Earnings Call Transcript - CCU Q4 2025

Operator, Operator

Good day, everyone, and welcome to CCU's Fourth Quarter 2025 Earnings Conference Call on the 25th of February 2026. Please note that today's call is being recorded. At this time, I'd like to turn the conference call over to Claudio Las Heras, the Head of Investor Relations. Please go ahead, sir.

Claudio Las Heras, Head of Investor Relations

Welcome and thank you for attending CCU's Fourth Quarter 2025 Conference Call. Today with me are Mr. Felipe Dubernet, Chief Financial Officer; and Carolina Burgos, Senior Investor Relations Analyst. You have received a copy of the company's consolidated fourth quarter 2025 results. As usual, the call will start by reviewing our overall results, and then we will move to our Q&A session. Before we begin, please take note of the following statements. The 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 that outperformance or results could materially differ. This segment also 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 also at the annual report submitted at the CMF. It is now my pleasure to introduce Mr. Felipe Dubernet.

Felipe Dubernet, Chief Financial Officer

Thank you, Claudio, and thank you all for joining the call today. During 2025, CCU posted a strong set of results in its main operating segment while it faced a particularly challenging year in Argentina and in the wine business, especially during the second half of this year. Isolating the nonrecurring gain from the sale of a portion of land in Chile in 2024, consolidated EBITDA decreased 2.9%. On the pricing segment, Chile posted a robust 7.8% EBITDA growth, which was diluted by the 29.5% contraction in the International Business operating segment and a 14.9% drop in the wine operating segment. In addition, net income was down 16.3%. Under the same criteria and isolating Argentina, consolidated EBITDA would have grown mid-single digits in 2025. In terms of business scale, consolidated volumes reached 36.2 million hectoliters, expanding 7.3% versus 2024. Organic volumes increased 0.6%, fully driven by the Chile operating segment, which expanded 1.1%, recovering growth after three consecutive years of contraction. In terms of our strategy, during the year, we moved forward in our strategic 2025-2027 plan and its three pillars: Profitability, Growth, and Sustainability. Regarding profitability, as mentioned, our core operating segment, Chile expanded EBITDA by 7.8%, well above inflation, and EBITDA margin grew 48 basis points, while we continue to grow in high-margin innovation and achieve efficiencies in every aspect of the business. Regarding our Growth pillar, we strengthened our regional footprint by successfully integrating PepsiCo's beverage portfolio and snacks distribution in Paraguay. Furthermore, we posted volume growth in our water business in Argentina in a tough business scenario and increased our beer scale in Colombia. Also, to meet evolving consumer trends, we posted double-digit growth in low-alcohol and ready-to-drink beverage products in Chile, innovating and consolidating our leadership in this high-growth category segment, which involves beer, wine, and spirits in the context of soft industries. Regarding Brand Equity, we recorded a solid performance in Chile, increasing brand equity levels that are key to expanding overall market share. Finally, regarding sustainability in our Juntos por un Mejor Vivir strategy, we kept reducing industrial water consumption. Regarding the profitability pillar of our strategy, in the year that we celebrated 175 years of history, we reached significant milestones. We obtained a high level of employee satisfaction, got certified in Chile and Argentina as a Top Employer by the Top Employers Institute, moved up in cadet ranking of citizen brands, and were recognized as one of the companies with the best practices in corporate governance by the survey La Voz del Mercado 2025. From a quarterly perspective, Consolidated volumes rose 0.6%, fully driven by the Chile operating segment. Our financial results were below last year, mostly explained by a challenging business scenario in Argentina, together with a high comparison base in the country and headwinds in the wine operating segment. This was partially compensated by our main operating segment, Chile, which continued to show positive results. Consolidated EBITDA contracted 17.2% where the 6% expansion in the Chile operating segment was more than offset by the 44.5% and 45.2% EBITDA contraction in the International Business and wine operating segments, respectively. Net income contracted 25.7%. Consolidated EBITDA isolating Argentina would have expanded low single digits in the quarter. In terms of our segment performance, in Q4 2025, the Chile operating segment top line expanded by 5.5% as a result of a 4.1% increase in volumes and a 1.3% higher average prices. Volumes were boosted by non-alcoholic categories. Average prices were driven by the revenue management efforts, offset by negative mix effects. EBITDA reached 6% mostly due to a 9.1% gross profit expansion, partially offset by 10.1% higher sell, distributive and administration expenses. Regarding gross profit, the rise was driven by higher volumes and lower cost pressures related to favorable prices in some raw materials, with the exception of some costs, and the appreciation of the Chilean peso against the U.S. dollar, which is positive on U.S. dollar linked costs, partially compensated by higher costs from our PET recycling plant. On the other side, sell, distributive and administration expenses funded mostly associated with higher distribution expenses and larger marketing expenses to support revenue. In the International Business Operating segment, net sales recorded a 36.3% decrease, mostly driven by lower average prices and a 4.6% decline in volumes, significantly influenced by a high single-digit contraction in the beer industry in Argentina. The decrease in average prices in Chilean pesos was driven by Argentina, impacted by negative translation effects, pricing below inflation throughout the year, and negative mix effects. The latter was partially compensated by efficiencies. Overall, EBITDA dropped 44.5%. The Wine Operating segment posted a top-line contraction of 16.8%, driven by a 9.7% drop in volumes, together with a 7.9% decrease in average prices. Lower sales were driven by both exports and domestic markets. The weaker average prices were mostly explained by a stronger Chilean peso and its negative impact on export revenues and negative mix effects in the portfolio, partially compensated with the revenue management initiatives. EBITDA contracted 45.2%, also impacted by the higher cost of wine. Regarding our main joint venture and associated business, in Colombia, volumes reached 2.4 million hectoliters in 2025, increasing by 6.1%. We continue to build a robust brand portfolio and sales execution in Colombia, which is the path to long-term volume and financial growth. Now I will be glad to answer any questions you may have.

