Santiago, Chile, October 29, 2008 -- CCU announced today its consolidated financial results, stated in Chilean GAAP for the third quarter and full year ended September 30, 2008. All US dollar figures are based on the exchange rate effective September 30, 2008 (US$1.00 = Ch$551.31).
COMMENTS FROM THE CEO
We are satisfied with the results obtained during the third quarter of 2008. They were reached in a challenging economic scenario, with unexpectedly high cost inflation. The consumer price index variation for the quarter was 3.2 %, reaching for the last 12 months 9.2% with a noticeable acceleration. Under this scenario we were able to increase volumes by 11.4% resulting in an expansion in revenues of 12.6% in real terms and 23% in nominal terms. According to Chilean GAAP, for comparison purposes previous year figures have been adjusted for inflation. Our operating income and EBITDA grew by 7.4% and 7.8% respectively, in real terms, i.e. above inflation. These achievements were obtained despite of the costs pressures, as a result of strong volumes and controlled costs and expenses.
The Chilean beer segment increased its volumes by 6.6% at an average price slightly lower than in 2007, in real terms. In August the prices of premium brands and non-returnable packaging were increased by 9.3%. Additionally, in October the prices of returnable packages and mainstream were increased by 6%. Market price of malt and energy were respectively 50% and 24% higher than in 2007, impacting in the segment’s cost. Cost of goods sold increased from 40.5% to 46.0% of revenues due to higher raw material costs, energy and depreciation costs and a lower credit adjustment related to warranties on bottles. Expenses were kept under control, going down as a percentage of revenues, and compensated in part the rise in direct cost, so that the EBITDA margin declined from 32.3% to 28.7%.
The Argentine beer business revenues grew by 110.2% and improved its operating income by Ch$1,314 million, mainly due to a 45.9% growth in volumes as well as 44.5% higher prices in Chilean pesos. The results in Chilean pesos are distorted due to the variation of the exchange rate during the quarter. In dollar terms, revenues grew 84.2%, prices -both because of structural changes and a higher premium mix- increased 27.1%, and operating income improved US$1.8 million. Higher volumes and revenues are partially explained by the acquisition of ICSA last April; without considering ICSA, volumes increased 16.5%. The EBITDA margin improved from 8.1% to 10.3%.
The non-alcoholic beverages segment (soft drinks, nectars and mineral water segment) increased its revenues by 5.1% and its operating income remained almost flat. As a percentage of revenues cost of goods sold was higher due to higher cost of energy and lower credit adjustments related to warranties on bottles and accumulation of inventories, partially compensated by lower raw material costs. All categories increased their volumes: soft drinks grew by 3.5%, mineral water 4.8%, and nectars, 6.3%.
The spirits category evolved positively during the quarter, improving its operating results by 46.0%, EBITDA by 40.7% and EBITDA margin by 7.90 percentage points, mainly as a consequence of reducing marketing expenses to a long term marketing rate, as well as placing focus on premium products and cocktails. The positive performance of “Sierra Morena” rum, as well as the successful launching of “Chirimoya Colada” during this quarter contributed to the result.
Lastly, the wine business improved its operating income by 26.5% and EBITDA by 13.2%. In line with VSP strategy of moving towards better margin products, export prices in US dollar increased by 7.6% and domestic ones by 8.2% in real Chilean pesos. Better prices plus lower raw material costs, more than compensated lower export volumes and higher distribution costs. Thus, operational margin grew from 8.6% to 11.1%, and EBITDA increased by 13.2% with the EBITDA margin improving from 14.4% to 16.7.