixed rates. Inflation risk is partially mitigated by pricing policies and swaps. Raw material price risk is a key exposure that is not hedged. Credit risk is managed through internal credit policies and the use of credit insurance, which covers a significant portion of receivables - The company's main risk exposures are related to exchange rates, interest rates, inflation, raw materials prices, and credit risk[210] - As of March 31, 2025, 100% of the company's debt is at fixed interest rates to manage interest rate risk[225] - The company does not engage in hedging for raw material purchases, such as barley, malt, cans, and sugar, exposing it to price fluctuations[236] - Credit risk on domestic accounts receivable in Chile is mitigated by credit insurance covering 82% of total accounts receivable as of March 31, 2025[243] Note 6: Financial Information as per Operating Segments The company operates through three segments: Chile, International Business, and Wine. In Q1 2025, the International Business segment was the primary growth driver, with a 31.8% increase in net sales and a 45.5% rise in adjusted operating results. The Chile segment saw modest sales growth of 2.8% but a decline in operating results. The Wine segment experienced flat sales and a decrease in operating results. Overall consolidated net sales grew 9.6% year-over-year Q1 2025 vs Q1 2024 Segment Performance (Ch$ in thousands) | Operating Segment | Net Sales (Q1 2025) | Net Sales (Q1 2024) | % Change | Adjusted Operating Result (Q1 2025) | Adjusted Operating Result (Q1 2024) | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Chile | 515,794,592 | 501,876,690 | 2.8% | 70,226,058 | 76,824,254 | (8.6%) | | International Business | 256,029,914 | 194,253,750 | 31.8% | 21,785,416 | 14,970,806 | 45.5% | | Wines | 60,021,512 | 58,765,210 | 2.1% | 3,421,104 | 3,730,296 | (8.3%) | | Total | 817,670,591 | 746,023,982 | 9.6% | 91,883,253 | 88,914,195 | 3.3% | - The company's sales are diversified geographically, with Chile accounting for Ch$ 556.9 billion and Argentina for Ch$ 216.1 billion of net sales in Q1 2025[267] Note 15: Business Combinations This note details two significant business combinations. First, on July 1, 2024, CCU gained control of its former joint venture, Aguas de Origen S.A. (ADO) in Argentina, by increasing its stake to 50.1%. Second, on October 14, 2024, CCU formed a strategic partnership in Paraguay with Vierci Group, consolidating their respective beverage businesses and resulting in CCU holding a 51% controlling interest in the combined operations - On July 1, 2024, CCU exercised a stock option to increase its ownership in Aguas de Origen S.A. (ADO) to 50.1%, thereby gaining control and beginning to consolidate its financial information[354][355] - On October 14, 2024, CCU entered into a definitive association agreement with Vierci Group in Paraguay, combining their beverage businesses. CCU now owns 51% of the resulting entities (AV S.A., Bebidas del Paraguay S.A., and Distribuidora del Paraguay S.A.)[357][358] Note 16: Investments Accounted for Using Equity Method The company holds investments in joint ventures and associates, which are accounted for using the equity method. As of March 31, 2025, the total value of these investments was Ch$ 139.0 billion. The most significant investments are the joint ventures in Colombia, Central Cervecera de Colombia S.A.S. and Zona Franca Central Cervecera S.A.S. For Q1 2025, the company's share of net loss from these investments was Ch$ 1.5 billion Investments in Joint Ventures & Associates (Ch$ in thousands) | Investment Type | As of March 31, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | | Total Joint Ventures | 137,239,665 | 137,933,397 | | Total Associates | 1,796,798 | 1,813,524 | | Total | 139,036,463 | 139,746,921 | - The company's share of net loss from these equity method investments was Ch$ 1,518 million for Q1 2025, compared to a loss of Ch$ 3,318 million in Q1 2024[364] Note 18: Goodwill As of March 31, 2025, the company's goodwill balance was Ch$ 159.7 billion. This goodwill is allocated across various Cash-Generating Units (CGUs) within the Chile, International Business, and Wine segments. The company performs annual impairment tests using a discounted cash flow model. Key assumptions for the tests include perpetual growth rates (e.g., 3.0% for Chile, 4.0% for Argentina) and discount rates based on WACC. No impairment losses were