Compañía Cervecerías Unidas S.A. (NYSE:CCU) Q3 2025 Earnings Call Transcript

Compañía Cervecerías Unidas S.A. (NYSE:CCU) Q3 2025 Earnings Call Transcript November 6, 2025

Compañía Cervecerías Unidas S.A. misses on earnings expectations. Reported EPS is $0.0869 EPS, expectations were $0.09148.

Operator: Good day, everyone, and welcome to CCU’s Third Quarter 2025 Earnings Conference Call on the 6th of November 2025. 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 Heras: Welcome, and thank you for attending CCU’s Third Quarter 2025 Conference Call. Today with me are Mr. Felipe Dubernet , Chief Financial Officer; Mr. Joaquín Trejo, Financial Planning and Investor Relations Manager; and Carolina Burgos, Senior Investor Relations. You have received a copy of the company’s consolidated third quarter 2025 earnings release. The call will start by reviewing our overall results, and then we will move into a Q&A session. As every quarter, before we begin, please take note of the following statement. The statements made in this conference call that relate to CCU’s future financial results are forward-looking statements, which, of course, involve known and unknown risks and uncertainties that could cause actual performance or results to materially differ.

These statements 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 is now my pleasure to introduce our CFO, Mr. Felipe Dubernet .

Felipe Dubernet: Thank you, Claudio, and thank you all for joining the call today. In the third quarter 2025, CCU posted higher operating results and increased profitability versus last year in a volatile and an uncertain business scenario. Consolidated EBITDA grew 4.6% versus last year, mainly driven by our main operating segment, Chile, which in the context of soft industries expanded EBITDA margin through gross margin improvement and efficiencies, maintaining the positive trend in financial results throughout the year. The International Business Operating segment also expanded EBITDA versus last year. Within the segment, we are facing a very challenging scenario in Argentina, where the beer industry contracted mid-single digit during the quarter.

On the other hand, the Wine Operating segment posted a lower EBITDA driven by weaker domestic markets in Chile and Argentina together with a higher cost of wine. Our year-to-date results show that our path to recover profitability remains on track, supported by our 2025-2027 strategic plan, which prioritize profitability through revenue management efforts and efficiencies. Regarding our main consolidated figures in the third quarter 2025, net sales were down 1.1%, explained by 2.2% lower average prices in Chilean pesos, partially compensated by 1.2% volume growth. Gross profit decreased 2.9% and gross margin was down 79 basis points. In addition, consolidated MSD&A expenses in Chilean pesos dropped 4.7% due to efficiencies and a favorable translation currency effect from Argentina.

In all, EBITDA expanded 4.6% and EBITDA margin expanded 60 basis points. For the first 9 months of the year, and excluding the nonrecurring gain from the sale of a portion of line in Chile in the second quarter 2024, consolidated EBITDA expanded 9.9%. In terms of our segments, in the Chile Operating segment, top line expanded 1.8% as a result of a 2.4% increase in average prices, partially offset by 0.6% lower volumes. Higher average prices were explained by revenue management efforts in all the categories. This was offset by mix effects between alcoholic and nonalcoholic categories. Volumes were below last year due to soft industries, mainly in alcoholic categories. Gross profit and gross margin expanded 3.6% and 75 basis points, respectively, due to lower cost pressures related to favorable prices in some raw materials, which compensated higher costs from our PET recycling plant, CirCCUlar.

MSD&A expenses grew 3.2% below inflation in spite of higher marketing expenses and as a percentage of net sales increased by 46 basis points. Altogether, EBITDA increased 4.8% and EBITDA margin expanded 41 basis points. Isolating costs and expenses associated to CirCCUlar, EBITDA would have expanded 10.2% and EBITDA margin by 117 basis points. In International Business Operating segment, volumes posted a 5.3% expansion, although net sales contracted 8.9%, driven by 13.5% lower average prices in Chilean pesos. The decline in average prices in Chilean pesos was mainly due to the 42.2% devaluation of the Argentine peso against the U.S. dollar and a very challenging pricing scenario in Argentina, where prices grew below inflation and negative mix effects within the beer category.

The volume expansion, excluding AV, the recent acquisition in Paraguay was mainly explained by Argentina, fully driven by the water category, while beer volumes contracted in line with the industry. Regarding our other operations, Bolivia and Paraguay posted higher volumes and Uruguay contracted low single digits. Gross profit decreased 16.6% and gross margin contracted 382 basis points. MSD&A expenses were down 19.2% and as a percentage of net sales decreased 552 basis points. In all, EBITDA grew 73.1%, driven by all geographies in the International segment. The Wine Operating segment posted a top line expansion of 1.6%, mainly driven by a 4.8% rise in average prices, while volumes were 3% lower. The higher average prices were mostly explained by a weaker Chilean peso and its favorable impact on export revenues and revenue management initiatives in the domestic markets.

