UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20152018
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of event requiring this shell company report _____________
For the transition period from _____________ to _____________
Commission file number 0-20486
COMPAÑIA CERVECERIASÍA CERVECERÍAS UNIDAS S.A.
(Exact name of Registrant as specified in its charter)
UNITED BREWERIES COMPANY, INC.
(Translation of Registrant's name into English)
Republic of Chile
(Jurisdiction of incorporation or organization)
Vitacura 2670, Twenty-Third Floor, Santiago, Chile
(Address of principal executive offices)
Felipe Dubernet, (562-24273536),fdubern@ccu.cl Vitacura 2670, Twenty-Third Floor, Santiago, Chile
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to section 12(b) of the Act.
Name of each exchange | |
Title of each class | on which registered |
American Depositary Shares | New York Stock Exchange |
Representing Common Stock | |
Common Stock, without par value | New York Stock Exchange* |
Name of each exchange__________
Title of each classon which registered
American Depositary Shares New York Stock Exchange
Representing Common Stock
Common Stock, without par value New York Stock Exchange*
__________
* Not for trading, but only in connection with the registration of American Depositary Shares which are evidenced by American Depositary Receipts
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Not applicable
30444.00900
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
Not applicable
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.
Common stock, with no par value: 369,502,872
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES X NO____
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
YES NO X
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES X NO_____NO__
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES XNO__
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.filer, or an emerging growth company. See definitiondefinitions of “accelerated filerfiler”, “large accelerated filer”, and large accelerated filer”“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer X Accelerated filer Non-accelerated filer____filer __Emerging growth company__
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.
___
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP International Financial Reporting Standards as issued Other____Other__
by the International Accounting Standards Board X
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
ITEM 17 ITEM 18__
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES NO X
30444.00900
In this annual report on Form 20-F, all references to “we,” “us,”“we”, “us”, “Company” or “CCU” are to Compañía Cervecerías Unidas S.A., an open stock corporation (sociedad(sociedad anónima abierta)abierta) organized under the laws of the Republic of Chile, and its consolidated subsidiaries. Chile is divided into regions, each of which is known by its roman number (e.g. “Region XI”). Our fiscal year ends on December 31st. The expression “last three years’’ means the years ended December 31, 2013, 20142016, 2017 and 2015.2018. Unless otherwise specified, all references to “U.S. dollars” “dollars” “USD” or “US$” are to United States dollars, and references to “Chilean pesos” “pesos” “Ch$” or “CLP” are to Chilean pesos. We prepare our consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). See the notes to our consolidated financial statements included in pages F-1 through F-104F-[137] of this annual report. We use the metric system of weights and measures in calculating our operating and other data. The United States equivalent units of the most common metric units used by us are as shown below:
1 liter = 0.2642 gallons | 1 gallon = 3.7854 liters |
1 liter = 0.008522 US beer barrels | 1 US beer barrel = 117.34 liters |
1 liter = 0.1761 soft drink unit cases (8 oz cans) | 1 soft drink unit case (8 oz cans) = 5.6775 liters |
1 liter = 0.1174 beer unit cases (12 oz cans) | 1 beer unit case (12 oz cans) = 8.5163 liters |
1 hectoliter = 100 liters | 1 liter = 0.01 hectoliters |
1 US beer barrel = 31 gallons | 1 gallon = 0.0323 US beer barrels |
1 hectare = 2.4710 acres | 1 acre = 0.4047 hectares |
1 mile = 1.6093 kilometers | 1 kilometer = 0.6214 miles |
i
This annual report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to as the “Securities Act,”Act”, and Section 21E of the Securities and Exchange Act of 1934, which we refer to as the “Exchange Act.”Act”. These statements relate to analyses and other information, which are based on forecasts of future results and estimates of amounts not yet determinable. They also relate to our future prospects, development and business strategies.
These forward-looking statements are identified by the use of terms and phrases such as “anticipate;” “believes;” “could;” “expects;” “intends;” “may;” “plans;” “predicts;” “projects;”“anticipate”; “believes”; “could”; “expects”; “intends”; “may”; “plans”; “predicts”; “projects”; “will” and similar terms and phrases. We caution you that actual results could differ materially from those expected by us, depending on the outcome of certain factors, including, without limitation:
· our success in implementing our investment and capital expenditure program;
· the nature and extent of future competition in our principal marketing areas;
· the nature and extent of a global financial disruption and its consequences;
· political and economic developments in Chile, Argentina and other countries where we currently conduct business or may conduct business in the future, including other Latin American countries; and
· other factors discussed under “Item 3: Key Information – Risk Factors,”Factors”, “Item 4: Information on the Company” and “Item 5: Operating and Financial Review and Prospects.”Prospects”.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this annual report. We undertake no obligation to publically update any of these forward-looking statements to reflect events or circumstances after the date of this annual report, including, without limitation, changes in our business strategy or planned capital expenditures, or to reflect the occurrence of unanticipated events.
ii
PART I
ITEM 1: Identity of Directors, Senior Management and Advisers
Not applicable.
ITEM 2: Offer Statistics and Expected Timetable
Not applicable.
The following table presents selected consolidated financial data as of December 31, 2017 and 2018 and for the years ended December 31, 2015, 20142016, 2017 and 20132018, which has been derived from our consolidated financial statements prepared in accordance with IFRS and included elsewhere in this annual report, and as of December 31, 2014, 2015 and 2016 and for the years ended December 31, 20122014 and 20112015, which has been derived from our consolidated financial statements prepared in accordance with IFRS and not included in this annual report. The financial data set forth below should be read in conjunction with the consolidated financial statements and related notesand “Item 5: Operating and Financial Review and Prospects” included elsewhere in this annual report.
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| Year ended December 31, | |||||
| IFRS |
| 2011 | 2012 | 2013 | 2014 | 2015 |
1. Income Statement Data: | (million of CLP)(1) | ||||||
| Net sales |
| 969,551 | 1,075,690 | 1,197,227 | 1,297,966 | 1,498,372 |
| Gross margin | 521,689 | 582,603 | 660,530 | 693,429 | 813,296 | |
| Operating Result(2) | 192,818 | 181,188 | 188,266 | 179,920 | 204,937 | |
| Other gains (losses) | 3,010 | -4,478 | 959 | 4,037 | 8,512 | |
| Net financing expenses | -7,324 | -9,362 | -15,830 | -10,821 | -15,256 | |
| Results as per adjustment units | -6,728 | -5,058 | -1,802 | -4,159 | -3,283 | |
| Foreign currency exchange differences | -1,079 | -1,003 | -4,292 | -613 | 958 | |
| Income taxes |
| -45,196 | -37,133 | -34,705 | -46,674 | -50,115 |
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| Net income for the year: | 134,802 | 123,977 | 132,905 | 120,792 | 140,526 | |
| Attributable to: |
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| Equity holders of the Parent Company | 122,752 | 114,433 | 123,036 | 106,238 | 120,808 | |
| Non-controlling interests | 12,051 | 9,544 | 9,869 | 14,553 | 19,717 | |
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| Basic and Diluted Income per share | 385.40 | 359.28 | 370.81 | 287.52 | 326.95 | |
| Basic and Diluted Income per ADS(3) | 770.80 | 718.57 | 741.61 | 575.04 | 653.90 | |
| Dividend per share (4) | 192.7 | 179.6 | 166.5 | 161.8 | 163.5 | |
| Dividend per ADS in US$(3)(4) | 0.78 | 0.76 | 0.61 | 0.52 | 0.47 | |
| Weighted average shares outstanding (000) | 318,503 | 318,503 | 331,806 | 369,503 | 369,503 | |
| Shares outstanding as of December 31 (000) | 318,503 | 318,503 | 369,503 | 369,503 | 369,503 |
IFRS | Year ended December 31, (millions of CLP)(1) | ||||||
1. Income Statement Data: | 2014 | 2015 | 2016 | 2017 | 2018 | ||
| Net sales | 1,297,966 | 1,498,372 | 1,558,898 | 1,698,361 | 1,783,282 | |
| Gross profit | 693,429 | 813,296 | 817,078 | 899,622 | 923,271 | |
| Other Income by Function(2) | 25,464 | 6,577 | 5,144 | 6,718 | 228,455 | |
| Other Expenses(3) | (1,743) | (2,372) | (2,027) | (2,662) | (1,428) | |
| Exceptional Items (EI)(4) | (1,628) | - | - | - | - | |
| MSD&A(5) | (535,603) | (612,565) | (619,543) | (668,783) | (681,576) | |
| Adjusted Operating Result(6) | 179,920 | 204,937 | 200,652 | 234,894 | 468,722 | |
| Other Gains (Losses) | 4,037 | 8,512 | (8,346) | (7,717) | 4,030 | |
| Net financial expenses | (10,821) | (15,256) | (14,627) | (19,115) | (7,766) | |
| Results as per Adjustment Units | (4,159) | (3,283) | (2,247) | (111) | 742 | |
Equity and Income from Joint Ventures | (899) | (5,228) | (5,561) | (8,914) | (10,816) | ||
| Foreign Currency Exchange Differences | (613) | 958 | 457 | (2,563) | 3,300 | |
| Income Taxes | (46,674) | (50,115) | (30,246) | (48,366) | (136,127) | |
| Net income for the year: | 120,792 | 140,526 | 140,082 | 148,108 | 322,085 | |
| Attributable to: |
| |||||
| Equity Holders of the Parent Company | 106,238 | 120,808 | 118,457 | 129,607 | 306,891 | |
| Non-Controlling Interests | 14,553 | 19,717 | 21,624 | 18,501 | 15,194 | |
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| Basic and Diluted Income per Share | 287.52 | 326.95 | 320.59 | 350.76 | 830.55 | |
| Basic and Diluted Income per ADS(7) | 575.04 | 653.90 | 641.17 | 701.52 | 1,661.10 | |
| Dividend per Share (8) | 161.8 | 163.5 | 176.3 | 178.9 | 498.3 | |
| Dividend per ADS in US$(7)(8) | 0.52 | 0.47 | 0.53 | 0.59 | 1.48 | |
| Weighted Average Shares Outstanding (000) | 369,503 | 369,503 | 369,503 | 369,503 | 369,503 | |
| Shares Outstanding as of December 31st (000) | 369,503 | 369,503 | 369,503 | 369,503 | 369,503 |
3
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| Year ended December 31, | ||||
| IFRS |
| 2011 | 2012 | 2013 | 2014 | 2015 |
2. Balance Sheet Data: | (Million of CLP) (1) | ||||||
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| Total assets |
| 1,298,365 | 1,328,710 | 1,727,720 | 1,768,901 | 1,823,357 |
| Total non-current liabilities | 251,026 | 303,662 | 234,347 | 242,070 | 247,144 | |
| Total Financial debt (5) | 258,969 | 263,997 | 263,251 | 199,853 | 180,901 | |
| Capital stock |
| 231,020 | 231,020 | 562,693 | 562,693 | 562,693 |
| Subtotal Equity attributable to equity holders of the parent company | 568,976 | 613,220 | 988,676 | 1,025,588 | 1,057,816 | |
| Total shareholders' equity | 684,786 | 710,518 | 1,084,244 | 1,148,500 | 1,187,522 | |
3. Other Data |
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| Sales volume (in millions of liters): |
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| Total volume | 1,839.7 | 1,990.9 | 2,191.6 | 2,289.8 | 2,391.0 | |
| Chile Operating segment(6) | 1,260.4 | 1,384.4 | 1,557.0 | 1,621.6 | 1,686.5 | |
| International Business Operating segment(7) | 458.1 | 478.9 | 507.1 | 537.5 | 569.7 | |
| Wine Operating segment(8) | 121.2 | 127.6 | 127.4 | 130.6 | 134.8 | |
(1) | Except for the number of shares outstanding, per share and per ADS amounts and sales volume. | ||||||
(2) | Defined, for management purposes, as earnings before other gains (losses), net financial expenses, equity and income of joint ventures, foreign currency exchange differences, results as per adjustment units and income taxes. Please see “Item 5: Operating and Financial Review and Prospects—OPERATING RESULT” for more details regarding Operating Result and a reconciliation of the most directly applicable IFRS measure to Operating Result. | ||||||
(3) | Per ADS amounts are determined by multiplying per share amounts by 2. As of December 20, 2012, there was an ADR ratio change from 1 ADR to 5 common shares, to a new ratio of 1 ADR to 2 common shares. | ||||||
(4) | Dividends per share are expressed in Chilean pesos as of payment dates, with charge to prior year's net income. Dividends per ADS are expressed in U.S. dollars at the conversion rate in effect on the date on which payment is made. | ||||||
(5) | Includes short-term and long-term financial debt (mainly bank loans, bonds and financial leasing). | ||||||
(6) | Includes sales of beer, non-alcoholic beverages and spirits in Chile. | ||||||
(7) | Includes sales of beer, non-alcoholic beverages and spirits in Argentina, Paraguay and Uruguay. | ||||||
(8) | Includes domestic and export sales to more than 80 countries. Excludes bulk wine sales. |
Year ended December 31, | ||||||||
| IFRS | 2014 | 2015 | 2016 | 2017 | 2018 | ||
2. Balance Sheet Data: | (millions of CLP)(1) | |||||||
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Total Assets | 1,768,901 | 1,825,447 | 1,872,027 | 1,976,229 | 2,405,865 | |||
Total Non-Current Liabilities | 242,070 | 249,235 | 228,998 | 280,651 | 371,025 | |||
Total Financial Debt (9) | 199,853 | 180,901 | 184,624 | 214,593 | 290,952 | |||
Capital Stock | 562,693 | 562,693 | 562,693 | 562,693 | 562,693 | |||
Total Equity Attributable to Equity Holders of the Parent Company | 1,025,588 | 1,057,816 | 1,077,298 | 1,101,077 | 1,280,127 | |||
Total Shareholders' Equity | 1,148,500 | 1,187,522 | 1,200,656 | 1,226,829 | 1,389,116 | |||
3. Other Data |
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Sales Volume (in millions of liters): |
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Total Volume | 2,289.8 | 2,392.7 | 2,478.4 | 2,602.0 | 2,853.0 | |||
(1) | Except for the number of shares outstanding, per share and per ADS amounts and sales volume. | |||||||
(2) | In 2018, Other Income by Function includes the gain of CLP 208,842 million received from the CCU Argentina and Anheuser-Busch InBev S.A./N.V.(“ABI”) transaction (the “Transaction”). See Note 30 to our consolidated financial statements included herein and see “Item 4: Information on the Company – A. History and Development of the Company”. In 2014, Other Income by Function includes the one-time effect of compensation of CLP 18,882 million by our Argentine subsidiary CICSA during the second quarter of 2014 for the termination of a contract that allowed us to import and distribute on an exclusive basis Corona and Negra Modelo beers in Argentina and to produce and distribute Budweiser beer in Uruguay. | |||||||
(3) | Other expenses are part of the ´Other expenses by function´ as presented in the Consolidated Statement of Income. These Other expenses mainly consist of losses related to the sales and write off of fixed assets. | |||||||
(4) | EI are part of ‘Other expenses by function’ as presented in the Consolidated Statement of Income; 2014 EI corresponds to the effect of CLP 1,628 million associated with restructuring processes across Operating segments. | |||||||
(5) | Marketing, Sales, Distribution & Administrative expenses | |||||||
(6) | For management purposes, Adjusted Operating Result is defined as Net Income before other gains (losses), net financial expense, equity and income of joint ventures, foreign currency exchange differences, result as per adjustment units and income taxes. Please see “Item 5: Operating and Financial Review and Prospects– A. ADJUSTED OPERATING RESULT” for more details regarding Adjusted Operating Result and a reconciliation of the most directly applicable IFRS measure to Adjusted Operating Result. | |||||||
(7) | Per ADS amounts are determined by multiplying per share amounts by 2. As of December 20, 2012, there was an ADS ratio change from 1 ADS to 5 common shares, to a new ratio of 1 ADS to 2 common shares. | |||||||
(8) | Dividends per share are expressed in CLP as of payment dates, with charge to prior year's net income. Dividends per ADS expressed in USDserve as reference purposes only; we pay all dividends in CLP. The Chilean peso amounts as shown here have been converted into USD at the respective observed exchange rate in effect at each payment date or, in respect of the dividend payable for the year ended December 31, 2018, at the observed exchange rate in effect as of April 24, 2019 | |||||||
(9) | Includes short-term and long-term financial debt (mainly bank loans, bonds and financial leasing). |
Exchange Rates.Rates. Prior to 1989, Chilean law permitted the purchase and sale of foreign currency only in those cases explicitly authorized by the Central Bank of Chile. The Central Bank Act, which was enacted in 1989, liberalized the rules that govern the ability to buy and sell foreign currency. Currently, pursuant to the Central Bank Act, the Central Bank of Chile has the authority to mandate that certain purchases and sales of foreign currency specified by law are to be carried out in the formal exchange market. The formal exchange market is formed by banks and other entities authorized by the Central Bank of Chile. All payments and distributions made to our holders of ADSs must be transacted in the formal exchange market.
In order to keep fluctuations in the average exchange rate within certain limits, the Central Bank of Chile has in the past intervened by buying or selling foreign currency on the formal exchange market. In September 1999, the Central Bank of Chile decided to limit its formal commitment to intervene and decided to exercise it only under extraordinary circumstances, which are to be announced in advance. The Central Bank of Chile also committed to provide periodic information about the levels of its international reserves.
The observed exchange rate is the average exchange rate at which commercial banks conduct authorized transactions on a given date, as certified by the Central Bank of Chile. The Central Bank of Chile generally carries out its transactions at the spot market rate. Authorized transactions by banks are now generally conducted at the spot market rate.
4
Purchases and sales of foreign currencies effectuated outside the formal exchange market are carried out in theMercado Cambiario Informal mercado cambiario informal (the informal exchange market). The informal exchange market reflects the supply and demand for foreign currency. There are no limits imposed on the extent to which the rate of exchange in the informal exchange market can fluctuate above or below the observed exchange rate. On April 1, 20162019 the U.S. dollarUSD observed exchange rate relating to March 31, 201629, 2019 was CLP 669.80678.53 per U.S. dollar.USD.
The following table sets forth the low, high, average and period-end observed exchange rates for U.S. dollarsUSD for each of the indicated periods starting in 20112014 as reported by the Central Bank of Chile. The Federal Reserve Bank of New York does not report a noon buying rate for Chilean pesos.
CLP.
| Daily Observed Exchange Rate(1) | |||
| (CLP per USD) | |||
| Low(2) | High (2) | Average(3) | Period-end(4) |
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2011 | 455.91 | 533.74 | 483.57 | 519.20 |
2012 | 469.65 | 519.69 | 486.58 | 479.96 |
2013 | 466.50 | 533.95 | 495.53 | 524.61 |
2014 | 524.61 | 621.41 | 570.50 | 606.75 |
2015 | 597.10 | 715.66 | 654.79 | 710.16 |
October 2015 | 673.91 | 695.53 | 684.48 | 690.32 |
November 2015 | 688.94 | 715.66 | 705.00 | 711.20 |
December 2015 | 693.72 | 711.52 | 704.39 | 710.16 |
January 2016 | 710.16 | 730.31 | 721.40 | 710.37 |
February 2016 | 689.18 | 715.41 | 703.31 | 694.17 |
March 2016 | 669.80 | 694.82 | 681.02 | 669.80 |
Source: Bloomberg |
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(1) Historical pesos. |
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(2) Rates shown are the actual low and high, on a day-by-day basis for each period. |
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(3) For yearly data, the average of monthly average rates during the period reported, and for monthly data, the average of daily average rates during the period reported. | ||||
(4) Published on the first day after month(year) end. |
| Daily Observed Exchange Rate(1) | |||
| (CLP per USD) | |||
| Low(2) | High(2) | Average(3) | Period-end(4) |
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2014 | 524.61 | 621.41 | 570.50 | 606.75 |
2015 | 597.10 | 715.66 | 654.79 | 710.16 |
2016 | 645.22 | 730.31 | 676.70 | 669.47 |
2017 | 614.75 | 679.05 | 649.05 | 614.75 |
2018 | 588.28 | 698.56 | 642.06 | 694.77 |
October 2018 | 656.25 | 698.56 | 678.56 | 698.56 |
November 2018 | 667.46 | 698.56 | 678.27 | 671.09 |
December 2018 | 666.49 | 695.69 | 684.23 | 694.77 |
January 2019 | 657.81 | 697.64 | 676.22 | 657.81 |
February 2019 | 649.22 | 665.90 | 656.00 | 651.79 |
March 2019 | 656.57 | 683.73 | 668.95 | 678.53 |
Source: Bloomberg |
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(1) Historical pesos. | ||||
(2) Rates shown are the actual low and high, on a day-by-day basis for each period. | ||||
(3) For yearly data, the average of monthly average rates during the period reported, and for monthly data, the average of daily average rates during the period reported. | ||||
(4) Published on the first day after month (year) end. |
The exchange rate on April 2224th, 2016,2019, the latest practicable date, was CLP 666.80672.83 per U.S. dollar.USD.
B.Capitalization and Indebtedness
Not applicable.
C.Reasons for the Offer and Use of Proceeds
Not applicable.
5
RISKS RELATING TO CHILE
We are substantially dependent on economic conditions in Chile, which may adversely impact the results of our operations and financial condition.
We are predominantly engaged in business in Chile.Chile is our most significant market. The Chile Operating segment generated6062% of our sales revenues in 2015 was generated from our Chile Operating segment,27% came from2018, the International Business Operating segment which(which includes Argentina, Bolivia, Paraguay and Uruguay, andUruguay) contributed13 27% came from, and the Wine Operating segment.segment,including the domestic markets in Chile and Argentina, as well as exports, accounted for 11% of revenues. Thus, the results of our operationsoperating and financial condition areperformance is dependent, to a large extent, on the overall level of economic activity in Chile. The Chilean economy has experienced an average annual growth rate (measured by GDP) of3.83.0% between 20102008 and 2015,2018, and2.1% 4.0% in 2015.2018. In the past, slower economic growth in Chile has slowed downresulted in a decline in the growth rate of consumption of our products and, consequently, adversely affected our profitability. Chile’s economic performance wasgrowth rate has been affected in the past by the disruption in the global financial markets, as was the case in 2009 and catastrophic events such as earthquakes in the years 2010 and 2015.2009. Therefore, economic growth rates of past periods cannot be extrapolated to future performance.
Furthermore, Chile, as an emerging market economy, is more exposed to unfavorable conditions in the international markets, which could have a negative impact on the demand for our products, as well as products ofon third parties with whom we conduct business.business with. Any combination of lower consumer confidence, disrupted global capital markets and/or reduceddepressed international economic conditions could have a negative impact on the Chilean economy and, consequently, on our business. In addition, a global liquidity crisis or an increase in interest rates could limit our ability to obtain the cash necessary to meet our commitments and, therefore, increase our financial expenses.
The Company has implemented efficiency and revenue management plans, as well as cost and expense improvements through the “ExCCelencia CCU” program. CCU has also diversified its operations geographically in recent years. The Company’s conservative capital structure and high liquidity have contributed to its Level 1 classification by credit rating agencies Fitch Chile Clasificadores de Riesgo Limitada and International Credit Rating Compañía Clasificadora de Riesgo Limitada (“ICR”). The Company’s bonds are also rated AA+ by both rating agencies. However, securities ratings are subject to revision or withdrawal at any time, and there can be no guarantee that the Company’s foregoing initiatives will insulate it from the effects of any such downturns or negative conditions.
Currency fluctuations may affect our profitability
Because we purchase the majority of our supplies at prices set in USD and we export wine in prices set in USD, Canadian dollars, euros and pounds, we are exposed to foreign exchange risks that may adversely affect our financial condition and the results of our operations. The effect of the exchange rate variation on export revenues partially offsets the FX impact on the cost of raw materials expressed in CLP.
The relative liquidity and volatility of Chilean securities markets may increase the price volatility of our American Depositary Shares (“ADSs”) and adversely impact a holder’s ability to sell any shares of our common stock withdrawn from our American Depositary Receipt (“ADR”) facility.
The Chilean securities markets are substantially smaller, less liquid and more volatile than major securities markets in the United States. For example, the Santiago Stock Exchange, which is Chile’s principal stock exchange, had a market capitalization of approximately US$ 190.6USD 250.1 billion as of December 31, 2015,2018, while The New York Stock Exchange (“NYSE”) had a market capitalization of approximately US$24.5USD 28.5 trillion and the NASDAQ National Market (“NASDAQ”) had a market capitalization of approximately US$7.90USD 13.7 trillion as of the same date. In addition, the Chilean securities markets can be materially affected by developments in other emerging markets, particularly other countries in Latin America.
The lower liquidity and greater volatility of the Chilean markets relative to markets in the United States could increase the price volatility of the ADSs and may impair a holder’s ability to sell in the Chilean market shares of our common stock withdrawnstockwithdrawn from the ADR facility in the Chilean market in the amount, and at the price and at the time the holder wishes to do so. See “Item 9: The Offer and Listing.”Listing”.
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We are subject to different corporate disclosure requirements and accounting standards than U.S. companies.
Although the securities laws of Chile whichthat govern open stock corporations and publicly listed companies such as us have as a principal objective promotingpromote disclosure of all material corporate information to the public as a principal objective, Chilean disclosure requirements differ from those in the United States in certain important respects. In addition, although Chilean law imposes restrictions on insider trading and price manipulation, the Chilean securities market is not as highly regulated and supervised as the U.S. securities market. We have been subject to the periodic reporting requirements of the Exchange Act since our initial public offering of ADSs in September 1992.
RISKS RELATING TO ARGENTINA
We have operationsare substantially dependent on economic conditions in Argentina, which may adversely impact our operating results and economic conditions there have adversely affected the results of our operations in the past and may do so in the future.financial position.
WeIn addition to our Chilean operations, we have significant assets in Argentina and we have generatedgenerate significant income from our operations in this country.
As demand for alcoholic and non-alcoholic beverages is usually correlated with economic conditions prevailing in the local market, which in turn is dependent on the macroeconomic condition of the country, theThe financial conditionposition and results of our operations in Argentina are, to a considerable extent, dependent upon political and economic conditions prevailing in Argentina. From 1999 through 2002, Argentina, suffered a prolonged recession, which culminated in an economic crisis. Althoughas demand for beverage products generally depends on the economic situation in Argentina has improved since the economic crisis of 2002, we have been observing a slowdown of the economy, and therefore, cannot assure you thatprevailing economic conditions in the local market. In the past, Argentina will continuehas suffered recessions, high levels of inflation, currency devaluations and significant economic decelerations in various periods of its history. During 2016, Argentina's GDP contracted by 2.3% and inflation was close to improve or40%. In 2017, GDP growth was 2.8% and inflation was close to 20%, showing a slight recovery in the economy. However, in 2018 Argentina’s GDP again experienced an estimated contraction of 3.5% and inflation of 47.6%. Consequently, given that the cumulative inflation rate exceeded 100% in the last three years, Argentina, as prescribed by IAS 29, was declared a hyperinflationary economy as of July 1, 2018 (see Note 4 to our business will not be materially affected ifconsolidated financial statements included herein).
Inflationary pressures in Argentina may negatively impact demand for our goods, profitability and future investments.
Argentina has faced and continues to face inflationary pressures. The increase in inflationary risk may erode macroeconomic growth and limit the availability of financing, causing a negative impact on our operations. In the past, during periods of high inflation, the Argentine economic conditions weregovernment has regulated prices of consumer goods, including beverages, which has impacted our profitability. Even without government regulation, high inflation may impede our ability to deteriorate.pass on higher costs to customers, which would also negatively impact profitability.
The Argentine peso is subject to volatility which could adversely affect our results.
A devaluationdepreciation of the Argentine peso may adverselynegatively affect our operatingconsolidated financial results. In 2015 Argentina experienced an average devaluation of theOur Argentine peso versus the dollar of14% year over year. We cannot assure you that the Argentine economy will recover or that it will not face a recession, nor can we predict what effect such a recession would have on our operations in Argentina. In 2009, the Company first reported its financial statements under IFRS, usingsubsidiaries use the Argentine peso as thetheir functional currency for our Argentine subsidiaries. The resultsand their financial statements are calculated in Argentine pesos and then translated into Chilean pesosto CLP for consolidation purposes.purposes, which may produce variations to the Company’s consolidated net income and shareholders’ equity, due to translation effects. Also, most of our raw material costs in Argentina are indexed to the dollar. When comparing the average exchange rates for each period, the Argentine peso depreciated against the USD by 60% in 2016, by 12% in 2017, and by 68% in 2018. When comparing the exchange rate as of the end of each period, the Argentine peso depreciated against the USD by 22% in 2016, by 17% in 2017, and 107% in 2018. All of the above resulted in a significant translation effect in our reported revenues, costs and expenses, as well as pressure on dollarized costs.
Given that we cannot predict how macroeconomic conditions will evolve in the future in Argentina, nor when Argentina will cease to qualify as a hyperinflationary economy for accounting purposes, we cannot foresee how CCU’s business will be affected by Argentina’s future macroeconomic environment. In order to mitigate theimpact of the current macroeconomic challenges, CCU Argentina has implemented efficiency and revenue management plans, as well as cost and expense improvements through the “ExCCelencia CCU” program. However, we cannot guarantee that our business will not be materially affected by Argentina’s macroeconomic environment.
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Argentina’s legal regime and economy are susceptible to changes that could adversely affect our Argentine operations.
The measuresMeasures taken by the previous Argentine governmentgovernments to address the country’s economic crisis of 2002crises severely affected the Argentinestability of Argentina's financial system’s stabilitysystem and have had a materially negative impact on the country´scountry’s economy. Recently, the Argentine government lifted restrictions on foreign exchange transactions for obligations entered into after December 17, 2015. Restrictions on obligations entered into before December 17, 2015 will remain in effect until May 2016. If Argentina were to experience a new fiscal and economic crisis, the Argentine government could implement economic and politicalThese measures which could adversely impact our business.
Since January 2006, the Argentine government has adoptedincluded, among others, different methods to directly and indirectly regulate the pricesprice increases of various consumer goods, including bottled beer, in an effort to slowwith the intention of reducing inflation. Additionally, the measures taken byimplemented in the previous Argentine governmentpast to control the country’s trade balance and to limit the access to foreign currencies haveexchange rate negatively impacted the free import of goods and royalty payments by the Company, and also the repatriation of profits. This situation has recently changed following the installation of the new government in December 2015. WeHowever, we cannot assure youguarantee that the current Argentine governmentauthorities in Argentina will not implement this type oflegal and economic measures and that these will not have an adverse effect onmay adversely affect our operations in Argentina.
RISKS RELATING TO OUR BUSINESS
PotentialPossible changes in tax laws in the countries where we operate could affect our business and, in particular, changes in corporate and excise taxes could adversely affect our results and investments.
Our businesses are subject to Chilean tax rules may resultdifferent taxes in anthe countries where we operate, including, among others, income taxes and specific taxes on alcoholic and non-alcoholic beverages. An increase in the pricesrates or application of these taxes, or any other, could negatively affect our productssales and a corresponding decline in sales volumes.profitability.
Changes such as the new ChileanIn Argentina, a tax reform (the “Tax Reform Act”)bill was passed by Congress that, became effective on October 1, 2014, and implemented a series of changes to the tax rates and tax policies, increasing among other thingsmeasures, gradually reduces the income tax rate for profits from 35% to 25% (30% for 2018 and 2019 and 25% from 2020 onwards), starting in 2018. In addition, dividends to be distributed will be subject to a withholding tax that will gradually increase from 0% to 13% (7% for 2018 and 2019 and 13% from 2020 onwards) applicable starting in 2018. In addition, the excise tax for alcoholic and sugar-containinglevied on various beverages in Chile, forced uswas increased, including the excise tax on beer, which increased from 8% to implement price increases for certain categories, leading14% over the manufacturer's sale price. In the case of wine, there was no change; therefore, wine continues to a possible decline in volume.
Furthermore, the Tax Reform Act establishes two different systems: “The Partially Integrated System” and the “Attributed Income Regime”. The "Partially Integrated System" provides for a gradual increase in the First Category Income tax rate, going from 20%not be subject to 21% for the 2014 business year, to 22.5% for the 2015 business year, to 24% for the 2016 business year, to 25.5% for the 2017 business year and to 27% starting in the 2018 business year. The Tax Reform Act provides that corporations will apply by default the "Partially Integrated System", unless a future Extraordinary Shareholders Meeting agrees to opt for the "Attributed Income Regime”.
Implementation of these or similar future reforms that we are not aware of nor foresee, might adversely affect our business, our operating result and our financial position.an excise tax.
Fluctuations in the cost of our raw materials may adversely impact our profitability if we arewere unable to pass those costs on to our customers.
We purchase malt, rice and hops for beer, sugar for soft drinks, grapes for wine, pisco and cocktails, and packaging materialmaterials from local producers or in the international market. The prices of those materials are subject to volatility caused by market conditions, and have experienced significant fluctuations over time and are determined by thereflecting global supply and demand for commodities as well as other factors, such as fluctuations in exchange rates, over which we have no control.
Although we historically have been able to implement price increases in response to increases in raw material costs, we cannot assure you that our ability to recover increases in the cost of raw materials will continue in the future. In particular, where raw material price fluctuations do not keep pace with market conditions in the markets in which we operate, we may have limited capacity to raise prices to offset increases in costs. If we are unable to increase prices in response to increases in raw material costs, any future increases in raw material costs may reduce our margins and profitability if we are not able to offset such cost increases through efficiency improvements or other measures.
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Consolidation in the beer industry may impact our market share.
In 2005, SABMiller Plc mergedall the countries where we operate, we compete with Grupo Empresarial Bavaria, a Colombian brewer with operations in Colombia, Peru, EcuadorAnheuser-Busch InBev S.A./N.V. (“ABI”) and Panama, formingits subsidiaries, the then second-largest brewerlargest beer company in the world. In 2010SABMiller Plc acquired CerveceríABI has expanded globally in recent years, through a Argentina S.A. (“CASA Isenbeck”), the third-largest brewerseries of mergers and acquisitions, and today has more than 500 brands and operations in Argentina, previously subsidiary of Warsteiner Brauerei Hans Cramer GmbH & Co. (“Warsteiner”).50 countries.
In March 2004, Companhia de Bebidas das Américas (“AmBev”) and Interbrew announced an agreement to merge, creating the world’s largest brewer under the name InBev. Additionally, in January 2007, AmBev assumed control of Quilmes Industrial S.A. (“Quilmes”). In Chile, Quilmes sells its beer through Cervecería Chile S.A. (“Cervecería Chile”). In November 2008 InBev and Anheuser-Busch Companies, Inc. (“Anheuser-Busch”) merged, creating Anheuser-Busch Inbev (“AB Inbev”), the worldwide leader in beer. In 2013, AB Inbev finalized the acquisition of Grupo Modelo.
During 2015 SAB Miller plc accepted an offer from AB Inbev to merge its operations. The merger has not yet been completed as it is subject to regulatory approvals. With this we face a major challenge: we are witnessing one of the largest global mergersforegoing consolidation in the historymarket, as well as any further consolidation of beerour competitors, may increase their pricing and/or investment competitiveness, which could negatively affect our market share, and carbonated soft drinks, which will create a powerful global player, capable of producing and distributing more than 700 million hectoliters per year, with presence in more than 65 countries. We are monitoring the scope and implications of the possible regulatory restrictions to this merger in the different countries where SABMiller plc and AB Inbev currently operate, and possible consequences foraccordingly our operations.results.
Competition in the Chilean beer market may erode our market share and lower our profitability.
Our largest competitor in the Chilean beer market by volume is Cervecería Chile.Chile S.A. (“Cervecería Chile”), a subsidiary of ABI. In the past, Cervecería Chile has engagedimplemented aggressive commercial practices. Additionally, Cervecería Chile is in aggressive pricing.the process of expanding its production capacity in Chile. If Cervecería Chile were to amplifycontinues its aggressive price discountingcommercial practices in the future and completes its expansion plans, we cannot assure given the current environment,you that any such discountingthis or other competitive activities will not have a material adverse impacteffect on our profitability or market share.
Additionally, if commercial conditions in the beer market continue to be relatively favorable in Chile, more enterprises may attempt to enter this market, either by producing beer locally or through importation. While we expect per capita beer consumption in Chile to continue to increase, mitigating the effect of competition, the entry into the market of additional competitors could erode our market share or lead to price discounting.
Our beer brands in Chile may face increased competition from other alcoholic beverages such as wine and spirits, as well as from non-alcoholic beverages, such as carbonated soft drinks.
Beer consumption in Chile may be influenced by changes in the relative price of domestic wine, spirits and/or other non-alcoholic beverages. Increases in domestic wine prices have tended to lead to increases in beer consumption, while reductions in wine prices have tended to reduce or slow the growth of beer consumption. As a result of our lower market share in the Chilean wine, spirits and soft drinks markets as compared to our market share in the Chilean beer market, we expect that our consolidated profitability could be adversely affected if beverage consumers were to shift their consumption from beer to either wine, spirits or non-alcoholic beverages.
Quilmes dominates the beer market in Argentina and we may not be able to maintain our current market share.
In Argentina we face competition from Cervecería y Maltería Quilmes and CASA Isenbeck, which asS.A.I.C. (“Quilmes”), a resultsubsidiary of the merger between AB Inbev and SAB Miller plc, if consummated, would become one player in the Argentine beer market.ABI. As a result of its dominant position and large size in Argentina, Quilmes’ large size by itself enables it to benefit fromQuilmes has significantly larger economies of scale than us in both production and distribution.
In the second quarter of 2018, Compañía Cervecerías Unidas Argentina S.A. (“CCU Argentina”) and ABI executed a transaction (the “Transaction”) that primarily consisted in the productiontransfer of brands and distributioncash in exchange for the early termination of beer throughoutthe Budweiser brand license agreement in Argentina. In the Transaction, CCU Argentina a position that would strengthen asreceived five brands (Isenbeck, Diosa, Iguana, Norte, Báltica) and the licenses of two international brands (Grolsch and Warsteiner). As a result, CCU Argentina began commercializing Isenbeck and Diosa, and stopped selling Budweiser. ABI, through its local subsidiary, continues to produce and market Iguana, Norte, Báltica, Grolsch and Warsteiner, on behalf of CCU Argentina. If we fail to maintain the merger. Therefore,volume and price levels of this new brand portfolio, we cannot assure you that we willmay not be able to grow or maintain our current market share in the Argentine beer market.
Restrictions in the gas supply from Argentina and taxes on carbon dioxide emissions could increase our energy costs, and higher oil prices could increase our distribution expenses.profitability.
In the past, the Argentine government restricted gas exports to Chile due to domestic supply problems. This increased the operating cost of our beer plants in Chile and Argentina, and of our non-alcoholic plants in Chile. As a consequence, the Chilean government implemented a strategy to diversify the country’s energy supply. The construction in Quintero of the first plant to process imported LNG (liquefied natural gas), which started its operation in August 2009, brought relief to the energy issue. Taxes on carbon dioxide emissions in Chile will go into effect in 2017, and the cost of these taxes will most likely be passed on to energy prices. We cannot assure that the supply of energy or the cost thereof will not experience future fluctuations. Electric power costs have increased significantly in the past mainly due to hydroelectric plants having lower water reservoir levels, which was exacerbated by the absence of new installed capacity at lower costs. Increases in oil prices or unfavorable hydric conditions could reduce our margins if we are unable to improve efficiencies or increase our prices to offset them.
Changes in the labor market in the countries in which we operate may affect margins in our business.
In December 2014,all the Chilean government presentedcountries where we operate, we are exposed to the Chilean Congress a bill for a labor reform which could resultchanges in a more rigid labor market. This reform has been approved by the Chilean Congress but is currently pending resolution by the Constitutional Court. The main elements of the labor reform are the following:
·Collective bargaining coverage is expanded to certain employees who were prevented from exercising this right, such as apprentices, temporary workersmarket that could affect our profitability and others.
·Unions are recognized as the only party entitled to exercise the right to collectively bargain on behalf of the workers.
·Benefits obtained by a unionfuture growth. These changes could include fluctuations in the course of a negotiation are extended for the benefit of any worker joining that union after the negotiation has concluded. The extension of said benefits to employees would be contingent to the assent of each union.
·Collective bargaining agreements currentlylabor supply, as well as changes in effect would constitute a floor for the negotiation of new conditions of employment. The financial situation of the company or business as of the date of discussions for a new agreement would not have any bearing on ongoing negotiations.
·The employer's right to replace those workers participating in a strike with current or new employees while the strike is taking place is curtailed.
·Modification of the definition of “minimum services” through “emergency teams” for which unions are obliged to provide the personnel required. These minimum services should be of a certain minimum level to prevent accidents and protect the equipment.
·Matters that may be subject to collective bargaining agreements are expanded, allowing the negotiation of more flexible workdays, adaptable systems andlabor legislation, among others.
·Unions may annually request from large companies information regarding the remunerations and duties associated with each category of employees.
In Argentina, the high levels of inflation couldand union pressure may affect our salary expenses.
The foregoing, as well as the implementation of new labor regulations, could have an adverse effect on our expenses and negatively affect our margins.
We depend upon the renewal of certain license agreements to maintain our current operations.
Most of our license agreements include certain conditions that must be met during their term, as well as provisions for their renewal at their expiry date. We cannot assureguarantee that such conditions will be fulfilled, and therefore that the agreements will remain in place until their expiration or that they will be renewed, or that any of these contracts will not undergo early termination. TerminationWhile approximately two-thirds of our sales volume are derived from private label products, the termination of, or failure to renew our existing license agreements, could have an adverse impact on our operations.
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Consolidation in the supermarket industry may affect our operations.
The Chilean supermarket industry has gone through a consolidation process, increasingwhich has increased the importance and purchasing power of a few supermarket chains. As a result, we may not be able to negotiate favorable prices, which may adverselycould negatively affect our sales and profitability.
Additionally, and despite having insurance coverage, this supermarket chain consolidation has the effect of increasing our exposure to counterparty credit risk, given the fact that we have more exposure in the event one of these large customers fails to honorfulfill its payment obligations to us for any reason.
DependenceWe depend on a single supplier for some important raw materials.
In the case of aluminum cans, both in Chile and Argentina, we purchase from a single supplier, Rexam,Ball, which has production plants in both countries. However, cansif necessary, we could also be importedimport aluminum cans from other Rexam plants from the same supplier or from alternative suppliers in the region. We have long term contracts forIn Argentina, we purchase malt in Chile and in Argentina. We purchase one way polyethylene terephthalate resins (“PET”) from severalsuppliers located in China, Mexico and US and ina single supplier, Cargill, whose malt operations were recently acquired by Boortmalt. In the past, we have also purchasednot experienced significant malt supply interruptions in Argentina. While we have alternatives in procuring our supplies, if we were to experience disruptions in our supply chainHowever, we cannot assure youguarantee that we will be ablenot encounter a malt supply disruption in the future, nor can we guarantee that we will have the ability to obtain replacement supplies at favorable pricing or advantageous terms, which may adversely affect our future results.
Water supply is essential to the development of our businesses.
Water is an essential component for beer, soft drinks, mineralthe production of our beverage products and purified water.the irrigation of our fields. While we have adopted policies for the responsible and sustainable use of water, a failure in our water supply or contamination of our wells could negatively affect our sales and profitability.
The Chilean Congress is currently discussing a bill that provides, among others, for a new regime of temporary water rights, which would apply to future water rights that are granted. The bill would also introduce a system of revocation of water rights, for those not in use. This bill could undergo modifications during its discussion in the Chilean Congress. After its enactment,The effects of any such regulations willcannot be required forascertained at this time, but may result in the implementation of the new regime,Company losing certain water rights, which is not expected to occur during the year 2016.could adversely affect our future results.
The supply, production and logistics chain is key to the timely supply of our products to consumer centers.
Our supply, production and logistics chain is crucial for the delivery of our products to consumer centers. An interruption or a significant failure in this chain may negatively affect our results, if the failure is not quickly resolved. An interruption in the chain could be caused by various factors, such as strikes, riots,utility shutdowns such as customs and ports, planning errors of our suppliers, terrorism, safety failures, complaints by communities, or other factors which are beyond our control.
If we are unable to protect our information systems against data corruption, cyber-based attacks or network security breaches, our operations could be disrupted.
We are increasingly dependent on information technology networks and systems, including the Internet, to process, transmit and store electronic information. In particular, we depend on our information technology infrastructure, including data centers, for digitalsales, production, planning and logistics, marketing activities and electronic communications within the Company and with our clients, suppliers and our subsidiaries. Security breaches of this infrastructure can create system disruptions, shutdowns or unauthorized disclosure of confidential information. If we are unable to prevent such breaches, our operations could be disrupted, or we may suffer financial damage or loss because of lost or misappropriated information. The Company has taken measures to create a backup structure for its critical systems, but we cannot assure you that these measures will be sufficient.
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Possible regulations for labeling materials and promotion of alcoholic beverages and other food products in Chilethe countries in which we operate could adversely affect us.
CurrentlyLaw N° 20,606 of 2012 and Law N° 20,869 of 2015, relating to the Nutritional Composition of Foods and their Advertising and the complementary regulations, in force since June 2016, establish certain restrictions on the advertising, labelling and marketing of foods classified as "high" in certain defined critical nutrients, which affects a part of our portfolio of non-alcoholic beverages. We cannot assure you that this regulation will not have an impact on our sales volumes and, therefore, on our results.
A bill that modifies lawLaw N° 18,455, is in the third phase of being passed. The bill fixeswhich sets standards for the production, elaboration and commercialization of ethyl alcohol, alcoholic beverages and vinegar.vinegar, is currently in the legislature. The bill aims to establish restrictions on promotion material, labeling and commercialization of alcoholic beverages, including warnings about the consumption of alcohol on labeling and promotionpromotional materials, restrictions in hourson the time of promotionday of promotions and the prohibition of participation inpromotions during sports and cultural events, among others. A regulatory change of this nature willwould affect our alcoholalcoholic beverages portfolio and certain marketing activities.
On June 26, 2015 decree N° 13 of the Ministry of Health was published which modifies the Sanitary Food Products Regulations (DC 977 of the Ministry of Health) and enforces Law N° 20,606 of 2012 regarding the nutritional composition of food products and its promotion. Both regulations establish certain restrictions on promotion material, labeling, and commercialization of these products that have been classified as being “high” in calories or any of the defined critical nutrients, such as sodium, sugar and saturated fats. Additionally on November 13, 2015 Law N° 20,869 regarding the promotion of food products was published, restricting the time of day promotions for products high in calories or any of the defined critical nutrient can be aired on television and in the cinema.
This law will become effective as of June 27, 2016 and will affect a portion of our non-alcoholic portfolio. We are taking measures to mitigate the impact of this new law, though we cannot assure that these measures will be successful.
If further proposed bills are passed,legislation or other regulations restrictingthat restrict the sale of alcoholic or non-alcoholic beverages or sweet snacks are enacted, thisis passed, it could affect the consumption of our products and, as a consequence, negativelyadversely impact our business.
New applicable environmental regulations may negativelycould affect our profitability and reputation.business.
CCU’s operations are subject to environmental regulations at local, national and international levels.environmental norms and regulations. These regulations cover, among other things, emissions, noise, disposal of solid and liquid wastes, and other activities inherent to our industry In Chile a bill has been approved by the Chilean Congress that establishesindustry. On this topic, on June 1, 2016 Law N° 20,920 was enacted and established a framework for waste management and extended producer responsibility, also known as theand stimulation of recycling law,(“REP Law”), with the objective of lowering the generation of waste of proprietarypriority products as determined by the bill and fostering recycling of the waste.
On November 30, 2017, the Regulations on Procedures of the REP Law were published. During 2018, regulations were issued that established the collection, valorization and other associated obligations for tires, and we expect regulations for the collection, valorization and other associated obligations for packaging materials to be issued in 2019 (see “Item 4: Information on the Company – E. Environmental Matters”). CCU places special carehas been actively participating through the associations that represent the different industrial areas, in public and dedicates constant efforts to the compliance with environmental regulations. Modifications to the existing regulation might involve new costs and investments by the Company.
Our products are taxed with different duties, particularlyprivate discussion panels with respect to excise taxes on the consumption of alcoholicdevelopment and non-alcoholic beverages.
The Argentine ad valorem excise tax is 8.7% for beer, and the Chilean ad valorem excise tax is 20.5% for beer and wine, 31.5% for spirits, 18% for non-alcoholic beverages containing more than 15 gr./240ml. of sugar and 10% for non-alcoholic beverages containing 15 gr./240ml. or less of sugar. An increase in the rateimplementation of these or any other tax could negatively affect our sales and profitability.
Currency fluctuations may affect our profitability.
Because we purchase some of our supplies at prices set in U.S. dollars, and export wine in U.S. dollars, Canadian dollars, euros and pounds, we are exposed to foreign exchange risks that may adversely affect our financial condition and the results of our operations. Therefore, any future changes in the valuenew regulations. Although none of the Chilean peso against said currencies would affect the revenues of our wine export business,above environmental regulations, as well as the cost of several of our raw materials, especially in the beer and soft drink businesses where prices of raw materials are indexedthey currently stand, represent a meaningful risk to the U.S dollar. The effect of the exchange rate variation on export revenues wouldCompany's operations, possible future regulations could have an oppositea significant effect on the cost of raw materials expressed in Chilean peso terms.our business.
Catastrophic events in the marketsregions in which we operate could have a materialsignificant adverse effect on our financial condition.
Natural disasters, climate change terrorism, pandemics, strikesimpact events or other catastrophic events could impair our ability to manufacture, distribute or sell our products. Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to manage such events effectively if they occur, could adversely affect our sales volume, cost and supply of raw materials, earnings and could have a materialsignificant effect on our business, operational results, and financial position.
In 2015 Chile washas been affected in the past by several natural disasters, including the large floods, mudslides and mudflows in several towns of the Antofagasta, Atacama and Coquimbo regions during March 2015, and an 8.4 magnitude earthquake in the northern regions of Chile, followed by a tsunami on September 17, 2015.forest fires. These events did not have a significant effect on our operations.
Aoperations, although a future earthquake, tsunami or other natural disaster, however,catastrophic event could have a significant effect on our business, results of operations and financial condition.
If we are unable to maintain the image and quality of our products and a good relationship with our clients and consumers, our financial results may suffer.
The image and quality of our products is essential for ourthe success and growth.development of the Company. Problems with product quality could tarnish the reputation of our products and may adversely affect our sales revenues.
The Company must also ensure that our sales force provides good customer service and adapts to fulfill the needs and preferences of our consumers. If we are unable to financemaintain a good relationship with our operations weclients and consumers, our financial results may be adversely affected.suffer.
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A global liquidity crisis or an increase in financial interest rates may eventually limit our ability to obtain the cash needed to fulfill our commitments. Sales could also be affected by a global disruption if consumption decreases sharply, placing stress on our cash position.
RISKS RELATING TO OUR ADSs
We are controlled by one majority shareholder, whose interests may differ from those of holders of our ADSs, and this shareholder may take actions that adversely affect the value of a holder’s ADSs or common stock.
As of March 31, 2016,2019, Inversiones y Rentas S.A. (“IRSA”) a Chilean closedclosely held corporation, directly and indirectly owned 60.0% of our shares of common stock. Accordingly, IRSA has the power to control the election of most members of our board of directors and its interests may differ from those of the holders of our ADSs. IRSA also has significant influence in determining the outcome of any corporate transaction submitted to our shareholders for approval, including mergers, consolidations, the sale of all or substantially all of our assets and going-private transactions. In addition, actions by IRSA with respect to the disposal of the shares of common stock that it owns, or the perception that such actions may occur, may adversely affect the trading prices of our ADSs or common stock.
Chilean economic policies, currency fluctuations, exchange controls and currency devaluations may adversely affect the price of our ADSs.
The Chilean government’s economic policies and any future changes in the value of the Chilean pesoCLP relative to the U.S. dollarUSD could adversely affect the dollarUSD value and the return on any investment in our ADSs. The Chilean pesoCLP has been subject to large nominal devaluations and appreciations in the past and may be subject to significant fluctuations in the future. For example, inwhen comparing the period from December 31, 2014 to December 31, 2015, the daily average value ofexchange rates for each period, the Chilean peso relative todepreciated against the U.S. dollar increasedUSD by15% 3.5% in nominal terms, whereas2016, appreciated by 4.1% in 2017, and appreciated by 1.4% in 2018. When comparing the year end value increased by 17% based on the observed exchange rate for U.S. dollars on those dates.as of the end of each period, the Chilean peso depreciated against the USD by 5.7% in 2016, appreciated by 8.2% in 2017, and depreciated 13.0% in 2018. See “Item 3: Key Information – A. Selected Financial Data – Exchange Rates.”Rates”.
While our ADSs trade in U.S. dollars,USD, Chilean trading in the shares of our common stock underlying our ADSs is conducted in Chilean pesos.CLP. Cash distributions to be received by the depositary for the shares of our common stock underlying our ADSs will be denominated in Chilean pesos.CLP. The depositary will translate any Chilean pesosCLP received by it to U.S. dollarsUSD at the then-prevailing exchange rate with the purpose of making dividend and other distribution payments on the ADSs. If the value of the Chilean pesoCLP declines relative to the U.S. dollar,USD, the value of our ADSs and any distributions to holders of our ADSs received from the depositary may be adversely affected. See “Item 8: Financial Information – A. Consolidated Statements and Other Financial Information – Dividend Policy and Dividends.”Dividends”.
For example, since our consolidated financial statements are reported in Chilean pesos,CLP, a decline in the value of the Chilean pesoCLP against the dollar would reduce our earnings as reported in U.S. dollars.USD. Any dividend we may pay in the future would be denominated in Chilean pesos.CLP. A decline in the value of the Chilean pesoCLP against the U.S. dollarUSD would reduce the U.S. dollarUSD equivalent of any such dividend. Additionally, in the event of a dividend or other distribution, if exchange rates fluctuateduring any period of time when the ADS depositary cannot convert a foreign currency into dollars, a holder of our ADSs may lose some of the value of the distribution. Also, since dividends in Chile are subject to withholding taxes, which we retain until the following year when the exact amount to be paid is determined, if part of the retained amount is refunded to the shareholders, the amount received by holders of our ADSs would be subject to exchange rate fluctuations between the two dates.
Holders of our ADSs may be subject to certain risks due to the fact that holders of our ADSs do not hold shares of our common stock directly.
In order to vote at shareholders’ meetings, ifADS holders may exercise voting rights associated with common stock only in accordance with the deposit agreement governing our ADSs. Accordingly, ADS holders will face practical limitations when exercising their voting rights because ADS holders must first receive a holder is not registered on the booksnotice of the ADS depositary, the holder of our ADSs is required to transfer their ADSs for a certain number of days before a shareholders’ meeting into a blocked account established for that purpose by the ADS depositary. Any ADSs transferred to this blocked account will not be available for transfer during that time. If a holder of our ADSs is registered on the books of the ADS depositary, the holder must give instructions to the ADS depositary not to transfer such holder’s ADSs during such period before the shareholders’ meeting. A holder of our ADSs must therefore receive voting materials from the depositary and may then exercise their voting rights by instructing the depositary, on a timely basis, on how they wish to vote. This voting process necessarily will take longer for ADS holders than for direct common stock holders, who are able to exercise their vote by attending our shareholders’ meetings. Therefore, if the depositary sufficiently in advance in orderfails to make these transfersreceive timely voting instructions from some or all ADS holders, the depositary will assume that ADS holders agree to give these instructions. There can be no guarantee that a holder of ourdiscretionary proxy to a person designated by us to vote their ADSs willon their behalf.Furthermore, ADS holders may not receive voting materials in time to instruct the ADS depositary on how to vote. It is possible thatAccordingly, ADS holders may not be able to properly exercise their voting rights.
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The right of a holder of our ADSs to force us to purchase the underlying shares of our common stock pursuant to Chilean corporate law upon the occurrence of certain events may be limited.
Because of the absence of legal precedent as to whether a shareholder that has voted both for and against a proposal, such as the depositary of our ADSs, may exercise withdrawal rights (as described in “Item 10. Additional Information – B. Memorandum and Articles of Association”) with respect to those shares voted against the proposal, there is doubt as to whether a holder of ADSs will not have the opportunitybe able to exercise a right to vote at all. Additionally,withdrawal rights either directly or through the depositary for the shares of our common stock represented by their ADSs. Accordingly, for a holder of our ADSs to exercise its appraisal rights, it may not receive copies of all reports from us orbe required to surrender its ADRs, withdraw the ADS depositary. A holdershares of our common stock represented by its ADSs, may have to arrange withand vote the ADS depositary’s offices to inspect any reports issued.shares against the proposal.
In the past, Chile has imposed controls on foreign investment and repatriation of investments that affected investments in, and earnings from, our ADSs.
Equity investments in Chile by persons who are not Chilean residents have historically been subject to various exchange control regulations that restrict repatriation of investments and earnings therefrom. In April 2001, the Central Bank eliminated most of the regulations that affected foreign investors, although foreign investors still have to provide the Central Bank with information related to equity investments and must conduct such operations within the formal exchange market. Additional Chilean restrictions applicable to holders of our ADSs, the disposition of the shares underlying them, the repatriation of the proceeds from such disposition or the payment of dividends may be imposed in the future, and we cannot advise you as to the duration or impact of such restrictions if imposed. See also “Item 10: Additional Information – D. Exchange Controls”.
If for any reason, including changes in Chilean law, the depositary for our ADSs were unable to convert Chilean pesosCLP to U.S. dollars,USD, investors would receive dividends and other distributions, if any, in Chilean pesos.
The right of a holder of our ADSs to force us to purchase the underlying shares of our common stock pursuant to Chilean corporate law upon the occurrence of certain events may be limited.
In accordance with Chilean laws and regulations, any shareholder that votes against certain corporate actions or does not attend the meeting at which certain corporate actions are approved and communicates to the corporation their dissent in writing within the time period established by law may exercise a withdrawal right, tender their shares to the company and receive cash compensation for their shares, provided that the shareholder exercises their rights within the prescribed time periods. See “Item 10: Additional Information–Memorandum and Articles of Association–Rights, preferences and restrictions regarding shares.” In our case, the actions triggering a right of withdrawal include the approval of:
·our transformation into a different type of legal entity;
·our merger with and/or into another company;
·the transfer of 50% or more of our corporate assets, whether or not liabilities are also transferred, to be determined according to the balance sheet of the previous fiscal year, or the proposal or amendment of any business plan that contemplates the transfer of assets exceeding said percentage; the disposition of 50% or more of the corporate assets of a subsidiary, which represents at least 20% of the assets of the corporation, as well as any disposition of shares which results in the parent company losing its status as controller;
·the granting of real or personal guarantees to secure third-party obligations exceeding 50% of the corporate assets except when the third party is a subsidiary of the company (in which case approval of the board of directors will suffice);
·the creation of preferences for a series of shares or the increase, extension or reduction in the already existing ones. In this case, only dissenting shareholders of the affected series shall have the right to withdraw;
·curing certain formal defects in our charter which otherwise would render it null and void or any modification of our bylaws that grant this right; and
·other cases provided for by statute or in our bylaws, if any.
In addition, shareholders may withdraw if a person becomes the owner of two-thirds or more of the outstanding shares of the corporation as a consequence of a share acquisition and such person does not make a tender offer for the remaining shares within 30 days from the date of such acquisition.
Minority shareholders are also granted the right to withdraw when the controller acquires more than 95% of the shares of an open stock corporation.
Our bylaws do not provide for additional circumstances under which shareholders may withdraw.
Because of the absence of legal precedent as to whether a shareholder that has voted both for and against a proposal, such as the depositary of our ADSs, may exercise withdrawal rights with respect to those shares voted against the proposal, there is doubt as to whether a holder of ADSs will be able to exercise withdrawal rights either directly or through the depositary for the shares of our common stock represented by their ADSs. Accordingly, for a holder of our ADSs to exercise its appraisal rights, it may be required to surrender its ADRs, withdraw the shares of our common stock represented by its ADSs, and vote the shares against the proposal.CLP.
Preemptive rights to purchase additional shares of our common stock may be unavailable to holders of our ADSs in certain circumstances and, as a result, their ownership interest in our Company may be diluted.
TheLey sobre Sociedades Anónimas N° 18,046 (“(“Chilean Corporations Act”) and theReglamento de Sociedades Anónimas,, require us, whenever we issue new shares for cash, to grant preemptive rights to all holders of shares of our common stock, including shares of our common stock represented by ADSs, giving those holders the right to purchase a sufficient number of shares to maintain their existing ownership percentage. We may not be able to offer shares to holders of our ADSs pursuant to preemptive rights granted to our shareholders in connection with any future issuance of shares unless a registration statement under the Securities Act is effective with respect to those rights and shares, or an exemption from the registration requirements of the Securities Act is available.
We intend to evaluate at the time of any future offerings of shares of our common stock the costs and potential liabilities associated with any registration statement as well as the indirect benefits to us of enabling U.S. owners of our ADSs to exercise preemptive rights and any other factors that we consider appropriate at the time, before making a decision as to whether to file such a registration statement. We cannot assure you that any such registration statement would be filed.
To the extent that a holder of our ADSs is unable to exercise their preemptive rights because a registration statement has not been filed, the depositary will attempt to sell the holder’s preemptive rights and distribute the net proceeds of the sale, net of the depositary’s fees and expenses, to the holder, provided that a secondary market for those rights exists and a premium can be recognized over the cost of the sale. A secondary market for the sale of preemptive rights can be expected to develop if the subscription price of the shares of our common stock upon exercise of the rights is below the prevailing market price of the shares of our common stock. Nonetheless, we cannot assure you that a secondary market in preemptive rights will develop in connection with any future issuance of shares of our common stock or that if a market develops, a premium can be recognized on their sale. Amounts received in exchange for the sale or assignment of preemptive rights relatingrightsrelating to shares of our common stock will be taxable in Chile and the United States. See “Item 10: Additional Information –Taxation–– E. Taxation – Chilean Tax Considerations –Capital– Capital Gains” and “–United States Federal IncomeTax Considerations–Income Tax Considerations – Taxation of Capital Gains.”Gains”. If the rights cannot be sold, they will expire and a holder of our ADSs will not realize any value from the grant of the preemptive rights. In either case, the equity interest of a holder of our ADSs in us will be diluted proportionately.
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ITEM 4: Information on the Company
A.History and Development of the Company
Our current legal and commercial name is Compañía Cervecerías Unidas S.A. We were incorporated in the Republicare a public corporation (sociedad anónima abierta) organized by means of Chile ina public deed dated January 8, 1902, as an open stock corporation, following the merger of two existing breweries, one of which traces its origins back to 1850, when Mr. Joaquín Plagemann founded one of the first breweries in Chile in(in Valparaíso.so). By 1916, we owned and operated the largest brewing facilities in Chile. Our operations have also included the production and marketingcommercialization of soft drinks since the beginning of the last century, the bottling and selling of mineral water products since 1960, the production and marketingcommercialization of wine since 1994, the production and marketingcommercialization of beer in Argentina since 1995, the production and marketingcommercialization of pisco since 2003 and the production and marketingcommercialization of rum since 2007. Also, we had been involved in the production and commercialization of sweet snacks products sincefrom 2004 and the production and marketing of rum since 2007.until December 2018.
We are subject to a full range of governmental regulation and supervision generally applicable to companies engaged in business in Chile, Argentina, Bolivia, Colombia, Paraguay, Peru and Uruguay. These regulations include labor laws, social security laws, public health, consumer protection and environmental laws, securities laws, and antitrust laws. In addition, regulations exist to ensure healthyhealth and safesafety conditions in facilities for the production and distribution of beverages and sweet snacks products.
Our principal executive offices are located at Avenida Vitacura N°2670, 23rd floor, Santiago, Chile. Our telephone number in Santiago is (56-2) 2427-3000, and our website is www.ccu.cl. Our authorized representative in the United States is Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19715, USA, telephone number (302) 738-6680 and fax number (302) 738-7210. The information on our website is not incorporated by reference into this document.
In 1986, IRSA, our current principalcontrolling shareholder, acquired its controlling interest in us through purchases of common stock at an auction conducted by a receiver who had assumed control of us following the economic crisis in Chile in the early 80’s, which resulted in our inability to meet our obligations to our creditors. IRSA, at that time, was a joint venture between Quiñenco S.A.(“Quiñenco”) and the Schörghuber Group from Germany, through its wholly owned subsidiary Finance Holding International B.V. (“FHI”) of the Netherlands.
To our knowledge, none of our common stock is currently owned by governmental entities. Our common stock is listed and traded on the principal Chilean stock exchanges. See “Item 7: Major Shareholders and Related Party Transactions.”
In September 1992, we issued 4,520,582 ADSs, each representing five shares of our common stock, in an international American Depositary Receipt (“ADR”) offering. The underlying ADSs were listed and traded on the NASDAQ, until March 25, 1999. Since that date, the ADSs have been listed and traded on the NYSE. On December 20, 2012, the ratio of ADSs to shares of common stock was changed from 1 to 5, to a new ratio of 1 to 2.
Prior to November 1994, we independently produced, bottled and distributed carbonated and non-carbonated soft drinks in Chile. In November 1994, we merged our soft drink and mineral water businesses with the one owned by Buenos Aires Embotelladora S.A. (“BAESA”) in Chile (PepsiCo’s bottler in Chile at that time) creating Embotelladoras Chilenas Unidas S.A. (“ECUSA”) for the production, bottling, distribution and commercialization of soft drink and mineral water products in Chile. Through ECUSA, we began producing PepsiCo brands under license. We have had control of ECUSA since January 1998, when the shareholders agreement was amended. On November 29, 1999 we purchased 45% of ECUSA’s shares owned by BAESA for approximately CLP 54,118 million. We currently own 99.98% of ECUSA’s shares. In January 2001, ECUSA and SchweppesHoldings Ltd. signed an agreement to continue bottling Crush and Canada Dry brands. See “Item 4. B. Business Overview – 4. Production and Marketing – Chile Operating segment”.
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In 1994 we purchased 48.4% of the equity of the Chilean wine producer Viña San Pedro S.A. (“VSP”) for approximately CLP 17,470 million. During the first half of 1995, VSP’s capital was increased by approximately CLP 14,599 million, of which we contributed approximately CLP 7,953 million. From August through October 1997, VSP’s capital was increased again by approximately CLP 11,872 million, of which we contributed approximately CLP 6,617 million, plus approximately CLP 191 million in additional shares bought during October 1997 in the local stock market. Furthermore, in October 1998 and during 1999, we purchased additional shares in VSP through the local stock exchanges for an amount of approximately CLP 5,526 million. From March through June 1999, VSP’s capital was increased by approximately CLP 17,464 million, of which we contributed approximately CLP 10,797 million.
In December 1995, we entered into a joint venture agreement pursuant to which Anheuser-Busch acquired a 4.4% interest in CCU Argentina. The agreement involved two different contracts: an investment and a licensing contract. Through CCU Argentina, we began our expansion into Argentina by acquiring an interest in two Argentine breweries: 62.7% of the outstanding shares of Compañía Industrial Cervecera S.A. (“CICSA”), were acquired during January and February 1995 and 98.8% of the outstanding shares of Cervecería Santa Fe S.A. (“CSF”), were acquired in September 1995. In 1997, CCU Argentina increased its interest in CICSA to 97.2% and in CSF to 99.9% through the purchase of non-controlling interests. In January 1998, we decided to merge these two breweries into one company operating under the name of CICSA. Following the merger, CCU Argentina’s interest in CICSA was 99.2%. In April 1998, CCU Argentina completed the purchase of the brands and assets of Cervecería Córdoba S.A. As of mid 1998, after the resolution of certain labor issues, we began the production of the Córdoba brand at our Santa Fe plant.
After a capital increase approved by our shareholders in October 1996, we raised approximately US$USD 196 million between December 1996 and April 1999. Part of this capital expansion was accomplished between December 1996 and January 1997 through our second ADR offering in the international markets. On December 20, 2012, the ratio of ADSs to shares of common stock was changed from 1 to 5, to a new ratio of 1 to 2.
On June 18, 2013 the extraordinary shareholders’ meeting approved the issuance of 51,000,000 of ordinary shares which were registered in the Securities Registry of the Superintendency of Securities and Insurance (“SVS”) under N°980 dated July 23, 2013. On November 8, 2013 CCU successfully concluded this capital increase, the total number of shares issued pursuant to the capital increase having been subscribed and paid, raising a total amount of CLP 331,718,929,410. This capital increase, representing our third ADR offering in the international markets, was made in order to continue our expansion plan, which includes organic and inorganic growth in Chile and the surrounding region.
To increase our presence in the premium beer segment, inIn November 2000, we acquired a 50% stake inand Malterías Unidas S.A. became joint owners (50% each) of Cervecería Austral S.A. (“Cervecería Austral”), a Chilean company located in the city of Punta Arenas that produces, sells and distributes Austral beer in Chile. Additionally, Cervecera CCU Chile Limitada (“Cervecería CCU”) has a two-year renewable license agreement, subject to compliance with an annualthe conditions established in the agreement, for the production capacity of 6.1Austral Lager beer, returnable liter containers and kegs in Chile and a distribution agreement for the sale and marketing of all Austral products in Chile, with the exception of the Magallanes Region, where selling and distribution is carried out by Comercial Patagona Ltda., a subsidiary of Cervecería Austral.
During 2000, VSP, through its subsidiary Finca La Celia S.A. (“FLC”), acquired the winery Finca La Celia in Mendoza, Argentina, initiating its international expansion, allowing VSP to include fine quality Argentine wines into its export product portfolio. In December 2001, Viña Santa Helena S.A. (“VSH”) created its own commercial and productive winemaking operation, distinct from its parent, VSP, under the Viña Santa Helena label in the Colchagua Valley. Between November 2000 and March 2001, VSP’s capital was increased by approximately CLP 22,279 million, liters. Further, inof which we contributed approximately CLP 13,402 million.
In May 2002, we acquired a 50% stake in Compañía Cervecera Kunstmann S.A., currently Cervecería Kunstmann S.A. (“CCK”CK”), a brewery located in the southern city of Valdivia.Valdivia, in Chile. In June 2003, our beer division began selling Kunstmann nationwide. In November 2006, we acquired additional shares of CK that allowed us to consolidate this subsidiary into our consolidated financial statements as of that month.
In February 2003, we began the sale of a new product for our beverage portfolio, pisco, under the brand Ruta Norte. Pisco is a grape spirit very popular in Chile that is produced in the northern part of the country. Our pisco, at that time, was only produced in the Elqui Valley in the Coquimbo Region and was sold throughout the country by our beer division sales force. In March 2005, we entered into an association with the second-largest pisco producer at that time, Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda. (“Control”). This new joint venture was named Compañía Pisquera de Chile S.A. (“CPCh”), to which the companies contributed principally with assets, commercial brands and – in the case of Control – also some financial liabilities. Currently we own 80% of CPCh and Control owns the remaining 20%.
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On April 17, 2003, the Schörghuber Group, at the time an indirect owner of 30.8% of our ownership interest, gave Quiñenco, also at the time an indirect owner of 30.8% of our ownership interest, formal notice of its intent to sell 100% of its interest in FHI to Heineken Americas B.V., a subsidiary of Heineken International B.V. As a result of the sale, Quiñenco and Heineken Americas B.V., the latter through FHI, became the only two shareholders of IRSA, the owner of 61.6% of our equity at that time, each with a 50% interest in IRSA. Heineken International B.V. and FHI subsequently formed Heineken Chile Ltda., to hold the latter’s 50% interest in IRSA. Therefore, Quiñenco and Heineken Chile Ltda. are the only two current shareholders of IRSA, with a 50% equity each. On December 30, 2003, FHI merged into Heineken Americas B.V., which together with Heineken International B.V. remained as the only shareholders of Heineken Chile Ltda. At present IRSA owns, directly and indirectly, 60.0% of our equity.
Prior to November 1994, we independently produced, bottled and distributed carbonated and non-carbonated soft drinksIn August 2003, VSP formed Viña Tabalí S.A., a joint venture in Chile. We have produced and sold soft drinks in Chile since 1902 and spirits since 2003. In November 1994, we merged our soft drink and mineral water businessesequal parts with the one owned by Buenos Aires Embotelladora S.A. (“BAESA”) in Chile (PepsiCo’s bottler in Chile at that time) creating Embotelladoras Chilenas Unidas S.A. (“ECUSA”)Sociedad Agrícola y Ganadera Río Negro Ltda., for the production bottling, distribution and marketing of soft drink and mineral water products in Chile. Through ECUSA, we began producing PepsiCo brands under license (currently Pepsi, Pepsi Light, Seven Up, Seven Up Light, Mirinda, Gatorade and Lipton Ice Tea). We have had control of ECUSA since January 1998, when the shareholders agreement was amended. On November 29, 1999 we purchased 45% of ECUSA’s shares owned by BAESA for approximately CLP 54,118 million. We currently own 99.93% of ECUSA’s shares. In January 2001, ECUSA and Schweppes Holdings Ltd. signed an agreement to continue bottling Crush and Canada Dry brands. See “– Production and Marketing – Chile Operating segment.” In December 2015 CCU started to distribute Red Bull in Chile.
In October 2013, CCU, together ECUSA, executed a series of contracts and agreements with PepsiCo Inc. and affiliates, which allowed them to expand their current relationshippremium wines. This winery is located in the non-alcoholic beverages segment with specific focus on carbonated soft drinks, as well as extending its long term duration. The performance of ECUSA as PepsiCo Inc.’s bottler has been recognized by the latter on several occasions including the award granted to ECUSA in Bangkok as Bottler of the YearLimarí Valley, Chile’s northernmost winemaking region, which is noted for the Latin America Region. In 2014, ECUSA received the distinctionproduction of “PepsiCo Global Bottler of the Year” from over 200 bottlers worldwide.outstanding wines.
In January 2004, we entered the sweet snacks business by means of a joint venture between our CCU Inversiones S.A. and Industria Nacional de Alimentos S.A,S.A., a subsidiary of Quiñenco, with a 50% interest each in Calaf S.A. (which has been, which was renamed Foods Compañía de Alimentos CCU S.A. (“Foods”), or Foods, a corporation that acquired the trademarks, assets and know-how, among other things, of Calaf S.A.I.C. and Francisca Calaf S.A., traditional Chilean candy makers, renowned for more than a century. In 2007 we acquired the brand Natur, adding a new line of products to our ready-to-eat portfolio. In August 2008, Foods bought 50% of Alimentos Nutrabien S.A. (“Nutrabien”), a company specializingthat specializes in muffinsbrownies and other high quality home-made productshigh-quality baked goods under the brand Nutrabien.
In 2007 weOctober 2004, VSP acquired the well-known Manquehuito Pop Wine brand, Natur, adding cereal barsa sparkling fruit-flavored wine with low alcohol content, broadening its range of products. At VSP’s extraordinary shareholders meeting held on July 7, 2005, the shareholders approved a capital increase that was to our portfolio. In 2015 we sold the brands Calafbe partially used for stock option programs. During October and Natur to Empresas Carozzi S.A. (“Carozzi”), leaving Foods with only the Nutrabien brand.November 2005, VSP’s capital was increased by approximately CLP 346 million. We did not participate in this capital increase.
In December 2006, we signed a joint venture agreement with Watt’s S.A. (“Watt’s”), a local food related company, under which, as of January 30, 2007, we participate in equal parts in Promarca S.A. (“Promarca”). This new company owns, among others, the brands “Watt’s,”“Watt’s”, “Watt’s Ice Frut,”Frut”, “Yogu Yogu” and “Shake a Shake” in Chile. Promarca granted both of its shareholders (New Ecusa S.A., a subsidiary of ECUSA, and Watt´sWatt’s Dos S.A,S.A., a subsidiary of Watt´s S.A)Watt’s S.A.), for an indefinite period, the exclusive licenses for the production and sale of the different product categories.
