Good day, and welcome to the CCU's Fourth Quarter 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Claudio Las Heras, Head of Investor Relations. Please go ahead.

Thank you. Welcome, everyone, and thank you for attending CCU's Fourth Quarter 2019 Conference Call. Today with me are Patricio Jottar, Chief Executive Officer; Felipe Dubernet, Chief Financial Officer; and Nicolás Novoa, Financial Planning and Investor Relations Manager. You have received a copy of the company's consolidated fourth quarter 2019 results. Patricio will now review our overall performance, and we will then move on to a question-and-answer session. Before we begin, please take note of our cautionary statement. Statements made in this call that relate to CCU's future performance or financial results are forward-looking statements, which involve known and unknown risks and uncertainties that could cause actual performance or results to materially differ. These statements should be taken in conjunction with the additional information about risks and uncertainties set forth in CCU's annual report in Form 20-F filed with the U.S. Security and Exchange Commission and in the annual report submitted to the CMF and available on our website. It is now my pleasure to introduce Patricio Jottar.

Thank you, Claudio, and thank you all for joining us today. During 2019, CCU was able to deliver a solid performance in volumes by growing 5.2%, allowing us to surpass 30 million hectoliter, while we've been maintaining or doing much here, in our main categories. This accomplishment was achieved in a very challenging economic and social environment in all the regions where we operate and was a result of our continuous improvement in competitive innovation and commercial execution. In spite of higher volumes, EBITDA dropped 4.9%. And EBITDA margin contracted 138 basis points, more than explained by negative external effects, mostly related to the sharp depreciation of the Chilean and Argentine peso against the U.S. dollar. These effects were partially offset by higher volumes, as mentioned above, and efficiencies from the ExCCelencia CCU program. The FX variations generated an adverse estimated effect of CLP 45,314 million on EBITDA. Excluding this effect, EBITDA would have expanded 7.9%. At the net income level, we decreased 13%, primarily driven by the same reasons recently described. In the fourth quarter of 2019, CCU's consolidated volumes continued to grow with strong momentum, expanding 6.1%, supported by a 5.8% growth in the Chile Operating segment, and an 8.6% increment in the International Business Operating segment, while the Wine Operating segment decreased 1%. Regarding financial results, EBITDA expanded 4.4%, posting a positive turnaround after 2 quarters of contraction during 2019. This performance was triggered by all operating segments and was the result of the higher volume, the implementation of revenue management initiatives and efficiencies that more than offset the negative effects from the devaluation of the Chilean and Argentine peso against the U.S. dollar. The FX variations generated an unfavorable estimated effects of CLP 18,882 million of EBITDA. It is important to mention that it takes time…

[Operator Instructions] And we'll move to our first question. Please go ahead.

It's Fernando Olvera from Bank of America. I have 2 questions. My first question is related to Chile. Firstly, can you comment what was the volume growth for alcoholic and nonalcoholic beverages? And also, can you give us your outlook about consumption this year? And what would be your pricing strategy? That's the first one. I have a second one. I'll wait.

Thank you, Fernando, for your question. And as I mentioned before, we grew our consolidated volumes in the Chilean segment by 5.8%. In beer, growing single -- so a little bit more than double digit. And nonalcoholic less than the 5.8% average. We saw an interesting expansion of beer during the quarter. Beginning 2020, this year, the trend continued, but as you know, we do not make projections for the future or quantitative projections, but we feel relatively comfortable that we'll have a good year in volume. The scenario in prices has been much more complicated with a lot of promotions, particularly in supermarkets, but also there is some adjacent actions in the traditional channels. But we have been able to compensate prices by volumes and by scale and by efficiency. But the scenario -- and in summary, the scenario in volumes -- I mean, the volumes have been much more positive than the scenario in prices.

Great. And my second question is related to the Wine division? And can you give us some color of how your export volume had behaved today? And they have been significantly impacted by the coronavirus.

Yes. It's difficult to say. We export 5% of our volumes to China and 100% of our volumes to the world. There isn't just a problem in China, today it seems to be a problem of the world. So originally, we reported the 5% -- the 7% -- we didn't really talk, but just 7% of our volumes were under threat. But today, eventually 100% of our volumes are under threat. So far, we haven't seen so much effect. But definitely, this is an open window and there is a lot of uncertainty on what is going to happen.