Volumes contracted due to a 6.3% decrease in Chile domestic market, in line with the industry. partially offset by 4.5% growth in exports. Gross profit decreased 1.6% and gross margin deteriorated by 128 basis points due to cost pressures from a higher cost of wine and higher U.S. dollar-linked packaging costs. MSD&A expenses rose 4.5% and as a percentage of net sales increased 78 basis points due to higher marketing expenses. Altogether, EBITDA decreased 12% and EBITDA margin was down 224 basis points. Finally, regarding our main joint venture and associated business in Colombia, we delivered low double-digit volume growth, outperforming the industry. We continue to build a robust brand portfolio and sales execution, which is the path to the long-term volume and financial growth.

Now I will be glad to answer any questions you may have.

Q&A Session

Operator: [Operator Instructions] Our first question is from Constant Gonzalez from Quest Capital.

Constanza González Muñoz: I have a question regarding the international segment, specifically in Argentina. Are you expecting a recovery in prices for the fourth quarter of this year? And also, what are you expecting for 2026? Are you expecting a recovery in prices and volumes? And secondly, could you tell us more about the environment that you are seeing in conception in that country?

Felipe Dubernet: Thank you for your question regarding Argentina. Yes, in the second semester, we are facing a much more challenging scenario in Argentina, let’s say, decline especially in the third quarter of the volumes, especially in beer, while the water business is growing mid-teens, let’s say. The point of that, as you indicated, is that with prices that are below inflation. In fact, we are practically 9% below the inflation this year, year-to-date. We have increased prices in our side, but the scenario is competitive. The market share are rather stable, but we expect in the near future because everybody needs to recover profitability. Price increases, that’s key in order to recover the profitability of the industry. Regarding volumes, let’s say, we have maybe a more stable scenario in Argentina after the elections, where the government would — is expected to, let’s say, to decrease the uncertainty and its financial issues regarding — especially the U.S. dollar.

On the other hand, it is expected to do some reforms in this new Congress. Regarding the near future, we expect an increase in private consumption, but more than that, in this increase in private consumption that is expected to be next year, 3%, it would be different among different consumption categories. Maybe as you know, many Argentinians changed their car at the beginning of the year. So they have had some records in car sales. And normal people — so I’m considering myself normal, I do not change the car every year. It’s a very bad business. So maybe some of these resources from the consumers would come back to our categories, especially categories that are more linked to have fun as the beer — responsible, responsible consumption of beer.

And to regain momentum in the industry in the near future, along with — we hope recovery of the overall economy. So we have had a bad third quarter. However, we expect recovery next year, I would say, and also more price adjustments to be at least in the near future in line with increase.

Operator: Our next question is from Thiago Bortoluci from Goldman Sachs.

Thiago Bortoluci: I’d like to turn the conversation back to Chile, right? Obviously, there are different dynamics playing out there. But what I see from the consolidated numbers is your pricing growth moderating, actually printing even a little bit below inflation, while I wouldn’t call it for a material decline in volumes, but volumes slightly down meaning — I know probably these efforts to be less aggressive on pricing, let’s say, are not necessarily resulting in a stronger demand. Could you please elaborate more how you’re seeing pricing versus volume growth versus competition, market share across the different categories, soft drinks and beer please? And more importantly than that, how much space you see for eventually more pricing to be implemented in each one of those going forward?

Felipe Dubernet: Thank you, Thiago. Good to hear about you. Thank you for your question regarding Chile. Let me make very clear on price because I saw your report and then commentary now. Price in general per category are in line with inflation or above inflation. The thing that you are seeing is the entire segment, Chile that is showing a price of 2.7%, 2.4% quarter-on-quarter, but because there is a big mix effect between alcoholic categories and nonalcoholic categories. As the industry in alcoholic categories is declining, I have a negative mix effect in price. Excluding that mix effect, prices are increasing 4%, which is above inflation. So I need to make this precision because I read your report. The competitive dynamic, I would say, is very competitive, Chile, as you know.