Operator, Operator

Our first question is from Fernando Olvera from Bank of America.

Fernando Olvera Espinosa de los Monteros, Analyst

The first one is regarding the volume growth seen in Chile this quarter. If you can comment if this was favored by the alliance with Nestle highlighted in the press release. And some additional questions, sir, if you can share what was the performance of beer during the quarter and also how these low-alcohol products that you have mentioned will favor volume performance in 2026.

Felipe Dubernet, Chief Financial Officer

Yes. Thank you, Fernando, for your question. Yes, we have robust growth in Chile, growing by 4.1%, driven, as we highlighted, by the non-iconic category. However, our spirits unit grew mid-single digits thanks to a very good performance of all the non-alcohol ready-to-drink flavored products in that category. So it was a very good quarter where we had overall market checks in the quarter. This drove good growth in the overall set. Regarding the quarter, in general terms, it was good. We experienced flat volumes against the same quarter of 2024. And seasonally adjusted, it was a bigger quarter than quarter 3, let's say, seasonally adjusted. Therefore, experiencing seasonally adjusted growth for the beer category. You asked a more overall question regarding alcohol consumption. The capital alcohol consumption decreased mid-single digits, something like 4%. We are still calculating because it depends on the population estimates. But overall, consumption decreased by 4%. Specifically regarding beer, we returned to 2019 per capita consumption levels. Following this, as we highlighted consumer trends, we are pleased with the growth we are experiencing in all our low-alcohol ready-to-drink flavored products portfolio, which grew by over 20% and reached, in the Chile operating segment, practically 7% of the mix. This encompasses a proposition on beer as mixers. We are very satisfied with the growth we are experiencing in the Stone brand and in all these different flavors, along with spirits, where all the low-alcohol flavored products are growing practically 25%. So the consumer is moving towards these products. Fortunately, we have a high level of innovation in that specific category where CCU has more than 80% of market share of the overall market.

Operator, Operator

Our next question is from Felipe Ucros from Scotiabank.