In December 2007, we entered into an agreement with Nestlé Chile S.A. and Nestlé Waters Chile S.A., the latter of which acquired a 20% interest in our subsidiary Aguas CCU-Nestlé Chile S.A. (“Aguas CCU”), the company through which we develop our bottled water business in Chile. As part of this new association, Aguas CCU introduced in 2008 the Nestlé Pure Life brand in Chile. Nestlé Waters Chile S.A. had a call option to increase its ownership in Aguas CCU by an additional 29.9%, which expired on June 5, 2009. On June 4, 2009 ECUSA received a notification from Nestlé Waters Chile S.A. exercising its irrevocable option to buy 29.9% of Aguas CCU equity, within the scope of the association contract. The completion of the deal represented a profit before taxes for ECUSA of CLP 24,439 million. On September 30, 2009 in extraordinary shareholders’ meetings, Aguas CCU and Nestlé Waters Chile S.A. approved the merger of Nestlé Waters Chile S.A. and Aguas CCU. The current shareholders of Aguas CCU are ECUSA (50.10%) and Nestlé Chile S.A. (49.90%).
In December 2012, Aguas CCU completed an acquisition of 51.01% of the company Manantial S.A. (“Manantial”), a Home and Office Delivery (“HOD”) business of purified water in bottles with the use of dispensers. The partnership enabled Aguas CCU to participate in a new business category. The shareholders agreement of Manantial included a call option to purchase the remaining shares. On January 29, 2016 Aguas CCU and ECUSA exercised the call option, acquiring 48.07% and 0.92% of the shares of Manantial respectively. As a consequence, Compañía Cervecerías Unidas S.A. is currently the indirect owner of 100% of the shares of Manantial, remaining as the only direct shareholders of Manantial: (i) Aguas CCU with 99.08% of the capital stock, and (ii) ECUSA with 0.92% of the capital stock.
In February 2003, we began the sale of a new product for our beverage portfolio, pisco, under the brand Ruta Norte. Pisco is a grape spirit very popular in Chile that is produced in the northern part of the country. Our pisco, at that time, was only produced in the Elqui Valley in Region IV of Chile and was sold throughout the country by our beer division sales force. In March 2005, we entered into an association with the second-largest pisco producer at that time, Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda. (“Control”). This new joint venture was named Compañía Pisquera de Chile S.A. (“CPCh”), to which the companies contributed principally with assets, commercial brands and – in the case of Control – also some financial liabilities. Currently we own 80% of CPCh and Control owns the remaining 20%. In May 2007, CPCh entered the rum marketwith our proprietary brand Sierra Morena and later, in 2008, added new rum brand extensions and introduced various pisco based cocktails. Since 2011, our international strategy has focused on exports to Argentina, the United States and Asia, including Russia. CPCh signed a licence agreement for the commercialization and distribution in Chile of the pisco brand Bauzá. In addition, CPCh acquired 49% of the licensor company Compañía Pisquera Bauzá S.A. (“Bauza”), owner of the brand in Chile. In January 2016, CPCh sold its interest in Bauzá to Agroproductos Bauzá S.A. Furthermore, during 2011 CPCh began the distribution of Pernod Ricard products in Chile.
In December 1995, we entered into a joint venture agreement pursuant to which Anheuser-Busch Incorporated acquired a 4.4% interest in Compañía Cervecerías Unidas Argentina S.A. (“CCU Argentina”). The agreement involved two different contracts: an investment and a licensing contract. In 2008, the licensing contract was extended until 2025 and grants CCU Argentina the exclusive right to produce, package, market, sell and distribute Budweiser beer in Argentina. After subsequent capital increases, the last one in June 2008, Anheuser-Busch Incorporated reduced its interest in CCU Argentina to 4.04% and we increased our participation to 95.96%. In December 2010, our subsidiary Inversiones Invex CCU Ltda. acquired a 4.04% equity stake in CCU Argentina from Anheuser-Busch Investment, S.L. After the acquisition, CCU, through its subsidiary Inversiones Invex CCU Ltda., became the sole equity holder of CCU Argentina. This transaction had no effect on the Budweiser brand production and distribution contract which expires in 2025 (in 2015 for the distribution of the brand in Chile). Currently, CCU´s subsidiaries Inversiones Invex CCU Ltda. and Inversiones Invex CCU Dos Ltda. own 80.649% and 19.351%, respectively, of CCU Argentina´s share capital.
Through CCU Argentina, we began our expansion into Argentina by acquiring an interest in two Argentine breweries: 62.7% of the outstanding shares of Compañía Industrial Cervecera S.A. (“CICSA”), were acquired during January and February 1995 and 98.8% of the outstanding shares of Cervecería Santa Fe S.A. (“CSF”), were acquired in September 1995. In 1997, CCU Argentina increased its interest in CICSA to 97.2% and in CSF to 99.9% through the purchase of non-controlling interests. In January 1998, we decided to merge these two breweries into one company operating under the name of CICSA. Following the merger, CCU Argentina’s interest in CICSA was 99.2%. In April 1998, CCU Argentina completed the purchase of the brands and assets of Cervecería Córdoba S.A. for US$8 million. After the resolution of certain labor issues, we began the production of the Córdoba brand at our Santa Fe plant from the middle of 1998. In April 2008, we bought the Argentine brewer Inversora Cervecera S.A. (“ICSA”) after receiving the approval of the Argentine antitrust authorities. CICSA paid an aggregate amount of US$88 million to acquire ICSA. ICSA owns, among other assets, the Bieckert, Palermo and Imperial beer brands, which together represented approximately 5.8% of the Argentine beer market, and a brewery in Luján, Buenos Aires, with a nominal production capacity of 270 million liters per year. On December 27, 2010, CICSA acquired equity interests in Saénz Briones S.A. and Sidra La Victoria S.A. Through this transaction, CICSA became the controlling shareholder of these companies. These companies own the assets used in the production, packaging and marketing of cider and other spirits businesses in Argentina, which are marketed through several brands, including Sidra Real and Sidra La Victoria. In 2011, we started to export Schneider beer to Paraguay through Bebidas del Paraguay S.A (“Bebidas del Paraguay”), and in 2013 to Uruguay through Milotur S.A. (“Milotur”). In 2012 we signed an agreement by virtue of which we have the exclusive right to produce Heineken beer in Argentina and distribute it in Paraguay. In 2013 we started exporting Heineken to Uruguay through Milotur and in 2015 to Bolivia through Bebidas Bolivianas BBO S.A. (“BBO”). Together, both brands represented 2.0% of the total beer sales volume of CCU Argentina in 2015. Exports to Paraguay, Uruguay and Bolivia represented 84% of CCU Argentina’s total exports in 2015. As of June 6, 2014, CICSA reached agreements with Cervecería Modelo S. de R.L. de CV. and Anheuser-Busch LLC, for the termination of the contract which allows CICSA to import and distribute on an exclusive basis, Corona and Negra Modelo beers in Argentina, and the license for the production and distribution of Budweiser beer in Uruguay. CICSA received compensation in respect of these agreements in the amount of ARS 277.2 million, equivalent to US$34.2 million.
In September 2012, CCU acquired 100% of the shares of the Uruguayan companies Milotur S.A., Marzurel S.A. and Coralina S.A. and, indirectly, of Andrimar S.A., a wholly-owned subsidiary of Milotur S.A. These companies own the assets of a business developed in Uruguay that engages in the production and marketing of bottled mineral waters under the Nativa brand, and carbonated soft drinks under the Nix brand. This acquisition is in line with the Company’s strategic plan, which seeks to expand its activities into new markets. Milotur, our afilliate in Uruguay, also commercializes Schneider and Heineken beer brands, the latter due to an amendment to the trademark license agreement in force with Heineken Brouwerijen B.V.
In December 2013, CCU acquired 50.005% of Bebidas del Paraguay, and 49.959% of Distribuidora del Paraguay S.A., entering the Paraguayan market with the production, marketing and sale of non-alcoholic beverages, such as soft drinks, juices and water, and import, marketing and sale of beer, under various brands, both proprietary and under licensees and imported.
In 1994 we purchased 48.4% of the equity of the Chilean wine producer Viña San Pedro S.A. (“VSP”, today “VSPT” as described below) for approximately CLP 17,470 million. During the first half of 1995, VSPT’s capital was increased by approximately CLP 14,599 million, of which we contributed approximately CLP 7,953 million. From August through October 1997, VSPT’s capital was increased again by approximately CLP 11,872 million, of which we contributed approximately CLP 6,617 million, plus approximately CLP 191 million in additional shares bought during October 1997 in the local stock market. Furthermore, in October 1998 and during 1999, we purchased additional shares in VSPT through the local stock exchanges for an amount of approximately CLP 5,526 million. From March through June 1999, VSPT’s capital was increased by approximately CLP 17,464 million, of which we contributed approximately CLP 10,797 million. During 2000, VSPT, through its subsidiary Finca La Celia S.A. (“FLC”), acquired the winery Finca La Celia in Mendoza, Argentina, initiating its international expansion, allowing VSPT to include fine quality Argentine wines into its export product portfolio. In December 2001, Viña Santa Helena (“VSH”) created its own commercial and productive winemaking operation, distinct from its parent, VSPT, under the Viña Santa Helena label in the Colchagua Valley. Between November 2000 and March 2001, VSPT’s capital was increased by approximately CLP 22,279 million, of which we contributed approximately CLP 13,402 million. In August 2003, VSPT formed Viña Tabalí S.A., a joint venture in equal parts with Sociedad Agrícola y Ganadera Río Negro Ltda., for the production of premium wines. This winery is located in the Limarí Valley, Chile’s northernmost winemaking region, which is noted for the production of outstanding wines. In October 2004, VSPT acquired the well-known Manquehuito Pop Wine brand, a sparkling fruit-flavored wine with low alcohol content, broadening its range of products. At VSPT’s extraordinary shareholders meeting held on July 7, 2005, the shareholders voted to increase the number of board members from 7 to 9 and approved a capital increase that was to be partially used for stock option programs. During October and November 2005, VSPT’s capital was increased by approximately CLP 346 million. We did not participate in this capital increase. Viña Misiones de Rengo S.A. and Viña Urmeneta S.A. merged into Viña Valles de Chile S.A., of which the latter is the legal successor, with effect as of June 2013 and in May 2014 Vitivinícola del Maipo S.A merged into Viñas Orgánicas S.A., the latter being the legal successor. Additionally, in April 2015 Viña Santa Helena S.A. merged into Viña San Pedro Tarapacá S.A., pursuant to the Chilean Corporations Act, due to the fact that Viña San Pedro Tarapacá S.A. became the sole shareholder of the company for more than 10 days.
In January 2007, Viña Tabalí S.A. bought the assets of Viña Leyda, located in the Leyda Valley, a new winemaking region south of Casablanca Valley and close to the Pacific Ocean. Viña Leyda produces excellent wines that have won awards in different international contests. After this acquisition, Viña Tabalí S.A. changed its name to Viña Valles de Chile S.A. In September 2007, VSPTVSP bought a 50% interest in Viña Altaïr S.A. which belonged to Château Dassault, in line with our strategy of focusing on premium wines. As a consequence, VSPTVSP owns 100% of said company.
Between April and June 2007, VSPT’sVSP’s capital was increased by approximately CLP 13,692 million, of which we contributed approximately CLP 5,311 million.
In May 2007, CPCh entered the rum market with our proprietary brand Sierra Morena and later, in 2008, added new rum brand extensions and introduced various pisco based cocktails. In June 2010 CPCh purchased Fehrenberg, a small, but well-recognized spirits brand produced in Chile. In July 2011 CPCh began the distribution of Pernod Ricard products (Chivas Regal, Ballantine’s, Havana Club, Absolut, among others). Furthermore, in 2011, CPCh signed a licence agreement for the commercialization and distribution in Chile of the pisco brand Bauzá. In addition, in 2011 CPCh acquired 49% of the licensor company Compañía Pisquera Bauzá S.A. (“Bauza”), the owner of the brand in Chile, and CPCh sold such interest to Agroproductos Bauzá S.A. in January 2016.
In December 2007, we entered into an agreement with Nestlé Chile S.A. and Nestlé Waters Chile S.A., the latter of which acquired a 20% interest in our subsidiary Aguas CCU-Nestlé Chile S.A. (“Aguas CCU”), thecompany through which we develop our bottled water business in Chile. As part of this new association, Aguas CCU introduced in 2008 the Nestlé Pure Life brand in Chile. On June 4, 2009 ECUSA received a notice from Nestlé Waters Chile S.A.whereby it exercised its irrevocable option to buy 29.9% of Aguas CCU’s equity, pursuant to the terms and conditions of the association agreement. The completion of the deal represented a profit before taxes for ECUSA of CLP 24,439 million. On September 30, 2009 in the extraordinary shareholders’ meetings, Aguas CCU and Nestlé Waters Chile S.A. approved the merger of both companies, the latter being the surviving company under the name Aguas CCU-Nestlé Chile S.A. The current shareholders of Aguas CCU are ECUSA (50.10%) and Nestlé Chile S.A. (49.90%).
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In 2008, the licensing contract, that grants CCU Argentina the exclusive right to produce, package, commercialize and distribute Budweiser beer in Argentina, was extended until 2025. After subsequent capital increases, the last one in June 2008, Anheuser-Busch reduced its interest in CCU Argentina to 4.04% and we increased our participation to 95.96%. In April 2008, we bought the Argentine brewer Inversora Cervecera S.A. (“ICSA”) after receiving the approval of the Argentine antitrust authorities. CICSA paid an aggregate amount of USD 88 million to acquire ICSA. ICSA owns, among other assets, the Bieckert, Palermo and Imperial beer brands, which together represented approximately 5.8% of the Argentine beer market, and a brewery in Luján, Buenos Aires, with a nominal production capacity of 270 million liters per year.
In November 2008, CCU and its affiliate VSP entered into a Merger Agreement with Compañía Chilena de Fósforos S.A. and its subsidiariesTerciados y Elaboración de Maderas S.A. and Viña Tarapacá S.A. (“VT”), in order to merge VT into VSP. Under the terms of the Merger Agreement, and prior to its execution, CCU had to acquire 25% of VT’s equity. On December 3, 2008, the extraordinary shareholders’ meetings of VSP and VT approved the merger of both companies. Once all the legal requirements were fulfilled, the merger by absorption of VT by VSP was completed on December 9, 2008, with an effective date for accounting purposes of October 1, 2008. The mergedsurviving company was named “ViñViña San Pedro Tarapacá S.A.” (VSPT) (“VSPT”), which began consolidating its financial statements with ours starting on October 1, 2008, with operations commencing on December 9, 2008. VSPT’s capital was increased, as a consequence of the merger, by issuing 15,987,878,653 shares to be exchanged for the total number of shares issued by Viña TarapacáVT at a ratio of 1,480.30828 new VSPT shares per each share of the absorbed company.
In December 2010, our subsidiary Inversiones Invex CCU Ltda., acquired a 4.04% equity stake in CCU Argentina from Anheuser-Busch Investment, S.L. After the acquisition, CCU, through its subsidiary Inversiones Invex CCU Ltda., became the sole equity holder of CCU Argentina. This transaction had no effect on the Budweiser brand production and distribution contract, which was set to expire in 2025 (prior to the 2017 offer letter signed between ABI and CCU Argentina described below). The license for the distribution of the brand in Chile expired in 2015. Currently, CCU’s subsidiaries Inversiones Invex CCU Ltda. and Inversiones Invex CCU Dos Ltda. own 80.649% and 19.351%, respectively, of CCU Argentina’s share capital. CCU Argentina owns 77.005% of CICSA’s share capital, Inversiones Invex CCU Dos Ltda owns the remaining 22.995%.
In December 2010, CICSA acquired equity interests in Saénz Briones y Cía. S.A.I.C. and Sidra La Victoria S.A. Through this transaction, CICSA became the controlling shareholder of these companies. These companies own the assets used in the production, packaging and marketing of cider and other spirits businesses in Argentina, which are marketed through several brands, the most important cider and spirits brands are Real, La Victoria, Saénz Briones, 1888 and in spirits, El Abuelo. In 2015 Sidra La Victoria S.A. merged with and into Saénz Briones y Cía S.A.I.C.
In August 2011, the board of directors of VSPT agreed to spin-off Viña Valles de Chile S.A. (VDC)(“VDC”), a corporation owned, in equal parts, by VSPT and Sociedad Agrícola y Ganadero Río Negro Limitada (ARN)(“ARN”). VDC had two major vineyards: Viña Tabalí and Viña Leyda. According to such agreement, VSPT would remain the 100%sole owner of Viña Leyda (whose net assets would remain within VDC) and ARN would remain the 100%sole owner of Viña Tabalí (whose net assets would be assigned to the spun off company). This transaction concluded on December 29, 2011, through a stock swap contract, whereby VDC became a subsidiary of VSPT, that is, directly and indirectly, 100% owned by VSPT. Furthermore, in 2013,
In September 2012, CCU through its subsidiary CCU Inversiones S.A., increased its stake in VSPT to 64.72% by acquiring an additional stakeacquired 100% of the outstanding shares of VSPT. Asthe Uruguayan companies Milotur S.A. (“Milotur”), Marzurel S.A. (“Marzurel”) and Coralina S.A. (“Coralina”) and, indirectly of Andrimar S.A. (“Andrimar”), a wholly-owned subsidiary of Milotur. These companies own the assets of a business developed in Uruguay thatengages in the production and commercialization of mineral and flavored bottled water under the Nativa brand, and carbonated soft drinks under the Nix brand. Milotur also commercializes Schneider and Heineken beer brands, the latter due to an amendment to the trademark license agreement in force with Heineken Brouwerijen B.V.
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In December 2014, our total ownership interest in VSPT was 64.72%.VSPT is formed by the wineries San Pedro, Tarapacá, Santa Helena, Misiones de Rengo, Altaïr, Viña Mar, Casa Rivas, FLC, Bodega Tamarí, and Viña Valles de Chile (Viña Leyda).These are all important and renowned cellars in Chile and Argentina, each with its own distinctive brands. Since the merger, VSPT has become the second-largest Chilean wine exporter and one2012, Aguas CCU completed an acquisition of 51.01% of the leaderscompany Manantial S.A. (“Manantial”), a Home and Office Delivery (“HOD”) business of purified water in the domestic market. Furthermore, VSPT’s Viña San Pedro Tarapacá winery was awarded the “Winery of the Year 2014” distinction by Wines of Chile, as well as “Ethical Company of the Year” by Drinks Business Magazine. 2015 was a very special year for VSPTbottles with the celebrationuse of dispensers. The partnership enabled Aguas CCU to participate in a new business category. The shareholders agreement of Manantial included a call option to purchase the 150th Anniversary of Viña San Pedro, the oldest that gave birth to the group.remaining shares.
On April 3, 2013, Andrónico Luksic assumed the role of Chairman of the Board, after his brother, Guillermo Luksic passed away.
On June 18, 2013, the extraordinary shareholders’ meeting approved the issuance of 51,000,000 of ordinarycommon shares which were registered in the Securities Registry of the Superintendency of Securities and Insurance“Superintendencia de Valores y Seguros” (“SVS”), currently “Comisión para el Mercado Financiero” (“CMF”)1, under N°980 datedon July 23, 2013. On November 8, 2013 CCU successfully concluded this capital increase, the total number of shares issued pursuant to the capital increase having been subscribed and paid, raising a total amount of CLP 331,718,929,410. This capital increase representing our third ADR offering in the international markets, was made in order to continue our expansion plan, which includes organic and inorganic growth in Chile and the surrounding region. Part of this capital increase was offered in the international markets, representing our third ADR offering.
In December 2013, CCU acquired 50.005% of Bebidas del Paraguay S.A. (“Bebidas del Paraguay”), and 49.959% of Distribuidora del Paraguay S.A. (“Distribuidora del Paraguay”), entering the Paraguayan market with the production, marketing and sale of non-alcoholic beverages, such as soft drinks, juices and water, and the marketing and sale of beer, under various brands, both proprietary and under licensees and imported.
Furthermore, in 2013, CCU, through its subsidiary CCU Inversiones S.A., increased its stake in VSPT to 64.72% by acquiring additional outstanding shares of VSPT.VSPT is formed by the wineries San Pedro, Tarapacá, Santa Helena, Viña Leyda, Misiones de Rengo, Viña Mar, Casa Rivas, Finca La Celia, and Bodega Tamarí.These are all important and renowned cellars in Chile and Argentina, each with its own distinctive brands. Since the merger, VSPT has become the second-largest Chilean wine exporter and one of the leaders in the domestic market. In June 2013, the merger of Viña Misiones de Rengo S.A. and Viña Urmeneta S.A. was completed, with Viña Valles de Chile S.A., as the legal successor. In May 2014 Vitivinícola del Maipo S.A. merged into Viñas Orgánicas SPT S.A., the latter being the legal successor. Additionally, in April 2015 Viña Santa Helena S.A. merged into Viña San Pedro Tarapacá S.A., pursuant to the Chilean Corporations Act, due to the fact that Viña San Pedro Tarapacá S.A. became the sole shareholder of the company for more than 10 days.
In May 2014, CCU entered intothe Bolivian market through a partnership through which it participates in the businesswith Grupo Monasterio, acquiring 34% of Bebidas Bolivianas BBO S.A. (“BBO”), which involves the production, marketing. BBO produces and multi-category sales ofcommercializes alcoholic beverages and soft drinksnon-alcoholic beverages in Bolivia. CCU's initial stake in BBO iswas 34%, which was obtained by a capital injection, and which contemplates the right of CCU to acquire additional interests that would enable it to own 51% of the shares of BBO in a second stage. This transaction also includes contracts that will allow BBO to operate CCU’s brands in Bolivia. The Company has recorded this investment asunder joint ventureventures and associates.associated companies. As of 2014, BBO acquired Cordillera beer brand from SABMiller.
As of June 6, 2014, CICSA reached agreements with Cervecería Modelo S.A. de CV. and Anheuser-Busch LLC, for the termination of the contract, which allowed CICSA to import and distribute on an exclusive basis, Corona and Negra Modelo beers in Argentina, and the license for the production and distribution of Budweiser beer in Uruguay. CICSA received compensation in respect of these agreements in the amount of ARS 277.2 million, equivalent to USD 34.2 million.
In November 2014, CCU, directly and through its subsidiary CCU Inversiones II Ltda., signed a series of contracts and agreements with the Colombian entity Postobón S.A. and related companies (“Grupo Postobón”), by which we have agreed to initiate a joint venture for the manufacturing, commercialization and distribution of beer andbeerand malt based non-alcoholic beverages in Colombia. The joint venture iswas established through a company named Central Cervecera de Colombia S.A.SS.A.S. (“Central Cervecera deColombia”CCC”), in which CCU and Grupo Postobón participate asin equal shareholders.parts. This transaction included the following contracts and agreements: an Investment Framework Agreement,investment framework agreement, a Shareholders Agreement,shareholders agreement, a long-term logistics and distribution contract and a sales contract governing services to be provided by Grupo Postobón to the Central Cervecera de Colombia,CCC, a trademark license agreements granted to Central Cervecera de ColombiaCCC by CCU and Grupo Postobón, a shared services agreement governing services to be provided by Postobón to Central Cervecera de Colombia S.A.S,CCC, and an exclusive license granted by Heineken to Central Cervecera de Colombia S.A.SCCC for the import, production and distribution of Heineken products in Colombia. Central Cervecera deAs of September 2015, CCC also has anexclusive contract to import, produce and distribute Coors Light in Colombia.Additionally, as of April 1, 2016, CCC also has an exclusive license granted by Heineken to import, produce and distribute Tecate in Colombia is accounted forand Sol as a Joint venture and associates.of July 1, 2017.
1Pursuant to Law N° 21,000, as of January 15, 2018, the SVS was replaced by the CMF (Comisión para el Mercado Financiero or Financial Market Commission). Therefore, any reference to the SVS must also be understood as including its successor entity, the CMF, as of such date.
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In November 2015, ECUSA entered into a joint operation agreement with Empresas Carozzi S.A. (“Carozzi”) for the production, commercialization, and distribution of instant powder drinks under the brands Sprim, Fructus, Vivo and Caricia. This joint operation will beis carried out by Bebidas Carozzi CCU SpA (“Bebidas Carozzi CCU”), of which ECUSA acquired 50% of the share capital. Carozzi will beis in charge of the production of the respective products, and ECUSA will be in charge of its distribution.
In 2015 we sold the brands Calaf and Natur to Carozzi, leaving Foods only with its 50% stake in Nutrabien. During 2016, Foods acquired the remaining 50% stake of Nutrabien.
On January 29, 2016, Aguas CCU and ECUSA exercised the call option, acquiring 48.07% and 0.92% of the shares of Manantial respectively. As a consequence, CCU is currently the indirect owner of 100% of the shares of Manantial, remaining as the only direct shareholders of Manantial: (i) Aguas CCU with 99.08% of the capital stock, and (ii) ECUSA with 0.92% of the capital stock.
In February 2016 CCU and Watt’s, among others, entered into an “International Association Agreement” in order to expand the brand Watt’s to certain South American countries, through Promarca Internacional SpA, currently a wholly owned subsidiary of Promarca S.A.
In March 2016, we, through our subsidiary Bebidas del Paraguay S.A., acquired 51% of Sajonia Brewing Company SRL (formerly Artisan SRL) which produces and commercializes Sajonia craft beer in Paraguay.
In 2016, CCC acquired the brand and assets related to the craft beer brand “3 Cordilleras” of Artesana Beer Company S.A. in Colombia. CCC is reported under Joint Ventures and Associated Companies.
In 2017, we began producing and commercializing Miller Genuine Draft (“MGD”) in Argentina.
As of April 2017, CCC also has launcheda license agreement to commercialize and distribute the Miller Lite and Miller Genuine Draft brands in Colombia.
In June 2017, CPCh incorporated to its Strategic Plan 2016-2018,portfolio the Peruvian pisco brand BarSol, through the acquisition of 40% of Americas Distilling Investments LLC (“ADI”), which is based on two pillars: Growthin the United States and Efficiencies, withowns the BarSol brand and productive assets based in Peru.
On August 16, 2017, CCU, through its subsidiary CCU Inversiones ll Ltda., acquired 50% of Zona Franca Central Cervecera S.A.S. (“ZF CC”), a focus on our core categoriescompany incorporated in Colombia in which CCU and Grupo Postobón are the sole shareholders in equal parts. The price of the transaction amounted to USD 10.2 million, equivalent to CLP 6.4 billion. The purpose of ZF CC is to act exclusively as an industrial user of one or more free-trade zones, providing toll manufacturing services to CCC, which will produce, market and distribute beer and non-alcoholicmalt beverages. We have proposed ourselves to grow profitably
In December 2017, CCU, through its subsidiary CCU Inversiones S.A., increased its stake in all our categories and businesses, andVSPT by acquiring additional outstanding shares of VSPT through a tender offer, which concluded at the end of January 2018, and allowed us to increase our total stake from 67.22% to 83.01%.
On September 6, 2017, CCU and CCU Argentina signed an offer letter with ABI (together with CCU Argentina, the "Parties"), under which the early termination of the "Budweiser" license agreement in Argentina was agreed to inexchange for the transfer to CCU Argentina of a portfolio of beer brands and cash payments, among other matters. This transaction was subject to the prior approval of the Comisión Nacional de Defensa de la Competencia (“CNDC”) and the Secretario de Comercio del Ministerio de Producción de la Argentina (“SECOM”), which are Argentina’s antitrust regulators. On March 14, 2018, SECOM, based on the CNDC's favorable opinion, approved the transaction, pending review and approval by the CNDC of the terms and conditions of the definitive contracts in respect thereof. On April 27, 2018, after receiving the approval from CNDC and SECOM, the Parties were legally obliged to close the transaction. On May 2, 2018, the abovementioned transaction (the “Transaction”) was executed, which included, among other matters: (i) the early termination of the Budweiser brand license agreement in Argentina, between the Parties, and (ii) the transfer to CCU Argentina of the ownership of the Isenbeck, Diosa, Norte, Iguana and Báltica brands, as well as the transfer of the licenses for Argentina of the international brands Warsteiner and Grolsch. In order to achieve an orderly transition of the aforementioned brands, the Transaction contemplates several contracts in which (i) CCU Argentina will produce Budweiser, on behalf of ABI, for a period of up to one year; (ii) ABI will produce Isenbeck and Diosa, on behalf of CCU Argentina, for a period of up to one year; and (iii) ABI will carry out the production and distribution of Iguana, Norte, Báltica, Grolsch and Warsteiner, on behalf of CCU Argentina, for a period of up to three years (the “Transition Brands”). As a consequence, as of May 2, 2018, CCU Argentina began commercializing Isenbeck and Diosa and ceased selling Budweiser. As part of the terms of the Transaction, CCU Argentina received from ABI a cash payment of US$ 306 million, as part of its compensation for the early termination of the license contract for the Budweiser brand, as well as an additional US$ 10 million for producing Budweiser on behalf of ABI for a year. CCU Argentina will also receive from ABI payments of up to US$ 28 million per year, for a period of up to three years, depending on the scope and length of the transition of the production and/or commercialization of the Transition Brands.
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On June 15, 2017, Foods and CCU Inversiones S.A. signed a purchase agreement, for the sale of all the shares of its subsidiary Nutrabien, with Ideal S.A, a subsidiary of Grupo Bimbo, subject to the approval of the antitrust authorities in Chile. Having received said approval, the sale of 100% of the shares of Nutrabien to Ideal S.A. was completed on December 17, 2018.
On August 9, 2018, CCU exercised its option to purchase from Grupo Monasterio, holder of 66% of BBO capital stock 30,286, ordinary shares of BBO, representing 17% of the total capital stock of BBO, with which CCU increased its stake from 34% to 51%, with Grupo Monasterio retaining the remaining 49%. Subsequently, on December 17, 2018, CCU contributed the totality of its BBO shares to its subsidiary CCU Inversiones II Ltda., the current shareholder and controller of BBO.
On August 17, 2018, CCU placed a three million UF bond in the Chilean market. The 25-year bullet note was priced at 2.85% in UF’s (Chile’s inflation adjusted currency), which represented a spread of 68 bps over the Chilean Central Bank bond (BCU) with the same duration.
In September of 2018, CCU was included for the first time wein the Dow Jones Sustainability Index Chile, created in 2015, which assesses and selects companies based on an analysis of their environmental, social and governance (ESG) performance.
On September 4, 2018, CCU and 29 other companies in Chile, signed a Zero Waste to Landfill Clean Production Agreement (CPA), together with the Chilean government’s Sustainability and Climate Change Agency (ASCC) and the Recycling Industry National Association. In this agreement, the participant companies committed to reducing to zero the waste that they send to landfills, within a period of two years.
On December 27, 2018, CCU, through its subsidiary Viña San Pedro Tarapacá S.A., signed an agreement with Pernod Ricard Argentina to acquire part of the Pernod Ricard wine business in that country. The purchase agreement, which is subject to compliance with the usual closing conditions for such operations, includes the Graffigna, Colón and Santa Silvia brands, which together represent approximately 1.5 million boxes of 9 liters per year. The Graffigna winery, located in the province of San Juan, is included in the transaction, along with the Pocito and Cañada Honda vineyards, also located in San Juan, as well as the La Consulta vineyard, located in the Uco Valley, in Mendoza.
At the end of 2018, CCU finalized the construction of the new distribution center for non-alcoholic beverages that is part of the CCU Renca Project. The new distribution center has a 22,500 square meter warehouse and uses 100% electricity-powered machinery, in addition to being a zero-waste-to-landfill operation. The CCU RencaProject also includes a production plant for non-alcoholic beverages, which is expected to begin construction during 2019.
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In November of 2018, and as part of our electromobility plan, CCU began to operate the first 100% electric, high-tonnage truck in the country. With a capacity of up to 13 tons and a range of 280 kilometers, the heavy-load vehicle will seek efficiencies with determination,be used to transport CCU’s products in Santiago. CCU’s goal is for electric trucks to represent 50% of the fleet by executing our “ExCCelencia CCU” Program.2030.
CAPCapital Expenditures
ITAL EXPENDITURES
The capital expenditure figures for the last three years shown below reconcile to the Cash Flow statement as shown in the Consolidated Statements of Cash Flows.
Our capital expenditures for the last three years were CLP 124,559128,883 million, CLP230,080 125,765 million andCLP 131,731131,440 million, respectively, totaling CLP486,370 386,089 million of which CLP228,639281,427 million was invested in the Chile Operating segment, CLP91,132 million in the International Business Operating segment, CLP27,579 million in the Wine Operating segment and CLP 104,662139,020million in the Others Operating segment.outside Chile.
In recent years, our capital expenditures were made primarily for the expansion of our production capacities and bottling operations, improving the distribution chain, additional returnable bottles and boxes, increasing marketing assets (mainly refrigerators), environmental improvements and the integration of new operations, among others.
During 2013 we invested 57%2016, 60% of our capital expenditures were allocated to our operations in our Chile Operating segment.Chile. These investments were required to support the increased sales volume, experienced during 2012 and 2013. 22% of our capital expenditures were directedwith investments related to increasing bottling capacity, new packaging,lines, replacement of obsolete lines and marketing assets. It wasWe also necessary to investinvested in the construction of new warehouses and storesdistribution centers throughout Chile in order to optimize the distribution of our products.products and new categories.
During 2014,37%2017, 86% of our capital expenditure wasexpenditures were allocated to our operations in our Chile Operating segment.Chile. These investments were requirednecessary to increase marketing assets, bottlingimprove our capacity and operational efficiencies, as well as the quality of our production processes, logistics and distribution, including the initiation of the process of changing pallets from wood to plastic and the start of construction of a new packaging, mostlydistribution center in Santiago. We also invested in our soft drink and beer categories. Furthermore, we acquired an industrial sitebusinesses in the Santiago metropolitan area for futureArgentina with capacity expansions (shown under Others).increases to support increased sales volume.
During 2015,55%2018, 80% of our capital expenditure wasexpenditures were allocated to our operations in our Chile Operating segment.Chile. These investments were requiredmade to increase production capacity and productive efficiencies, as well as the quality of our logistics and distribution processes, continuing with the process of changing from wood to plastic pallets and the start-up of the new distribution center in Santiago. Additionally, we have acquired new lands and plantations for our wine business, as well as invested in the automation of the elaboration process. We also invested in our businesses in Argentina with capacity increases to support the increased sales volume of our categories experienced in 2014, with investments related to increasing bottling capacity, new packaging, and marketing assets. We also needed to invest in building new warehouses and stores throughout Chile in order to optimize the distribution of our products.volume.
Our majorThe following table shows our primary capital expenditures for the period 2013-2015 are shown in the following table.2016 - 2018. See “Item 5: Operating and Financial Review and Prospects –Liquidity– B. Liquidity and Capital Resources – Capital Expenditures” for the 2016-20192019 - 2022 period.
Operating segment |
| 2013 | 2014 | 2015 |
| (CLP Millions) | |||
|
|
|
|
|
Chile |
| 70,441 | 85,905 | 72,293 |
| As a percentage of Total | 56.6% | 37.3% | 54.9% |
| Machinery and equipment | 48,631 | 50,730 | 37,694 |
| Packaging | 12,611 | 15,987 | 10,256 |
| Marketing assets | 8,317 | 11,253 | 11,587 |
| Software and hardware | 49 | 256 | 703 |
| Others | 833 | 7,679 | 12,052 |
|
|
|
|
|
International Business | 29,779 | 33,481 | 27,872 | |
| As a percentage of Total | 23.9% | 14.6% | 21.2% |
| Machinery and equipment | 14,632 | 11,476 | 10,509 |
| Packaging | 11,438 | 14,070 | 9,114 |
| Marketing assets | 2,617 | 6,122 | 3,987 |
| Software and hardware | 441 | 512 | 950 |
| Others | 650 | 1,301 | 3,312 |
|
|
|
|
|
Wine |
| 4,840 | 12,686 | 10,053 |
| As a percentage of Total | 3.9% | 5.5% | 7.6% |
| Machinery and equipment | 1,735 | 4,139 | 5,331 |
| Packaging | 1,360 | 1,483 | 1,292 |
| Marketing assets | 15 | 36 | 25 |
| Software and hardware | 63 | 114 | 134 |
| Others | 1,668 | 6,914 | 3,271 |
|
|
|
|
|
Others |
| 19,498 | 98,008 | 21,514 |
| As a percentage of Total | 15.7% | 42.6% | 16.3% |
|
|
|
|
|
Total |
| 124,559 | 230,080 | 131,731 |
CLP Million | 2016 | 2017 | 2018 |
Chile | 89,290 | 93,452 | 98,683 |
Abroad | 39,593 | 32,313 | 32,757 |
Total | 128,883 | 125,765 | 131,440 |
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CCU is a diversifiedmulti-category beverage company operating principallywith operations in Chile, Argentina, Bolivia, Colombia, Paraguay, Peru and Uruguay. CCU is one of the largest Chilean brewer,players in each one of the beverage categories in which it participates in Chile, including beer, soft drinks, mineral and bottled water, juice, wine and pisco, among others. CCU is the second-largest Chilean soft drinks producerbrewer in Argentina and the largest Chilean water and nectar producer, the second-largest Argentine brewer, the second-largest Chilean wine producer and the largest pisco distributor. It also participates in the HOD, rumcider, spirits and confectionery industrieswine industries. In Uruguay and Paraguay, the Company is present in Chile,the beer, mineral and bottled water, soft drinks and juice categories. In Bolivia, CCU participates in the beer, water, and soft drinks, industriesjuice and malt beverage categories. In Colombia, the Company participates in Uruguay,the beer industry and in Peru, in the soft drinks, water and nectar industries and beerpisco industry. The Company’s principal licensing, distribution in Paraguay and Bolivia. The Company has licensing and / or distributionjoint venture agreements withinclude Heineken Brouwerijen B.V., Anheuser-Busch Incorporated, PepsiCo Inc., Seven-up International, Schweppes Holdings Limited, Guinness Overseas Limited, Société des Produits Nestlé S.A., Pernod Ricard Chile S.A., Promarca S.A. (Watt’s) and Coors Brewing Company.
CCU reports its consolidated results pursuant to the following Operating segments, essentially defined with respect to its revenues in the geographic areas of commercial activity: Chile, International Business and Wine. Corporate revenues and expenses are presented separately within the Other Operating segment. These Operating segments mentioned are consistent with the way the Companyis managed and how results will be reported by CCU. These segments reflect separate operating results which are regularly reviewed by each segment Chief Operating Decision Maker in order to make decisions about the resources to be allocated to the segment and assess its performance. Corporate revenues and expenses are presented separately as Other.
In 2015 the Committee of International Business was created, which brought together management of the business activities regarding the geographical areasin Argentina, Uruguay and Paraguay. Following this, the Río de la Plata Operating segment (consisting of the business activities referred to)to above) was renamed into the International Business Operating segment. The Committee of International Business also represents and looks after the interests associated with the investments in Bolivia and Colombia, which continue to report their results under Equity and incomeIncome of JVs and are associated on a consolidated basis.
We evaluateCCU completed the performance2016-18 Strategic Plan, which included, among other initiatives, the “ExCCelencia CCU” program. During 2016 we implemented the integration of the segmentsroute-to-market of the beer and non-alcoholic category in Chile throughout the country. Simultaneously, the Company incorporated into the Chile Operating segment the business activities performed by the Strategic Service Units (“SSU”), which include Transportes CCU Limitada (“Transportes CCU”), Comercial CCU S.A. (“Comercial CCU”), CRECCU S.A. (“CRECCU”) and Fábrica de Envases de Plásticos S.A. (“Plasco”). This change enables us to capture additional efficiencies and improve the service level of our logistics operation.
At the end of 2018, CCU launched the 2019-21 Strategic Plan, which continues to be based on several indicators, including OR (Operating Result), ORBDA (Operating Result Before Depreciationour three Strategic Pillars: Growth, Profitability and Amortization), ORBDA margin (%Sustainability. Our plan has six strategic goals: 1) grow profitably in all our business units; 2) strengthen our brands; 3) continue to innovate; 4) execute our “ExCCelencia CCU” program to capture additional efficiencies; 5) continue working towards the integral development of ORBDAour employees; and 6) taking care of total revenues forour planet through the segment), volumesdevelopment and sales revenues. Sales between segments are conducted using terms and conditions at current market rates.implementation of our 2030 Environmental Vision.
Overview:Chile Operating segment
We estimate that our weighted volume market share2 for the Chile Operating segment was approximately 40.0%42.3%, 40.8%42.7% and 41.5%43.4% in 2013, 20142016, 2017 and 20152018, respectively. Weighted volume market share includes all categories in which CCU participates in the Chilean domestic market, excluding wines and HOD, according to Nielsen figures.
2 The calculation of the weighted average for past periods includes markets and industries that CCU entered at a later date.
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We produce and sell alcoholic and non-alcoholic beverages in Chile. In the beer category, we carry a wide portfolio of products which includes premium, mainstream and convenience brands, of alcoholic and non-alcoholic beer, which are primarily marketed under ten different proprietary brands and five licensed brands, with Cristal as our flagship brand in Chile. In addition, webrands. We are the exclusive producer and distributor of Heineken, beer;Sol and Coors beer in Chile; the exclusive distributor of imported SolTecate beer and BudweiserBlue Moon beer (the latter until December 2015) and we distributeproduce and producedistribute Kunstmann and Austral beer in Chile via distribution or license agreements. With our four production plants in Santiago, Temuco, Valdivia (Kunstmann) and Punta Arenas (Austral), we are the only brewery in Chile with a nationwide production and distribution network.
We also produce and sellOur non-alcoholic beverages in Chile which includesinclude carbonated soft drinks (both cola and non-cola), nectars and juices, sports and energy drinks, ice teatea; and waters (includingwater, which include mineral, purified and flavored bottled water and HOD with proprietary and licensed brands acrosswater. These include both our categories. Our line of soft drink products includes proprietary brands in addition toand brands produced under license, from PepsiCo (for(carbonated and non-carbonated soft drinks, functional drinks and iced teas)drinks), Schweppes Holdings (for(carbonated soft drinks) and Promarca (nectars(juice and fruitfruit-flavored beverages), which. In the energy drinks business, we are producedthe exclusive distributor of Red Bull energy drinks in three production plants: Santiago, Temuco and Antofagasta. We have been in the bottled mineral water business since 1960, under our two proprietary brand names, Cachantun and Porvenir, which are bottled and distributed nationally from our two natural sources located within the central region of Chile (Casablanca and Coinco).Chile. We also produce and distribute purified waters under license from Societé des Produits Nestlé S.A. and others, and distribute the imported brand Perrier. We enteredalso participate in the ready-to-mix category with instant powder drinks in a joint operation with Carozzi. In the energy drinks business, we are the exclusive distributor of Red Bull energy drinks in Chile.
In 2003, we added a new product to our beverage portfolio:We also produce and distribute pisco, which is produced by our subsidiary Pisconor S.A. who entered into an association agreement in 2005 with the second-largest pisco producer in Chile, Control, creating a new subsidiary, CPCh. In May 2007, CPCh entered the rum category through our proprietary brand “Sierra Morena.” In June 2010 CPCh purchased Fehrenberg, a small, but well-recognizedand spirits brand produced in Chile. In July 2011 CPCh began the distribution ofaddition, we distribute Pernod Ricard products (Chivas Regal, Ballantine’s, Havana Club, Beefeater and Absolut among others) through the traditional channel, which excludes supermarkets with centralized distribution. Furthermore, during December 2011, CPCh acquired 49% of Compañía Pisquera Bauzá S.A., andsigned a license agreement for the commercialization and distribution of the Bauzá brand of pisco in Chile.In January 2016 CPCh sold its interest in Bauzá to Agroproductos Bauzá S.A..We operate five productive plants and own 80% of CPCh, while the remaining 20% is owned by Control.non-supermarket retail stores.
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Wholesale and retail prices of all the previously mentioned categories are not regulated in Chile. Wholesale prices are subject to negotiation between the producer and the purchaser; while retailers determine retail prices to the final consumer. We believe that the key factors determining retailers’ prices include: national and/or local price promotions offered by the manufacturer, the nature of product consumption (on-premises or take-out)off-premise), the type of packaging (returnable or non-returnable), the applicable tax structure and the desired profit margins considering all related costs and expenditures such as marketing, sales, distribution, marketing, G&Aand administrative expenses (MSD&A) and production.
During 2016 we implemented the integration of the route-to-market of the beer and non-alcoholic category in Chile throughout the country, and at the same time, the Company incorporated into the Chile Operating segment the business activities performed by the SSU, which include Transportes CCU, Comercial CCU, CRECCU and Plasco.
Comercial CCU is responsible for the sale of all of the Company’s products through a single sales force in those areas where this synergic sales model is more efficient. Additionally, product distribution is handled by our subsidiary Transportes CCU. Comercial Patagona Limitada (“Comercial Patagona”) handles our sales and distribution in the Magallanes Region. In the case of our HOD service, Manantial directly handles its own sales and distribution, given the nature of the business.
In Argentina, Bolivia, Paraguay and Uruguay we use our own sales force, as well as third party distributors.
Plasco, a subsidiary of CCU, produces nearly all of the injected preforms we use to produce plastic bottles in the Chile Operating segment.
Overview:International Business Operating segment
We estimate that our weighted volume market share3 for the International Business Operating segment was approximately 16.9%14.0%, 17.1%14.7% and 18.2%20.0% in 2013, 20142016, 2017 and 2015,2018, respectively, including Beerbeer and ciders in Argentina according to Nielsen,Nielsen; carbonated soft drinks, beer,juice, mineral water and CSD and Mineralflavored water in Uruguay, according to IDRetail.IDRetail; and beer, carbonated soft drinks,juice and mineral water in Paraguay, according to internal estimates.
3The calculation of the weighted average for past periods includes markets and industries that CCU entered at a later date, but the 2018 figure does not consider Bolivia. Inclusive of Bolivia, the 2018 figure would have been 15.8%.
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We produce and/or import, sell and distribute beer under proprietary brands and licensed brands in Argentina, Bolivia, Paraguay and Uruguay. We also produce, sell and distribute cider in Argentina.
We entered the Argentine beer market in 1995 by acquiring two breweries and their brands, CICSA and CSF. Under a joint venture agreement entered into with Anheuser-Busch in 1995, we began importing, selling and distributing Budweiser beer in Argentina in March 1996. We began production and distribution of locally produced Budweiser beer in Argentina in December 1996. Additionally, in 1998, we bought the brands and assets of Cervecería Córdoba S.A. In April 2008, we bought ICSA and as a result added to our portfolio the brands Palermo, Bieckert and Imperial. In Argentina, we are the exclusive producer and distributor of Heineken, Amstel, Sol, and Sol beersMiller beer brands; and the exclusive distributor in Argentina of importimported Kunstmann and GuinnessBlue Moon beer brands. Additionally,Also, from Argentina we export beer under the Schneider and Imperial beers, our proprietary brands, and Heineken brands. We have beer operations located in Salta, Santa Fe and Luján.
In December 2010, CICSA, our subsidiary in Argentina, acquired control of Sáenz Briones y Cía. S.A.I.C and Sidra La Victoria S.A., entering the cider and spirits businesses in that country. These two operations are the largest in a very fragmented market and own traditional, well-recognized brands, with operating plants in Río Negro (Allen) and Buenos Aires (Pilar and Ciudadela). The most important cider and spirits brands are Real, La Victoria, Saenz Briones 1888 and in spirits, El Abuelo. In 2015 the merger by absorption of Sáenz Briones and Sidra la Victoria was executed.
In September 2012, CCU acquired 100% of the shares of the Uruguayan companies Milotur S.A., Marzurel S.A. and Coralina S.A., and indirectly Andrimar S.A., a wholly-owned subsidiary of Milotur S.A. These companies own the assets of a business developed in Uruguay engaged in the production and marketing of bottled mineral and flavored waters under the Nativa brand, and carbonated soft drinks under the Nix brand. We also import and distribute Heineken, Schneider and Kunstmann beers. In 2016 we started to produce and distribute Watt´s in Uruguay as well.
By the end of 2013, CCUacquired 50.005% of Bebidas delBolivia, Paraguay and 49.959% of Distribuidora delUruguay. Additionally, through our subsidiaries in Paraguay, S.A. andentered the Paraguayan market with the production, marketing and distribution of alcoholic and non-alcoholic beverages under various brands, both proprietary and under license. Bebidas del Paraguay is the owner of the brands Pulp for carbonated soft drinks, Puro Sol for juices and La Fuente for waters, and has been granted the license to produce and distribute nectars under the Watt’s brand. Additionally, Bebidas del Paraguay S.A. haswe have the license to distribute beer under the Heineken, Coors, Paulaner, Schneider and Kunstmann brands. Also,through our subsidiaries in Bolivia, we have the license to distribute beer under the Heineken brand.
On June 6, 2014, CICSA reached agreements with Cervecería Modelo S. de R.L. de CV.In Uruguay, CCU, through its subsidiaries, produces and Anheuser-Busch LLC,distributes mineral and flavored bottled water under the Nativa brand, carbonated soft drinks under the Nix brand, juices under Watt´s brand, isotonic beverages under FullSport brand and we launched an energy drink under the Thor brand. As of 2017, we export Watt’s juice and Full Sport to Paraguay.
In Paraguay, CCU, through its subsidiaries, produces and distributes carbonated soft drinks under the brand Pulp, Puro Sol for juices, La Fuente for waters, and Zuma for flavored water, and has been granted the termination of the contract which allows CICSAlicense to importproduce and distribute on an exclusive basis, Corona and Negra Modelo beersjuice under the Watt’s brand. In addition to imported beer distribution in Argentina, andParaguay, the license forCompany entered into craft beer market production with the production and distribution of Budweiser beer in Uruguay.Sajonia brand.
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In Bolivia, CCU, through its subsidiary BBO, produces and distributes beer under the brands Real, Capital and Cordillera; and carbonated soft drinks under Mendocina, Free Cola, Sinalco and Malta Real. The latter is a soft drink with sugar based on malt, but without alcohol. Mendocina also participates in the water category and Natur-All for juices.
Overview:Wine Operating segment
Viña San Pedro Tarapacá S.A. (VSPT)(“VSPT”) produces and markets a full range of wine products for the domestic and mainly the export market,markets, reaching over 80 countries. The weighted average volume marketmarket4 share was 17.6%18.1%, 18.3%18.2% and 17.9%17.7% in 2013, 20142016, 2017 and 2015,2018, respectively. In 20152018 VSPT’s sales amounted to approximately 28.4%30.0% of total measured domestic industry sales by volume in Chile, according to Nielsen, and 13.5%12.3% of total Chilean wine export sales by volume, when excluding bulk wine, according to Wines of Chile Association.
VSPT’s mainprimary vineyards are located in all principalthe main viticulture Chilean valleys including productivein Chile, with production plants in the cities of Lontué, Molina, Totihue, Isla de Maipo and also in Mendoza, Argentina.
We believe that having entered into the Chilean wine business provided us with the opportunity to further leverage our nationwide distribution system through the expansion of our beverage portfolio. We also believe that the development of our domestic wine business helps to reduce the seasonality of our sales, as wine sales in Chile tend to be stronger during winter months when beerOverview: Joint Ventures and soft drinks consumption decline.
OthersAssociated Companies
Comercial CCU is equal joint owner with Malterías Unidas S.A. (“Comercial CCU”) is responsibleof Cervecería Austral, a company that produces, sells and distributes Austral beer in Chile. Additionally, Cervecería CCU has a two-year renewable license agreement, subject to compliance with the conditions established in the agreement, for the production of Austral Lager beer, returnable liter containers and kegs in Chile and a distribution agreement for the sale and marketing of all Austral products in Chile, with the exception of the Company’s products through a unique sales force in those areasMagallanes Region, where this synergic sales model is more efficient.
Additionally, productselling and distribution is handled by our subsidiary Transportes CCU Ltda. (“TCCU”). To the south of Coyhaique, sales and distribution are performedcarried out by Comercial Patagona S.A. In Argentina, Uruguay and Paraguay these operations are carried out by our own sales force as well as distributors.
Fabrica de Envases Plásticos S.A. (“PLASCO”)Ltda., a subsidiary of CCU, produces nearly all of the returnable and non-returnable plastic bottles used by the Chile operating segment.
Joint Ventures and Associated companiesCervecería Austral.
In May 2014, CCU entered the Bolivian market by means of a partnership through which it participates in the business of BBO, which is engaged in the production, marketing and multi-category sales of alcoholic beverages and non-alcoholic beverages in Bolivia. Specifically, it produces soft drinks and beer in three plants located in the cities of Santa Cruz de La Sierra and Nuestra Señora de La Paz. Since 2015 BBO has the exclusive license to import, distribute and sell Heineken beer from CICSA.
In November 2014,Colombia, CCU entered into a series of contracts and agreements with Grupo Postobón, by which the parties agreed to initiate a joint agreement for the manufacturing, commercialization and distribution of beer and malt based non-alcoholic beverages through CCC in Colombia. CCC is a 50-50 joint venture between CCU and Grupo Postobón, in which neither party exercises full control; thus, CCU uses the equity method to account for this investment. CCC has exclusive contracts to import, produce and distribute Heineken, has granted Central Cervecera de Colombia an exclusive contractAmstel, Murphys, Buckler, Coors Light, Tecate and Sol in Colombia. In 2016 CCC acquired the brand and assets related to the craft beer brand “3 Cordilleras” of Artesana Beer Company S.A. As of April 2017, the Miller Lite and Miller Genuine Draft brands were incorporated by means of a license agreement for the import, productiondevelopment and/or marketing of these brands in Colombia. In August 2017, through its subsidiary CCU Inversiones ll Ltda., CCUacquired 50% of the shares of ZF CC, in which Grupo Postobón holds the remaining 50%. ZF CC acts exclusively as an industrial user of one or more free-trade zones in Colombia, providing toll manufacturing services to CCC, which will produce, commercialize and distributiondistribute beer and malt beverages. In February 2019, CCC launched Andina, our first mainstream beer brand produced locally in the new brewery, located north of Heineken productsBogota, in Colombia.the municipality of Sesquile, Cundinamarca.
4The calculation of the weighted average for past periods includes markets and industries that CCU entered at a later date.
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Until the end of 2018, CCU participated in the sweet snacks business by means of a joint venture between CCU Inversiones S.A. and Industria Nacional de Alimentos S.A., the latter a subsidiary of Quiñenco, each with a 50% interest in Foods, the parent company of Nutrabien, a company that specializes in high-quality baked-goods. On December 17, 2018, CCU completed the sale of 100% of its shares of Nutrabien and exited the sweet snacks business.
The Beverage Market:Chile Operating segment
We estimate that annual beer consumption in Chile was 764821 million liters in 20152018 or approximately 4344 liters per capita. The following table shows our estimates for total and per capita consumption levels for beer in Chile for the years 20112014 - 2015:
2018:
Year | Total Sales Volume(1) | Per Capita |
| (in millions of liters) | (liters) |
2011 | 667 | 39 |
2012 | 681 | 39 |
2013 | 723 | 41 |
2014 | 745 | 42 |
2015 | 764 | 43 |
(1) Source: Canadean, Global Beverage Forecast of March 2016. Figures have been rounded |
Year | Total Beer Sales Volume(1) | Per Capita |
(in millions of liters) | (liters) | |
2014 | 745 | 42 |
2015 | 767 | 43 |
2016 | 780 | 43 |
2017 | 799 | 43 |
2018 | 821 | 44 |
(1)Source: Canadean figures. 2014 to 2017 - Global Beverage Forecast of September 2017. 2018 - Quarterly Beverage Forecast of February 2019. |
The four major Chilean beer manufacturers are us, Cervecería Chile, CCK and Cervecería Austral, whose principal brands of beer in Chile are Cristal, Becker, Kunstmann and Austral, respectively. In November 2000, we acquired a 50% stake in Cervecería Austral, located in the city of Punta Arenas. In October 2001, Cervecería Austral entered into a license agreement with our subsidiary Cervecera CCU Chile Limitada (“Cervecería CCU”) to produce and sell our brand Cristal, as well as any other brand owned by or licensed to Cervecería CCU in the southern part of Chile. During 2003, Cervecería Austral began the production and sale of our brands Cristal, Escudo and Dorada. In May 2002, we acquired a 50% ownership interest in CCK, a microbrewery located in the southern city of Valdivia, with an annual production capacity of 3 million liters at that time. Since June 2003, our beer division began selling Kunstmann nationwide. In November 2006, we acquired additional shares of CCK that allowed us to consolidate this subsidiary into our financial statements since that month.
The non-alcoholic beverages market in Chile consists of both carbonated and non-carbonated beverages. The principal types of carbonated beverages are colas, non-colas and non-colas.carbonated mineral bottled water. The principal non-carbonated beverages are fruit nectarsjuices, functional drinks and fruit based soft drinks. non-carbonated mineral, purified and flavored bottled water.
The table below sets forth our estimates of total and per capita consumption of non-alcoholic beverage in Chile during each of the last five years:
Non-Alcoholic Beverage Sales | |||||||
Total Sales Volume(1) | liters Per Capita(1) | ||||||
(in millions of liters) | |||||||
Year | CarbonatedSoft Drinks | Nectar & Juices(3) | Waters(2) | CarbonatedSoft Drinks | Nectar & Juices(3) | Waters(2) | |
2011 | 2,299 | 359 | 371 |
| 134 | 21 | 22 |
2012 | 2,390 | 426 | 416 |
| 137 | 25 | 24 |
2013 | 2,425 | 470 | 464 | 138 | 27 | 26 | |
2014 | 2,345 | 480 | 500 | 132 | 27 | 28 | |
2015 | 2,317 | 471 | 550 | 129 | 26 | 31 | |
(1) Source: Canadean, Global Beverage Forecast of March 2016. | |||||||
(2) Includes HOD, excludes flavored waters. | |||||||
(3) Includes flavored waters. |
Total Non-Alcoholic Beverage | |||||||||
| Sales Volume(1) |
| Per Capita | ||||||
(in millions of liters) | (liters) | ||||||||
Year | CarbonatedSoft drinks | Juices | Functional drinks(2) | Water(3) | CarbonatedSoft drinks | Juices | Functional drinks(2) | Water(3) | |
2014 | 2,296 | 429 | 56 | 596 | 129 | 24 | 3 | 33 | |
2015 | 2,270 | 417 | 67 | 638 | 126 | 23 | 4 | 35 | |
2016 | 2,249 | 424 | 74 | 668 | 124 | 23 | 4 | 37 | |
2017 | 2,215 | 434 | 87 | 710 |
| 121 | 24 | 5 | 39 |
2018 | 2,150 | 436 | 89 | 714 |
| 116 | 23 | 5 | 38 |
(1)Source: Canadean figures. 2014 to 2017 - Global Beverage Forecast of September 2017. 2018 - Quarterly Beverage Forecast of February 2019. | |||||||||
(2) Includes Sports drinks, Energy drinks, ice tea and ice coffee. | |||||||||
(3) Includes HOD, packaged water, flavored water, enhanced water. |
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The following table sets forth Nielsen estimates as to the percentage of total carbonated soft drinks sales in Chile, represented by each of the two principal categories of carbonated soft drinks during the last three years:
Type | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
| |||||||||
Colas | 55% |
| 55% |
| 54% | 54% | 55% | ||
Non-colas | 45% | 45% | 46% | 46% | 45% | ||||
Total | 100% | 100% | 100% | 100% |
The bottled water market in Chile is comprised of both carbonated and non-carbonated mineral water, purified water and flavored water. Approximately 92% of all bottled water in Chile is processed and marketed by two entities, us and Vital Aguas S.A., a subsidiary of the two licensed companies of TCCC in Chile. Our mineral water products have been produced by ECUSA since November 1994.
Traditionally, beer, wine and pisco have been the principal alcoholic beverages consumed in Chile. Pisco is a distilled wine spirit, produced exclusively in the IIIregions of Atacama and IV RegionsCoquimbo in the north of Chile.
The table below sets forth our estimates of Spiritstotal and per capita spirits consumption in Chile during each of the last five years:
Year | Total Spirits Sales Volume(1) | Spirits per Capita |
| (in millions of liters) | (liters) |
2011 | 54 | 3 |
2012 | 63 | 4 |
2013 | 68 | 4 |
2014 | 70 | 4 |
2015 | 71 | 4 |
(1) Source: Canadean, Global Beverage Forecast of March 2016. |
| Total Spirits |
|
Year | Sales Volume(1) | Per Capita |
(in millions of liters) | (liters) | |
2014 | 70 | 4 |
2015 | 71 | 4 |
2016 | 71 | 4 |
2017 | 72 | 4 |
2018 | 76 | 4 |
(1)Source: Canadean figures. 2014 to 2017 - Global Beverage Forecast of September 2017. 2018 - Quarterly Beverage Forecast of February 2019. |
On October 1, 2014, the Chilean Tax Reform Act became effective, bringing a series of changes to tax rates and tax schemes. There has been an increase inThe beverage excise taxes for alcoholic and sugar containing beverages in Chile. The new excise taxesChile are as shown in the following table:
Category | Previous Tax | Current Tax |
Beer | 15.0% | 20.5% |
Wine | 15.0% | 20.5% |
Spirits | 27.0% | 31.5% |
Sugar containing Softdrink(1) | 13.0% | 18.0% |
No sugar containing Softdrink(2) | 13.0% | 10.0% |
Flavored Water | 13.0% | 10.0% |
(1) More than 15 gr./240ml of sugar |
|
|
(2) With 15 gr./240ml. or less of sugar |
|
|
Category | Current Excise Tax |
Beer | 20.5% |
Wine | 20.5% |
Spirits | 31.5% |
Sugar containing Softdrink(1) | 18.0% |
No sugar containing Softdrink(2) | 10.0% |
Flavored Water | 10.0% |
(1) more than 15 gr / 240 ml of sugar | |
(2) with 15 gr / 240 ml or less of sugar |
26
The Beverage Market:International Business Operating segment
The Argentine beer market is estimated by us to be almost 2.42.2 times the size of Chile’s. Traditionally, beer and wine have been the principal alcoholic beverages consumed in the country. We estimate that annual beer consumption in Argentina was 1,8222,080 million liters in 20152018 or approximately 4247liters per capita, reflecting a 1.2% industry decrease for 2015.capita.
The table below sets forth our estimates of total and per capita beer, functional, spirits and cider consumption in Argentina during each of the last five years:
Argentina | |||||||||
Total Sales Volume | liters Per Capita | ||||||||
(in millions of liters) | (Liters) | ||||||||
Year | Beer | Functional Drinks | Spirits | Cider | Beer | Functional Drinks | Spirits | Cider | |
2011 | 1,871 | 96 | 124 | 85 |
| 45 | 2 | 3 | 2 |
2012 | 1,870 | 105 | 128 | 94 | 44 | 2 | 3 | 2 | |
2013 | 1,844 | 112 | 129 | 97 | 43 | 3 | 3 | 2 | |
2014 | 1,826 | 117 | 130 | 94 | 42 | 3 | 3 | 2 | |
2015 | 1,822 | 120 | 130 | 95 | 42 | 3 | 3 | 2 | |
Source: Canadean, Global Beverage Forecast of March 2016. |
|
Argentina | |||||||
Total Sales Volume(1) | Per Capita | ||||||
(in millions of liters) | (liters) | ||||||
Year | Beer | Spirits | Cider | Beer | Spirits | Cider | |
2014 | 1,833 | 130 | 94 | 43 | 3 | 2 | |
2015 | 1,875 | 130 | 95 | 43 | 3 | 2 | |
2016 | 1,778 | 130 | 89 | 41 | 3 | 2 | |
2017(2) | 2,032 | 135 | 88 |
| 46 | 3 | 2 |
2018(2) | 2,080 | 153 | 93 |
| 47 | 3 | 2 |
(1)Source: Canadean figures. 2014 to 2017 - Global Beverage Forecast of September 2017. 2018 - Quarterly Beverage Forecast of February 2019. (2) Internal estimates for beer category. |
Excise taxes forOn December 2017, the beverage industry in Argentina have been subject to variations inArgentine Congress passed a new bill (which became effective on March 1, 2018), which, amongst other measures, increases the past. The last modification was in 1999 and has been applicable since January 2000.excise tax on several beverages. The following table shows current Argentinenominal Argentinean excise beverage taxes:
Product Type | 1999 Excise Taxes | Current Excise Taxes |
Non-Alcoholic Beverages |
|
|
Flavored soft drinks, mineral water and juices | 0% - 4% | 4.17% - 8.7% |
|
|
|
Alcoholic Beverages |
|
|
Beer | 4% | 8.7% |
Whisky | 12% | 25% |
30% or more alcohol content | 8% | 25% |
Wine-cider | 6% | 0% |
Category | Current Excise Tax |
Beer | 14.0% |
Whisky | 26.0% |
10% - 29% alcohol content | 20.0% |
30% or more alcohol content | 26.0% |
Wine - cider | 0.0% |
Flavored soft drinks, mineral water and juices | 4.0% - 8.0% |
The integration of the operations of Paraguay andIn Uruguay, are progressing in line with plans, and we are expanding our portfolio of categories of soft drinks and beer. As of 2015, we participate in the productionbeer and marketing of bottled mineral and flavored waters, carbonated soft drinks, nectars and juices; andnon-alcoholic beverages categories since our entrance to the market in the distribution of beer.2012. The tablestable below setsets forth our estimates of total and per capita beer and non-alcoholic categoriesbeverage consumption in Uruguay and Paraguay:in the last five years:
Uruguay | |||||||||
Total Sales Volume(1) | Per Capita | ||||||||
(in millions of liters) | (liters) | ||||||||
Year | Beer | Carbonated Soft drinks | Juices | Water(2) | Beer | Carbonated Soft drinks | Juices | Water(2) | |
2014 | 104 | 395 | 31 | 329 | 30 | 114 | 9 | 95 | |
2015 | 106 | 386 | 33 | 360 | 31 | 111 | 10 | 104 | |
2016 | 100 | 377 | 34 | 399 | 29 | 108 | 10 | 115 | |
2017 | 103 | 374 | 35 | 436 |
| 29 | 107 | 10 | 125 |
2018 | 110 | 372 | 33 | 457 |
| 31 | 106 | 9 | 130 |
(1)Source: Canadean figures. 2014 to 2017 - Global Beverage Forecast of September 2017. 2018 - Quarterly Beverage Forecast of February 2019. (2)Includes HOD, packaged water, flavored water, enhanced water. | |||||||||
27
Uruguay | |||||||||
Total Sales Volume | liters Per Capita | ||||||||
(in millions of liters) | (liters) | ||||||||
Year | Beer | CSD | Nectar & Juices (2) | Water(1) | Beer | CSD | Nectar & Juices(2) | Water(1) | |
2011 | 101 | 389 | 38 | 219 | 30 | 115 | 11 | 65 | |
2012 | 100 | 392 | 47 | 240 | 29 | 115 | 14 | 71 | |
2013 | 99 | 404 | 52 | 273 | 29 | 118 | 15 | 80 | |
2014 | 101 | 404 | 60 | 290 | 29 | 118 | 18 | 85 | |
2015 | 102 | 394 | 65 | 300 | 30 | 115 | 19 | 88 | |
Source: Canadean, Global Beverage Forecast of March 2016. | |||||||||
(1) Includes HOD, excludes flavored waters. | |||||||||
(2) Includes flavored waters. |
In Paraguay, we participate in the beer and non-alcoholic beverages categories since our entrance to the market in 2013, both proprietary and under license. The table below sets forth our estimates of total and per capita beer and non-alcoholic beverage consumption in Paraguay in the last five years:
Paraguay | |||||||||
Total Sales Volume | liters Per Capita | ||||||||
(in millions of liters) | (liters) | ||||||||
Year | Beer | CSD | Nectar & Juices(2) | Water(1) | Beer | CSD | Nectar & Juices(2) | Water(1) | |
2011 | 283 | 518 | 51 | 182 | 43 | 79 | 8 | 28 | |
2012 | 280 | 558 | 57 | 206 | 42 | 83 | 9 | 31 | |
2013 | 283 | 555 | 60 | 224 | 42 | 82 | 9 | 33 | |
2014 | 290 | 559 | 64 | 252 | 42 | 81 | 9 | 36 | |
2015 | 299 | 553 | 64 | 267 | 42 | 79 | 9 | 38 | |
Source: Canadean, Global Beverage Forecast of March 2016. | |||||||||
(1) Includes HOD, excludes flavored waters. | |||||||||
(2) Includes flavored waters. |
Paraguay | |||||||||
Total Sales Volume(1) | Per Capita | ||||||||
(in millions of liters) | (liters) | ||||||||
Year | Beer | Carbonated Soft drinks | Juices | Water(2) | Beer | Carbonated Soft drinks | Juices | Water(2) | |
2014 | 289 | 554 | 54 | 261 | 43 | 83 | 8 | 39 | |
2015 | 290 | 541 | 55 | 282 | 43 | 80 | 8 | 42 | |
2016 | 297 | 547 | 57 | 316 | 43 | 80 | 8 | 46 | |
2017 | 303 | 554 | 57 | 346 |
| 44 | 80 | 8 | 50 |
2018 | 327 | 586 | 73 | 364 |
| 46 | 83 | 10 | 52 |
(1)Source: Canadean figures. 2014 to 2017 - Global Beverage Forecast of September 2017. 2018 - Quarterly Beverage Forecast of February 2019. (2)Includes HOD, packaged water, flavored water, enhanced water. | |||||||||
In Bolivia, we participate in the beer and non-alcoholic beverages categories, both proprietary and under license. BBO is consolidated in our Income Statements since August 2018. The table below sets forth our estimates of total and per capita beer and non-alcoholic beverage consumption in Bolivia during 2018:
Bolivia | |||||||
Total Sales Volume(1) | liters Per Capita | ||||||
(in millions of liters) | (liters) | ||||||
Year | Beer | Carbonated Soft drinks | Water | Beer | Carbonated Soft drinks | Water | |
2018 | 389 | 1116 | 231 | 35 | 100 | 21 | |
(1) Source: Canadean figures. 2014 to 2017 - Global Beverage Forecast of September 2017. 2018 - Quarterly Beverage Forecast of February 2019. |
The Beverage Market:Wine Operating segment
We estimate wine consumption in Chile was approximately 13 liters per capita in 2015. Given that the Chilean wine industry is fragmented, no single wine producer accounts for the majority of production and/or sales.The leading wineries include, other than VSPT, Viña Concha y Toro S.A.(“Concha y Toro”), Viña Santa Rita S.A. (“Santa Rita”) and Bodegas y Viñedos Santa Carolina S.A.(“Santa Carolina”).In addition, there are numerous medium-sized wineries, including Viña Undurraga S.A. (“Undurraga”), Cousiño Macul S.A. (“Cousiño Macul”) and Viña Montes. Chile’s formal wine market includes all wineries that sell wine products that comply with industry and tax regulations. VSPT is a member of the formal wine market, as are most other principal wineries in Chile. The informal wine market is composed of many small wine producers. The Agricultural and Livestock Service (Servicio Agrícola Ganadero, or “SAG”) is the entity in charge of wine industry regulation and principally oversees inventory records and product quality.
The following chart shows our estimates for the formal wine market and per capita consumption levels for wine in Chile for the last five years:
Year | Total Volume (1) | Per Capita |
(in millions of liters) | (liters) | |
2014 | 225 | 13 |
2015 | 231 | 13 |
2016 | 233 | 13 |
2017 | 236 | 13 |
2018(2) | 235 | 13 |
(1) Source: Canadean figures. 2014 to 2017 - Global Beverage Forecast of September 2017. 2018 - Quarterly Beverage Forecast of February 2019. (2) Internal estimates. |
28
Year | Total Volume (1) | Per Capita |
| (in millions of liters) | (liters) |
2011 | 232 | 13 |
2012 | 226 | 13 |
2013 | 227 | 13 |
2014 | 225 | 13 |
2015 | 231 | 13 |
(1) Source: Canadean, Global Beverage Forecast of March 2016. |
Wines in Chile can be segmented by product type. Chilean wineries produce and sell premium, varietal and popular-priced wines within the domestic market. Premium wines and many of the varietal wines are produced from high-quality grapes, aged and packaged in glass bottles. Popular-priced wines are usually produced using non-varietal grapes and are not aged. These products are generally sold in either cartons or jug packaging.
4)Production and Marketing.Marketing
Production and Marketing:Chile Operating segment
The production, marketing and sales of beverages in Chile generated Net sales of CLP 765,196997,376 million, CLP 830,3411,047,119 million and CLP 902,0211,109,574 million in 2016, 2017 and 2018, respectively, or 63.9%64.0%, 64.0%61.7% and 60.0%62.2% of our totalCCU’s consolidated Net sales in 2013, 2014 and 2015, respectively.those years. Our sales by volume in Chile increased 4.0%5.6% in 2015.2018.
Under each license agreement, we have the exclusive right to produce and/or sell and distribute the respective licensed products in Chile. Generally, under our license agreements, we are required to maintain certain standards of quality with respect to the production of licensed products, to achieve certain levels of marketing and, in certain cases, to fulfill minimum sales requirements. We believe that we are in compliance with the quality of all of our license agreements.
Our brand Cristal is the best selling beer brand in Chile, followed by Escudo, the second most popular beer in the country. Other relevant brands are: Royal Guard, our proprietary premium beer brand; Morenita, our dark beer brand; Dorada, our convenience brand; and Stones, a flavored sweetened beer, with 2.5% alcohol content. From time to time, we introduce innovations and brand extensions to our most relevant brands, highlighting during 2018 the following: Escudo Sin Filtrar, Smooth Lager de Royal, Austral Ruibarbo, Guayacán IPA and Guaraná Stones. In 2018, we also launched Bavaria, a new mainstream brand.
In October 2001, Cervecería Austral entered into a license agreement with our subsidiary Cervecería CCU to produce and sell our brand Cristal, as well as any other brand owned by or licensed to Cervecería CCU in the southern part of Chile. The agreement also permits us to commercialize and distribute the Austral brand in Chile, with the exception of the Magallanes Region, where selling and distribution is carried out by Comercial Patagona Ltda., a subsidiary of Cervecería Austral. This agreement is currently renewable for periods of two years, subject to compliance with the contract conditions.
On April 28, 2003, through our subsidiaries Cervecería CCU and CCU Argentina, we and Heineken Brouwerijen B.V. signed license and technical assistance agreements providing us with the exclusive rights to produce, sell and distribute Heineken beer in Chile and Argentina commencing June 18, 2003. On October 12, 2011, we signed with Heineken InternationalBrouwerijen B.V. the Amended and Restated versions of the Trademark License Agreements, which provide us with the exclusive rights to produce, sell and distribute Heineken beer in Chile and Argentina, in force as of January 1, 2011. These agreements have an initial term of 10ten years, and shall automatically be renewed each January 1 for a new period of ten years, unless either party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires. In Chile, Heineken beer is the leading brand in the premium segment, the beer segment with the highest growth in Chile in recent years.
Cristal is our principal and best selling beer brand In 2018, CCU launched Heineken 0.0 in Chile, followed by Escudo, the second most popular beerfirst country in the country. Other relevant brands are: Royal Guard, our single, proprietary,Latin America to offer this non-alcoholic premium brand; Morenita in the dark beers; Dorada as our convenience brand; and Lemon Stones a lemon flavored sweetened beer, with 2.5% alcohol content. From time to time, we introduce innovations in our most relevant brands. These innovations include Cristal Cer0,0°, Cristal Light, the 1.2 liter returnable bottle, Escudo Negra and Escudo Triple X, amongst others.brand.