In terms of market share in the overall beverage industry, I would say we gained slightly share compared to previous quarter and quarter-on-quarter compared to same quarter last year, also we gained some share in both alcoholic and nonalcoholic categories because now we see the market as alcoholic and nonalcoholic, especially when you have industries that are declining and they are shift between industries. So I would say it’s very competitive, but thanks to our brand equity, our revenue management strategies, our execution while we have increased prices in alcoholic and nonalcoholic categories, we have been able even to slightly gain share. The point regarding going forward in price always, we have an aim of optimizing our revenue management in all the categories, of course, to regain profitability, of course, there is competition.

Alcoholic categories, especially wine, but also beer, the industries are very soft, are declining. The one that is declining the most is wine. But beer is also a decline in the third quarter, the industry. The only one that is growing low single digit in alcohol is spirit, thanks to the ready-to-drink where we lead innovation, will lead the market in this fast-growing category, which are the spirits ready-to-drink. Also, we have low alcohol or nonalcohol beer and all the shandies and the flavored beer such as, as an example, the Lemon Stones brand in Chile, where we led the market and it’s also growing. Innovation is key in this scenario, okay? That’s the answer, Thiago.

Thiago Bortoluci: That’s helpful, Felipe. And if I may, a follow-up in Chile, right? Obviously, I know this is a harder answer, but would love to pick our brains on that. I guess, across the world, we are seeing, in general, declining volumes in beer, right? 2025 has been an atypical year in some regions, you have adverse weather, you have obviously volatile macro, particularly across South America. What’s your assessment of this weakness in beer, particularly for Chile? Would you say something more temporary? Would you say there is a structural component related to the consumption occasions, new generations, preferences? And what is CCU doing itself to try to revert this trend?

Felipe Dubernet: Thiago, it’s not useful to — in alcoholic, I prefer to talk about alcoholic categories rather than specific because we have different pictures in different segments, let’s say. As I said in my previous answer, the one that the industry is declining more is wine. This is a global trend and has been for many years and also a Chilean trend in the last 10 years. Wine, the per capita consumption in 2014 was 13.5 liters per capita. And in 2024 was 10.5. In the opposite of beer in 2014, per capita consumption was 44 liters per capita and last year for 54 liters per cap. There is no single explanation. We carried out very scientific or [ values ] based on data and on quantitative and qualitative, what are the reasons maybe this year in 2025, we saw a further decline from where we were in 2021 or what we have experienced in previous year.

And there are high numbers of factors that came from, and you pointed out correctly, is how much money has the consumer. The economy has not been brilliant in the last years in Chile growing 2% on average or less than 2%, huge adjustment interest rate. Interest rates are declining now. The perspective of the Chilean economy should be better in the next 2 or 3 years. Copper prices are on the roof, thanks to the climate change and all of this. There are a number of projects that Chile with enhanced GDP. So we are positive about the economy in Chile in the near future. And this — if we have this, maybe we will see a better perspective for overall categories, not only alcoholic but also nonalcoholic categories. But there are other reasons that are linked to alcohol consumption.

One example is unsecurity. People feel very unsecure in Chile than it was 10 years ago. The sense of going out to on-premise, having a beer or having a cup of wine and let’s say, the on-premise was in Chile 10%. And nowadays, it’s 5% to 6%. So — and this is linked to unsecurity. All presidential candidates, in 10 days, there will be presidential elections in Chile. The #1 priority is unsecurity. And when you ask the consumer, why you are not consuming so much alcohol or why are you not going out and having, as you said, in Brazil, a [Foreign Language] or a [Foreign Language] in French. Now because I feel unsecure to go in the night, so I prefer to stay home and not miss my friends. So — there are many reasons, Thiago. But we expect because we have studied other realities such as the U.S. market.

The U.S. market is declining a lot to beer consumption. But however, there has been some period of history where we have seen rebounds on consumption in specific categories. And the category that is performing very well because it is linked to trends is the ready-to-drink category in spirits, but also variants of beer, where you have flavor, you have low alcohol content, beers that are more seasonable. So innovation is key because we led the categories, especially in Chile, the alcoholic category. And innovation is key to, let’s say — and it’s a key pillar of our strategic plan to overcome the situation, let’s say.

Operator: Our next question is from Fernando Olvera from Bank of America.

Fernando Olvera Espinosa de los Monteros: Can you hear me?

Operator: Yes, we can hear you.

Fernando Olvera Espinosa de los Monteros: Great. Perfect. The first one is related to costs. If you can comment, Felipe, regarding the outlook on costs for the fourth quarter and 2026 would be great. And my second question is related to CapEx also for next year. I mean, considering the soft demand that we are seeing overall in alcoholic beverages, what is your initial thoughts on CapEx for 2026?