Felipe Ucros Nunez, Analyst

Thanks, operator. I have a couple of questions, one focused on the short term and the other on the long term. First, regarding SG&A in Chile, you've made improvements in your SG&A to sales ratio over the past couple of years, so I was surprised to see a reversal this quarter, as SG&A grew slightly faster than sales. You mentioned in the release that this was partly due to investments in marketing. Can you elaborate on this and whether you plan to maintain this level of investment? Additionally, could you provide some insight into where this investment is directed? Is it mainly aimed at boosting the new RTD category, or is it necessary for the beer segment to maintain stable volumes? My second question, which has a longer-term perspective, pertains to beer lagging behind nonalcoholic beverages for a while now. There are likely multiple factors contributing to this trend. Could you discuss the different rates of volume growth you anticipate in this regard? In a challenging market, it's understandable for beer to underperform since it's seen as more discretionary. However, there is also a noticeable shift in consumer preferences away from alcoholic beverages. Could you comment on the two factors and their impact on your outlook?

Felipe Dubernet, Chief Financial Officer

Felipe, thank you for your question. Regarding the marketing investment, it was mainly driven by the year. As we also had a low comparison base in quarter 4, this was a temporary increase. I would say, it was a more substantial investment in quarter 4 2025 compared to quarter 4 2024, mainly to support our premium portfolio. So I think this is to build a stronger premium portfolio. At the same time, price growth in beer was in the quarter in line with inflation, which is very good, slightly above inflation. So it's a different combination on the P&L, but nothing to worry about. Regarding your long-term question, we believe our winning non-alcoholic portfolio will continue to grow, especially in the water business, both with plain water and with strong gas propositions. Also, we continue to grow at a high rate in our flavored or enhanced water portfolio. All of these are driving growth in our category and should grow in line with private consumption in our view. Specifically regarding alcohol, as I mentioned in the previous question, we returned to per capita consumption levels in 2025 that we had in 2019. But consider that 20 years ago, per capita consumption in Chile was 44 liters; in 2019, it was 52 liters; and in 2025, it remained at 52 liters. Overall, we cannot forecast the future precisely, but we expect the overall beer category to stabilize around 0% to 1% growth, driven by low-alcohol beer propositions. We recently launched Cristal Ultra in January with great success, along with our leadership in the low-alcohol ready-to-drink portfolio of flavored products or mixers, which I mentioned previously is experiencing significant growth. This will certainly sustain growth in the near future. But again, these are projections, and we are closely following consumer trends.

Felipe Ucros Nunez, Analyst

If I could do a quick follow-up on the first one. Do you expect this higher marketing spend? I know there was a comparison base, but should we expect it to grow at more historical levels going forward? Or do you expect a higher marketing spend moving forward?

Felipe Dubernet, Chief Financial Officer

No. The marketing range would be the same.

Operator, Operator

Our next question is from Guilherme from Apple Capital. What is your pricing strategy in Chile for alcoholic and non-alcoholic beverages as we approach 2026? Will you be increasing prices, or will you utilize lower cost pressures to be more competitive in growing your market share?

Felipe Dubernet, Chief Financial Officer

Overall, the company historically aims to grow prices in line with inflation. As in the last years, you know our input cost inflation was much higher than inflation. We are still lagging in terms of recovering profitability that we have in the past. We still have this lag. Our aim is to take every revenue management initiative. This could be by raising prices, which is the less sophisticated answer to your question in terms of pricing, but also by launching higher-margin innovation. In fact, the portfolio that is growing, the low-alcohol ready-to-drink flavored products, are at a premium compared to mainstream beer. So you could increase prices or your revenue per hectoliter in different ways. But bottom line, the aim is to not gain share through pricing or promotions; instead, to sustain market share in the long term through brand equity, marketing investments, and high-quality products rather than trying to gain share with aggressive promotions. The aim is to increase prices, but always considering market competition; however, the primary goal is to increase prices in line with inflation.