In October 2001, we signed a license agreement with Cervecería Austral for the production of the Austral brand by our beer division. This agreement is currently renewable for periods of two years, subject to compliance with the contract conditions. Our investment in Cervecería Austral, the production of the Austral brand by our beer division; the investment in CCK (Kunstmann is a specialty beer produced in a variety of versions); and the production of Heineken beer since June 2003, among other initiatives, are part of our strategy to increase our presence in the premium segment of the Chilean beer market.
On April 30, 2010, FEMSA announced the closing of the transaction pursuant to which FEMSA agreed to exchange 100% of its beer operations for a 20% economic interest in the Heineken Group. Since then, Heineken introduced the Sol brand to its portfolio, and in 2013 we launched the Sol brand (from Heineken) in the north of Chile, as a successful test plan to compete in the imported Mexican beer segment, and in 2014 we completedcompleting the national roll out of the brand. Similarbrand in 2014. As of 2015, we started to the Heinekenproduce Sol beer brand wein our facilities. We have an exclusive 10ten year license, automatically renewable license on the samea yearly basis, for up to ten additional years, on similar terms (Rolling Contract), each yearto Heineken for a period of 10 years,Sol (rolling contract), unless notice of non-renewal is given for Chilegiven. In addition, we also have the license to import, sell and Argentina.distribute Tecate in Chile.
During January 2015, we launched Coors and Coors Light in Chile. The license agreement with Coors Brewing Company considers after the initial termination date,allows for the automatic renewal under the samesimilar conditions (Rolling Contract)(rolling contract), each year for a period of 5five years after the initial termination date, subject to the compliance with the contract conditions. Furthermore, we import, sell and distribute Blue Moon under the same conditions.
29
The following table shows our proprietary parent beer brands, brands produced under license and brands imported under license for the Chilean Market:
Premium | Mainstream | Convenience | ||
|
|
| ||
Royal Guard | Cristal | Dorada | ||
| Cristal Cer0,0°(2) |
| ||
Heineken |
| |||
| Escudo |
| ||
Austral(1) |
| |||
Polar Imperial(1) | Stones |
| ||
Kunstmann |
Bavaria |
| ||
D'olbek |
|
| ||
Sol(1) |
|
| ||
Coors |
| |||
Tecate |
|
| ||
Blue Moon | ||||
Szot(5) | ||||
Guayacán |
|
| ||
(1) Produced under | license. |
| ||
(2) | Non-alcoholic beer. |
| ||
(3) | ||||
(4) Imported. | ||||
(5) Distribution contract. | ||||
(6) Commercialization began in |
Our beer products sold in Chile are bottled or packaged in returnable and non-returnable glass bottles, aluminum cans or stainless steel kegs at our main production facilities in the Chilean cities of Santiago, Temuco, Valdivia, and Punta Arenas. The Temuco plant commenced production in November 1999, replacing the closed Concepción and Osorno plants.
During the last three years we sold our beer products in Chile in the following containers:
Percentage of Total Beer Products Sold | Percentage of Total Beer Products Sold | Percentage of Total Beer Products Sold | ||||
Container | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 |
|
|
| ||||
Returnable(1) | 47% | 44% | 42% | 37% | 34% | 30% |
Non-returnable(2) | 50% | 52% | 55% | 59% | 63% | 67% |
Returnable kegs(3) | 3% | 4% | 4% | 4% | ||
Total | 100% | 100% | ||||
|
|
|
|
| ||
(1) Returnable beer containers include glass bottles of various sizes. | (1) Returnable beer containers include glass bottles of various sizes. | (1) Returnable beer containers include glass bottles of various sizes. | ||||
(2) Non-returnable beer containers include bottles and aluminum cans, both of assorted sizes. | ||||||
(2) Non-returnable beer containers include glass bottles and aluminum cans, both of assorted sizes. | (2) Non-returnable beer containers include glass bottles and aluminum cans, both of assorted sizes. | |||||
(3) Returnable kegs are stainless steel containers, which have a capacity of 20, 30 and 50 liters. | (3) Returnable kegs are stainless steel containers, which have a capacity of 20, 30 and 50 liters. | (3) Returnable kegs are stainless steel containers, which have a capacity of 20, 30 and 50 liters. |
The following table sets forth our beer sales volume breakdown in Chile by category, for each of the last three years:
Category | 2016 | 2017 | 2018 |
Premium | 21% | 21% | 23% |
Mainstream | 75% | 75% | 73% |
Convenience | 4% | 4% | 4% |
Total | 100% | 100% | 100% |
30
Category | 2013 | 2014 | 2015 |
Premium | 16% | 18% | 20% |
Mainstream | 80% | 78% | 76% |
Convenience | 4% | 4% | 4% |
Total | 100% | 100% | 100% |
Our soft drinks include proprietary brands, in addition to brands produced under license from PepsiCo, Inc., Schweppes Holdings Ltd. and Promarca S.A., which are produced in three production plants: Santiago, Temuco and Antofagasta.
Our subsidiary Aguas CCU produces, commercializes and distributes mineral, purified and flavored waters. We have two proprietary mineral water brands, Cachantun and Porvenir, which are bottled at their sources, located in Coinco (O’Higgins Region) and Casablanca (Valparaíso Region). We also commercialize Nestlé Pure Life, a brand of purified water, and Mas and Mas Woman, which are brands of flavored waters. Aguas CCU also distributes the imported brand Perrier. Manantial, a subsidiary of Aguas CCU, also produces, commercializes and distributes purified water with our Manantial brand, primarily in the home and office delivery (HOD) format.
In 1994, our subsidiary ECUSA and Cadbury Schweppes plc (“Cadbury Schweppes”), the latter through its subsidiaries CS Beverages Ltd. and Canada Dry Corporation Ltd., entered into license agreements for all Cadbury Schweppes products. On December 11, 1998, TCCCThe Coca-Cola Company announced an agreement with Cadbury Schweppes to acquire certain of the latter's international beverage brands, including those licensed to ECUSA, and in August 1999 the agreement was reported to have been consummated. In September 2000, after more than a year’s litigation, both in Chile (suits at civil courts and antitrust authorities) and England (arbitration under ICC rules), ECUSA and TCCCThe Coca-Cola Company reached an agreement superseding ECUSA’s previous license contracts with CS Beverages Ltd. and Canada Dry Corporation Ltd. The new agreement, referred to as the “Bottler Contract,”Contract”, was executed between ECUSA and Schweppes Holdings Ltd., concerning the Crush and Canada Dry brands, and was approved by the Chilean antitrust commission, thus putting an end to the proceeding regarding the Cadbury Schweppes brands issue and dismissing all complaints filed in consideration of the agreement. On January 15, 2009, the parties executed an amendment to the Bottler Contract which, among others, extended its duration until December 31, 2018, renewable for consecutive five-year periods, provided that certain conditions are fulfilled.subject to the compliance with the contract conditions. The contract was renewed until December 31, 2023.
In August, 2002, we began importing, selling and distributing Gatorade, the world’s number one isotonica sport drink. In March 2006, a new franchise commitment letter and exclusive bottling agreement wasappointment ("Gatorade Contracts") were executed between ECUSA and Stokely Van-Camp, Inc., a subsidiary of PepsiCo, Inc., authorizing ECUSA to bottle, sell and distribute Gatorade products in Chile, for an initial term ending on March 31, 2010, automatically renewable for successive two or three-year periods if certain conditions set forth in the contract areGatorade Contracts were met. In 2012, this agreement was renewed until March 31, 2015. At this timeOctober 2013, ECUSA and Stokely Van-Camp, Inc. entered into a Second Amendment to the Gatorade license is set to expire inContracts under which such Contracts were renewed for a period ending on December 2018, renewablesubject to automatic renewal for an additional period equal to the durationterm of the Shareholders Agreement of Bebidas CCU-PepsiCo Spa, subject toSpA, that is, 2043, upon satisfaction of certain conditions. Since said conditions were satisfied, the compliance with the contract conditions.Gatorade Contracts were automatically renewed in December 2018 as stated above. Since October 2006, we have been producing Gatorade locally.
In November 2007, ECUSA signed an exclusive bottling agreement with Pepsi Lipton International Limited, authorizing ECUSA to produce, sell and distribute ready to drink tea beverages in Chile. This agreement terminates on March 31, 2020.
The license agreement for nectarjuice products with Watt’s, which granted us exclusive production rights, was first signed in June 1977 and originally had a 33-year term. In February 1999, a new license agreement was signed allowing us to produce new flavors and bottle Watt’s nectarsjuices in non-returnable packaging (wide mouth glass and plastic bottles). A new license agreement between us and Watt’s S.A. was signed in July 2004. This new contract providedgranted us with a ten-year license renewable automatically for three consecutive periods of three years if the conditions set forth in the contract arewere fulfilled at the date of renewal. In December 2006, we signed a joint venture agreement with Watt’s S.A., under which, as of January 30, 2007, we participate in equal parts in Promarca S.A. This new company owns the brands “Watt’s”, “Watt’s Ice Frut”, “Yogu Yogu”, “Shake a Shake” and “Frugo”, among others in Chile. Promarca S.A. granted both of its shareholders(New Ecusa S.A., a subsidiary of ECUSA, and Watt´sWatt’s Dos S.A,S.A., a subsidiary of Watt´s S.A)Watt’s), for an indefinite period, the exclusive licenses for the production and sale of the different product categories.
In February 2005, we launched a new Cachantun product, under the trademark Mas, a sugar free product made of mineral water, calcium and citric flavor, creating a new category of flavored water.
InSince December 2007, we entered into an agreement with Nestlé Chile S.A. and Nestlé Waters Chile S.A., the latter of which acquired a 20% interest inthrough our subsidiary Aguas CCU, the company that owns the assets through which we develop our bottled water business in Chile. As part of this new association, Aguas CCU producesproduce and sellssell the Nestlé Pure Life brand in Chile under a license contract of the same date, with an initial term of five years, renewable for successive periods of five years if certain conditions are met. Nestlé Waters Chile S.A. had a call option to increase its ownership in Aguas CCU by an additional 29.9%, which expired on June 5, 2009. On June 4, 2009 ECUSA receivedSince 2012, under the notification from Nestlé Waters Chile S.A. exercising its irrevocable option to buy 29.9% of Aguas CCU equity, within the scope of the contract. Since the conclusion of the sale, ECUSA holds 50.10% of the ownership interests of Aguas CCU. CCU owns directly or indirectly 99.93% of ECUSA’s equity.
In December 2012, the subsidiary Aguas CCU-Nestlé Chile S.A. acquired a 51% ownership interest in the company Manantial S.A. which carriesbrand we carry out the business of home and office delivery of purified water in bottles with the use of dispensers. Additionally, a shareholder’s agreement with Manantial S.A. was entered into in connection with the acquisition.dispensers (HOD).
31
On October 2013, CCU together with its subsidiary ECUSA executed a series of contracts and agreements with PepsiCo Inc. and its affiliates, that will allow the partieswhich allowed them to expand their current relationship in the non-alcoholic beverages segment with specific focus on the carbonated soft drinks, as well as extending the duration of their long-term relationship.relationship duration. Pursuant to these agreements, which take into account the creation of an affiliate, Bebidas CCU-PepsiCo SpA, the licenses to produce, sell and distribute in Chile Pepsi, 7up and Mirinda (Pepsi brands) and Bilz, Pap, Kem and Nobis (CCU brands) were granted to ECUSA until December 2043.
In line with our multicategory business strategy, in November 2015 we entered the ready-to-mix category through a joint operation agreement with Carozzi, for the production, commercialization, and distribution of instant powder drinks under the brands Sprim, Fructus, Vivo and Caricia. In December 2015 we started to distribute Red Bull in Chile. Aligned with our innovation process:process in non-alcoholic beverages during 20022017, we continue to strengthen Pepsi Zero, launched Bilz Light, Pap Light, Agua Tónica Lightlate 2016 in the Chilean market, by increasing consumer interest through new packaging formats. From time to time, we and Gatorade. In April 2003,our partners introduce innovations and brand extensions to our most relevant brands. For example, in 2018, we and our partners introduced to the marketPepsi Zero Limón, Ginger Ale Zero, Kem Xtreme a soft drink with a high level of caffeine. In September 2004, we launched Canada Dry Ginger Ale Light, and in October 2004, we re-launched Nobis, a traditional proprietary soft drink brand, to be used strategically against discount brands. In September 2006, we launched Canada Dry Limón Soda Light. In January 2007, we introduced two new products into the market: (i) Slice by Kem, a tropical fruit flavored soft drink, and (ii) SoBe Adrenaline Rush, an energy drink sold under the PepsiCo license. In November 2007, we entered into a new product category, ice tea, with the brand Lipton Ice Tea, produced by us under the PepsiCo license. During 2008 we introduced Watt’s Soya from Promarca (50% owned by us), and Nestlé Pure Life from Aguas CCU, a well-known purified water brand, in order to place ourselves in a leading position in the healthy foods market. In 2009, the Company introduced Mas Woman by Cachantun, a beverage made from Cachantun mineral water, in a variety of flavors, targeted towards women. In addition, in the same year, the Company began to import the renowned mineral water Perrier. In 2011 we introduced several new product offerings including Pop from Bilz and Pap, Kem Xtreme Girl, the first zero calorie energy soft drink developed specifically for women, Slice by Kem,Lipton Feel Green in two flavors and powder Gatorade. During 2014 we continued our innovation strategy launching brands like Adrenaline Red, a locally produced energy drink that replaced SoBe Adrenaline Rush, Sobe Waters and Ocean Spray (all licensed by PepsiCo), Kem Rio GuaranáAm and Kem Xtreme Sugar Free. In December 2015, we signed an exclusive distribution agreement with Red Bull for the sales and distribution of Red Bull energy drink products in Chile. Furthermore, in December 2015 we began a joint operation with Carozzi in order to participate in the Ready-to-mix categories with the brands Vivo, Sprim, Fructus and Caricia.Pm.
The following table shows the soft drink and water parent brands produced and/or sold and distributed by us through our non-alcoholic subsidiary ECUSA, during 2015:2018:
Brand | Product Category |
| Affiliation(1) | |||
Bilz | Soft Drink, Non-Cola |
| CCU | |||
Pap | Soft Drink, Non-Cola |
| CCU | |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
Kem | Soft Drink, Non-Cola |
| CCU | |||
Kem Xtreme | Soft Drink, Non-Cola |
|
| |||
|
|
|
| |||
|
|
| CCU | |||
Nobis | Soft Drink, Non-Cola |
| CCU | |||
Canada Dry Ginger Ale | Soft Drink, Non-Cola |
| Schweppes | |||
|
|
|
| |||
Canada Dry Agua Tónica | Soft Drink, Non-Cola |
| Schweppes | |||
|
|
|
| |||
Canada Dry Limón Soda | Soft Drink, Non-Cola |
| Schweppes | |||
|
|
|
| |||
Crush | Soft Drink, Non-Cola |
| Schweppes | |||
|
|
|
| |||
Pepsi | Soft Drink, Cola |
|
| |||
|
|
| PepsiCo | |||
Seven-Up | Soft Drink, Non-Cola |
|
| |||
|
|
| PepsiCo | |||
Lipton Ice Tea | Ice Tea |
| PepsiCo | |||
Mirinda | Soft Drink, Non-Cola |
| PepsiCo | |||
Gatorade | Isotonic |
| PepsiCo | |||
Ocean Spray |
|
|
| |||
Adrenaline Red | Energy | Licensed | PepsiCo | |||
|
|
|
| |||
Red Bull | Energy | Licensed | Red Bull | |||
Frugo |
| Licensed | Promarca | |||
Watt’s |
| Licensed | Promarca | |||
Watt’s Light |
| Licensed | Promarca | |||
|
| Licensed | Promarca | |||
Cachantun | Mineral Water | Proprietary | Aguas CCU | |||
Mas |
| Proprietary | Aguas CCU | |||
Mas Woman |
| Proprietary | Aguas CCU | |||
Porvenir | Mineral Water | Proprietary | Aguas CCU | |||
Perrier | Mineral Water | Licensed | Nestlé | |||
Nestlé Pure Life | Purified Water | Licensed |
| |||
Manantial | HOD | Proprietary | Manantial | |||
Vivo |
| Licensed | Bebidas Carozzi CCU | |||
Fructus |
|
| Bebidas Carozzi CCU | |||
Sprim |
|
|
| |||
Caricia |
| Licensed |
| |||
(1)CCU indirectly owns | ||||||
CCU. ECUSA owns 50% of Bebidas Carozzi CCU. Aguas CCU and ECUSA own 99.08% and 0.92% of Manantial, | ||||||
|
32
During the last three years, we sold our non-alcoholic beverageproducts in the following packaging formats:
Soft drinks | Mineral, purified and flavored water | ||||||
Container | 2016 | 2017 | 2018 | 2016 | 2017 | 2018 | |
Returnable(1) | 28% | 29% | 20% | 28% | 28% | 28% | |
Non-returnable(2) | 69% | 67% | 77% | 72% | 72% | 72% | |
“Post-Mix”(3) | 2% | 4% | 3% | - | - | - | |
Total | 100% | 100% | 100% | 100% | 100% | 100% | |
|
| ||||||
(1) Returnable soft drink containers include both glass and plastic bottles of assorted sizes. Returnable water containers include glass bottles of assorted sizes and returnable 20-liter jugs (HOD). | |||||||
(2) Non-returnable soft drink containers include glass and plastic bottles, and aluminum cans of assorted sizes. Non-returnable water containers include plastic bottles and certain glass bottles of assorted sizes. | |||||||
(3) Post-mix cylinders are sold specifically to on premise locations for fountain machines. |
Carbonated Soft Drinks, Nectars and Juices | Mineral and Purified Water | ||||||
Container | 2013 | 2014 | 2015 | 2013 | 2014 | 2015 | |
Returnable(1) | 29% | 28% | 27% | 28% | 28% | 28% | |
Non-returnable(2) | 69% | 70% | 71% | 72% | 72% | 72% | |
“Post-Mix”(3) | 2% | 2% | 2% | - | - | - | |
Total | 100% | 100% | 100% | 100% | 100% | 100% | |
(1) Returnable soft drink containers include both glass and plastic bottles of assorted sizes. Returnable water containers include glass bottles of assorted sizes and returnable 20-liter jugs and HOD. | |||||||
(2) Non-returnable soft drink containers include glass and plastic bottles, and aluminum cans of assorted sizes. Non-returnable water containers include plastic bottles and certain glass bottles of assorted sizes. | |||||||
(3) Post-mix cylinders are sold specifically to on-premise locations for fountain machines. |
The following table shows the sales mix of our non-alcoholic beverages by category during each of the last three years:
Category | 2013 | 2014 | 2015 |
Colas |
|
|
|
Licensed | 16% | 16% | 16% |
Non-colas |
|
|
|
Proprietary | 36% | 36% | 36% |
Licensed | 27% | 27% | 25% |
Nectars |
|
|
|
Licensed | 21% | 22% | 23% |
Soft drinks total | 100% | 100% | 100% |
Mineral water |
|
|
|
Proprietary | 66% | 64% | 61% |
Licensed | 0% | 0% | 0% |
Purified water |
|
|
|
Proprietary | 0% | 0% | 0% |
Licensed | 7% | 8% | 11% |
HOD | 27% | 28% | 28% |
Total Bottled Water | 100% | 100% | 100% |
The following table shows the sales mix of our non-alcoholic beverages by affiliation during each of the last three years:
Affiliation | 2013 | 2014 | 2015 |
Soft drinks |
|
|
|
Proprietary | 26% | 25% | 26% |
Schweppes | 16% | 15% | 9% |
PepsiCo | 15% | 15% | 13% |
|
|
|
|
Promarca (1) | 16% | 15% | 17% |
|
|
|
|
Water |
|
|
|
Proprietary(2) | 25% | 27% | 31% |
Nestlé Waters | 2% | 2% | 4% |
Total | 100% | 100% | 100% |
(1) CCU owns 50% of the rights to the Watt’s brand (nectar), currently held through our affiliate Promarca. | |||
(2) CCU owns 50.1% of the rights to all the water brands held through the affiliate Aguas CCU. Includes HOD. |
Category | 2016 | 2017 | 2018 |
Carbonated soft drinks |
|
|
|
Colas |
|
|
|
Licensed | 16% | 16% | 18% |
Non-colas |
|
|
|
Proprietary | 34% | 33% | 32% |
Licensed | 22% | 23% | 23% |
Non-carbonated soft drinks |
|
|
|
Juices |
|
|
|
Licensed | 22% | 21% | 21% |
Others(1) |
|
|
|
Licensed | 6% | 6% | 6% |
|
|
|
|
Soft drinks total | 100% | 100% | 100% |
Mineral water |
|
|
|
Proprietary | 41% | 40% | 39% |
Licensed | 0% | 0% | 0% |
Purified water |
|
|
|
Licensed | 12% | 14% | 14% |
Flavored water |
|
|
|
Proprietary | 19% | 18% | 19% |
HOD | 28% | 28% | 28% |
Total Bottled Water | 100% | 100% | 100% |
(1) Includes functional drinks and teas. |
After the completion of the CPCh transaction with Control in 2005, we expanded our proprietary parent brand portfolio considerably, adding brands such as Campanario in the pisco mainstream and cocktail categories, as well as Control C, Mistral, Nobel, Mistral Gran Nobel, Horcón Quemado, Espíritu de los Andes and Tres Erres MOAI in the ultra-premium pisco segment, Mistral, Bauzá (until January 2016) and 3RRRTres Erres in the premium pisco segment and La Serena in the popular-priced pisco category. Furthermore, from time to time we introduce new brands of piscos and cocktails extensions and flavors. For example, during 2018 we introduced Sol de Cuba and Cusqueño Sour.
In the rum market, our proprietary brandsOur spirits are Cabo Viejo in the popular-priced segment, Sierra Morena Dorado and Sierra Morena Añejo in the medium-priced segment, Sierra Morena 5 Años in the premium segment and Sierra Morena Imperial in the ultra-premium segment. Also, during 2011 CPCh began the distribution of Pernod Ricard products (Chivas Regal, Ballantine’s, Havana Club, Beefeater and Absolut among others) through the traditional channel.
During 2014, our spirits were produced at four plants which are located in Regions IIIregions of Atacama and IVCoquimbo in the north of Chile. The bottling process wasis done in the Ovalle plant bottling facility. Horcón Quemado is produced and bottled in a third-party plant.plant in the Atacama Region.
33
In the rum market, our proprietary parent brands are Cabo Viejo and Sierra Morena. Also, CPCh distributes Pernod Ricard products, including Chivas Regal, Ballantine’s, Havana Club and Absolut, among others.
ThroughIn 2018 CPCh we produceentered the cider category with the launch of Cygan, a beverage made from green and market ultra-premium, premium, medium-pricedred apples, with an alcohol content of 4.5° and popular-priced pisco brands in Chile, as well as rum. 64 calories per 100 ml.
The following table shows our principalparent pisco, cocktail and FAB brands:
| FAB | |||
Premium |
|
|
| |
|
|
|
|
|
Control C |
| Campanario |
| La Serena |
Mistral | ||||
Mistral |
|
| ||
|
| Bauzá |
| Ice(1) |
MOAI | Sol de Cuba |
| Iceberg | |
Horcón Quemado | Cusqueño Sour |
| Sierra Morena Ice | |
Tres Erres |
|
|
| |
| ||||
|
|
| ||
|
| |||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
|
| |||
|
|
|
| |
|
(1)In January 2016 CPCh divested its interest in Compañía Pisquera Bauzá S.A.
In June 2017, CPCh added the Peruvian brand BarSol to its portfolio through the acquisition of 40% of Americas Distilling Investments LLC, which is based in the United States and owns the BarSol brand and productive assets based in Peru.
Production and Marketing:
International Business Operating segment
Our operation in International Business Operating segment generated Net sales of CLP 282,435370,109 million, CLP 299,668460,317 million and CLP 405,714483,926 million in 2016, 2017 and 2018, respectively, representing 23.6%23.7%, 23.1%27.1% and 27.1% of our totalCCU’s consolidated Net sales in the last three years, respectively.those years.The International Operating segment includes our operations in Argentina, Bolivia, Paraguay and Uruguay.
CCU, through its subsidiary CCU Argentina, owns and operates breweries located in the cities of Salta, Santa Fe and Luján. Our main beer brands include Schneider, Imperial, Palermo, Santa Fe, Salta, and Córdoba and we hold exclusive license agreements for the production and commercialization of Miller, Heineken, Amstel and Sol. As of May of 2018, CCU Argentina’s brand portfolio also includes Isenbeck, Diosa, Iguana, Norte and Báltica, as well as the exclusive license agreements for the production and commercialization of Grolsch and Warsteiner, and no longer includes the license agreement for Budweiser5. CCU Argentina imports the Kunstmann and Blue Moon beer brands. Furthermore, CCU Argentina exports beer to several countries, mainly under the brands Schneider, Imperial and Heineken.
On April 28, 2003, CCU Argentina and Heineken Brouwerijen B.V., a subsidiary of Heineken International B.V., signed license and technical assistance agreements that provide us with the exclusive rights to produce, sell and distribute Heineken beer in Argentina commencing June 18, 2003. On October 12, 2011, we and Heineken Brouwerijen B.V. signed the Amended and Restated versions of the Trademark License Agreements which provide us with the exclusive rights to produce, sell and distribute Heineken beer in Chile and Argentina, in force as of January 1, 2011. These agreements have an initial term of 10ten years, and shall automatically be renewed each year (January 1st) for a new period of ten years, unless any party gives notice of its decision not to renew, inwhich case the agreements will be in force until the last renewal period expires. Heineken beer is the second-largest brand in terms of volume in the premium segment in Argentina.
5See “Item 4: Information on the Company – A. History and Development of the Company”.
34
On November 28, 2012, CICSA and Heineken Brouwerijen B.V. entered into a Trademark License Agreement which granted us the exclusive rights to produce, sell and distribute Heineken beer in Paraguay. This agreement had an initial term of ten years, automatically renewable for a period of five years unless either party gave notice of its decision not to renew, in which case the agreements would be in force until the last renewal periodexpired. On April 20, 2018, Bebidas del Paraguay S.A. and Heineken Brouwerijen B.V. signed a Trademark License Agreement and a Distribution Agreement which provides us with the exclusive rights to produce, sell and distribute Heineken beer in Paraguay. This agreement has an initial term of five years from May 1,st) 2018, and will be automatically renewed for subsequent three year periods unless any party gives notice of its decision not to renew. Therefore, and as agreed on June 11, 2018, the Trademark License Agreement entered on November 28, 2012, by CICSA and Heineken Brouwerijen B.V. was terminated with retroactive effects as of April 30, 2018 and, in its place, Heineken Brouwerijen B.V. and CICSA entered into a supply agreement which provides CICSA the non-exclusive right to sell and supply Heineken Lager in the Paraguayan market to Bebidas del Paraguay S.A., for a period of five years beginning on April 30, 2018.
In 2013, we started exporting Heineken to Milotur, our subsidiary in Uruguay, and in 2015 to BBO, our then associated company in Bolivia. On June 4, 2013, CICSA, Milotur and Heineken Brouwerijen B.V. signed a trademark license agreement that provides us with the exclusive rights to produce, sell and distribute Heineken beer in Uruguay, in force as of May 1, 2013. This agreement has an initial term of ten years, and automatically renews on January 1 of each year for a new period of ten years, unless any party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires. In Uruguay, we participate in the mineral and flavored water business with the Nativa brand, in soft drinks with the Nix brand, and in Watt's branded juices, isotonic drinks with the Fullsport brand and energy drinks with Thor brand. In addition, we import Heineken, Schneider, Imperial and Kunstmann beer.
On July 15, 2015, CICSA, BBO and Heineken Brouwerijen B.V. signed the Ancillary Trademark License Agreement which provides us with the exclusive rights to produce, sell and distribute Heineken beer isin Bolivia, in force as of January 1, 2015. This agreement has an initial term of ten years, and will be automatically renewed for five year periods unless any party gives notice of its decision not to renew, in which case the second-largest brandagreement will be in terms of volume inforce until the premium segment in Argentina.last renewal period expires.
In September 2014, CICSA began with the exclusive distribution in Argentina of imported Sol beer. The Sol beer brand is owned by Heineken. This licensing agreement is for a period for ten years in Argentina, automatically renewable on the same terms (rolling contract), each year for a period of ten years, unless notice of non-renewal is given.
In October 2006, we signed a long-term contract with ICSA to brew, bottle and package beer in the former AmBev plant in Luján, near Buenos Aires, that was purchased by ICSA. In January 2007, we began brewing our local brands in this plant, obtaining enough production capacity to ensure future growth. In April 2008, we acquired ICSA, including the Luján plant and the brands Imperial, Bieckert and Palermo. ICSA also had a brewing contract agreement with AmBev and, under such contract CICSA brewed beer for AmBev during the peak demand season of 2008-2009.
The license agreement between CCU Argentina and Anheuser-Busch LLC6, which providesprovided CCU Argentina with the exclusive right to produce, package, market,commercialize, sell and distribute Budweiser beer in Argentina and Uruguay, had an initial term of 20 years commencing in December 1995, which in March 2008 was extended to December 2025. Among other things,2025 (CCU and ABI agreed to the early termination of the license agreement includes provisions for both technical and marketing assistance from Anheuser-Busch. Under the license agreement, CCU Argentina is obligated to purchase certain raw materials from Anheuser-Busch or from suppliers approved by Anheuser-Busch. We began distribution of our locally produced BudweiserUruguay in December 1996. See “– Sales, Transportation and Distribution.” In addition, the license agreement is subject to certain specified market share targets and marketing expenditures.2014). In 2010, the license agreement was modified due to regulatory reasons under the context of the merger between Anheuser-Busch LLC and InBev. As a result, certain contractual restrictions were released, and rights granted to Anheuser-Busch LLC waived, both in favor of CCU Argentina. DuringOn September 6, 2017, CCU and CCU Argentina reached an agreement with ABI for the third quarter 2000, we and Anheuser-Busch signed an export agreement to supply Budweiser from Argentina to Paraguay and Chile. At the end of 2011, the agreement to supply Budweiser from Argentina to Paraguay was ended.
In November 2011, we signed an addendum to the import and distribution contract with Cervecería Modelo S.A., including a clause that specified the automatic renewalearly termination of the contractBudweiser license in Argentina, in exchange for aportfolio of brands (Isenbeck and Diosa, which were at the time owned by SAB Miller; and Báltica, Iguana, and Norte, which were owned by ABI), representing similar volumes to Budweiser in Argentina, plus a series of payments over a three-year period. On April 27, 2018, after receiving approval from Argentina’s antitrust regulators, CCU Argentina and ABI were legally obliged to close the transaction. As a result, on May 2, 2018, CCU Argentina and ABI (CCU Argentina and ABI, together identified as the “Parties”) executed a transaction (the “Transaction”), which included, among other matters: (i) the early termination of the Budweiser brand license agreement in Argentina, between the Parties, and (ii) the transfer to CCU Argentina of the ownership of the Isenbeck, Diosa, Norte, Iguana and Báltica brands, as well as the transfer of the licenses for Argentina of the international brands Warsteiner and Grolsch. In order to achieve an orderly transition of the aforementioned brands, the Transaction contemplates several contracts in which (i) CCU Argentina will produce Budweiser, on behalf of ABI, for a period of four years atup to one year; (ii) ABI will produce Isenbeck and Diosa, on behalf of CCU Argentina, for a period of up to one year; and (iii) ABI will carry out the endproduction and distribution of 2014 provided thatIguana, Norte, Báltica, Grolsch and Warsteiner, on behalf of CCU Argentina, for a period of up to three years.
6See “Item 4: Information on the Company – A. History and Development of the Company”.
35
In August 2016 CICSA would meet certain minimum purchases goal. In that case,signed a license and distribution agreement with Coors Brewing Company to manufacture, package, commercialize and distribute the agreement would last until December 31, 2018.Miller brands in Argentina. We started to commercialize and distribute Miller Genuine Draft in April 2017, and to produce MGD in our own facilities as of May 2017.
CCU Argentina participates in the cider business, with the leading Real brand and other brands such as La Victoria and 1888. Also, we participate in the liquor business, under the El Abuelo brand, in addition to importing other liquors from Chile.
In 2012, the Company began in Argentina the migration process to its new proprietary returnable bottle in place of the generic container currently in the industry. The decision to implement this important project was based primarily on the change introduced by the main market player, who in 2011 started to replace the use of generic packaging by a proprietary container for one liter returnable products. The proprietary container’s use results in significant important changes in logistics processes, including the adaptation of the building structure of plants, the acquisition of specific equipment, the adaptation of production lines and agreements with glass bottles and crates suppliers in order to achieve the timely supply of the new bottling process required inputs. The introduction of these proprietary returnable bottles resulted in significant impacts on the industry’s value chain, with higher operating costs associated with the operation of recovery and classification of packaging that significantly affect the level of profitability and industry´sindustry’s return on capital employed (ROCE). This transition process requires significant investments between 2012 and 2017 mainly in packaging, equipment and infrastructure. To partially finance these investments, bank loans were obtained in local currency with long repayment periods, mitigating the risk of exchange rate and interest rate fluctuations thereby minimizing the fluctuation risk. Due to the Transaction, CCU Argentina and ABI, among other matters, agreed that Compañía Industrial Cervecera S.A. (a subsidiary of CCU Argentina) and Cervecería y Maltería Quilmes S.A. (a subsidiary of ABI), may each use, without any payment or restriction whatsoever, the one litter returnable amber bottles, denominated as “proprietary”, of the other company (hereinafter the “Free Use of Bottles”). For this purpose, the parties agreed that the term for the Free Use of Bottles will be three years, with the option to renew the term for three additional years in case any of the parties thereto has fulfilled certain investments in bottle requirements. At the end of the three or six year term, each party will be permanently authorized to use the other party’s proprietary bottles for up to a 10% of its total bottled product (current authorization allows such use up to 0.5%). This agreement is favorable to CCU Argentina, as it will allow the company to obtain operational efficiencies.
In September 2012, CCU acquired 100% shares of2011, the Uruguayan companies Milotur S.A., Marzurel S.A. and Coralina S.A. and indirectly Andrimar S.A., a wholly- owned subsidiary of MiloturS.A.
On November 29, 2012, CICSA and Heineken Brouwerijen B.V. signed the Trademark License Agreement which provides us with the exclusive rightsCompany started to produce, sell and distribute Heinekenexport Schneider beer into Paraguay in force as of November 29, 2012. This agreement has an initial term of 10 years, and will be automatically renewed for a five years period unless any party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires.
39
In 2013 the production of Budweiser beer started in Luján, in addition to Heineken which was already being brewed since 2009. Currently Santa Fe and Luján Plants produce both brands. Additionally, the production of Amstel beer was launched under the license of Amstel Brouwerijen BV, an affilliate of Heineken International.
On June 4, 2013, CICSA, Milotur and Heineken Brouwerijen B.V. signed the Trademark License Agreement which provides us with the exclusive rights to produce, sell and distribute Heineken beer in Uruguay, in force as of May 1, 2013. This agreement has an initial term of 10 years, and automatically renew on January 1 of each year for a new period of ten years, unless any party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires.
By the end of 2013, CCU executed various agreements and contracts with Cartes Group in Paraguay, in virtue of which acquired 50.005% ofthrough Bebidas del Paraguay (owner of productive assets and brands through which it develops the business consisting of the production, marketing and sale of non-alcoholic beverages, such as soft drinks, juices and water, and import, marketing and sale of beer, under various brands, both proprietary and under licensees and imported) and 49.959% of Distribuidora del Paraguay S.A., a company which distributesand in 2013 to Uruguay through Milotur.In Paraguay we participate in the productsbeer and non-alcoholic categories since our entrance to the market in 2013, with the introduction of new brands such as Zuma, and the acquisition of the above-mentioned company.craft beer brand Sajonia.
In June 2014, CICSA reached agreements with Cervecería Modelo S. de R.L. de CV. and Anheuser-Busch LLC, for2018, the termination of the contract which allows CICSACompany increased its stake from 34% to import and distribute on an exclusive basis,Corona andNegra Modelo beers51% in Argentina, and the license for the production and distribution ofBBOBudweiser. beer in Uruguay. CICSA received compensation in respect of these agreementsIn Bolivia, CCUparticipates in the amountnon-alcoholic beverages and beer business which has two plants located in the city of ARS 277.2 million, equivalent to USD 34.2 million.
Santa Cruz de la Sierra. In September 2014, CICSA began with exclusive distributionnon-alcoholic beverages, it participates in Argentina imported Sol brand, owned by Heineken, initiating local production in November 2014. For Sol brand in Argentina, we have the license for 10 years, automatically renewable on the same terms (Rolling Contract), each year for a period of 10 years, unless notice of non-renewal is given.
On July 15, 2015, CICSA, BBO and Heineken Brouwerijen B.V. signed the Ancillary Trademark License Agreement which provide ussoft drinks business with the exclusive rights to produce, sellbrands Mendocina, Free Cola, Sinalco and distributeMalta Real. The latter is a soft drink with sugar based on malt, but without alcohol. Mendocina also participates in the water category and Natur-All for juices. In beers, it has the brands Real, Capital and Cordillera. In addition, it markets the imported Heineken beer in Bolivia, in force as of January 1, 2015. This agreement has an initial term of 10 years, and will be automatically renewed for a five years period unless any party gives notice of its decision not to renew, in which case the agreement will be in force until the last renewal period expires.brand.
36
Aligned with our innovation strategy, during 2015 we launched brand extensions such as Santa Fe Frost and Sol 650 in Argentina, and we pushed the one way packaging in beer in Uruguay with Schneider and Heineken, increasing our volumes in that market.
Escribe texto o la dirección de un sitio web, o bien,traduce un documento.
At present we produce and market premium, medium-priced and popular-priced beer brands in the International Business Operating segment, which includes Argentina, UruguayBolivia, Paraguay and Paraguay. Uruguay.
37
The following table shows our principalproprietary parent beer brands, brands produced under license and brands imported under license in Argentina in 2015:
40
for the Argentinean market:
|
|
|
|
|
|
Heineken(1) | Budweiser | Córdoba |
Sol(1) | Salta | Palermo |
Kunstmann(2) | Santa Fe | Bieckert |
Imperial | Schneider | Báltica(5) |
Amstel(1) | Isenbeck(4) | Diosa(4) |
Miller Genuine Draft | Iguana(5) | |
Grolsch(5) | Norte(5) | |
Warsteiner(5) |
|
|
|
|
|
| ||
| ||
| ||
|
|
|
(1) (2) Imported. (3) Due to the early termination of the Budweiser license agreement, since May 2, 2018, CCU Argentina ceased the commercialization of this brand, and will produce Budweiser, on behalf of ABI, for a period of up to one year. (4) As from May 2, 2018, ABI will produce Isenbeck and Diosa, on behalf of CCU Argentina, for a period of up to one year. (5) As from May 2, 2018, ABI will carry out the production and distribution of Iguana, Norte, Báltica, Grolsch and Warsteiner, on behalf of CCU Argentina, for a period of up to three years. | ||
In 2018 CCU entered the energy drinks category in Uruguay with the launch of Thor, our first energy drink brand. Also in 2018, we began to import Imperial to Uruguay, our proprietary premium beer brand from Argentina. The following table shows our proprietary parent beer and soft drinks brands, produced and/or imported under license for the market in Uruguay:
Brand | Product Category | Ownership | Affiliation |
Heineken | Beer | Licensed(1) | Heineken Brouwerijen B.V. |
Schneider | Beer | Proprietary(1) | CCU |
Kunstmann | Beer | Proprietary(1) | CCU |
Imperial | Beer | Proprietary(1) | CCU |
Nix | Soft Drink | Proprietary | CCU |
Watt´s | Juice | Licensed(2) | Promarca |
Nativa | Water | Proprietary | CCU |
Nix | Water | Proprietary | CCU |
FullSport | Sport Drink | Proprietary | CCU |
Thor | Energy Drink | Proprietary | CCU |
(1) Imported. (2) |
38
In 2018 CCU entered the sport drink category in Paraguay, with our brands FullPower and FullSport. The following table shows our proprietary parent beer and soft drinks brands, produced and/or imported under license for the market in Paraguay:
Brand | Product Category | Ownership | Affiliation |
Heineken | Beer | Licensed(1) | Heineken Brouwerijen B.V. |
Schneider | Beer | Proprietary(1) | CCU |
Paulaner | Beer | Licensed(1) | Paulaner Brauerei GmbH &Co KG |
Kunstmann | Beer | Proprietary(1) | CCU |
Sajonia | Beer | Proprietary | CCU |
Sol | Beer | Licensed(1) | Heineken Brouwerijen B.V. |
Pulp | Soft Drink | Proprietary | CCU |
Puro Sol | Juice | Proprietary | CCU |
Watt´s | Juice | Licensed(2) | Promarca |
La Fuente | Mineral Water | Proprietary | CCU |
Zuma | Flavored Water | Proprietary | CCU |
FullPower | Sport Drink | Proprietary(1) | CCU |
FullSport | Sport Drink | Proprietary(1) | CCU |
(2)CCU indirectly owns 50% of Promarca. |
The following table shows our proprietary parent beer and soft drinks brands, produced and/or imported under license for the market in Bolivia:
Brand | Product | Category | Affiliation |
Heineken | Beer | Licensed | Heineken Brouwerijen B.V. |
| Beer | Propietary | CCU |
Real | Beer | Propietary | CCU |
Capital | Beer | Proprietary | CCU |
Mendocina | Soft Drink | Proprietary | CCU |
Free Cola | Soft Drink | Proprietary | CCU |
Sinalco | Soft Drink | Licensed | Sinalco |
Mendocina | Water | Proprietary | CCU |
Malta Real | Malta based beverage | Proprietary | CCU |
Natur-All | Juice | Proprietary | CCU |
The following table sets forth our beer sales volume in Argentina by category during each of the last three years, including exports to other countries:
Category | Argentina | Argentina
| ||||||
| 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | ||
Premium | 18% | 18% | 19% | 21% | 26% | 31% | ||
Mainstream | 62% | 62% | 62% | 62% | 60% | 47% | ||
Convenience | 20% | 20% | 19% | 17% | 14% | 23% | ||
Total | 100% | 100% | 100% | 100% | 100% | |||
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Our beer products are bottled or packaged in returnable and non-returnable glass bottles, aluminum cans orand stainless steel kegs at our production facilities. During the last three years, we sold our beer products in Argentina Uruguay and Paraguay in the following packaging formats:
Container | Percentage of Total Beer Sold in Argentina | Percentage of Total Beer Sold in Argentina | ||||||
| 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | ||
Returnable(1) | 79% | 81% | 76% | 72% | 63% | 51% | ||
Non-returnable(2) | 20% | 18% | 23% | 27% | 36% | 48% | ||
Returnable kegs(3) | 1% | 1% | 1% | 1% | 1% | |||
Total | 100% | 100% | 100% | 100% | 100% | |||
(1) Returnable beer containers include glass bottles of various sizes. | (1) Returnable beer containers include glass bottles of various sizes. | (1) Returnable beer containers include glass bottles of various sizes. | ||||||
(2) Non-returnable beer containers include glass bottles and aluminum cans, both of assorted sizes. | (2) Non-returnable beer containers include glass bottles and aluminum cans, both of assorted sizes. | (2) Non-returnable beer containers include glass bottles and aluminum cans, both of assorted sizes. | ||||||
(3) Returnable kegs refer to stainless steel containers in assorted sizes. | (3) Returnable kegs refer to stainless steel containers in assorted sizes. | (3) Returnable kegs refer to stainless steel containers in assorted sizes. |
Container | Percentage of Total Beer Sold in Uruguay | |||||
2013 | 2014 | 2015 | ||||
Returnable(1) | 83% | 39% | 11% | |||
Non-returnable(2) | 17% | 61% | 89% | |||
Total | 100% | 100% | 100% | |||
(1) Returnable beer containers include glass bottles of various sizes. | ||||||
(2) Non-returnable beer containers include glass bottles and aluminum cans, both of assorted sizes. |
Percentage of Total Beer Sold in Paraguay | ||||
Container | 2014 | 2015 | ||
Returnable(1) | 10% | 7% | ||
Non-returnable(2) | 90% | 93% | ||
Total | 100% | 100% | ||
(1) Returnable beer containers considers only litre bottles | ||||
(2) Non-returnable beer containers include glass bottles and aluminum cans, both of assorted sizes. |
Production and Marketing:Wine Operating segment
VSPT is one of Chile’s largest producers and distributors of wine in terms of sales volume and Net sales. Our wineWine Operating segment generated Net sales amounted toof CLP 152,255201,402 million, CLP 172,349204,454 million and CLP 189,515206,519 million in 2016, 2017 and 2018, respectively, or 12.7%12.9%, 13.3%12.0% and 12.6%11.6% of our totalCCU’s consolidated Net sales in the last three years, respectively.those years.
VSPT is composed of seven different wineries in Chile and two in Argentina. Its principalmain vineyards are located in Molina, approximately 200 kilometers south of Santiago. The VSPT estate in Molina is one of the largest single-site vineyards in Chile with an area of 1,0641,059 hectares. As of December 31, 2015,2018, VSPT’s vineyards covered an aggregate of 4,2453,932 hectares in Chile, distributed among 10 different plantations. The winery also has 333338 hectares under long-term leases. In Argentina, we haveVSPT has another 379645 planted hectares located in the province of Mendoza.
The following table indicates the breakdown of VSPT’sWine Operating segment’s volume in the domestic and export markets, including sales from FLC and Tamarí in Argentina:
Year | Domestic Volume | Export Volume | Total Volume(1) |
| (in millions of liters) | ||
2011 | 60 | 67 | 127 |
2012 | 61 | 71 | 132 |
2013 | 62 | 70 | 131 |
2014 | 62 | 70 | 133 |
2015 | 62 | 76 | 138 |
(1) Includes bulk sales exports in Chile and Argentina |
Year | Domestic Volume | Export Volume(1) | Total Volume |
|
| ||
| (in millions of liters) | ||
2014 | 62 | 71 | 133 |
2015 | 62 | 76 | 138 |
2016 | 64 | 78 | 142 |
2017 | 68 | 75 | 143 |
2018 | 68 | 71 | 139 |
(1) Includes Argentinean operations and bulk sales. |
According to Nielsen, VSPT’s share by volume of Chile’s formal wine market was approximately 27.3% in 2013, 28.8% in 2014 and 28.4% in 2015. According to the Wines of Chile Association, VSPT’s share of Chile’s total wine export sales by volume was 13.1%, 13.6% and 13.5% in the last three years, respectively.
Viña San Pedro, Viña Tarapaca,Tarapacá, Viña Leyda, Viña Santa Helena, Viña Misiones de Rengo, Viña Mar, Viña Casa Rivas in Chile and Finca La Celia and Tamarí in Argentina, produce and market premium, varietal and popular-priced wines.Thewines.
40
The principal brands are set forth below:
Brand |
| Icon | Premium | Varietal | Popular-Priced | |
Viña San Pedro |
|
|
|
| ||
Altaïr | X | |||||
Sideral | X | |||||
Cabo de Hornos | X |
|
|
| ||
| Kankana del Elqui | X |
|
|
| |
| Tierras Moradas | X |
|
|
| |
| 1865 |
| X |
|
| |
| Castillo de Molina |
| X |
|
| |
| Épica |
| X |
|
| |
| 35 South |
| ||||
|
|
| X |
| ||
| Urmeneta |
|
| X |
| |
| Gato Negro |
|
| X |
| |
| Gato |
|
|
| X | |
| Manquehuito |
|
|
| X | |
| San Pedro Exportación |
|
|
| X | |
Viña Tarapacá |
| |||||
|
|
|
|
| ||
| Gran Reserva Etiqueta Azul | X |
|
|
| |
| Gran Reserva Etiqueta Negra |
| X |
|
| |
| Tarapacá Gran Reserva | X |
|
| ||
| Gran Tarapacá |
| ||||
|
| X |
|
| ||
| Tarapacá Reserva |
| X |
|
| |
| Tarapacá Varietal |
|
| X |
| |
| León de Tarapacá |
|
| X |
| |
Viña Santa Helena |
|
|
|
| ||
|
|
| ||||
|
| |||||
Selección del Directorio |
| X |
|
| ||
| Siglo de Oro |
| X |
| ||
| Santa Helena Varietal |
|
| X |
| |
| Alpaca |
|
| X |
| |
| Gran Vino |
|
|
| X | |
| Santa Helena |
|
|
| X | |
Viña Misiones de Rengo |
|
|
|
| ||
| Misiones de Rengo Cuvée |
| X |
|
| |
| Misiones de Rengo Reserva |
| X |
|
| |
Misiones de Rengo Varietal |
|
| X |
| ||
| ||||||
|
| X | X |
| ||
Viña Mar | ||||||
Viña Mar |
| X | X |
| ||
|
| |||||
Viña Mar Espumante |
| X | ||||
| X |
| ||||
Casa Rivas |
|
|
|
|
| |
Casa Rivas Reserva |
| X |
|
| ||
Viña Leyda | ||||||
Leyda Lot | X | |||||
Leyda Reserva | X | |||||
Leyda Single Vineyard | X | |||||
|
| |||||
La Celia |
| |||||
|
| |||||
|
| |||||
| ||||||
|
| |||||
|
| |||||
La Celia | X | |||||
La Consulta | X | |||||
La Finca | X | |||||
Eugenio Bustos | X | |||||
Tamari | ||||||
Tamarí Reserva | X |
41
The following table presents our breakdown of total sales volume in thousands of liters by category of VSPT’s winesthe Wine Operating segment during 2015:
2018:
Category | Domestic(1) | Export(1) | Total | Domestic | Export(1) | Total | |||
| (in thousands of liters) |
| (in thousands of liters) | ||||||
Premium | 5,737 | 8,187 | 13,924 | 8,112 | 8,020 | 16,132 | |||
Varietal | 7,402 | 56,968 | 64,370 | 8,061 | 55,310 | 63,371 | |||
Popular-Priced | 49,162 | 7,372 | 56,534 | 51,861 | 7,397 | 59,258 | |||
Bulk | 151 | 3,024 | 3,175 | - | 423 | ||||
Total | 62,451 | 75,551 | 138,003 | 68,035 | 71,150 | 139,185 | |||
(1) Includes Finca La Celia and Tamarí |
| ||||||||
(1) Includes Argentinean operations and bulk wine. | (1) Includes Argentinean operations and bulk wine. |
As of December 31, 2015, VSPT’s storage capacity totaled 88.8 million liters and its peak bottling and packaging capacity totaled 72,000 liters per hour.
Domestic Market. Our Chilean domestic wine is packaged in glass bottles, jugs,cans, cartons, and bag-in-box containers at VSPT’s production facilities in Lontué, Molina and Isla de Maipo. The following chart shows our packaging mix for domestic wine sales for the last three years:
Container | Percentage of Total DomesticWine Sold in Chile | Percentage of Total Domestic | |||||||
| 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
Carton | 56% | 54% | 51% | 49% | 47% | 48% | |||
Glass Bottles | 44% | 46% | 49% | 51% | 53% | 52% | |||
Bag-in-Box | 0% | 0% | 0% | - | |||||
Total | 100% | 100% | 100% | 100% |
Beer is a substitute product for wine in Chile. In addition, our wine products may also compete with other alcoholic beverages, such as spirits (mainly pisco), and with non-alcoholic beverages, such as soft drinks and juices.
The average price for our domestic wine customers was CLP 2,008 and CLP 2,065 per liter in 2014 and 2015, respectively, experiencing a growth of 2.8%. Our wine price policy is mainly determined as a consequence of four factors: a) market prices, b) change in sales mix, c) inflation rate and d) desired profit margin in relation to costs of raw materials.
Chilean Export Market.According to industry sources, exports of Chilean wine increased from approximately 43 million liters in 1990 to 877849 million liters in 2015,2018, at a compounded annual growth rate of 13%11%. During 20142017 and 2015,2018, Chilean wine exports reached 801849 million liters and 877941 million liters, respectively. We believe that Chilean wine exports have grown steadily due to their comparatively low prices and positive international image, as well as due to external factors, such as low wine production in the Northern Hemisphere in certainrecent years.
VSPT exported from Chile 70 million liters in 2013, 7074 million liters of wine in 2014, and 732016, 72 million liters of wine in 2015.2017 and 68 million liters of wine in 2018. During 2015,2018, VSPT exported wine to more than 80 countries worldwide. Exports accounted for Net sales of CLP 85,730131,168 million, CLP 102,272127,962 million and CLP 117,450119,216 million, in the last three years, respectively. In 2015,2018, VSPT’s primary export markets included the United States, Japan, Brazil, Finland, Paraguay, the Netherlands and China.
Most exported wine is sold in glass bottles, except for a certain quantity of unbranded wine that is occasionally sold in bulk, as well as the amountsome wine that is sold in bag-in-box containers. The following chart shows our packaging mix for export Chilean wine volume in the last three years:
Container | Percentage of Total Export | ||
2016 | 2017 | 2018 | |
Glass Bottles | 86% | 91% | 91% |
Bulk | 4% | - | - |
Bag in box | 10% | 9% | 9% |
Total | 100% | 100% | 100% |
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Container Percentage of Total ExportWine Volume from Chile 2013 2014 2015 Glass Bottles(1) 81% 85% 86% Bulk 5% 3% 4% Bag in box 14% 13% 10% Total 100% 100% 100% (1) Includes jugs. 5)RawRaw Materials and other Supplies.Supplies
The main raw materials that we use are sugar, soft drink concentrates, fruit pulps, malt, rice, hops, grapes glass bottles, aluminum cans, PET bottles, hops and water. We purchase ourThe sugar requirements both imported and fruit pulps that we use are from local supply.and international origin suppliers. We obtain our supply of malt through long term contracts with malt suppliers from Chile and Argentina. Rice is sourced mainly from local and international suppliers in spot transactions. We pre-treat rice in order to ensure that it meets our standards of quality.
Water is essential in our production. We obtain all of our water from wells located at our plants and/or from public utilities. The water is treated at facilities located at our plants to remove impurities and to adjust the characteristics of the water before it is used in the production process.
We own two mineral water sources in Chile from which the Cachantun and Porvenir brand mineral water products are obtained. These water sourcessprings are located in two areas near Santiago: Coinco and Casablanca, respectively. All of our mineral water products are bottled at their respective sources and distributed throughout the country. Purified water is produced with water pumped from our wells locatedand treated in the plant.
We generally purchase all ofThe most relevant packaging materials are: glass bottles, aluminum cans, PET bottles, caps, films, labels, corrugated cases and folding cartons. Long term contracts are signed with the glassmain strategic suppliers.
Glass bottles used in our packaging are purchased from the main local glass suppliers, Cristalerías Chile S.A. and Verallia Chile S.A. and Cristalerías Toro S.A.I.C. in Chile, and Rigolleau/Rigolleau S.A., Cattorini Hnos S.A.I.C.F.E.I. and Owens Illinois Argentina S.AS.A. in Argentina. During 2015,2018, all of our requirements for aluminum cans were purchased from global suppliers, RexamBall Chile S.A., Rexam and Ball Argentina S.A. We buy our labels, films and Fabricas Monterrey S.A. (“FAMOSA”), subisidiary of Crown Holdings. We obtain the labels for our productscorrugated cartons mainly from local suppliers. Plastic capsThe majority of our PET resins are mainly purchased from three suppliers in Chile (including PLASCO), and crowns are currently imported from Mexico.Asia. Bottles and injected preforms are produced by our subsidiary Plasco.
We maintain testing facilities at each of our plants and factories where raw materials are analyzed according to our standards. Additionally, the samples are analyzed at various stages of production to ensure product quality. For example, samples of Heineken Cristal and Budweiser beer are periodically sent to the Heineken facilities in The Netherlands and to Anheuser-Busch7 facilities in the United States, respectively, to verify the quality of the product, samplesproduct. Samples of Nestlé Pure Life water are sent to Perrier in France, and samples of Pepsi and Schweppes are analyzed by PepsiCo either at our plants or at the point of sale.
Prices of our main raw materials used in the production are tied to the U.S. dollar,USD, and have fluctuated in Chilean and Argentine peso terms due to general commodity price fluctuations in the international markets as well as to the variation of the Chilean and Argentine peso against the U.S. dollar.USD. In addition, from time to time, prices of grapes and wine have varied depending on fluctuations in demandsupply and supplydemand factors.
We believe that all of the contracts or other agreements between us and third-party suppliers, with respect to the supply of raw materials, contain standardStandard and customary commercial terms and conditions. We do not believe weconditions are dependentwidely used in all our contracts and supply agreements. Strategic alliances and supplier diversification allow us to reduce dependency on any onea single supplier for a significant portion of our raw and packaging materials. During the past ten years, we have not experienced any material shortage or difficulties in obtaining adequate supplies of necessary raw materials, nor do we expect to do so in the future.
VSPT’s main raw materials and packaging materials are purchased and harvested grapes, purchased wine, glass bottles, carton containers, corks and cardboard boxes. VSPT obtained approximately 48.0%34.0% of the grapes used for export wines from itsour own vineyards during 2015.2018. Of the wine sold in the domestic market, 11.6%approximately 8.5% are grapes from our vineyards. In 2015,2018, approximately 53.0%40.0% of the wine used in domestic and export sales was purchased from ten local producers: VinicolaVinícola Patacón SPA, AgricolaSpA, Agrícola y Comercial Bodegas de las Mercedes Ltda,Ltda., Corretajes Torres y Cía. Ltda., Vitivinícola Melior Ltda., Anatolio Segundo Albornoz Vargas, RR Wine Ltda., Comercial Viña Ureta Ltda., Santa Teresa S.A., Aguilera y Barrios Ltda, Vitivinicola Melior Ltda,SpA, Viñedos Errazuriz Ovalle S.A, Viñedos Gurfinkel Ltda, Juan Manuel Diaz Abasolo, Cooperativa Agrícola y Pisquera Elqui Ltda, Sociedad Agroindustrial Cerrillos Ltda, AMS Familya Siegel S.A. VSPT has various alternative sources of supply, which can be used when they are attractive.favorable. VSPT’s glass bottles are mainly purchased from Cristalerías Chile and Verallia; however, when prices have been favorable,VSPT has purchased glass bottles from other local and international suppliers. Carton containers are purchased either from Tetra Pak de Chile Comercial Ltda. or from SIG Combibloc Inc. and are assembled in VSPT’s own automated packing lines.
7See “Item 4: Information on the Company – A. History and Development of the Company”.
43
Sales, Transportation and Distribution.Distribution
Sales, Transportation and Distribution:Chile Operating segment
We distribute all of our products in Chile directly to retail, supermarket and wholesale customers. This system enables us to maintain a high frequency of contact with our customers, obtain more timely and accurate marketing-related information, and maintain good working relationships with our retail customers.
After production, bottling and packaging, our beverages are either stored at one of our production facilities or transported to a network of 2428 owned or leased warehousesdistribution centers that are located throughout Chile. Products are generally shipped from the region of production to the closest warehouse,distribution center, allowing us to minimize our transportation and delivery costs.
In July 2002,Product distribution is carried out by Transportes CCU throughout the country or by Comercial Patagona Limitada began sellingin the Magallanes Region.
Beginning in October 2001, all of the distribution centers and transportation companies used to store and deliver all of our beer products in the Chile’s Region XII. are managed on a consolidated basis by Transportes CCU.
Comercial Patagona Limitada is a subsidiary of CerveceraCervecería Austral and, as of July 2002, is responsible for the salessale and distribution of our products and those of CerveceraCervecería Austral in Chile’s extreme south.the Magallanes Region. Comercial Patagona reaches 913 points of sale.
We distribute our products throughout Chile to:
·off-premise retail: small and medium-sized retail outlets, which in turn sell our products to consumers for take-out consumption;
·on premise retail: retail establishments such as restaurants, hotels and bars for on-premises consumption;
·wholesalers; and
·supermarket chains
In the last three years, the percentage mix of the above distribution channels for our products in Chile was as follows:
Percentage of Total Products Sold |
| ||
Distribution Channels | 2016 | 2017 | 2018 |
Off-premise retail | 40% | 37% | 37% |
On-premise retail | 12% | 15% | 12% |
Wholesalers | 14% | 15% | 17% |
Supermarkets | 34% | 33% | 33% |
Total | 100% | 100% | 100% |
In October 2005, we launched Comercial CCU, a subsidiary responsible for a single sales force dedicated to selling our beverage and sweet snack products,beverages, in order to capture synergies and focus on sales execution. Originally, this plan was piloted in rural areas and small cities in southern Chile. As of 2008, the territory covered by CommercialComercial CCU S.A. has expanded to include the north of Chile from Arica to Copiapó/Vallenar, and the south, from Curicó to Coyhaique except for the city of Concepción.
In 2015, we had a dedicated sales forceAs of approximately 565 salespeople, responsible for salesAugust 2016, following the restructuring in Chile that encompassed combining the route-to-market of our productsthe beer and non-alcoholic categories in the territorieswhole country, Comercial CCU also covers the beer and non-alcoholiccategory in the Metropolitan Region including the capital Santiago, and several other large cities such as Viña del Mar, Rancagua, La Serena, and Concepción.
44
For areas not covered by Comercial CCU orwe have dedicated sales forces. Together with Comercial Patagona Limitada. ThisCCU we have a total sales force uses a pre-sell system, like the rest of CCU’s sales platform, and covers approximately 78,185 clients, including 26 supermarket chains, which represent 79,103982 people, reaching 129,010 points of sales.
As of December 31, 2015, we had more than 134,363 customers insale, related to the Chile for our products
Operating segment. None of our customers accounted for more than 2.3%2.5% of our total sales by volume, with the exception of three large supermarket chains that represented in the aggregate 26.9%28.0% of our total sales by volume. During 2015, the ChileanOne of these supermarket industry continued to consolidate, increasing the importance and purchasing powerchains represented over 10.0% of a few supermarket chains.our total sales by volume.
Our customers make payment for our products either in cash at the time of delivery or in accordance with one of several types of credit arrangementarrangements that we offer. Payment on credit sales for the Chile Operating segment are generally due 28 days from the date of delivery. Credit sales accounted for 39.2%40.8%, 40.0%41.8% and 39.8%42.4% of our sales in Chile during 2013, 20142016, 2017 and 2015,2018, respectively. Losses on credit sales in Chile have not been significant.
Beginning in October 2001, all of the warehousesSales, Transportation and transportation companies used to store and deliver all of our products are managed on a consolidated basis by our TCCU.
We distribute our products throughout Chile to:
·Distribution:off-premises retail: small and medium-sized retail outlets, which in turn sell beer to consumers for take-out consumption;
·on-premises retail: retail establishments such as restaurants, hotels and bars for on-premises consumption;
·wholesalers; and
·supermarket chains. In the last three years, the percentage mix of the above distribution channels for our products in Chile was as follows:
Percentage of Total Products Sold | ||||||
Distribution Channels | 2013 | 2014 | 2015 | |||
Off-premise retail | 41% | 41% | 41% | |||
On-premise retail | 14% | 10% | 11% | |||
Wholesalers | 13% | 14% | 14% | |||
Supermarkets | 32% | 35% | 34% | |||
Total | 100% | 100% | 100% |
International Business Operating segment
After
In Argentina, after production, bottling and packaging, our beer is either stored at the production facilities or transported to a network of six warehousesdistribution centers leased or owned by us. Beer products are generally shipped to warehouses which are located within the region in which the beer products are sold.
WeAs of December 31, 2018, we have the capacity to reach 159,411185,234 points of sale in Argentina with our direct and indirect sales force. HalfApproximately 70% of our beer in Argentina is sold andand/or distributed through third-party sales and distribution chains. Aschains, including two independent Coca-Cola bottlers who distribute our products mainly in the north and south of December 31, 2015, we hadthe country, representing in the aggregate 22% of our total sales by volume. We have a direct sales force which soldsells our beer products to approximately 89,500 customers within Salta, San Juan, San Luis, Mendoza, Córdoba, Santa Fé, Rosario, the Federal Capital and its outlying metropolitan area,Buenos Aires City, in addition to 7872 regional and national supermarket chains throughout the country. None of our retail customers individually accounted for more than 3.2%4% of our total beer sales by volume.
Looking for greater operational efficiency, during 2016 and 2017 we modified our route to the market, moving volume withfrom direct sales to wholesalers within the exception of Coca Cola bottlers that represented in the aggregate 19.1% of our total sales by volume.outer Buenos Aires Metropolitan Area and Salta.
In Argentina, though most beer is sold tothrough wholesalers and distributors, we also sell our products to retailers and supermarket chains. In the last three years, the percentage mix of the above distribution channels for our beer products in Argentina was as follows:
Argentina | ||||||
Distribution Channels | 2013 | 2014 | 2015 | |||
Wholesalers | 54% | 50% | 49% | |||
Retailers | 31% | 33% | 31% | |||
Supermarkets | 16% | 17% | 20% | |||
Total | 100% | 100% | 100% |
Argentina | |||
Distribution Channels | 2016 | 2017 | 2018 |
Wholesalers/distributors | 54% | 68% | 70% |
Retailers | 28% | 16% | 12% |
Supermarkets | 19% | 17% | 19% |
Total | 100% | 100% | 100% |
In Uruguay our commercial distribution system reaches the whole country and all supermarkets. During 2016, as a result of restructuring, we changed from a direct sales system in Montevideo to an indirect sales system. In 2018, we maintained approximately 17,378 points of sale.
45
In the last three years, the percentage mix of the distribution channels for our beer and non-alcoholic products in Uruguay was as follows:
Uruguay | |||
Distribution Channels | 2016 | 2017 | 2018 |
Indirect | 84% | 87% | 86% |
Retailers | - | - | - |
Supermarkets | 16% | 12% | 14% |
Total | 100% | 100% | 100% |
In Paraguay, we have four distribution centers and a direct sales force. Together with a network of distributors and wholesalers, we reach a total of 27,613 points of sale, which allows us to have national coverage with our products.
In the last three years, the percentage mix of the above distribution channels for our beer and non-alcoholic products in Paraguay was as follows:
Paraguay | |||
Distribution Channels | 2016 | 2017 | 2018 |
Indirect | 16% | 18% | 14% |
Retailers | 64% | 64% | 66% |
Supermarkets | 21% | 18% | 20% |
Total | 100% | 100% | 100% |
In Bolivia, we have four distribution centers and a direct sales force. We reach a total of 48,412 points of sale, which allows us to have national coverage with our products. The percentage mix of the above distribution channels for our beer and non-alcoholic products in Bolivia was as follows:
Bolivia | |
Distribution Channels | 2018 |
Off-premise retail | 43% |
On-premise retail | 15% |
Wholesalers | 38% |
Supermarkets | 4% |
Total | 100% |
Our International Business segment customers either make payments for our products either in cash at the time of delivery or throughin accordance with one of our variousseveral types of credit arrangements.arrangements that we offer. In Argentina, payment on credit sales is currently due 15 days from the date of delivery to wholesalers, and an average of 71 days of delivery to supermarkets. Credit sales in Argentina accounted for 88%, 89% and 88% of total sales during 2015, while in Uruguay2016, 2017 and Paraguay they2018, respectively. In Bolivia, credit sales accounted for 95%22%, 17% and 13% of total sales, respectively. In Uruguay, credit sales accounted for 100% of total sales during 2016, 2017 and 2018. In Paraguay, credit sales accounted for 35%, 40% and 38% of total sales during 2016, 2017 and 2018, respectively. Losses on credit sales in the International Business segment have not been significant.
46
Sales, Transportation and Distribution:Wine Operating segment
Domestic.After production, bottling, and packaging, wine is either stored at the production facilities or transported to one of our 24 warehouses28 distribution centers located throughout Chile. VSPT wines are distributed and sold in Chile through our sales and distribution network, under the same system and payment terms as all our other products.
We distribute our wine products throughout Chile in the territories not covered by Comercial CCU or Comercial Patagona, Limitada, with our own sales force, to:
· off-premisesoff-premise retail: small and medium-sized retail outlets, which in turn sell wine to consumers for take-out consumption;
· on-premiseson premise retail: retail establishments such as restaurants, hotels and bars for on-premises consumption;
· wholesalers; and
· supermarket chains.
For the last three years, the percentage mix of the above distribution channels for our wine products in Chile was as follows:
Distribution Channels | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |||
Off-premise retail | 34% | 34% | 33% | 31% | 29% | 28% | |||
On-premise retail | 5% | 5% | 5% | 5% | |||||
Wholesalers | 24% | 22% | 24% | 25% | 26% | 29% | |||
Supermarkets | 37% | 39% | 38% | 39% | 39% | 38% | |||
Total | 100% | 100% | 100% | 100% |
We sellreach a total of 32,518 points of sale with our wine products directly to approximately 7,700 customers, nonededicated sales force of which accounted for more than 10% of our total wine sales by volume,81 people, together with the exceptionsales force of four supermarket chains that represented in the aggregate 33% of our total wine sales by volume. We do not maintain any long-term contractual arrangements for the sale of wine with any of our customers.Comercial CCU.
Export.VSPT has a presence in more than 80 countries. In order to increase its presence in the international market, VSPT haswe have distribution agreements with key distributors, such as Pernod Ricard in Sweden, Finland, Norway and Estonia; Shaw Ross International in the U.S.; Asahi in Japan; Interfood in Brasil;Brazil; and DGS and Baarsma in Holland and Denner in Switzerland.The Netherlands. In Canada we have distribution agreements with Phillipe Dandurand wines, in Korea with Keumyang, as well as agreements with other distributors.
Our Wine Operating segment customers make payment for our products either in cash at the time of delivery or in accordance with one of several types of credit arrangements that we offer. Credit sales accounted for 84.2%, 83.9% and 83.5% of total sales during 2016, 2017 and 2018, respectively. Losses on credit sales have not been significant.
47
Seasonality:Chile Operating segment
As a result of the seasonality of our different beverages, our sales and production volumes are normally at their lowest in the second and third calendar quarters and at their highest in the first and fourth calendar quarters (i.e., those months corresponding to the holidays as well as the summer vacation season in Chile).
The following table shows our annual sales volume of beer, non-alcoholic beverages and spirits in Chile, excluding exports, by quarter in the last three years:
Seasonality Chile Operating segment | |||||
Year | Quarter | Sales Volume | % of Annual | ||
(millions of liters) | Sales Volume | ||||
2016 | 1st quarter | 511.1 | 29% | ||
2nd quarter | 341.8 | 19% | |||
3rd quarter | 380.2 | 22% | |||
4th quarter | 531.2 | 30% | |||
Total | 1,764.3 | 100% | |||
| |||||
2017 | 1st quarter | 527.7 | 30% | ||
2nd quarter | 351.1 | 20% | |||
3rd quarter | 387.7 | 22% | |||
4th quarter | 519.8 | 29% | |||
Total | 1,786.3 | 100% | |||
| |||||
2018 | 1st quarter |
| 518.7 |
| 27% |
| 2nd quarter |
| 383.4 |
| 20% |
| 3rd quarter |
| 417.0 |
| 22% |
| 4th quarter |
| 567.8 |
| 30% |
| Total |
| 1886.8 |
| 100% |
|
|
|
|
|
|
Seasonality Chile Operating segment | ||||||
|
|
|
| |||
Year | Quarter | Sales Volume | % of AnnualSales Volume | |||
|
| (millions of liters) |
| |||
|
|
|
| |||
2013 | 1st quarter | 427.3 | 27% | |||
| 2nd quarter | 314.1 | 20% | |||
| 3rd quarter | 341.5 | 22% | |||
| 4th quarter | 474.2 | 30% | |||
| Total | 1557.0 | 100% | |||
|
|
|
| |||
2014 | 1st quarter | 455.5 | 28% | |||
| 2nd quarter | 334.7 | 21% | |||
| 3rd quarter | 354.8 | 22% | |||
| 4th quarter | 476.6 | 29% | |||
| Total | 1621.6 | 100% | |||
|
|
|
| |||
2015 | 1st quarter | 473.8 | 28% | |||
| 2nd quarter | 361.9 | 21% | |||
| 3rd quarter | 366.8 | 22% | |||
| 4th quarter | 484.0 | 29% | |||
| Total | 1686.5 | 100% |
48
Seasonality:International Business Operating segment
As a result of the seasonality of the beverage industry with respect to the categories in which we participate, our sales and production volumes are normally at their lowest in the second and third calendar quarters and at their highest in the first and fourth quarters (i.e., those months corresponding to the summer and holiday seasons in the region). The following table shows the annual sales volume for the International Business operating segment, including exports, during each quarter in the last three years:years (the International Business Operating segment includes BBO as of the third quarter of 2018):
Seasonality International Business Operating segment | ||||||
Year | Quarter | Sales Volume(*) | % of AnnualSales Volume | |||
|
| (millions of liters) |
| |||
|
|
|
| |||
2013 | 1st quarter | 142.4 | 28% | |||
| 2nd quarter | 87.3 | 17% | |||
| 3rd quarter | 109.1 | 22% | |||
| 4th quarter | 168.3 | 33% | |||
| Total | 507.1 | 100% | |||
|
|
|
| |||
2014 | 1st quarter | 149.5 | 28% | |||
| 2nd quarter | 96.7 | 18% | |||
| 3rd quarter | 114.9 | 21% | |||
| 4th quarter | 176.5 | 33% | |||
| Total | 537.5 | 100% | |||
|
|
|
| |||
2015 | 1st quarter | 154.6 | 27% | |||
| 2nd quarter | 108.9 | 19% | |||
| 3rd quarter | 127.3 | 22% | |||
| 4th quarter | 179.0 | 31% | |||
| Total | 569.7 | 100% | |||
|
|
|
| |||
(*) Includes Uruguay since September 2012 and Paraguay since January 2014 |
Seasonality International Business Operating segment | |||||
Year | Quarter | Sales Volume | % of Annual | ||
(millions of liters) | Sales Volume | ||||
2016 | 1st quarter | 158.3 | 28% | ||
2nd quarter | 98.1 | 17% | |||
3rd quarter | 128.6 | 22% | |||
4th quarter | 190.2 | 33% | |||
Total | 575.2 | 100% | |||
| |||||
2017 | 1st quarter | 174.1 | 26% | ||
2nd quarter | 124.1 | 18% | |||
3rd quarter | 155.3 | 23% | |||
4th quarter | 219.1 | 33% | |||
Total | 672.6 | 100% | |||
| |||||
2018 | 1st quarter |
| 212.6 |
| 26% |
| 2nd quarter |
| 160.5 |
| 19% |
| 3rd quarter |
| 192.0 |
| 23% |
| 4th quarter |
| 262.2 |
| 32% |
| Total |
| 827.3 |
| 100% |
49
Seasonality:Geographical Markets.Wine Operating segment
As a result of the seasonality of the beverage industry with respect to the categories in which we participate, our sales and production volumes are normally at their lowest in the first and fourth calendar quarters and at their highest in the second and third quarters (i.e., those months corresponding to the winter and autumn in the Southern Hemisphere). The following table shows the annual sales volume for the Wine Operating segment during each quarter in the last three years:
Seasonality Wine Operating segment | |||||
Year | Quarter | Sales Volume | % of Annual | ||
(millions of liters) | Sales Volume | ||||
2016 | 1st quarter | 30.0 | 22% | ||
2nd quarter | 37.6 | 27% | |||
3rd quarter | 38.2 | 28% | |||
4th quarter | 33.0 | 24% | |||
Total | 138.8 | 100% | |||
| |||||
2017 | 1st quarter | 31.8 | 22% | ||
2nd quarter | 36.4 | 25% | |||
3rd quarter | 40.8 | 28% | |||
4th quarter | 34.2 | 24% | |||
Total | 143.1 | 100% | |||
| |||||
2018 | 1st quarter | 29.6 |
| 21% | |
| 2nd quarter | 36.7 |
| 26% | |
| 3rd quarter | 37.7 |
| 27% | |
| 4th quarter | 34.8 |
| 27% | |
| Total | 138.9 |
| 100% |
Our principal beverages production facilities
50
8) Geographical Markets
Chile is our primary market in terms of sales, followed by Argentina. In 2016, 2017 and 2018, Chile represented 76%, 72% and 72%, respectively, of CCU’s consolidated Net sales, while Argentina, in the same time periods, represented 21%, 24% and 24%, respectively.
