pania Cervecerias Unidas S.A.(CCU) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q2 2024, the company's revenues contracted by 8.6%, primarily due to a 12.7% drop in volumes, partially offset by a 4.6% increase in average prices in Chilean pesos [6][7] - Gross profit decreased by 15.8%, and the gross margin as a percentage of net sales deteriorated by 338 basis points due to higher cost pressures from currency depreciation [7] - EBITDA reached CLP10,053 million, representing a 78.7% decrease, with an EBITDA margin contraction of 629 basis points [7][8] - Net income reported a loss of CLP15,888 million, excluding a non-recurring gain from land sale, which would have resulted in a gain of CLP5,040 million if included [7][8] Business Line Data and Key Metrics Changes - In the Chile Operating segment, net sales contracted by 5.5%, driven by an 8.4% volume drop, partially offset by a 3.1% growth in average prices [8] - The International Business Operating segment saw a 22.1% drop in net sales, with a 27.2% reduction in volumes, partially offset by a 7% rise in average prices [9] - The Wine Operating segment experienced a revenue increase of 12%, driven by an 11.9% rise in average prices, with export volumes expanding by 9.1% [10] Market Data and Key Metrics Changes - The Chilean peso and Argentine peso depreciated by 16.8% and 255.1% against the U.S. dollar, respectively, increasing U.S. dollar-denominated costs [6] - Despite the challenging economic environment, the company maintained overall market share in both Chile and Argentina [6] Company Strategy and Development Direction - The company is focusing on revenue management and cost control measures under the HerCCUles plan to return to profitability [6][7] - Management emphasized the importance of a multi-category beverage strategy to leverage synergies and improve financial performance [48] Management Comments on Operating Environment and Future Outlook - Management noted that the second quarter was heavily impacted by adverse weather conditions and a challenging economic context in Chile and Argentina [5][6] - Looking ahead, management expressed cautious optimism for volume recovery in July and anticipated a gradual improvement in the second half of 2024 [14][38] Other Important Information - The company does not expect to have any non-recurring asset sales similar to the land sale in the second half of the year [40] - Management confirmed that they do not hedge raw materials due to the unpredictability of commodity prices [42] Q&A Session Summary Question: Impact of weather on volume performance - Management acknowledged that weather significantly affected beer volumes, with extreme conditions in May and June leading to a notable decline [12][14] Question: Competitors' pricing actions - Management indicated that competitors are facing similar cost pressures and are likely to follow price increases to recover margins [16][18] Question: Transition from Coke distribution in Argentina - Management reported a smooth transition to their own distribution system, which has resulted in positive financial outcomes [20][21] Question: Volume and pricing expectations in Argentina - Management expressed uncertainty about volume recovery but anticipated a gradual improvement towards the end of 2024 [38] Question: Cost outlook for the remainder of the year - Management noted that while some raw material costs have softened, the overall outlook remains volatile due to currency fluctuations [34][35] Question: Measures to recover margins - Management highlighted cost control, revenue management initiatives, and efficiency improvements as key strategies to enhance profitability [36][37]