Chile: CCU’s net profit for the third quarter 2005 increased by 48%

Chile's largest brewer, Compañía Cervecerías Unidas S.A. (CCU) announced on October 28 a 48% rise in quarterly net income, compared with the same period last year, due to higher prices and volumes in most of its business segments.

The CEO of the company said: “The third quarter of 2005 was very positive for CCU. Net income grew 48.0%, operating income increased 18.4%, consolidated revenues rose by 13.9% and EBITDA grew 7.2%. These good results are attributable to higher volumes in almost all of our business segments, as well as price adjustments in almost all of our product categories to mitigate, in part, the effect of higher costs and inflation.

The Chilean beer segment had a good performance with 19.8% higher operating income explained by prices and volumes that grew 6.1% and 4.9%, respectively. In July, we updated the image of our main brand, Cristal, with a new marketing campaign and packaging innovations.

The Argentine beer business results for the quarter are distorted due to exchange rate variations. Nevertheless, in US dollar terms, the performance of our Argentine subsidiary was very positive, having improved revenues by 32.7% and operating results by 83.3%, due to 25.4% higher prices in US dollar terms and a 5.7% volume growth.”

Total revenues in Q3 2005 increased by 13.9% to Ch$111,059 million (US$209.9 million), as a result of higher consolidated volumes and higher average prices. Consolidated volumes growth is explained by increases of 4.9% in beer Chile, 5.7% in beer Argentina, 3.0% in the soft drinks segment, 19.0% in the Chilean domestic wine business, 236.2% and 34.0% in the pisco and Argentinean wine businesses, respectively. The increase in average prices is explained by higher prices in pisco, beer Chile, soft drinks segment and domestic wine, partially offset mainly by lower prices in beer and wine from Argentina when translated to Chilean pesos. In dollar terms, prices in beer Argentina improved 25.4%. YTD accumulated revenues increased 12.7% and amounted to Ch$339,427 million (US$641.4 million).

Gross profit in Q3'05 increased 13.9% to Ch$53,216 million (US$100.6 million) as a result of 13.9% higher revenues, partially offset by 14.0% higher cost of goods sold, which amounted to Ch$57,843 million (US$109.3 million). The increase in cost of goods sold is mainly explained by the higher level of pisco sales, as well as higher costs in almost all businesses. In Q3'05, the gross profit margin, as a percentage of sales, remained almost flat at 47.9%, recovering from a decrease during the first half of the year. YTD Gross Profit increased 10.5% to Ch$169,947 million (US$321.1 million). The consolidated gross margin decreased 1.0 percentage point to 50.1%.

Operating profit for Q3'05 amounted to Ch$9,795 million (US$18.5 million), 18.4% higher than Q3'04, mainly due to 13.9% higher gross profit, partially offset by 12.9% higher selling, general and administrative (SG&A) expenses. SG&A expenses reached Ch$43,421 million (US$82.1 million) in Q3'05, mainly due to higher SG&A expenses in beer Chile and pisco businesses. SG&A expenses as a percentage of sales decreased from 39.5% in Q3'04 to 39.1% in Q3'05. The consolidated operating margin for the period increased from 8.5% to 8.8%. YTD Operating Profit increased 9.0% to Ch$40,165 million (US$75.9 million). The consolidated operating
margin decreased 0.4 percentage points to 11.8%.

EBITDA for Q3'05 Increased 7.2% to Ch$20,148 million (US$38.1 million) compared to Q3'04, while the consolidated EBITDA margin (EBITDA as a percentage of sales) was 1.1 percentage points lower than in Q3'04 at 18.1%. This quarter, the depreciation of agricultural assets and barrels, which are included in the direct cost of wine, were considered in the calculation of EBITDA. This new criteria has been applied to 2004 figures in order to facilitate comparison between the two periods. YTD EBITDA increased 2.2% to Ch$70,700 million (US$133.6 million). The EBITDA margin decreased 2.2 percentage points to 20.8%.

The company said prices were 6.1 percent higher on average for its Chilean beer segment, and volume grew 4.9 percent in the quarter, compared with a year earlier. That meant the unit had 19.8 percent higher operating income, year over year.

Revenues from Chilean beer increased 11.3% to Ch$37,272 million (US$70.4 million), as a result of 4.9% higher sale volumes and 6.1% higher real average prices.

Revenues from Argentina beer measured in Chilean pesos decreased 2.8% to Ch$7,780 million (US$14.7 million), due to 7.2% lower prices, partially offset by 5.7% higher sales volumes. Nevertheless, in US dollar terms, prices increased 25.4% and revenues grew 32.7%.

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