pania Cervecerias Unidas S.A.(CCU) - 2020 Q4 - Annual Report

Financial Performance - Net sales for 2020 reached CLP 1,857,594 million, showing a growth from CLP 1,822,541 million in 2019, representing a 1.8% increase[16] - Gross profit for 2020 was CLP 873,558 million, down from CLP 914,223 million in 2019, indicating a decrease of 4.5%[16] - Adjusted Operating Result for 2020 was CLP 186,591 million, a significant decline from CLP 230,808 million in 2019, reflecting a decrease of 19.2%[16] - Net income for 2020 was CLP 108,195 million, down from CLP 145,646 million in 2019, marking a decrease of 25.7%[16] - The company experienced a decline in basic and diluted income per share to CLP 260.22 in 2020 from CLP 352.21 in 2019, a decrease of 26.1%[16] - The ORBDA (Operating Result Before Depreciation and Amortization) for 2020 was 296,405 million CLP, down from 335,829 million CLP in 2019[167] - Net income prior to non-controlling interests decreased by 25.7% to CLP 108,195 million in 2020[176] - Net income attributable to equity holders of the parent company declined by 26.1% to CLP 96,152 million in 2020[177] Assets and Liabilities - Total assets as of December 31, 2020, were CLP 2,525,337 million, an increase from CLP 2,353,691 million in 2019, representing a growth of 7.3%[17] - Total financial debt increased to CLP 514,141 million in 2020 from CLP 330,155 million in 2019, indicating a rise of 55.7%[17] - As of December 31, 2020, total indebtedness amounted to CLP 490,457 million, with a consolidated interest coverage ratio of 10.32[182] - As of December 31, 2020, total interest-bearing debts amounted to CLP 588,437 million, with fixed-rate debts constituting CLP 579,889 million and variable-rate debts CLP 8,548 million[183] Market Segments - The Chile Operating segment generated 67% of sales revenues in 2020, while the International Business Operating segment contributed 22%[27] - The weighted volume market share for the Chile Operating segment was approximately 43.4%, 43.8%, and 45.2% in 2018, 2019, and 2020, respectively[77] - The weighted volume market share for the International Business Operating segment was approximately 15.8%, 16.7%, and 17.7% in 2018, 2019, and 2020, respectively[79] - The International Business Operating segment generated net sales of CLP 483,926 million, CLP 464,487 million, and CLP 402,829 million in 2018, 2019, and 2020, representing 27.1%, 25.5%, and 21.7% of CCU's consolidated net sales respectively[103] Sales and Volume - Sales volume for 2020 was 3,069.3 million liters, up from 3,003.2 million liters in 2019, reflecting an increase of 2.2%[17] - In 2020, the Chilean beer industry had an estimated size of 955 million liters, while the carbonated soft drink industry was estimated at 2,123 million liters[83] - In 2020, the Bolivian beer industry had an estimated size of 298 million liters, and the carbonated soft drink industry had an estimated size of 990 million liters[89] - The Argentine beer industry had an estimated size of 2,088 million liters in 2020, approximately 2.2 times the size of Chile's beer industry[88] Environmental Initiatives - The company reduced water consumption by approximately 49% per liter produced as of 2020, with a goal of a 60% decrease by 2030[46] - New environmental regulations, including the REP Law, aim for a 50% reduction in greenhouse gas emissions per liter produced by 2030[54] - The company is committed to achieving 100% valorization of industrial solid waste and 75% use of renewable energy by 2030[54] - In 2020, the company achieved a 35.7% reduction in greenhouse gas emissions per liter produced, surpassing its goal of 20%[158] - The company also achieved a 48.6% decrease in water consumption per liter produced, exceeding its target of 33%[158] Economic Context - Argentina's GDP contracted by 9.9% in 2020, primarily due to COVID-19 restrictions, while inflation reached 36.1%[31] - The Chilean economy contracted by 5.8% in 2020, with inflation at 3.0% and unemployment at 10.8%, impacting consumer behavior and product consumption[188] - The average exchange rate for USD in 2020 was CLP 792.22, compared to CLP 702.63 in 2019, indicating a depreciation of the Chilean peso[22] - The Chilean peso (CLP) experienced a depreciation of 12.8% in 2020, impacting the USD value of the company's earnings and dividends[57] Corporate Governance - As of March 31, 2021, Inversiones y Rentas S.A. owned 61.56% of the company's common stock, giving it significant control over corporate decisions[56] - The board of directors includes Andrónico Luksic as Chairman since April 2013 and Carlos Molina as Vice Chairman since May 2018[195] - The total compensation paid to directors for services rendered in 2020 amounted to CLP 4,210 million[204] - The board of directors consists of nine members elected for a term of three years, with the latest election held on April 14, 2021[208] Strategic Initiatives - The company has implemented efficiency and revenue management plans in Argentina to mitigate macroeconomic challenges[33] - CCU's 2019-21 Strategic Plan focuses on growth, profitability, and sustainability, with six strategic goals including brand strengthening and innovation[75] - The company is analyzing potential acquisitions in the beverage sector to support growth strategies in Chile and other South American markets[184] - Research and development efforts are ongoing, with a focus on new technologies and digital transformation, including investments in e-commerce platforms[187] Risks and Challenges - The company faces risks from natural disasters and climate change, which could significantly impact its operations and financial condition[48] - The company continues to face risks from health crises that could disrupt operations and financial performance[49] - Consolidation in the beer industry may negatively impact the company's market share due to increased competition from larger players like ABI[38] - Potential new regulations on advertising and labeling of alcoholic beverages could adversely affect sales volumes and results[52]