Business context and reporting period
Embotelladora Andina S.A. (Coca-Cola Andina), a Chilean beverage bottler and distributor, filed this Form 20-F on April 28, 2021 for the fiscal year ended December 31, 2020. It operates in Chile, Brazil, Argentina and Paraguay and reports under IFRS in Chilean pesos. This is an annual report, not a standalone fourth-quarter filing; Q4 commentary is included but separate Q4 financial statements are not provided in the supplied text.
Key financial metrics
Amounts below are in Ch$ millions unless otherwise noted.
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Net sales | 1,698,281 | 1,779,025 | -4.5% |
| Gross profit | 675,783 | 730,681 | -7.5% |
| Gross margin | 39.8% | 41.1% | -1.3 percentage points |
| Net income | 123,117 | 175,246 | -29.7% |
| Net margin | 7.2% | 9.9% | -2.7 percentage points |
| Operating cash flow | 278,769 | 255,148 | +9.3% |
| Capital expenditure | 82,653 | 116,171 | -28.9% |
- Sales volume was 734.6 million unit cases, down 1.6%. Soft-drink volume fell 1.9%; waters fell 6.6%; juices and other non-alcoholic beverages fell 8.7%; beer and spirits rose 57.2%, partly reflecting new distribution activity.
- Distribution, administrative and sales expenses declined 11.5% to Ch$436,171 million, or 25.7% of sales versus 27.7%. Cost of sales fell 2.5% but rose to 60.2% of sales from 58.9%.
- At year-end, cash and cash equivalents were Ch$309,531 million; current assets Ch$797,298 million; current liabilities Ch$378,056 million (an approximate 2.1 current ratio). Total liabilities were Ch$1,616,504 million and equity Ch$831,561 million. Financial liabilities were Ch$1,028,396 million, including current and non-current balances; reported total bonds payable were Ch$937,626 million net of issuance costs.
- Investing cash flow was an outflow of Ch$223,879 million, including Ch$139,450 million of purchases of financial instruments and Ch$85,875 million of property, plant and equipment. Financing cash flow was an inflow of Ch$113,041 million, principally reflecting the 2020 bond issuance. Cash increased by Ch$151,963 million during the year.
- Interest expense was Ch$54,773 million versus Ch$46,209 million. Income tax expense was Ch$54,905 million versus Ch$61,167 million. The filing does not provide a clear consolidated EBITDA amount in the supplied text.
Material changes versus the prior comparable period
- Chile sales rose 5.9% to Ch$644,762 million, while Brazil declined 6.3% to Ch$580,063 million, Argentina declined 19.2% to Ch$318,828 million, and Paraguay declined 1.1% to Ch$157,153 million. Currency translation materially weighed on reported Brazil and Argentina sales.
- Argentina sales were pressured by lower volume, price controls and currency translation. Brazilian beer sales increased 21.1% in reported pesos; Chile beer and spirits sales increased substantially after the AB InBev distribution agreement began in November 2020.
- Net income fell more sharply than sales, partly because 2019 benefited from recognition of Brazilian PIS/COFINS tax-credit recoveries and related income. Other expense, net, was Ch$61,589 million in 2020 versus Ch$1,368 million in 2019; the filing attributes the deterioration mainly to lower financial income and other income, as well as higher financial costs.
- Cash from operations improved, while capital expenditure decreased. Total liabilities increased 13.7%, primarily from the January 2020 bond issuance and related derivative valuation; current liabilities decreased 8.2%.
- Foreign-currency translation losses drove other comprehensive income to negative Ch$191,714 million and total comprehensive income to negative Ch$68,596 million, despite positive net income.
Outlook, commentary, risks and unusual items
- Management budgeted US$160–180 million of capital expenditure for 2021, expected to be financed largely from internally generated funds. Priorities include technology, capacity, returnable packaging, trucks and water-use efficiency. Plans may change with market and pandemic conditions.
- Management said it expected no liquidity problems, significant provisions or write-offs from COVID-19 at the time of filing. Q4 sales continued to be weaker in restaurants and bars, while traditional and wholesale channels supported volume growth; management said it was too early to assess lasting shifts in consumption.
- Key risks include COVID-19 and channel disruption; inflation, devaluation and exchange restrictions, especially in Argentina; currency exposure and dollar-denominated input costs; competition and price controls; water availability and environmental regulation; and reliance on The Coca-Cola Company, which sets concentrate prices and controls bottler-agreement renewals. Coca-Cola bottler agreements expire in 2022 in Brazil and Argentina, March 2022 in Paraguay, and 2023 in Chile.
- In Brazil, tax authorities assert approximately R$2.471 billion of IPI claims. The company disputes the claims and describes most as possible to remote; provisions for probable litigation losses across the group totaled Ch$50,070 million at year-end. The auditors identified Brazilian tax contingencies as a critical audit matter.
- The modified Heineken distribution arrangement in Brazil was expected to take effect in mid-2021, subject to antitrust approval; the company estimated the initial portfolio at about 26% of volume under the previous agreement. The previous agreement was due to terminate in March 2022.
- The annual impairment review found no impairment for the principal cash-generating units, but the AdeS brand in Chile was written down by Ch$1,451 million. A change in estimated useful lives in Chile increased 2020 depreciation by approximately Ch$7,071 million.
- The filing reports a US$300 million bond issued in January 2020 at a 3.95% coupon, but its maturity is inconsistently stated as 2050 in the narrative and 2039 in one financial-statement note. Verify against the indenture and final filed statements.
- Auditors issued unqualified opinions on the IFRS financial statements and internal control over financial reporting. Management also concluded disclosure controls and internal controls were effective at year-end.
Most important facts for investors to verify
- Confirm the 2020 bond’s contractual maturity, principal and hedge terms, given the filing’s conflicting maturity references.
- Review the Brazilian IPI litigation, the R$2.471 billion amount at issue, related recorded provisions and potential effects on cash or tax credits.
- Assess the sustainability of margins and earnings after the 2019 Brazilian tax-credit benefit and the 2020 deterioration in gross and net margins.
- Track renewal of Coca-Cola bottler agreements and antitrust approval and execution of the revised Heineken arrangement in Brazil.
- Check the 2021 capex program, liquidity and debt covenants against actual results, particularly amid currency volatility, Argentine controls and continued COVID-related channel impacts.