Net Sales for the year | |||
2016 | 2017 | 2018 | |
(millions of CLP) | |||
Chile(1) | 1,176,972 | 1,226,668 | 1,289,513 |
Argentina(2) | 329,585 | 413,467 | 421,607 |
Uruguay | 15,204 | 16,402 | 17,709 |
Paraguay | 37,136 | 41,824 | 43,565 |
Bolivia | - | - | 10,888 |
Total | 1,558,898 | 1,698,361 | 1,783,282 |
(1) Includes revenue from Net sales of the SSU and eliminations between geographical operations. In addition, includes Net sales of the Wine Operating segment. | |||
(2) Includes revenue from Net sales from the subsidiaries Finca La Celia S.A. and Los Huemules S.R.L. which are presented in Wine Operating segment and Chile Operating segment, respectively. |
CCU’s Net sales are locatedprimarily generated in Santiago. Santiagothe domestic beverage market in the countries in which we have operations in Latin America. In 2016, 2017 and 2018, the surrounding areas (referred to as the Metropolitan Region) account for approximately 40%domestic market represented 92%, 93% and 93%, respectively, of the population ofCCU’s consolidated Net sales.
Net Sales for the year | |||
2016 | 2017 | 2018 | |
(millions of CLP) | |||
Domestic | 1,429,152 | 1,572,617 | 1,664,614 |
Exports | 129,746 | 125,743 | 118,668 |
Total | 1,558,898 | 1,698,361 | 1,783,282 |
CCU’s Wine Operating segment exports wine from Chile and accounted for approximately 41% of our sales in Chile by volume in 2015. We also have one additional beer and non-alcoholic production facility in Temuco and two other beer facilities, in Valdivia (Kunstmann) in Punta Arenas (Austral), all of which are located inArgentina to over 80 countries around the southern region of Chile. We also have a non-alcoholic production and bottling facility in Antofagasta. Currently most of our brands are primarily supplied and distributed from these production facilities.
world. The following table provides the distribution of VSPT’sWine Operating segment’s exports from Chile during 2015in 2018 by geographical markets:market:
Market | Volume(1) | Percentage ofTotal Exports | Volume(1) | Percentage of | ||
| (thousands of liters) |
| (thousands of liters) | |||
Europe | 22,973 | 33% | 22,728 | 32% | ||
Latin America | 17,238 | 25% | 18,421 | 26% | ||
USA and Canada | 8,302 | 12% | 8,095 | 11% | ||
Asia and Oceania | 21,163 | 30% | 21,483 | 31% | ||
Others | 0 | 0% | ||||
Total | 69,676 | 100% | 70,727 | 100% | ||
(1) Excludes bulk exports | ||||||
(1) Includes Argentinean operations, excludes bulk wine. | (1) Includes Argentinean operations, excludes bulk wine. |
51
The Metropolitan Region represented approximately 419)%Competition of total domestic sales of VSPT products by volume in 2015.
Competition. Competition:
Chile Operating segment
The beer market in Chile is drivenhighly competitive, characterized by the competitive environmenta wide range of locally produced and imported beers, promoting among other factors an estimated average industry volume growth rate of 5% over the last ten years.
beers. Our largest competitor in the beer business is Cervecería Chile (a subsidiary of AB InBev), which commenced operations in Chile during the second half ofin 1991. Cervecería Chile’s primary beer brands are Becker, Corona, Báltica, Stella Artois and Budweiser. Cervecería Chile has one production facility, located in Santiagowhich is under expansion, and also imports products from various beer operations abroad. They distribute theirCervecería Chile distributes its products throughout Chile using a mix ofthrough direct distribution and third party distributors.wholesalers.
OtherAnother relevant playersplayer in the beer market in Chile include DESA, which, in addition to Cervecería Chile, distributes the Corona beer brand in Chile, andis Viña Concha y Toro, through its subsidiary Distribuidora Peumo, which imports Miller Genuine Draft and distributesCusqueña. Concha y Toro also owns a majority stake in Southern Brewing Company, makers of Kross craft beer.
Cooperativa Agrícola Pisquera Elqui Limitada (“Capel”), which we also compete with in the Miller beer brand alongpisco category, imports Carlsberg and Bear Beer. We also compete with a number of local craft beers. In addition, a number of smallsmaller direct importers of several international brands compete in the beer marketbrands in Chile.
Our principal competitors in the non-alcoholic beverages business are companies which produce, bottle and distribute soft drinks in Chile under licenses from The Coca-Cola Company (“TCCC”) and its affiliates. The two principal soft drinksdrink players in Chile are the licensees of TCCCThe Coca-Cola Company and us. TCCCThe Coca-Cola Company operates through Embotelladora Andina S.A. and Coca-Cola Embonor S.A. In October 2012, Embotelladora Andina S.A. merged with Coca-Cola Polar S.A., where Embotelladora Andina S.A. absorbed Coca-Cola Polar S.A.
Fruit nectars under the trade name “Watt’s” face competition from other soft drinks, which are sold by a number of local companies. Our principal competitor in the mineral, purified and flavored water business is Vital Aguas S.A. (a, a subsidiary of Embotelladora Andina S.A., onein which Coca Cola Embonor S.A. has a minority stake. Our principal competitor in the juice, ice tea and sports drink business is Vital Jugos S.A., a subsidiary of TCCC licenseesEmbotelladora Andina S.A., in Chile).
TCCC’s products are produced, bottled and distributed in Chile through two separate licensees which market soft drinks under the Coca-Cola, Coca-Cola Light, Coca-Cola Zero, Fanta, Fanta Light, Sprite, Sprite Zero, Quatro Light, Nordic Mist, Taí, Andina nectars and juices, and Kapo juice brand names.Coca Cola Embonor S.A. has a minority stake.
Our domestic competitors in the soft drinksdrink business have benefited from both internationally recognized brand labelsbrands (especially with regard to the Coca-Cola product line) and a large number of local bottling companies distributing their products throughout Chile. As a result of the formation of ECUSA, we also similarly benefited from the internationally recognized Pepsi brand as well as our competitive strengths, which include a portfolio of nationally well-known brands and a nationwide distribution system.
Given the high percentage of soft drink sales volumes in returnable containers coupled with the high cost of transportation to Chile, theThe spirits market for imported soft drinks in Chile is not significant in 2014. While there are no legal barriers to entry, we believe that the existing returnable bottle systemalso highly competitive, characterized by a wide range of locally produced and high transportation costs may continue to deter potential competitors from exporting soft drinks to Chile.
With respect toimported products. Our largest competitor is Capel, which produces pisco our competitorlocally and imports a number of spirits. Capel has nine production facilities located in Regions IIIthe Atacama and IVCoquimbo regions in the north of Chile and distributes its products throughout the country. Capel uses its own sales force, as well as third-party distributors.
While there are currently no significant legal or regulatory barriers to entering the Chilean beverages market, substantial investment would be required to establish or acquire production We also compete against Diageo Chile Limitada, which imports premium spirits such as Johnnie Walker whiskey and distribution facilitiesSmirnoff vodka, among others. As of mid-2018, Diageo’s productswere distributed by Embotelladora Andina and bottles for useEmbotelladora Embonor. We also compete against several other smaller importers of international brands, as well as local producers of pisco. In January 2016 CPCh divested its interest in Chile’s proprietary returnable bottling system, and to establish Compañía critical mass in sales volumes. Nevertheless, if long-term economic conditions in Chile continue to be favorable, other enterprises may be encouraged to attempt to enter the Chilean market. In addition, our brands in Chile may face increased competition from other beverages, produced or marketed by other parties.Pisquera Bauzá S.A. making Bauzá a competitor.
The following chart shows estimates of our Chile market share for the last five years based on store audits conducted by Nielsen.years:
Year | Chile Operating segment Volume market share | |
|
| |
2011 | 37.9% | |
2012 | 38.1% | |
2013 | 40.0% | |
2014 | 40.8% | |
2015 | 41.5% |
Year | Chile Operating segment Volume market share(1) |
| |
2014 | 40.9% |
2015 | 41.6% |
2016 | 42.3% |
2017 | 42.7% |
2018 | 43.4% |
(1) Source: Nielsen. The calculation of the weighted average for past periods includes markets and industries that CCU entered at a later date.
52
Competition:International Business Operating segment
Since 2003, after the agreement between Quilmes and AmBev, the Argentine beer market consisted of three principal brewing groups: AmBev-Quilmes, us and CASA Isenbeck. The principal proprietary brands of these companies are Quilmes, Schneider and Isenbeck, respectively. In December 2006, ICSA, a new competitor, entered the Argentine beer market. ICSA began its operations at the former AmBev brewery in Luján producing three beer brands: Palermo, Bieckert and Imperial, which had previously belonged to Quilmes. These assets were sold by AmBev-Quilmes in response to requirements of the antitrust authorities in Argentina. In 2008, these assets were bought by CCU Argentina and subsequently merged into CICSA.Compañía Industrial Cervecera S.A. acquired ICSA´s shares after receiving the approval of the Argentine antitrust authorities. In November 2010, SABMiller acquired CASA Isenbeck.
The following table shows estimates of the market share of our International Business Operating segment (including Beer and Cider (since 2011) in Argentina, CSD and Mineral Water in Uruguay) for the last five years based on ID Retail sources for Uruguay and Nielsen source for Argentina.
Year | International Business Operating segment Volume market share | |
|
| |
2011 | 16.8% | |
2012 | 15.7% | |
2013 | 16.9% | |
2014 | 17.1% | |
2015 | 18.2% |
Quilmes, the beer market leader in Argentina and our principal competitor, also has beer operations in Chile, Paraguay, Uruguay and Bolivia. As of December 31, 2015, Quilmes had five breweries in Argentina with an estimated total annual production capacity of 16001,600 million liters. Quilmes’ large size enables it to benefit from economies of scale in the production and distribution of beer throughout Argentina. In 1994, Companhia Cervejaria Brahma, one of the two largest beer producers in Brazil, commenced production at its new brewery in Luján, near Buenos Aires, which at present belongs to CCU Argentina. In addition, Warsteiner (today SABMiller), a large German brewer, commenced production at its new brewery in Zárate, also near Buenos Aires, with an annual production capacity estimated to be approximately 140 million liters. Prior to commencing production in Argentina, Companhia Cervejaria Brahma and Warsteiner competed in the Argentine market with imported beer. In July 1999, the merger of Companhia Cervejaria Brahma and Companhia Antarctica Paulista was announced, creating AmBev. This merger was finally approved in March 2000, creating one of the largest beverage producers in the world.
In May 2002, AmBev and Quilmes announced that pursuant to an agreement between both parties, AmBev would transfer all of its beer assets in Argentina, Bolivia, Paraguay and Uruguay to Quilmes in exchange for 26.4 million new B shares of Quilmes. Additionally, according to that announcement, AmBev would purchase from the controlling shareholders of Quilmes 230.92 million class A shares for US$USD 346.4 million. The agreement further stipulated that AmBev can purchase at the end of a seven-year period the remaining Quilmes shares owned by the current controlling group, the Bemberg family, with AmBev shares. The Bemberg family had the option to sell to AmBev their remaining class A shares during a period beginning with the end of the first year and ending with the seventh year after the agreement was announced. This option was exercised in April 2006. This transaction was approved by the Argentine antitrust authorities on January 13, 2003, subject to the condition that AmBev and Quilmes divest themselves of certain brands and the AmBev plant in Luján, near Buenos Aires, to a company currently not present in the Argentine beer market. On February 14, 2003, through our subsidiary CICSA, we filed a complaint before the Argentine federal courts in order to be eligible to participate in the acquisition of these assets. In February 2006, the Argentine Supreme Court of Justice ruled against our complaint. In December 2006, the Argentine authorities approved the sale of these assets to ICSA, a company owned by local investors. On March 3, 2004, AmBev and Interbrew announced an agreement to merge the two companies, creating the world’s largest brewer under the name InBev. This merger was closed in August 2004. On November 18, 2008 Anheuser Busch and InBev merged creating the global beer leader. Consolidation in the beer industry has resulted in larger and more competitive participants, which could change the current market conditions under which we operate.
In 2010 SABMillerSAB Miller bought Casa Isenbeck (Isenbeck, Warsteiner and La Diosa brands) and launched Miller Genuine Draft and Miller Lite beer in Argentina.
During 2015 SAB Miller plc accepted an offer from AB Inbev to merge its operations. As a result of the merger between AB Inbev and SAB Miller plc, Quilmes and CASA Isenbeck would become oneplayer. See “Risk Factors – Risks Relating to Our Business – Consolidationbecame one player. This merger was approved by the Argentine antitrust authorities in April 2018, conditioned on AB Inbev’s satisfaction of all its obligations under the beer industry may impact our market share.”
Our beer brands inswap agreement with CCU Argentina also face competition from other alcoholic beverages, such as wineS.A. and spirits, as well as from non-alcoholic beverages, such as soft drinks.Compañía Industrial Cervecera S.A.
In 2016 AB Inbev sold the Miller brands to Coors Brewing Company. In Argentina, CICSA signed an agreement with Coors Brewing Company to manufacture, package, commercialize and distribute the Miller brands through December 2026, with an automatic renewal for a period of five years if the renewal criteria have been satisfied.
On September 6, 2017, CCU and CCU Argentina reached an agreement with ABI for the early termination of the Budweiser license in Argentina in exchange for a portfolio of brands and several payments. See “Item 4: Information on the Company – A. History and Development of the Company”.
53
The following table shows estimates of the market share of our International Business Operating segment including: beer in Argentina; beer, carbonated soft drinks, juice, mineral and flavored water in Uruguay; beer, carbonated soft drinks, juice and mineral water in Paraguay; and beer, malt and carbonated soft drinks in Bolivia:
Year | International Business Operating segment Volume market share (1) |
2014 | 12.9% |
2015 | 13.8% |
2016 | 14.0% |
2017 | 14.7% |
2018(2) | 20.0% |
(1)Sources: For Argentina, Nielsen until 2017 and Ernst and Young for 2018. ID Retail for Uruguay, CCR for Paraguay and Ceismori for Bolivia. The calculation of the weighted average for past periods includes markets and industries that CCU entered at a later date.
(2)Figure including Bolivia would have been 15.8%.
Competition:Wine Operating segment
The wine industry is highly fragmented and competitive in both the domestic and the export markets. No single wine producer in Chile accounts for the majority of production and/or sales. In Chile, VSPT competes directly against all other Chilean wineries.Apart from VSPT, the leading wineries in Chile include Viña Concha y Toro S.A. (“Concha y Toro”), Viña Santa Rita S.A. (“Santa Rita”) and Bodegas y Viñedos Santa Carolina S.A. (“Santa Carolina”). In addition, VSPT competes against numerous medium-sized wineries, including Viña Undurraga S.A. (“Undurraga”), Cousiño Macul S.A. (“Cousiño Macul”) and Viña Montes, among others. We believe that VSPT’s primarylargest domestic competitors, such as Concha y Toro and Santa Rita, derive their relative competitive strengths from their wide portfolio of products, well-recognized brand names and established distribution networks. In 2015,2018, Concha y Toro and Santa Rita had a volume market share of approximately 28.1%29.2% and 31.6%30.0%, respectively. VSPT also competes with Santa Carolina and numerous medium-sized wineries, including Undurraga and Cousiño Macul, and many small wine producers that make up Chile’s informal wine market.producers.
Internationally, VSPT competes against Chilean producers as well as with wine producers from other parts of the world. According to information compiled by the WineriesWines of Chile Association,association, VSPT is the second-largest exporter of Chilean wines with a market share of approximately 13.5%12.3% in 2015,2018, excluding bulk wine. Our other principalmain Chilean competitors, namely Viña Concha y Toro, Viña Santa Rita and Viña Santa Carolina had market sharesrepresented 30.5%, 5.3% and 5.0%, respectively, of 32.8%, 4.5% and 4.9%, respectively.total Chilean wine exports, excluding bulk wine, in 2018.
The following table shows estimates of the volume market share of our Wine Operating segment (excluding bulk wine sales) for the last five years accordingyears:
Year | Wine Operating segment Volume market share(1) |
2014 | 18.3% |
2015 | 18.0% |
2016 | 18.1% |
2017 | 18.2% |
2018 | 17.7% |
(1)According to Nielsen figures for domestic wine and Viñas de Chile for export figures.
Year | Wine Operating segment Volume market share |
|
|
2011 | 16.0% |
2012 | 17.3% |
2013 | 17.6% |
2014 | 18.3% |
2015 | 17.9% |
Other
Distribution Network. In Chile, we have an extensive and integrated distribution network for the sale and distribution of beer, soft drinks, mineral water, purified water, functional beverages, nectars, wine, pisco, rum, whiskey, vodka and sweet snacks products with capacity to reach approximately 134,363 points of sale. The network includes a total of 24 owned or leased warehouses and a network of independent transportation companies handled by TCCU. Sales are performed by category-specific sales forces and by Comercial CCU, which has a sales force of approximately 503 people who sell our products to approximately 46,417 customers in the northern area of Chile from Arica to Copiapó/Vallenar and in the mid-south area from Curicó/Talca through Coyhaique, except for Concepción. In the far south of Chile, in Punta Arenas, Comercial Patagona Limitada does the selling for all our products, reaching 538 customers. In the central partscalculation of the countryweighted average for past periods includes markets and in the City of Concepción, there are dedicated sales forcesindustries that focus on single lines of products. Product distribution is carried out by TCCU throughout the country or by Comercial Patagona Limitada in its territory.CCU entered at a later date.
In Argentina we have the capacity to reach 159,411 points of sale. Our network of sales and distribution for our products consists of six owned or leased warehouses, a direct sales force and 10 logistics operators serving approximately 89,500 customers and more than 78 supermarket chains stores. Approximately 19.1% of beer sales volume is served by two independent Coca Cola bottlers (mainly in the north and south of the country).
54
10)Plastic Bottles.Government RegulationThrough our subsidiary PLASCO, we own and operate a plastic factory in Renca which supplies most of the pre-forms, returnable and non-returnable bottles and caps, primarily used by us in the packaging of our soft drinks and water products. Additionally, PLASCO has three blowing bottle machines in ECUSA at Santiago facilities and two in Antofagasta.
The manufacturing of both returnable and non-returnable plastic bottles involves a two-step process. The first step consists of an injection molding process, which manufactures pre-forms from PET resin. The second step involves blowing plastic bottles from the molded pre-forms. We purchase resin and complete the two-step process in order to fulfill the majority of our bottling requirements. In some cases, we purchase pre-forms manufactured by third party suppliers and complete only the bottle-blowing step at our own facilities.
The manufacturing of plastic caps for carbonated soft drinks and water also involves a two-step process. The first consists of a compress molding process, which manufactures caps from PP resin. The second step is the decoration of plastic caps with an offset printing process. For juices and Gatorade we produce caps in a one step process with another raw material (HDPE).
Government Regulation
Government Regulation in Chile
We are subject to the full range of governmental regulation and supervision generally applicable to companies engaged in business in Chile. These regulations include labor laws, social security laws, public health, consumer protection, environmental laws, securities laws, and antitrust laws. In addition, regulations exist to ensure healthy and safe conditions in facilities for the production, bottling, and distribution of beverages. For a more detailed discussion of environmental laws, see “Item 4.D.4. Information on the Company – E. Environmental Matters”.
Regulations specifically concerning the production and distribution of “alcoholic beverages” are contained in Chilean Law N°18,455 and its Ordinance, which set the standards for human consumption of such beverages, by minutely describing the different types of alcohol; the minimum requirements that must be met by each class of beverage; raw materials and additives that may be used in their manufacture; their packaging and the information that must be provided by their labels; and the procedure for their importation, among others.
Additional regulations concerning wine origin denominations are contained in Executive Decree N° 464 of the Ministry of Agriculture, dated December 14, 1994, as amended, which also laid out the wine-growing regions and set rules regarding grape varieties, vintage year, labeling and selling requirements. Pisco origin denominations, also applicable to us, are regulated in Executive Decree N° 521 dated May 27, 2000 of the Ministry of Agriculture and likewise contains provisions relating to pisco producing regions, raw material standards, manufacturing procedures, packaging and labeling.
The large-scale production of alcoholic beverages does not need any licenses or permits other than those required for the general run of commercial and industrial enterprises engaged in the manufacture of consumer commodities.
On January 19, 2004According to Law N°19,925 was published,enacted in 2004, which amended and restated the Act on Sale and Consumption of Alcoholic Beverages (former Law N°17,105).
All, all establishments dealing in alcoholic beverages, whether wholesale or retail, require a special municipal license, the cost of which is fixed by the law and varies according to the nature of the outlet or point of sale (i.e. liquor store, tavern, restaurant, hotel, warehouse, etc.). We are in possession of all licenses necessary for our wholesale operations.
Law N°19,925 also set new opening and closing hours; limited geographical areas for the sale of alcohol; reduced the maximum number of licenses to be granted by zones and population; increased criminal liability for selling alcohol to persons under eighteen years of age; and tightened the restrictions, imposing prison sentences and higher fines, among others, for violations formerly deemed lighter. One of its most important innovations iswas to forbid the sale of alcohol to minors at all outlets, and not just for on-premises drinking (the only exception retained is the case of children who are served meals when accompanied by their parents).
The regulatory agency for alcoholic beverages is the Servicio AgricolaAgrícola y Ganadero (“SAG”).
The production, bottling and marketing of non-alcoholic beverages is subject to applicable sanitary legislation and regulations, particularly the Sanitary Code and the Food Ordinance (the Reglamento“Reglamento Sanitario de los Alimentos)Alimentos”).
Non-alcoholic beverages are also subject to the provisions of Law N° 20,606 on Nutritional Composition of Food and Advertising enacted in 2012, Decree No.N° 13 of the Ministry of Health which was enacted on June 26, 2015, which amendedamending the Food Ordinance referred to above, and Law N° 20.86920,869 on Food Advertising, enacted on November 13, 2015, and Supreme Decree N° 1 of the of Ministry of Health enacted on December 11, 2017 and effective as of June 11, 2018, which set certain restrictions on and requirements for the advertising, labeling and marketing of foods that are qualified as " high""high” in calories or any of the defined critical nutrients, such as sodium, sugar and saturated fats.
The third phase of the regulation is expected to go into effect in June 2019, reducing the maximum permitted calorie level (see table). We have taken measures to mitigate the impact of this new law.
55
Phase 1 | Phase 2 | Phase 3 | |
| June 2016 | June 2018 | June 2019 |
Calories kcal/100ml | 100 | 80 | 70 |
Sodium mg/100ml | 100 | 100 | 100 |
Sugar g/100ml | 6.0 | 5.0 | 5.0 |
Saturated fat g/100ml | 3.0 | 3.0 | 3.0 |
Law N°19,937, which was enacted in 2004, and fully operative by February 2004,2006, established a newthe structure and powers for the current Sanitary Authority, and became effective on January 1, 2005 and was fully operative by February 2006.Authority. The Servicios de Salud (“Health Services”) was replaced by the Ministry of Health’s Regional Offices, which constitute the new Sanitary Authorities, and inspect plants on a regular basis, taking samples for analysis, directing the adoption of new safety procedures and applying fines and other penalties for infringement of regulations.
The production and distribution of mineral water is also subject to special regulation.regulation, Supreme Decree N° 106 of Ministry of Health enacted on January 22, 1997, as amended, as well as the Food Ordinance referred to above. Mineral water may only be bottled directly from sources, which have been designated for such purpose by a Supreme Decree signed by the President of Chile. The competent Sanitary Authority provides a certification of the data necessary to achieve such a designation. All of our facilities have received the required designation.
Independently of the products manufactured or services provided in each plant or facility, the premises are also regularly inspected by the Sanitary Authorities, regarding sanitary and environmental conditions, labor safety, and related matters.
There are currently no material legal or administrative proceedings pending against us in Chile with respect to any regulatory matter. We believe that we are in compliance in all material respects with all applicable statutory and administrative regulations with respect to our businesses in Chile.
Government Regulation in Argentina
We are subject to the full range of governmental regulation and supervision generally applicable to companies engaged in business in Argentina, including social security laws, public health, consumer protection and environmental laws, securities laws and antitrust laws. As closely held corporations, our subsidiaries in Argentina are principally governed by Law N° 19,550 on commercial companies included in the Civil and Commercial Code.
National Law N°18,284 (the Argentine Food Code, or the “Food Code”) regulates the manufacturing, packaging, import, export and packagingmarketing of food and beverages. The Food Code provides specific standards with which manufacturing plants must comply and regulates the production of food and beverages mentioned in the Food Code. The Food Code also specifies the different methods in which beer may be bottled as well as the information to be provided on labels. National Law N° 24,788, enacted in March 1997, establishedand its Regulatory Decree N° 688/2009, regulates the sale and consumption of alcoholic beverages and its advertising and establishes the national minimum age requirements for the purchase of alcoholic beverages. Under this lawLaw, the sale of alcoholic beverages is not permitted to persons under 18 years of age, and the health authorities of each province undertake the enforcement of the Food Code. In theFederalthe Federal Capital and many provinces of Argentina, local law restricts the sale of alcoholic beverages, particularly between the hours of 11 p.m. and 8 a.m., and establishes harsh penalties for infringement. Additionally, Law N° 5,708 also establishes further advertising requirements for the Federal Capital.
There are currently no material legal or administrative proceedings pending against us in Argentina with respect to any regulatory matter. We believe that we are in compliance in all material respects with all applicable statutory and administrative regulations with respect to our business in Argentina.
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Government Regulation in Uruguay
In Uruguay, we are subject to the full range of governmental regulation and supervision generally applicable to companies engaged in business in said country. As a closedclosely held corporation, our subsidiary issubsidiaries are principally governed by Law N° 16,060, which regulates all commercial companies.
The main applicable laws are Decree N° 315/94 containing the National Bromatological Regulations, Code of Children and Adolescents regulating aspects related to sale and advertising of alcoholic beverages, Law No.N° 17,849 and its regulatory decreeRegulatory Decree N° 260/07 regulating Integrated Packaging Management System, Mercosur Technical Regulations for labeling of packaged food, Law N° 18,159 regulates the promotion and defense of competition, and Law N° 19,196 governing the criminal liability of employers for breach of occupational safety rules when it threatens or causes damage to the lives of workers.
There are currently no material legal or administrative proceedings pending against us in Uruguay with respect to any regulatory matter. We believe that we are in compliance in all material respects with all applicable statutory and administrative regulations with respect to our business in Uruguay.
Government Regulation in Paraguay
In Paraguay, Bebidas del Paraguay and Distribuidora del Paraguay S.A. are governed by the laws of the Republic of Paraguay, in particular by Law N° 1,034/83 of Merchants, and Articles 1048N° 1,048 to 1159N° 1,159 of Law N° 1183/1,183/85 Civil Code and its subsequent amendments: (i)amendments, Law N° 388/94 creating detailed rules on the establishment or formation, capital and powers of the assemblyshareholders’ meetings of corporations, and (ii) Law N° 3228/3,228/07 which, in turn, modifies N° 388/94 regarding formalities for the organization of corporations.corporations, and Law N° 5,895/17 that establishes transparency rules in the corporate governance of companies constituted by shares, and Decree
N° 9,043/17 as amended, that regulates Law N° 5,895/17 and establishes fines in case of non-compliance.
In addition, for the import, sale and advertising of alcoholic and non-alcoholic beverages, the corporation Bebidas del Paraguay is subject to the provisions of the Health Code Law N° 836/80, Law N° 1,334/98 of Consumer and User Protection, Law N° 1,333/98 on advertisement and promotion of tobacco and alcohol, Law N° 1.642/1,642/00 prohibiting the sale of alcoholic beverages to minors and its consumption on public roads, Executive Decree N° 1635/1,635/99 and Resolution of the Ministry of Public Health and Social Welfare N° 643/12 regulating aspects relating to registration of food products.products as amended, among others.
There are currently no material legal or administrative proceedings pending against us in Paraguay with respect to any regulatory matter. We believe that we are in compliance in all material respects with all applicable statutory and administrative regulations with respect to our business in Paraguay.
B.Government Regulation in BoliviaOrganizational Structure
BBO is a closely held corporation governed by the laws of the Plurinational State of Bolivia, in particular by Chapter V (Corporations) of Decree Law N° 14,379 Commercial Code, which establishes provisions on the constitution of companies, rights and obligations of the shareholders, the administration and control bodies of the company, as well as the classification of the shares, issuance rules and records.
In addition, in view of the corporate purpose of BBO and the commercial activities carried out in Bolivia, regarding the production, import, export and marketing of alcoholic and non-alcoholic beverages, the following rules are applicable: Law N° 1,990 or General Law of Customs and Supreme Decree N° 25.870 that contains the regulation of the General Law of Customs, both regulate the regime of imports and exports, Law N° 2.061 of the National Service of Agricultural Health and Food Safety (“SENASAG”), regulating entities responsible for administering the agricultural health and food safety regime in the country, Resolution N° 15/2018 that contains the regulation for the classification and registration of food, issued by SENASAG, Law N° 259 on control of sale and consumption of alcoholic beverages, and Supreme Decree N° 29,519 that regulates competition and consumer protection.
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There are currently no material legal or administrative proceedings pending against us in Bolivia with respect to any regulatory matter. We believe that we are in compliance in all material respects with all applicable statutory and administrative regulations with respect to our business in Bolivia.
Government Regulation in Colombia
CCC and ZF CC are simplified stock corporations governed by the laws of the Republic of Colombia, in particular, with respect to their corporate existence and operation, Law N° 1,258 of 2008, Law N° 222 of 1995 and the Colombian Commercial Code. These companies are closely held corporations and may not become issuers of listed securities in the stock exchange while they remain organized as simplified stock corporations. In connection with laws applicable to ongoing businesses in Colombia, generally, the two companies are subject to laws regulating labor matters, social security, compliance, data protection, consumer protection, health and sanitary oversight and registrations, environmental matters (particularly, in connection with the recently inaugurated beer plant of ZF CC near Bogotá) and tax matters, among others.
ZF CC must comply with the free trade zone regime, including Decree N° 2,685 of 1999, Law N°1,004 of 2005, Decree N° 2,147 of 2016, Decree N° 390 of 2016 and Decree N° 349 of 2018 and its approved master plan (plan maestro). It has been announced by the Colombian Government that the Ministry of Treasury and Public Credit will soon issue a new decree compiling the free trade zone regulation (Decree Project No. 0910).
Furthermore, both CCC and ZF CC are subject to the regulations included in Decree N° 1,686 of 2012, which sets forth the sanitary requirements for the production, packaging, advertising, transportation, import and marketing of alcoholic beverages destined for human consumption. On the other hand, Law N°124 of 1994 regulates the sale and consumption of alcoholic beverages and its advertising and establishes the national minimum age requirements for the purchase of alcoholic beverages. Under this law, the sale of alcoholic beverages is not permitted to persons under 18 years of age.
Law N° 223 of 1995, and regulations issued thereunder, regulate local taxes to which provinces (departamentos) in Colombia are entitled in connection with the production and distribution of alcoholic beverages, including beers.
There are currently no material legal or administrative proceedings pending against us in Colombia with respect to any regulatory matter. We believe that we are in compliance in all material respects with all applicable statutory and administrative regulations with respect to our business in Colombia.
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C. Organizational Structure
Ownership Structure as of March 31, 20162019
We are controlled by IRSA, which owns directly and indirectly 60.0% of the shares of our common stock. IRSA, since 1986, was a joint venture between Quiñenco and the Schörghuber Group through its wholly owned subsidiary FHI of the Netherlands. OnIn April 2003, the Schörghuber Group sold FHI to Heineken Americas B.V., a subsidiary of Heineken International B.V. FHI and Heineken International B.V. formed Heineken Chile Ltda., through which 50% of IRSA shares are held. On December 30, 2003, FHI merged into Heineken Americas B.V. Currently, Quiñenco and Heineken Chile Ltda., a Chilean limited corporation controlled by Heineken Americas B.V., are the only shareholders of IRSA, each with a 50% equity interest.
Quiñenco is the holding company of one of the largest and most diversified business conglomerates in Chile, with investments in various sectors of the Chilean economy. Apart from CCU, Quiñenco’s principal holdings include Banco de Chile (a leading financial institution in Chile), Invexans S.A. (the largest shareholder of the French cable producer Nexans S.A.), Tech Pack S.A.(1) (a leading manufacturer of flexible packaging in Latin America), Empresa Nacional de Energía Enex S.A. (the second-largest retail fuel distributor in Chile), Compañía Sud Americana de Vapores S.A. (main shareholder of Hapag-Lloyd A.G., one of the largest container ship operatorsliners worldwide), and Sudamericana Agencias Aéreas y MarítimasSociedad Matriz SAAM S.A. (one of the largestmain port operators in South America and the fourth largestleading tugboat operator worldwide)in America).
Heineken, the Dutch brewer, is one of the largest brewers in the world with over 156 breweries inwhich markets and sells more than 70300 brands in 190 countries and 73,767has more than 85,000 employees worldwide. Heineken group’s beer volume was 188.3233.8 million hectoliters during 2015, and its principal brands are Heineken and Amstel.
2018.
The following table provides our significant subsidiaries as of December 2015:2018:
Subsidiaries | Country | Total Ownership Interest | ||
Cervecería CCU | Chile | 100.00% | ||
CCU Argentina | Argentina |
| ||
ECUSA | Chile |
| ||
| Chile |
| ||
|
|
| ||
|
|
|
(1)On April 18, 2016, Tech Pack S.A. (“Techpack”) announced an agreement to sell its subsidiary Alusa S.A. to Amcor, the main flexible packaging manufacturer in the world. The transaction is subject to approval from Techpack’s shareholders and antitrust authorities in certain jurisdictions, among others.
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C.D.Property, Plants and Equipment
Set forth below is information concerning our production facilities as of December 31, 2015,2018, all of which are owned and operated by us or our subsidiaries.
For the Chile Operating segment, we had an aggregated Supply Capacity per month18of 334.5 438.2million liters9 with a Utilized Capacity during peak month210of 56.01%64.3%. The annual Nominal Installed Capacity for our two main businesses in Chile (beer and soft drinks)this segment is 27.848.2 million hectoliters.
Our Chile Operating segment total facilities size is 587,765 square meters (total built area including warehousing logistics activities related to the production process).
Set forth below is a list of our 15 principal production facilities.facilities:
Chile Operating segment | ||||
| Type of Plant | |||
| Beer |
| ||
Valdivia | Beer | |||
|
| |||
Temuco | Mixed | |||
|
| |||
|
| |||
Antofagasta | Non-alcoholic beverages |
| ||
Coinco | Non-alcoholic beverages | |||
Santiago -Renca | Non-alcoholic beverages | |||
Casablanca | Non-alcoholic beverages | |||
|
| |||
|
| |||
| Coronel (Manantial) | Non-alcoholic beverages (HOD) | ||
Santiago- Quilicura (Manantial) | Non-alcoholic beverages (HOD) | |||
Puerto Montt (Manantial) | Non-alcoholic beverages (HOD) | |||
Pisco Elqui | Spirits | |||
Sotaquí | Spirits |
| ||
Monte Patria | Spirits |
| ||
Salamanca | Spirits |
| ||
Ovalle | Spirits |
|
| |
|
The CCU Renca project11will represent a total investment of USD 380 million, which includes a new distribution center and a new production plant for non-alcoholic beverages, both incorporating the latest technologies for efficient and sustainable production and distribution. The distribution center, launched at the end of 2018, is the largest in the company, with a warehouse of 22,500 square meters and has 100% electric mobile equipment. The new production plant, which we expect to begin to build this year, will be an operation that contemplates zero residues to sanitary landfill from the outset.
For the International Business Operating segment, we had an aggregated Supply Capacity per month of 79.1110.6 million liters with a Utilized Capacity during peak month of 79.16%81.3%.
Our The annual Nominal Installed Capacity for the International Business Operating segment total facilities sizebusiness is 232,194 square meters (total built area including warehousing logistics activities).
12.1 million hectoliters.
18Supply Capacity per month is defined as nominal installed production capacity for the current product/packaging mix during 25 days per month and 3 shifts per day.Theday. The calculated slack (spare) capacity does not necessarily indicate real slack capacity. The real production capacity is less than the nominal installed production capacity as adjustments are required for real machinery performance, packaging mix, availability of raw materials and bottles, seasonality within the months and other factors. As a result, we believe that the peak monthly capacity utilization rates shown above understate real capacity utilization and that slack capacity is overstated.
29 Includes Manantial.
10Utilized Capacity During Peak Month is equal to production output as a percentage of Nominal Installed Production Capacity during our peak month for each respective plantplant.
11See “Item 5: Operating and Financial Review and Prospects – B. Liquidity and Capital Resources – Capital Expenditures.”
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Our International Business Operating segment total facilities size is 403,656 square meters (total built area including warehousing logistics activities).
Set forth below is a list of our 10 principal production facilities.
facilities:
International Business Operating segment | |||
| Country | Type of Plant | |
| |||
Buenos Aires (Luján) | Argentina | Beer | |
Santa Fé | Argentina | Beer | |
Salta | Argentina | Beer | |
| Paraguay | Beer | |
| Bolivia |
| |
| Uruguay | Non-alcoholic beverages | |
San Antonio | Paraguay | Non-alcoholic beverages | |
Santa Cruz | Bolivia | Non-alcoholic beverages | |
Allen | Argentina | Cider | |
Ciudadela | Argentina | Cider | |
|
|
For the Wine Operating segment, we had an aggregated Nominal FilingFilling Capacity of 72,00080,040 liters per hour and a Storage Capacity in Tanks and Barrels of 88.894.0 million liters. The total facilities size is 150,946153,706 square meters.
Set forth below is a list of our four principal production and two storage facilities.facilities:
| WineOperating segment | ||||
| Country | Type of Plant | |||
Molina | Chile | Wine Production | |||
Totihue | Chile | Wine Production | |||
| Chile | Wine Production | |||
Finca La Celia | Argentina | Wine Production | |||
Lontué | Chile | Wine Storage | |||
Viña Mar | Chile | Wine Storage |
D.Our two principal production facilities through joint ventures12 are set forth below:
Joint Ventures | ||
Location | Country | Type of Plant |
Punta Arenas | Chile | Beer(1) |
Sesquille | Colombia | Beer(2) |
(1) Production in the Punta Arenas facility is under licensing agreements and, accordingly, we do not consolidate this facility. | ||
(2) In February 2019, CCU through its joint venture with Grupo Postobón, started beer production at the new three million hectoliter plant. Accordingly, we do not consolidate this facility. |
12See “Item 4: Information on the Company – B. Business Overview – Overview – Joint Ventures and Associated Companies”.
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In addition to our production plants listed above, we have 34 owned and 7 leased distribution centers in the countries in which we operate:
Own Distribution Centers | Country | Leased Distribution Centers | Country | |
Arica | Chile | Illapel | Chile | |
Iquique | Chile | La Vara | Chile | |
Calama | Chile | Castro | Chile | |
Copiapo | Chile | San Antonio | Chile | |
Coquimbo | Chile | Encarnacion | Paraguay | |
Ovalle | Chile | Coronel Oviedo | Paraguay | |
Llay Llay | Chile | Trinidad | Bolivia | |
Curauma | Chile | |||
Santiago Sur | Chile | |||
Rancagua | Chile | |||
Talca | Chile | |||
Chillan | Chile | |||
Talcahuano | Chile | |||
Los Angeles | Chile | |||
Valdivia | Chile | |||
Osorno | Chile | |||
Puerto Montt | Chile | |||
Coyhaique | Chile | |||
Cervecera | Chile | |||
Temuco | Chile | |||
Antofagasta | Chile | |||
Modelo | Chile | |||
Villarrica | Chile | |||
Renca | Chile | |||
Sauce Viejo | Argentina | |||
Cordoba | Argentina | |||
Rosario | Argentina | |||
Munro | Argentina | |||
Mendoza | Argentina | |||
San Juan | Argentina | |||
Pan de Azúcar | Uruguay | |||
Asunción | Paraguay | |||
Ciudad del Este | Paraguay | |||
La Paz | Bolivia |
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Chile
Our operations are subject to both national and local regulations in Chile relatingin relation to the protection of the environment.environmental protection. Regarding human health, the fundamental law in Chile is the Health Code, which establishes minimum health standards and regulates air and water quality, as well as sanitary landfills. The local Sanitary Authority is the governmental entity in charge of the enforcement of these rules and has the authority to impose fines.
The environmental framework is governed by Law N°19,300, enacted in 1994, as amended, which includes not only environmental protection rules but also rules concerning the preservation of natural resources. Among other matters, it creates the environmental impact assessment system which requires any future project or major amendment of an existingindustrial activity that may affect the environment to evaluate its possible environmental impact, in order to fulfill related regulations and to implement mitigation, compensation and restoration measures.
Law N°19,300 also creates a mechanism of pointthat establishes sources emission limits and environmental quality standards that are developed and detailed by specific regulations. In this sense, there is a special regulation for wastewater discharges into sewage systems, and another regulation for wastewater discharges into superficial water bodies, in both cases pursuant to a schedule of deadlines. Over the years, CCU implemented specific action plans in each operation, optimizing those emissions and,based on the location and wastewater quality, invested in highly efficient treatment plants. Such plants are also designed to generate boiler-suitable biogas.bodies. We are in compliancecomply with this law and related regulations in all material respects, having fulfilledrespects.
Over the years, CCU has implemented specific action plans in each of its operations through the Environmental Vision 2020, which seeks to achieve three objectives within the decade (2010 - 2020): a reduction of greenhouse gas emissions per hectoliter by 20%, a reduction of water consumption per hectoliter by 33%, and to reach 100% in the valorization of industrial solid waste.
In 2016, the Company took important steps in the area of environmental sustainability, including (1) our first satellite natural gas regasification plant at each relevant stageCCU’s Temuco plant, which allowed the conversion from heavy oil to natural gas, decreasing the plant’s CO2 emissions by 20%; (2) our mini hydroelectric power plant in Isla de Maipo, which generates 250 kilowatts of electrical power for the winery of Viña Tarapacá; and (3) a biogas plant in Molina, which operates exclusively with biological waste from the harvest.
In 2017, CCU was distinguished by the United Nations through its Pacto Global Chile Network, with the VIII Environmental Recognition 2017 granted by the Climate, Energy and Water Committee of the Chilean-British Chamber of Commerce (Carbon Footprint).
In 2018, we continued to make progress in our Environmental Vision 2020 plan, with the reduction in greenhouse gases reaching 24.4%; the decrease in water consumption of 42.2%; and the valorization of industrial waste by 98.5%. To support this last objective, CCU signed a Zero Waste to Landfill Clean Production Agreement (“CPA”), together with 29 other Chilean companies, as well as with the Chilean government’s Sustainability and Climate Change Agency (“ASCC”) and the Recycling Industry National Association. In this agreement, the participant companies committed to reducing to zero the waste that they send to landfills, by introducing circular economy practices, in order to avoid their generation or increase their recovery. Related to the reduction of Greenhouse Gas emissions, our Quilicura plant began to use biogas in its boilers inAugust 2018. InJanuary 2019, our subsidiary Plasco was recertified under ISO 50,001.
In June 2016, Law N° 20,920 was enacted, which establishes the framework for waste management, the extended responsibility of the producer (REP) and promotion of recycling, which names “priority products” that must be recovered by the producers who put them on the market. The priority products must be managed through recycling, recovery or final disposal through an individual or collective Waste Management System. Regarding the latter, the authority will impose recollection goals through specific regulations that are still under development. On November 30, 2017, the Regulations on Procedures of the REP Law were published. During 2018, regulations were issued that established the collection, valorization and other associated obligations for tires and we expect regulations for other priority products, including all requirements prescribed by them.packaging materials, to be issued in 2019.
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ThroughRelating to environmental pollution levels, Law N° 19,300 gives the possibility to the Office of the Secretary-General of the Presidency to define categories of highly polluted areas as “Latent Zone” and “Saturated Zone” through the enactment of Law N°20,417 in 2010 and Law N°20,600 in 2012 (amending Law N°19,300),a Supreme Decree. For the former category, the Ministry of Environmentmust establish decontamination plans, and the three governmental bodies (Environmental Superintendency, Environmental Assessment Service and specific Environmental Courts) were established, replacing all former activities of the CONAMA, the National Environmental Commission (or Comision Nacional del Medio Ambiente, or “CONAMA”). Those new governmental bodies are now responsible for the development, implementation and enforcement of various regulations regarding environmental management in relation to environmental standards, protection of natural resources, environmental education and pollution control, among other responsibilities.latter category, it must establish prevention plans.
Due to the high levels of air pollution in the Santiago metropolitan area,Metropolitan Area, the relevant authorities have implemented a decontamination plan, which includes different levelstypes of measures depending on the air quality and certain measures thatlevels, some of which can be imposed on industries. In the case of emergency situations, thoseemergencies, the companies comprising the industries classified as producing the highest levels of particle and gas emissions must suspend their activities. We are in compliance withcomply current regulations applicable to both our beer and soft drink facilities in the Santiago metropolitan areaMetropolitan Area in all material respects.
On October 4, 2016, a decontamination plan for Santiago City was approved (“Santiago Respira”). Santiago Respira includes new measures to reduce levels of pollution during winter. The plan includes a “low emissions area” that will only allow the circulation of newer models of trucks and may impose a permanent restriction on the circulation of vehicles with a “green seal” between May and August of each year.
Regarding the Tax Reform Act of 2014, and its amendments of 2016, an annual tax has been adopted, applicable to emissions from stationary sources over 50MWt. On December 2, 2016, a list of facilities subject to payment of such tax was published. Included on that list Cervecería CCU’s industrial plant located in Quilicura. Therefore during 2017, we are required to report our emissions on a monthly basis.
Finally according to the RE 2129 of July 29, 2016 from the General Water Authority (Dirección General de Aguas or “DGA”), owners of groundwater usage rights will be required to modify their extraction control systems and to report their results periodically to DGA.
There are currently no material legal or administrative proceedings pending against us in Chile with respect to any environmental matter. We believe that we are in compliance in all material respects with all applicable environmental regulations.
CCU received the VIII Environmental Recognition 2017 granted by the Climate, Energy and Water Committee of the British Chilean Chamber of Commerce, in the Carbon Footprint category. This distinction was awarded due to the electric trucks project that our logistics department implemented in the center of Santiago, as part of the new distribution model.
In 2018 CCU received recognition from the Environmental Ministry, for our 2017 registration in the carbon footprint program called “HuellaChile”.
Argentina
New laws and regulations have been enacted inIn Argentina, as a result of heightened community concerns for environmental issues. Consequently, there are several statutes imposing obligations on companies regarding environmental matters at the municipal, provincial and federal levels in accordance with the General Environmental Protection Framework (Law N° 25,675), which establishes the Basic Environmental Protection Budgets, forming the fundamentals to develop all legislation and national environmental policy. In many cases, private entities operating public utilities such as water supply and sewage are in charge of controlling and enforcing those regulations. Examples of new laws and regulations recently enacted are: (i) the National Register of Chemical Substances (Decree N° 900/12), which was implemented in January 2014 and aims to improve the traceability of chemical substances by means of strict control of all chemical substances that enter or leave the industrial plant, (ii) Decree N° 801/2015 regarding the global system of classification and labeling of chemical products, which based on Decree 3359/N° 3,359/2015 was implemented in April 2016 for pure substances, and will be implemented in January 2017 for mixed substances, and (iii) Law No.N° 26,190 the National Regime for the Use and Promotion of Renewable Sources of Energy, which was modified by Law N° 27,191 and regulated by Decree N° 531/2016, with the objective to gradually implement the Use of Renewable Sources of Energy in the plants.
Another important federal environmental legislation in Argentina is the Hazardous Waste Act (Law N°24,051), which is supplemented by additional provincial legislation, to enforce the provisions of the Hazardous Waste Act when specific federal tests indicate the need to do so. The application of the provisions of the Hazardous Waste Act depends upon the magnitude of the public health risk and whether those conditions exist in more than one province.oneprovince. Hazardous waste is defined broadly and includes any residue that may cause harm, directly or indirectly, to human beings that may pollute the soil, water, atmosphere or the environment in general. Generally, claims involving hazardous waste give rise to strict liability in the event of damage to third parties. In addition, each province in which we operate facilities has enacted environmental legislation with broad and generic goals, as well as water codes and related agencies to regulate the use of water and the disposal of effluents in the water.
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Over the last several years CCU Argentina has implemented a complete program for the treatment of its industrial waste, which involves the separation, collection, transportation and reusing of thegeneratedthe generated solid waste, in compliance with the Industrial Waste Act (Law N° 25,612), as well as wastewater treatment plants. The waste program is part of our constant effort to improve environmental conditions.
The main features of our wastewater treatment plants are their production of biogas which is used as boiler fuel, their minimum space requirements and its low electric power consumption. Also, all of CCU’s major operations facilities have been awarded theCertificado de Aptitud Ambiental (Environmental Aptitude Certificate) which is the main document endorsing the company’s environmental management in each provincial state.
Notwithstanding the foregoing, the regulation of matters related to environmental protection is not as well developed in Argentina as in the United States and certain other countries. Accordingly, we anticipate that additional laws and regulations will be enacted over time with respect to environmental matters.
While we believe that we will continue to be in compliance with all applicable environmental regulations, we cannot assure you that future legislative or regulatory developments will not impose restrictions on us, which could result in material adverse effects on our businesses, results of operations and our financial condition. There are currently no material legal or administrative proceedings pending against us in Argentina with respect to any regulatory matter. We believe that we are in compliance in all material respects with all applicable statutory and administrative regulations with respect to our business in Argentina.
ITEM 4A: Unresolved Staff Comments
Not applicable.
ITEM 5: Operating and Financial Review and Prospects
CCU is a diversified beverage company operating principally in Chile, Argentina, Bolivia, Colombia, Paraguay and Uruguay. CCU is the largest Chilean brewer, the second-largest Chilean soft drinks producer and the largest Chilean water and nectar producer, the second-largest Argentine brewer, the second-largest Chilean wine producer and the largest pisco distributor. It also participates in the HOD, rum and confectionery industries in Chile, in the beer, water and soft drinks industries in Uruguay, and in the soft drinks, water and nectar industries and beer distribution in Paraguay and Bolivia. The Company has licensing and/or distribution agreements with Heineken Brouwerijen B.V., Anheuser-Busch Incorporated, PepsiCo Inc., Schweppes Holdings Limited, Guinness Overseas Limited, Société des Produits Nestlé S.A., Pernod Ricard and Coors Brewing Company.
We face certain key challenges and risks associated with our business. These risks include competition within the marketplace, managing operating costs and the integration and expansion of new products. We are the leading brewerybusiness, as highlighted in Chile; however, competitors are investing in this market and launching new products, and therefore, we must concentrate on competitive pricing and marketing strategies to maintain our market share. Operating costs are subject to variations depending on plant efficiency, product mix and production cycles, and also on U.S. dollar commodities prices and the rate of exchange from Chilean pesos to U.S. dollars or Euros. Our principal costs include the cost of raw and packaging materials, distribution and marketing costs. We continue to sell and deliver new products to our customers, including products through new licensing agreements and new products through internal development.Item 3.D. Risk Factors.
The analysis of our results is based on financial statements prepared in accordance with IFRS as issued by the IASB. The three most recent years are considered in the discussion below.
In 2015, we reached new historical records in sales volumes and Net sales revenues, obtaining consolidated Net sales of CLP 1,498,372 million, of which 60% was accounted for from the Chile Operating segment; 27% from the International Business Operating Segment; 13% from the Wine Operating Segment, and the remainder from sales of other products and/or consolidation eliminations. Our Net sales revenues increased15.4% over the prior year as we increased sales of existing products and had a higher average price per product.
Circular Letter N° 856
On September 29, 2014 Act No.N° 20,780 was published in Chile, regarding the Tax Reform Act which introducesintroduced amendments, among others, to the income tax system. The Tax Reform Act providesestablishes that corporations will apply by defaultas of 2017 Open Stock Corporations should calculate their taxes based on the "Partially“Partially Integrated System", unless a future extraordinary shareholders´ meeting agreesSystem” without the possibility to opt for the "Attributedalternative “Attributed Income Regime”.
The difference between assets and liabilities"Partially Integrated System" provides for deferred taxes that occur as a direct effect of thegradual increase in the First Category Income tax rate, introduced by Act No. 20,780going from 20% to 21% for the 2014 business year, to 22.5% for the 2015 business year, to 24% for the 2016 business year, to 25.5% for the 2017 business year, and according to 27% starting in the Circular Letter N°856 (“Oficio Circular” N°856) of the SVS, has been accounted against Equity, under Retained earnings. As of September 30, 2014, the total effect registered against the Company’s Equity amounted to CLP 14,395 million.2018 business year.
Consequently, since December 31, 2014, in addition to the financial statements issued to comply with the rules and instructions of the SVS, the Company issues financial statements in which the adjustment caused by the application of the new tax rates in Chile to the difference in assets and liabilities for deferred taxes, is registered against income in order to comply with IFRS as issued with the IASB, the regulation required by the Securities and Exchange Commission (“SEC”).65
ADJUSTED OPERATING RESULT
The following discussion should be read in conjunction with our consolidated financial statements and the notes included thereto in this annual report. In the following discussion, Chilean pesoCLP amounts have been rounded to the nearest million pesos, unless otherwise indicated. Certain amounts (including percentage amounts) which appear herein have been rounded and may not sum to the totals shown.
We evaluate the performance of the segments based on several indicators, including Adjusted Operating Result, is aAdjusted Operating Result Before Depreciation and Amortization (ORBDA), ORBDA margin (% of ORBDA of total revenues for the Operating segment), volumes and sales revenues. Sales between segments are conducted using terms and conditions at current market rates.
Adjusted Operating Result and ORBDA are non-IFRS financial measure, as it ismeasures. Adjusted Operating Result reflects a subtotal in our Consolidated Statement of Income.Note 6 under Operating segment’s additional information (pageF-46). A non-IFRS financial measure does not have a standardized meaning prescribed by either IFRS or U.S. GAAP. For management purposes, Adjusted Operating Result is defined as earningsNet income before other gains (losses), net financial expense, equity and income of joint ventures, foreign currency exchange differences, result as per adjustment units and income taxes.taxes (or alternatively, Adjusted Operating Result can be defined as “Income from operational activities” excluding “Other gains/(losses)”). For management purposes, ORBDA is defined as Adjusted Operating Result before depreciation and amortization.
Our managementThe Company believes that the use of “Adjusted Operating Result” provides investors with a better understanding of the day-to-day performance of the Company, because elements included under “Other gains/(losses)” such as impacts derived from derivative contracts and marketable securities are not considered part of the core business of each Operating segment and therefore are managed at the corporate level. The performance of each Operating segment is assessed by this measure, and for the same reason this measure is used by each segment’s Chief Operating Decision Maker to assess the performance of the Operating segments. This measure eliminates items that have less bearing on our operating performance and thus highlights trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. The Company believes that disclosure of Adjusted Operating Result provides useful information to investors and financial analysts in their review of our operating performance and their comparison of our operating performance to the operating performance of other companies in the beverage industry, but it may not be comparable to similarly titled indicators used by other companies.Further, the Company believes that the use of ORBDA provides useful information to investors and analysts in their review of financial results as it is a common figure disclosed by other companies to calculate financial ratios in order to have comparable measures used in the industry. Neither Adjusted Operating Result is not a substitutenor ORBDA are substitutes for IFRS measures of earnings.
Adjusted Operating Result and ORBDA have important limitations as analytical tools. For example, they do not reflect (a) our cash expenditures or future requirements for capital expenditures or contractual commitments; (b) changes in, or cash requirements needed for, our working capital needs; (c) the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; or (d) tax payments or distributions to our parent to make payments with respect to taxes attributable to us that represent a reduction in cash available to us. Although we consider the items excluded in the calculation of non-IFRS measures to be less relevant to the evaluation of our performance, some of these items may continue to take place and accordingly may reduce the cash available to us.
The following table presents the Net sales and Adjusted Operating Result, and the relevant percentage as a component of Net sales, for each of our Operating segments:segments. Starting from the third quarter of 2016, the Company has incorporated into the Chile Operating segment the business activities performed by the Strategic Service Units (SSU), which include Transportes CCU, Comercial CCU, CRECCU and Plasco. Prior to December 2015, the revenue and expenses of the Strategic Service Units were reported under Others.
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| Year Ended December 31, | |||||
| 2013 | 2014 | 2015 | |||
| (in millions of CLP, except percentages) | |||||
Net sales |
|
|
|
|
|
|
Chile Operating segment | 765,196 | 63.9% | 830,341 | 64.0% | 902,021 | 60.2% |
International Business Operating segment | 282,435 | 23.6% | 299,668 | 23.1% | 405,714 | 27.1% |
Wine Operating segment | 152,255 | 12.7% | 172,349 | 13.3% | 189,515 | 12.6% |
Other | -2,660 | -0.2% | -4,391 | -0.3% | 1,122 | 0.1% |
Total | 1,197,227 | 100.0% | 1,297,966 | 100.0% | 1,498,372 | 100.0% |
|
|
|
|
|
|
|
Operating Result |
|
|
|
|
|
|
Chile Operating segment | 147,367 | 78.3% | 129,740 | 72.1% | 153,924 | 75.1% |
International Business Operating segment | 26,693 | 14.2% | 28,152 | 15.6% | 30,266 | 14.8% |
Wine Operating segment | 12,913 | 6.9% | 24,780 | 13.8% | 32,533 | 15.9% |
Other | 1,292 | 0.7% | -2,752 | -1.5% | -11,786 | -5.8% |
Total | 188,266 | 100.0% | 179,920 | 100.0% | 204,937 | 100.0% |
| Year Ended December 31, | |||||
| 2016 | 2017 | 2018 | |||
| (in millions of CLP, except percentages) | |||||
Net sales |
|
|
|
|
|
|
Chile Operating segment(1) | 997,376 | 64.0% | 1,047,119 | 61.7% | 1,109,574 | 62.2% |
International Business Operating segment(2) | 370,109 | 23.7% | 460,317 | 27.1% | 483,926 | 27.1% |
Wine Operating segment(3) | 201,402 | 12.9% | 204,454 | 12.0% | 206,519 | 11.6% |
Other | (9,989) | (0.6)% | (13,530) | (0.8)% | (16,736) | (0.9)% |
Total | 1,558,898 | 100.0% | 1,698,361 | 100.0% | 1,783,282 | 100.0% |
|
|
|
|
| ||
Adjusted Operating Result(4) |
|
|
|
| ||
Chile Operating segment(1) | 154,551 | 77.0% | 182,784 | 77.8% | 202,662 | 43.2% |
International Business Operating segment(2) | 20,815 | 10.4% | 45,266 | 19.3% | 266,345 | 56.8% |
Wine Operating segment(3) | 37,189 | 18.5% | 24,519 | 10.4% | 22,667 | 4.8% |
Other | (11,903) | (5.9)% | (17,676) | (7.5)% | (22,952) | (4.9)% |
Total | 200,652 | 100.0% | 234,894 | 100.0% | 468,722 | 100.0% |
|
|
|
|
|
|
|
Volume (in million liters) |
|
|
|
| ||
Chile Operating segment(1) | 1,764.4 | 71.2% | 1,786.3 | 68.7% | 1,886,8 | 66.1% |
International Business Operating segment(2) | 575.2 | 23.2% | 672.6 | 25.8% | 827,3 | 29.0% |
Wine Operating segment(3) | 138.8 | 5.6% | 143.1 | 5.5% | 138,9 | 4.9% |
Total | 2,478.4 | 100.0% | 2,602.0 | 100.0% | 2,853.0 | 100.0% |
(1) Includes beers, non-alcoholic beverages, spirits and shared services units in Chile. | ||||||
(2) Includes beers, cider, non-alcoholic beverages and spirits in Argentina, Bolivia (from August 2018), Paraguay and Uruguay. | ||||||
(3) Includes domestic and export wine sales to more 80 countries. | ||||||
(4) Defined, for management purposes, as Net Income before other gains (losses), net financial expenses, equity and income of joint ventures, foreign currency exchange differences, results as per adjustment units and income taxes. | ||||||
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The following is a reconciliation of our income from operational activities,Net income; the most directly comparable IFRS measure to Adjusted Operating Result and ORBDA for the years ended December 31, 2011, 2012, 2013, 2014, 2015, 2016, 2017 and 2015, and by Operating segment for the years ended December 31, 2013, 2014 and 2015.
2018.
| For the Years Ended December 31, | ||||
|
|
|
|
|
|
| 2011 | 2012 | 2013 | 2014 | 2015 |
(millions of CLP) |
|
|
|
|
|
Income from operational activities | 195,828 | 176,710 | 189,225 | 183,957 | 213,449 |
Add (Subtract):................................... |
|
|
|
|
|
Results Derivative Contracts........... | -2,459 | 4,030 | -2,390 | -4,153 | -9,840 |
Marketable Securities to Fair Value | 227 | -92 | 108 | 103 | -36 |
Other(1) ..................................................... | -778 | 540 | 1,324 | 12 | 1,364 |
Exceptional Items (EI)(2)…………… | -12,905 | - | 2,989 | 1,628 | - |
Operating Result before EI | 179,913 | 181,188 | 191,255 | 181,548 | 204,937 |
Exceptional Items (EI)(2)…………… | 12,905 | - | -2,989 | -1,628 | - |
Operating Result(3)........................... | 192,818 | 181,188 | 188,266 | 179,920 | 204,937 |
(1) Other includes items such as expenses related to capital increases, expenses related to acquisitions of new businesses, and results related to divestments of Joint Operations, among others. | |||||
(2) 2011 EI corresponds to the earthquake insurance compensation in Chile and the restructuring charges of cider business in Argentina; 2013 EI corresponds to a restructuring process of the organization which implied the early retirement of managers replaced internally, promotions and the sole and exceptional paymen of incentives to the leaving and remaining personnel; 2014 EI corresponds to the effect of CLP 1,628 million associated with restructuring processes across Operating segments | |||||
(3) After Exceptional Items |
|
|
|
|
|
For the years ended December 31, | |||||
2014 | 2015 | 2016 | 2017 | 2018 | |
(in million CLP) | |||||
| |||||
Net income of year | 120,792 | 140,526 | 140,082 | 148,108 | 322,085 |
Add (Subtract): |
| ||||
Other gains (losses) | (4,037) | (8,512) | 8,346 | 7,717 | (4,030) |
Financial Income | (12,137) | (7,846) | (5,680) | (5,051) | (15,794) |
Financial costs | 22,957 | 23,101 | 20,307 | 24,166 | 23,561 |
Share of net loss of joint ventures and associates accounted for using the equity method | 899 | 5,228 | 5,561 | 8,914 | 10,816 |
Foreign currency exchange differences | 613 | (958) | (457) | 2,563 | (3,300) |
Result as per adjustment units | 4,159 | 3,283 | 2,247 | 111 | (742) |
Income taxes | 46,674 | 50,115 | 30,246 | 48,366 | 136,127 |
Adjusted Operating result(1) | 179,920 | 204,937 | 200,652 | 234,894 | 468,722 |
Exceptional Item (EI) | 1,628 | - | - | - | - |
Adjusted Operating result before (EI) | 181,548 | 204,937 | 200,652 | 234,894 | 468,722 |
Depreciation and amortization | 68,608 | 81,567 | 83,528 | 92,200 | 93,289 |
ORBDA before (EI) | 250,155 | 286,504 | 284,180 | 327,094 | 562,011 |
Exceptional Item (EI) | (1,628) | - | - | - | - |
ORBDA(2) | 248,528 | 286,504 | 284,180 | 327,094 | 562,011 |
(1) Defined, for management purposes, as Net Income before other gains (losses), net financial expenses, equity and income of joint ventures, foreign currency exchange differences, results as per adjustment units and income taxes. | |||||
(2) Defined, for management purposes, as Adjusted Operating Result before depreciation and amortization. |
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Chile Operating Segment | For the Years Ended December 31, |
| |
|
|
|
|
| 2013 | 2014 | 2015 |
(millions of CLP) |
|
|
|
Income from operational activities | 147,020 | 129,704 | 152,466 |
Add (Subtract): |
|
|
|
Results Derivative Contracts | -5 | 118 | 57 |
Marketable Securities to Fair Value | - | - | - |
Other(1) | 352 | -82 | 1,401 |
Exceptional Items (EI) | 780 | - | - |
Operating Result before EI | 148,147 | 129,740 | 153,924 |
Exceptional Items (EI) | -780 | - | - |
Operating Result(2) | 147,367 | 129,740 | 153,924 |
(1) Other includes items such as expenses related to capital increases, expenses related to acquisitions of new businesses, and results related to divestments of Joint Operations, among others. | |||
(2) After Exceptional Items | |||
|
|
|
|
International Business Operating Segment | For the Years Ended December 31, | ||
|
|
|
|
| 2013 | 2014 | 2015 |
(millions of CLP) |
|
|
|
Income from operational activities | 26,693 | 27,847 | 30,303 |
Add (Subtract): |
|
|
|
Results Derivative Contracts | - | - | - |
Marketable Securities to Fair Value | - | - | - |
Other(1) | - | 305 | -37 |
Exceptional Items (EI) | 543 | 1,215 | - |
Operating Result before EI | 27,236 | 29,367 | 30,266 |
Exceptional Items (EI) | -543 | -1,215 | - |
Operating Result(2) | 26,693 | 28,152 | 30,266 |
(1) Other includes items such as expenses related to capital increases, expenses related to acquisitions of new businesses, and results related to divestments of Joint Operations, among others. | |||
(2) After Exceptional Items | |||
|
|
|
|
Wine Operating Segment | For the Years Ended December 31, | ||
| 2013 | 2014 | 2015 |
(millions of CLP) |
|
|
|
Income from operational activities | 13,246 | 24,559 | 32,838 |
Add (Subtract): |
|
|
|
Results Derivative Contracts | -333 | 221 | -305 |
Marketable Securities to Fair Value | - | - | - |
Other(1) | - | - | - |
Exceptional Items (EI) | 276 | - | - |
Operating Result before EI | 13,189 | 24,780 | 32,533 |
Exceptional Items (EI) | -276 | - | - |
Operating Result(2) | 12,913 | 24,780 | 32,533 |
(1) Other includes items such as expenses related to capital increases, expenses related to acquisitions of new businesses, and results related to divestments of Joint Operations, among others. | |||
(2) After Exceptional Items | |||
|
|
|
|
Other Operating Segment | For the Years Ended December 31, | ||
| 2013 | 2014 | 2015 |
(millions of CLP) |
|
|
|
Income from operational activities | 2,265 | 1,846 | -2,158 |
Add (Subtract): |
|
|
|
Results Derivative Contracts | -2,052 | -4,492 | -9,592 |
Marketable Securities to Fair Value | 108 | 103 | -36 |
Other(1) | 971 | -210 | - |
Exceptional Items (EI) | 1,390 | 413 | - |
Operating Result before EI | 2,683 | -2,339 | -11,786 |
Exceptional Items (EI) | -1,390 | -413 | - |
Operating Result(2) | 1,293 | -2,752 | -11,786 |
(1) Other includes items such as expenses related to capital increases, expenses related to acquisitions of new businesses, and results related to divestments of Joint Operations, among others. | |||
(2) After Exceptional Items |
The following table presents our Income statement for the periods noted below:
| Year Ended December 31, | |||||
| 2016 | 2017 | 2018 | |||
| (millions of CLP, except percentages) | |||||
Net sales | 1,558,898 | 100.0% | 1,698,361 | 100.0% | 1,783,282 | 100.0% |
Cost of sales | (741,820) | 47.6% | (798,739) | 47.0% | (860,011) | 48.2% |
Gross profit | 817,078 | 52.4% | 899,622 | 53.0% | 923,271 | 51.8% |
Other income by function | 5,144 | 0.3% | 6,718 | 0.4% | 228,455 | 12.8% |
Other expenses(1) | (2,027) | 0.1% | (2,662) | 0.2% | (1,428) | 0.1% |
Exceptional Items (EI) | - | - | - | - | - | - |
MSD&A(2) | (619,543) | 39.7% | (668,783) | 39.4% | (681,576) | 38.2% |
Adjusted Operating Result(3) | 200,652 | 12.9% | 234,894 | 13.8% | 468,722 | 26.3% |
Net financing expenses | (14,627) | 0.9% | (19,115) | 1.1% | (7,766) | 0.4% |
Results as per adjustment units | (2,247) | 0.1% | (111) | 0.0% | 742 | 0.0% |
Exchange rate differences | 457 | 0.0% | (2,563) | 0.2% | 3,300 | 0.2% |
Equity and income from joint ventures | (5,561) | 0.4% | (8,914) | 0.5% | (10,816) | 0.6% |
Other gains/(losses) | (8,346) | 0.5% | (7,717) | 0.5% | 4,030 | 0.2% |
Income before taxes | 170,328 | 10.9% | 196,474 | 11.6% | 458,211 | 25.7% |
Income taxes | (30,246) | 1.9% | (48,366) | 2.8% | (136,127) | 7.6% |
Net income for the year | 140,082 | 9.0% | 148,108 | 8.7% | 322,085 | 18.1% |
Attributable to: |
|
|
| % |
|
|
Equity Holders of Parent Company | 118,457 | 7.6% | 129,607 | 7.6% | 306,891 | 17.2% |
Non controlling interest | 21,624 | 1.4% | 18,501 | 1.1% | 15,194 | 0.9% |
(1) Other expenses are part of the ´Other expenses by function´ as presented in the Consolidated Statement of Income. These Other expenses mainly consist of losses related to the sales and write off of fixed assets. | ||||||
(2) MSD&A, included Marketing, Selling, Distribution and Administrative expenses. | ||||||
(3) Defined, for management purposes, as Net Income before other gains (losses), net financial expenses, equity and income of joint ventures, foreign currency exchange differences, results as per adjustment units and income taxes. |
69
FISCAL YEAR ENDED DECEMBER 31, 2018 COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 2017
The main highlights of the Income Statement for the fiscal year ended 2018 were: (a) Net sales growth of 5.0%, driven by 9.6% higher volumes, partially offset by 4.2% lower average prices in millionsCLP terms; (b) Net income growth of pesos136.8%; and (c) Adjusted Operating Result growth of 99.5%, mainly explained by the increase of 488.4% in the International Business Operating segment and 10.9% in the Chile Operating segment, partially offset by the decrease of 7.6% in the Wine Operating segment. It is also important to highlight that the Income Statement in 2018 reflects both ongoing operations and the impact of: i) the CCU Argentina – ABI transaction ii) the application of Hyperinflation Accounting in Argentina (see Note 4 to our consolidated financial statements included herein) and (iii) the tax asset revaluation in Argentina as discussed herein.
Net sales
Our Net sales increased by 5.0% to CLP 1,783,282 million in 2018, from CLP 1,698,361 million in 2017, due to 9.6% higher consolidated volumes, partially offset by 4.2% lower average prices. Volume growth was driven by a 23.0% and 5.6% increase in volumes in the International Business and Chile Operating segments, respectively, partially offset by 3.0% lower volumes in the Wine Operating segment. The 4.2% lower average price in CLP was primarily explained by the sharp depreciation of the ARS against the CLP, which resulted in a 14.5% lower average price in CLP terms from the International Business Operating segment. Net sales performance of each of our Operating segments during 2018 is described below:
Chile: Net sales increased 6.0% to CLP 1,109,574 million in 2018, from CLP 1,047,119 in 2017, as a result of 5.6% higher sales volume coupled with 0.3% higher average prices. The volume growth was mainly explained by industry growth and slight market share gains.
International Business: Net sales increased 5.1% to CLP 483,926 million in 2018, from CLP 460,317 million in 2017 as a result of 23.0% higher sales volumes partially offset by 14.5% lower average prices in CLP. The consolidation, as of August 9, 2018, of BBO, our subsidiary in Bolivia, also contributed to volume growth this year. Excluding Bolivia, volumes grew 18.9%. The increase in volumes was mainly driven by our convenience packaging strategy, innovation in brand extensions and effective brand portfolio management. The lower average price in CLP terms was primarily due to the sharp depreciation of the Argentine peso against the CLP in 2018, given that prices in the International Business Operating segment increased in line with local inflation.
Wine: Net sales increased 1.0% to CLP 206,519 million in 2018, from CLP 204,454 million in 2017. The increase in Net sales was the result of 4.1% higher average prices, primarily explained by price increases in the domestic market, partially offset by a 3.0% decrease in volumes, as we experienced a contraction in our export market.
Cost of sales
Cost of sales consists primarily of the cost of raw materials, packaging, labor costs for production, personnel, depreciation of assets related to production, depreciation of returnable packaging, licensing fees, bottle breakage, utilities, and the costs of operating and maintaining plants and equipment. Our Cost of sales increased 7.7% to CLP 860,011 million in 2018, from CLP 798,739 million in 2017, mostly due to 9.6% higher volumes, given that the Cost of sales per hectoliter declined 1.8%. As a percentage of Net sales, Cost of sales increased to 48.2% in 2018, from 47.0% in 2017, explained by the 4.2% decrease in the average price per hectoliter. The Cost of sales for our Operating segments during 2018 is described below:
Chile: Cost of sales increased 3.6% to CLP 501,256 million in 2018, from CLP 483,604 million in 2017, driven primarily by the increase in volumes, given that the Cost of sales per hectoliter decreased by 1.9%. The decrease in the Cost of sales per hectoliter was explained by manufacturing efficiencies, lower cost of sugar and the 1.4% appreciation of the CLP against the USD, which reduced our USD-denominated costs, offset by higher PET and aluminum costs. All in, Cost of sales as a percentage of Net sales:sales decreased to 45.2% in 2018 from 46.2% in 2017.
International Business: Cost of sales increased 20.8% to CLP 230,069 million in 2018, from CLP 190,387 million in 2017, driven primarily by volume growth and the impact on USD-denominated costs. Cost of salesper hectoliter in CLP decreased by 1.8%, primarily explained by currency translation, given that in local currency, the Cost of sales per hectoliter rose as a result of higher USD-denominated costs, due to the sharp depreciation of the ARS/USD. As a result, Cost of sales as a percentage of Net sales increased to 47.5% in 2018 from 41.4% in 2017.
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Wine: Cost of sales increased 5.6% to CLP 133,272 million in 2018, from CLP 126,244 million in 2017. Cost of sales per hectoliter increased 8.8% as result of the higher cost of wine, following the weak 2016 and 2017 harvests in Chile. As a percentage of Net sales, Cost of sales increased to 64.5% in 2018 from 61.7% in 2017.
Gross profit
Our Gross profit increased 2.6% to CLP 923,271 million in 2018, from CLP 899,622 million in 2017. Gross profit decreased to 51.8% in 2018 from 53.0% in 2017.
Marketing, Selling, Distribution and Administrative Expenses
Marketing, Selling, Distribution and Administrative expenses (“MSD&A”) primarily include advertising and promotional expenses, selling expenses, distribution costs such as product transportation costs, services provided by third parties and other administrative expenses. Our MSD&A expenses increased 1.9% to CLP 681,576 million in 2018, from CLP 668,783 million in 2017. As a percentage of Net sales, our MSD&A improved 116 bps partially driven by the “ExCCelencia CCU” program in all of our Operating segments to 38.2% in 2018, from 39.4% in 2017. The MSD&A performance of each Operating segment during 2018 is described below:
Chile: MSD&A expenses increased 6.3% to CLP 407,243 million in 2018, from CLP 383,169 million in 2017, driven primarily by the increase in volumes. As a percentage of Net sales, MSD&A remained almost flat at 36.7% in 2018 compared to 36.6% in 2017, as operating efficiencies were offset by higher fuel prices.