recognized Goodwill by Segment (Ch$ in thousands) | Segment | As of March 31, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | | Chile | 46,502,610 | 46,502,645 | | International Business | 80,796,232 | 82,664,444 | | Wines | 32,416,144 | 32,416,144 | | Total | 159,714,986 | 161,583,233 | - Goodwill is tested for impairment annually using a value-in-use model based on discounted cash flows. Management determined that no reasonably possible change in key assumptions would cause a CGU's carrying amount to exceed its recoverable amount[388][393] Note 21: Other Financial Liabilities Total other financial liabilities amounted to Ch$ 1,357.7 billion as of March 31, 2025, consisting mainly of bank borrowings and bonds payable. The note details the terms, maturities, and interest rates for various debt instruments, including several series of local bonds (J, L, M, P, R) and an international bond. The company is subject to financial covenants on its major borrowings, such as maintaining specific debt-to-equity and interest coverage ratios, and was in compliance with all covenants as of the reporting date Other Financial Liabilities Breakdown (Ch$ in thousands) | Liability Type | Current (Mar 31, 2025) | Non-Current (Mar 31, 2025) | Total | | :--- | :--- | :--- | :--- | | Bank Borrowings | 33,795,782 | 166,263,683 | 200,059,465 | | Bonds Payable | 92,541,670 | 1,039,093,986 | 1,131,635,656 | | Derivatives & Deposits | 17,663,746 | 8,366,244 | 26,029,990 | | Total | 144,001,198 | 1,213,723,913 | 1,357,725,111 | - The company has several bond issuances with specific covenants, including maintaining a Consolidated Net Financial Debt Level not greater than 1.5 times Total Adjusted Equity and a financial expense coverage of no less than 3 times[486] - As of March 31, 2025, the company was in compliance with all financial covenants related to its borrowings and bonds[484][488] Note 28: Common Shareholders' Equity As of March 31, 2025, the company's paid-up capital was Ch$ 562.7 billion, represented by 369,502,872 common shares. The company's dividend policy is to distribute at least 50% of the annual net distributable profit. In April 2025, a final dividend of Ch$ 100.28470 per share for the 2024 fiscal year was approved. Basic and diluted earnings per share for Q1 2025 were both Ch$ 156.37, as there were no potential dilutive instruments - The company's capital consists of 369,502,872 common shares with no par value, totaling Ch$ 562.7 billion[534] Earnings Per Share (in Chilean pesos) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Basic EPS | 156.37 | 141.28 | | Diluted EPS | 156.37 | 141.28 | - The company's dividend policy is to distribute at least 50% of the net distributable profit annually. A final dividend for fiscal year 2024 of Ch$ 100.28470 per share was approved in April 2025[541][543] Note 35: Contingencies and Commitments The company has various commitments and contingencies. As of March 31, 2025, capital investment commitments totaled Ch$ 67.7 billion. The company is also involved in several legal proceedings, primarily related to labor claims and administrative fees, for which it has provisioned Ch$ 2.8 billion. Additionally, CCU has provided indirect guarantees, such as comfort letters and standby letters of credit, to support financing for its subsidiaries and joint ventures - As of March 31, 2025, the company had capital investment commitments of approximately Ch$ 67.7 billion[571] - The company faces several legal proceedings and has established provisions of Ch$ 2.8 billion to cover potential losses from these contingencies[572][574] - CCU has provided indirect guarantees, including a stand-by letter of credit for USD 2.6 million to support a subsidiary's debt in Peru, and has committed to maintaining majority ownership in key subsidiaries to comply with loan covenants[576][577] Note 36: Subsequent Events The Board of Directors approved the interim consolidated financial statements on May 7, 2025. No other significant events that could materially affect the interpretation of these financial statements occurred between the reporting date of March 31, 2025, and the date of issuance - The interim consolidated financial statements as of March 31, 2025, were approved by the Board of Directors on May 7, 2025[577] - No other significant financial or other matters that could affect the interpretation of the financial statements were reported after March 31, 2025[577]