Embotelladora Andina S.A. (Andina Bottling Company) — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022; filed April 26, 2023. The consolidated financial statements are prepared under IFRS and presented in Chilean pesos (Ch$). This is an annual report, not a standalone Q4 filing.
Business context
Andina bottles and distributes Coca-Cola trademark beverages in Chile, Brazil, Argentina and Paraguay, and also sells other non-alcoholic and alcoholic beverages. It reported 873.6 million unit cases of beverage sales in 2022. Soft drinks represented 64% of consolidated net sales. The Coca-Cola Company remains central to the business: Coca-Cola trademark soft drinks generated 64% of 2022 net sales, with another 20% from other beverages bearing its trademarks.
Key financial metrics
| Metric | FY2022 | FY2021 | Change / context |
|---|---|---|---|
| Net sales | Ch$2,656,878 million | Ch$2,216,733 million | Up 19.9% |
| Sales volume | 873.6 million unit cases | 828.3 million unit cases | Up 5.5% |
| Gross profit / margin | Ch$1,028,177 million / 38.7% | Ch$841,340 million / 38.0% | Margin up 0.7 percentage points |
| Net income | Ch$128,459 million | Ch$157,032 million | Down 18.2%; net margin fell to 4.8% from 7.1% |
| Operating cash flow | Ch$397,452 million | Ch$305,055 million | Higher collections, partly offset by higher supplier, employee and tax payments |
| Investing cash flow | Outflow of Ch$85,168 million | Outflow of Ch$198,253 million | Lower purchases of financial instruments and investment redemptions partly offset higher capital spending |
| Financing cash flow | Outflow of Ch$286,963 million | Outflow of Ch$115,320 million | Higher dividend payments were a principal driver |
| Cash and cash equivalents | Ch$291,682 million | Ch$304,312 million | Year-end cash decreased |
| Total liabilities / equity | Ch$2,127,298 million / Ch$883,403 million | Ch$1,844,693 million / Ch$1,101,414 million | Liabilities rose; equity declined |
- Cost of sales rose 18.4% to Ch$1,628,702 million, but declined as a share of sales to 61.3% from 62.0%. Management cited higher volumes, PET resin and sugar costs, currency effects and concentrate price increases.
- Distribution, administrative and sales expenses increased 24.4% to Ch$683,032 million, or 25.7% of sales versus 24.8%. Other expenses, net, increased to Ch$112,341 million, including Ch$24,984 million from selling a receivable at a discount and higher inflation-indexed debt losses.
- Income tax expense more than doubled to Ch$104,345 million; the effective tax rate was 44.8%, compared with 22.7% in 2021. Management cited the absence of a prior-year Brazilian deferred-tax reversal, Chilean foreign-exchange effects and higher taxable profits from monetary correction.
- Capital expenditures were Ch$173,675 million, up from Ch$141,952 million. Cash flow from operations exceeded capital expenditures, before dividends and other financing needs.
Material changes and regional performance
- Net sales rose in all four operating countries. Reported growth also reflected translation effects, particularly for Argentina, Brazil and Paraguay; reported Chile-peso growth should not be read as local-currency growth.
- Chile sales increased 15.2% to Ch$1,123,665 million; volume rose 4.2%, although soft-drink volume fell 1.5%. Brazil sales increased 18.1% to Ch$636,860 million; volume rose 4.4%, while the loss of Heineken and Amstel distribution drove a steep fall in beer and spirits volume and sales.
- Argentina sales increased 28.3% to Ch$688,705 million and volume rose 9.1%. Paraguay sales increased 25.5% to Ch$212,339 million and volume rose 5.9%. Argentine results are affected by hyperinflation accounting and translation at the period-end exchange rate.
- Consolidated other comprehensive income was a loss of Ch$170,053 million, principally reflecting negative cash-flow hedge and foreign-currency translation movements. Total comprehensive income was a loss of Ch$41,594 million.
Liquidity, debt and capital resources
- Current assets were Ch$1,161,729 million and current liabilities Ch$949,245 million at year-end. The current-liability increase was primarily due to reclassifying the principal of the 2013 U.S. bond to current liabilities ahead of its October 2023 maturity.
- Outstanding bond principal was approximately Ch$1,104,136 million. The 2013 U.S. notes had US$365 million outstanding and matured in October 2023; the 2050 U.S. bond had US$300 million outstanding. The filing reports total future interest payments on notes of Ch$495,574 million, including Ch$25,874 million due within 12 months.
- Management said cash, operating cash generation and access to debt markets should meet requirements over the next 12 months and beyond. The company also reported Ch$178,230 million in unused short-term credit lines and compliance with debt covenants. Its disclosed covenant measures included net financial debt of Ch$642,080 million and trailing-12-month EBITDA of Ch$463,623 million; the reported indebtedness ratio was 1.20 times against a 3.5-times limit.
- Debt is mainly fixed-rate; inflation-indexed Chilean UF debt and foreign-currency exposure remain relevant. Cross-currency swaps hedge substantial portions of U.S.-dollar obligations. The filing says net exposure to foreign-currency assets and liabilities, after derivatives, was Ch$13,158 million.
Outlook, risks and unusual items
- Management budgeted US$250 million of 2023 capital expenditures, expected to be funded largely from internally generated cash. Planned projects include production capacity, returnable packaging, recycled PET, water treatment and reuse, fleet renewal and technology investment. The plan may change with market and economic conditions.
- Andina reported that COVID-19 did not materially affect 2022 operations and that channel mix had returned to pre-pandemic levels. It said it did not anticipate liquidity problems, significant provisions or write-offs at the time of filing, while noting continuing uncertainty.
- Key risks include inflation and foreign-exchange volatility, raw-material and energy costs, competition and price controls, water availability, environmental and labeling rules, and dependence on Coca-Cola bottling agreements. Chile and Paraguay agreements were under renewal; Brazil and Argentina agreements were stated to expire in October and September 2027, respectively.
- Argentina’s 2022 consumer inflation was reported at 94.79%, and the company continued to apply IAS 29 hyperinflation accounting. Chile inflation reached 12.8%; inflation-indexed debt contributed to financial losses.
- Brazilian subsidiary Rio de Janeiro Refrescos faced IPI tax proceedings totaling approximately R$2.87 billion (about US$546 million). Management, relying on external counsel, assessed most claims as possible or remote and recorded no provision for the principal disputed claims; the auditor identified Brazilian tax contingencies as a critical audit matter.
- Probable-loss provisions for litigation totaled Ch$48,695 million at year-end, down from Ch$57,412 million. The auditor also identified impairment testing of indefinite-life distribution rights and goodwill as a critical audit matter; management reported no impairment in its 2022 tests.
- Shareholders approved two 2022-related dividend payments in April 2023 totaling Ch$78,518 million. Series B shares receive a 10% higher per-share dividend than Series A shares. The company reported effective disclosure controls and internal control over financial reporting.
Important facts for investors to verify
- How the US$365 million 2013 notes maturing in October 2023 were refinanced or repaid, and the resulting liquidity and interest costs.
- Progress and terms of renewal for the Chilean and Paraguayan Coca-Cola bottling agreements.
- Developments, potential exposure and legal assessments in the Brazilian IPI tax proceedings, including any change to provisions or collateral.
- Whether 2023 capital spending, operating cash flow and dividends remain consistent with management’s liquidity expectations.
- How much of reported sales and profit growth reflects local pricing and volume versus inflation and currency translation, particularly in Argentina.
- Comparability of 2022 market-share statistics: the filing cautions that survey methodology changed for 2020–2021 in Chile, Argentina and Paraguay.