International Business: MSD&A decreased 6.5% to CLP 210,591 million in 2018, from CLP 225,342 million in 2017, primarily due to the depreciation of the ARS against the CLP. As a percentage of Net sales, MSD&A decreased to 43.5% in 2018 from 49.0% in 2017, primarily as a result of logistic efficiencies and scale benefits, due to our double-digit volume growth, contributing to the 544 bps improvement in MSD&A as a percentage of Net sales.
Wine: MSD&A decreased 2.8% to CLP 52,409 million in 2018, from CLP 53,942 million in 2017. As a percentage of Net sales, MSD&A decreased to 25.4% in 2018 from 26.4% in 2017, mainly due to operating efficiencies.
Other operating income/(expenses)
Other operating income/(expenses) increased 5,497.9% to CLP 227,027 million in 2018, from CLP 4,056 million in 2017. The variation is primarily attributable to the CLP 208,842 one-time operating gain from the CCU Argentina and ABI transaction executed in the second quarter of 2018, as well as other operating income received during the rest of the year.
Adjusted Operating Result13
Our Adjusted Operating Result increased 99.5% to CLP 468,722 million in 2018, from CLP 234,894 million in 2017, and our Adjusted Operating Result as a percentage of Net sales increased to 26.3% in 2017, from 13.8% in 2017. These results include growth from both ongoing operations, as well as a gain of CLP 208,842 million from the Transaction14, the application of Hyperinflation Accounting in Argentina which had an adverse impact of CLP 5,023 million. The Adjusted Operating Result performance of each of our Operating segments during 2018 is described below:
13See “Item 5. A. Adjusted Operating Result”.
14See “Item 4: Information on the Company – A. History and Development of the Company”.
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Chile: The Adjusted Operating Result increased 10.9% to CLP 202,662 million in 2018 from 182,784 million in 2017. The Adjusted Operating Result margin increased to 18.3% in 2018 from 17.5% in 2017, mainly explained by lower Costs of sales as a percentage of Net sales.
International Business: The Adjusted Operating Result increased 488.4% to CLP 266,345 million in 2018, from CLP 45,266 million in 2017. The Adjusted Operating Result margin increased to 55.0% in 2018 from 9.8% in 2017, mainly explained by gains from the CCU Argentina – ABI transaction in Other operating income.
Wine: The Adjusted Operating Result decreased 7.6% to CLP 22,667 million in 2018, from CLP 24,519 million in 2017. The Adjusted Operating Result margin decreased to 11.0% in 2018 from 12.0% in 2017, mainly explained by higher Costs of sales as a percentage of Net sales.
Other: The Adjusted Operating Result for Others decreased to a loss of CLP 22,952 million in 2018, from a loss of CLP 17,676 million in 2017, mainly due to higher corporate expenses.
Net financial expenses
Our Net financial expenses decreased 59.4% to a loss of CLP 7,766 million in 2018 from a loss of CLP 19,115 million in 2017, generating a positive impact of CLP 11,349 million mainly due to higher levels of Cash and cash equivalents.
Equity and income from joint ventures and associated companies
CCU has 50% or less participation in Cervecería Austral, Foods, BBO (until August 9, 2018), CCC and in other companies. The share of the gain/loss in the referred companies increased to a loss of CLP 10,816 million in 2018, from a loss of CLP 8,914 million in 2017, mainly due to higher losses in CCC and ZF CC, in Colombia, partially offset by higher gains in Cervecería Austral.
Result as per adjustment units and Foreign currency exchange differences
The adjustment applied to our net liabilities due to Chilean inflation and foreign exchange fluctuations resulted in a net gain of CLP 3,300 million in 2018, compared to a net loss of CLP 2,563 million in 2017. This variation is primarily due to higher Foreign currency exchange rate differences, due to USD-denominated assets.
Other gains (losses)
Our Other gains (losses) improved to a net gain of CLP 4,030 million in 2018, from a net loss of CLP 7,717 million in 2017. This is explained by gains on forward contracts entered into to mitigate the impact of foreign exchange rate fluctuations on our foreign currency denominated assets, as a consequence of the appreciation of the USD against the CLP.
Income taxes
Our income taxes in 2018 amounted to CLP 136,127 million, translating into an effective consolidated tax rate of 29.7%. Income taxes in 2017 amounted to CLP 48,366 million translating into an effective consolidated tax rate of 24.6%. Income tax increased by CLP 87,761 million explained by an increase of 133.2% in consolidated taxable income, the increase of the First Category Income tax rate in Chile from 25.5% to 27.0% and by the impact on taxes resulting from our foreign currency denominated assets, as a consequence of the appreciation of the USD against the CLP. This was partially offset by the decrease in the corporate income tax rate in Argentina from 35.0% to 30.0% and by CCU Argentina’s tax asset revaluation.
Net income prior to non-controlling interests
| Year Ended December 31, | |||||||
| 2013 |
| 2014 |
| 2015 | |||
| (millions of CLP, except percentages) | |||||||
Net sales | 1,197,227 | 100.00% |
| 1,297,966 | 100.00% |
| 1,498,372 | 100.00% |
Cost of sales | -536,697 | 44.80% |
| -604,537 | 46.60% |
| -685,075 | 45.72% |
Gross margin | 660,530 | 55.20% |
| 693,429 | 53.40% |
| 813,297 | 54.28% |
Other operating income/(expenses) | 4,249 | 0.40% |
| 23,721 | 1.80% |
| 4,205 | 0.28% |
MSD&A | -473,524 | 39.60% |
| -535,603 | 41.30% |
| -612,565 | 40.88% |
Operating Result(1) | 188,266 | 15.70% |
| 179,920 | 13.90% |
| 204,937 | 13.68% |
Net financing expenses | -15,830 | 1.30% |
| -10,821 | 0.80% |
| -15,256 | 1.02% |
Results as per adjustment units | -1,802 | 0.20% |
| -4,159 | 0.30% |
| -3,283 | 0.22% |
Exchange rate differences | -4,292 | 0.40% |
| -613 | 0.00% |
| 958 | 0.06% |
Equity and income from joint ventures | 309 | 0.00% |
| -899 | 0.10% |
| -5,228 | 0.35% |
Other gains/(losses) | 959 | 0.10% |
| 4,037 | 0.30% |
| 8,512 | 0.57% |
Income before taxes | 167,609 | 14.00% |
| 167,465 | 12.90% |
| 190,640 | 12.72% |
Income taxes | -34,705 | 2.90% |
| -46,674 | 3.60% |
| -50,115 | 3.34% |
Net income for the year | 132,905 | 11.10% |
| 120,792 | 9.30% |
| 140,525 | 9.38% |
Attributable to: |
|
|
|
|
|
|
|
|
Equity Holders of Parent Company | 123,036 | 10.30% |
| 106,238 | 8.20% |
| 120,808 | 8.06% |
Non controlling interest | 9,869 | 0.80% |
| 14,553 | 1.10% |
| 19,717 | 1.32% |
Our Net income prior to minority shareholders in 2018 increased 117.5% to CLP 322,085 million in 2018, from CLP 148,108 million in 2017.
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Net income attributable to equity holders of the parent company
Our Net income attributable to equity holders of the parent company increased 136.8% to CLP 306,891 million in 2018, from CLP 129,607 million in 2017. This increase includes growth from both ongoing operations, as well as a gain of CLP 157,359 million from the Transaction, comprised of the reported one-time gain in the second quarter of CLP 153,496 million, as well as CLP 2,131 million in the third quarter of 2018 and CLP 1,732 million in the fourth quarter of 2018, which mainly corresponds to after-tax net financial income related to cash and cash equivalents maintained for upcoming tax expenses from the Transaction. This growth, however, was partially offset by the application of Hyperinflation Accounting in Argentina, which adversely impacted Net income by CLP 6,087 million. Also this year, CCU Argentina opted in for a tax asset revaluation, which generated a CLP 6,822 million positive impact at Net income. Excluding these effects, Net income increased by 14.8% to CLP 148,797 million.
Net income attributable to Non-controlling interests
Net income attributable to non-controlling interests decreased to CLP 15,194 million in 2018 from CLP 18,501 million in 2017, mainly due to a decline in results in our Wine Operating segment.
FISCAL YEAR ENDED DECEMBER 31, 20152017 COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 20142016
The major occurrences of the fiscal year ended 20152017 were: (a) Net sales growth of 8.9%, due to 5.0% higher volumes, together with 3.8% higher average prices in CLP terms; (b) Net income growth of 9.4%, due to the 15% average devaluationhigher taxable income, partially offset by higher income taxes; and (c) Adjusted Operating Result growth of 17.1%, mainly explained by the Chilean pesoincrease of 117.5% in the International Business Operating segment and 18.3% in the 14% average devaluationChile Operating segment, partially offset by the decrease of 34.4% in the Argentine peso during 2015; (b) decrease in commodity prices, especially oil, aluminum and sugar; (c) the implementation of the “ExCCelencia CCU” program.Wine Operating segment.
Net sales
Our Net sales wereincreased by 8.9% to CLP 1,498,3721,698,361 million in 2015 compared to2017, from CLP 1,297,9661,558,898 million in 2014, representing an increase of 15.4%, primarily2016, due to 5.0% higher salesconsolidated volumes and 3.8% higher average pricesprices. The growth in allNet sales was mainly due to the International Business Operating segment, which increased 24.4%, driven by Argentina’s beer industry growth and market share gains in this Operating segment. The Chile Operating segment and Wine Operating segment also contributed to the Net sales growth by increasing 5.0% and 1.5% respectively, and slightly increasing market share in both operating segments. Net sales performance of each of our Operating segments during 20152017 is described below:
Chile:Chile: Net sales increased 8.6%5.0% to CLP 902,0211,047,119 million in 2017, from 997,376 in 2016, as a result of 4.0%1.2% higher sales volume coupled with 4.5%3.7% higher average prices. Higher sales volumes were fueled partiallyprices, mainly explained by revenue management efficiencies, such as improved promotional activities performed throughout the year as well as good execution at the points of sale and effective marketing campaigns, which allowed us to increase our consolidated market share and higher temperatures during the year. Average prices increased due to a higher sales mix price, coupled with price increases throughout the year.effectiveness.
International Business:Business: Net sales increased 35.4%24.4% to CLP 405,714460,317 million due to 6.0%in 2017, from 370,109 million in 2016 as a result of 16.9% higher sales volumes coupled with 27.7%and 6.4% higher average prices. Volumes and prices in CLP terms, driven mainly by Argentina’s beer industry growth, and also by market share gains in this Operating segment through our packaging strategy in Argentina, Uruguaywhere we are giving more convenience and Paraguay where higher in 2015 than in 2014, compensating inflation and currency devaluation in those countries.packaging options to our consumers.
Wine:Wine Our: Net sales of wine increased 10.0%1.5% to CLP 189,515204,454 million in 2015,2017, from CLP 172,349201,402 million in 2014.2016. The increase in Net sales was achieved due to a 3.2%3.1% higher sales volume, andpartially offset by a 6.5% increase1.5% decrease in average prices mainly due to the export side4.1% appreciation of the business,CLP versus USD, which showed good performance,affected our export revenues. Volume growth was driven mainly driven by the markets in Asia and Oceania.domestic business.
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Cost of sales
The costCost of sales consists primarily of the cost of raw materials, packaging, labor costs for production, personnel, depreciation of assets related to production, depreciation of returnable packaging, licensing fees, bottle breakage and costs of operating and maintaining plants and equipment. Our Cost of sales in 2015 was CLP 685,075 million comparedincreased 7.7% to CLP 604,537798,739 million in 2014, a 13.3% increase compared to 2014.2017, from CLP 741,820 million in 2016. As a percentage of Net sales, Cost of sales decreased to 45.7%47.0% in 20152017, from 46.6%47.6% in 2014.2016. The Cost of sales for our Operating segments during 20152017 is described below:
Chile:Chile The: Cost of sales for our Chile Operating segment increased 9.6%2.6% to CLP 420,298483,604 million in 2015,2017, from CLP 383,559471,152 million in 2014.2016, driven by the increase in volumes and the increase in the cost of some raw materials, mainly aluminum and fruit pulp, which were partially offset by the 4.1% appreciation of the CLP against the USD compared to the previous year, and reducing our USD-denominated cost base. All in, Cost of sales as a percentage of Net sales decreased to 46.2% in 2017 from 47.2% in 2016.
International Business: Cost of sales increased 20.9% to CLP 190,387 million in 2017, from CLP 157,486 million in 2016, driven by volume growth, a 12.2% devaluation of ARS versus USD, and an increase in raw material costs, including aluminum. However, Cost of sales as a percentage of Net sales decreased to 41.4% in 2017 from 42.6% in 2016, due to efficiencies achieved under the "ExCCelencia CCU" program and the positive impact of scale effects on production costs.
Wine: Cost of sales increased 11.8% to CLP 126,244 million in 2017, from CLP 112,938 million in 2016, mostly due to the higher cost of wine following two consecutive weak harvests in Chile, as well as weak international harvests in 2017. Cost of sales as a percentage of Net sales increased to 46.6%61.7% in 20152017 from 46.2%56.1% in 2014, primarily2016 due to the 15% average currency devaluation in Chile during the year compared to last year, partially offset by lower USD denominated price of raw materials and by the results of the efficiency program “ExCCelencia CCU”.
International Business: The Cost of sales of our International Business Operating segment increased 19.5% to CLP 162,665 million in 2015, from CLP 136,175 million in 2014. Cost of sales as a percentage of Net sales decreased to 40.1% in 2015 from 45.4% in 2014. This was mainly due to the results of the efficiency program “ExCCelencia CCU” and lower raw material prices denominated in USD, offsetting the average devaluation of the currencies in the region in 2015 when compared to 2014: 14% in Argentina, 18% in Uruguay and 16% in Paraguay.
Wine: The Cost of sales for our Wine Operating segment increased 8.6% to CLP 105,956 million in 2015, from CLP 97,524 million in 2014. Cost of sales, as a percentage of Net sales, decreased from 56.6% in 2014 to 55.9% in 2015, mostly due to the excellent 2015 harvest, and the results of the efficiency program.foregoing factors.
Gross marginprofit
Our Gross marginprofit increased 17.3%10.1% to CLP 813,296899,622 million in 2015,2017, from CLP 693,429817,078 million in 2014. As a percentage of Net sales,2016. Gross marginprofit increased to 54.3%53.0% in 20152017 from 53.4%52.4% in 2014.2016.
Marketing, Selling, Distribution and Administrative Expenses
The Marketing, Selling, Distribution and Administrative expenses (“MSD&A”) primarily include advertising and promotional expenses, selling expenses, distribution costs such as product transportation costs, services provided by third parties and other administrative expenses. Our MSD&A expenses increased 14.4%7.9% to CLP 612,565668,783 million in 2015,2017, from CLP 535,603619,543 million in 2014.2016. As a percentage of Net sales, our MSD&A decreased to 40.9%39.4% in 20152017, from 41.3%39.7% in 2014.2016. The MSD&A performance of each Operating segment during 20152017 is described below:
Chile:Chile The: MSD&A expenses of our Chile Operating segment increased 3.4%2.6% to CLP 328,489383,169 million in 2015,2017, from CLP 317,765373,408 million in 2014.2016, in connection with the increase in sales volumes. Nevertheless, as a percentage of Net sales, MSD&A decreased to 36.4%36.6% in 20152017 from 38.3%37.4% in 2014,2016, mainly due to the results of the efficiency plan “ExCCelencia CCU”. program, in particular, planning and logistics.
International Business:Business The: MSD&A of our International Business Operating segment increased 40.1%17.7% to CLP 216,099225,342 million in 2015,2017, from CLP 154,300191,414 million in.in 2016, in connection with the increase in sales volumes. As a percentage of Net sales, MSD&A decreased to 49.0% in 2017 from 51.7% in 2016, due to efficiency initiatives, such as the change in our distribution system in Argentina, which was partially offset by high levels of inflation.
Wine: MSD&A increased 3.7% to CLP 53,942 million in 2017, from CLP 52,007 million in 2016, in connection with the increase in sales volumes. As a percentage of Net sales, MSD&A increased to 53.3%26.4% in 20152017 from 51.5%25.8% in 2014, partially explained by higher marketing expenses.2016, mainly due to inflation levels that surpassed in effect the increase in Net sales.
Wine:Other operating income/(expenses) The MSD&A of our Wine Operating segment
Other operating income/(expenses) increased 1.6%30.1% to CLP 51,0704,056 million in 2015,2017, from CLP 50,2843,117 million in 2014. Nevertheless, MSD&A2016. The variation is primarily due to a low comparison base, given that in 2016 we incurred in restructuring expenses of CLP 980 million in our operation in Uruguay, where we moved to an indirect distribution model.
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Adjusted Operating Result
Our Adjusted Operating Result increased 17.1% to CLP 234,894 million in 2017, from CLP 200,652 million in 2016, and our Adjusted Operating Result as a percentage of Net sales decreasedincreased to 26.9%13.8% in 20152017, from 29.2%12.9% in 2014.
Other Operating Income/(expenses) and Exceptional items
2016. The Other operating income/(expenses) decreased 82.3% in 2015 to CLP 4,205 million, from CLP 23,721 million in 2014, mainly due to the CLP 18,882 million compensation received by our Argentine subsidiary CICSA in 2014, for the termination of the contract that allowed us to import and distribute on an exclusive basis, Corona and Negra Modelo beers in Argentina, and the license for the production and distribution of Budweiser beer in Uruguay.
Operating Result
Our Operating Result increased 13.9% to CLP 204,937 million in 2015, as compared to CLP 179,920 million in 2014 and as a percentage of Net Sales decreased from 13.9% to 13.7% in 2015. Excluding the positive one-time effect compensation of CLP 18,882 million received by our Argentine subsidiary CICSA in Q2’14 for the termination of the contract that allowed us to import and distribute on an exclusive basis, Corona and Negra Modelo beers in Argentina and to produce and distribute Budweiser beer in Uruguay, Operating Result increased by 27.3%, which means an EBIT margin expansion of 127 bps. TheAdjusted Operating Result performance of each of our Operating segments during 20152017 is described below:
Chile:Chile: The Adjusted Operating Result for the Chile Operating segment increased 18.6%18.3% to CLP 153,924182,784 million due to an 8.6% increase in Net sales, partially offset by an increase of 3.4%2017 from 154,551 million in MSD&A expenses and an increase of 9.6% in Cost of sales.2016. The Adjusted Operating Result margin increased to 17.5% in 2017 from 15.6%15.5% in 2014 to 17.1% in 2015.2016, mainly explained by lower Costs of sales and MSD&A, both as a percentage of Net sales.
International Business: The Adjusted Operating Result for the International Business Operating segment increased 7.5%117.5% to CLP 30,266 million.45,266 million in 2017, from CLP 20,815 million in 2016. The Adjusted Operating Result margin increased to 9.8% in 2017 from 5.6% in 2016, mainly explained by lower Costs of sales and MSD&A, both as a percentage of Net sales.
Wine: The Adjusted Operating Result decreased 34.1% to CLP 24,519 million in 2017, from CLP 37,189 million in 2016. The Adjusted Operating Result margin decreased to 12.0% in 2017 from 9.4%18.5% in 20142016, mainly explained by higher Costs of sales as a percentage of Net sales, increasing to 7.5% for61.7% in 2015. Excluding the above mentioned one-time effect compensation, the Operating Result margin expansion was 437 bps.2017 from 56.1% in 2016.
Wine:Other: The Adjusted Operating result from our wine Operating segment increased 31.3%Result for Others decreased to a loss of CLP 32,53317,676 million in 2015,2017, from a loss of CLP 24,78011,903 million in 2014. The Operating result margin increased from 14.4% in 20142016, mainly due to 17.2% in 2015.higher corporate expenses.
Net Financing Expensesfinancial expenses
Our Net financingfinancial expenses increased 41.0%30.7% to CLP 15,25619,115 million in 2015 as compared to2017, from CLP 10,82114,627 million in 2014.2016. This increase was primarilymainly due to a lower level of Cash and cash equivalentshigher debt levels in 2015.Chile.
Equity and income from joint ventures and associated companies
CCU has 50% or less participation in Cervecería Austral, Foods, BBO, Central Cervecera,CCC, and in other companies. The share of the gain/loss in the referred companies decreasedincreased to a loss of CLP 5,2288,914 million in 2015,2017, from a loss of CLP 8995,561 million in 20142016, mainly due to lower results in some of these joint ventures, including the divestments of the brands Calaf and Natur which generated CCC, partially offset by better results in Cervecería loss net of taxes of CLP 1,035 million.Austral.
Result as per adjustment units and Foreign currency exchange differences
The adjustment applied to our net liabilities due to Chilean inflation and foreign exchange fluctuations resulted in a net loss of CLP 2,3252,563 million in 2015, as2017, compared to a net lossgain of CLP 4,772457 million in 2014.2016. This variation is primarily due to higher foreignForeign currency exchange rate differences, and higher Result as per adjustment units, due to a lower inflation during 2015 compared to 2014.the devaluation of the ARS against the USD.
Other gains (losses)
Our Other gains (losses) increasedimproved to a net loss of CLP 7,717 million in 2017, from a net gainloss of CLP4,037 8,346 million in 20142016. This is explained by a decrease in losses on our forward contracts, entered into in order to a net gainreduce the impact of CLP 8,512 million in 2015. The increase mainly resulted from gains related to hedges covering foreign exchange variationsrate fluctuations on taxes.tax on our foreign currency denominated assets compared to 2016.
Income taxes
Our income taxes in 20152017 amounted to CLP 50,11548,366 million, translating into an effective consolidated tax rate of 26.3%24.6%. Income taxes in 20142016 amounted to CLP 46,67430,246 million translating into an effective consolidated tax rate of 27.9%17.8%. Income tax increased by CLP 3,441 million.18,120 million mainly due to higher taxable income in Argentina, the Chilean tax rate increase to 25.5% in 2017, from 24% in 2016, and a decrease in losses on our forward contracts, entered into in order to reduce the impact of foreign exchange rate fluctuations on tax on our foreign currency denominated assets compared to 2016.
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Net income for the year
Our Net income in 20152017 increased 16.3%,5.7% to CLP 148,108 million in 2017, from CLP 120,792140,082 million in 2014 to CLP 140,526 million in 2015, primarily as a result of a 13.9% increase in Operating Result.2016.
Net income attributable to equity holders of parent
Our Net income attributable to equity holders of our parent company increased 13.7%9.4% to CLP 129,607 million in 2017, from CLP 106,238118,457 million in 2014 to CLP 120,808 million in 2015.
Non-controlling interests
Non-controlling interests increased from CLP 14,553 million in 2014 to CLP 19,717 million in 2015.
FISCAL YEAR ENDED DECEMBER 31, 2014 COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 2013
The major occurrences of the fiscal year ended 2014 were: (a) the 15% devaluation of the Chilean peso and the 48% devaluation of the Argentine peso during 2014; (b) higher marketing expenses which are consistent with our long-term strategy for developing strong brands coupled with increased distribution expenses in our Chilean operation; (c) the compensation received by our Argentine subsidiary CICSA, for the termination of the contract which allowed us to import and distribute on an exclusive basis, Corona and Negra Modelo beers in Argentina, and the license for the production and distribution of Budweiser beer in Uruguay; and (d) the Chilean Tax Reform Act which became effective on October 1, 2014, bringing a series of changes to tax rates and tax schemes.
Net sales
Our Net sales were CLP 1,297,966 million in 2014 compared to CLP 1,197,227 million in 2013, representing an 8.4% increase, primarily due to higher sales volumes and higher per unit prices in all Operating segments. Net sales performance of each of our Operating segments during 2014 is described below:
Chile: Net sales increased 8.5% to CLP 830,341 million as a result of 4.1% higher sales volume coupled with 4.2% higher average prices. Higher sales volumes were fueled partially by promotional activities performed throughout the year as well as good execution in the points of sale and effective marketing campaigns, which allowed us to increase our consolidated market share. Unit prices increased due to a higher sales mix, coupled with price increases throughout the year.
International Business: Net sales increased 6.1% to CLP 299,668 million due to 6.0% higher sales volumes, partially offset by 5.6% lower average prices. Volumes increased due to the contribution of 456 thousand hectoliters from the Paraguay operation.
Wine: Our Net sales of wine increased 13.2% to CLP 172,349 million in 2014, from CLP 152,255 million in 2013. The increase in sales was due to a 2.5% increase in sales volume and a 10.4% increase in average prices, mainly due to the export side of the business, which showed good performance mainly driven by Asia and Latin America exports, and the domestic business, where good execution allowed us to consolidate our leading position in value terms.
Cost of sales
The cost of sales consists primarily of the cost of raw materials, packaging, labor costs for production, personnel, depreciation of assets related to production, depreciation of returnable packaging, licensing fees, bottle breakage and costs of operating and maintaining plants and equipment. Our Cost of sales in 2014 was CLP 604,537 million compared to CLP 536,697 million in 2013, 12.6% increase from 2013. As a percentage of Net sales, Cost of sales increased to 46.6% in 2014 from 44.8% in 2013. The Cost of sales for our Operating segments during 2014 is described below:
Chile: The Cost of sales for our Chile Operating segment increased 11.7% to CLP 383,559 million in the twelve months ended December 31, 2014, from CLP 343,230 million in the twelve months ended December 31, 2013, primarily due to an increase in direct costs of 10.5% due to the 15% currency devaluation in Chile during the year, partially offset by lower commodity costs; and 14.9% higher manufacturing costs as energy and salaries rose. Cost of sales as a percentage of Net sales increased to 46.2% in the twelve months ended December 31, 2014 from 44.9% in the twelve months ended December 31, 2013.
International Business: The Cost of sales of our International Business Operating segment increased 20.2% to CLP 136,175 million in the twelve months ended December 31, 2014, from CLP 113,265 million in the twelve months ended December 31, 2013 mainly due an increase in direct costs of 27.6% due to the 48% devaluation of the Argentine peso coupled with high inflation in Argentina, which was not offset by our cost saving efforts. Cost of sales as a percentage of Net sales increased to 45.4% in the twelve months ended December 31, 2014 from 40.1% in the twelve months ended December 31, 2013.
Wine: The Cost of sales for our Wine Operating segment increased 5.0% to CLP 97,524 million in 2014, from CLP 92,864 million in 2013, mainly due to higher manufacturing costs as energy costs rose. Cost of sales, as a percentage of Net sales, decreased from 61.0% in 2013 to 56.6% in 2014, mainly due to lower input costs partially offset by a higher exchange rate.
Gross margin
Our Gross margin increased 5.0% to CLP 693,429 million in 2014, from CLP 660,530 million in 2013. As a percentage of Net sales, Gross margin decreased to 53.4% in 2014 from 55.2% in 2013.
Marketing, Selling, Distribution and Administrative Expenses
The Marketing and Selling, Distribution and Administrative expenses (“MSD&A”) primarily include advertising and promotional expenses, maintenance, distribution costs such as product transportation costs, services provided by third parties and other administrative expenses. Our MSD&A expenses increased 13.1% to CLP 535,603 million in 2014, from CLP 473,524 million in 2013. As a percentage of Net sales, our MSD&A increased to 41.3% in 2014 from 39.6% in 2013. The MSD&A performance of each Operating segment during 2014 is described below:
Chile: The MSD&A expenses of our Chile Operating segment increased 15.5% to CLP 317,765 million in the twelve months ended December 31, 2014, from CLP 275,203 million in the twelve months ended December 31, 2013. The increase in MSD&A was mainly due to higher marketing investments and distribution expenses of CLP 14,681 million and CLP 21,199 million respectively. As a percentage of Net sales, MSD&A increased to 38.3% in the twelve months ended December 31, 2014 from 36.0% in the twelve months ended December 31, 2013.
International Business: The MSD&A of our International Business Operating segment increased 7.9% to CLP 154,300 million in the twelve months ended December 31, 2014, from CLP 142,972 million in the twelve months ended December 31, 2013 due mainly to the Argentina operation. Cost saving programs were not enough to offset the increase in MSD&A due to higher marketing expenses of CLP 3,988 million and higher administrative expenses of CLP 6,516 million, all related mainly to inflationary pressures in the Argentinean operation. As a percentage of Net sales, our MSD&A increased to 51.5% in the twelve months ended December 31, 2014 from 50.6% in the twelve months ended December 31, 2013.
Wine: The MSD&A of our Wine Operating segment increased 9.2% to CLP 50,284 million in 2014, from CLP 46,036 million in 2013. This increase in MSD&A is primarily related to higher marketing expenses of CLP 2,091 million and higher distribution costs of CLP 901 million, caused by an increase in marketing to support our branding strategy. As a percentage of Net sales, our MSD&A for this segment decreased to 29.2% in the twelve month period ended December 31, 2014 from 30.2% in the twelve month period ended December 31, 2013 as higher Net sales compensated for the increase in MSD&A.
Other Operating Income/(expenses) and Exceptional items
The Other operating income/(expenses) increased in 2014 reaching CLP 23,721 million, compared to Other operating income/(expenses) of CLP 4,249 million in 2013, mainly due to the compensation received by our Argentine subsidiary CICSA, for the termination of the contract which allowed us to import and distribute on an exclusive basis, Corona and Negra Modelo beers in Argentina, and the license for the production and distribution of Budweiser beer in Uruguay. During 2014, we recognized as an Exceptional item the effect of CLP 1,627 million associated with restructuring processes across Operating segments.
Operating Result
Our Operating Result decreased 4.4% to CLP 179,920 million in 2014, as compared to CLP 188,266 million in 2013, mainly due to a higher cost of sales and higher expenses, partially offset by the positive one-time effect of the compensation received by our Argentine subsidiary CICSA. The Operating Result performance of each of our Operating segments during 2014 is described below:
Chile: The Operating result for the Chile Operating segment decreased 12.0% to CLP 129,740 million due to an increase of 15.5% in MSD&A expenses and an increase of 11.7% in Cost of sales as thecurrency devaluated and higher marketing expenses were incurred, partially offset by a 8.5% increase in Net sales. The Operating result margin decreased from 19.3% to 15.6% for the twelve months ended December 31, 2014.
International Business: The Operating result for the International Business Operating segment increased 5.5% to CLP 28,152 million due to the agreements reached with Cervecería Modelo S. de R.L. de CV. and Anheuser-Busch LLC, for the termination of the contract which allows CICSA to import and distribute on an exclusive basis, Corona and Negra Modelo beers in Argentina, and the license for the production and distribution of Budweiser beer in Uruguay. CICSA received in compensation for these agreements the amount of ARS 277.2 million, equivalent to US $34.2 million. The Operating result margin decreased from 9.5% to 9.4% for the twelve months ended December 31, 2014.
Wine: The Operating result from our wine Operating segment increased 91.9% to CLP 24,780 million in 2014, from CLP 12,913 million in 2013. The Operating result margin for this Operating segment increased from 8.5% to 14.4% for the twelve months ended December 31, 2014.
Net Financing Expenses
Our Net financing expenses decreased 31.6% to CLP 10,821 million in 2014 as compared to CLP 15,830 million in 2013. This decrease was primarily due to a lower level of Net financial debt in 2014.
Equity and income from joint ventures
CCU has 50% participation in both Cervecería Austral and Foods. The share of the gain/loss in the referred companies decreased to a loss of CLP 899 million in 2014, from a gain of CLP 309 million in 2013 mainly due to lower results in our joint ventures.
Result as per adjustment units and Exchange rate differences
The adjustment applied to our net liabilities due to Chilean inflation and foreign exchange fluctuations resulted in a net loss of CLP 4,772 million in 2014, as compared to a net loss of CLP 6,094 million in 2013. This variation is primarily due to higher foreign currency exchange differences partially offset by a lower Result as per adjustment units due to higher inflation during the year.
Other gains (losses)
Our Other gains increased from a net gain of CLP 959 million in 2013 to a net gain of CLP 4,037 million in 2014. The increase resulted from gains related to hedges covering foreign exchange variations on taxes.
Income taxes
Our income taxes for the twelve months ended December 31, 2014 amounted to CLP 46,674 million, translating into an effective consolidated tax rate of 27.9%. Income taxes in 2013 amounted to CLP 34,705 million translating into an effective consolidated tax rate of 20.7%. Income tax increased by CLP 11,969 million mainly due to the tax rate increase for 2014 in Chile. The effect of the new tax rate of 21%, applicable from January 1, 2014, resulted in charges of CLP 1,359 million against Income in 2014. The difference between assets and liabilities for deferred taxes which occur as a direct effect of the increase in the First Category Income tax rate introduced by Act No. 20,780, has been accounted against Net income. As of December 31, 2014, the total effect accounted against Net income was an amount of CLP 14,520 million.
Net income for the year
Our Net income for the twelve months ended December 31, 2014 decreased 9.1%, from CLP 132,905 million in 2013 to CLP 120,792 million in 2014, primarily as a result of a 4.4% decrease in Operating Result and higher Income taxes.2016.
Net income attributable to equity holders of parent companyNon-controlling interests
Our Net income attributable to equity holders of our parent companynon-controlling interests decreased 13.7%to CLP 18,501 million in 2017 from CLP 123,03621,624 million in 20132016, mainly due to CLP 106,238 milliona decline in 2014 for the reasons explainedresults in the preceding paragraphs.
Non-controlling interests
Non-controlling interests increased from CLP 9,869 million in 2013 to CLP 14,553 million in 2014.our Wine Operating segment.
B.Liquidity and Capital Resources
Our principal source of liquidity has been cash generated by our operating activities, which amounted to CLP 194,155190,014 million, CLP 173,622262,161 million and CLP 219,511429,313 million during the years 2013, 20142016, 2017 and 2015,2018, respectively.
Our cash flow from operations and working capital are our primary sources to meet both our short-term and long-term obligations. In the opinion of our management, they are sufficient for those purposes.
The principal component of cash flows generated by operating activities in 20152018 were amounts collected from clients net of payments to suppliers of CLP 649,767755,184 million compared to CLP 532,878764,197 million in 20142017 and CLP 513,398646,311 million in 2013.
2016.
In 2015,2018, our cash flows from financing activities totalled outflows of CLP 82,83952,964 million compared to outflows of CLP 132,15653,001 million in 20142017 and inflowsoutflows of CLP 251,62295,060 million in 2013.2016. The principal components of cash flows used in financing activities consisted of dividends paid of CLP 66,14774,825 million in 2015,2018, including dividends paid relating to minority interests (CLP 65,31675,128 million in 20142017 and CLP 63,68169,820 million in 2013)2016), of the repayment of bank borrowingsloan payments of CLP 54,797112,665 million in 20152018 (CLP 20,76625,754 million in 20142017 and CLP 22,34427,911 million in 2013)2016), partially offset by the proceeds from short-term and long-term borrowings of CLP 42,929184,008 million in 20152018 (CLP 37,36657,777 million in 20142017 and CLP 22,89323,150 million in 2013)2016), and other cash movement outflowsinflows of CLP 2,526819 million in 2015 mainly due to the amortization of the series E bond (outflows2018 (inflows of CLP 81,47136 million in 2014 mainly due to the payment2017 and inflows of the series I bond and CLP 3,162913 million in 2013), and.2016). Additionally, we received a netpaid amount of CLP 326,66449,223 million from our 2013 capital increase.
for the acquisition of an additional 15.79% interests in Viña San Pedro Tarapacá S.A. through CCU InversionesS.A. (CLP 7,800 million in 2017 for the acquisition of an additional 2.5% interests in Viña San Pedro Tarapacá S.A. through CCU Inversiones S.A.)
In 2015,2018, our cash used in investment activities totalled CLP 165,810199,002 million compared to CLP 238,970173,614 million in 20142017 and CLP 136,918155,007 million in 2013.2016. The principal components of cash used in investment activities in 20152018 consisted of capital expenditures of CLP 131,731131,440 million (CLP 230,080125,765 million in 20142017 and CLP 124,559128,883 million in 2013)2016) and payments made to acquire interests in joint ventures, in non-controlling interests and to obtain control of subsidiaries or other businesses of CLP 44,08465,325 million (CLP 15,22250,463 million in 20142017 and CLP 14,56629,859 million in 2013)2016).
As of December 31, 2015,2018, we had CLP 75,485122,695 million (CLP 131,55867,349 million in 20142017 and CLP 313,64758,585 million in 2013)2016) in cash, overnight deposits, bank balances, time deposits and investments in mutual funds, which do not include CLP 117,069196,319 million (CLP 83,217102,696 million in 20142017 and CLP 95,20675,448 million in 2013)2016) corresponding to securities purchased under resale agreements. Indebtedness, including accrued interest, amounted to CLP 168,118270.636 million as of December 31, 2015.2018. Short-term indebtedness included:
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• CLP 27,71538,160 million of short-term bank borrowings,
• CLP 3,1554,081 million of bonds payable, and
• CLP 321366 million of financial lease obligationsobligations.
As of December 31, 2015,2018, long-term indebtedness, excluding the current portion, comprised:
• CLP 48,33575,201 million of long-term obligations to banks,
• CLP 71,353135,281 million of long-term obligations to the public represented by bonds, and
• CLP 17,23817,546 million of long-term financial lease obligations.
OnIn April 2, 2009 the Company issued two series of notes in the local market for UF 3 million (all outstanding amounts under the “I” Series bonds were paid during 2014), and UF 2 million for a total of CLP 104,188 million in order to refinance a previous loan of CLP 30,000 million and a US$USD 100 million syndicated loan that matured in November 2009. The current conditions of the bonds are as follows:
| “ | “ |
UF amount |
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Term |
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|
Amortization |
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Interest Rate | UF+ | UF+ |
As mentioned above, during the last quarter of 2009 we repaid a syndicated loan of US$100 million which had been converted into a fixed-rate UF loan through a cross-currency swap. Additionally, during March 2014 we paid all outstanding amounts under the “I” Series bonds.
As of December 31, 2015,2018, some of our outstanding debt instruments required that we maintain certain financial ratios. The most significant covenants (“H” and “J”, given that all outstanding amounts under the “E” Series bonds were paid during 2018) required us to maintain a consolidated interest coverage ratio of Adjusted Operating Result before Depreciation and AmortizationORBDA (as calculated by CCU in accordance with particular debt instruments in order to measure such instruments’ financial covenants) to interest expenses equal to or higher than 3.00 to 1.00;in CCU and CPCh; to maintain a consolidated leverage ratio (the ratio of adjusted liabilities to adjusted equity) equal to or lower than 1.50 to 1.00 in CCU 1.20and 2.50 in CPCh; to 1.00maintain a consolidated financial leverage ratio (the ratio of net financial debt to adjusted equity) lower than 1.50 in VSPTCCU; and 2.00 to 1.00 in CPCh; a minimum consolidated adjusted equity of CLP 312,516.75 million of CLP 83,337.8 million in VSPTCCU and of UF 770 thousand (CLP 19,73420,912 million as of December 31, 2015)2018) in CPCh; and a maximum indebtedness ratio of less than 3.00 to 1.00 from financial liabilities (bank loans, notes, and leasing obligations) to Adjusted Operating Result before Depreciation and Amortization.CPCh. Furthermore, we were required to maintain a ratio of our unpledged assets over our unsecured liabilities of at least 1.2. The definition of, and calculation mechanics for, all covenants were established when we first entered into these debt instruments, and were based on Chilean GAAP, which are no longer in use since the Company adopted IFRS, as issued by the IASB. For that reason, the Company in 2010 adapted, with the consent of its creditors, these requirements to the new accounting standards and principles.principles (see Note 21 to our audited consolidated financial statements included herein).
At December 31, 2015, we2018, CCU met all ourof its financial debt covenants and had a consolidated interest coverage ratio of 12.40 to 1.00,23.85, a consolidated leverage ratio of 0.46 to 1.00.0.56 and consolidated financial leverage ratio of -0.03. The consolidated adjusted equity attributable to equity holders of the parent company as of December 31, 20152018 was CLP 1,118,2201,433,572 million. Our ratio of unpledged assets over unsecured liabilities was 3.17.8.89.
None of our indebtedness, or that of our subsidiaries, contains any term that restricts our ability to pay dividends other than the requirement to maintain a minimum consolidated equity.
The following table summarizes debt obligations held by us as of December 31, 2015.2018. The table presents principal payment obligations in millions of Chilean pesosCLP by interest rate structure, financial instrument and currency, with their respective maturity dates and related weighted-average interest rates:
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Interest - Bearing Debts as of December 31, 2015 - Cash | ||||||||||||||||
(millions of Ch$, except percentages) | ||||||||||||||||
Contractual Maturity Date | ||||||||||||||||
Fixed Rate | Averge Int.Rate | 2016 | 2017 | 2018 | 2019 | 2020 | Thereafter | TOTAL | ||||||||
Ch$ (UF)(1) | Bonds | 4.2% | 5,607 | 7,064 | 7,064 | 7,064 | 7,064 | 64,743 | 98,605 | |||||||
Ch$ (UF)(1) | Banks | 6.0% | 1,884 | 1,682 | 1,646 | 11,210 | 1,270 | 28,871 | 46,563 | |||||||
Ch$ | Banks | 5.4% | 6,437 | 18,135 | 1,023 | 1,023 | 1,023 | - | 27,640 | |||||||
US$ | Banks | 3.2% | 690 | - | - | - | - | - | 690 | |||||||
Argentine pesos | Banks | 24.8% | 12,933 | 6,855 | 1,722 | 530 | - | - | 22,040 | |||||||
Uruguayan pesos | Banks | 6.0% | 345 | 851 | 851 | - | - | - | 2,047 | |||||||
TOTAL | 27,895 | 34,588 | 12,305 | 19,826 | 9,356 | 93,614 | 197,585 | |||||||||
Variable rate | Averge Int.Rate | 2016 | 2017 | 2018 | 2019 | 2020 | Thereafter | TOTAL | ||||||||
US$ | Banks | 1.6% | 10,564 | 126 | 5,663 | - | - | - | 16,354 | |||||||
Argentine pesos | Banks | 25.2% | 1,905 | 1,661 | 1,098 | 805 | - | - | 5,469 | |||||||
TOTAL | 12,469 | 1,788 | 6,762 | 805 | - | - | 21,823 | |||||||||
TOTAL | 40,363 | 36,376 | 19,067 | 20,631 | 9,356 | 93,614 | 219,407 | |||||||||
(1) UF as of Dec 31, 2015 |
|
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|
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|
|
|
|
|
|
|
|
|
| ||
Interest - Bearing Debts(1) as of December 31, 2018 | |||||||||||||||
(millions of CLP, except percentages) | |||||||||||||||
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| ||||||||||||||
Contractual Flows Maturities | |||||||||||||||
Fixed Rate | Averge Int.Rate | 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | TOTAL | |||||||
CLP (UF) (2) | Bonds | 3.3% | 7,206 | 9,554 | 9,343 | 9,132 | 8,921 | 167,691 | 211,847 | ||||||
CLP(UF)(2) (3) | Banks | 3.6% | 11,738 | 955 | 955 | 955 | 955 | 23,079 | 38,637 | ||||||
CLP | Banks | 4.6% | 8,108 | 4,435 | 4,435 | 57,687 | 6 | 44 | 74,716 | ||||||
USD | Banks | 3.1% | 16,468 | - | - | - | - | - | 16,468 | ||||||
ARS | Banks | 54.7% | 4,771 | 2 | - | - | - | - | 4,773 | ||||||
BOB | Banks | 5.0% | 782 | 1,161 | 1,161 | 1,074 | 1,074 | 3,338 | 8,589 | ||||||
UYU | Banks | 4.8% | 488 | 896 | - | - | - | - | 1,384 | ||||||
|
| ||||||||||||||
Sub-total | 49,561 | 17,002 | 15,894 | 68,847 | 10,955 | 194,152 | 356,412 | ||||||||
|
| ||||||||||||||
|
| ||||||||||||||
Variable rate | Averge Int.Rate | 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | TOTAL | |||||||
USD | Banks | 3.4% | 294 | 288 | 8,199 | - | - | - | 8,781 | ||||||
ARS | Banks | 32.5% | 506 | - | - | - | - | - | 506 | ||||||
|
| ||||||||||||||
Sub-total | 800 | 288 | 8,199 | - | - | - | 9,287 | ||||||||
|
| ||||||||||||||
TOTAL | 50,361 | 17,290 | 24,093 | 68,847 | 10,955 | 194,152 | 365,699 | ||||||||
(1) Including long-term debt obligations and capital lease obligations. (3) Includes Capital Lease Obligations for an amount of CLP 27,867 million. | |||||||||||||||
To hedge our market risks, we hold debt obligations in various currencies and enter into derivatives contracts. See “Item 11: Quantitative and Qualitative Disclosure about Market Risk.”Risk”.
Our treasury policy is to invest in highly liquid financial instruments issued by first-class financial institutions. Investments are made primarily in Chilean pesos and U.S. dollars.CLP. As of December 31, 2015,2018, we had invested CLP 149,708254,708 million in Chilean peso related instruments.
time deposits, mutual funds and securities purchased under resale agreements (Repos). The following table summarizes financial instruments, including time deposits, mutual funds and securities purchased under resale agreements (Repos), held by us as of December 31, 2015:2018:
Short-Term Financial Instruments | |
(in millions of CLP) | |
Time deposits |
|
Mutual Funds | 10,194 |
Repos |
|
Total |
|
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Our plans for capital expenditures through the period 2016-2019(1)2019-2022 are displayed in the following table:
Operating segment | 2016 | 2017 | 2018 | 2019 | |
|
| (CLP Millions) |
|
|
|
|
|
|
|
|
|
Chile |
| 84,663 | 52,244 | 130,929 | 81,118 |
| As a percentage of Total | 43.8% | 38.6% | 55.5% | 57.1% |
| Machinery and equipment | 44,696 | 24,378 | 68,464 | 32,056 |
| Packaging | 19,010 | 14,568 | 16,045 | 18,407 |
| Marketing assets | 9,602 | 7,092 | 7,512 | 7,001 |
| Software and hardware | 685 | 310 | 218 | 173 |
| Others | 10,670 | 5,895 | 38,690 | 23,480 |
|
|
|
|
|
|
International Business | 57,379 | 35,785 | 29,026 | 21,003 | |
| As a percentage of Total | 29.7% | 26.5% | 12.3% | 14.8% |
| Machinery and equipment | 23,720 | 5,348 | 7,679 | 2,415 |
| Packaging | 16,331 | 9,594 | 9,897 | 10,393 |
| Marketing assets | 10,365 | 12,810 | 7,560 | 7,210 |
| Software and hardware | 3,258 | 1,153 | 733 | 243 |
| Others | 3,706 | 6,881 | 3,157 | 742 |
|
|
|
|
|
|
Wine |
| 12,506 | 10,860 | 11,904 | 9,767 |
| As a percentage of Total | 6.5% | 8.0% | 5.0% | 6.9% |
| Machinery and equipment | 4,976 | 5,955 | 3,581 | 2,690 |
| Packaging | 1,127 | 1,459 | 1,570 | 1,707 |
| Marketing assets | 15 | 23 | 25 | 28 |
| Software and hardware | 227 | 104 | 92 | 88 |
| Others | 6,161 | 3,319 | 6,635 | 5,255 |
|
|
|
|
|
|
Others | 38,957 | 36,399 | 63,874 | 30,149 | |
| As a percentage of Total | 20.1% | 26.9% | 27.1% | 21.2% |
|
|
|
|
|
|
Total |
| 193,505 | 135,289 | 235,731 | 142,037 |
(CLP Million) | 2019 | 2020 | 2021 | 2022 |
Chile | 171,751 | 141,408 | 93,160 | 77,812 |
Abroad | 41,232 | 65,035 | 31.919 | 39,590 |
Total | 212,982 | 206,442 | 125,079 | 117,402 |
(1)Updated April 5, 2016
During the years 2016 through 2019, weThe investment plan to make capital expendituressupport organic growth at a consolidated level contemplates investing CLP 212,982 million in 2019, composed mainly of CLP 85,920 million in production assets, which includes the start up of construction of thenew production plant for non-alcoholic beverages in Renca (Santiago), CLP 25,903 million in distribution assets to adapt, update and increase production capacity, installing new packaging lines, enhancing environmental protection, optimizingoptimize our distribution system and warehouse facilities, investingCLP 26,493 million in packaging material such as bottles and additional returnable bottles and crates to replace obsolete inventories adapting to new packaging formats and supporting industry volume growth.CLP 25,613 million in marketing assets. Capital expenditures are also directed at improving facilities and offices in our plants, and implementing information and management systems in line with the development of our business. These figures may be subject to improving management information systemsadjustments depending on market conditions and making additional investments in marketing assets.the Company's ongoing needs.
We review our capital investment program periodically and changes to the program are made as appropriate. Accordingly, we cannot assure you that we will make any of these proposed capital expenditures at the anticipated level or at all. In addition, we are analyzing the possibility of making acquisitions in the same or related beverage businesses, either in Chile or in other countries of South America’s southern cone. Our capital investment program is subject to revision from time to time due to changes in market conditions for our products, general economic conditions in Chile, Argentina and elsewhere, interest, inflation and foreign exchange rates, competitive conditions and other factors.
We expectThe financing of our investments comes mostly from cash flow from operations generated by the Company and new credits, always taking into account an adequate debt/equity structure in order to fundminimize capital costs, and at the same time debt levels and maturities compatible with our capitaloperational cash flow generation.
Innovation is the driver that allows CCU to meet constantly evolving demand. Our research and development efforts to continuously satisfy the market by introducing new products and brands, although significant, do not involve material expenditures, throughas we have a combinationclose relationship with the companies that own the brands subject to license contracts. The relationship with the license owners is a constant resource in these matters as well as in the application of internally generated funds, long-term indebtednessproduction best practices, providing access to the “state of the art” techniques and knowledge in the industry.
In 2003, we entered into two technical agreements with Heineken Brouwerijen B.V. for assistance regarding all technical issues related to the production and bottling of Heineken Lager, one for Chile and the 2013 capital increase.other for Argentina.
In May 2005, we entered into a technical assistance agreement with Heineken Technical Services B.V. (currently Heineken Supply Chain B.V.) for certain operational aspects of our breweries, with an initial term of one year, renewable for subsequent periods of one year each. See “Item 6: Directors, Senior Management and Employees” and “Item 7: Major Shareholders and Related Party Transactions”.
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The Chilean economy grew 4.0% in 2018, with an inflation rate of 2.6%. Average unemployment was 6.9% in 2018. We cannot assure you that the consumption of our products will vary in the same proportion as the overall economic indicators, since there is no perfect correlation. The conditions in particular sectors of the economy may have different impact in our business. Factors such as competition and changes in relative prices among the various types of beverages can affect the consumption of our products.
In August 2016, labor reform Law N° 20,940 was approved, which results in a more regulated labor market, effective as of April 2017.
On June 26, 2015 Decree N° 13 of the Ministry of Health was published which modifies the Food Ordinance (Supreme Decree N° 977 of the Ministry of Health) and enforces Law N° 20,606 of 2012 regarding the nutritional composition of food products and its promotion. Both regulations establish certain restrictions on promotion material, labeling, and commercialization of these products that have been classified as being “high” in calories or any of the defined critical nutrients, such as sodium, sugar and saturated fats. Additionally, on November 13, 2015 Law N° 20,869 regarding the promotion of food products was published, restricting the time of day promotions for products high in calories or any of the defined critical nutrient can be aired on television and in the cinema. The first phase of this regulation came into force in June 2016 and affected part of our non-alcoholic portfolio. The second phase of the regulation went into effect in June 2018, decreasing the maximum permitted calorie and sugar levels. The third phase of the regulation is expected to go into effect in June 2019, reducing the maximum permitted calorie level. We have taken measures to mitigate the impact of this new law.
The Chilean Congress is currently discussing a bill that provides, among others, for a new regime of temporary water rights, which apply to future water rights that are granted. The bill would also introduce a system of revocation of water rights, for those not in use. This bill could undergo modifications during its discussion in the Chilean Congress.
All CCU plants have electrical power contracts, either regulated or agreed to with distributors or generators, with prices tied to spot prices, coal prices and CPI (U.S. consumer price index). A shortage is not foreseen in the coming years. Natural gas for CCU plants in Chile comes from GNL Quinteros facilities, which imports gas from renewable sources at international prices. We do not foresee any shortages.
In 2018, the Argentine economy contracted by 3.5% and the Argentine peso depreciated by an average of 68% and when comparing the exchange rate as of the end of each period, the Argentine peso depreciated against the USD by 107% in 2018. Depreciation of the Argentine peso against the dollar may negatively affect our consolidated financial results. Our Argentine subsidiaries use the Argentine peso as their functional currency and their financial statements are translated to CLP for consolidation purposes, which may produce variations to the Company’s consolidated net income and shareholders’ equity, due to translation effects. Also, most of our raw material costs in Argentina are indexed to the dollar, so a depreciation of the ARS against the USD may impact our profitability.
Argentina has faced in the past, and continues to face, high inflation. The increase in inflationary risk may also erode macroeconomic growth and limit the availability of financing, causing a negative impact on our operations. In the years 2016, 2017 and 2018 inflation in Argentina was approximately 40%, 20% and 41%, respectively. Consequently, given that the cumulative inflation rate exceeded 100% in the last three years, Argentina, as prescribed by IAS 29, was declared a hyperinflationary economy as of July 1, 2018 (see Note 4 to our consolidated financial statements included herein).
Measures taken by previous Argentine governments to address the country’s economic crises severely affected the stability of Argentina's financial system and have had a materially negative impact on the country’s economy. These measures included, among others, different methods to directly and indirectly regulate price increases of various consumer goods, including beer, with the intention of reducing inflation. Additionally, the measures implemented in the past to control the country’s trade balance and exchange rate negatively impacted the free import of goods and the repatriation of profits. This situation changed in December 2015. However, we cannot guarantee that the authorities in Argentina will not implement legal and economic measures that may adversely affect our operations in Argentina.
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E.Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements involving any transactions, agreements or other contractual arrangements involving an unconsolidated entity under which we have:
·made guarantees;
·a retained or a contingent interest in transferred assets;
·an obligation under derivative instruments classified as equity; or
·any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or that engages in leasing, hedging or research and development arrangements with us.
We record payments made under operating leases as expenses, and none of our operating lease obligations are reflected on our balance sheet. We have no other off-balance sheet arrangements. See Note 34 to our consolidated financial statements included herein for a more detailed discussion of contingencies, including guarantees.
The following table summarizes our known contractual obligations as of December 31, 2015:2018:
|
|
| Payments due by period |
| ||||||
Payments due by period | Payments due by period | |||||||||
|
|
| (in million of CLP) |
| (in million of CLP) | |||||
Contractual Obligations | Total | Less than 1 year | 1 - 3 years | 3 - 5 years | More than 5 years | Total | Less than 1 year | 1 - 3 years | 3 - 5 years | More than 5 years |
Long-Term Debt Obligations(1) | 183,882 | 38,858 | 52,733 | 27,548 | 64,743 | 337,832 | 49,395 | 39,471 | 77,893 | 171,073 |
Capital Lease Obligations(2) | 35,526 | 1,506 | 2,710 | 2,439 | 28,871 | 27,867 | 967 | 1,912 | 1,910 | 23,079 |
Operating Lease Obligations(3) | 213,064 | 82,677 | 51,603 | 25,204 | 53,580 | 138,377 | 56,311 | 40,459 | 18,945 | 22,661 |
Purchase Obligations(4) | 535,576 | 144,657 | 210,398 | 126,396 | 54,126 | 1,337,560 | 245,986 | 439,475 | 414,824 | 237,275 |
Total | 968,048 | 267,697 | 317,444 | 181,587 | 201,320 | 1,841,636 | 352,659 | 521,317 | 513,572 | 454,088 |
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| |||||||
(1) Includes interest. | ||||||||||
(2) Includes our obligations to lease our headquarters building (see Note 27 to the financial statements). | ||||||||||
(3) includes real state property, vineyards and warehouse leases, as well as marketing contracts. | ||||||||||
(1) Includes interest expense. | ||||||||||
(2) Includes our obligations to lease our headquarters building (see Note 21 to the financial statements). | (2) Includes our obligations to lease our headquarters building (see Note 21 to the financial statements). |
| ||||||||
(3) Includes real estate property, vineyards and warehouse leases, as well as marketing contracts. | (3) Includes real estate property, vineyards and warehouse leases, as well as marketing contracts. | |||||||||
(4) Includes raw material purchase contracts. | (4) Includes raw material purchase contracts. |
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements involving any transactions, agreements or other contractual arrangements involving an unconsolidated entity under which we have:
·made guarantees;
·a retained or a contingent interest in transferred assets;
·an obligation under derivative instruments classified as equity; or
·any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or that engages in leasing, hedging or research and development arrangements with us.
We record payments made under operating leases as expenses, and none of our operating lease obligations are reflected on our balance sheet. We have no other off-balance sheet arrangements. See Note 35 to our audited consolidated financial statements for a more detailed discussion of contingencies, including guarantees.
Research and Development
Innovation is the driver that allows CCU to meet constantly evolving demand. Our research and development efforts to continuously satisfy the market by introducing new products and brands, although significant, do not involve material expenditures, as we have a close relationship with the companies that own the brands subject to license contracts. The relationship with the license owners is a constant resource in these matters as well as in the application of production best practices, providing access to the “state of the art” techniques and knowledge in the industry.
In 2003, we entered into two technical agreements with Heineken Brouwerijen B.V. for assistance regarding all technical issues related to the production and bottling of Heineken Lager, one for Chile and the other for Argentina. On October 12, 2011, we and Heineken Brouwerijen B.V. signed the Amended and Restated versions of the Trademark License Agreements which provide us with the exclusive rights to produce, sell and distribute Heineken beer in Chile and Argentina, in effect as of January 1, 2011. These agreements have an initial term of 10 years, and shall automatically be renewed on January 1 of each year for a new period of ten years, unless any party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires.81
In May 2005, we entered into a technical assistance agreement withHeineken Technical Services B.V. (currently Heineken Supply Chain B.V.)for certain operational aspects of our breweries, with an initial term of one year, renewable for subsequent periods of one year each. See “Item 6: Directors, Senior Management and Employees” and “Item 7: Major Shareholders and Related Party Transactions.”
The license agreement between CCU Argentina and Anheuser-Busch, signed in 1995, as amended, also provides us with both technical and marketing assistance for the production and marketing of Budweiser beer brand in Argentina. See “Item 4: Information on the Company – Business Overview – Production and Marketing –International Business Operating segment.”
Critical Accounting Policies and Practices
A summary of our significant accounting policies is included in Note 2 to our audited consolidated financial statements, which are included in this annual report. The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions are based on historical experiences, changes in the business environment and information collected from qualified external sources. However, actual results may differ from estimates under different conditions, sometimes materially. Critical accounting policies and estimates are defined as those that are both most important to the portrayal of our financial condition and results and/or require management’s subjective judgments. The most critical accounting policies and estimates are described below.
a) Property, plant, equipment and bottles: The key judgments we must make under the property and equipment policy include the estimation of the useful lives of our various asset types, expected residual values, the election of a method for recording depreciation, management’s judgment regarding appropriate capitalization or expensing of costs related to fixed assets, and the evaluation of potential impairments, if any.
Property and equipment are stated at cost and are depreciated using the straight-line method based on the estimated useful lives of the assets. In estimating the useful lives (residual values are considered) we have primarily relied upon actual experience with the same or similar types of equipment and recommendations from the manufacturers. Useful lives are based on the estimated amount of years an asset will be productive and are revised periodically to recognize potential impacts caused by new technologies, changes to maintenance procedures, changes in utilization of the equipment, and changing market prices of new and used equipment of the same or similar types.
Property and equipment assets are evaluated for possible impairment. Factors that would indicate potential impairment may include, but are not limited to, significant decreases in the market value of the long-lived asset(s), a significant change in the long-lived asset’s physical condition and operating or cash flow losses associated with the use of the long-lived asset. This process requires our estimate of future cash flows generated by each asset or group of assets. For any instance where this evaluation process indicates impairment, the appropriate asset’s carrying values are written down to net realizable value and the amount of the write-down is charged against the results of continuing operations.
Expenditures that substantially improve and/or increase the useful life of facilities and equipment are capitalized. Other maintenance or repair costs are charged income as incurred.
b) Goodwill, impairment of goodwill and intangible assets other than goodwill: Management exercises judgment in assessing goodwill and the useful lives of other intangible assets including commercial trademarks and software programs. Judgments are also exercised for assessing potential impairments for these kinds of assets. Goodwill is recorded as the excess of the purchasepricepurchase price of companies acquired over the fair value of identifiable net assets acquired and is accounted for at its cost value less accumulated impairment losses, if any. Goodwill in the acquisition of joint ventures and associated companies is assessed for impairment as part of the investment, provided that there are signs indicating that the investment may be impaired. We annually review the recorded value of our goodwill, or sooner if changes in circumstances indicate that the carrying amount may exceed fair value. Recoverability of the carrying value of the asset is determined by comparing net book value, including goodwill, to fair value based on the estimated future net cash flows of the relevant assets. See Notes 2.15 and 2.16 to our consolidated financial statements.statements included herein.
c) Deposits for returns of bottles and containers: Deposits for returns of bottles and containers corresponds to the liabilities registered by the guarantees of money received from customers for bottles and containers placed at their disposal and represents the value that will be returned to the customer when it returns the bottles to the Company in good condition along with the original document. This value is determined by the estimation of the bottles and containers in circulation that are expected to be returned to the Company in the course of time based on the historic experience, physical counts held by clients and independent studies over the quantities that are in the hands of end consumers, valued at the average weighted guarantees for each type of bottles and containers.
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The Company does not intend to make significant repayment of these deposits within the next 12 months. Such amounts are classified within current liabilities, under the line Other financial liabilities, since the Company does not have the legal ability to defer this payment for a period exceeding 12 months. This liability is not discounted, since it is considered a payable on demand, with the original document and the return of the respective bottles and containers and it does not have adjustability or interest clauses of any kind in its origin.
d) Severance Indemnities: As of December 31, 2015,2018, the liabilities for mandatory severance indemnities have been determined at their current actuarial value, based on the accrued cost of the benefit, using an annual discount interest rate of 6.36%5.69% in Chile and 39.26%34.62% in Argentina. The calculation also considers several assumptions such as the estimated years of service that personnel will have at the date of their retirement, mortality rates and future salary increases.33333333
e) Financial instruments:IFRS 9 – Financial instruments, replaces the IAS 39 – Financial instruments, for the annual periods beginning on January 1, 2018 and which brings together three aspects of accounting and which are: classification and measurement; impairment and hedge accounting.
Financial assets
The Company recognizes a financial asset or liability in its balance sheet when it becomes subject to the contractual stipulationsConsolidated Statement of a financial instrument. Financial Position as follows:
As of the date of the initial recognition, Managementmanagement classifies its financial assets (i) at fair value through profit and loss or collectible credits and accounts (ii) collectible creditstrade and accounts, dependingother current receivables and (iii) hedging derivatives. The classification depends on the purpose for which the financial assets were acquired. For those instruments not classified at fair value through profit and loss,income, any cost attributable to the transaction is recognized as part of the assetasset’s value.
The fair value of the instruments that are actively quotedtraded in formal markets is determined by the quotedtraded price as ofon the financial statement closing date. For those investments without an active market, the fair value is determined using valuation techniques including (i) the use of recent market transactions, (ii) references to the current market value of another financial instrument of similar characteristics, (iii) discounted cash flow,flows and (iv) other valuation models. These
After the initial recognition the Company values the financial assets are valued at fair valueas described below:
Trade and the gainsother current receivables
Trade receivable credits or losses originated by the change in fair valueaccounts are recognized in the Consolidated Statement of Income. The financial instruments at fair value through profit and loss include financial assets classified as held for trading by the Company. Financial assets are classified as held for trading when acquired with the purpose of selling them within a short term. Derivative instruments are classified as held for trading unless they are classified as hedge instruments.according to their invoice value.
The estimatedCompany acquires loan insurances covering approximately 90% and 99% of the individually significant accounts receivable balances for the domestic market and the international market, of the total of trade receivables, respectively, net of a 10% deductible.
An impairment of accounts receivable balances is recorded when there is objective evidence that the Company will not be capable to collect amounts according to the original terms. Some indicators that an account receivable has impairment are the financial problems, initiation of a bankruptcy, financial restructuring and age of the balances of our customers.
Estimated losses from bad debts are determined by applying different percentages, taking into account maturitymeasured in an amount equal to the "expectations of credit losses", using the simplified approach established in International Financial Reporting Standard 9-Financial Instruments (“IFRS 9”) and in order to determine whether or not there is impairment from portfolio, a risk analysis is carried out according to historical experience (three years) on the uncollectability, which is adjusted according to macroeconomic variables, in order to obtain sufficient prospective information for the estimation and considering other factors of aging until reaching 100% of the balance in most of the debts older than 180 days, with the exception of those cases that in accordance with current policies, for which losses are estimated due to partial deterioration based on a case by case analysis. Additionally, the company maintains credit insurance for individually significant accounts receivable. Impairment losses are recorded in the Consolidated Statement of Income in the period incurred.
Current trade receivable credits and accounts are initially recognized at their nominal value and are not discounted because they do not differ significantly from their fair value. The Company has determined that thecalculation of the amortized cost is not materially different from the invoiced amount because the transactions do not have significant associated costs.
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LoansFinancial liabilities
The Company recognizes a financial liability in its Consolidated Statement of Financial Position as follows:
Interest-bearing loans and financial obligations accruing interest
Interest-bearing loans and financial obligations are initially recognized at the fair value of the resources obtained, less incurred costs incurredthat are directly attributable to the transaction. After initial recognition, interest-bearing loans and obligations accruing interest are valuedmeasured at their amortized cost. The difference between the net amount received and the value to be paid is recognized in the Consolidated Statement of Income duringover the term of the loan, using the effective interest rate method.
Interest paid and accrued related to debtsloans and obligations used in a financingto finance its operations appearare presented under financial cost. Loansfinance costs.
Interest-bearing loans and obligations accruing interest with a maturitymaturing within a twelve-month periodtwelve months are classified as current liabilities, unless the Company has the unconditional right to defer the payment of the obligation for at least a twelve-month periodtwelve months after the closing date of the consolidated financial statements.
Trade and other payables
Trade and other payables are initially recognized at nominal value because they do not differ significantly from their fair value. The Company has determined that no significant differences exist between the carrying value and amortized cost using the effective interest rate method.
Derivative Instruments
All derivative financial instruments are initially recognized at fair value as of the date of the derivative contract and subsequently re-measured at their fair value. Gains and losses resulting from fair value measurement are recorded in the Consolidated Statement of Income as gains or losses due to fair value of financial instruments, unless the derivative instrument is designated as a hedging instrument.
Financial Instruments at fair value through profit and loss include financial assets classified as held for trading and financial assets which have been designated as such by the Company. Financial assets are classified as held for trading when acquired for the purpose of selling them in the short term. The fair value of derivative financial instruments that do not qualify for hedge accounting is immediately recognized in the consolidated statement closing date.of income under Other gains (losses). The fair value of these derivatives is recorded under Other financial assets and Other financial liabilities.
Derivative instruments classified as hedges are accounted for as cash flow hedges.
In order to classify a derivative as a hedging instrument for accounting purposes, the Company documents (i) as of the transaction date or at designation time, the relationship or correlation between the hedging instrument and the hedged item, as well as the risk management purposes and strategies, (ii) the assessment, both at designation date as well as on a continuing basis, whether the derivative instrument used in the hedging is highly transaction effective to offset changes in inception cash flows of the hedged item. A hedge is considered effective when changes in the cash flows of the underlying directly attributable to the risk hedged are offset with the changes in fair value, or in the cash flows of the hedging instrument with effectiveness between 80% to 125%(See Note 4 - Accounting changes to our audited consolidated financial statements included herein).
The total fair value of a hedging derivative is classified as assets or financial liabilities in Other non-current if the maturity of the hedged item is more than 12 months and as other assets or current liabilities if the remaining maturity of the hedged item is less than 12 months. The ineffective portion of these instruments can be viewed in Other gains (losses) of the Consolidated Statements of Income. The effective portion of the change in the fair value of derivative instruments that are designated and qualified as cash flow hedges are initially recognized inCash Flow Hedge Reserve in a separate component of Equity. The income or loss related to the ineffective portion is immediately recognized in the Consolidated Statement of Income. The amounts accumulated in Equity are reclassified in Income during the same period in which the corresponding hedged item is reflected in the Consolidated Statement of Income. When a cash flow hedge ceases to comply with the hedge accounting criteria, any accumulated income or loss existing in Equity remains in Equity and is recognized when the expected transaction is finally recognized in the Consolidated Statement of Income. When it is estimated that an expected transaction will not occur, the accumulated gain or loss recorded in Equity is immediately recognized in the Consolidated Statement of Income.
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Derivative instruments are classified as held for trading unless they are classified as hedge instruments.
Deposits for returns of bottles and containers
Deposits for returns of bottles and containers corresponds to the liabilities registered by the guarantees of money received from customers for bottles and containers placed at their disposal and represents the value that will be returned to the customer when it returns the bottles to the Company in good condition along with the original invoice. This value is determined by the estimation of the bottles and containers in circulation that are expected to be returned to the Company in the course of time based on the historic experience, physical counts held by clients and independent studies over the quantities that are in the hands of end consumers, valued at the average weighted guarantees for each type of bottles and containers.
The Company does not intend to make significant repayment of these deposits within the next 12 months. Such amounts are classified within current liabilities, under the line Other financial liabilities, since the Company does not have the legal ability to defer this payment for a period exceeding 12 months. This liability is not discounted, since it is considered a payable on demand, with the original invoice and the return of the respective bottles and containers and it does not have adjustability or interest clauses of any kind in its origin.
f)Accounting changes:
1.The accounting policies described in the consolidated financial statements as of December 31, 2018 reflect the modifications made byInternational Financial Reporting Standard 15-Revenue from Contracts with Customers (“IFRS 15”) and IFRS 9 which went into effect as of January 1, 2018. The following is an explanation of the initial impact of the application of these rules:
In relation to IFRS 9, the Company has made an evaluation of its impacts which included the determination of gaps between criteria of classification and measurement of financial instruments with respect to the criteria currently used and the determination of the impact of moving to a model of expected credit losses to determine the impairment of its financial assets.
Based on the evaluation, we have determined that there are no significant changes impacting the classification and measurement of the Company’s financial assets as a result of the application of IFRS 9. We have not identified significant impacts on accounting policies for financial liabilities, since the new requirements only impacts accounting for liabilities, other than derivative financial instruments, which are designated at fair value through profit or loss, on which the Company, as of January 1, 2018, does not have, nor has there been debt renegotiations that could be affected by the new clarifications about the accounting treatment regarding modification of liabilities; however, for derivative financial instruments that are recognized at fair value through profit or loss as of January 1, 2018, the Company has determined an increase of ThCh$ 1,307, net of deferred taxes, which was recorded under Retained earnings in Equity as of January 1, 2018.
In relation to the new impairment model, the standard requires the recognition of impairment losses based on expected credit losses (ECL), instead of only incurred credit losses as indicated in IAS 39. Based on the evaluations performed on the portfolio of Trade receivables as of January 1, 2018, the Company determined a decrease of ThCh$ 128,029, net of deferred taxes, which was recorded under Retained earnings in Equity as of January 1, 2018 and additionally modified, as of said date, the respective accounting policy.
The Company has elected to continue using the IFRS 9’s exception that allows continuing the recording of hedge accounting according to IAS 39.
The date of adoption of this new standard is mandatory as of January 1, 2018. The Company applied this rule prospectively, using the practical resources allowed by the standard, and given that the effects are not significant the comparative balances for the year 2017 will not be restated.
As of January 1, 2018, financial assets and liabilities are classified as fair value with changes in profit or loss, measured at amortized cost and at fair value in other comprehensive income, without affecting the classification maintained by the Company.
-In relation to IFRS 15, the basic principle of IFRS 15 is that an entity recognizes income from ordinary activities, in a way that represents the transfer of goods or services committed to customers, in exchangefor an amount that reflects the compensation in which the entity expects to be entitled to in exchange for these goods or services. An entity shall recognize revenue from ordinary activities in accordance with that basic principle by applying the following 5 steps which are:
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Step 1 – Identify the contract (or contracts) with the customer.
Step 2 - Identify performance obligations in the contract.
Step 3 - Determine the price of the transaction.
Step 4 - Assign the price of the transaction between performance obligations.
Step 5 - Recognize income from ordinary activities when (or as) the entity satisfies a performance obligation.
The Company has carried out an evaluation of the 5 steps indicated above and no new performance obligations have been identified or different from those already presented in the consolidated financial statements and additionally has determined there are no significant changes in the recognition of income, since these are recorded to the extent that it is likely the economic benefits flow to the Company and can be measured reliably, with determined prices that are measured at the fair value of the economic benefits received or to be received, once the performance obligation is satisfied and income is presented net of valued added tax, specific taxes, returns, discounts and rebates.
The Company adopted IFRS 15 based on the early applicationmodified retrospective approach. There was no impact from the adoption and no adjustment to the opening balance of Amendmentretained earnings was made.
2.Financial reporting in hyperinflationary economies
Inflation in Argentina has shown significant increases since the beginning of 2018. The cumulative inflation rate of three years, calculated using different combinations of consumer price indices, has exceeded 100% for several months, and it is still increasing. The cumulative three-year inflation calculated using the general price index has already exceeded 100%. Therefore, as prescribed by International Accounting Standard 29-Financial Reporting in Hyperinflationary Economies (“IAS 29”), Argentina was declared a hyperinflationary economy as of July 1, 2018.
According to the aforementioned, IAS 16 and 4129 must be applied by all entities whose functional currency is the Argentine peso for the accounting periods ended after July 1, 2018, as if the economy had always been hyperinflationary. In this regard, IAS 29 requires that the financial statements of an entity whose functional currency is the currency of a hyperinflationary country be restated in 2015. This change in accounting policyterms of the current purchasing power at the end of the reporting period. The above mentioned implies that Biological assets (vinesthe restatement of non-monetary items must be made from their date of origin, last restatement, valuation or another particular date in some very specific cases and considering that the financial statements are prepared under formationthe historical cost criteria.
The adjustment factor used in each case is obtained based on the combined index of the National Consumer Price Index (IPC), with the Wholesale Price Index (IPIM), published by the National Institute of Statistics and under production)Census of the Argentine Republic (INDEC), according to the series prepared and published by the Argentine Federation of Professional Councils of Economic Sciences (FACPCE).
For consolidation purposes, for subsidiaries whose functional currency is the Argentine peso, paragraph 43 of International Accounting Standard 21-The Effects of Changes in Foreign Exchange Rates (“IAS 21”) has been considered, which requires that the financial statements of a subsidiary that has a functional currency of a hyperinflationary economy to be restated in accordance with IAS 29, before being converted so that they are reclassified to Property, plant and equipment from Biological assets. Additionally,included in the costs associated with agricultural activities are reclassified to Biological current assets from Inventories. Until December 31, 2014 and January 1, 2014 these were presented under Biological assets (vines under formation and under production) and Inventories, respectively. The effects of this accounting policy are explained in Note 2.29 to our audited consolidated financial statements. For comparisonThe comparative amounts presented previously (2017 for the purposes these change was applied retroactively to 2014.of the Consolidated Statement of Financial Position and years 2017 and 2016 for the Consolidated Statement of Incomes by Function, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows) in CLP have not been restated.
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Re-expression due to hyperinflation will be recorded until the period in which the economy of the entity ceases to be considered as a hyperinflationary economy; at that time, adjustments made for hyperinflation will be part of the cost of non-monetary assets and liabilities.
The comparative amounts in the Company’s consolidated financial statements are presented in a stable currency and they are not adjusted by inflationary changes.