Felipe Dubernet: Fernando, good question about the cost and commodities. I will give you a medium term, let’s say, 2026 as our cautionary statement, I don’t do forecast. But what we are seeing, we are doing the budget right now. We are seeing favorable news in practically all the commodities, except aluminum compared to 2025 and also compared to 2024, not yet at the level of prices of commodities that we had pre-pandemic, 2019. But we are seeing better news in barley, sugar, virgin, PET, resins, pulps that was a big hit, especially on juice in the next 2 years. So we are seeing a material, let’s say, better commodity prices with the exception of aluminum. We are talking about an easy a projection about $10 million of better commodity prices in U.S. As I said, my #1 commodity is the U.S. dollar, and it seems stable in Chile, at least Chile, which is account for 70% of the EBITDA exchange rate seems stable going forward.

And along with a lot of initiatives in terms of efficiencies in Chile that are linked to procurement, let’s say, the strategic sourcing also design to value. We always see at our packaging or our formulations in order without affecting at all quality, however, doing in a more valuable or more cost-effective way to deliver the same benefits to the consumer. The consumer is first. However, we always look — and we work on new material, new specification to reduce cost. And third is what we call nearshoring that is to have closer production of our raw materials and packaging materials to our breweries or factories, let’s say, to decrease logistic costs. And in that side, also we have a strong efficiency program. So we saw a better scenario with the exception of aluminum for next year that is increasing practically in our projection 5%.

On the other hand, what is — and we have highlighted this year, we have had higher cost and expenses linked to the CirCCUlar. CirCCUlar is about introducing recycled packaging in our PET bottles up to 15%. And so far, this has had a significant impact in our EBITDA, about [ CLP 10 million ], roughly $12 million of extra cost and expenses year-to-date. On a yearly basis, this year would cost us something like CLP 15 billion. But overall, the aluminum is increasing, but all the rest is in better shape. We have efficiencies, so we expect a better scenario for raw materials and packaging materials going forward.

Fernando Olvera Espinosa de los Monteros: No, that’s great insight. And what about CapEx, Felipe?

Felipe Dubernet: CapEx, I will hand over this question to my colleague, Mr. Joaquin Trejo, Financial Planning Manager.

Joaquín Trejo Darraidou: Thanks, Felipe, and thank you, Fernando, for your question. Regarding CapEx, we actually estimate to close the year slightly below what we published in our annual report between 10% and 15% below the published figure for 2025. And looking ahead, we don’t actually see major CapEx needs for capacity as the volume trend is what Felipe mentioned earlier, but rather focusing on technology. We are changing our IT system for sales and distribution and also innovation to address this new consumer trend that Felipe also mentioned in previous questions, and also regulatory requirements. The ratio we like to look at is the CapEx over sales, and we forecast it to be below 6% going forward. And also, this is why the CapEx over depreciation ratio should be at some point below 1% going forward, where the new projects are actually a smaller amount compared to previous years where we had, for example, the CapEx for the CirCCUlar plant.

But this is also offset by some CapEx carryover from 2025 that is going to be transferred to 2026. But in general terms, Fernando, that’s the trend we foresee.

Operator: [Operator Instructions] Our next question is from Claudia Raggio from Provida AFP. Could you give us some color on the sales volumes of beer in Argentina on October?

Felipe Dubernet: Yes, I would anticipate that we have had in both alcoholic and nonalcoholic, we saw decline also in October. So we have maintained in alcoholic the same trend we have in quarter 3. And in water, practically flat, small decline in water business.

Operator: Thank you. We’ll give it a few more moments for any further questions to come in. It looks like we have no further questions. I’ll now hand it back to the CCU team for the closing remarks.

Felipe Dubernet: Thank you all for attending today. In summary, in the third quarter 2025, our main operating segment in Chile continued in a trend of financial results and profitability in the context of soft industries and higher costs from CirCCUlar. The later was boosted by gross margin improvements, efficiencies and lower prices in raw materials. International Business Operating segment posted higher EBITDA, although results were negatively affected by a challenging scenario in Argentina due to a tough deceleration in consumption. The Wine Operating segment contracted EBITDA due to a higher cost of wine and weak scenario in domestic market, while export grew mid-single digits. We will keep executing our 2025-2027 strategic plan and its 3 pillars: profitability growth, enhancing innovation, and sustainability.

With special focus on profitability, supported by both revenue management efforts backed by our strong and diversified portfolio of brands and efficiencies across all operating segments and functions. Thank you very, very much for attending today, and I wish you a wonderful end of day.

Operator: That concludes the call for today. Thank you, and have a nice day.