[Operator Instructions] And we'll move to our next question.

[ Sebastian Rodriguez ], Banco de Chile. I want to ask 2 questions. One in regards to International Operations. Mainly in the current scenario in Argentina, could you please share with us your pricing strategy for 2020? How competition is behaving? How do you -- would you assess the ability to pass through inflation and exchange rate depreciation in the current scenario? What should we assume for the pricing strategy for 2020? And the second one comes on the line on the Chilean segment, is that -- we've seen very strong growth in volumes during the whole year. How feasible do you see that those volumes to be maintained in 2020? And I mean your -- in beer, how tough is the competition behaving in terms of discounts? Have we seen any change from the -- from what we saw in 2019 and the first month of 2020? That will be all from my side.

Thank you, [ Sebastian ], for your 2 questions. Look in Argentina, our strategy has been the same for many years for the team and still the same. We make our best effort to recuperate prices on dollar terms and we avert them at a fixed time. And we will increase prices along with inflation when things maybe move along with inflation, but when we have a big devaluation as we have now, it's not possible to fix price in line with devaluation in time zero because volumes would suffer too much. But we focus on increasing price and recuperating price in dollar term. Here, we have some... Anyway, second point. In Q4 2019, we have increased prices by 30% in Argentine pesos but it is not enough to compensate the devaluation, which is much higher, as I mentioned in my introduction. So we need to further improve prices to recuperate the prices on U.S. dollar terms. When it's going to happen? I think it is going to happen with -- of course, we have our own projections but we have our own targets, but as I said, we are not to make quantitative projections for the future. But there is still room for price recuperation in U.S. dollar terms in Argentina. Regarding Chile, as I mentioned before, the beginning of 2020 has been very good in terms of volumes. But keeping the good trend that we had in the second -- in the last quarter of 2019, it's going to be maintained during the rest of the year or not, it's difficult to say. But the only thing I would like to say, that I remain positive regarding consumption because the economies are going to grow a lot, but there are many social plans and -- which will allow…

And if I may add a follow-up. With the current cost structure, what would be the required increase in prices, or if equal, to compensate the inflation in Argentina? Just trying to understand, in order to maintain your margin is stable in Argentinian peso, should we think in a 30% to 40% increase in prices? Or it's even higher than that?

I don't have a mathematical answer to that question now. You could prepare this but I don't have a -- you made me a very precise question. I don't have a very precise answer to that, yes. We mentioned increased prices more than inflation in order to recuperate the prices in U.S. dollar, that I mentioned before, and these are our purpose. So we have in our past but we don't know what is going to happen because it depends on many elements. But a mathematical answer, we do not have it here.

Let me -- this is Felipe Dubernet, with the price increases we did in last quarter, 30%, we were able to at least maintain margins compared to 2018. But still in one quarter, which was particularly a very good quarterly volumes. So we diluted a lot of fixed up cost. So -- but still, there is a lot of room for increasing prices and compensate the big impact of the devaluation and inflation in Argentina.

[Operator Instructions] We move to our next question.

This is Thiago Duarte with BTG. I have 2 questions. The first question is regarding to Colombia. You mentioned in your opening remarks and here in the release, the positive developments in terms of volume growth and in terms of the strategy to produce all the brands locally and so on. But when we look at the company's P&L, in the equity income of JVs and associates, we can tell that the loss in the quarter has intensified, if you look at the balance of the full year 2019, you're still growing the loss coming from JVs and associates. So my question would be whether -- when you guys expect to have a breakeven? Or when you expect that operation to start to become profitable? If you have any guidance or any sort of indication in terms of how much scale you guys are going to be almost reaching Colombia before the operation brings a positive contribution to the bottom line? That would be the first question. And the second question, circling back to Chile a little bit. It is not totally clear to me how we should think about prices. I mean when you look on a year-over-year basis, the average revenue per hectoliter was flat. So just if you could comment a little bit how much mix effect took place there in the quarter? And how much was a more, let's say, promotional decision or something like that? So if you just could guide us through a little bit how we should think of average pricing in Chile in the fourth quarter and into 2020, given that we would expect pressure from the currency to continue based on the screened prices and so on?