The application for the first time of IAS 29 gave rise to a positive adjustment of ThCh$ 92,241,004, net of taxes, which have been charged to the "Reserve of exchange differences on translation" account (Other comprehensive income). On the other hand, during fiscal year 2018, the application of this standard generated a gain in net monetary position of ThCh$ 2,312,604 (before tax), which is recognized in the Consolidated Statement of Incomes under "Result as per adjustment units". Additionally, since the Argentine economy was declared as hyperinflationary, a loss of ThCh$ 6,086,727 was recorded in results for the year, generated by the inflation adjustment and translation at the year-end exchange rate as of December 31, 2018.
The most significant effects on the non-monetary items restated, after rating the Argentine economy in a situation of hyperinflation, are the following:
Thousands of CLP | |
Current assets | 1,905,102 |
Non-current assets | 118,989,487 |
Current liabilities | - |
Non-current liabilities | (27,149,456) |
Total Shareholders' Equity | 93,745,133 |
Non-controlling interests | (1,504,129) |
Equity attributable to equity holders of the parent | 92,241,004 |
3.During the year ended on December 31, 2015,2018, there have beenwere no other significant changes in the use of accounting principles or relevant changes in any accounting estimates with regard to previous years that have affected these consolidated financial statements.
Trend Information
The Chilean economy grew2.1% in 2015, with an inflation rate of4.4%. The GDP growth for 2016 had been estimated in the range of1.3% to3.4%. Average unemployment was6.3% in 2015. We cannot assure you that the consumption of our products will vary in the same proportion as the overall economic indicators, since there is no perfect correlation. The conditions in particular sectors of the economy may have different impact in our business. Factors such as competition and changes in relative prices among the various types of beverages can affect the consumption of our products.
In December 2014, the Chilean government presented to the Chilean Congress a bill for a labor reform which could result in a more rigid labor market. This reform has been approved by the Chilean Congress but is currently pending resolution by the Constitutional Court.
On June 26, 2015 decree N° 13 of the Ministry of Health was published which modifies the Sanitary Food Products Regulations (DC 977 of the Ministry of Health) and enforces Law N° 20,606 of the year 2012 regarding the nutritional composition of food products and its promotion. Both regulations establish certain restrictions on promotion material, labeling, and commercialization of these products that have been classified as being “high” in calories or any of the defined critical nutrients, such as sodium, sugar and saturated fats. Additionally on November 13, 2015 Law N° 20,869 regarding Promotion of Food Products was published, which restricts the time of day for promotion on television and the cinema of the previously indicated products. This law will become effective as of June 27, 2016 and will affect a proportion of our non-alcoholic portfolio. We are taking measures to mitigate the impact of this new law.
The Chilean Congress is currently discussing a bill that provides, among others, a new regime of temporary water rights, which apply to future water rights that are granted. The bill would also introduce a system of revocation of water rights, for those not in use. This bill could be subject to modifications during its discussion in the Chilean Congress.After its enactment, regulations will be required for the implementation of the new regime, which is not expected to occur during the year 2016.
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Electricity spot prices have increased significantly in the past years due to drought conditions and the postponement of investments in new capacity, specifically hydroelectricity and coal generation. All CCU plants have electrical power contracts, either regulated or agreed with distributors or generators, with prices tied to spot prices, coal prices and CPI (U.S. consumer price index). A shortage is not foreseen in the coming years as electricity can be generated with fuel, though at a higher cost.
Our main plants in Chile are supplied by Metrogas Quintero, a natural gas company, which imports gas from renewable sources at international prices. Accordingly, we do not foresee shortages as was the case in the past when the natural gas supply depended on Argentina.
The measures taken by the previous Argentine government to address the country’s economic crisis of 2002 severely affected the Argentine financial system’s stability and have had a materially negative impact on the country´s economy. Recently, the Argentine government has lifted restrictions on foreign exchange transactions for obligations entered into after December 17, 2015. Restrictions on obligations entered into before December 17, 2015 will remain in effect until May 2016. If Argentina were to experience a new fiscal and economic crisis, the Argentine government could implement economic and political measures, which could adversely impact our business.
Since January 2006, the Argentine government has adopted different methods to directly and indirectly regulate the prices of various consumer goods, including bottled beer, in an effort to slow inflation. Additionally, measures taken by the previous Argentine government to control the country’s trade balance and to limit the access to foreign currencies have negatively impacted the free import of goods and royalty payments by the Company, and also the repatriation of profits. This situation has recently changed following the installation of the new government in December 2015. We cannot assure you that the current Argentine government will not implement this type of measures and that these will not have an adverse effect on our operations in Argentina.
Revenues from CCU Argentina, in Chilean pesos, are also subject to the volatility of exchange rates of the Chilean peso and Argentine peso in any given period. This volatility may also affect the level of income reported from our foreign operations under IFRS.
ITEM 6: Directors, Senior Management and Employees
A.Directors and Senior Management
The following table sets forth certain information with respect to the members of our boardBoard of directors, as of April 13, 2016:
Directors:
Directors | Position | Position Held Since | At CCU Since | |
Board of Directors | Andrónico Luksic | Chairman of the Board | April 2013 (Chairman), November 1986 (Director) | November 1986 |
Carlos Molina | Vice Chairman of the Board | May 2018 (Vice Chairman) April 2012 (Director) | April 2012 | |
Francisco Pérez | Director | July 1998 | February 1991 | |
Vittorio Corbo | Director | April 2012 | April 2012 | |
Pablo Granifo | Director | April 2013 | April 2013 | |
Rodrigo Hinzpeter | Director | July 2015 | July 2015 | |
José Miguel Barros | Director | April 2016 | April 2016 | |
Rory Cullinan | Director | May 2018 | Mayo 2018 | |
Hemmo Parson | Director | May 2018 | Mayo 2018 | |
Didier Debrosse(1) | Director | July 2015 | July 2015 | |
Marc Busain(1) | Vice Chairman of the Board | April 2016 | April 2016 |
(1) Resigned with effect from May 1, 2018.
Andrónico Luksic (62)(65), was appointed Chairman of the board Boardof Compañía Cervecerías Unidas S.A.in April 2013 and has served as a Director since November 1986. He is currentlythe Chairman of the Board of the Company’s primary subsidiaries, including Cervecera CCU Chile Limitada, Embotelladoras Chilenas Unidas S.A., Companía Cervercerías Unidas Argentina S.A. and he is also a member of the Boardboard of Cervecería CCU, ECUSA, CCU Argentina, CICSA, and Central Cervecera de Colombia. HeColombia S.A.S. and Zona Franca Central Cervecera S.A.S. Mr. Luksic is also currently the Chairman of the Board of Quiñenco S.A. and LQ Inversiones Financieras S.A., Vice Chairman of the Board of Banco de Chile and Compañía Sud Americana de Vapores S.A., as well as a member of the board of directors of several other companies and institutions, including Antofagasta plc, Antofagasta Minerals S.A., Nexans, Tech Pack S.A., and Invexans S.A. Mr. Luksic is a member of the International Business Leaders’ Advisory Council for the Mayor of Shanghai. He is a member of the International Advisory Board of Barrick Gold, the International Advisory Council of the Brookings Institution, the Advisory Board of the Panama Canal Authority, and the Chairman’s International Council of the Council of the Americas. In addition, Mr. Luksic is a Trustee Emeritus at Babson College, and a member of the Harvard Global Advisory Council, the Columbia University World Projects Advisory Council, the International Advisory Board of the Blavatnik School of Government at Oxford University, the International Advisory Boards of both the Tsinghua University School of Economics and Management and the Fudan University School of Management, the Harvard Business School Latin America Advisory Board, the Dean’s Council at the Harvard Kennedy School, the Advisory Committee of the David Rockefeller Center at Harvard University, and the Latin AmericanAmericas Executive Board of the MIT Sloan School of Management.
Carlos Molina17 (62), has served as Director of Compañía Cervecerías Unidas S.A since April 2012 and as Vice Chairman of the Board since May 2018.He is also a member of the Board of Directors of Cervecera CCU Chile Limited, Embotelladoras Chilenas Unidas S.A., Compañía Cervecerías Unidas Argentina S.A., Viña San Pedro Tarapacá S.A., Foods Compañía de Alimentos CCU S.A. and Compañía Pisquera de Chile S.A., and CEO of Corporación Dinámica Industrial, S.A. in Mexico.He has over 30 years of management and strategic consulting experience in multiple industries, especially in beverages and consumer goods across the Americas. In beverages, his roles have included Business Development for Heineken Americas; Planning and Strategy for Femsa Cerveza; and board member of Kaiser in Brazil. Prior to these roles, Mr. Molina was a Partner in Booz, Allen & Hamilton, a global business consulting firm. Mr. Molina is a Mexican citizen and has a BBA (Bachelor of Business Administration) from the University of Houston, and an MBA from the University of Texas.
Francisco Pérez (61),has served as director of Compañía Cervecerías Unidas S.A. since July 1998 and previously, between 1991 and 1998, he held the position ofChief Executive Officerof said the Company. In 1998 he was appointed Chief Executive Officer of Quiñenco S.A., a position he holds to date.He is member ofthe board of several companies, including Cervecera CCU Chile Limitada, Embotelladoras Chilenas Unidas S.A., Viña San Pedro Tarapacá S.A., Companía Cervercerías Unidas Argentina S.A., Compañía Pisquera de Chile S.A., Compañía Industrial Cervecera S.A., Inversiones y Rentas S.A., Banco de Chile, Banchile Corredores de Seguros S.A., LQ Inversiones Financieras S.A., Sudamericana Agencias Aéreas y Marítimas S.A, Nexans, Hapag Lloyd and Invexans Limited. He is also Chairman of the Board of Compañía Sud Americana de Vapores S.A., Empresa Nacional de Energía Enex S.A., Invexans S.A. and Tech Pack S.A. He received a degree in Business Administration from the Pontificia Universidad Católica de Chile and a Master’s degree in Business Administration from the University of Chicago.
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Vittorio Corbo14 (76),has held the position of member of the Directors Committee of Compañía Cervecerías Unidas S.A., in his capacity as independent director, since he was elected director in April 2012, which he currently chairs. He is president of Vittorio Corbo y Asociados Limitada, member of the MIT Sloan Latin American Advisory Council, of the International Advisory Council of the Center for Social and Economic Research (CASE) of Warsaw, Poland, and member of the Public Opinion Committee of the Centro de Estudios Públicos (CEP) in Santiago, Chile. He was president of the Central Bank of Chile between 2003 and 2007, director of Banco Santander S.A. (Spain) between the years 2011-2014, Chairman of the Board of Banco Santander Chile between 2014 and 2018, and director of the Santander-México Group and ENDESA Chile. He is an economic advisor to large companies as well as family offices. He held senior management positions at the World Bank in Washington DC and has provided numerous consultancies to the World Bank, IDB, US-AID, CIDA, SIDA, FASID and the OECD, as well as governments and central banks in Latin America. He was Professor of Economics in Canada, the United States and Chile. Mr. Corbo holds a degree in Business Administration from the Universidad de Chile and a Ph.D. in Economics from MIT.
Pablo Granifo (60), has served as Directorof Compañía Cervecerías Unidas S.A.since April 2013. He has been the Chairman of the Board of Banco de Chile S.A. since 2007 and Chairman of the Board of Viña San Pedro Tarapacá S.A. since 2013. He is a member of the board of Cervecera CCU Chile Limitada and Embotelladoras Chilenas Unidas S.A. Additionally, he is Chairman of the boards of Banchile Asesoría Financiera S.A., Socofin S.A., Banchile Securitizadora S.A., and Banchile Administradora General de Fondos S.A., and a member of the executive committee of Banchile Corredores de Seguros Limitada. He is also a member of the board of Empresa Nacional de Energía Enex S.A. He holds a degree in Business Administration from the Pontificia Universidad Católica de Chile.
Rodrigo Hinzpeter (53), has served as Directorof Compañía Cervecerías Unidas S.A. since July 2015. He is also member of the board of Cervecera CCU Chile Limitada, Embotelladoras Chilenas Unidas S.A., Companía Cervercerías Unidas Argentina S.A. and Inversiones y Rentas S.A. Since 2014 he has been the General Counsel of Quiñenco S.A. He is also member of the board of Invexans S.A. and Tech Pack S.A. Before that he was Secretary of Interior Affairs (2010-2012) and, later, the Secretary of Defense of the Government of Chile(2012-2014). He holds a Law degree from the Pontificia Universidad Católica de Chile.
José Miguel Barros (55), was appointed Directorof Compañía Cervecerías Unidas S.A. in April 2016. He is member of the board of various subsidiaries, including Cervecera CCU Chile Limitada, Embotelladoras Chilenas Unidas S.A., Viña San Pedro Tarapacá S.A. and Compañía Pisquera de Chile S.A. He is a Senior Managing Director and Partner of Chilean Investment Bank LarrainVial S.A. He is currently a member of the board of Lipigas S.A. and Stel Chile S.A. Mr. Barros holds a degree in Economics and Business Administration from Pontificia Universidad Católica de Chile and is a graduate from PADE, ESE Business School, Universidad de los Andes.
Hemmo Parson(50), was appointed Director of Compañía Cervecerías Unidas S.A. in May 2018. He is also member of the board of Cervecera CCU Chile Limitada, Embotelladoras Chilenas Unidas S.A. and Companía Cervercerías Unidas Argentina S.A. He has held various positions in Heineken and is currently serving as Legal Director of Heineken Americas. In addition, he is a member of the board of directors of Desnoes & Geddes Ltd., Surinaamse Brouwerij N.V. and Caribbean Development Company Ltd. Mr. Parson holds a law degree from the University of Utrecht.
15Messrs. Corbo and Molina meet the independence criteria under the Securities Exchange Act of 1934, as amended, the Sarbanes-Oxley Act of 2002 and the corporate governance rules of the New York Stock Exchange.
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Rory Cullinan(59),He has served as director of Compañía Cervecerías Unidas S.A. since May 2018. He is also a member of the Board of Directors of Cervecera CCU Chile Limitada, Embotelladoras Chilenas Unidas S.A. and Compañía Cervecerías Unidas Argentina S.A. Mr. Cullinan has wide experience across different markets and sectors, working in Europe, Africa, America and Russia. Mr. Cullinan held various positions in the Royal Bank of Scotland, including as executive chairman. He is currently non-executive director at J2 Acquisition Limited, a publicly traded company listed in London Stock Exchange and serves as senior advisor to Mckinsey.
Didier Debrosse (62), was appointed Directorof Compañía Cervecerías Unidas S.A. in July 2015 and he served as a member of the Board until May 2018. He was also member of the board of Cervecera CCU Chile Limitada, Embotelladoras Chilenas Unidas S.A. and Companía Cervercerías Unidas Argentina S.A. He has worked for Heineken since 1997, where he is currently President of Heineken Brazil. Additionally, he is Knight of the Legion of Honor as awarded by France. He received an Advanced Management Programme degree from INSEAD and completed the Board Member course at Harvard Business School.
Marc Busain (48)(51), was appointed as our directorDirector and Vice Chairman of the board Boardof Compañía Cervecerías Unidas S.A.in April 2016.2016 and he served as a member of the Board until May 2018. He was member of the board of Cervecera CCU Chile Limitada, Embotelladoras Chilenas Unidas S.A. and Companía Cervercerías Unidas Argentina S.A. He is currently member of the board of Central Cervecera de Colombia.Colombia S.A.S. He has been with Heineken since 1995 where he is currently President of Heineken Americas.Americas B.V. Prior to that, he served within Heineken as Managing Director of different countries including Mexico, France, Egypt and Burundi. He holds a Master´sMaster’s degree in Economics from the Vrije Universiteit Brussel.
Francisco Pérez (58), has served as director since July 1998. He is Chief Executive Officer of Quiñenco since 1998. Prior to joining Quiñenco, he was our Chief Executive Officer between 1991 and 1998. He is member of the board of several companies, including Cervecería CCU, CICSA, CCU Argentina, ECUSA, CPCh, Central Cervecera de Colombia, IRSA, Banco de Chile, Banchile Corredores de Seguros S.A., LQ Inversiones Financieras S.A.,VSPT, Sudamericana Agencias Aéreas y Marítimas S.A., Nexans and Hapag Lloyd. Also he is chairman of the board of CSAV (Compañía Sud Americana de Vapores S.A.), ENEX (Empresa Nacional de Energía Enex S.A.) and Invexans S.A., and Vice Chairman of Tech Pack S.A. He received a degree in Business Administration from the Pontificia Universidad Católica de Chile and a Master’s degree in Business Administration from the University of Chicago.
Carlos Alberto Molina (59), has served as our director since April 2012. He is also member of the board of Cervecería CCU, ECUSA, CCU Argentina, CICSA, VSPT, Foods, Central Cervecera de Colombia and CPCh. He has over 30 years of management and strategic consulting experience in multiple industries, especially in beverages and consumer goods across the Americas. In beverages, his roles have included Business Development for Heineken Americas; Planning and Strategy for Femsa Cerveza; and board member of Kaiser in Brazil. Prior to these roles, Mr. Molina was a Partner with Booz, Allen & Hamilton, a global business consulting firm. Mr. Molina is a Mexican citizen and has a BBA from the University of Houston, and an MBA from the University of Texas.
Vittorio Corbo (73),has served as our director since April 2012. He is a Senior Research Associate at the Centro de Estudios Públicos (CEP) in Santiago, Chile. He is also Chairman of the board of Directors of Banco Santander Chile, and Director of Grupo Santander Mexico, and of SURA Insurance-Chile, and economic consultant to several large corporations in Chile and abroad. He served in senior management positions at the World Bank in Washington, DC, was Professor of Economics in Canada, the U.S.A. and Chile, was also President of the Central Bank of Chile (2003-2007) and Director of Banco Santander S.A. (Spain) from 2011-2014 among other jobs. Mr. Corbo holds a Commercial Engineering degree (with maximum distinction) from Universidad de Chile and a Ph.D. in economics from MIT.
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Pablo Granifo (57), was appointed as a director in April 2013. He has been the Chairman of Banco de Chile since 2007 and the Chairman of VSPT since 2013. He is member of the board of Cervecería CCU. Additionally, he is Chairman of the boards of Banchile Asesoría Financiera S.A., Socofin S.A., Banchile Securitizadora S.A., and Banchile Administradora General de Fondos S.A., and a member of the executive committee of Banchile Corredores de Seguros Limitada. He is also a member of the board of Enex. He holds a Business Administration degree from the Pontificia Universidad Católica de Chile.
Rodrigo Hinzpeter (50), was appointed as a director in July 2015. He is also member of the board of Cervecería CCU, ECUSA and IRSA. Since 2014 he has been the Manager of the Legal department of Quiñenco. Before that he was Minister of Internal Affairs and later Secretary of Defense for the Government of Chile. He received his Law degree from the Pontificia Universidad Católica de Chile.
Didier Debrosse (59), was appointed as a director in July 2015. He is also member of the board of Cervecería CCU. He has been working for Heineken since 1997, where he is currently President of Heineken Brazil. Additionally he is President of the Dutch Brazilian Chamber of Commerce and is Knight of the Legion of Honor as awarded by France. He received an Advanced Management Programme degree from INSEAD and completed the Board Member course at Harvard Business School.
José Miguel Barros (52), was appointed as a director in April 2016. He is member of the board of VSPT. He is a Senior Managing Director and Partner of Chilean Investment Bank Larrain Vial S.A. He is currently member of the Board of Lipigas S.A., CDF, Stel Chile S.A., Bolsa de Productos S.A. and Cámara Chileno-Holandesa de Comercio. Mr. Barros holds a Commercial Engineering degree from Pontificia Universidad Católica de Chile and is a graduate from PADE, ESE Buisiness School, Universidad de los Andes.
John Nicolson (62), served as our director from October 2008, and Vice Chairman from November 2008, until April 13, 2016. He served as member of the board of Cervecería CCU, ECUSA, CCU Argentina S.A., CICSA and CPCh. He is the Chairman of IRSA and he was President of Heineken Americas and member of Heineken’s Executive Committee until 2013, having joined from Scottish & Newcastle following its acquisition by Heineken N.V. His early career was with ICI Plc, Unilever PLC and Fosters Brewing Group. He also holds a non-executive position as Chairman of AG Barr PLC, NED of Stock Spirits Group PLC, and NED of North American Breweries and is a member of Edinburgh University’s Advisory Board. He received a degree in Marketing and Economics at the University of Strathclyde, Scotland and also completed the Executive Program at Carnegie Mellon University, U.S.A. and the Directors’ Forum at London Business School, United Kingdom.
Jorge Luis Ramos (63), served as our director from May 2011 until April 13, 2016. He was member of the board of directors of Cervecería CCU, VSPT, ECUSA, CPCh and IRSA, among others. Mr. Ramos was appointed Deputy President for Heineken Americas in 2010 until 2013. He currently provides assistance to other boards of Heineken joint ventures in Central America. He also serves as director in other public and private companies in Mexico. He joined FEMSA in 1996 and became CEO of FEMSA Cerveza in 2006, after serving two years as Co-CEO. Mr. Ramos has a bachelor’s degree in Administration and Public Accounting from Tecnológico de Monterrey and an MBA degree from the University of Pennsylvania’s Wharton School of Business.
Manuel José Noguera(66), served as our director from May 1987 until June 30, 2015. He lends assistance to the board of Quiñenco and is a senior partner at the law firm Noguera, Larraín y Dulanto Ltda. He has been the legal advisor for the Luksic Group for over 40 years. He received his Law degree from the Pontificia Universidad Católica de Chile.
Phillipe Pasquet(77), served as our director from June 2003 until June 30, 2015. He has worked for Heineken since 1976. He was member of the board of directors of VSPT, CPCh, Foods and IRSA. He received degrees from theÉcole Supérieure de Commercein Dijon, France, theInstitut International de Commercein Paris, and theCentre Européen d’Education Permanente inFontainebleau, France.
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The principal business activities of our current and former 20152017 and 20162018 directors are summarized in the following table:
Directors | Business Activities |
Andrónico Luksic | Chairman of CCU |
|
|
Francisco Pérez | Quiñenco’s CEO |
|
|
Vittorio Corbo | Economist and Director of Companies |
Pablo Granifo | Chairman of Banco de Chile and VSPT |
Rodrigo Hinzpeter |
|
|
|
José Miguel Barros |
|
|
|
| Director of Companies |
|
|
|
|
Americas |
At the shareholder’s(1) Resigned with effect from May 1, 2018.
(2) Retired as of 1 March 2019.
The shareholders’ meeting held on April 13, 2016, a new board was elected as directors, for a term of three years.The current members areyears, Messrs. Andrónico Luksic, Francisco Pérez, Pablo Granifo, Rodrigo Hinzpeter, Marc Busain, Carlos Molina, Didier Debrosse, José Miguel Barros and Vittorio Corbo, the latter independent according to article 50 bis of Law Nº18,046.
On May 9, 2018, due to the resignation of directors Messrs. Marc Busain and Didier Debrosse, both effective as of May 1, 2018, the board of directors appointed, pursuant to article 32 of Law N° 18,046, Messrs. Hemmo Parson and Rory Cullinan in these vacancies until the next shareholders' meeting. In addition, in said meeting, the board designated Mr. Carlos Molina as vice chairman of the board of directors, in lieu of Mr. Marc Busain
Pursuant to the above, the shareholders’ meeting held on April 17, 2019 elected as directors, for a term of three years, Messrs. Andrónico Luksic, Francisco Pérez, Carlos Molina, Vittorio Corbo, Pablo Granifo, Rodrigo Hinzepeter, Didier Debrosse andHinzpeter, José Miguel Barros.Barros, Hemmo Parson and Rory Cullinan. None of our directors is party to a service contract.
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The following table sets forth certain information with respect to our senior management as registered at the SVS,CMF, as of April 15, 2016:
17, 2019:
Senior Management | Position | Position Held Since | At Company Since |
Patricio Jottar | Chief Executive Officer | July 1998 | July 1998 |
Marisol Bravo | Corporate Affairs | June 1994 | July 1991 |
| Chief Human Resources Officer |
| April |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Felipe Dubernet | Chief Financial Officer | February 2014 | May 2011 |
| General |
| March 2015 |
Jesús García | General Comptroller | May | May 2015 |
Ronald Lucassen | Corporate Industrial Processes | May 2014 | May 2014 |
|
|
|
|
Martín | Head of Project Management Office and Innovation | March 2015 | March 2015 |
Antonio Cruz | Corporate Development Manager | June 2017 | June 2017 |
Francisco Diharasarri | General Manager CCU Chile | October 2003 | June 1985 |
Fernando Sanchis | General Manager CCU Argentina | May 1995 | November 1994 |
|
|
|
|
Ludovic Auvray |
| June 2015 | June 2015 |
| General Manager |
|
|
| General Manager |
|
|
Patricio Jottar (53)(56), has served as our Chief Executive Officer since 1998. HeMr. Jottar is also currentlyon the board of directors of a directornumber of CCU’s subsidiaries and affiliated companies, including, among others: Cervecera CCU Chile Limitada, Embotelladoras Chilenas Unidas S.A., Companías Cervecerías Unidas Argentina S.A., Viña San Pedro Tarapacá S.A., Aguas CCU-Nestlé Chile S.A., Cervecería CCU, CCU Argentina, CICSA, ECUSA, VSPT, Foods, Aguas CCU,Kunstmann S.A., Bebidas CCU-Pepsico SpA, Promarca, CCK, Bebidas del Paraguay andS.A., Central Cervecera de Colombia S.A.S., Zona Franca Central Cervecera S.A.S., Distribuidora del Paraguay S.A. and Foods Compañía de Alimentos CCU S.A. He is also Chairman of the Board of CPCh, ComercialCompañía Pisquera de Chile S.A., Transportes CCU Limitada and TCCU among others.Promarca S.A. Prior to joining us,the Company, he was Chief Executive Officer of Santander Chile Holding. He receivedMr. Jottar holds a degree in Business Administration from the Pontificia Universidad Católica de Chile and a Master’s degree in Economics and Business Administration from the Instituto de Estudios Superiores de la Empresa, in Barcelona, Spain.
Felipe Dubernet (49), has been our Chief Financial Officer since February 2014. He joined the Company in May 2011 and was the Procurement Officer until January 2014. He is currently a member of the board of several of CCU’s subsidiaries, including Aguas CCU-Nestlé Chile S.A., Comercial CCU S.A., Transportes CCU Limitada, Fábrica de Envases de Plásticos S.A. and CRECCU S.A.,among other. Prior to joining us, he worked for 15 years at Unilever holding several positions in Supply Chain and Finance in Chile, Brazil and the United States. He holds a degree in Civil Engineering from the Pontificia Universidad Católica de Chile.
Jesús García (56), joined CCU as General Comptroller in May 2015. He is currently a member of the board of Transportes CCU Limitada and Fábrica de Envases Plásticos S.A. He has also worked with Heineken since 2000 in various financial positions in Spain, the Netherlands and Singapore, and previously with Diageo and with PricewaterhouseCoopers in Spain. Prior to joining CCU he served as Senior Regional Tax Manager Asia Pacific for the Heineken Group. He holds a degree in Business Law from Universidad de Sevilla, in Spain, and a Master’s degree in Business Administration from Instituto Internacional San Telmo, in Sevilla, Spain.
Gabriela Ugalde (53), joined CCU as Chief Human Resources Officer in April 2018. Previously, she had been in charge of Organizational Development at Quiñenco S.A. since 2014. During her career she has worked for multinational and local companies, including Nestlé, S.A.C.I. Falabella, Banco Itaú and Banco de Chile, where she has held management positions in the Human Resources Department. She received a degree in Psychology from the Pontificia Universidad Católica de Chile and a Master’s degree from the same university.
Felipe Benavides (43), has been our General Counsel since March 2015. He is currently a member of the board of Aguas CCU-Nestle Chile S.A., in Chile, Andrimar S.A., Coralina S.A., Marzurel S.A. and Milotur S.A. in Uruguay;of Bebidas del Paraguay S.A. and Distribuidora del Paraguay S.A. in Paraguay; and of Bebidas Bolivianas BBO S.A. in Bolivia. Previously, he was the General Counsel at SMU S.A. since 2013. He was also a Senior Associate at Cariola, Diez, Pérez Cotapos and an International Associate for Debevoise & Plimpton LLP (New York). He received his Law degree from the Pontificia Universidad Católica de Chile and a LLM from Duke University.
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Marisol Bravo (56)(59), is our Corporate Affairs Senior DirectorOfficer and has been with usthe Company since 1991. Prior to her current position, she was Head of Special Projects.Projects at CCU. Before joining us, she was Assistant Manager of Marketing at Citicorp Mutual Funds. She received a degree in Business Administration from the Universidad de Chile.
Felipe ArancibiaRonald Lucassen (41), is our Chief Human Resources Officer and assumed the position in January 2014. He has been with us since 2002, holding several positions in Finance and Business Development. The latest position was as of Corporate Finance and Investor Relations Manager. Prior to this position he was Global Finance Manager for Heineken International in Amsterdam and Business Development Manager for Heineken Brazil in Sao Paulo. Before this position he was the Planning and Finance Manager at ECUSA. He received a degree in Business Administration from Universidad de Los Andes in Chile and holds an Executive Scholar Program in Finance and Alumnus from Kellogg School of Management, Northwestern University and a certificate in Human Resources from the Ross School of Business from the University of Michigan and is also a part-time Professor at Universidad de Los Andes in Chile.
Ludovic Auvray (45) is our Manager International Business, and has held that position since July 2015. He is Chairman of the board of Milotur en Uruguay and, of Bebidas del Paraguay, and member of the board of Central Cervecera de Colombia and BBO among others. He has worked with Heineken since 1995 where he has held various positions in Sales and Marketing, his latest position was Global Marketing Director for Cerveza Sol and Specialty Beers in Heineken International in Amsterdam. He received an MBA from the Babson Graduate School.
Diego Bacigalupo (36), is our Corporate Development Manager, and has held that position since January 2014. He has been with CCU since August 2013. He is currently a member of the board of PLASCO, Aguas CCU, Bebidas Bolivianas BBO, Bebidas del Paraguay, Milotur and Nutrabien, amongst others. Prior to his current position, he was Strategic Planning Manager of CCU between August and December 2013. Before joining us, he worked at Quiñenco within its Business Development area. He received an Industrial Engineering degree from the Pontificia Universidad Católica de Chile and an MBA from MIT Sloan School of Management.
Matias Bebin (33)(55), has been the General Manager of CPCh since January 1, 2014. He is currently a member of the board of Transportes CCU. Prior to this position he was the Planning & Finance Manager for the Company. He has been with us since 2006, working in different companies of the group such as ECUSA and Aguas CCU. He received a degree in Business Administration from the Pontificia Universidad Católica de Chile and a MBA from Berkeley University.
Felipe Benavides (40) is our General Counsel, and has held the position since March 2015. Previous to this position he was the General Counsel at SMU since 2013. He was also a Senior Associate at Cariola, Diez, Pérez Cotapos and an International Associate for Debevoise & Plimpton LLP (New York). He received his Law degree from the Pontifica Universidad Católica de Chile and an LLM from Duke University.
Francisco Diharasarri (55), is the General Manager of ECUSA and has been with us since 1985. Prior to his current position, he was General Manager of Cervecería CCU, General Manager of ECUSA and General Manager of PLASCO. He is also currently Chairman of the Board of Aguas CCU, PLASCO, Foods, Alimentos Nutrabien S.A., Manantial, and Bebidas Carozzi CCU and is also a member of the board of CRECCU, CICSA, Transportes CCU, Bebidas CCU-Pepsico, Bebidas del Paraguay, Promarca, among others. He received a degree in Civil Engineering from the Universidad de Chile.
Felipe Dubernet (46), is our Chief Financial Officer, and has held that position since February 2014. He has been with us since May 2011 as Procurement officer until January 2014. He is currently a member of the board of PLASCO, CRECCU and Transportes CCU, among others. Prior to his current position, he was Chief Procurement Officer CCU between May 2011 and January 2014. Prior to joining us, he worked for 15 years at Unilever holding several positions in Supply Chain and Financein Chile, Brazil and United States. He received a degree in Civil Engineering from the Pontificia Universidad Católica de Chile.
Pedro Herane (46) is the General Manager of VSPT and assumed the position as of April 2013. Additionally, he is a member of the board of Viña Valles de Chile S.A., Viña Ältair S.A., Viña del Mar de Casablanca S.A., Viñas Orgánicas S.P.T. S.A., Finca La Celia S.A., and Transportes CCU. Prior to his current position, he was in charge of the Domestic Market as Commercial Manager of VSPT. Prior to joining us, he was Senior Group Manager at Procter & Gamble for 10 years in multiple positions in Chile, Latin America and United States. He received a Bachelor’s degree in Business from University Adolfo Ibáñez in Chile and a Master’s degree in Marketing from the Paris School of Management (ESCP – EAP) in France.
Ronald Lucassen (51), has been theCorporate Industrial Processes Corporate Manager since May 2014. Prior to this position, Ronald worked for2014, and currently board member of Fábrica de Envases Plásticos S.A. Previously, he held various positions at Heineken since January 1990. He worked in The Netherlands as Production Manager in the Zoeterwoude Brewery and as Quality Manager in Den Bosch.Bosch Brewery. Subsequently, he has completed a number of international assignments, working as General Manager of Brewing for DB Breweries’ in New Zealand, Technical Manager of GBNC in New Caledonia, Production Manager of the Hainan Brewery in China for Asia Pacific Breweries, Supply Chain Director Czech Republic and Senior Supply Chain Director Heineken Russia. He holds a Mechanical Engineering degree and a Master’s degree from the Technische Universiteit Delft.
Hugo OvandoMartín Rodríguez (46)(58), isjoined CCU as Head of the GeneralProject Management Office in March 2015 and in September 2017 he was also appointed Head of Innovation. Previously, he was M&A Manager and Strategic Development Manager at Quiñenco S.A., where he held various positions since 1999. He was a board member of CerveceríCervecera CCU Chile Limitada, Embotelladoras Chilenas Unidas S.A. and Foods Compañía de Alimentos CCU S.A. until March 2015. He has an MBA from UCLA as well as a Master’s degree in Economics and assumed this positionBusiness Administration from the Pontificia Universidad Católica de Chile.
Antonio Cruz (37) joined CCU as of January 31, 2014. Prior to this, he has worked with us in several positions: General Manager of CPCh,Corporate Development Manager in June 2017. He is currently a member of CCU, General Managerthe board of Transportes CCU, General Manager of Comercial CCU, Development Manager, Corporate Projects ManagerBebidas del Paraguay S.A. and Investor Relations Manager.Bebidas Bolivianas BBO S.A., as well as Andrimar S.A., Coralina S.A., Marzurel S.A. and Milotur S.A. in Uruguay, among others. He has been with CCU since June 2015, and before joining us, since 1997.he worked at Quiñenco S.A. within its Business Development division. He is also a director of Comercial CCU S.A., Transportes CCU Ltda., CICSA, CCK and Cervecería Austral. He receivedholds a degree in Business Administration from the Pontificia Universidad Católica de Chile and aan MBA from Babson College.Columbia University in New York.
Martín RodriguezFrancisco Diharasarri (55)(58), is the HeadGeneral Manager of our Project Management Office, holding this new positionCCU Chile and has been with the Company since March 2015.1985. Previously, he was General Manager of Embotelladoras Chilenas Unidas S.A. and before that he was General Manager of Cervecera CCU Chile Limitada and General Manager of Fábrica de Envases Plásticos S.A. He was at Quiñenco from 1999 to March 2015, as M&A Manageris also currently Chairman of the Board of Aguas CCU-Nestlé Chile S.A., Comercial CCU S.A., Fábrica de Envases Plásticos S.A., Foods Compañía de Alimentos CCU S.A., Manantial S.A. and Strategic Development Manager. He wasBebidas Carozzi CCU SpA and is also a board member of Cerveceríthe board of CRECCU S.A., Compañía Industrial Cervecera S.A., Transportes CCU ECUSALimitada, Bebidas CCU-Pepsico SpA, and Foods until March 2015.Promarca S.A. among others. He received a degree in Business and AdministrationCivil Engineering from the Pontificia Universidad Católica de Chile, and holds a Master´s degree in Economics from the same University and an MBA from UCLA.Chile.
Fernando Sanchis (55)(58), is the General Manager of CCUCompanía Cervecerías Unidas Argentina S.A. and he has been with usthe Company since 1995. Prior to joining us,Previously, he was Chief Financial Officer of Embochile, a former PepsiCo bottler, and he also held the same position at Uruguay’s PepsiCo’s bottler. He is also currently a board member of CCUCompanía Cervecerías Unidas Argentina S.A. and Bebidas del Paraguay, amongst others.Compañía Industrial Cervecera S.A. He received an accounting degree from the University of Buenos Aires in Argentina.
Alvaro RománLudovic Auvray(43) (48),is our General Manager of Transportes CCU, and has held that position since May 2010. He has been with usour International Business Manager since March 1999,July 2015. He is Chairman of the Board of Andrimar S.A., Coralina S.A., Marzurel S.A., Milotur S.A. in Uruguay and of Bebidas del Paraguay S.A., and member of the board of Distribuidora del Paraguay S.A. and Bebidas Bolivianas BBO S.A., among others. Previously, he worked at Heineken since 1995, where prior to his current role he has held various positions in sales, marketingSales and business development.Marketing, including Global Marketing Director for Cerveza Sol and Specialty Beers for Heineken International, based in Amsterdam. He received a degree in Civil Engineeringholds an MBA from the Pontificia Universidad Católica de Chile.Babson Graduate School.
Alvaro Río (Domingo Jiménez55) (38), is ourthe General Manager of Comercial CCUCompañía Pisquera de Chile S.A., and has held that position since May 2010, and as part of the Senior Management since March 2015. He has been with CCU since 1991 holding various positions including Operational Manager of Transportes CCU, and Sales Manager of Cervecería CCU. He received a degree in Business Administration from Universidad Diego Portales.
Jesús García (53) is our General Controller since May 2015. He is currently a member of the board of PLASCO and Transportes CCU.CCU Limitada. Previously, he was the Finance Director at CCU Chile. He has also workedbeen with the Company since 2004, working in different subsidiaries, as well as Heineken since 2000 in various Finance positions in Spain, the NetherlandsAmericas and Singapore, and previously with Diageo and with PWC in Spain. Prior to joining CCU he served as Senior Regional Tax Manager Asia Pacific for the HeinekenGroup. Heineken USA.
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He holdsreceived a degree in Business LawAdministration from the Pontificia Universidad Católica de Sevilla,Chile.
Pedro Herane (49), has been the General Manager of Viña San Pedro Tarapacá S.A. since April 2013. In addition, he is a member of the board of Viña Valles de Chile S.A., Viña Ältair S.A., Viña del Mar de Casablanca S.A., Finca La Celia S.A. and Transportes CCU Limitada. Prior to his current position, he was the Commercial Manager in Spaincharge of the Domestic Market at Viña San Pedro Tarapacá S.A. Prior to joining us, he was Senior Group Manager at Procter & Gamble, where he worked for ten years in multiple positions in Chile, Latin America and United States. He received a Bachelor’s degree in Business from University Adolfo Ibáñez in Chile and a Master’s degree in Business AdministrationMarketing and Communications from Instituto Internacional San Telmothe Paris School of Management (ESCP – EAP) in Sevilla.France.
Our senior managers are full time employees; therefore, they do not perform principal business activities outside us.
On January 13, 2003, the existing shareholders’ agreement was amended in order to allow the Schörghuber Group to sell its interest in IRSA to Heineken Americas B.V., a subsidiary of Heineken International B.V. On April 17, 2003, the Schörghuber Group gave Quiñenco formal notice of the sale of its interest in IRSA to Heineken International B.V. Currently, Heineken Chile Ltda., a Chilean limited corporation controlled by Heineken Americas B.V., owns 50% of IRSA’s shares. As of December 31, 2005, IRSA’s primary shareholders’ agreement gives Quiñenco the right to propose to our board of directors the candidates for Chief Executive Officer, and to Heineken Chile Ltda. our General Comptroller and Cervecería CCU’s General Manager. On the other hand, under the agreement, neither Quiñenco nor Heineken Chile Ltda. can separately, directly or indirectly, buy or sell our shares.
For the year ended December 31, 2015, the aggregate amount of compensation paid by us to all our Directors was CLP2,982million.
The board of directors’ gross compensation is determined by the shareholders at the annual shareholders’ meeting. As approved at the annual shareholders´ meeting held on April 15, 2015,11, 2018, the directors’ monthly remuneration, for their attendance to meetings, independent of the number of meetings held in each period, was fixed inat UF15 100 per director, and UF 200 for the Chairman,chairman, plus an amount equivalent to 3% of the distributed dividends, for the board as a whole, board, at a rate of one-ninth for each director and in proportion to the time each one served as such during the year 2015.2018. If the distributed dividends exceed 50% of the net profits, the board of directors’ variable remuneration shall be calculated over a maximum 50% of such profits. Those directors that are members of the directors committee (See Item(see “Item 6.C. Board Practices – directors committee)Directors Committee”) receive a gross remuneration of UF 34 for each meeting they attend, plus the amount that, as the percentage of the dividends, is required to complete one third of the total remuneration a director is entitled to, pursuant to articleArticle 50 bis of Law Nº 18,046 and Regulation N° 19561,956 of the SVS.CMF. Directors that are members and observers of the audit committee receive a monthly gross remuneration of UF 25.
The described gross compensation packagefor board members was also approved for 20162019 at the shareholders’ meeting held on April 13, 2016.17, 2019. Additionally, regarding directors that are members of the directors committee (see “Item 6.C. Board Practices – Directors Committee”) the shareholders at said meeting approved a gross compensation of UF 50 for each meeting they attend, plus the amount that, as the percentage of the dividends, is required to complete one third of the total remuneration a director is entitled to pursuant to Article 50 bis of Law Nº 18,046 and Regulation N° 1,956 of the CMF. Additionally, for directors that are members and observers of the audit committee, a monthly gross remuneration of UF 50 was determined.
16 UF stands for “Unidad de Fomento” which is an inflation linked accounting unit used in Chile. As of March 31, 2019 its value corresponded to CLP 27.565,76.
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In 2015,2018, the total compensation paid by us and our subsidiaries to each of our directors for services rendered was as follows:
| Attendance | Dividend |
|
Director | Meetings fee | Participation(1) | Total |
| (in thousands of CLP) |
| |
Andrónico Luksic Craig | 43,852 | 199,262 | 243,114 |
John Nicolson | 122,152 | 199,262 | 321,415 |
Jorge Luis Ramos | 144,784 | 218,572 | 363,356 |
Manuel José Noguera Eyzaguirre | 14,809 | 199,262 | 214,071 |
Philippe Pasquet | 99,780 | 218,572 | 318,352 |
Francisco Pérez Mackenna | 244,612 | 199,262 | 443,874 |
Carlos Molina Solís | 150,996 | 199,262 | 350,258 |
Vittorio Corbo | 111,781 | 199,262 | 311,043 |
Pablo Granifo Lavin | 72,268 | 237,882 | 310,150 |
Rodrigo Hinzpeter Kirberg | 70,657 | - | 70,657 |
Didier Debrosse | 35,515 | - | 35,515 |
(1) Includes the remuneration for members of the Audit and Directors Committees. |
| Attendance | Dividend |
|
Director(1) | Meetings fee(2) | Participation(2) | Total |
| (in thousands of CLP) | ||
Andrónico Luksic Craig | 52,609 | 216,012 | 268,621 |
Carlos Molina Solís | 207,033 | 310,160 | 517,193 |
Francisco Pérez Mackenna | 205,915 | 310,160 | 516,075 |
Vittorio Corbo Lioi | 50,201 | 288,016 | 338,217 |
Pablo Granifo Lavín | 151,482 | 260,300 | 411,782 |
Rodrigo Hinzpeter Kirberg | 154,737 | 216,012 | 370,749 |
José Miguel Barros van Hövell tot Westerflier | 153,035 | 238,156 | 391,191 |
Didier Debrosse(3) | 13,437 | 216,012 | 229,449 |
Marc Busain(3) | 4,162 | 216,012 | 220,174 |
Total | 992,611 | 2,270,840 | 3,263,451 |
| |||
(1)In 2018, per attendance meetings fee were accrued CLP 77,184 thousand and paid CLP 14,160 thousand in favor of director Rory Cullinan and were accrued CLP 55,132 thousand and paid CLP 10,084 thousand in favor of director Hemmo Parson. | |||
(2) Includes the remuneration for members of the audit and directors committees. | |||
(3) They resigned with effect from 1 May 2018. |
For the year ended December 31, 2015,2018, the aggregate amount of compensation paid by us to all ourdirectors was CLP3,263 million.
For the year ended December 31, 2018 the aggregate amount of compensation paid to our senior managers registered at the SVSCMF during 2015,2018, was CLP5,4977,308 million. We do not and are not required under Chilean law to disclose to our shareholders or otherwise make public information as to the compensation of our individual senior managers.
We do not maintain any stock option, pension or retirement programs for our directors or senior managers.
We are managed by our board of directors which, in accordance with our bylaws (Estatutos), is formed by nine directors who are elected at the annual shareholders’ meeting. The entire board of directors is elected for three years.years and may be re-elected. The board of directors may appoint replacements to fill any vacancies that occur during periods between annual shareholders’ meetings. If such vacancy occurs, the entire board of directors must be renewed at the next following shareholders’ meeting. On April 10, 2013, at the annual
The shareholders’ meeting the entire board ofheld on April 13, 2016, elected as directors, was renewed for a term of three years, and the board members elected were Messrs. Andrónico Luksic, John Nicolson,Francisco Pérez, Pablo Granifo, Rodrigo Hinzpeter, Marc Busain, Carlos Molina, Didier Debrosse, José Miguel Barros and Vittorio Corbo, Manuel José Noguera,the latter independent according to article 50 bis of Law Nº18,046.
On May 9, 2018, due to the resignation of directors Messrs. Marc Busain and Didier Debrosse, both effective as of May 1, 2018, the board of directors appointed, pursuant to article 32 of Law N° 18,046, Messrs. Hemmo Parson and Rory Cullinan in these vacancies until the next shareholders' meeting.
Pursuant to the above, the shareholders´ meeting held on April 17, 2019 elected as directors, for a term of three years, Messrs. Andrónico Luksic, Francisco Pérez, Carlos Molina, Philippe Pasquet, Francisco Pérez, Jorge Luis RamosVittorio Corbo, Pablo Granifo, Rodrigo Hinzpeter, José Miguel Barros, Hemmo Parson and Pablo Granifo.Rory Cullinan. None of our directors is party to a service contract with us or any of our subsidiaries that provides for benefits upon termination.
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Due to the resignation of Messrs. Manuel José Noguera EyzaguirreOur Chief Executive Officer and Philippe Pasquet of their positions as directors of the Company, both effective as of June 30, 2015, at the board of directors´ meeting held on July 7, 2015, Messrs. Didier Debrosse and Rodrigo Hinzpeter Kirberg were appointed as directors, until the next annual shareholders´ meeting, as permitted by Article 32 of the Chilean Corporations Act.
At the shareholder’s meeting held on April 13, 2016, a new board was elected for a term of three years. The current members of the board of directors are Messrs. Andrónico Luksic, Marc Busain, Francisco Pérez, Carlos Molina, Vittorio Corbo, Pablo Granifo, Rodrigo Hinzepeter, Didier Debrosse and José Miguel Barros.
Ourother senior managers are appointed by the board of directors and hold office at the discretion of the board of directors. There are regularly scheduled meetings of the board of directors once a month; extraordinary meetings are specially summoned by the Chairman, at the request of one or more board members where prior qualification of the necessity of such meeting has been met and, in any case, if requested by the absolute majority of the directors. The board of directors does not have an executive committee.
The directorsdirector’s committee discussions, agreements, and organization are regulated, in every applicable matter, by the Chilean Corporations Act provisions relating to board of directors’ meetings. The directors committee shall inform the board of directors about the manner in which it will request information and about its resolutions.
In addition to the general liabilities imputable to any director, the directors that compose the directors committee shall, in the exercise of their duties, be jointly and severally liable for any damage caused to the corporation or the shareholders.
According to the Chilean Securities Market Law and the Chilean Corporations Act, corporations whose market capitalization reaches or exceeds UF 1.5 million Unidades de Fomento (as of March 31, 20162019 approximately CLP 38,71841,344 million) and at least 12.5% of its outstanding shares with voting rights are in the possession of shareholders that individually control or possess less than 10% of such shares, shall designate a “comité de directores” or “directors committee” and appoint at least one independent director. The directors committee shall be composed of three members and at least one member shall be independent. If the market capitalization or stock percentage falls below this threshold, the obligation to designate a directors committee no longer applies. However, corporations which do not meet these requirements may voluntarily assume the obligations concerning the directors committee, in which case they shall strictly follow the provisions of the Chilean Corporations Act.
Pursuant to the Chilean Corporations Act, the powers and duties of the directors committee are as follows:
Regarding related party transactions mentioned in the third bullet point above, Chapter XVI of the Chilean Corporations Act applies to open stock corporations and its subsidiaries, while dispositions of Articles N° 44, 89 and 93 of the Chilean Corporations Act, are applicable only to closedclosely held corporations, which are not subsidiaries of an open stock corporation. See “Item 7: Major Shareholders and Related Party Transactions.”Transactions”.
Pursuant to the Chilean Corporations Act, no person shall be considered independent who, at any time during the previous eighteen months:
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1. Maintained any relationship, interest or economic, professional, credit or commercial dependence, of a nature and relevant volume, with the company, other companies of the financial conglomerate to which the company belongs, its comptroller, or principal executive officer of any one of them, or was a director, manager, administrator, principal executive officer or advisor of such companies;
2. Was a close relative (i.e., parents, father/mother in law, sisters, brothers, sisters/brothers in law), to any one of the persons referred to in 1 above;
3. Was a director, manager, administrator or principal executive officer of non-profit organizations that received contributions or large donations from any individual referred to in clause 1 above;
4. Was a partner or shareholder that possessed or controlled, directly or indirectly, 10% or more of the company’s capital; a director; manager; administrator or principal executive officer of entities who had provided consulting or legal services, for relevant amounts, or of external audit, to the persons referred to in 1 above; or
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5. Was a partner or shareholder who possessed or controlled, directly or indirectly, 10% or more of the company’s capital; a director; manager; administrator or principal executive officer of principal competitors, suppliers or clients of the company.
Should there be more than three directors entitled to participate in the directors committee, the board of directors shall elect the members of the directors committee by unanimous vote. Should the board of directors fail to reach an agreement, preference to be appointed to the committee shall be given to directors elected with the highest percentage of votes cast by shareholders that individually control or possess less than 10% of the company’s shares. If there is only one independent director, such director shall appoint the other members of the committee among non-independent directors. Such directors shall be entitled to exercise full powers as members of the committee. The chairman of the board of directors shall not be entitled to be appointed as a member of the committee nor any of its subcommittees, unless he is an independent director.
To be elected as independent director, the candidates must be proposed by shareholders that represent 1% or more of the shares of the company, at least 10 days prior to the date of the shareholders' meeting called to that end.
The candidate who obtains the highest number of votes shall be elected as independent director.
At the shareholdersboard meeting held on April 10, 2013,13, 2016, following the election of a new board of directors was appointed for a three year term.at the shareholders’ meeting held the same day, Mr. Vittorio Corbo, was elected as independent director in accordance with Article N° 50 bis of the Chilean Corporations Act.
In the board meeting held on April 10, 2013, the independent director Mr. Vittorio Corbo, in accordance with the above-referenced law,Act, appointed Messrs. Philippe PasquetCarlos Molina and Francisco Pérez as members of our directors committee which is composed ofin accordance with the three directors above mentioned.above-referenced law.
Due toFollowing the resignationelection of Mr. Philippe Pasquet of his position as director of the Company, effective as of June 30, 2015, at thea new board of directors meeting held on July 7, 2015, the independent director Mr. Vittorio Corbo appointed director Mr. Jorge Luis Ramos as a member of the directors committee, to replace Mr. Philippe Pasquet, as required by article 50 bis of the Chilean Corporations Act.
Finally, at the shareholders´ meeting held on April 13, 2016, a new board of directors was elected for a three year term.17, 2019, Mr. Vittorio Corbo, was elected as independent director in accordance with Article N° 50 bis of the Chilean Corporations Act.
AtAct, at the board meeting held on April 13, 2016, following the shareholders´ meeting, the independent director Mr. Vittorio Corbo, in accordance with the above-referenced law,same date, appointed Messrs. Francisco Pérez and Carlos Molina as members of our directors’ committee.directors committee Messrs. Carlos Molina and Francisco Pérez. Therefore, the current members of the directors committee is currently composed byare Messrs. Vittorio Corbo, Francisco Pérez and Carlos Molina.
The members of the directors committee receive a remuneration the amount of which is established annually by the shareholders, taking into consideration the duties that the directors committee members shall perform, which shall not be less than a third of the remuneration of a director. The gross remuneration of our directors committee members, as approved at the shareholders’ meeting of the Company held on April 10, 2013,17, 2019, is 34 Unidades de FomentoUF 50 (as of March 31, 2016,2019, approximately CLP 877.21,378 thousand) per attendance at a directors committee meeting plus the amount required to complete the remaining third of the remuneration of a director.
The same remuneration package was approved for 2014, 20152017 and 2016,2018, at the shareholders’ meetings of the Company held on April 9, 2014, April 15, 2015,12, 2017 and April 13, 2016, respectively.11, 2018, respectively, was UF 34 per attendance at a directors committee meeting plus the amount required to complete the remaining third of the remuneration of a director.
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The shareholders shall determine the budget of the directors committee and those of its advisors, which, pursuant to Chilean Corporations Act, shall not be less than the aggregate amount of the annual remuneration of the committee members. The directors committee shall be allowed to requesttherequest the recruitment of professionals to fulfill its duties within the limits imposed by the budget. The activities of the directors committee, the annual report of the performance of its duties and its expenses, including its advisors’ expenses, shall be included in the annual report and conveyed to the shareholders. The budget of the directors’directors committee and its advisors, approved at the shareholders’ meeting of the Company held on April 13, 2016,17, 2019, shall be equal to the aggregate amount of the annual remuneration of the committee members.
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2)Audit Committee.
In accordance with provisions of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley(“Sarbanes-Oxley Act”) and the corporate governance rules of the New York Stock Exchange (the “NYSE(“NYSE Rules”) applicable to us as a foreign private issuer with securities listed on a U.S. national exchange, we have an audit committee.
At the board of directors meeting held on April 10, 2013, following the election of a new board at the shareholders´ meeting, the board of directors appointed the following directors to our audit committee: Vittorio Corbo and Philippe Pasquet. Mr. Pasquet and Mr. Corbo meet the independence criteria under the Exchange Act and under the NYSE Rules. The board of directors also resolved that directors Mr. Jorge Luis Ramos and Mr. Francisco Pérez shall participate in the audit committee´s meetings as observers.
Due to the resignation of Mr. Philippe Pasquet of his position as director of the Company, effective as of June 30, 2015, at the board of directors´ meeting held on June 7, 2015, Mr. Jorge Luis Ramos Santos was appointed as a member of the audit committee, to replace Mr. Pasquet. Additionally, at the board of directors´ meeting held on July 7, 2015, director Carlos Molina was appointed to the audit committee on an observer status.
Finally, at the board of directors meeting held on April 13, 2016, following the election of a new board at the shareholders´ meeting held the same day, the board of directors appointed directors Messrs. Vittorio Corbo and Carlos Molina to our audit committee. Mr.Messrs. Corbo and Mr. Molina meet the independence criteria under the Exchange Act and under the NYSE Rules. The board of directors also resolved that directors Mr.Messrs. José Miguel Barros and Mr. Francisco Pérez shall participate in the audit committee´scommittee’s meetings as observers.
Following the election of a new board at the shareholders´ meeting held on April 17, 2019, the board of directors, at the meeting held the same date, appointed directors Messrs. Vittorio Corbo and Carlos Molina to our audit committee, both of whom meet the independence criteria under the Exchange Act and under the NYSE Rules. As in 2016, the board of directors also resolved that directors Messrs. José Miguel Barros and Francisco Pérez shall participate in the audit committee’s meetings as observers.
The duties of the audit committee are:
The audit committee meets regularly and also holds meetings with our managers, our comptroller, and our internal and external auditors in order to discuss a variety of topics related to its duties.
As approved at the shareholders’ meetings of the Company held on April 12, 2017 and April 11, 2018, members and observers of the audit committee receive a monthly gross remuneration of UF 25.
As approved at the shareholders’ meeting of the Company held on April 17, 2019, members and observers of the audit committee will receive a monthly gross remuneration of UF 50.
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The total annual budget for operating cost and advisors of the audit committee, approved at each of the shareholders’ meetings referred to above, amounts to UF 2,000.
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D.Employees The following table shows the breakdown of our employees by operating segments as of December 31 for each of the years listed below: 2013 2014 2015 2016 2017 2018 Chile 2,083 2,514 2,594 4,567 4,635 4,650 International Business 1,442 1,857 1,938 1,990 2,030 2,578 Wine 1,180 1,206 1,250 1,264 1,242 1,197 Others 2,184 2,265 2,318 365 363 372 Total 6,889 7,842 8,100 8,186 8,270 8,797 (1) Includes our corporate office, PLASCO, TCCU, CRECCU and Comercial CCU.(1)(1)(2)
(1)Includes Bolivia as of 2018.
(2)Includes corporate head office functions only.
All employees whowhose contracts are terminated for reasons other than misconduct are entitled by law to receive a severance payment. In the last three years, we made severance payments in the amounts of CLP 10,342 million,3,244, CLP 9,2587,958 million and CLP 6,0788,188 million, respectively.
In Chile, permanent employees are entitled to thea basic severance payment, as required by law, of one month’s salary for each year, or six-month portion thereof, worked. This condition is subject to a limitation of a total payment of no more than 11 months’ pay for employees hired after August 14, 1981. Severance payments to employees hired before August 14, 1981 are not subject to this limitation. Our employees who are subject to collective bargaining agreements have a contractual benefit to receive a payment in case of resignation, consisting of a payment of one monthly base salary for each full year worked, not subject to a limitation on the total amount payable but subject to a limitation on the total number of employees who can claim the severance benefit during any one year. In 2015,2018, we laid off 689617 employees.
Chile Operating segment, Wine Operating segment and Other
In the Chile and Wine Operating segments and Other, Operating segments, as of December 31 of the last three years, we had a total of 5,447, 5,9856,196, 6,240 and 6,1626,219 permanent employees, respectively. As of December 2015, 3,4952018, 4,039 were represented by 45 labor unions. The average tenure of our permanent employees was approximately eight years.
Unionized employees represent approximately 57%62% of our total permanent workforce. Our management believes it generally has a good relationship with the labor unions representing our employees.
During 2015, 1,1252018, 2,122 employees renewed their collective contracts, most of them for a period of two years.
We do not maintain any pension fund or retirement program for our employees. Workers in Chile are subject to a national pension fund law which establishes a system of independent pension plans, administered byAdministradoras de Fondos de Pensiones (“AFPs”). We have no liability for the performance of the pension plans or any pension payments to be made to our employees.
In addition to our permanent work force, as of December 31, 2015,2018, we had 325400 temporary employees, who were hired for specific time periods to satisfy short-term needs.
International Business Operating segment
Collective bargaining in Argentina is done on an industry-wide basis, rather than, as in Chile, on a company-by-company basis. In Argentina, as in Chile, all employees who are terminated for reasonsotherreasons other than misconduct are entitled by law to receive a severance payment. According to the Argentine Labor Law, employees who joined us before October 1998 are entitled to the basic payment as required by law of one month’s salary for each year or fractionorfraction thereof worked. This monthly amount cannot exceed three times the average monthly salary established under the applicable collective bargaining agreement and cannot be less than the equivalent of two monthly salaries of the employee.
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In Argentina, unionized employees represent approximately74% 72% of our total permanent workforce, moreover in Uruguay this number represent71% 59% of our total permanent workforce.
In addition to our permanent work force, as of December 31, 2015,2018, we had386 237 temporary employees, who were hired for specific time periods to satisfy short-term needs.
Except as disclosed in “Item 7: Major Shareholders and Related Party Transactions – A. Major Shareholders,”Shareholders”, as of March 31, 2016,2019, our senior management and our board members in the aggregate directly owned less than one percent of our shares.
We do not maintain stock option or other programs involving our employees in the capital of the Company.
ITEM 7: Major Shareholders and Related Party Transactions
Our only outstanding voting securities are our shares of our common stock. The following table sets forth information concerning the ownership of our common stock as of March 31, 2016, presenting the twelve largest shareholders and all of our directors and senior management as a group:
2019:
Shareholder | Number of shares owned | % Ownership | ||
|
|
| ||
INVERSIONES Y RENTAS S A(1) | 196,421,725 | 53.16% | ||
J P MORGAN CHASE BANK SEGUN CIRCULAR | 63,614,029 | 17.22% | ||
BANCO ITAU POR CUENTA DE INVERSIONISTAS EXTRANJEROS | 30,567,227 | 8.27% | ||
BANCO DE CHILE POR CUENTA DE TERCEROS NO RESIDENTES | 26,191,534 | 7.09% | ||
INVERSIONES IRSA LTDA (1) | 25,279,991 | 6.84% | ||
BANCO SANTANDER POR CUENTA DE INV EXTRANJEROS | 8,705,816 | 2.36% | ||
BANCO SANTANDER-HSBC BANK PLC LONDON CLIENT ACCOUN | 2,601,580 | 0.70% | ||
BANCHILE C DE B S A | 2,085,073 | 0.56% | ||
BOLSA ELECTRONICA DE CHILE BOLSA DE VALORES | 1,095,203 | 0.30% | ||
BOLSA DE COMERCIO DE SANTIAGO BOLSA DE VALORES | 987,409 | 0.27% | ||
BTG PACTUAL CHILE S A C DE B | 561,336 | 0.15% | ||
VALORES SECURITY S A C DE B | 526,756 | 0.14% | ||
Our directors and senior management as a group (2) | 14,897 | 0.004% | ||
(1) Inversiones y Rentas S.A. owns 99.9999% of Inversiones IRSA Ltda.’s equity. |
| |||
(2) Does not include the 221,701,716 shares of our common stock owned, directly and indirectly, by Inversiones y Rentas S.A., which is 50% beneficially owned by Quiñenco, holding company of the Luksic Group, as discussed below, which is controlled by the Luksic family. Andrónico Luksic, our Director, is a member of the Luksic family. |
Number of shares owned | Ownership % | |
INVERSIONES Y RENTAS S.A. (“IRSA”)(1) | 196,421,725 | 53.158% |
INVERSIONES IRSA LIMITADA(1) | 25,279,991 | 6.842% |
Controlling Shareholders | 221,701,716 | 60.000% |
JPMorgan Chase Bank N.A. (ADRs) | 72,217,531 | 19.545% |
BANCO ITAU CORPBANCA POR CTA. DE INVERSIONISTAS EXTRANJEROS | 18,129,195 | 4.906% |
BANCO SANTANDER POR CUENTA DE INV. EXTRANJEROS | 14,225,286 | 3.850% |
BANCO SANTANDER-HSBC BANK PLC LONDON CLIENT ACCOUNT | 641,468 | 0.174% |
BANCO DE CHILE POR CUENTA DE TERCEROS NO RESIDENTES | 27,043,386 | 7.319% |
Custodian banks | 60,039,335 | 16.249% |
AFPs as a group (Chilean pension funds) | 1,801,635 | 0.488% |
Our directors and senior management as a group(2) | 35,440 | 0.009% |
Other | 13,707,215 | 3.710% |
TOTAL | 355,795,657 | 96.290% |
(1) Inversiones y Rentas S.A. owns 99.9999% of Inversiones IRSA Limitada’s equity. | ||
(2) Does not include the 221,701,716 shares of our common stock owned, directly and indirectly, by Inversiones y Rentas S.A., which is 50% beneficially owned by Quiñenco, a holding company of the Luksic Group, as discussed below, which is controlled by the Luksic family. Andrónico Luksic, our director, is a member of the Luksic family. Our director Francisco Pérez Mackenna has a 0.004% direct ownership interest in Compañía Cervecerías Unidas S.A. with 14,897 shares as of December 31, 2018. Our director Vittorio Corbo Lioi indirectly owns 4,343 shares of Compañía Cervecerías Unidas S.A., equivalent to 0.001%, through the ownership of Vittorio Corbo y Asociados Limitada, of which it holds 82%. Our director José Miguel Barros van Hövell tot Westerflier indirectly owns 16,200 shares of Compañía Cervecerías Unidas S.A., equivalent to 0.004%, through Inversiones Carpe Vitam Limitada. |
To the best of our knowledge our beneficial shareholders who, directly or indirectly, own more than 5% of the outstanding shares of our common stock are IRSA with 60.00% and Commonwealth Bank of Australia with 7.85% (according to the Schedule 13G filed on February 12, 2016, stating a holding of 29,000,801 shares, as of December 31, 2015).
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CCU is controlled by IRSA, which owns, directly and indirectly, 60.0% of March 31, 2016, JPMorgan Chase Bank N.A. (“JPMorgan”), the Depositary for our ADR facility, was the record owner of 63,614,029 shares of our common stock (17.22% of the outstanding common stock) deposited in our ADR facility.
As of March 31, 2016, we had4,328shareholders of record. To the best of our knowledge 12 shareholders are not Chilean, excluding ADR holders, and of those 12 non-Chilean shareholders, to the best of our knowledge 2 are U.S. corporations with a total of 78,343 (0.02%) shares of common stock. Non-Chileans can also hold shares in custody of private banks. However, as that information is not publicly available, we have included four custodians as part of the 12 non-Chilean shareholders although we have no citizenship information relating thereto. All shareholders have equal voting rights.
IRSA is a Chilean corporation owned 50% by Quiñenco, which is a holding company of the Luksic Group, and 50% by Heineken Chile Ltda., a subsidiary of Heineken International. IRSA directly owns 196,421,725 shares of our common stock and, indirectly, through Inversiones IRSA Ltda.,Limitada, 25,279,991 additional shares of our common stock. Inversiones IRSA Ltda. is a subsidiary of IRSA.
The shareholders of IRSA, Quiñenco S.A. and Heineken Chile Limitada, signed a Shareholders' Agreement, which was then registered in the Depósito Central de Valores (“DCV”). The agreement restricts IRSA’s shareholders, Quiñenco and Heinenken, from independently acquiring shares of CCU, with the exception of acquiring shares through IRSA. This Shareholders’ Agreement also restricts the shareholders of IRSA from freely selling CCU’s shares, as it imposes preferential rights, among other restrictions.
As of March 31, 2019, JPMorgan Chase Bank N.A. (“JPMorgan”), the depositary for our ADR facility, was the record owner of 72,217,531 shares of our common stock 19.54% of the outstanding common stock) deposited in our ADR facility.
As of March 31, 2019, we had3,864shareholders of record. All shareholders have equal voting rights. It is not practicable for us to determine the number of our ADSs or our common shares beneficially owned in the United States as the depositary for our ADSs only has knowledge of the record holders, including the Depositary Trust Company and its nominees. As a result, we are not able to ascertain the domicile of the final beneficial holders represented by the one ADS record holder in the United States. Likewise, we cannot readily determine the domicile of any of our foreign shareholders who hold our common stock, either directly or indirectly.
To our knowledge, none of our common stock is currently owned by governmental entities. Our common stock is listed and traded on the principal Chilean stock exchanges.
Regarding related party transactions, Chapter XVI of the Chilean Corporations Act is applicable to open-stockopen stock corporations and their subsidiaries, while Articles 44, 89 and 93 are only applicable to closedclosely held corporations which are not subsidiaries of an open-stockopen stock corporation.
Pursuant to Chapter XVI of the Chilean Corporations Act referenced above, a related-party transaction shall be any and all negotiation, agreement or operation between the open-stockopen stock corporation and any one of the following:
· one or more related persons pursuant to the Chilean Securities Market Law;
· a director, manager, administrator, principal executive officer or liquidator of the company, personally or acting on behalf of a person other than the company, or their respective spouses or close relatives (e.g. parents, father/mother in law, sisters, brothers, sisters/brothers in law);
· company or concern in which the persons referred to in the above clause are the owners, directly or indirectly through any other individual or corporation, of 10% or more of its capital; or of which any of the persons referred to in the above clause are a director, manager, administrator, principal executive officer thereof;
· those contemplated by the bylaws of the company or upon sufficient grounds determined by the directors committee, as the case may be, which can include subsidiaries in which the company owns, directly or indirectly, at least 95% of the equity or capital stock; and
· those in which the office of director, manager, administrator, principal executive officer or liquidator has been held by a director, manager, administrator, principal executive officer or liquidator of the company within the prior 18 months.
The following persons are considered under the Chilean Securities Market Law to be related persons:
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· | corporate entities that have, with respect to us, the character of parent company, affiliated companies or subsidiary. Parent companies are those that control directly or indirectly more than 50% of the subsidiary’s voting stock (or participation, in the case of business organizations other than stock companies), or that may otherwise elect or appoint, or cause the election or appointment, of the majority of the directors or officers. A limited partnership (sociedades en comandita) may likewise be a subsidiary of a corporation, whenever the latter has the power to direct or guide the administration of the general partner (gestor) thereof. For these purposes, affiliated companies are those where one of them, without actually controlling the other, owns directly or indirectly 10% or more of the latter’s voting stock (or equity, in the case of business organizations other than stock companies), or that may otherwise elect or appoint, or cause the election or appointment of, at least one board member or manager; |
· | persons who are directors, managers, administrators, principal executive officers or liquidators of us, and their spouses or their close relatives (i.e. parents, father/mother in law, sisters, brothers, sisters/brothers in law); as well as any other entity controlled by, directly or indirectly, any one of the above; and |
· | any person who, whether acting alone or in agreement with others, may appoint at least one member of our management or controls 10% or more of our voting capital. |
The SVSCMF may presume that any individual or corporate entity is related to a company if, because of relationships of equity, administration, kinship, responsibility or subordination, the person:
· whether acting alone or in agreement with others, has sufficient voting power to influence the company’s management
· creates conflicts of interest in doing business with the company;
· in the case of a corporate entity, is influenced in its management by the company; or
· holds employment or a position which affords the person access to non-public information about the company and its business, which renders the person capable of influencing the value of the company’s securities.
However, a person shall not be considered to be related to a company by the mere fact of owning up to 5% of the company, or if the person is only an employee of the company without managerial responsibilities.
Additionally, pursuant to Article 147 of Chapter XVI of the Chilean Corporations Act, an open-stockopen stock corporation shall only be entitled to enter into a related-party transaction when it is in the interest of the company, the price, terms and conditions are similar to those prevailing in the market at the time of its approval and the transaction complies with the requirements and procedures stated below:
1. The directors, managers, administrators, principal executive officers or liquidators that have an interest or that take part in negotiations conducive to the execution of an arrangement with a related party of the open-stockopen stock corporation, shall report it immediately to the board of directors or whomever the board designates. Those who breach this obligation will be jointly liable for damages caused to the company and its shareholders.
2. Prior to the company’s consent to a related party transaction, it must be approved by the absolute majority of the members of the board of directors, with exclusion of the interested directors or liquidators, who nevertheless shall make public his/her/their opinion with respect to the transaction if it is so requested by the board of directors, which opinion shall be set forth in the minutes of the meeting. Likewise, the grounds of the decision and the reasons for excluding such directors from its adoption must also be recorded in the minutes.
3. The resolutions of the board of directors approving a related party transaction shall be reported at the next following shareholders' meeting, including a reference to the directors who approved suchtransaction. A reference to the transaction is to be included in the notice of the respective shareholders' meeting.
4. In the event that an absolute majority of the members of the board of directors should abstain from voting, the related-party transaction shall only be executed if it is approved by the unanimous vote of the members of the boardtheboard of directors not involved in such transaction, or if it is approved in a shareholders' extraordinary meeting by two-thirds of the voting shares of the company.
5. If a shareholders' extraordinary meeting is called to approve the transaction, the board of directors shall appoint at least one independent advisor who shall report to the shareholders the terms of the transaction, its effects and the potential impact for the company. In the report, the independent advisor shall include all the matters or issues the directors committee may have expressly requested to be evaluated. The directors committee of the company or, in the absence of such committee, directors not involved in the transaction, shall be entitled to appoint an additional independent advisor, in the event they disagree with the appointment made by the board.
The reports of the independent advisors shall be made available to the shareholders by the board on the business day immediately following their receipt by the company, at the company’s business offices and on its internet site, for a period of at least 15 business days from the date the last report was received from the independent advisor, and such arrangement shall be communicated to the shareholders by means of a “Relevant Fact” (Communication sent to the SVSCMF and the stock markets in Chile).
The directors shall decide whether the transaction is in the best interest of the corporation, within five business days from the date the last report was received from the independent advisors.
6. When the directors of the company must decide on a related party-transaction, they must expressly state the relationship with the transaction counterparty or the interest involved. They shall also express their opinion on whether the transaction is in the best interest of the corporation, their objection or objections that the directors committee may have expressed, as well as the conclusions of the reports of the advisors. The opinions of the directors shall be made available to the shareholders the day after they were received by the company, at the business offices of the company as well as on its internet site, and such arrangement shall be reported by the company as a “Relevant Fact.”Fact”.
7. Notwithstanding the applicable sanctions, any infringement of the above provisions will not affect the validity of the transaction, but it will grant the company or the shareholders the right to sue the related party involved in the transaction for reimbursement to the company of a sum equivalent to the benefits that the operation reported to the counterpart involved in the transaction, as well as indemnity for damages incurred. In this case, the defendant bears the burden of proof that the transaction complies with the requirements and procedures referred to above.
Notwithstanding the above, the following related party transactions may be executed, pursuant to letters a), b) and c) of Article 147 of the Chilean Corporations Act, without complying with the requirements and procedures stated above, with prior authorization by the board:
1. Transactions that do not involve a “material amount.”amount”. For this purpose, any transaction that is both greater than UF 2,000 Unidades de Fomento (as of March, 31, 2016,2019, approximately CLP 51.655 million) and in excess of 1% of the corporation’s equity, or involving an amount in excess of UF 20,000 Unidades de Fomento (as of March 31, 2016,2019, approximately CLP 516.2551 million) shall be deemed to involve a material amount. All transactions executed within a 12 month period that are similar or complementary to each other, with identical parties, including related parties, or objects, shall be deemed to be a single transaction.
2. Transactions that pursuant to the company’s policy of usual practice as determined by its board of directors, are in the ordinary course of business of the company. Any agreement or resolutionestablishing or amending such policies shall be communicated as a “Relevant Fact” and made available to shareholders at the company’s business offices and on its internet site, and the transaction shall be reported as a “Relevant Fact,”Fact”, if applicable.
3. Transactions between legal entities in which the company possesses, directly or indirectly, at least 95% of the equity of the counterpart.
The usual practice policy adopted by the board of directors in the meeting held on January 13, 2010, as amended on July 6, 2011, July 5, 2016, and December 5, 2018 remains available to shareholders at the Company’s offices in Avda.Avenida Vitacura N° 2670, 2623thrd Floor, Santiago, Chile, and on the web site www.ccu.cl. The foregoing website is provided for informational purposes only, and the information thereon is not incorporated into this annual report.
102
In the ordinary course of business, we engage in a variety of transactions with some of our affiliates and related parties. Financial information concerning these transactions is set forth in Note 1611 to our consolidated financial statements.
Our corporate support units and strategic service units provide shared services to all the organization through service level-agreements. Shared services are provided in a centralized manner to capture the synergies between the different units. Service-level agreements are annual contracts specifying the services to be provided as well as the variables used to measure the levels of service and their prices. Service levels are evaluated directly by users three times a year.
