CCU

Business Context and Reporting Period

Company: Compañía Cervecerías Unidas S.A. (United Breweries Company, Inc.)
Reporting Period: Year ended December 31, 2025
Business Overview: A diversified beverage company operating primarily in Chile, Argentina, Uruguay, Paraguay, Colombia, and Bolivia. The company is the largest brewer in Chile and a major producer of soft drinks, wines, bottled water, and spirits. It operates through three segments: Chile, International Business, and Wines.
Accounting Standards: IFRS. The filing includes the initial adoption of amendments to IAS 21 regarding "Lack of exchangeability" for subsidiaries in Argentina and Bolivia, resulting in a negative equity impact of ThCh$ 61.6 billion due to exchange rate adjustments.

Key Financial Metrics (Year Ended Dec 31, 2025)

Note: All figures are in thousands of Chilean pesos (ThCh$).

Material Changes vs. Prior Period

• Revenue Stability: Net sales remained relatively flat, increasing slightly by 0.2% to ThCh$ 2.91 trillion, driven by growth in the Chile segment (+4.7%) offset by declines in International Business (-8.2%) and Wines (-2.2%).
• Profitability Decline: Net income attributable to equity holders of the parent decreased by 27.2% to ThCh$ 117.2 billion. This was primarily driven by a 15.9% drop in Adjusted Operating Result (ThCh$ 220.8 billion vs. ThCh$ 262.7 billion) and a significant loss on derivative contracts (ThCh$ 22.9 billion).
• Segment Performance:
  • Chile: Adjusted Operating Result increased 7.3% to ThCh$ 220.4 billion.
  • International Business: Adjusted Operating Result fell 64.5% to ThCh$ 9.5 billion, heavily impacted by currency translation and operational challenges in Argentina.
  • Wines: Adjusted Operating Result decreased 20.6% to ThCh$ 23.2 billion.
• Balance Sheet: Total assets decreased by 8.6% to ThCh$ 3.65 trillion, largely due to the revaluation of assets in hyperinflationary economies (Argentina) and the application of new IAS 21 amendments. Cash and cash equivalents dropped 26.6% to ThCh$ 519.2 billion.
• Debt: Total financial liabilities decreased, with bond payables and bank borrowings showing reductions in book value due to repayments and exchange rate effects.

Guidance, Outlook, and Risks

• Management Commentary: The company highlighted the impact of the new IAS 21 standard on Argentina and Bolivia, which required using non-official exchange rates (CCL dollar and private bank quotes) for translation, significantly affecting equity and retained earnings. Management noted that despite the decline in net income, the Chile segment remained resilient.
• Dividends: The company maintained its policy of distributing at least 50% of net income. An interim dividend of ThCh$ 84.00 per share was paid in November 2025.
• Key Risks:
  • Exchange Rate Risk: Significant exposure to the Chilean Peso, US Dollar, and Argentine Peso. A 10% fluctuation in exchange rates could impact net income by approximately ThCh$ 45.3 billion (hypothetical sensitivity).
  • Hyperinflation: Continued volatility in Argentina and Bolivia affects financial reporting and operational costs.
  • Raw Material Costs: Exposure to price fluctuations in barley, malt, cans, and concentrates. An 8% increase in direct costs could reduce pre-tax income by ThCh$ 102.6 billion across segments.
  • Legal Contingencies: Provisions for litigation totaled ThCh$ 2.65 billion, primarily related to labor disputes.
• Unusual Items: A loss of ThCh$ 27.7 billion was recorded in "Other gains (losses)," primarily due to results from derivative contracts. Additionally, the sale of land in Quilicura (completed in 2024) and Iquique (completed in 2025) generated gains, though the 2025 impact was smaller.

Investor Verification Checklist

• IAS 21 Impact: Verify the specific impact of the "Lack of exchangeability" amendment on the Argentine and Bolivian subsidiaries' equity and retained earnings (ThCh$ 61.6 billion negative impact).
• Derivative Losses: Review the ThCh$ 22.9 billion loss on derivative contracts in Note 32 to understand the hedging strategy effectiveness and future exposure.
• Argentina Operations: Assess the sustainability of the International Business segment given the 64.5% drop in Adjusted Operating Result and the hyperinflationary environment.
• Cash Position: Confirm the reduction in cash and cash equivalents (ThCh$ 519.2 billion) and its sufficiency for upcoming debt maturities and dividend obligations.
• Debt Covenants: Verify compliance with financial covenants (Net Financial Debt/Equity ratio and Financial Expense Coverage) as detailed in Note 21, particularly given the equity reduction.