Operator, Operator

Our next question is from Constanza Gonzalez from Quest Capital.

Constanza González Muñoz, Analyst

I have two questions. The first one regarding the environment in Argentina. Could you give us more detail about the trend in construction that you are expecting for this year? Some recovery in the volumes? And secondly, I would like to ask you about the CapEx for this year. Thank you.

Felipe Dubernet, Chief Financial Officer

Thank you, Constanza, for your question. I hope you are doing well. Yes. Regarding Argentina, the alcoholic industry was very soft; I would say it is a declining industry. We have seen this year affecting specifically also beer, and even wine performed more dramatically. In beer, we experienced a decline. However, we saw some potential improvement towards the end of the year. During the quarter, we had a terrible November in terms of weather; it rained every weekend. Without good weather, you don't do barbecues, and without barbecues, you don't drink beer. Despite this terrible November, seasonally adjusted volumes in quarter 4 compared to quarter 3 improved by 4%. This sustains my statement that we saw gradual improvement. We don't have clarity if we exclude the weather we had in November; maybe this would reflect a high single-digit improvement seasonally adjusted. Today, we are observing a gradual recovery in terms of volume in Argentina.

Operator, Operator

Our next question is from Aldo Morales from BICE Inversiones. Can you please explain if this negative inflection point in Argentina in ARS seems to continue over the next quarters? Also, can you please explain how persistent this negative pricing scenario in wine could be?

Felipe Dubernet, Chief Financial Officer

Aldo, thank you. Yes, in a broader perspective, in 2023, our beer prices in Argentina were above inflation. In 2024, slightly above inflation, we saw big numbers. In 2025, we were below inflation. Therefore, 2025, in terms of pricing, was not a good year for beer in Argentina. Although, looking to the future, we have increased prices in December, effective in January, which will lead to some improvement in profitability in the near future along with gradual improvements. I mentioned that we saw towards the end of last month. Regarding the other question regarding wine pricing, this is primarily due to mix effects, mainly in exports. In the domestic market, we increased prices above inflation.

Operator, Operator

Our next question is from Thiago Bortoluci from Goldman Sachs.

Thiago Bortoluci, Analyst

Thanks, Felipe, for the presentation and for the questions. I would just like to move back to the discussion on pricing in Chile, right? During your remarks, you mentioned that essentially beer prices are growing with inflation. Your headline prices are growing a bit below inflation, which suggests, all else equal, that your price mix for non-alcoholic is negative, right? Obviously, there are a lot of moving parts here. I would just like to understand how much of this is mix, how much of this is like-for-like, and more importantly, particularly for non-alcoholic, what's the strategy going forward?

Felipe Dubernet, Chief Financial Officer

Overall, prices in the Chile operating segment increased by 3.5% for the year. The price effect was around 4.3%, and the mix effect was around 0.8%, which was the impact of the product mix. In the last quarter, we had a more notable mix effect due to accelerated water sales during the quarter. Regarding specifically non-alcoholic beverages, as I mentioned, the pricing strategy would be to at least increase prices in line with inflation.

Operator, Operator

Our next question is from Martin Zetzsche from Fundamenta Capital. How should we think about margins in Chile finishing in 2026, given the favorable levels for the Chilean peso?

Felipe Dubernet, Chief Financial Officer

Martin, I will not provide a specific number for margin for 2026 as that is forward-looking. However, as you mentioned in your question, we are facing favorable effects in Chile, which would certainly impact our raw material costs positively. This will particularly take effect in quarter 1 of this year because we carried out some inventory in quarter 4 of specific raw materials. That's why you didn't see, as a full extent, the benefit of the lower exchange rate in Chile. However, there are also some signals in some raw materials, particularly aluminum, where we are seeing very high prices that are concerning, above $3,000 per tonne for aluminum, comparable to what we saw in 2022. But this should be more than compensated by the exchange rate, as you pointed out. Considering this, we should see a favorable EBITDA margin and positive expansion of EBITDA in 2026. Again, these are based on assumptions that could change during the year.