Additionally, our logistic subsidiaries Transportes CCU and Comercial CCU provide logistic, warehousing and sales services on a consolidated basis to all of our strategic business units. These services are regulated by annual contracts specifying the services to be provided as well as the variables used to measure the levels of service and their prices. Service levels are evaluated directly by users three times a year.
We engage in a variety of transactions with affiliates of the Luksic Group and Heineken, the beneficial owners of IRSA, as well as with other shareholders of ours. Currently, Quiñenco and Heineken Chile Ltda., a Chilean limited corporation controlled by Heineken Americas B.V., are the only shareholders of IRSA, each with a 50% equity interest See “Item 4: Information on the Company – C. Organizational Structure.”Structure”.
On November 30, 2005, we and Heineken Brouwerijen B.V. amended the license and technical assistance agreements which provide us with the exclusive rights to produce, sell and distribute Heineken beer in Chile and Argentina commencing June 18, 2003. These agreements have an initial term of 10 years beginning in June 2003, renewable for subsequent periods of five years. See “Item 4: Information on the Company – B. Business Overview – Our Beer Chile business– Beer Production and Marketing in Chile”– Chile Operating segment” and “Item 4: Information on the Company – B. Business Overview – Our Beer Argentina business–4. Production and Marketing in Argentina.”– International Business Operating segment”.
On October 12, 2011, we and Heineken Brouwerijen B.V. signed the Amended and Restated versions of the Trademark License Agreements which provide us with the exclusive rights to produce, sell and distribute Heineken beer in Chile and Argentina, in force as of January 1, 2011. These agreements have an initial term of 10 years, and automatically renew on January 1 of each year for a new period of ten years, unless any party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires.
On November 29,September 28, 2012, CICSA and HeinekenAmstel Brouwerijen B.V. signed the Trademark License Agreement which provides us with the exclusive rights to produce, sell and distribute HeinekenAmstel beer in Paraguay.Argentina. This agreement has an initial term of 10ten years, and will be automatically renewedrenew on Janaury 1 of each year for a fiveanew period of ten years, period unless any party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires.
On June 4, 2013, CICSA, Milotur and Heineken Brouwerijen B.V. signed the Trademark License Agreement, which provides us with the exclusive rights to produce, sell and distribute Heineken beerin Uruguay, in force as of May 1, 2013. This agreement has an initial term of 10ten years, and automatically renews on January 1 of each year for a new period of ten years, unless any party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires.
On November 10, 2014, Central Cervecera de Colombia S.A.S. and Heineken Brouwerijen B.V. signed a Trademark License Agreement which provides us with the exclusive rights to import, produce, sell and distribute Heineken beer in Colombia. This agreement has an initial term of thirteen years as of March 1, 2015, and will each year thereafter (January 1) be automatically renewed for subsequent five year periods unless, starting in 2029, any party gives notice of its decision not to renew, in which case the agreement will be in force until the expiration of the latest renewal period.
On July 15, 2015, CICSA, BBO and Heineken Brouwerijen B.V. signed the Ancillary Trademark License Agreement, which provide us with the exclusive rights to produce, sell and distribute Heineken beer in Bolivia, in force as of January 1, 2015. This agreement has an initial term of 10ten years, and will be automatically renewed for afora five-year period unless any party gives notice of its decision not to renew, in which case the agreement will be in force until the last renewal period expires.
103
Additionally, a Technical Assistance Agreement was executed with Heineken Technical Services B.V. (currently Heineken Supply Chain B.V.) on May 4, 2005, whereby the latter was appointed, on a non-exclusive basis, as our technical advisor in respect of operational aspects of our breweries, including also special services regarding project engineering for extensions of the breweries’ capacity and construction of new plants, assistance in development of new products, production methods and distribution systems as well as advice on purchasing systems, among others. This agreement has an initial term of one year as from May 4, 2005, renewable for subsequent periods of one year each, unless either party gives at least three months’ prior written notice to the other of its intention to terminate this agreement. This agreement has been renewed automatically each year.
OnIn January 28, 2015, a Trade Mark License Agreement (TMLA)(“TMLA”) was executed between our subsidiary Cervecería CCU and Heineken Brouwerijen B.V. to produce, sell and distribute beer under the brand name SOLSol in Chile. The TMLA contemplates a 10-yearten-year term as of July 1, 2014 and shall each year (as of July 1st) automatically be renewed for a new period of 10ten years, unless any party has given notice in writing of its decision not to renew.
On March 23, 2015, CICSA and Heineken Brouwerijen B.V. signed the Trademark License Agreement which provides with the exclusive rights to produce, sell and distribute Sol beer in Argentina. This agreement has an initial term of ten years, and will be automatically renewed for a ten years period unless any party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires.
On April 4, 2016, Central Cervecera de Colombia S.A.S. and Heineken Brouwerijen B.V. signed a Trademark License Agreement which provides us with the exclusive rights to import, produce, sell and distribute Tecate beer in Colombia. This agreement came into force on April 1, 2016, will continue to be in force until February 28, 2028, and each year thereafter (January 1) will be automatically renewed for subsequent five year periods unless, starting in 2029, any party gives notice of its decision not to renew, in which case the agreement will be in force until the expiration of the latest renewal period.
On September 27, 2017, Central Cervecera de Colombia S.A.S. and Heineken Brouwerijen B.V. signed the Trademark License Agreement which provides us with the exclusive rights to import, produce, sell and distribute, Sol beer in Colombia. This agreement came into force on July 1, 2017, will continue to be in force until February 28, 2028, and shall each year thereafter (January 1) be automatically renewed for subsequent five year periods unless, starting in 2029, any party gives notice of its decision not to renew, in which case the agreement will be in force until the expiration of the latest renewal period.
In January 2018, Bebidas del Paraguay S.A. and Heineken Brouwerijen B.V. signed the Trademark License Agreement which provides us with the exclusive rights to produce, sell and distribute Sol beer in Paraguay. This agreement has an initial term of five years, and will be automatically renewed for a three years period unless any party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires.
On April 20, 2018, Bebidas del Paraguay S.A. and Heineken Brouwerijen B.V. signed a Trademark License Agreement and a Distribution Agreement which provides us with the exclusive rights to produce, sell and distribute Heineken beer in Paraguay. These agreements have an initial term of five years from May 1, 2018, and will be automatically renewed for subsequent three year periods unless any party gives notice of its decision not to renew. Therefore, and as agreed on June 11, 2018, the Trademark License Agreement entered on November 28, 2012, by CICSA and Heineken Brouwerijen B.V., which provided CICSA with the exclusive rights to produce, sell and distribute Heineken beer in Paraguay,was terminated with retroactive effects as of April 30, 2018 and, in its place, Heineken Brouwerijen B.V. and CICSA entered into a supply agreement which provides CICSA the non-exclusive right to sell and supply Heineken Lager in the Paraguayan market to Bebidas del Paraguay S.A., for a period of five years beginning on April 30, 2018.
On November 13, 2018, we and Heineken Brouwerijen B.V. signed an Amendment Agreement to the the Amended and Restated Trademark License Agreement with Cercevera CCU Chile Limitada dated October 12,2011, in order to include, as of January 1, 2018, the trade mark “Heineken 0.0” to the Trade Marks we have the exclusive rights to produce, sell and distribute in Chile.
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Finally, in 2015, we revised and amended the 2014 amended and restated Framework Agreement entered with Banco de Chile, a Quiñenco subsidiary, which was in effect as of May 1, 2003, for the rendering of banking services to us and certain of our subsidiaries and affiliates, including, among others, payment to suppliers and shareholders, cashier service, transportation of valuables and payment of salaries.
Since the establishment of our directors’ committee in 2001, as required by the Chilean Corporations Act, it has reviewed all related-party contracts, before being sent to our board of directors for approval, which was standard practice prior to the creation of the directors’ committee. The above does not include related-party transactions executed according tothat fall within the usual practice policy adopted on January 13, 2010 as amended on July 6, 2011 by the board of directors in respect of transactions mentionedexemptions contemplated in letters a), b) and c) of Article 147 of the Chilean Corporations Act. OurAct, which includes those executed according to the usual practice policy adopted by the board of directors on January 13, 2010 as amended on July 6, 2011, July 5, 2016 and December 5, 2018.Our principal related-party contracts include rental of properties, the rendering of services and product sales.
Our principal transactions with related parties for the twelve-month period ended December 31, 2015,2018, are detailed below:
Company | Relationship | Transaction | Amount (in millions of CLP) |
Heineken Brouwerijen B.V. | Related to the |
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Amstel Brouwerijen B.V. | Related to the controller's shareholder | License and technical assistance | 247 |
Inversiones y Rentas S.A. |
| Dividends paid/Office |
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Inversiones Irsa |
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Minera Antucoya | Related to the controller's shareholder | Sales of products | 2 |
Viña Tabalí S.A. | Related to the controller's shareholder | Services provided | 90 |
Canal 13 SpA. | Related to the controller's shareholder | Advertising | 2,642 |
Minera Centinela | Related to the controller's shareholder | Sales of products | 7 |
Cervecería Kunstmann Ltda. | Related to non-controlling subsidiary | Sales of products/Services received | 887 |
Comercial Patagona Ltda. | Subsidiary of joint venture | Sales of products/Services received | 6,184 |
Inversiones PFI Chile Ltda. |
| Purchase of |
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| Shareholder of subsidiary |
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Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda. | Shareholder of subsidiary | Purchase of grape/Dividends paid/Supply contract/Loan | 6,231 |
Nestlé Chile S.A. | Shareholder of subsidiary | Dividends paid |
|
| Controller's Shareholder |
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| Sales of products | 35 |
Inversiones Enex S.A. | Related to the controller's shareholder | Sales of products | 1,475 |
Banchile Corredora de Bolsa S.A. | Related to the controller's shareholder | Investments | 2,451,175 |
Empresas Carozzi S.A | Related joint venture |
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SAAM Extraportuario S.A | Related to the controller's shareholder | Services received | 84 |
Radiodifusión SpA. | Related to the controller's shareholder | Services provided | 470 |
Cervecería Austral S.A. | Joint venture |
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Banco de Chile | Related to the |
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Foods Compañía de Alimentos CCU S.A. | Joint venture |
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See Note 1611 to our Consolidated Financial Statementsconsolidated financial statements included herein for detailed information.
C.Interests of Experts and Counsel
105
A.Consolidated Statements and Other Financial Information
See “Item 18: Financial Statements” and “Item 19: Exhibits” for the Company's Financial Statements and notes, audited by PricewaterhouseCoopers.PricewaterhouseCoopers Consultores, Auditores SpA.
Wine Exports
We, through our subsidiary VSPT, exported wine to more than80 countries in 2015.2018. VSPT is the second-largest wine exporter in Chile. See “Item 4: Information on the Company– B.Business Overview– Operating Segments InformationCompetition– Our Wine Operating Segment.”segment”.
The following table presents our total wine exports by volume and sales, as of December of the last three years as percentage of consolidated volume and sales for the last three years:
| 2016 | 2017 | 2018 |
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Exports (thousands of liters)(1) | 77,927 | 75,462 | 71,194 |
% of total consolidated sales volume | 3.14% | 3.04% | 2.87% |
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Exports (CLP million)(1) | 131,168 | 127,962 | 127,962 |
% of total consolidated sales | 8.41% | 8.21% | 7.18% |
(1) Includes Argentinean operations and bulk wine. | |||
| 2013 | 2014 | 2015 |
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Exports (thousands of liters) | 69,649 | 66,936 | 69,676 |
% of total consolidated sales volume | 3.18% | 2.92% | 2.91% |
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Exports (CLP million) | 91,579 | 102,279 | 117,450 |
% of total consolidated sales | 7.65% | 7.88% | 7.84% |
Legal Proceedings
Nothing to report.
Our dividend policy is reviewed and established from time to time by our board of directors and reported during our annual ordinary shareholders’ meeting, which is generally held in April of each year. Each year our board of directors must submit its proposal for a final dividend for the preceding year for shareholder approval at the annual ordinary shareholders’ meeting. As required by the Chilean Corporations Act, we must distribute a cash dividend in an amount equal to at least 30% of our netNet income for that year, after deducting any accumulated losses from previous years, unless otherwise decided by unanimous vote of the issued shares of our common stock. Our board of directors has the authority to pay interim dividends during any one fiscal year, to be charged toagainst the earnings forof that year.
Our board of directors announced at our annual ordinary shareholders’ meeting held on April 15, 2015,11, 2018, its dividend policy for future periods, authorizing the distribution of cash dividends in an amount at least equal to 50% of our Net income of the Year Attributableyear attributable to Equity Holdersequity holders of the Parent Companyparent company under IFRS for the previous year. Our dividend policy is subject to change in the future due to changes in Chilean law, capital requirements, economic results and/or other factors. During our annual ordinary shareholders’ meeting held on April 15, 2015,11, 2018, a dividend of CLP 98.78138108.88833 per share of common stock (CLP 197.56276217.7766 per ADRADS using the new ratio as of December 20, 2012 of 1 ADRADS to 2 common shares) was approved, in addition to the interim dividend of CLP 6370 per share of common stock (CLP 126140 per ADR)ADS) distributed in January 9, 2015.5, 2018. Together, these dividend payments amounted to CLP 59,77966,100 million, representing 50.0%51.0% of the “Net income of the Year Attributableyear attributable to Equity Holdersequity holders of the Parent Company”parent company” for 2014.2017.
The board of directors, in its meeting held on December 1, 2015, approved the distribution, with a charge to 2015’s profits, of an interim dividend of CLP 66 per share of common stock (CLP 132 per ADR), totaling CLP 24,387,189,552, which was paid on January 8, 2016. Additionally, the board of directors, in its meeting held on March 1, 2016, resolved to propose to the next annual shareholders meeting, the distribution, with a charge to 2015’s profits, of a final dividend of CLP 97.47388 per share of common stock (CLP 194.94776 per ADR). The proposal, representing a total payment of CLP 36,016,878,605, was approved at our last annual shareholders’ meeting held on April 13, 2016 and the final dividend was paid beginning April 22, 2016 to the shareholders of record as of midnight of April 16, 2016.107
Dividends are paid to shareholders of record on midnight of the fifth business day, including Saturdays, preceding the date set for payment of the dividend. The holders of ADRsADSs on the applicable record dates are entitled to dividends declared for each corresponding period.
The board of directors, in its meeting held on December 5, 2018, approved the distribution, with a charge to 2018’s Net income attributable to equity holders of the parent company, of an interim dividend of CLP 140 per share of common stock (CLP 280 per ADS), totaling CLP 51,730,402,080, which was paid as of January 4, 2019. Additionally, the board of directors, in its meeting held on March 6, 2019, resolved to propose to the next ordinary shareholders meeting, the distribution, with charge to 2018’s Net income attributable to equity holders of the parent company, of a final dividend of CLP 358.33030 per share of common stock (CLP 716.66059 per ADS). The proposal, representing a total payment of CLP 132,404,074,974, was approved at our last annual ordinary shareholders’ meeting held on April 17, 2019 and the final dividend will be paid as of April 29, 2019 to shareholders of record at midnight on April 23, 2019.
The following table sets forth the amounts of interim and final dividends and the aggregate amounts of such dividends per share of common stock and per ADRADS in respect of each of the years indicated:
Year ended | CLP Per share(1) | US$ Per ADR(2) | CLP Per share(1) | USD Per ADS(2) | ||||||||
December 31 | Interim | Final(3) | Total | Interim | Final(3) | Total | Interim | Final(3) | Total | Interim | Final(3) | Total |
2011 | 61.00 | 131.70 | 192.70 | 0.24 | 0.54 | 0.78 | ||||||
2012 | 63.00 | 116.64 | 179.64 | 0.27 | 0.49 | 0.76 | ||||||
2013 | 63.00 | 103.49 | 166.49 | 0.24 | 0.37 | 0.61 | 63 | 103.49 | 166.49 | 0.24 | 0.37 | 0.61 |
2014 | 63.00 | 98.78 | 161.78 | 0.21 | 0.32 | 0.52 | 63 | 98.78 | 161.78 | 0.21 | 0.32 | 0.52 |
2015 | 66.00 | 97.47 | 163.47 | 0.18 | 0.29 | 0.47 | 66 | 97.47 | 163.47 | 0.18 | 0.29 | 0.47 |
2016 | 66 | 110.32 | 176.32 | 0.20 | 0.33 | 0.53 | ||||||
2017 | 70 | 108.89 | 178.89 | 0.23 | 0.36 | 0.59 | ||||||
2018 | 140 | 358.33 | 498.33 | 0.41 | 1.07 | 1.48 | ||||||
(1) Interim and final dividend amounts are expressed in historical pesos | (1) Interim and final dividend amounts are expressed in historical pesos |
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| (1) Interim and final dividend amounts are expressed in historical pesos | ||||||||
(2) U.S. dollars per ADR dividend information serves reference pupouses only we pay all dividends in Chilean pesos. On December 20, 2012, there was an ADR ratio change from 1 ADR to 2 common shares. The ammounts shown above have been adjusted to reflect this change. The Chilean peso ammounts as shown here have been converted into U.S. dollars at the respective observed exchange rate in effect at each payment date. Note: The Federal Reserve bank of New York does not report a noon buying rate for Chilean pesos. | ||||||||||||
(2) USD per ADS dividend information provided soleley for reference purposes only, as we pay all dividends in CLP. The amounts shown above have been adjusted to reflect this change. The Chilean peso amounts as shown here have been converted into USD at the respective observed exchange rate in effect at each payment dateor, in respect of the dividend payable for the year ended December 31, 2018, at the observed exchange rate in effect as of April 24, 2019. Note: The Federal Reserve Bank of New York does not report a noon buying rate for CLP. | (2) USD per ADS dividend information provided soleley for reference purposes only, as we pay all dividends in CLP. The amounts shown above have been adjusted to reflect this change. The Chilean peso amounts as shown here have been converted into USD at the respective observed exchange rate in effect at each payment dateor, in respect of the dividend payable for the year ended December 31, 2018, at the observed exchange rate in effect as of April 24, 2019. Note: The Federal Reserve Bank of New York does not report a noon buying rate for CLP. | |||||||||||
(3) The final dividend with respect to each year is declared and paid within the first five months of the subsequent year. | (3) The final dividend with respect to each year is declared and paid within the first five months of the subsequent year. | (3) The final dividend with respect to each year is declared and paid within the first five months of the subsequent year. |
Pursuant to current Chilean foreign exchange regulations, a shareholder who is not a resident of Chile does not need to be authorized as a foreign investor in order to receive dividends, sale proceeds or other amounts with respect to its shares remitted outside Chile, but the investor must inform the Central Bank about any such transactions and must remit foreign currency through the Formal Exchange Market.formal exchange market. See “Item 10. Additional Information – D. Exchange Controls” for additional information on how ADR holders may remit currency outside Chile. Dividends received in respect of shares of Common Stockcommon stock by holders, including holders of ADRs who are not Chilean residents, are subject to Chilean withholding taxes. See “Item 10: Additional Information – Taxation.”E. Taxation”.
Nothing to report.
108
For the periods indicated, the table below sets forth the reported high and low closing sales prices for the Common Stockcommon stock on the Santiago Stock ExchangeExchanges in Chile as well as the high and low sales prices of the ADSs as reported by the NYSE:
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| Santiago Stock Exchange | NYSE(1) |
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| (per share of common stock) | (per ADS) |
| Santiago Stock Exchange | NYSE | ||||
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| High | Low | High | Low | High | Low | High | Low | |
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| (CLP) | (CLP) | (US$) | (CLP) | (CLP) | (CLP) | (CLP) | ||
Years | Years |
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2014 | 6,900 | 5,600 | 24.22 | 17.89 | |||||||
2015 | 8,784 | 5,479 | 25.27 | 17.73 | |||||||
2016 | 8,120 | 6,500 | 24.17 | 18.78 | |||||||
2017 | 9,300 | 6,820 | 29.72 | 20.31 | |||||||
2018 | 9,587 | 7,848 | 30.35 | 24.30 | |||||||
2019 (through Mar. 31) | 9,974 | 9,700 | 29.47 | 28.73 | |||||||
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| 2011 | 6,704 | 4,653 | 25.45 | 19.18 |
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| 2012 | 7,788 | 5,930 | 32.73 | 24.07 | ||||||
| 2013 | 8,094 | 5,900 | 34.91 | 22.89 | ||||||
| 2014 | 6,900 | 5,600 | 24.22 | 17.89 | ||||||
| 2015 | 8,784 | 5,479 | 25.27 | 17.73 | ||||||
| 2016 (through Mar. 31) | 7,875 | 6,502 | 22.87 | 18.78 | ||||||
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2013 |
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| 1st quarter | 7,884 | 7,270 | 34.03 | 31.02 | ||||||
| 2nd quarter | 8,094 | 6,309 | 34.91 | 24.92 | ||||||
| 3rd quarter | 7,850 | 6,408 | 30.21 | 25.97 | ||||||
| 4th quarter | 6,985 | 5,900 | 27.95 | 22.89 | ||||||
2014 |
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| 1st quarter | 6,400 | 5,670 | 24.22 | 20.46 | ||||||
| 2nd quarter | 6,900 | 5,804 | 23.94 | 21.02 | ||||||
| 3rd quarter | 6,750 | 6,200 | 23.79 | 21.02 | ||||||
| 4th quarter | 6,594 | 5,600 | 22.13 | 17.89 | ||||||
2015 |
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| 1st quarter | 6,500 | 5,479 | 20.90 | 17.73 | ||||||
| 2nd quarter | 7,146 | 6,409 | 23.91 | 20.73 | ||||||
| 3rd quarter | 7,935 | 6,550 | 23.80 | 20.23 | ||||||
| 4th quarter | 8,784 | 7,300 | 25.27 | 20.58 | ||||||
2017 | |||||||||||
1st quarter | 8,449 | 6,820 | 25.46 | 20.31 | |||||||
2nd quarter | 9,120 | 8,236 | 27.28 | 25.16 | |||||||
3rd quarter | 9,190 | 8,220 | 28.22 | 25.40 | |||||||
4th quarter | 9,300 | 8,000 | 29.72 | 25.03 | |||||||
2018 | |||||||||||
1st quarter | 9,210 | 7,890 | 30.35 | 27.27 | |||||||
2nd quarter | 9,100 | 7,848 | 29.86 | 24.37 | |||||||
3rd quarter | 9,587 | 7,850 | 28.52 | 24.65 | |||||||
4th quarter | 9,545 | 8,300 | 28.88 | 24.30 | |||||||
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Last six months | Last six months |
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| October 2015 | 8,750 | 7,573 | 25.15 | 22.11 | ||||||
| November 2015 | 8,784 | 7,851 | 25.27 | 22.29 | ||||||
| December 2015 | 8,600 | 7,300 | 23.09 | 20.58 | ||||||
| January 2016 | 7,805 | 6,800 | 21.76 | 18.82 | ||||||
| February 2016 | 7,875 | 6,502 | 22.07 | 18.78 | ||||||
| March 2016 | 7,700 | 6,838 | 22.87 | 19.49 | ||||||
October 2018 | 9,545 | 8,500 | 28.88 | 24.55 | |||||||
November 2018 | 8,902 | 8,300 | 26.37 | 24.30 | |||||||
December 2018 | 9,179 | 8,305 | 26.45 | 24.75 | |||||||
January 2019 | 9,399 | 8,600 | 28.00 | 24.92 | |||||||
February 2019 | 9,669 | 8,925 | 29.28 | 27.30 | |||||||
March 2019 | 9,974 | 9,210 | 29.47 | 27.90 |
(1)On December 20, 2012, there was an ADR ratio change from 1 ADR to 5 common shares, to a new ratio of 1 ADR to 2 common shares. Prices shown above take into account this change.
Significant trading suspensions of the Company's stock have not occurred in the last three years.
17 See “Item 10: The Offer and Listing – C. Markets”.
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B.Plan of distribution Not applicable. Our common stock is currently traded on the Santiago Stock Exchange, the Chile Electronic Stock Exchange and, until October 8, 2018, the Valparaíso Stock Exchange under the symbol The trading volume of our ADSs in the NYSE in the last three years is as follows: Year Quarter Traded Volume(1) Quarter Traded Volume (thousands of ADS) (thousands of ADS) 2013 1st quarter 6,037 2nd quarter 9,674 3rd quarter 12,442 4th quarter 11,706 Total 39,859 2014 1st quarter 12,052 2nd quarter 10,094 3rd quarter 9,642 4th quarter 10,771 Total 42,559 2015 1st quarter 8,464 1st quarter 8,464 2nd quarter 8,133 2nd quarter 8,133 3rd quarter 8,730 3rd quarter 8,730 4th quarter 9,338 4th quarter 9,338 Total 34,666 Total 34,666 2016 1st quarter 10,853 2nd quarter 10,121 3rd quarter 16,093 4th quarter 15,288 Total 52,355 2017 1st quarter 11,269 2nd quarter 13,193 3rd quarter 9,606 4th quarter 11,597 Total 45,665 2018 1st quarter 8,848 2nd quarter 10,560 3rd quarter 14,465 4th quarter 12,038 Total 45,911“CCU.”“CCU”. The Santiago Stock Exchange accounted for approximately 90.1%87.4%, 87.7%86.4% and 88.3%94.6% of the trading volume of our common stock in Chile in the last three years, respectively. The remaining 9.9%12.6%, 12.3%13.6% and 11.7%5.4% respectively, was traded mainly on the Chile Electronic Stock Exchange. Shares of our common stock were traded in the United States on the NASDAQ Stock Market between September 24, 1992 and March 25, 1999 and on the NYSE since March 26, 1999, in the form of ADSs, under the symbol “CCU”, with such ADSs being evidenced by ADRs, which until December 20, 2012, had each represented five shares of our common stock. Starting on December 20, 2012, the ratio was changed so that each ADS represented two shares of our common stock. The ADSs are issued under the terms of a deposit agreement dated September 1, 1992, as amended and restated on July 31, 2013, among us, JPMorgan, as depositary, and the holders from time to time of the ADSs.
(1)On December 20, 2012, there was an ADR ratio change from 1 ADR to 5 common shares, to a new ratio of 1 ADR to 2 common shares. Volumes shown above take into account this change.
Not applicable.
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F.Expenses of the Issue
Not applicable.
ITEM 10: Additional Information
Not applicable.
B.Memorandum and Articles of Association
Provided below is a summary of certain material information found in our bylaws and provisions of Chilean law. This summary is not exhaustive. For more information relating to the items discussed in this summary, the reader is encouraged to read our updated bylaws, available in our website atwww.ccu.cl. The information on our website is not incorporated by reference into this document.
Registration and corporate purposes. We are a public corporation (sociedad anónima abierta) organized by means of a public deed dated January 8, 1902, executed before the notary public of Valparaíso, Mr. Pedro Flores, and our existence was approved by Supreme Decree N° 889 of the Treasury Department, dated March 19, 1902, both of which were recorded on the reverse of folio 49, N° 45 of Valparaíso’s Registry of Commerce for 1902, and published in Chile’s Official Gazette on March 24, 1902. We were recorded on March 8, 1982, at Chile’s Securities Registry of the SVSCMF under N° 0007.
The last amendment to our articles of association, which incorporates the resolutions of the extraordinary shareholders’ meeting held on June 18, 2013, that approved to increase the capital of the Company, by the issuance of 51,000,000 shares, were set forth in a public deed dated June 18, 2013, executed before the notary public of Santiago, Eduardo Diez Morello, an extract of which was recorded on the folio 48,216 N° 32,190 of the Santiago Registry of Commerce for 2013, published in the Official Gazette on June 25, 2013.
Under Article 4 of our bylaws, the corporation’s principal purpose is to produce, manufacture and market alcoholic and non-alcoholic beverages, to manufacture containers and packaging, and to provide transportation services, among other businesses.
Directors. Under the Chilean Corporations Act, a corporation may not enter into a contract or agreement in which a director has a direct or indirect interest without prior approval by the board of directors, and then only if it is in the interest of the company, the price, terms and conditions are similar to those prevailing in the market at the time of its approval and the transaction complies with the requirements and procedures stated in Chapter XVI of the Chilean Corporations Act regarding Related Party Transactions. See “Item 7: Major Shareholders and Related Party Transactions.”Transactions”.
The amount of any director’s remuneration is established each year by the annual shareholders’ meeting. Directors are forbidden, unless previously and duly authorized thereto by the board of directors, to borrow or otherwise make use of corporate money or assets for their own benefit or that of their spouses, certain relatives or related persons. These rules can only be modified by law.
It is not necessary to hold shares to be elected director, and there is no age limit established for the retirement of directors.
Rights, preferences and restrictions regarding shares. At least 30% of our net profits for each fiscal year are required to be distributed as dividends in cash to our shareholders, unless ourshareholdersour shareholders unanimously decide otherwise. Any remaining profits may be used to establish a reserve fund (that may be capitalized at any time, amending the corporate bylaws by the vote of a majority of the voting stock issued), or to pay future dividends.
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Compulsory minimum dividends, i.e., at least thirty percent of our net profits for each fiscal year, become due thirty days after the date on which the annual shareholders' meeting has approved the distribution of profits in the fiscal year. Any additional dividends approved by our shareholders become due on the date set by our shareholders or our board of directors.
Accrued dividends that corporations fail to pay or make available to their shareholders within certain periods are to be adjusted from the date on which those dividends became due and that of actual payment. Overdue dividends will accrue yearly interest at established rates over the same period.
Dividends and other cash benefits unclaimed by shareholders after five years from the date on which they became due will become the property of the Chilean Fire Department.
We have only one class of shares and there are therefore no preferences or limitations on the voting rights of shareholders. Each of our shareholders is entitled to one vote per share. In annual shareholders’ meetings, resolutions are made by a simple majority of those present, provided legal quorums are met. A special or extraordinary meeting generally requires an absolute majority, in other words, 50% plus one of the shares entitled to vote; however, the Chilean Corporations Act provides that in order to carry certain motions, a two-thirds majority of the outstanding voting stock is necessary.
Our directors are elected every three years and their terms are not staggered. Our shareholders may accumulate their votes in favor of just one person or distribute their votes to more than one person. In addition, by unanimous agreement of our shareholders present and entitled to vote, the vote may be omitted and the election made by acclamation.
In the event of liquidation, the Chilean Corporations Act provides that corporations may carry out distributions to shareholders on account of a reimbursement of capital only after the payment of corporate indebtedness.
There are no redemption or sinking fund provisions applicable to us, nor are there any liabilities to our shareholders relating to future capital calls by us.
Under Chilean law, certain provisions affect any existing or prospective holder of securities as a result of the shareholder owning a substantial number of shares. The Chilean Securities Market Law, establishes that (a) any person who, directly or indirectly, owns 10% or more of the subscribed capital of an open-stockopen stock corporation (the “majority shareholders”) or that, as a consequence of an acquisition of shares, attains such percentage, and (b) all directors, liquidators, principal executive officers, administrators and managers of such corporations, regardless of the number of shares they possess, either directly or indirectly, must report any purchase or sale of shares to the SVSCMF and to each of the stock exchanges in Chile where such corporation has securities listed, the day immediately following the execution of the transaction, through the technological means authorized by the SVS.CMF. This obligation shall also apply to the acquisition or sale of contracts or securities, the price or result of which is dependent upon or is conditioned on, in whole or in a relevant part, the fluctuation or evolution of the price of such shares. In addition, majority shareholders must inform the SVSCMF and the stock exchanges with respect to whether the purchase is aimed at acquiring control of the corporation or just as a financial investment.
The Chilean Securities Market Law also provides that when one or more persons intend to take over a corporation subject to oversight by the SVS,CMF, they must give prior public notice. This notice must include the price to be offered per share and the conditions of the proposed transaction, including the expected manner of acquiring the shares.
Finally, Chapter XXV of the Chilean Securities Market Law was enacted on December 20, 2000, to ensure that controlling shareholders share with minority shareholders the benefits of a change of control, by requiring that certain share acquisitions be made pursuant to a tender offer.
Article 199 bis of the Chilean Securities Market Law extends the obligation to make a tender offer for the remaining outstanding shares to any person, or group of persons with a joint performance agreement, that, as a consequence of the acquisition of shares, becomes the owner of two-thirds or more of the issued shares with voting rights of a corporation. Such tender offer must be effected within 30 days from the date of such acquisition.
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The Chilean Corporations Act provides shareholders with preemptive rights. The Act requires that options to purchase stock representing capital increases in corporations and debentures duly convertible into stock of the issuing corporation, or any other securities extending future rights over such stock, must be offered preferably, at least once, to existing shareholders, in proportion to the number of shares owned by them. A corporation must distribute any bonus stock in the same manner.
The Chilean Corporations Act also provides shareholders with the right to withdraw from a corporation in certain situations. Unless there is an ongoing bankruptcy proceeding, if a shareholders’ meeting approves any of the following matters, dissenting shareholders will be automatically entitled to withdraw from the corporation upon payment by the corporation of the market value of their shares:
· our transformation into a different type of legal entity;
· our merger with and/or into another company;
· the disposition of 50% or more of the corporate assets, whether or not liabilities are also transferred, to be determined according to the balance sheet of the previous fiscal year, or the proposal or amendment of any business plan that contemplates the transfer of assets exceeding said percentage; the disposition of 50% or more of the corporate assets of a subsidiary, which represents at least 20% of the assets of the corporation, as well as any disposition of shares which results in the parent company losing its status as controller;
· the granting of real or personal guarantees to secure third-party obligations exceeding 50% of the corporate assets, except when the third party is a subsidiary of the company (in which case approval of the board of directors will suffice);
· the creation of preferences for a series of shares or the increase, extension or reduction in the already existing ones. In this case, only dissenting shareholders of the affected series shall have the right to withdraw;
· curing certain formal defects in the corporate charter which otherwise would render it null and void or any modification of its bylaws that should grant this right; and
· other cases provided for by statute or in our bylaws, if any.
In addition, shareholders may withdraw if a person becomes the owner of two-thirds or more of the outstanding shares of the corporation as a consequence of a share acquisition and such person does not make a tender offer for the remaining shares within 30 days from the date of such acquisition.
Minority shareholders are also granted the right to withdraw when the controlling shareholder acquires more than 95% of the shares of an open-stockopen stock corporation.
Our bylaws do not provide for additional circumstances under which shareholders may withdraw.
Action necessary to change the rights of holders of stock. The rights of stockholders are established by law and pursuant to the bylaws of a corporation. For certain modifications of shareholders’ rights, the law requires a special majority, such as the creation, increase, extension, reduction or suppression of preferred stock, which may be adopted only with the consent of at least two-thirds of the affected series. Consequently any other impairment of rights not specifically regulated needs only an absolute majority (more than 50%) of the stock entitled to vote. However, the waiver of the shareholders’ right to receive no less than 30% of the net profits accrued in any fiscal year (the “minimum dividend”) requires the unanimous vote of all stockholders. The abovenotwithstanding,above notwithstanding, no decision of the shareholders’ meeting can deprive a shareholder of any part of the stock that he/she owns.
Our bylaws do not contemplate additional conditions in connection with matters described in this subsection.
Shareholders’ meetings. Our annual shareholders' meetings are to be held during the first four months of each year. During the meetings, determinations are made relating to particular matters, which matters may or may not be specifically indicated in the summons for such meeting.
The quorum for a shareholders' meeting is established by the presence, in person or by proxy, of shareholders representing at least an absolute majority of our issued voting stock; if a quorum is not present at the first meeting, the meeting can be reconvened and upon the meeting being reconvened, shareholders present at the reconvened meeting are deemed to constitute a quorum regardless of the percentage of the voting stock represented. In that case, decisions will be made by the absolute majority of stock with voting rights present or otherwise represented. The following matters are specifically reserved for annual meetings:
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· review of our state of affairs and of the reports of external auditors, and the approval or rejection of the annual report, balance sheet, financial statements and records submitted by our officers or liquidators;
· distribution of profits of the respective fiscal year, including the distribution of dividends;
· election or revocation of regular and alternate board members, liquidators and external auditors; and
· determination of the remuneration of the board members, directors committee remuneration and budget, designation of the newspaper where summons for meetings shall be published and, in general, any other matter to be dealt with by the annual meeting being of corporate interest and not specifically reserved to extraordinary shareholders' meetings.
Extraordinary shareholders' meetings may be held at any time, when required by corporate necessity. During extraordinary meetings, determinations are made relating to any matter which the law or the Company's bylaws reserve for consideration by such extraordinary meetings, which matters shall be expressly set forth in the relevant summons. When in an extraordinary shareholders' meeting determinations relating to matters specifically reserved to annual meetings must be made, the operation and decisions of such extraordinary meeting will follow the requirements applicable to annual meetings. The following matters, are specifically reserved for extraordinary meetings:
· dissolution of the corporation;
· transformation, merger or spin-off of the corporation and amendments to its bylaws;
· issuance of bonds or debentures convertible into stock;
· the disposition of 50% or more of the corporate assets, whether or not liabilities are also transferred, to be determined according to the balance sheet of the previous fiscal year, or the proposal or amendment of any business plan that contemplates the transfer of assets exceeding said percentage, the disposition of 50% or more of the corporate assets of a subsidiary, which represent at least 20% of the assets of the corporation, as well as any disposition of shares which results in the parent company losing its status of controlling shareholder; and
· guarantees of third parties' obligations, except when these third parties are subsidiary companies (in which case approval of the board of directors will suffice).
In addition to the above, annual and extraordinary shareholders' meetings must be called by the board of directors in the following circumstances:
· when requested by shareholders representing at least 10% of issued stock with voting rights regarding closedclosely held corporations; and
· when required by the SVS,CMF, notwithstanding its right to call such meeting directly.
Only holders of stock recorded in the Register of Shareholders of open-stockopen stock corporations at midnight of the fifth business day, including Saturdays, before the date of the pertinent meeting may participate with the right to be heard and vote in shareholders' meetings. Directors and officers other than shareholders may participate in shareholders' meetings with the right to be heard.
Shareholders may be represented at meetings by other individuals, regardless of whether or not those persons are shareholders themselves. A proxy must be conferred in writing, and for the total number of shares held by the shareholder and entitled to vote in accordance with the previous paragraph.
Limitations on the right to own securities. The right to own any kind of property is guaranteed by the Chilean Constitution, and the Chilean Corporations Act does not contain any general limitation regarding the right to own securities. There are, however, certain limitations on the right of foreigners to own securities of Chilean corporations, but only for certain special types of companies. We are not affected by these limitations, and our bylaws do not contain limitations or restrictions in this regard.
Article 14 of the Chilean Corporations Act forbids open stock corporations from including in their bylaws any provisions restricting the free transferability of stock. However, shareholders may enter into a private agreement on this matter, but, in order for these agreements to be effective against the company and third parties, they must be recorded by the corporation and thus made available to any interested third parties. See “Item 6: Directors, Senior Management and Employees – A. Directors and Senior Management.”Management”.
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Takeover defenses. Our bylaws do not contain any provisions that would have the effect of delaying, deferring or preventing a change in control of us and that would operate only with respect to a merger, acquisition or corporate restructuring involving us (or any of our subsidiaries). See “Item 10: Additional Information – B. Memorandum and Articles of Association – Rights, preferences and restrictions regarding shares”.
Ownership threshold. Our bylaws do not contain any ownership threshold above which shareholder ownership must be disclosed. For a description of the ownership thresholds mandated by Chilean law, see “– Rights, preferences and restrictions regarding shares” above. See “Item 10: Additional Information – B. Memorandum and Articles of Association – Rights, preferences and restrictions regarding shares”.
Our bylaws do not impose any conditions that are more stringent than those required by law for effecting changes in our capital.
General Legislation and Regulations. The Central Bank of Chile is responsible for, among other things, monetary policies and exchange controls in Chile. See “Item 3. Key Information – Selected Financial Data – Exchange Rates.”Rates”. Foreign investments can be registered with the Central Bank of Chile under Chapter XIV of the Central Bank Foreign Exchange Regulations, which regulates foreign exchange transactions, including access to the Formal Exchange Market. Pursuant to Law N° 20,780, on June 25, 2015 Law N° 20,848 was enacted, replacing Decree Law N° 600 of 1974 and establishing a new statute for direct foreign investments (henceforth, the "New Statute for Foreign Investment"). The New Statute for Foreign Direct Investments went into effect as of January 1, 2016. Foreign investors in companies that maintain a valid foreign investment agreement with the Government of Chile pursuant to the regulations of Decree Law N° 600 will fully retain the rights and obligations set forth in said agreements, provided that the agreements were executed prior to January 1, 2016. The New Statute for Foreign Investment does not grant investors eligibility for a tax invariability regime, which was granted to them by Decree Law N° 600. However, a transitory 4 four-year system has been established, under which foreign investors may request foreign investmentauthorizationsinvestment authorizations via the execution of agreements with the Government of Chile, albeit subject to a total income tax rate of 44.5%.
Effective April 19, 2001, the Central Bank of Chile abrogated the then existing Chapter XXVI of the Central Bank Foreign Exchange Regulations (“Chapter XXVI”), which addressed issuance of ADSs by a Chilean company, and issued an entirely new set of Foreign Exchange Regulations (the “April 19th Regulations”), virtually eliminating all the restrictions and limitations that had been in force up to that date. The April 19th Regulations were based upon the general principle that foreign exchange transactions can be made freely in Chile by any person, notwithstanding the power conferred by law to the Central Bank of Chile of imposing certain restrictions and limitations to such transactions.
With the issuance of the April 19th Regulations, the approval by the Central Bank of Chile required for access to the Formal Exchange Market was replaced with the requirement of reporting of the relevant transactions to the Central Bank of Chile. However, some foreign exchange transactions, notably foreign loans, capital investment or deposits, continued to be subject to the requirement of being effected through the Formal Exchange Market. The April 19th Regulations reduced the time needed to effect foreign exchange transactions by foreign investors in Chile.
According to the April 19th Regulations, foreign exchange transactions performed before April 19, 2001, remained subject to the regulations in effect at the time of the transactions (i.e. Chapter XXVI), unless the interested parties elected the applicability of the April 19th19th Regulations, thereby expressly waiving the applicability of the regulations in force at the time of the execution of the respective transaction.
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On January 23, 2002, the Central Bank of Chile issued an entirely new set of Foreign Exchange Regulations, effective March 1, 2002, replacing the April 19th Regulations (the “New Rules”). The New Rules preserve the general principle established in the April 19th Regulations of freedom in foreign exchange transactions, simplified procedures to reduce the time needed to materialize foreign exchange transactions by foreign investors in Chile, and introduced several new provisions.
Pursuant to the New Rules, Chilean entities are allowed, under Chapter XIV, which governs credits, deposits, investments and capital contribution from abroad, to: (i) dispose of such foreign currency allocated abroad, executing any of the transactions contemplated in Chapter XIV, without the need of delivering it into Chile, subject to the obligation of reporting said transaction to the Central Bank of Chile; and (ii) capitalize any liability expressed in foreign currency and acquired abroad.
According to the New Rules, section 7 of Chapter XIV, duly in force, states that foreign exchange transactions made pursuant to Chapter XIV, executed before April 19, 2001, were to continue to be subject to the regulations in effect at the time of the transactions, unless the interested parties elect the applicability of the New Rules, expressly waiving the applicability of the provisions which would otherwise govern them.
In connection with our initial public offering of ADSs, we entered into a foreign investment contract (the “Foreign Investment Contract”) with the Chilean Central Bank and the Depositary, pursuant to Article 47 of the Central Bank Act and former Chapter XXVI. Absent the Foreign Investment Contract, under Chilean exchange controls in force until April 19, 2001, investors would not have been granted access to the Formal Exchange Market for the purpose of converting Chilean pesosCLP to U.S. dollarsUSD and repatriating from Chile amounts received in respect of, among other things, deposited Shares or Shares withdrawn from deposit on surrender of ADRs (including amounts received as cash dividends and proceeds from the sale in Chile of the underlying Shares and any rights with respect thereto).
Notwithstanding the April 19th Regulations and the New Rules, Chapter XXVI remained in effect with respect to our ADR facility. On March 3, 2014, we, the Central Bank of Chile and the Depositary executed an agreement that terminated the Foreign Investment Contract. Consequently, the special exchange regime established under Chapter XXVI is no longer applicable. The Deposit Agreement, therefore, and the Company’s ADR program became subject to the exchange regulations of general applicability of Chapter XIV or such new regulations that may be issued in the future.
The ADS facility is currently governed by Chapter XIV on “Regulations applicable to Credits, Deposits, Investments and Capital Contributions from Abroad”. According to Chapter XIV number 2.3, the establishment of an ADS facility is regarded as an ordinary foreign investment, subject to the above mentioned limitations, and it is not necessary to seek the Central Bank’s prior approval in order to establish an ADS facility. The establishment of an ADS facility only requires that the Central Bank be informed of the transaction, and that the transactions thereunder be conducted through the Formal Exchange Market.
Investment in Our Shares and ADSs
Investments made in shares of our common stock are subject to the following requirements:
AnyAccording to Chapter XIV of the Central Bank Foreign Exchange Regulations Information Procedures and Forms Manual (hereinafter the “Manual”), any foreign investor acquiring shares of our common stock who brought funds into Chile for that purpose must bring those funds through an entity participating in the Formal Exchange Market; any foreign investor acquiring shares of our common stock to be deposited and converted into ADSs who brought funds into Chile for that purpose must bring those funds through an entity participating in the Formal Exchange Market; in both cases, the entity of the Formal Exchange Market through which the funds are brought into Chile must report such investment to the Central Bank;Bank following the instructions detailed in Chapter I of the Manual; all remittances of funds from Chile to the foreign investor upon the sale of the acquired shares of our common stock or from dividends or other distributions made in connection therewith must be made through the Formal Exchange Market; all remittances of funds from Chile to the foreign investor upon the sale of shares underlying ADSs (after conversion is implemented through the depositary) or from dividends or other distributions made in connection therewith must be made through the Formal Exchange Market; and
all remittances of funds made to the foreign investor must be reported to the Central Bank by the intervening entity of the Formal Exchange Market.
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When funds are brought into Chile for a purpose other than to acquire shares for subsequent deposit and eventual conversion into ADSs and subsequently such funds are used to acquire shares to be deposited and converted into ADSs, such investment must be reported to the Central Bank by the foreign investor (or its custodian in Chile) within ten days following the end of each month.month, using Appendix 3 of the Manual as detailed on its Chapter XIV number 6.
When funds to acquire shares of our common stock or to acquire shares for subsequent deposit and eventual conversion into ADSs are received by us abroad (i.e., outside of Chile), such investment must be reported to the Central Bank directly by the foreign investor within ten days following the end of the month in which the investment was made.made, according to number 2.2 of Chapter XIV of the Manual, using its Appendix N° 4.
When funds to acquire shares of our common stock or to acquire shares for subsequent deposit and eventual conversion into ADSs are received by us in Chile, such investment must be reported to the Central Bank directly by an entity participating in the Formal Exchange Market on the day the investment is made.made, according to number 1.2 of Chapter XIV of the Manual.
All payments in foreign currency in connection with our shares of common stock or ADSs made from Chile through the Formal Exchange Market must be reported to the Central Bank by the entity participating in the transaction.transaction, according to number 4 of Chapter XIV of the Manual. In the event there are payments made with foreign currency originating outside of Chile, the foreign investor must provide the relevant information to the Central Bank directly within the first ten calendar days of the month following the date on which the payment was made.made, according to number 5 of Chapter XIV of the Manual.
There can be no assurance that additional Chilean restrictions applicable to the holders of shares of our common stock or ADSs, the disposition of shares of our common stock underlying ADSs or the conversion or repatriation of the proceeds from such disposition will not be imposed in the future, nor can we assess the duration or impact of such restrictions if imposed.
This summary does not purport to be complete and is qualified by reference to Chapter XIV of the Central Bank Foreign Exchange Regulations, a copy of which is available in Spanish and English versions at the Central Bank’s website atwww.bcentral.cl.
Chilean Tax Considerations
The following discussion is based on certain Chilean income tax laws presently in effect, including Rulings N°324 of January 29, 1990, and N°3,708 of October 1, 1999 of the Chilean Internal Revenue Service and other applicable regulations and rulings. The discussion summarizes the principal Chilean income tax consequences of an investment in the ADSs or shares of common stock by an individual who is not domiciled in or a resident of Chile or a legal entity that is not organized under the laws of Chile and does not have a permanent establishment located in Chile which we refer to as a foreign holder. For purposes of Chilean law, an individual holder is a resident of Chile if he or she has resided in Chile for more than six consecutive months in one calendar year or for a total of more than six months whether consecutive or not, in two consecutive tax years. An individual holder is domiciled in Chile if he or she resides in Chile with the purpose of staying in Chile (such purpose to be evidenced by circumstances such as the acceptance of employment within Chile or the relocation of his or her family to Chile). This discussion is not intended as tax advice to any particular investor, which can be rendered only in light of that investor’s particular tax situation. Neither is it intended to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase, own or dispose of shares or ADSs and does address all of the tax consequences that may be relevant to specific holders in light of their particular circumstances. Holders of shares and ADSs are advised to consult their own tax advisors concerning the Chilean or other tax consequences relating to the ownership of shares or ADSs.
Under Chilean law, provisions contained in statutes such as tax rates applicable to foreign holders, the computation of taxable income for Chilean purposes and the manner in which Chilean taxes are imposed and collected may be amended only by another statute. In addition, the Chilean tax authorities issue rulings and regulationsandregulations of either general or specific application interpreting the provisions of Chilean tax law. Chilean taxes may not be assessed retroactively against taxpayers who act in good faith relying on such rulings and regulations, but Chilean tax authorities may changemodify said rulings and regulations prospectively. There is a general income tax treaty signed by Chile and the United States, but it is not in force (Congress approval is required).
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Cash dividends and Other Distributions. Cash dividends paid by us with respect to the ADSs or shares of common stock held by a foreign holder will be subject to a 35.0% withholding tax, which is withheld and paid by us (the “Chilean Withholding Tax”). A credit against the Chilean Withholding Tax is available based on the level of corporate income tax, or first category tax, actually paid by us on the taxable income to which the dividend is imputed; however, this credit does not reduce the Chilean Withholding Tax on a one-for-one basis because it also increases the base on which the Chilean Withholding Tax is imposed. In addition, distribution of book income in excess of retained taxable income is subjectThe modifications incorporated to the Chilean Withholding Tax, but such distribution does not have a related credit. Under Chilean income tax law for purposes of determining the level of the first category tax that has been paid by us, dividends generally are assumed to have been paid out of our oldest retained taxable profits. EnactedAct N° 20,780 enacted onSeptember 29, 2014, Act No. 20,780 providesand Act. N° 20,899 enacted on February 1st, 2016,provide for the "Partially Integrated System"System” for corporate tax, implementing a gradual increase in the First Category Income tax rate, going from 20% to 21% for the 2014 business year, to 22.5% for the 2015 business year, to 24% for the 2016 business year, to 25.5% for the 2017 businesstax year and to 27% starting the 2018 businesstax year. Whether the first category
The corporate income tax is imposeda credit for shareholders resident or not,domiciled in countries that have a Convention for the Avoidance of Double Taxation in force with Chile that are the effective overall combined ratebeneficiaries of Chilean taxes imposedthe dividends. This benefit is extended to countries that have signed a Convention for the Avoidance of Double Taxation with respect to our distributed profits would be 35.0%. Nevertheless, inChile before January 1, 2019, even if the Convention has not yet entered into force until December 31, 2021 as a limit. This is the case thatfor the retained taxable profits or exempted profits asUnited States of December 31America.
For other no resident shareholders, the credit for the corporate tax paid on such income may be used with a limit of 65% of its amount. In these cases, the year preceding a dividend are not sufficient to attribute to such dividend, we will make a withholding of 35.0% of theamount that exceeds those retained taxable or exempted profits. In case such withholding is determined to be excessive before the end of the year, thereeffective rate will be rights to file for the reimbursement of the excess withholding.44.45% from 2018 thereafter.
The foregoing tax consequences apply to cash dividends paid by us. Dividend distributions made in property (other than shares of common stock) will be subject to the same Chilean tax rules as cash dividends.
Capital Gains. Gain realized on the sale, exchange or other disposition by a foreign holder of ADSs (or ADRs evidencing ADSs) will not be subject to Chilean taxation, provided that such disposition occurs outside Chile or that it is performed under the rules of Title XXIV of the Chilean Securities Market Law, as amended by Law N° 19,601, dated January 18, 1999. The deposit and withdrawal of shares of common stock in exchange for ADRs will not be subject to any Chilean taxes.taxes, according to Rulings N° 1,705 of May 15, 2006 and N° 2,144 of October 3, 2013.
Gain recognized on aFrom January 1, 2017, gains obtained from the sale or exchange of shares of common stock (as( as distinguished from sales or exchanges of ADSs representing such shares of common stock) by a foreign holder will be subject to both the first category tax and the Chilean Withholding Tax (the former being creditable against the latter) if (1) the foreign holder has held such shares of common stock for less than one year since exchanging ADSs for the shares of Common Stock, (2) the foreign holder acquired and disposed, according to new Article 17 N° 8 of the sharesChilean Income Tax Law, effective as of common stock inJanuary 1,2017. The taxation with the ordinary coursealternative regime of its business or as a regular trader of stock or (3) the sale is made to a company in which the foreign holder holds an interest (10.0% or more of the shares in the case of open stock corporations). In all other cases, gain on the disposition of shares of common stock will be subject only to the first category tax levied as a sole tax. However, if it is impossible to determine the taxable capital gain, a 5.0% withholding will be imposed on the total amount to be remitted abroad without any deductions as a provisional payment of the total tax due.was derogated since December 31st, 2016.
The tax basis of shares of common stock received in exchange for ADSs will be the acquisition value of such shares. The valuation procedure set forth in the deposit agreement, which has been analyzed by the Chilean Internal Revenue Service pursuant to Ruling Nº 324 of 1990, values shares of common stock that are being exchanged at the highest price at which they trade on the Santiago Stock Exchange on the date of the exchange, generally will determine the acquisition value for this purpose. Consequently, the conversion of ADSs into shares of common stock and sale of such shares of common stock for the value established under the deposit agreement will not generate a capital gain subject to taxation in Chile. Ruling N° 324 of 1990 specifically analyzes the tax regime applicable to share transactions held with foreign investors through ADRs.
In the case where the sale of the shares is made on a day that is different from the date in which the exchange is recorded, capital gains subject to taxation in Chile may be generated. However, following Ruling N° 3708 of 1999 of the Chilean Internal Revenue Service, we will include in the deposit agreement a provision whereby the capital gain that may be generated if the exchange date is different from the date in which the shares received in exchange for ADSs are sold, will not be subject to taxation. Such provision states that in the event that the exchanged shares are sold by the ADS holders in a Chilean stock exchange on the same day in which the exchange is recorded in the shareholders’ registry of the issuer or within two business days prior to the date on whichonwhich the sale is recorded in the shareholders’ registry, the acquisition price of such exchanged shares shall be the price registered in the invoice issued by the stock broker that participated in the sale transaction.
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The exercise of preemptive rights relating to the shares of common stock will not be subject to Chilean taxation. Amounts received for the assignment of preemptive rights relating to the shares will be subject to both the first category tax and the Chilean Withholding Tax (the former being creditable against the latter to the extent described above).
Given the amendments made to the Chilean Tax Legislation which is fully enforced from 2017, please bear in mind that the tax treatment just mentioned regarding the ADR could be subject to future modifications, considering that the current tax treatment of ADR is supported in Chilean Internal Revenue Service rulings mentioned above, taking into account the new regulation of the taxation in indirect transfer of assets.
The Chilean Internal Revenue Service has not enacted any rule nor issued any ruling about the applicability of the norms explained below (referred to as Laws Nº 19,738 and Nº 19,768) to the foreign holders of ADRs.
To the extent that our shares are actively traded on a Chilean stock exchange, foreign institutional investors who acquire our shares may benefit from a tax exemption included in an amendment to the Chilean Income Tax Law, Law Nº 19,738 published on June 19, 2001, as amended by Law Nº 20,448 published on August 13, 2010. The amendment established an exemption for the payment of income tax by foreign institutional investors, such as mutual funds, pension funds and others, that obtain capital gains in the sales through a Chilean stock exchange, a tender offer or any other system authorized by the SVS,CMF, of shares of publicly traded corporations that are significantly traded in stock exchanges.
A foreign institutional investor is an entity that is either:
In order to be entitled to the exemption, foreign institutional investors, during the time in which they operate in Chile must:
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It is important to take into account that Article 106 of the Chilean Income Tax Law that contains the mentioned exemption was abrogated by Act N° 20,712 enacted on December 24, 2013. Transitional Article 5 of Act N° 20,712 indicate that the funds regulated by Law N° 18,657 will maintain the applicable tax regime of Article 106, allowing the distribution of profits established in Article 106, as long as they do not transform into one of the funds created by Act. N° 20,712.
In addition, Transitory Article 9 of Act N° 20,712 allows institutional foreign investors who have acquired securities as referred to in Article 107 of the Income Tax Law prior to January 1, 2017, to enjoy, in the subsequent disposal of these securities, the exemption established in Article 106, provided that during its operation in the country and the moment of acquisition and disposal of said securities comply with the requirements established in Article 106.
Pursuant to the enacted amendment to the Chilean Income Tax Law published on November 7, 2001 (Law N° 19,768) as amended by Law Nº 19,801 published on April 25, 2002, as amended by Law Nº 20,448 published on August 13, 2010, the sale and disposition of shares of Chilean public corporations which are actively traded on a Chilean stock exchange is not levied by any Chilean tax on capital gains if the sale or disposition was made:
Other Chilean Taxes. No Chilean inheritance, gift or succession taxes apply to the transfer or disposition of the ADSs by a foreign holder but such taxes generally will apply to the transfer at death or by a gift of shares of common stock by a foreign holder. No Chilean stamp, issue, registration or similar taxes or duties apply to foreign holders of ADSs or shares of common stock.
Withholding Tax Certificates. Upon request, we will provide to foreign holders appropriate documentation evidencing the payment of the Chilean Withholding Tax. We will also inform when the withholding was excessive in order to allow the filing for the reimbursement of taxes.
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United States Federal Income Tax Considerations
The following discussion summarizes the principal U.S. federal income tax considerations relating to the acquisition, ownership and disposition of Common Stockcommon stock or ADSs by a U.S. holder (as defined below) holding such Common Stockcommon stock or ADSs as capital assets for U.S. federal income tax purposes (generally, property held for investment). This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations, administrative pronouncements of the U.S. Internal Revenue Service (the “IRS”) and judicial decisions, all as in effect on the date hereof, and all of which are subject to change (possibly with retroactive effect) and to differing interpretations. This summary does not describe any implications under U.S. state, local or non-U.S. tax law, or any aspect of U.S. federal tax law (such as the estate tax, gift tax, the alternative minimum tax or the Medicare tax on net investment income) other than U.S. federal income taxation.
This summary does not purport to address all the material U.S. federal income tax consequences that may be relevant to the U.S. holders of the Common Stockcommon stock or ADSs, and does not take into account the specific circumstances of any particular investors, some of which (such as tax-exempt entities, banks or other financial institutions, insurance companies, dealers in securities or currencies, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, regulated investment companies, real-estate investment trusts, partnerships and other pass-through entities, U.S. expatriates, investors that own or are treated as owning 10% or more of our voting stock by either vote or value, certain taxpayers who file applicable financial statements required to recognize income for U.S. federal income tax purposes no later than when the associated revenue is reflected on such financial statements, investors that hold the Common Stockcommon stock or ADSs as part of a straddle, hedge, conversion or constructive sale transaction or other integrated transaction and persons whose functional currency is not the U.S. dollar) may be subject to special tax rules.
As used below, a “U.S. holder” is a beneficial owner of Common Stockcommon stock or ADSs that is, for U.S. federal income tax purposes:
· an individual citizen or resident of the United States;
· a corporation (or an entity taxable as a corporation) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;
· an estate, the income of which is subject to U.S. federal income tax regardless of its source; or
· a trust if (A) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust or (B) the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person.
If a partnership or other entity taxable as a partnership holds Common Stockcommon stock or ADSs, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partners of partnerships holding Common Stockcommon stock or ADSs should consult their tax advisors.
In general, for U.S. federal income tax purposes, holders of ADRs evidencing ADSs will be treated as the beneficial owners of the Common Stockcommon stock represented by those ADSs.
Taxation of Distributions
Since January 1st, 2017, we are subject to Chile’s Partially Integrated System, which may affect the U.S. federal income tax treatment of distributions on our common stock or ADSs. See “Item 10, Additional Information—E. Taxation—Chilean Tax Considerations—Cash dividends and Other Distributions” above. In general, distributions with respect to the Common Stockcommon stock or ADSs will, to the extent made from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, constitute dividends for U.S. federal income tax purposes. If a distribution exceeds the amount of our current and accumulated earnings and profits, as so determined under U.S. federal income tax principles, the excess will be treated first as a non-taxable return of capital to the extent of the U.S. holder’s tax basis in the Common Stockcommon stock or ADSs, and thereafter as capital gain. We do not intend to maintain calculations of our earnings and profits under U.S. federal income tax principles and, unless and until such calculations are made, U.S. holders should assume all distributions aremade out of earnings and profits and constitute dividend income. As used below, the term “dividend” means a distribution that constitutes a dividend for U.S. federal income tax purposes.
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The gross amount of any dividends (including amounts withheld in respect of Chilean taxes) paid with respect to the Common Stockcommon stock or ADSs generally will be subject to U.S. federal income taxation as ordinary income and will not be eligible for the dividends received deduction allowed to corporations.U.S.corporations. Dividends paid in Chilean currency will be included in the gross income of a U.S. holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date the dividends are actually or constructively received by the U.S. holder, or in the case of dividends received in respect of ADSs, on the date the dividends are actually or constructively received by the depositary or its agent, whether or not converted into U.S. dollars. A U.S. holder will have a tax basis in any distributed Chilean currency equal to its U.S. dollar amount on the date of receipt by the U.S. holder or disposition, as the case may be, and any gain or loss recognized upon a subsequent disposition of such Chilean currency generally will be foreign currency gain or loss that is treated as U.S. source ordinary income or loss. If dividends paid in Chilean currency are converted into U.S. dollars on the day they are received by the U.S. holder, the depositary or its agent, as the case may be, U.S. holders generally should not be required to recognize foreign currency gain or loss in respect of the dividend income. U.S. holders should consult their own tax advisors regarding the treatment of any foreign currency gain or loss if any Chilean currency received by the U.S. holder or the depositary or its agent is not converted into U.S. dollars on the date of receipt.
Under current law, the U.S. dollar amount of dividends by an individual with respect to the ADSs will be subject to taxation at a maximumreduced rate of 20% if the dividends represent “qualified dividend income.”income”. Dividends paid on the ADSs will be treated as qualified dividend income if (i) the ADSs are readily tradable on an established securities market in the United States, (ii) the U.S. holder meets the holding period requirement for the ADSs (generally more than 60 days during the 121-day period that begins 60 days before the ex-dividend date), and (iii) we were not in the year prior to the year in which the dividend was paid, and are not in the year in which the dividend is paid, a passiveforeignpassive foreign investment company (“PFIC”). The ADSs are listed on the New York Stock Exchange, and should qualify as readily tradable on an established securities market in the United States so long as they are so listed. However, no assurances can be given that the ADSs will be or remain readily tradable. Based on our audited financial statements as well as relevant market and shareholder data, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to our 20152017 taxable year. In addition, based on our audited financial statements and current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not anticipate becoming a PFIC for our 20162018 taxable year. Because these determinations are based on the nature of our income and assets from time to time, and involve the application of complex tax rules, no assurances can be provided that we will not be considered a PFIC for the current (or any past or future) tax year.
Based on existing guidance, it is not entirely clear whether dividends received with respect to the Common Stockshares of common stock (to the extent not represented by ADSs) will be treated as qualified dividend income, because the Common Stockcommon stock are not themselves listed on a U.S. exchange. In addition, the U.S. Treasury Department has announced its intention to promulgate rules pursuant to which holders of ADSs or preferred stock and intermediaries through whom such securities are held will be permitted to rely on certifications from issuers to establish that dividends are treated as qualified dividends. Because such procedures have not yet been issued, we are not certain that we will be able to comply with them. U.S. Holdersholders of ADSs and Common Stockcommon stock should consult their own tax advisors regarding the availability of the reduced dividend tax rate in the light of their own particular circumstances.
Dividends paid by us generally will constitute foreign source “passive category” income and will be subject to various other limitations for U.S. foreign tax credit purposes. Subject to generally applicable limitations under U.S. federal income tax law, Chilean income tax imposed or withheld on such dividends, ifreduced by the credit for any first category tax, as described above under “Item 10, Additional Information—E. Taxation—Chilean Tax Considerations—Cash dividends and Other Distributions”, generally will be treated as a foreign income tax eligible for credit against a U.S. holder’s U.S. federal income tax liability (or at a U.S. holder’s election if it does not elect to claim a foreign tax credit for any foreign income taxes paid during the taxable year, all foreign income taxes paid may instead be deducted in computing such U.S. holder’s taxable income). In general, special rules will apply to the calculation of foreign tax credits in respect of dividend income that is subject to preferential rates of U.S. federal income tax.
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U.S. holders should be aware that the IRS has expressed concern that parties to whom ADSs are released may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. holders of ADSs. Accordingly, the discussion above regarding the creditability of Chilean income tax on dividends could be affected by future actions that may be taken by the IRS. The rules with respect to the U.S. foreign tax credit are complex, and U.S. holders of Common Stockcommon stock or ADSs are urged to consult their own tax advisors regarding the availability of the foreign tax credit under their particular circumstances.
Taxation of Capital Gains
Deposits and withdrawals of Common Stockcommon stock by U.S. holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes.
In general, gain or loss, if any, realized by a U.S. holder upon a sale, exchange or other taxable disposition of Common Stockcommon stock or ADSs will be subject to U.S. federal income taxation as capital gain or loss in an amount equal to the difference between the amount realized on the sale, exchange or other taxable disposition and such U.S. holder’s adjusted tax basis in the Common Stockcommon stock or ADSs. Such capital gain or loss will be long-term capital gain or loss if at the time of sale, exchange or other taxable disposition the Common Stockcommon stock or ADSs have been held for more than one year. Under current U.S. federal income tax law, net long-term capital gain of certain U.S. holders (including individuals) is eligible for taxation at preferential rates. The deductibility of capital losses is subject to certain limitations under the Code.
Gain, if any, realized by a U.S. holder on the sale, exchange or other taxable disposition of Common Stockcommon stock or ADSs generally will be treated as U.S. source gain for U.S. foreign tax credit purposes. Consequently, if a Chilean income tax is imposed on the sale or disposition of Common Stock,common stock, a U.S. holder that does not receive sufficient foreign source income from other sources may not be able to derive effective U.S. foreign tax credit benefits in respect of such Chilean income tax. Alternatively, a U.S. holder may take a deduction for all foreign income taxes paid during the taxable year if it does not elect to claim a foreign tax credit for any foreign taxes paid or accrued during the taxable year. U.S. holders should consult their own tax advisors regarding the application of the foreign tax credit rules to their investment in, and disposition of, Common Stockcommon stock or ADSs.
Passive Foreign Investment Company Rules
In general, a foreign corporation is a PFIC with respect to a U.S. holder if, for any taxable year in which the U.S. holder holds stock in the foreign corporation, at least 75% of the foreign corporation’s gross income is passive income or at least 50% of the value of its assets (determined on the basis of a quarterly average) produce passive income or are held for the production of passive income. For this purpose, passive income generally includes, among other things, dividends, interest, rents, royalties and gains from the disposition of investment assets (subject to various exceptions). Based upon our current and projected income, assets and activities, we do not expect the Common Stockcommon stock or ADSs to be considered shares of a PFIC for our current fiscal year or for future fiscal years. However, because the determination of whether the Common Stockcommon stock or ADSs constitute shares of a PFIC will be based upon the composition of our income, assets and the nature of our business, as well as the income, assets and business of entities in which we hold at least a 25% interest, from time to time, and because there are uncertainties in the application of the relevant rules, there can be no assurance that the Common Stockcommon stock or ADSs will not be considered shares of a PFIC for any fiscal year. If the Common Stockcommon stock or ADSs were shares of a PFIC for any fiscal year, U.S. holders (including certain indirect U.S. holders) may be subject to adverse tax consequences, including the possible imposition of an interest charge on gains or “excess distributions” allocable to prior years in the U.S. holder’s holding period during which we were determined to be a PFIC, unless such U.S. holder makes an election to be taxed currently on its pro rata portion of our income, whether or not such income is distributed in the form of dividends, or otherwise makes a “mark-to-market” election with respect to the Common Stockcommon stock or ADSs as permitted by the Code. If we are deemed to be a PFIC for a taxable year, dividends on our Common Stockcommon stock or ADSs would not be “qualified dividend income” eligible for preferential rates of U.S. federal income taxation.
A U.S. Holderholder who owns Common Stockcommon stock or ADSs during any taxable year that we are a PFIC in excess of certainde minimis amounts and fails to qualify for certain other exemptions would be required to file IRS Form 8621. In addition, under certain circumstances, the temporary regulations also require a “United States person” (as such term is defined under the Code) that owns an interest in a PFIC as an indirect shareholder through one or more United States persons to file Form 8621 for any taxable year during which such indirect shareholder is treated as receiving an excess distribution in connection with the ownership or disposition of such interest, or reportsorreports income pursuant to mark-to-market election. U.S. holders should consult their own tax advisors regarding the application of the PFIC rules to the Common Stockcommon stock or ADSs.
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U.S. Information Reporting and Backup Withholding
A U.S. holder of Common Stockcommon stock or ADSs may, under certain circumstances, be subject to information reporting and backup withholding with respect to certain payments to such U.S. holder, such as dividends paid by our companyCompany or the proceeds of a sale, exchange or other taxable disposition of Common Stockcommon stock or ADSs, unless such U.S. holder (i) is an exempt recipient and demonstrates this fact when so required, or (ii) in the case of backup withholding, provides a correct taxpayer identification number, certifies that it is a U.S. person and that it is not subject to backup withholding, and otherwise complies with applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. Any amount withheld under these rules will becreditablebe creditable against a U.S. holder’s U.S. federal income tax liability, provided the requisite information is timely furnished to the IRS.
“Specified Foreign Financial Asset” Reporting
Owners of “specified foreign financial assets” with an aggregate value in excess of US$USD 50,000 (and in some circumstances, a higher threshold), may be required to file an information report with respect to such assets with their U.S. federal income tax returns. “Specified foreign financial assets” generally include any financial accounts maintained by foreign financial institutions as well as any of the following, but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S. persons, (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties and (iii) interests in foreign entities.
Prospective purchasers should consult their own tax advisors regarding the application of the U.S. federal income tax laws to their particular situations as well as any additional tax consequences resulting from purchasing, holding or disposing of Common Stockcommon stock or ADSs, including the applicability and effect of the tax laws of any state, local or foreign jurisdiction, including estate, gift, and inheritance laws.
Not applicable.
Not applicable.
We are subject to the informational requirements of the Exchange Act. In accordance with these requirements, we file annual reports and submit other information to the United States Securities and Exchange Commission (the “SEC”). These materials, including this Form 20-F and the exhibits thereto, may be inspected and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC in the United States at 1-800-SEC-0330. The SEC also maintains a website at http://www.sec.gov/ that contains reports, proxy statements and other information regarding registrants that file electronically with the SEC. Form 20-F reports and the other information submitted by us to the SEC may be accessed through this website. Additionally, the documents concerning us, which are referred to in this annual report, may be inspected at our principal offices at Vitacura 2670, Twenty Third23rd Floor, Santiago, Chile.
I.Subsidiary Information
Not applicable.
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ITEM 11: Quantitative and Qualitative Disclosures about Market Risk
The following discussion about our risk management activities includes “forward-looking statements” that involve risk and uncertainties. Actual results could differ materially from those projected in the forward-looking statements.
We face primary market risk exposures in three categories: interest rate fluctuations, exchange rate fluctuations and commodity price fluctuations. We periodically review our exposure to the three principal sources of risk described above and determine at our senior-management level how to minimize the impact on our operations of commodity price, foreign exchange and interest rate changes. As part of this review process, we periodically evaluate opportunities to enter into hedging mechanisms to mitigate such risks.
The market risk sensitive instruments referred to below are entered into only for purposes of hedging our risks and are not used for trading purposes.
A.Qualitative Information About Market Risk
Interest Rate Risk
As of December 31, 2015,2018, we had a total of CLP 15,940 and CLP 4,2668,576 million in debt indexed to London InterBank Offered Rate (“LIBOR”) and Buenos Aires Deposits of Large Amount Rate (“BADLAR”), respectivelyvariable interest rates (CLP 13,6916,561 million indexed to LIBOR as of December 31, 2014)2017). Consequently, as of December 31, 2015,2018, our financing structure consisted (without taking into account the cross currency interest rate swaps and cross interest rate swaps effects) of 12% (7%3% (3% as of December 31, 2014)2017) of debt with variable interest rates, and 88% (93%97% (97% as of December 31, 2014)2017) of debt with fixed interest rates.
To manage the interest rate risk, we have an interest rate administration policy that intends to reduce the volatility of our financial expenses, and to maintain an ideal percentage of our debt in fixed interest rate instruments. The financial position is mainly set by the use of short-term and long-term debt, as well as derivative instruments such as cross currency interest rate swaps and cross interest rate swaps.
As of December 31, 2015,2018, after considering the effect of cross currency interest rate swaps and cross interest rate swaps, 97% (100% in 2014)99.8% (99% as of December 31, 2017) of our debt had fixed interest rates.
The terms and conditions of the Company’s obligations as of December 31, 2015,2018, including exchange rates, interest rates, maturities and effective interest rates are detailed in Note 2721 to our audited consolidated financial statements included elsewhere in this Form 20-F.annual report.
Commodity and Raw Material Price Sensitivity
The principal commodity price sensitivityrisk faced by us relate to fluctuations in: 1) prices and supply of barley, malt and cans, which we use for the production of beer, 2) prices of concentrates, sugar and plastic resin, which we use for the production and packaging of soft drinks, and 3) prices of bulk wine and grapes, which we use for the manufacturing of wine and spirits.
Barley, malt and cans. In Chile, we obtain our supply of barley (until 2016) and malt from local producers and in the international market. Long-term supply agreements are entered into with local producers, where the barley price is set annually according to the market price, which is used to determine the malt price as per the agreements’ algorithms. The purchases and commitments expose the Company to risk regarding the fluctuation of commodity prices.
During 2015,2018, we purchased 53,89073,498 tons of malt (37,315(68,000 tons in 2014)2017) and 46,620 tons ofdid not purchase barley (52,720 tons in 2014). In2018 and 2017. CCU Argentina we acquireacquires malt onlymainly from local sources.producers. Such raw materials represent approximately 9% (12%5% (6% in 20142017 and 2013)7% in 2016) of the direct cost for the Chile Operating segment.
Of the cost of Chile Operating segment, the cost of cans represents approximately 12% of the direct cost (12% in 20142017 and 16%15% in 2013). Meanwhile2016), whereas in the International Business Operating segment, the cost of cans cost represent approximately 30%38% of the direct cost of raw materials in 2015 (20%2018 (33% in 20142017 and 22%34% in 2013)2016). See “Item 4:Information on the Company – B. Business Overview – 5. Raw Materials andother Supplies”. We do not hedge these transactions. Rather, we negotiate yearly contracts with malt suppliers.
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Concentrates, sugar and plastic resin. The principalmain raw material used in the production of non-alcoholic beverages are concentrates, which are mainly acquired from licensees, sugar and plastic resin for the manufacturing of plastic bottles and containers. The Company is exposed to price fluctuation risks with regardsregard to these raw materials, which jointly represent 29%27% (29% in 20142017 and 27%30% in 2013)2016) of the direct cost for the Chile Operating segment. See “Item 4: Information on the Company – B. Business Overview – 5. Raw Materials and other Supplies”. We do not hedge these transactions.
