Business context and reporting period
Embotelladora Andina S.A. (Andina Bottling Company) filed this audited Form 20-F on April 27, 2022, for the fiscal year ended December 31, 2021. The Chilean company bottles and distributes Coca-Cola products and other beverages in Chile, Brazil, Argentina and Paraguay. Financial statements are prepared under IFRS and presented in Chilean pesos (Ch$). The filing is an annual report; it does not provide a separate 2021 Q4 results summary.
Andina reported 828.3 million unit cases sold in 2021 and consolidated net sales of Ch$2,216,733 million. Soft drinks represented about 60.7% of net sales; the business also includes water, juices, energy drinks, beer and other alcoholic beverages.
Key financial metrics
| Metric | 2021 | 2020 |
|---|---|---|
| Net sales | Ch$2,216,733 million | Ch$1,698,281 million |
| Gross profit | Ch$841,340 million; 38.0% margin | Ch$675,783 million; 39.8% margin |
| Net income | Ch$157,032 million; 7.1% margin | Ch$123,117 million; 7.2% margin |
| Operating cash flow | Ch$305,055 million | Ch$278,769 million |
| Cash and cash equivalents at year-end | Ch$304,312 million | Ch$309,531 million |
| Total assets | Ch$2,946,107 million | Ch$2,448,064 million |
| Total liabilities | Ch$1,844,693 million | Ch$1,616,504 million |
| Equity | Ch$1,101,414 million | Ch$831,561 million |
Investing cash flow was negative Ch$198,253 million, including Ch$138,856 million of property, plant and equipment purchases. Financing cash flow was negative Ch$115,320 million; the comparison year included the 2020 bond issuance. Reported capital expenditures were Ch$141,952 million in 2021, up from Ch$82,653 million in 2020.
At year-end, outstanding bonds had an aggregate principal amount of Ch$1,046,045 million, including Ch$25,383 million payable within 12 months. The filing reports Ch$505,372 million of future bond interest payments, of which Ch$13,333 million was payable within 12 months. The company also had Ch$167,649 million of unused short-term credit lines. Current assets were Ch$990,986 million and current liabilities Ch$529,567 million.
Material changes versus the prior comparable period
- Net sales rose 30.5% and sales volume increased 12.8%. Excluding the additional Chilean beer volume from the AB InBev distribution agreement, volume growth was 8.6%.
- Net income increased 27.5%, while gross margin declined 1.8 percentage points to 38.0%; net margin was broadly stable at 7.1%.
- Cost of sales increased 34.5%, faster than revenue. Management cited higher volume, a mix shift toward higher-cost products and packaging, higher sugar and PET costs, currency effects and Argentina translation.
- Chile net sales increased 51.3%, supported by volume, revenue per case and beer and spirits distribution. Argentina net sales rose 68.4%, reflecting volume recovery, higher revenue per case and translation effects. Brazil net sales fell 7.0%, principally due to currency translation and lower beer sales; Paraguay net sales rose 7.7%.
- Cash from operations improved, but year-end cash decreased by Ch$5,219 million. Property, plant and equipment purchases increased from Ch$85,875 million in 2020 to Ch$138,856 million in 2021.
- Other expenses, net, increased to Ch$89,229 million from Ch$61,589 million, mainly reflecting increased losses on indexed financial assets and liabilities amid higher inflation and lower financial income.
Outlook, commentary, risks and unusual items
- Management budgeted US$190–200 million of capital expenditures for 2022, primarily for capacity, packaging, returnable containers, water efficiency, recycled PET, fleet and technology projects. It expected internally generated funds to finance a large part of the plan; spending could change with market conditions.
- Management said it expected no liquidity problems and did not anticipate significant provisions or write-offs related to COVID-19 at the time of the report. It cautioned that pandemic-related channel and supply effects remained uncertain. No specific revenue or earnings guidance was provided.
- Renewal of Coca-Cola bottler agreements is central to the business. Agreements for Argentina and Brazil were due to expire in September and October 2022, respectively; the Chile agreement expires in January 2023, and the Paraguay agreement was under renewal. Renewal is at Coca-Cola’s discretion.
- In Brazil, the Heineken and Amstel distribution arrangement was replaced in September 2021 with a new portfolio arrangement including Eisenbahn, Tiger, Sol, Kaiser and Bavaria. Management warned the new arrangement might not match the former agreement’s results. The filing also describes a 12-year Estrella Galicia distribution agreement and acquisition of 50% of the Therezópolis brand.
- Brazilian tax proceedings include claims of approximately R$2.775 billion relating principally to IPI tax credits. The company disputes the claims; external counsel assessed most as possible or remote, but outcomes remain uncertain. Total recorded provisions for probable litigation losses were Ch$57,412 million at year-end, including Ch$53,966 million in Brazil.
- Argentina is treated as hyperinflationary under IAS 29; 2021 inflation was reported at 50.21% in the financial-statement notes. Currency controls may restrict dividend remittances. Exposure to currency depreciation, inflation, dollar-denominated inputs and debt indexed to Chilean inflation are important risks.
- Other significant risks include raw-material and fuel cost volatility, water scarcity, competition and pricing pressure, health and packaging regulation, political and economic uncertainty, and reliance on Coca-Cola brands and concentrate supply. In Brazil, management recorded a BRL12.8 million impairment related to its Verde Campo investment.
- The financial statements received an unqualified audit opinion, and management and the auditor concluded internal control over financial reporting was effective. EY audited the 2021 statements; shareholders elected PwC as auditor for fiscal 2022.
Important facts for investors to verify
- Confirm renewal terms and continuity of the Coca-Cola bottler agreements in Argentina, Brazil, Chile and Paraguay.
- Track whether higher input costs and foreign-exchange movements continue to pressure gross margin and whether pricing offsets them.
- Review the Brazilian tax proceedings, related provisions and any developments affecting IPI credits or the ICMS/PIS/COFINS tax-credit recoveries.
- Assess the financial contribution and execution risks of the new Brazil beer portfolio and the planned 2022 capital program.
- Verify cash conversion, debt maturities, interest obligations, covenant headroom and the effects of Argentina’s inflation and exchange controls.
- Note that the April 2022 shareholders’ meeting approved dividends of Ch$189 per Series A share and Ch$207.9 per Series B share, totaling about Ch$187.8 billion, including accumulated earnings; confirm payment and distinguish this approval from dividends paid during 2021.