Operator, Operator

Our next question is from Alvaro Garcia from BTG.

Alvaro Garcia, Analyst

Felipe, I was wondering if you could comment on the nonalcoholic front in Chile regarding the performance of Pepsi Max, especially how it's positioned relative to Coke Zero or to other competitors in China. Any specific commentary on better-performing products in Chile would be helpful.

Felipe Dubernet, Chief Financial Officer

Yes. In Chile, we do have Pepsi Zero; we do not have Pepsi Max. To highlight, Pepsi Zero is doing very well, with tremendous success in Chile. In fact, the coverage of the soft drink category grew in the last quarter by low single digits, which for this category, considering Chile's high consumption level, is very good growth. Of course, Pepsi has been increasing brand equity and market share in the last few years. What is really driving the category are the water business and particularly enhanced water products that are growing double digits during the quarter, along with other products such as ready-to-drink items that are growing mid-single digits.

Operator, Operator

Our next question is from Nicol Helm from MetLife Investments. Can you elaborate on your financial policy going forward in terms of net leverage and capital allocation? S&P has maintained the company on a negative outlook for some time. Do you expect to preserve the current rating? Are there any specific measures you're taking for this?

Felipe Dubernet, Chief Financial Officer

Thank you, Nicol, for your questions. If I understood correctly, you are asking about the net financial debt to EBITDA ratio? Yes, the aim is to maintain the notch that we are having with the risk agency, which is something below a ratio of 2. Today, we are finishing with 2 in terms of net financial debt to EBITDA. Our goal is to maintain or even decrease that if the business improves. However, we don't have a specific policy on that. Nonetheless, the aim is to maintain the specific notch that we have within the risk monitor.

Operator, Operator

We'll now move on to our final question from Santiago Petri from Franklin Templeton. Hello. Thanks for the presentation. Could you guide us on your raw material cost expectations for 2026? What impact would that have on your margins?

Felipe Dubernet, Chief Financial Officer

Santiago, yes, specifically, I will answer the question more for Chile. Starting with what has been positive today, as we mentioned in a previous question, is the appreciation of the Chilean peso. We have some sensitivity around that: each 1% appreciation has about CLP 4,000 million of better results at the consolidated level because it also considers the offset we would have in the export revenues we had in the wine business. So this is positive; however, I would not predict the exchange rate scenario. However, if this is maintained, we are talking about a significant amount of money. Last year, the average rate was CLP 953, and this year, now the spot is CLP 960. Therefore, we are discussing a significant amount of money. But this, as always, is mitigated by higher aluminum prices that we are facing and higher PET recycling prices. As you know, we have a loan in Chile where 15% of plastic bottles must reach local recycling PET, and prices for that are the highest in Latin America. So to conclude, we are observing a generally positive scenario regarding input costs, thanks to exchange rates.

Operator, Operator

Thank you. We would like to thank everyone for their participation today. I will now hand it to the CCU team for the closing remarks.

Felipe Dubernet, Chief Financial Officer

Okay. Thank you to you all for attending today. To conclude, in 2025, in the context of soft industries, we posted solid performance in our main operating segment, Chile, recovering volume growth after three years of volume contraction while expanding EBIT and EBITDA margin. However, consolidated results were weaker due to a difficult macroeconomic scenario in Argentina, together with the contraction in the beer industry in this country and strong headwinds in the wine business. We look to the future with optimism as CCU's core strengths remain solid. Our focus will continue to 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 efficiency and high-margin innovation growth. Finally, I would like to express my gratitude to all our more than 10,000 employees in a special year for our company as we celebrated our 175-year anniversary. Their dedication and commitment to CCU's principles: Excellence, Commitment, Integrity have been key to navigating challenging times. We will continue to work to ensure sustainable and profitable growth for CCU. Thank you all, and I wish you a wonderful afternoon.

Operator, Operator

That concludes the call for today. We'll now be closing on the lines. Thank you, and have a nice day.