Thank you, Thiago, for your 2 questions. I mean, of course, in both years, we have our own projections and I could give you a, let's say a, quantified answer, but as you know, we do not quantify the future. But having said that, it's true. In 2019, we decided to be very aggressive in expenses in order to enter into the market. We spend a lot of money in marketing, in sales force, in execution, in point of sales, in training and -- I mean, we put every single Colombian peso on the table to enter into the market. We expect to improve importantly our results on EBITDA basis in 2020. And in 2021, we expect it to, importantly -- and of course, in 2020, to improve our net profit as we have provide EBITDA, importantly. And we expect in 2021 to have a much better result in net profit without giving the upward price, at this stage but this is the trend. In Chile, most of the schedule is not explained by -- I mean more proportion of the price probably was explained by the weight of the different categories. But most of the price categories explained, so most of the price is explained by promotion, right? It was very -- a quality, which was very promoted, particularly in the year. 2020 began in a very similar way than the last quarter 2019, probably it is volumes and it is the pressure, and price is probably similar. And difficult to predict what is going to happen in the year. So as I mentioned before, we are focused on keeping the good trend on volume, keeping on increasing but not losing market share in the whole beverage category in Chile has been our strategy. The recovery price, ideally, it's not possible to compensate it with volumes and efficiency. And by doing this, we expect to build a year where we have -- this is possible in terms of growth and good results in terms of profitability, which was not the case of 2019, as I explained before.

[Operator Instructions] And we have had another caller queue up.

This is Santiago Petri from Franklin Templeton. I would like to know your views on the cost outlook? How do you see raw materials developing into this 2020? And what is the expectation of the impact on margins and what you think about devaluation? And if we try to assess what would you expect for margins for 2020 in terms of your expense, how you're trying to control those, and therefore you cannot control because market gaining.

Thank you, Santiago, for your questions. Felipe, I prefer you to discuss on this.

Santiago, so regarding raw material or input cost, as you mentioned, the first driver to understand is that these are linked more or less between 70% to 80% our cost. It's linked to the U.S. dollar. So as you know, today, particularly in Chile and in Argentina, we have had a long 2019, it's due to devaluation of both currency. So in fact, in quarter 4, 2019, the total impact of the devaluation of the currencies was about CLP 19 billion, which is a huge number. And the year has not started particularly favorable in terms of exchange rate. Today, the Chilean peso is at CLP 815 per dollar. So certainly, this continue to impact our raw material cost. This is partially compensated, but not fully compensated at all by a lower cost of aluminum that we are selling in the international market as PET also, but not to compensate the impact of the devaluation of the Chilean peso and Argentine pesos on our European [indiscernible]. And for the future, so far, relevant commodity prices are stable, mainly aluminum, oil and PET. Only sugar has experienced some prices increases related to a more unfavorable supply/demand in India. Maybe you know that. So sugar has increased prices. Regarding 2020, for the rest of the year, given the coronavirus that was mentioned before for export in Wine, it's too early to call. What will happen with commodities, with the global economy. And also will be a selection in the -- at the end of the year. So I'm seeing today a more stable scenario in commodity prices. But it's too early to call. Another important commodity for us is the Wine. Regarding the 2020 harvest, also it's too early to call at this stage, would be a weaker harvest than 2019 due to especially the drought conditions in Chile, but today, we don't have a quantitative answer for that. But certainly, the drought would affect the targets. So only, we will continue to be impacted on the devaluation of the currency mainly, and we have some offset from raw material costs.

[Operator Instructions] And there are no other questions in the queue at this time.

Okay. Thank you very much. But for closing in 2019, as I mentioned before, we faced a challenging environment in the region related to devaluation of currency, economic deceleration and market source administration of integral material. Nevertheless, we are able to move forward with our long-term strategic plan by achieving a very positive volume growth, continuing to strengthen our portfolio of brand, consolidating CCU's market share positions and delivering further efficiency gains. Looking at schedule in 2020, we'll keep working to consolidate our regional leadership as a multi-category beverage company and to deliver a profitable and sustainable growth. Thank you very much.

And that does conclude today's conference. Thank you for your participation. You may now disconnect.