Grapes and wine. The principal raw materials used by our wine subsidiary VSPT in the production of wine are its own harvested grape as well as purchased grapes and wine. VSPT obtains approximately 49%41% of the grapes used for export wines from its own vineyards, thereby reducing grape price volatility and ensuring quality consistency. Approximately 12%10% of the grape supply for the production of the wine sold in the domestic market is purchased from third parties.own vineyards. During 2015,2018, VSPT purchased 55%11% of the necessary grapes and wine on the basis of yearly contracts at fixed prices from third parties. Spot transactions for wine are executed from time to time depending on additional wine needs. “Item 4: Information on the Company – B. Business Overview – Raw Materials and other Supplies.”Supplies”.
Exchange Rate Sensitivity
We are exposed to exchange rate risks resultingoriginating from: a) our net exposure of foreign currency assets and liabilities, b) exports sales, c) the purchase of raw material,materials and products and capital investments effected in foreign currencies, or indexed to such currencies, and d) the net investment of subsidiaries in Argentina, Uruguay and Paraguay, of associated in Bolivia and of joint venture in Colombia. Our greatest exchange rate risk exposure is the variation of the Chilean peso as compared to the U.S. dollar, euro, argentineUSD, Euro, Argentine peso, uruguayanUruguayan peso, paraguayan guaraníParaguayan Guaraní, boliviansBolivian peso and colombianColombian peso.
As of December 31, 2015,2018, we maintained in Chile foreign currency liabilities amounting to CLP 49,78688,219 million (CLP 46,78069,160 million as of December 31, 2014)2017), mostly denominated in U.S. dollars. Obligations with financial institutions and bonds in foreignUSD. Foreign currency obligations (CLP 16,62625,404 million as of December 31, 20152018 and CLP 19,83910,945 million as of December 31, 2014)2017) represent 10% (11%9% (6% as of December 31, 2014)2017) of the total of suchother financial liabilities. The remaining 90% (89%91% (94% as of December 31, 2014)2017) is mainly denominated mainly in inflation-indexed Chilean pesos.CLP. In addition, the Company maintains current foreign currency assets for CLP 72,888234,307 million (CLP 57,087140,346 million as of December 31, 2014)2017) that mainly correspond to exports in accounts receivable.
Regarding the foreign subsidiaries operations, the net exposure liabilityassets in U.S. dollarsUSD and other currencies amounted to CLP 1,3687,872 million as of December 31, 20152018 (CLP 1,9327,894 million as of December 31, 2014)2017).
To protect the value of the foreign currency assets and liabilities net position of our Chilean operations, we enter into derivative agreements (currency forwards) to hedge against any variation in the Chilean peso as compared to other currencies.
As of December 31, 2015,2018, net exposure in foreign currencies of our Chilean operations, after the use of derivative instruments, amounted to a liability of CLP 7571,364 million (CLP 2,588(asset of CLP 1,027 million as of December 31, 2014)2017).
In 2015,2018, of our total sales, 7% (7% in 2017 and 8% (8% in 2014 and 2013)2016) corresponded to export sales made in foreign currencies, mainly U.S. dollars,USD, euros and pounds sterling, and of the totaldirect costs, 54% (55%61% (62% in 20142017 and 57%63% in 2013)2016) correspond to raw material and product purchases in foreign currencies, or indexed to such currencies. We do not actively hedge the variations in the expected cash flows from such transactions.
On the other hand, we are exposed to exchange rate movements related to the conversion from argentineArgentine pesos, uruguayanUruguayan pesos, paraguayan guaranis, boliviansParaguayan Guaraní, Bolivian peso and colombianColombian pesos to chilean pesosCLP in the income, assets and liabilities of our subsidiaries in Argentina, Bolivia, Uruguay and Paraguay, associated in BoliviaPeru and joint venture in Colombia. We do not actively hedge the risks related to this conversion at our subsidiaries, the effects of which are recorded in Equity.
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As of December 31, 2015,2018, the net investment in foreign subsidiaries, associated and joint ventures amounted to CLP 133,555247,680 million, CLP 14,277958 million and CLP 18,719121,448 million, respectively (CLP 127,753133,135 million, CLP 12,7587,406 million and CLP 1,44571,070 million as of December 31, 2014)2017).
B.Quantitative Information About Market Risk
Interest Rate Sensitivity
Most of our debt is at a fixed interest rate, so it is not mainly exposed to fluctuations in interest rates. As of December 31, 2015,2018, our interest-bearing debt amounted to CLP 168,118270,636 million (see note 27Note 21 to theour consolidated financial statements)statements included herein), 88%97% of which was fixed debt and 12%3% of which was variable-rate debt.debt (without taking into account the cross currency interest rate swaps and cross interest rate swaps effects).
The following table summarizes debt obligations with interest rates by maturity date, the related weighted-average interest rates and fair values:
Interest - Bearing Debts as of December 31, 2015 |
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| 2016 |
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| Total | Fair Value |
Interest bearing liabilities |
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Fixed rate |
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Ch$ (UF)(1) | Bonds and Banks |
| 7,491 |
| 8,746 | 8,710 | 18,274 | 8,334 | 93,614 | 145,169 | 119,742 | ||||||
| Average interest rate |
| 4.5% | 4.5% | 4.5% | 4.6% |
| 4.8% |
| 4.8% |
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Ch$ |
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| 6,437 |
| 18,135 | 1,023 | 1.023 | 1,023 | - | 27,640 | 26,608 | |||||
| Average interest rate |
| 6.1% | 6.5% | 5.2% | 5.2% |
| 5.1% |
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US$ |
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| 690 |
| - | - | - | - | - | 690 | 689 | |||||
| Average interest rate |
| 3.2% |
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Argentine pesos |
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| 12,933 |
| 6,855 | 1,722 | 530 | - | - | 22,040 | 17,274 | |||||
| Average interest rate |
| 24.8% |
| 23.8% |
| 21.3% |
| 15,0% |
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Uruguayan pesos |
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| 345 |
| 851 | 851 | - | - | - | 2,047 | 2,047 | ||||||
| Average interest rate |
| 6.0% |
| 6.0% |
| 6.0% |
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Variable rate |
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US$ |
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| 10,564 |
| 126 | 5,663 | - | - | - | 16,354 | 15,946 | |||||
| Average interest rate | Libor + | 1.6% |
| 1.1% |
| 1.1% |
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Argentine pesos |
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| 1,905 |
| 1,661 | 1,098 | 805 | - | - | 5,469 | 4,266 | |||||
| Average interest rate | Badlar + | 25.2% |
| 25.19% |
| 25.2% |
| 25.2% |
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Non interest bearing liabilities |
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Cross Interest Rate Swap: |
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Receive US$ at Libor + 1.46 |
| 7,254 |
| - | - | - | - | - | 7,254 | 7,227 | |||||||
Pay US$ at 3.6% |
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| 7,362 |
| - | - | - | - | - | 7,362 | 7,335 | ||||||
Forwards |
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| 171 |
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| 171 | 171 |
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(1) UF as of Dec 31, 2015 |
Interest - Bearing Debts as of December 31, 2018 | ||||||||||
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Contractual Flows Maturities | ||||||||||
| 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | Total | Fair Value | ||
Interest bearing liabilities |
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Fixed rate |
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CLP (UF)(1) | Bonds and Banks | 18,944 | 10,509 | 10,298 | 10,087 | 9,876 | 190,770 | 250,483 | 222,277 | |
| Average interest rate | 3.2% | 3.9% | 3.9% | 3.9% | 3.9% | 3.3% | |||
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CLP | 8,108 | 4,435 | 4,435 | 57,687 | 6 | 44 | 74,716 | 67,558 | ||
| Average interest rate | 4.6% | 4.9% | 4.9% | 4.6% | 4.6% | 4,9% | |||
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USD | 16,468 | - | - | - | - | - | 16,468 | 17,350 | ||
| Average interest rate | 3.1% | ||||||||
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Argentine pesos | 4,771 | 2 | - | - | - | - | 4,773 | 3,667 | ||
| Average interest rate | 54,7% | 17,0% | |||||||
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Bolivian pesos | 782 | 1,161 | 1,161 | 1,074 | 1,074 | 3,338 | 8,589 | 7,713 | ||
| Average interest rate | 5.0% | 5.0% | 5.0% | 5.0% | 5.0% | 5.0% | |||
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Uruguayan pesos | 488 | 896 | - | - | - | - | 1,384 | 1,384 | ||
| Average interest rate | 4.8% | 4.8% | |||||||
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USD | 294 | 288 | 8,199 | - | - | - | 8,781 | 8,313 | ||
| Average interest rate | |||||||||
| Libor + | 3.4% | ||||||||
Argentine pesos | 506 | - | - | - | - | - | 506 | 506 | ||
| Average interest rate |
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| Badlar + | 32.5% | ||||||||
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Cross Interest Rate Swap: | ||||||||||
Receive | - | - | - | - | - | - | - | - | ||
Pay | - | - | - | - | - | - | - | - | ||
Forwards | 4,997 | - | - | - | - | - | 4,997 | 4,997 | ||
(1) UF as of Dec 31, 2018 | ||||||||||
127
Commodity Price Sensitivity
The major commodity price sensitivity faced by us relate to fluctuations in malt prices.
The following table summarizes information about our malt, (includes barley), sugar and bulk wine inventories and futures contracts that are sensitive to changes in commodity prices, mainly malt prices. For inventories, the table presents the carrying amount and fair value of the inventories and contracts as of December 31, 2015.2018. For these contracts the table presents the notional amount in tons, the weighted average contract price, and the total dollar contract amount by expected maturity date.
Commodity Price Sensitivity as of December 31, 2015 |
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Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||
On Balance Sheet Position | On Balance Sheet Position | On Balance Sheet Position |
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Malt inventory (millions of CLP) | 16,421 | 16,421 | Malt inventory (millions of CLP) | 7,981 | 7,981 | |||||||||||||||
Bulk wine inventory - raw material (millions of CLP) | 30,337 | 30,337 | Bulk wine inventory - raw material (millions of CLP) | 42,394 | 42,394 | |||||||||||||||
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Expected Maturity | Fair Value | Expected Maturity | Fair Value | |||||||||||||||||
2016 | 2017 | 2018 | 2019 | 2020 | Thereafter | 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | |||||||||
Purchase Contracts | Purchase Contracts | Purchase Contracts |
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Malt: | Malt: | Malt: |
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Fixed Purchase Volume (tons) | 129,556 | 131,782 | 135,033 | 136,683 | 22,817 | - | Fixed Purchase Volume (tons) | 118,900 | 119,000 | 105,000 | 106,500 | 110,500 | 139,000 |
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Weighted Average Price (US$ per ton)(*) | 575 | 575 | - | Weighted Average Price (USD per ton)(*) | 560 | 560 | 560 | 560 | 561 | 560 |
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Contract Amount (thousands of US$) | 74,495 | 75,775 | 77,644 | 78,593 | 13,120 | - | 308,143 | Contract Amount (thousands of USD) | 66,584 | 66,640 | 58,800 | 59,640 | 61,991 | 77,840 | 357,529 | |||||
Sugar: | Sugar: | Sugar: |
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Fixed Purchase Volume (tons) | 75,000 | - | Fixed Purchase Volume (tons) | 61,297 | - |
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Weighted Average Price (US$ per ton)(*) | 550 | - | Weighted Average Price (USD per ton)(*) | 427 | - |
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Contract Amount (thousands of US$) | 41,250 | - | 40,900 | Contract Amount (thousands of USD) | 26,174 | - | 25,467 | |||||||||||||
Grapes: | Grapes: | Grapes: |
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Fixed Purchase Volume (tons) | 30,044 | 16,781 | 13,806 | 2,772 | 1,477 | 252 | Fixed Purchase Volume (tons) | 45,724 | 27,482 | 18,690 | 11,870 | 9,215 | 400 |
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Weighted Average Price (CLP per kg.)(*) | 218 | 226 | 216 | 398 | 529 | 990 | Weighted Average Price (CLP per kg.)(*) | 211 | 195 | 174 | 182 | 174 | 593 |
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Contract Amount (millions of CLP) | 6,543 | 3,790 | 2,982 | 1,103 | 781 | 250 | 15,732 | Contract Amount (millions of CLP) | 9,636 | 5,350 | 3,245 | 2,158 | 1,604 | 237 | 20,656 | |||||
Wine: | Wine: | Wine: |
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Fixed Purchase Volume (tons) | 16,750 | - | Fixed Purchase Volume (Mlts) | 17,200 | 14,500 | - |
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Weighted Average Price (CLP per liter)(*) | 219 | - | Weighted Average Price (CLP per liter)(*) | 189 | 194 | - |
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Contract Amount (millions of CLP) | 3,666 | - | 3,666 | Contract Amount (millions of CLP) | 3,253 | 2,806 | - | 5,779 | ||||||||||||
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(*) Weighted average price estimation is calculated based on expected market prices. Prices to be paid by us are adjusted based on current market conditions. | (*) Weighted average price estimation is calculated based on expected market prices. Prices to be paid by us are adjusted based on current market conditions. | (*) Weighted average price estimation is calculated based on expected market prices. Prices to be paid by us are adjusted based on current market conditions. | ||||||||||||||||||
As of December 31, 20152018 we had malt and barley purchase contracts for US$54.8USD 35.0 million in Chile, compared with US$46.6USD 35.5 million as of December 31, 2014.2017.
128
Exchange Rate Sensitivity
The major exchange rate risk faced by us is the variation of the Chilean peso against the U.S. dollar.USD.
A portion of our subsidiaries adjusted operating results, assets and liabilities are in currencies that differ from our functional currencies. However, since some of their operating revenues, costs and expenses are in the same currency, this can create a partial natural hedge. For the portion that is not naturally hedged of operations in Chile we enter into derivative agreements (currency forwards) to mitigate any variation in the Chilean peso as compared to other currencies.
The following table summarizes our debt obligations, cash and cash equivalents, accounts receivable, accounts payable and derivative contracts in foreign currencies as of December 31, 20152018 in millions of Chilean pesos,CLP, according to their maturity date, weighted-average interest rates and fair values:
Exchange Rate Sensitivity as of December 31, 2018 |
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(millions of CLP, except percentages and exchange rate) |
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Debt Obligations |
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Variable rate (USD) |
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Short and medium term | 294 | 288 | 8,199 | - | - | - | 8,781 | 8,313 | |||||||||
| Average int.rate Libor + | 3.4% |
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Fixed rate (USD) |
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Short term | 16,468 | - | - | - | - | - | 16,468 | 17,350 | |||||||||
| Interest rate | 3.1% |
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Cash and Cash |
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Equivalents(1) |
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USD | 19,027 | 19,027 | 19,027 | ||||||||||||||
Others | 1,631 | 1,631 | 1,631 | ||||||||||||||
TOTAL | 20,658 | 20,658 | 20.658 | ||||||||||||||
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Accounts Receivable(1) |
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USD | 34,114 | 34,114 | 34,114 | ||||||||||||||
EUR | 10,153 | 10,153 | 10,153 | ||||||||||||||
Others | 2,345 | 2,345 | 2,345 | ||||||||||||||
TOTAL | 46,611 | 46,611 | 46,611 | ||||||||||||||
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(1) Figures as of December 31, 2018. |
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| Notional | 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | Total | Fair Value | ||||||||
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Derivate Contracts (in |
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Receive USD | 11,559 | 288 | 8,199 | - | - | - | 20,046 | 19,522 | |||||||||
Pay USD | 3,833 | - | - | - | - | - | 3,833 | 3,833 | |||||||||
Receive EUR | 226 | - | - | - | - | - | 226 | 226 | |||||||||
Pay EUR | 1,230 | 77 | 7,986 | - | - | - | 9,292 | 9,355 | |||||||||
Receive Others | 32 | - | - | - | - | - | 32 | 32 | |||||||||
Pay Others |
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129
Exchange Rate Sensitivity as of December 31, 2015 (millions of Ch$, except percentages and exchange rate) Contractual Maturity Date 2016 2017 2018 2019 2020 Thereafter Total Fair Value Debt Obligations Variable rate (US$) Short and medium term 10,564 126 5,663 - - - 16,354 15,946 Average int.rate Libor + 1.64% 1.1% 1.1% Fixed rate (US$) Short term 690 - - - - - 690 689 Interest rate 3.2% Cash and Cash Equivalents(1) US$ 5,386 5,386 5,386 Others 1,315 1,315 1,315 TOTAL 6,701 6,701 6,701 Accounts Receivable(1) US$ 25,499 25,499 25,499 EUR 7,463 7,463 7,463 Others �� 1,777 1,777 1,777 TOTAL 34,739 34,739 34,739 Accounts Payable(1) US$ 18,669 18,669 18,669 EUR 6,403 6,403 6,403 Others 424 424 424 TOTAL 25,496 25,496 25,496 (1) Figures as of December 31, 2015. Contractual Maturity Date Notional 2016 2017 2018 2019 2020 Thereafter Total Fair Value amount Derivate Contracts (in millions of Ch$) Receive US$ 19,840 126 5,663 - - - 25,630 25,410 Pay US$ 7,479 - - - - - 7,479 7,452 Receive EUR 58 - - - - - 58 58 Pay EUR 2,612 60 5,452 - - - 8,124 8,142 Receive Others 32 - - - - - 32 32 Pay Others 2 - - - - - 2 2 ITEM 12: Description of Securities Other than Equity Securities 12.D.3. Depositary Fees and Charges JPMorgan is the depositary of CCU shares in accordance with the amended and restated Deposit Agreement, dated July 31, 2013, entered into by and among CCU, JPMorgan, as depositary, and all owners from time to time of ADSs issued by CCU (“Deposit Agreement”). Pursuant to the Deposit Agreement, holders of our ADSs may have to pay to JPMorgan, either directly or indirectly, fees or charges up to the amounts set forth in the table below.
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Issuance of ADSs |
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During each year, the depositary will collect fees of US$USD 0.05 or less per ADS per calendar year for administering the ADSs.
ADS holders will also be responsible to pay certain fees and expenses incurred by the depositary bank and certain taxes and governmental charges such as: stock transfer or other taxes and other governmental charges; cable, telex and facsimile transmission and delivery charges incurred upon the transfer of securities; transfer or registration fees for the registration of transfers charged by the registrar and transfer agent; and expenses incurred for converting foreign currency into U.S. dollars.USD.
12.D.4. Depositary Payments
In 2015, the following2018 CCU S.A. received from JPMorgan USD 822,635.00 as depositary payments and reimbursements were made by JPMorgan, pursuant to the corresponding tax retention, in connection with our ADR program:program.
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ITEM 13: Defaults, Dividend Arrearages and Delinquencies
Not applicable.
ITEM 14: Material Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable.
130
ITEM 15: Controls and Procedures
(a) Controls and Procedures. The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2015.2018. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of December 31, 2015.2018.
Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods required and that such information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
(b) Management’s Annual Report on Internal Control over Financial Reporting. Our management, including our CEO and CFO, are responsible for establishing and maintaining adequate internal controls over financial reporting and has assessed the effectiveness of our internal control over financial reporting as of December 31, 20152018 based on the criteria established in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and, based on such criteria, our management has concluded that, as of December 31, 20152018 our internal control over financial reporting is effective.
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of changes in conditions, and that the degree of compliance with the policies or procedures may deteriorate.
The effectiveness of our internal control over financial reporting as of December 31, 20152018 has been audited by PricewaterhouseCoopers Consultores, Auditores SpA, an independent registered public accounting firm, as stated in their report which appears herein.
(c) Attestation Report of the Registered Public Accounting Firm. See page F-2 of Firm.See our audited consolidated financial statements.statementsincluded herein.
(d) Changes in Internal Control over Financial Reporting. There has been no change in our internal control over financial reporting during 20152018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
(e) Whistle-blowing procedure. We have a whistle-blowing procedure which allows any employee of CCU, of its associates or any person, to communicate to a designated person questionable practices or activities that constitute a breach of accounting procedures, internal controls, audit matters and the Code of Business Conduct.
131
ITEM 16A: Audit Committee Financial Expert
In the board of directors meeting held on April 10, 2013, after the election of a new board of directors at the Shareholders’ meeting, the board of directors appointed the following members to our audit committee: Messrs. Vittorio Corbo and Philippe Pasquet. Mr. Pasquet and Mr. Corbo meet the independence criteria contained in the Exchange Act and the NYSE Rules.
Due to the resignation of Mr. Philippe Pasquet of his position as director of the Company, effective as of June 30, 2015, at the board of directors´ meeting held on June 7, 2015, Mr. Jorge Luis Ramos Santos was appointed as a member of the audit committee, to replace Mr. Pasquet. Additionally, at the board of directors´ meeting held on July 7, 2015, director Mr. Carlos Molina was appointed to the audit committee on an observer status.
Finally, atAt the board of directors´ meeting held on April 13, 2016, following the election of a new board at the shareholders´ meeting held the same day, the board of directors appointed directors Messrs. Vittorio Corbo and Carlos Molina to our audit committee. Mr. Corbo and Mr. Molina meet the independence criteria under the Exchange Act and under the NYSE Rules. The board of directors also resolved that directors Messrs. José Miguel Barros and Francisco Pérez shall participate in the audit committee´scommittee’s meetings as observers.
As in 2016, at the board of directors´ meeting held on April 17, 2019, following the election of a new board at the shareholders´ meeting held the same day, the board of directors appointed directors Messrs. Vittorio Corbo and Carlos Molina to our audit committee, both of whom meet the independence criteria under the Exchange Act and under the NYSE Rules. The board of directors also resolved that directors Messrs. José Miguel Barros and Francisco Pérez shall participate in the audit committee’s meetings as observers.
We do not have an audit committee financial expert serving on our audit committee, as such term is defined under Item 407 of Regulation S-K. We do not have an audit committee financial expert because we are not required to appoint one under Chilean law.
We have adopted a Code of Business Conduct that applies to all of our executive officers and employees. Our Code of Business Conduct is available on our website atwww.ccu.cl orwww.ccuinvestor.com. Our code of ethics was updated on March 4, 2014 and no waivers, either explicit or implicit, of provisions of the code of ethics have been granted to the Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer. The information on our website is not incorporated by reference into this document.
In December 2013, we adopted a Code of Conduct of the board of directors that applies to all of the members of our board of directors, which was updated in July and December 2015. This Code ofConductof Conduct is available on our website atwww.ccu.cl orwww.ccuinvestor.com. The Code of Conduct sets forth certain basic principles intended to guide the actions of our directors, as well as certain procedures, policies and corporate governance best practices. The Code of Conduct covers matters of confidentiality, access to independent experts, and orientation of newly elected directors and review of information regarding candidates for election to the board of directors. The Code of Conduct also establishes rules and procedures regarding conflicts of interest. The information on our website is not incorporated by reference into this document.
132
ITEM 16C: Principal Accountant Fees and Services The following table sets forth the fees billed to us by our independent auditors,PricewaterhouseCoopers Consultores, Auditores SpA, during the fiscal years ended December 31, 2018:20142016, 2017 and 2015:
| 2014 | 2015 |
Audit Fees | 462 | 487 |
Audit-Related Fees | 0 | 0 |
Tax Fees | 0 | 8 |
All Other Fees | 2 | 11 |
Total Fees | 464 | 506 |
2016 | 2017 | 2018 | |||
(millions of CLP) | |||||
Audit Fees | 743 | 737 | 689 | ||
Audit-Related Fees | 30 | 1 | 0 | ||
Tax Fees | 7 | 8 | 7 | ||
All Other Fees | 18 | 12 | 16 | ||
Total Fees | 798 | 758 | 712 |
“Audit fees” in the above table are the aggregate fees billed by PricewaterhouseCoopersour independent auditors in connection with the review and audit of our semi-annual and annual consolidated financial statements, as well as the review of other fillings.filings. “Audit Related Fees” are fees billed by our independent auditors for the issuance of full IFRS reports related to foreign entities. “Tax fees” are fees billed by our independent auditors associated with the issuance of certificates for tax and legal compliance purposes. “All Other Fees” are fees billed by PricewaterhouseCoopersour independent auditors associated towith expenses related to Due Diligence during 2015.certifications of royalty payments and certification on payment terms to small suppliers, among others.
Audit Committee Pre-Approval Policies and Procedures
Since July 2005, our audit committee pre-approves all audit and non-audit services provided by our independent auditor pursuant to Sarbanes-Oxley Act of 2002.
ITEM 16D: Exemptions from the Listing Standards for Audit Committees
Not applicable.
ITEM 16E: Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Not applicable.
ITEM 16F: Change in Registrant’s Certifying Accountants
i) Pursuant to the Chilean Corporations Act the Company is obliged to elect on an annual basis its principal accountant. The election takes place at the annual shareholders´ meeting. The audit committee and the directors committee independently submitted to the board of directors their proposal for the election of the principal accountant for fiscal year 2016. The board of directors´ at its meeting held on January 5, 2016 agreed to propose to the annual shareholders´ meeting of April 13, 2016 two candidates: KPMG Auditores Consultores Ltda (“KPMG”) was proposed in first place, and Pricewaterhouse Coopers Consultores Auditores y Compañía Limitada (“PwC Chile”), in second place. At the referred annual shareholders´ meeting held April 13, 2016, KPMG was elected as principal accountant for the fiscal year 2016. As a consequence, PwC Chile was dismissed as our independent registered public accounting firm on April 13, 2016. Such dismissal becomes effective upon completion by PwC Chile of its procedures on the filing of Form 20-F for the year ended December 31, 2015. PwC Chile served as the company´s independent registered public accounting firm for the fiscal years 2015 and 2014.Not applicable.
(ii) The reports of PwC Chile on the financial statements for the fiscal years ended December 31, 2015 and 2014 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle.
(iii) During the fiscal years ended December 31, 2015 and 2014 and the subsequent interim period through April 13, 2016, there have been no disagreements with PwC Chile on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of PwC Chile would have caused them to make reference thereto in their reports on the financial statements for such years.
(iv) During the fiscal years ended December 31, 2015 and 2014 and the subsequent interim period through April 13, 2016, there have been no reportable events (as defined in Item 16F(a)(1)(v) of Form 20-F).
(v) The Registrant has requested that PwC Chile furnish it with a letter addressed to the SEC stating whether or not it agrees with the above statements. A copy of such letter, dated April 26, 2016, is filed as Exhibit 15.2 to this Form 20-F.
During the fiscal years ended December 31, 2015 and 2014 and the subsequent interim period through April 13, 2016, the registrant has not consulted with KPMG regarding any matters described in Item 16F(a)(2)(i) and Item 16F(a)(2)(ii) of Form 20-F.133
ITEM 16G: Corporate Governance General summary of significant differences with regard to corporate government standards The following paragraphs provide a brief, general summary of significant differences between corporate government practices followed by us pursuant to our home-country rules and those applicable to U.S. domestic issuers under NYSE listing standards. Composition of the board of directors; independence. The NYSE listing standards provide that listed companies must have a majority of independent directors and that certain board committees must consist solely of independent directors. Under NYSE rule 303A.02, a director qualifies as independent only if the board affirmatively determines that such director has no material relationship with the company, either directly or indirectly. In addition, the NYSE listing standards enumerate a number of relationships that preclude independence. Under the Chilean Corporations Act an open-stockopen stock corporation must have at least one independent director (out of a minimum of seven directors) when its market capitalization reaches or exceeds UF 1.5 million Unidades de Fomento (as of March 31, 20162019 approximately CLP 38,71841,139 million) and at least 12.5% of its outstanding shares with voting rights are in the possession of shareholders that individually control or possess less than 10% of such shares. In addition, the Chilean Corporations Act enumerates a number of relationships that preclude independence. Chilean law also establishes a number of principles of general applicability designed to avoid conflicts of interests and to establish standards for related party transactions. Specifically, directors elected by a group or class of shareholders have the same duties to the company and to the other shareholders as the rest of the directors, and all transactions with the company in which a director has an interest must be in the interest of and for the benefit of the company, relative in price, terms and conditions to those prevailing in the market at the time of its approval and comply with the requirements and procedures set forth in Chapter XVI of the Chilean Corporations Act. See “Item 7: Major Shareholders and Related Party Transactions.”Transactions”.
Furthermore, such transactions must be reviewed by the directors’ committee (as defined below); they require prior approval by the board of directors and must be disclosed at the next meeting of shareholders, unless such transactions fall within one the exemptions contemplated by the Chilean Corporations Act and,or, if applicable, included in the usual practice policy approved by the board of directors. See “Item 7: Major Shareholders and Related Party Transactions.”Transactions”. Pursuant to NYSE rule 303A.00, we may follow Chilean practices and are not required to have a majority of independent directors.
Committees.The NYSE listing standards require that listed companies have a Nominating/Corporate Governance Committee,nominating/corporate governance committee, a Compensation Committeecompensation committee and an Audit Committee.audit committee. Each of these committees must consist solely of independent directors and must have a written charter that addresses certain matters specified by the listing standards.
Under Chilean law, the only board committee that is required is the directors’directors committee (comité de directores), composed of three members, such committee having a direct responsibility to (a) review the company’s financial statements and the independent auditors’ report and issue an opinion on such financial statements and report prior to their submission for shareholders’ approval, (b) make recommendationspropose to the board of directors with respectthe independent accountants and the risk rating agencies, which the board must then propose to the appointment of independent auditors and risk rating agencies,shareholders, (c) review related party transactions, and issue a report on such transactions, (d) review the managers, principal executive officers’ and employees’ compensation policies and plans andplans; (e) to prepare an annual report of the performance of its duties, including the principal recommendations to shareholders; (f) advise the board of directors as to the suitability of retaining non-audit services from its external auditors, if the nature of such services could impair their independence; and (g) perform other duties as defined by the company’s bylaws, by a shareholders’ meeting or by the board. Requirements to be deemed an independent director are set forth in “Item 6: Directors, Senior Management and Employees– C.Board Practices– Directors Committee.”Committee”.
Pursuant to NYSE Rule 303A.06, we must have an audit committee that satisfies the requirements of Rule 10A-3 under the Exchange Act by July 31, 2005. At the board of directors´ meeting ofheld on April 10, 2013, following the17, 2019, followingthe election of a new board at the shareholders´ meeting held the board of directors appointed the following directors to our audit committee: Vittorio Corbo and Philippe Pasquet. Mr. Pasquet and Mr. Corbo meet the independence criteria under the Exchange Act and under the NYSE Rules. The board of directors also resolved that directors Messrs. Jorge Luis Ramos and Francisco Pérez shall participate in our audit committee´s meetings as observers.
Due to the resignation of Mr. Philippe Pasquet of his position as director of the Company, effective as of June 30, 2015, at the board of directors´ meeting held on June 7, 2015, Mr. Jorge Luis Ramos Santos was appointed as a member of the audit committee, to replace Mr. Pasquet. Additionally, at the board of directors´ meeting held on July 7, 2015, director Mr. Carlos Molina was appointed to the audit committee on an observer status.
Finally,at the board of directors´ meeting held on April 13, 2016, following the election of a new board at the shareholders´ meeting,same date, the board of directors appointed directors Messrs. Vittorio Corbo and Carlos Molina to our audit committee. Mr. Corbo and Mr. Molina meet the independence criteria under the Exchange Act and under the NYSE Rules. The board of directors also resolved that directors Messrs. José Miguel Barros and Francisco Pérez shall participate in the audit committee´scommittee’s meetings as observers.
134
Shareholder approval of equity-compensation plans. Under NYSE listing standards, shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions thereto, with limited exemptions. An “equity-compensation plan” is a plan or other arrangement that provides for the delivery of equity securities of the listed company to any employee, director or otherserviceother service provider as compensation for services.
Under Chilean law, if previously approved by shareholders at an extraordinary shareholders’ meeting, up to ten percent of a capital increase in a publicly traded company may be set aside to fund equity-compensation plans for the company’s employees and/or for the employees of the company’s subsidiaries. Pursuant to NYSE rule 303A.00, as a foreign private issuer, we may follow Chilean practices and are not required to comply with the NYSE listing standards with respect to shareholder approval of equity-compensation plans.
Corporate Governance Guidelines.The NYSE listing standards provide that listed companies must adopt and disclose corporate governance guidelines with regard to (a) director qualifications standards; (b) director responsibilities; (c) director access to management and independent advisors; (d) director compensation; (e) director orientation and continuing education; (f) management succession; and (g) annual performance evaluations of the board.
Chilean law does not require that such corporate governance guidelines be adopted. Director responsibilities and access to management and independent advisors are directly provided for by applicable law. Director compensation is determined by the annual meeting of shareholders pursuant to applicable law. As a foreign private issuer, we may follow Chilean practices and are not required to adopt corporate governance guidelines. Pursuant to SVSCMF rules, the company is only required to disclose whether or not it has adopted corporate governance guidelines regarding, among others, the matters referred to above.
Code of Business Conduct.The NYSE listing standards require that listed companies adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers.
We have adopted a code of business conduct that applies generally to all of our executive officers and employees. A copy of the code of business conduct, as amended, is available on our website atwww.ccu.cl orwww.ccuinvestor.com. The information on our website is not incorporated by reference into this document.
We have also adopted a code of conduct that applies to all members of our board of directors. A copy of this code is available on our website atwww.ccu.cl orwww.ccuinvestor.com. The information on our website is not incorporated by reference into this document.
Manual of Information of Interest to the Market. In 2008, the SVS (currently, CMF) promulgated new rules which require publicpublicly traded companies to adopt a manual regarding disclosure of information of interest to the market, board members and executives shares transactions and blackout periods for such transactions. This manual applies to our directors, the directors of our subsidiaries, our executive officers, some of our employees which may be in possession of confidential, reserved or privileged information of interest, and to our advisors. The manual took effect on June 1, 2008.A2008. A copy of themanualthe manual regarding disclosure of information of interest to the market, as amended on March 18, 2010, is available in our website atwww.ccu.cl orwww.ccuinvestor.com. The information on our website is not incorporated by reference into this document.
Executive Sessions. To empower non-management directors to serve as a more effective check on management, NYSE listing standards provide that non-management directors of each company must meet at regularly scheduled executive sessions without management.
Under Chilean law, the office of director is not legally compatible with that of general manager in publicly traded companies. The board of directors exercises its functions as a collective body and may partially delegate its powersitspowers to executive officers, attorneys, a director or a board commission of the company, and for specific purposes to other persons. As a foreign private issuer, we may follow Chilean practices and are not required to comply with the NYSE listing standard for executive sessions.
135
Certification Requirements. Under NYSE listing standards, Section 303A.12(a) provides that each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards, and Section 303A.12(b) provides that each listed company CEO must promptly notify the NYSE in writing after any executive officer of the listed company becomes aware of any material non-compliance with any applicable provisions of Section 303A.
As a foreign private issuer, we must comply with Section 303A.12(b) of the NYSE listing standards, but we are not required to comply with 303A.12(a).
ITEM 16H: Mine Safety Disclosure
Not applicable.
The Company has responded to Item 18 in lieu of responding to this item.
See Annex for the Financial Statements.
136
Index to Exhibits
1.1 Unofficial English translation of the By-laws of the Company (incorporated by reference to Exhibit 3.1 of the Company’s registration statement on Form F-3 (File No. 333-190641) filed on August 8, 2013).
12.1 Certification of Chief Executive Officer of Compañía Cervecerías Unidas S.A. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
15.1 Consent of PricewaterhouseCoopers.101.INS XBRL Instance Document.
15.2 Letter of PricewaterhouseCoopers regarding disclosure in Item 16.F. Change in Registrant´s Certifying Accountant101.SCH XBRL Taxonomy Extension Schema Document.
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB XBRL Taxonomy Extension Label Linkbase Document.
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.
SIGNATURES
The Registrant certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
Compañía Cervecerías Unidas S.A. | ||
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Date: April 29, 2016By: /s/ Patricio Jottar
Name: Patricio Jottar
Our management, including our Chief Executive Officer and Chief Financial Officer, are responsible for establishing and maintaining adequate internal controls over financial reporting and has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2015 based on the criteria established in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and, based on such criteria, our management has concluded that, as of December 31, 2015, our internal control over financial reporting is effective.
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of changes in conditions, and that the degree of compliance with the policies or procedures may deteriorate.
The effectiveness of our internal control over financial reporting as of December 31, 2015 has been audited by PwC Chile, an independent registered public accounting firm, as stated in their report which appears herein.
There has been no change in our internal control over financial reporting during 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
By: /s/__________________
Title: Chief Executive Officer
/s/ _________________Date: April
Chief Financial Officer25th, 2019
137
Dated: February 29, 2016
Distribution:
Investor Relation Manager
PwC Chile
Chief Financial Officer
Legal Affairs Manager_
Note 12 Inventories |
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Note 13 Biological assets |
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Note 15 Business Combinations | ||
Note 16 Investments accounted for using equity method | 81 | |
Note 17 Intangible assets other than goodwill | 84 | |
Note 18 Goodwill | 86 | |
Note 19 Property, plant and equipment | 88 | |
Note 20 Investment Property | 90 | |
Note 21 Other financial liabilities | 91 | |
Note 22 Trade and other current payables |
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Note 23 Other provisions |
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Note 24 Income taxes |
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Note 25 Employee Benefits |
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Note 26 Other non-financial liabilities |
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Note 27 Common Shareholders’ Equity |
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Note 28 Non-controlling Interests |
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Note 29 Nature of cost and expense |
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Note 30 Other incomes by function | ||
Note 31 Other Gains (Losses) |
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Note 32 Financial results | 125 | |
Note 33 Effects of changes in currency exchange rate | 126 | |
Note 34 Contingencies and Commitments | 130 | |
Note 35 Environment | 133 | |
Note 36 Subsequent Events | 137 |
Compañía Cervecerías Unidas S.A. and subsidiaries Consolidated Statement of Financial Position (Figures expressed in thousands of Chilean pesos) |
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ASSETS | Notes | As of December 31, 2015
| As of December 31, 2014 (Restated) (*) | As of January 1, 2014 (Restated)
(*) | Notes | As of December 31, 2018 | As of December 31, 2017 |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | |||
Current assets |
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|
|
| |
Cash and cash equivalent | 14 | 192,554,239 | 214,774,876 | 408,853,267 | |||
Cash and cash equivalents | 8 | 319,014,050 | 170,044,602 | ||||
Other financial assets | 6 | 13,644,105 | 6,483,652 | 4,468,846 | 7 | 22,745,469 | 10,724,196 |
Other non-financial assets | 19 | 17,654,373 | 18,558,445 | 21,495,398 | 9 | 18,861,414 | 15,834,225 |
Accounts receivable-trade and other receivables | 15 | 252,225,937 | 238,602,893 | 211,504,047 | |||
Accounts receivable from related companies | 16 | 4,788,930 | 11,619,118 | 9,610,305 | |||
Trade and other current receivables | 10 | 320,702,339 | 286,213,598 | ||||
Accounts receivable from related parties | 11 | 3,048,841 | 5,810,764 | ||||
Inventories | 17 | 174,227,415 | 167,545,598 | 146,955,193 | 12 | 228,062,237 | 201,987,891 |
Biological current assets | 18 | 7,633,340 | 7,633,591 | 6,130,652 | |||
Taxes receivables | 26 | 15,264,220 | 19,413,414 | 9,139,406 | |||
Total current assets different from assets of disposal group held for sale |
| 677,992,559 | 684,631,587 | 818,157,114 | |||
Assets of disposal group held for sale | 25 | 6,319,316 | 758,760 | 339,901 | |||
Total assets of disposal group held for sale |
| 6,319,316 | 758,760 | 339,901 | |||
Biological assets | 13 | 8,489,873 | 8,157,688 | ||||
Current tax assets | 24 | 17,302,429 | 28,027,878 | ||||
Total current assets other than non-current assets of disposal groups classified as held for sale |
| 938,226,652 | 726,800,842 | ||||
Non-current assets of disposal groups classified as held for sale | 14 | 2,780,607 | 2,305,711 | ||||
Total Non-current assets of disposal groups classified as held for sale |
| 2,780,607 | 2,305,711 | ||||
Total current assets |
| 684,311,875 | 685,390,347 | 818,497,015 |
| 941,007,259 | 729,106,553 |
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Non-current assets |
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Other financial assets | 6 | 80,217 | 343,184 | 38,899 | 7 | 3,325,079 | 1,918,191 |
Other non-financial assets | 19 | 27,067,454 | 5,828,897 | 15,281,111 | 9 | 5,007,150 | 4,644,827 |
Accounts receivable from related companies | 16 | 445,938 | 522,953 | 350,173 | |||
Investments accounted by equity method | 20 | 49,995,263 | 31,998,620 | 17,563,028 | |||
Trade and other non-current receivables | 10 | 3,363,123 | 3,974,395 | ||||
Accounts receivable from related parties | 11 | 190,865 | 258,471 | ||||
Investments accounted for using equity method | 16 | 142,017,781 | 99,270,280 | ||||
Intangible assets other than goodwill | 21 | 64,120,426 | 68,656,895 | 64,033,931 | 17 | 118,964,142 | 77,032,480 |
Goodwill | 22 | 83,300,573 | 86,779,903 | 81,872,847 | 18 | 123,044,901 | 94,617,474 |
Property, plant and equipment (net) | 23 | 872,667,210 | 851,255,642 | 698,656,429 | 19 | 1,021,266,631 | 917,913,428 |
Investment property | 24 | 6,838,002 | 7,917,613 | 6,901,461 | 20 | 8,715,956 | 5,825,359 |
Deferred tax assets | 26 | 34,529,593 | 30,207,019 | 24,525,361 | 24 | 37,691,088 | 40,351,329 |
Current tax assets non current | 24 | 1,270,941 | 1,316,300 | ||||
Total non-current assets |
| 1,139,044,676 | 1,083,510,726 | 909,223,240 |
| 1,464,857,657 | 1,247,122,534 |
Total Assets | Total Assets | 1,823,356,551 | 1,768,901,073 | 1,727,720,255 | Total Assets | 2,405,864,916 | 1,976,229,087 |
(*)SeeNote 2,29 and 4.
F-4
The accompanying notes 1 to 36 are an integral part of these consolidated financial statements. |
The accompanying notes 1 to 37 are an integral part of these consolidated financial statements.
Compañía Cervecerías Unidas S.A. and subsidiaries Consolidated Statement of Financial Position (Figures expressed in thousands of Chilean pesos) |
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LIABILITIES AND EQUITY | Notes | As of December 31, 2015
| As of December 31, 2014 (Restated) (*) | As of January 1, 2014 (Restated)
(*) | Notes | As of December 31, 2018 | As of December 31, 2017 |
LIABILITIES | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ||
Current liabilities |
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Other financial liabilities | 27 | 43,973,991 | 65,318,293 | 120,488,188 | 21 | 62,766,946 | 53,591,658 |
Accounts payable-trade and other payables | 28 | 227,736,803 | 203,782,805 | 183,508,115 | |||
Accounts payable- to related companies | 16 | 11,624,218 | 10,282,312 | 7,286,064 | |||
Other short-term provisions | 29 | 503,440 | 410,259 | 833,358 | |||
Tax liabilities | 26 | 12,198,024 | 11,697,135 | 10,916,865 | |||
Employee benefits provisions | 31 | 21,712,059 | 17,943,771 | 20,217,733 | |||
Trade and other current payables | 22 | 303,380,168 | 281,681,553 | ||||
Accounts payable to related parties | 11 | 6,936,910 | 10,069,043 | ||||
Other current provisions | 23 | 405,069 | 349,775 | ||||
Current tax liabilities | 24 | 75,885,449 | 22,526,634 | ||||
Provisions for employee benefits | 25 | 31,794,163 | 26,232,493 | ||||
Other non-financial liabilities | 30 | 70,942,144 | 68,896,763 | 65,878,578 | 26 | 164,555,540 | 74,298,299 |
Total current liabilities |
| 388,690,679 | 378,331,338 | 409,128,901 |
| 645,724,245 | 468,749,455 |
Non-current liabilities |
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Other financial liabilities | 27 | 136,926,545 | 134,534,557 | 142,763,030 | 21 | 228,185,297 | 161,001,732 |
Others accounts payable | 28 | 1,645,098 | 369,506 | 841,870 | |||
Accounts payable to related companies | 16 | - | - | 377,020 | |||
Other long-term provisions | 29 | 1,476,518 | 2,209,832 | 2,135,122 | |||
Trade and other non-current payables | 22 | 12,413 | 541,783 | ||||
Other non-current provisions | 23 | 7,425,759 | 1,240,389 | ||||
Deferred tax liabilities | 26 | 88,146,963 | 87,518,700 | 73,033,414 | 24 | 108,500,171 | 94,350,111 |
Employee benefits provisions | 31 | 18,948,603 | 17,437,222 | 15,196,620 | |||
Provisions for employee benefits | 25 | 26,901,088 | 23,517,009 | ||||
Total non-current liabilities |
| 247,143,727 | 242,069,817 | 234,347,076 |
| 371,024,728 | 280,651,024 |
Total liabilities |
| 635,834,406 | 620,401,155 | 643,475,977 |
| 1,016,748,973 | 749,400,479 |
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EQUITY | EQUITY |
| EQUITY | ||||
Equity attributable to equity holders of the parent | 33 |
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| 27 |
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Paid-in capital |
| 562,693,346 | 562,693,346 |
| 562,693,346 | 562,693,346 | |
Other reserves | (103,226,416) | (75,050,544) | (65,881,809) |
| (151,048,226) | (178,075,279) | |
Retained earnings | 598,349,442 | 537,945,375 | 491,864,319 |
| 868,481,588 | 716,458,990 | |
Subtotal equity attributable to equity holders of the parent |
| 1,057,816,372 | 1,025,588,177 | 988,675,856 | |||
Total equity attributable to equity holders of the parent |
| 1,280,126,708 | 1,101,077,057 | ||||
Non-controlling interests | 32 | 129,705,773 | 122,911,741 | 95,568,422 | 28 | 108,989,235 | 125,751,551 |
Total Shareholders' Equity | Total Shareholders' Equity | 1,187,522,145 | 1,148,499,918 | 1,084,244,278 | Total Shareholders' Equity | 1,389,115,943 | 1,226,828,608 |
Total Liabilities and Shareholders' Equity | Total Liabilities and Shareholders' Equity | 1,823,356,551 | 1,768,901,073 | 1,727,720,255 | Total Liabilities and Shareholders' Equity | 2,405,864,916 | 1,976,229,087 |
(*)SeeNote 2,29 and 4.
F-5
The accompanying notes 1 to 37 are an integral part of these consolidated financial statements.
The accompanying notes 1 to 36 are an integral part of these consolidated financial statements. |
Compañía Cervecerías Unidas S.A. and subsidiaries Consolidated Statement of Income (Figures expressed in thousands of Chilean pesos) |
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CONSOLIDATED STATEMENT OF INCOME | Notes | For the years ended December 31, | Notes | For the years ended December 31, | ||||
2015 | 2014 | 2013 | 2018 | 2017 | 2016 | |||
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |||||
Net sales | 9 | 1,498,371,715 | 1,297,966,299 | 1,197,226,510 | 6 | 1,783,282,337 | 1,698,360,794 | 1,558,897,708 |
Cost of sales | 10 | (685,075,251) | (604,536,815) | (536,696,634) | 29 | (860,011,392) | (798,738,655) | (741,819,916) |
Gross margin |
| 813,296,464 | 693,429,484 | 660,529,876 |
| 923,270,945 | 899,622,139 | 817,077,792 |
Other income by function | 12 | 6,577,244 | 25,463,716 | 5,508,863 | 30 | 228,455,054 | 6,717,902 | 5,144,154 |
Distribution costs | 10 | (277,599,722) | (240,848,630) | (221,701,175) | 29 | (314,391,183) | (290,227,129) | (270,835,822) |
Administrative expenses | 10 | (128,135,799) | (110,014,716) | (93,289,698) | 29 | (152,376,458) | (142,514,649) | (155,322,295) |
Other expenses by function | 10 | (209,201,189) | (188,109,562) | (162,782,032) | 29 | (216,236,609) | (238,704,061) | (195,412,109) |
Other gains (losses) | 13 | 8,512,000 | 4,036,939 | 958,802 | 31 | 4,029,627 | (7,716,791) | (8,345,907) |
Income from operational activities |
| 213,448,998 | 183,957,231 | 189,224,636 |
| 472,751,376 | 227,177,411 | 192,305,813 |
Financial Income | 11 | 7,845,743 | 12,136,591 | 8,254,170 | ||||
Financial costs | 11 | (23,101,329) | (22,957,482) | (24,084,226) | ||||
Equity and income of joint ventures and associated | 20 | (5,228,135) | (898,607) | 308,762 | ||||
Finance income | 32 | 15,794,456 | 5,050,952 | 5,680,068 | ||||
Finance costs | 32 | (23,560,662) | (24,166,313) | (20,307,238) | ||||
Share of net loss of joint ventures and associates accounted for using the equity method | 16 | (10,815,520) | (8,914,097) | (5,560,522) | ||||
Foreign currency exchange differences | 11 | 957,565 | (613,181) | (4,292,119) | 32 | 3,299,657 | (2,563,019) | 456,995 |
Result as per adjustment units | 11 | (3,282,736) | (4,159,131) | (1,801,765) | 32 | 742,041 | (110,539) | (2,246,846) |
Income before taxes |
| 190,640,106 | 167,465,421 | 167,609,458 |
| 458,211,348 | 196,474,395 | 170,328,270 |
Income taxes | 26 | (50,114,516) | (46,673,500) | (34,704,907) | ||||
Tax income (expense) | 24 | (136,126,817) | (48,365,976) | (30,246,383) | ||||
Net income of year |
| 140,525,590 | 120,791,921 | 132,904,551 |
| 322,084,531 | 148,108,419 | 140,081,887 |
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Net income attibutable to: |
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|
|
|
|
|
Equity holders of the parent |
| 120,808,135 | 106,238,450 | 123,036,008 |
| 306,890,792 | 129,607,353 | 118,457,488 |
Non-controlling interests | 32 | 19,717,455 | 14,553,471 | 9,868,543 | 28 | 15,193,739 | 18,501,066 | 21,624,399 |
Net income of year |
| 140,525,590 | 120,791,921 | 132,904,551 |
| 322,084,531 | 148,108,419 | 140,081,887 |
Net income per share (Chilean pesos) from: |
|
|
|
|
|
|
|
|
Continuing operations |
| 326.95 | 287.52 | 370.81 |
| 830.55 | 350.76 | 320.59 |
Diluted earnings per share (Chilean pesos) from: |
|
|
|
|
|
|
|
|
Continuing operations |
| 326.95 | 287.52 | 355.57 |
| 830.55 | 350.76 | 320.59 |
|
|
|
|
|
|
|
|
|
F-6
The accompanying notes 1 to 37 are an integral part of these consolidated financial statements.
The accompanying notes 1 to 36 are an integral part of these consolidated financial statements. |
Compañía Cervecerías Unidas S.A. and subsidiaries Consolidated Statement of Comprehensive Income (Figures expressed in thousands of Chilean pesos) |
|
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | Notes | For the years ended December 31, | ||
2015 | 2014 | 2013 | ||
ThCh$ | ThCh$ | ThCh$ | ||
Net income of year | 140,525,590 | 120,791,921 | 132,904,551 | |
Other income and expenses charged or credited againts equity |
|
|
|
|
Cash flow hedges (1) | 33 | 80,693 | (155,258) | 256,592 |
Exchange differences of foreign subsidiaries (1) | 33 | (29,678,944) | (4,629,683) | (17,054,187) |
Gains (losses) from defined plans | 33 | (939,433) | (1,884,054) | (469,987) |
Income tax related with cash flow hedge (1) | 33 | (17,563) | 39,470 | (51,304) |
Income tax relating to defined benefit plans | 33 | 314,541 | 501,689 | 105,151 |
Total other comprehensive income and expense |
| (30,240,706) | (6,127,836) | (17,213,735) |
Comprehensive income and expense |
| 110,284,884 | 114,664,085 | 115,690,816 |
Comprehensive income originated by: |
|
|
|
|
Equity holders of the parent (2) |
| 92,606,720 | 97,067,296 | 107,443,199 |
Non-controlling interests | 17,678,164 | 17,596,789 | 8,247,617 | |
Comprehensive income and expense |
| 110,284,884 | 114,664,085 | 115,690,816 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | Notes | For the years ended December 31, | ||
2018 | 2017 | 2016 | ||
ThCh$ | ThCh$ | ThCh$ | ||
Net income of year |
| 322,084,531 | 148,108,419 | 140,081,887 |
Other comprehensive income |
|
|
|
|
Components of other comprehensive income that will not be reclassified to income for the year, before taxes |
|
|
|
|
Gains (losses) from defined benefit plans | 27 | (1,263,781) | 19,669 | (2,355,384) |
Other comprehensive income that will not be reclassified to incom for the year, before taxes |
| (1,263,781) | 19,669 | (2,355,384) |
Components of other comprehensive income that will be reclassified to income for the year, before taxes |
|
|
|
|
Gains (losses) on exchange differences on translation | 27 | 37,990,079 | (34,786,480) | (27,280,176) |
Gains (losses) on cash flow hedges | 27 | 63,008 | (5,661) | 84,962 |
Other comprehensive income that will be reclassified to income for the year, before taxes |
| 38,053,087 | (34,792,141) | (27,195,214) |
Other comprehensive income, before tax |
| 36,789,306 | (34,772,472) | (29,550,598) |
Income taxes related to components of other comprehensive income that will not be reclassified to income for the year |
|
|
|
|
Income tax relating to defined benefit plans | 27 | 339,533 | (47,228) | 659,198 |
Income taxes related to components of other comprehensive income that will not be reclassified to income for the year |
| 339,533 | (47,228) | 659,198 |
Income taxes related to components of other comprehensive income that will be reclassified to income for the year |
|
|
|
|
Income tax relating to cash flow hedges | 27 | (16,196) | 728 | (20,648) |
Income taxes related to components of other comprehensive income that will be reclassified to income for the year |
| (16,196) | 728 | (20,648) |
Total other comprehensive income and expense |
| 37,112,643 | (34,818,972) | (28,912,048) |
Comprehensive income (expense) |
| 359,197,174 | 113,289,447 | 111,169,839 |
Comprehensive income (expense) attributable to: |
|
|
|
|
Equity holders of the parent |
| 341,548,106 | 96,580,893 | 91,752,250 |
Non-controlling interests |
| 17,649,068 | 16,708,554 | 19,417,589 |
Total Comprehensive income (expense) |
| 359,197,174 | 113,289,447 | 111,169,839 |
(1)These items will be reclassified to Consolidated Statement of Income when they are settled.
(2)Corresponds to the income for the year where no income or expenses have been recorded directly against shareholder´s equity.
.
F-7
The accompanying notes 1 to 37 are an integral part of these consolidated financial statements.
The accompanying notes 1 to 36 are an integral part of these consolidated financial statements. |
Compañía Cervecerías Unidas S.A. and subsidiaries Consolidated Statement of Changes in Equity (Figures expressed in thousands of Chilean pesos) |
|
STATEMENT OF CHANGES IN EQUITY | Paid in capital | Other reserves | Total other reservations | Retained earnings | Equity attributable to equity holders of the parent | Non-controlling interests | Total Shareholders' Equity | |||
Common Stock | Reserve of exchange differences on translation | Reserve of cash flow hedges | Reserve of Actuarial gains and losses on defined benefit plans | Other reserves | ||||||
ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | |
Balanced as of January 1, 2016 | 562,693,346 | (95,435,386) | (2,526) | (2,302,418) | (5,486,086) | (103,226,416) | 598,349,442 | 1,057,816,372 | 129,705,773 | 1,187,522,145 |
Changes |
|
|
|
|
|
|
|
|
|
|
Interim dividends (1) | - | - | - | - | - | - | (24,387,190) | (24,387,190) | - | (24,387,190) |
Interim dividends according to policy (2) | - | - | - | - | - | - | (34,841,553) | (34,841,553) | - | (34,841,553) |
Other increase (decrease) in Equity (3) | - | - | - | - | - | - | - | - | (14,413,649) | (14,413,649) |
Effects business combination (4) | - | - | - | - | - | - | - | - | 363,139 | 363,139 |
Total comprehensive income (expense) | - | (25,123,546) | 41,607 | (1,623,299) | - | (26,705,238) | 118,457,488 | 91,752,250 | 19,417,589 | 111,169,839 |
Increase (decrease) through changes in ownership interests in subsidaries (5) | - | - | - | - | (13,041,724) | (13,041,724) | - | (13,041,724) | (11,715,289) | (24,757,013) |
Total changes in equity | - | (25,123,546) | 41,607 | (1,623,299) | (13,041,724) | (39,746,962) | 59,228,745 | 19,481,783 | (6,348,210) | 13,133,573 |
AS OF DECEMBER 31, 2016 | 562,693,346 | (120,558,932) | 39,081 | (3,925,717) | (18,527,810) | (142,973,378) | 657,578,187 | 1,077,298,155 | 123,357,563 | 1,200,655,718 |
Balanced as of January 1, 2017 | 562,693,346 | (120,558,932) | 39,081 | (3,925,717) | (18,527,810) | (142,973,378) | 657,578,187 | 1,077,298,155 | 123,357,563 | 1,200,655,718 |
Changes |
|
|
|
|
|
|
|
|
|
|
Final dividends (6) | - | - | - | - | - | - | (5,922,874) | (5,922,874) | - | (5,922,874) |
Interim dividends (1) | - | - | - | - | - | - | (25,865,201) | (25,865,201) | - | (25,865,201) |
Interim dividends according to policy (2) | - | - | - | - | - | - | (38,938,475) | (38,938,475) | - | (38,938,475) |
Other increase (decrease) in Equity (3) | - | - | - | - | - | - | - | - | (8,805,260) | (8,805,260) |
Total comprehensive income (expense) | - | (32,982,829) | (10,837) | (32,794) | - | (33,026,460) | 129,607,353 | 96,580,893 | 16,708,554 | 113,289,447 |
Increase (decrease) through changes in ownership interests in subsidaries (7) | - | - | - | - | (2,075,441) | (2,075,441) | - | (2,075,441) | (5,509,306) | (7,584,747) |
Total changes in equity | - | (32,982,829) | (10,837) | (32,794) | (2,075,441) | (35,101,901) | 58,880,803 | 23,778,902 | 2,393,988 | 26,172,890 |
AS OF DECEMBER 31, 2017 | 562,693,346 | (153,541,761) | 28,244 | (3,958,511) | (20,603,251) | (178,075,279) | 716,458,990 | 1,101,077,057 | 125,751,551 | 1,226,828,608 |
Balanced as of January 1, 2018 | 562,693,346 | (153,541,761) | 28,244 | (3,958,511) | (20,603,251) | (178,075,279) | 716,458,990 | 1,101,077,057 | 125,751,551 | 1,226,828,608 |
Increase (decrease) due to changes in accounting policies (8) | - | - | - | - | - | - | (126,722) | (126,722) | (9,054) | (135,776) |
Initial balance restated | 562,693,346 | (153,541,761) | 28,244 | (3,958,511) | (20,603,251) | (178,075,279) | 716,332,268 | 1,100,950,335 | 125,742,497 | 1,226,692,832 |
Changes |
|
|
|
|
|
|
|
|
|
|
Final dividends (6) | - | - | - | - | - | - | (1,296,076) | (1,296,076) | - | (1,296,076) |
Interim dividends (1) | - | - | - | - | - | - | (51,730,402) | (51,730,402) | - | (51,730,402) |
Interim dividends according to policy (2) | - | - | - | - | - | - | (101,714,994) | (101,714,994) | - | (101,714,994) |
Other increase (decrease) in Equity (3) | - | - | - | - | - | - | - | - | (7,374,653) | (7,374,653) |
Effects business combination (10) | - | - | - | - | - | - | - | - | 6,755,102 | 6,755,102 |
Total comprehensive income (expense) (9) | - | 35,487,433 | 51,944 | (882,063) | - | 34,657,314 | 306,890,792 | 341,548,106 | 17,649,068 | 359,197,174 |
Increase (decrease) through changes in ownership interests in subsidaries (11) | - | - | - | - | (7,630,261) | (7,630,261) | - | (7,630,261) | (33,782,779) | (41,413,040) |
Total changes in equity | - | 35,487,433 | 51,944 | (882,063) | (7,630,261) | 27,027,053 | 152,149,320 | 179,176,373 | (16,753,262) | 162,423,111 |
AS OF DECEMBER 31, 2018 | 562,693,346 | (118,054,328) | 80,188 | (4,840,574) | (28,233,512) | (151,048,226) | 868,481,588 | 1,280,126,708 | 108,989,235 | 1,389,115,943 |
STATEMENT OF CHANGES IN EQUITY | Paid in capital | Other reserves | Retained earnings | Equity attributable to equity holders of the parent | Non-controlling interests | Total Shareholders' Equity | ||||
Common Stock | Shares premium | Currency translation difference | Hedge reserves | Actuarial gains and losses on defined benefit plans reserves | Other reserves | |||||
ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | |
Balanced as of January 1, 2013 | 215,540,419 | 15,479,173 | (44,675,962) | (98,990) | - | (3,371,276) | 430,346,315 | 613,219,679 | 97,298,607 | 710,518,286 |
Changes |
|
|
|
|
|
|
|
|
|
|
Interim dividends (1) | - | - | - | - | - | - | (23,278,681) | (23,278,681) | - | (23,278,681) |
Interim dividends according to policy (2) | - | - | - | - | - | - | (38,239,323) | (38,239,323) | - | (38,239,323) |
Other increase (decrease) in Equity (5) | - | - | - | - | - | - | - | - | (4,961,354) | (4,961,354) |
Effects business combination | - | - | - | - | - | - | - | - | 3,138,195 | 3,138,195 |
Other increase (decrease) in Equity (4) | 15,479,173 | (15,479,173) | - | - | - | - | - | - | - | - |
Increase (decrease) through changes in ownership interests in subsidaries that do not result in loss of control (3) | - | - | - | - | - | 2,867,444 | - | 2,867,444 | (8,154,643) | (5,287,199) |
Issuance Equity (4) | 331,673,754 | - | - | - | - | (5,010,216) | - | 326,663,538 | - | 326,663,538 |
Comprehensive income and expense | - | - | (15,408,235) | 164,099 | (348,673) | - | 123,036,008 | 107,443,199 | 8,247,617 | 115,690,816 |
Total changes in equity | 347,152,927 | (15,479,173) | (15,408,235) | 164,099 | (348,673) | (2,142,772) | 61,518,004 | 375,456,177 | (1,730,185) | 373,725,992 |
AS OF DECEMBER 31, 2013 | 562,693,346 | - | (60,084,197) | 65,109 | (348,673) | (5,514,048) | 491,864,319 | 988,675,856 | 95,568,422 | 1,084,244,278 |
Balanced as of January 1, 2014 | 562,693,346 | - | (60,084,197) | 65,109 | (348,673) | (5,514,048) | 491,864,319 | 988,675,856 | 95,568,422 | 1,084,244,278 |
Changes |
|
|
|
|
|
|
|
|
|
|
Interim dividends (1) | - | - | - | - | - | - | (23,278,681) | (23,278,681) | - | (23,278,681) |
Interim dividends according to policy (2) | - | - | - | - | - | - | (36,500,001) | (36,500,001) | - | (36,500,001) |
Other increase (decrease) in Equity (3) | - | - | - | - | - | 2,419 | (378,712) | (376,293) | (8,594,222) | (8,970,515) |
Effects business combination | - | - | - | - | - | - | - | - | 18,340,752 | 18,340,752 |
Comprehensive income and expense | - | - | (7,698,661) | (108,479) | (1,364,014) | - | 106,238,450 | 97,067,296 | 17,596,789 | 114,664,085 |
Total changes in equity | - | - | (7,698,661) | (108,479) | (1,364,014) | 2,419 | 46,081,056 | 36,912,321 | 27,343,319 | 64,255,640 |
AS OF DECEMBER 31, 2014 | 562,693,346 | - | (67,782,858) | (43,370) | (1,712,687) | (5,511,629) | 537,945,375 | 1,025,588,177 | 122,911,741 | 1,148,499,918 |
Balanced as of January 1, 2015 | 562,693,346 | - | (67,782,858) | (43,370) | (1,712,687) | (5,511,629) | 537,945,375 | 1,025,588,177 | 122,911,741 | 1,148,499,918 |
Changes |
|
|
|
|
|
|
|
|
|
|
Interim dividends (1) | - | - | - | - | - | - | (24,387,190) | (24,387,190) | - | (24,387,190) |
Interim dividends according to policy (2) | - | - | - | - | - | - | (36,016,878) | (36,016,878) | - | (36,016,878) |
Other increase (decrease) in Equity (5) | - | - | - | - | - | 25,543 | - | 25,543 | (10,884,132) | (10,858,589) |
Comprehensive income and expense | - | - | (27,652,528) | 40,844 | (589,731) | - | 120,808,135 | 92,606,720 | 17,678,164 | 110,284,884 |
Total changes in equity | - | - | (27,652,528) | 40,844 | (589,731) | 25,543 | 60,404,067 | 32,228,195 | 6,794,032 | 39,022,227 |
AS OF DECEMBER 31, 2015 | 562,693,346 | - | (95,435,386) | (2,526) | (2,302,418) | (5,486,086) | 598,349,442 | 1,057,816,372 | 129,705,773 | 1,187,522,145 |
(1) | Related to dividends declared as of December 31 of each year and paid during January of the following year, as agreed by the Board of Directors. |
(2) | Corresponds to the differences between CCU’s policy to distribute a minimum dividend of at least 50% of the income (Note 27-Common Shareholders’ Equity) and the interim dividends declared as of December 31 of each year. |
(3) | Mainly related to dividends to Non-controlling interest. |
(4) | Corresponds to thenon-controlling interest from the business combinations of paraguayan company Sajonia Brewing Company S.R.L. (Note 1 - General Information, letter D)). |
(5) | In 2016, the Company, through its subsidiaries Aguas CCU-Nestlé Chile S.A. and Embotelladoras Chilenas Unidas S.A., acquired an additional interest of Manantial S.A. for an amount of ThCh$ 19,111,686, with a carrying amount of ThCh$ 3,816,220, gererating in a decrease in Other reserves of ThCh$ 7,801,153 (seeNote 1 - General Information (1)). Additionally, during 2016 the Company, through its subsidiary Compañía Industrial Cervecera S.A. acquired an additional interest in Los Huemules SRL. for an amount of ThCh$ 118,092, with a carrying amount of ThCh$ 312,103, resulting in an increase in Other reserves of ThCh$ 194,000 (seeNote 1 - General Information (4)). Finally during 2016, the joint venture Foods acquired an additional interest in Alimentos Nutrabien S.A. for an amount of ThCh$ 14,352,706, with a carrying amount of ThCh$ 3,497,385, resulting in a decrease of ThCh$ 5,426,209. |
(6) | Corresponds to the differences between the final dividend and CCU’s policy of distributing a minimum dividend of at least 50% of income (Note 27 - Common Shareholders’ Equity). |
(7) | During 2017, through its subsidiary CCU Inversiones S.A., the Company acquired an additional interest of VSPT for an amount of ThCh$ 7,800,000 with a carrying amount of ThCh$ 5,724,003, generated, at CCU's consolidated level, a decrease in Other reserves of ThCh$ 2,075,441. |
(8) | SeeNote 4 - Accounting changes. |
(9) | SeeNote 27 - Common Shareholders’ Equity |
(10) | SeeNote 15 – Business combinations. |
(11) | During 2018, the Company through its subsidiary CCU Inversiones S.A., acquired an additional interest of VSPT for an amount of ThCh$ 49,222,781 with a carrying amount of ThCh$ 36,165,735, generated, at CCU's consolidated level, a decrease in Other reserves of ThCh$ 13,054,114 and on December 17, 2018the joint venture Foods Compañía de Alimentos CCU S.A. (“Foods”) and subsidiary CCU Inversiones S.A. sold the property over Alimentos Nutrabien S.A.generating an effect in Other reserves of ThCh $ 5,426,209 (Note 27 - Common Shareholders’ Equity). |
(1)Related to declared dividends at December 31 of each year and paid during January of the following year, as agreed by the Board of Directors.
(2)Corresponds to the differences between CCU’s policy to distribute a minimum dividend of at least 50% of the income (Note 33) based on the local statutory reported to SVS and the interim dividends declared at December 31 of each year.
(3)In 2013, the Company acquired additional interests in Viña San Pedro Tarapacá S.A. with a carrying value to ThCh$ 8,153,946 resulting in an increase to Other reserves of ThCh$ 2,526,520Note 1 (1).Additionally, as a part of the balance of 2013 recorded ThCh$ 341,169 related to an increase in additional interest in Saenz Briones & Cía S.A.I.C.
(4)SeeNote 33, paid in capital.
(5)Mainly related to dividends to Non-controlling interest.
F-8
The accompanying notes 1 to 36 are an integral part of these consolidated financial statements. |
Compañía Cervecerías Unidas S.A. and subsidiaries Consolidated Statement of Cash Flow (Figures expressed in thousands of Chilean pesos) |
CONSOLIDATED STATEMENT OF CASH FLOW | Notes | For the years ended as of December 31, | ||
2015 | 2014 | 2013 | ||
ThCh$ | ThCh$ | ThCh$ | ||
Net cash flows from (used in) operational activities |
|
|
|
|
Collection classes: |
| |||
Proceeds from goods sold and services rendered | 1,770,338,769 | 1,584,494,230 | 1,464,286,085 | |
Other proceeds from operating activities | 20,467,143 | 30,247,374 | 19,057,966 | |
Types of payments: |
| |||
Payments of operating activities | (1,120,571,275) | (1,051,616,618) | (950,888,252) | |
Payments of salaries | (178,915,580) | (171,898,347) | (145,277,349) | |
Other payments for operating activities | (220,365,087) | (162,644,788) | (154,495,134) | |
Dividends received | 45,492 | 75,169 | 95,463 | |
Interest paid | (19,813,502) | (20,757,207) | (21,112,371) | |
Interest received | 6,476,628 | 10,763,936 | 8,244,764 | |
Income tax reimbursed (paid) | (44,584,176) | (44,208,661) | (26,390,153) | |
Other cash movements | 13 | 6,432,460 | (833,425) | 634,480 |
Net cash flows from (used in) operational activities |
| 219,510,872 | 173,621,663 | 194,155,499 |
| ||||
Cash flows from (used in) investing activities |
|
|
|
|
Cash flows used for control of subsidaries or other businesses | 14 | - | (8,369) | (14,566,278) |
Cash flows used in the purchase of non-controlling interests | 14 | (1,921,245) | (13,776,885) | - |
Proceeds from payments of Associates | 6,709,845 | - | - | |
Other payments to acquire interests in joint ventures | 14 | (42,163,032) | (1,445,478) | - |
Proceeds from sale of property, plan and equipment | 2,776,474 | 2,587,448 | 1,740,687 | |
Acquisition of property, plant and equipment | (129,668,910) | (227,863,039) | (122,451,045) | |
Purchases of intangibles assets | (2,062,012) | (2,217,113) | (2,107,984) | |
Other cash movements | 518,711 | 3,753,297 | 466,710 | |
Net cash flows from (used in) investing activities |
| (165,810,169) | (238,970,139) | (136,917,910) |
| ||||
Cash flows from (used in) financing activities |
|
|
|
|
Payments for changes in ownership interests in subsidaries | 14 | - | - | (5,627,425) |
Proceeds from long-term loans | 19,570,689 | 15,482,763 | 10,852,892 | |
Porceeds from short-term loans | 23,358,700 | 21,882,842 | 12,040,310 | |
Total amount from loans | 42,929,389 | 37,365,605 | 22,893,202 | |
Loan payments | (54,797,023) | (20,766,024) | (22,343,703) | |
Proceeds from issuing shares | - | - | 326,663,538 | |
Payments of finance lease liabilities | (1,697,649) | (1,745,210) | (1,641,370) | |
Payments of loan from related entities | (601,494) | (223,225) | (1,479,201) | |
Dividends paid | (66,147,145) | (65,315,914) | (63,680,979) | |
Other cash movements | (2,525,569) | (81,470,807) | (3,162,277) | |
Net cash flows from (used in) financing activities |
| (82,839,491) | (132,155,575) | 251,621,785 |
| ||||
Net increase (decrease) in cash equivalents, before the effect of changes in exchange rate | (29,138,788) | (197,504,051) | 308,859,374 | |
Effects of changes in exchange rates on cash and cash equivalents |
| 6,918,151 | 3,425,660 | (2,343,382) |
| ||||
Cash and cash equivalents, initial balance |
| 214,774,876 | 408,853,267 | 102,337,275 |
Cash and cash equivalents, final balance | 14 | 192,554,239 | 214,774,876 | 408,853,267 |
F-9
CONSOLIDATED STATEMENT OF CASH FLOW | Notes | For the years ended as of December 31, | ||
2018 | 2017 | 2016 | ||
ThCh$ | ThCh$ | ThCh$ | ||
Cash flows from (used in) operating activities |
|
|
|
|
Classes of cash receipts from operating activities: | ||||
Proceeds from goods sold and services rendered | 2,063,846,199 | 2,027,615,713 | 1,862,763,071 | |
Other proceeds from operating activities | 30 | 211,980,184 | 27,287,853 | 23,086,788 |
Classes of cash payments from operating activities: | ||||
Payments of operating activities | (1,308,662,407) | (1,263,418,419) | (1,216,451,995) | |
Payments of salaries | (202,182,968) | (202,321,289) | (201,389,122) | |
Other payments for operating activities | (282,794,912) | (262,820,379) | (228,011,323) | |
Cash flow from (used in) operations | 482,186,096 | 326,343,479 | 239,997,419 | |
Dividends received | 374,208 | 264,079 | 34,380 | |
Interest paid | (17,691,156) | (18,564,514) | (16,958,068) | |
Interest received | 13,627,809 | 4,870,651 | 5,635,697 | |
Income tax reimbursed (paid) | (35,068,401) | (40,656,061) | (47,055,951) | |
Other cash movements | 31 | (14,115,425) | (10,096,203) | 8,360,871 |
Net cash flows from operating activities |
| 429,313,131 | 262,161,431 | 190,014,348 |
Cash flows from (used in) investing activities |
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Cash flows used to obtain control of subsidaries or other businesses | 8 | (5,819,495) | - | (641,489) |
Cash flows used to purchase non-controlling interests | 8 | - | (1,149,689) | (2,174,370) |
Other charges on the sale of interests in joint ventures | - | 1,058,984 | 512,596 | |
Other payments to acquire interests in joint ventures | 8 | (59,505,559) | (49,312,890) | (27,043,481) |
Proceeds from sales of property, plan and equipment | 1,064,516 | 1,554,696 | 2,753,539 | |
Purchase of property, plant and equipment | (128,366,525) | (123,526,778) | (125,691,740) | |
Purchases of intangibles assets | (3,073,897) | (2,238,702) | (3,191,685) | |
Other cash movements | (3,301,141) | - | 469,240 | |
Net cash flows used in investing activities |
| (199,002,101) | (173,614,379) | (155,007,390) |
Cash flows from (used in) financing activities |
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Proceeds from changes in ownership interests in subsidiaries that do not result in loss of control | 8 | (49,222,782) | (7,800,000) | (19,111,686) |
Proceeds from long-term loans and bonds | 91,201,377 | 40,850,000 | 3,804,384 | |
Porceeds from short-term loans and bonds | 92,806,210 | 16,927,169 | 19,345,325 | |
Total proceeds from loans | 184,007,587 | 57,777,169 | 23,149,709 | |
Loan and bonds payments | (112,665,293) | (25,754,218) | (27,910,666) | |
Payments of finance lease liabilities | (1,077,462) | (1,414,228) | (1,530,851) | |
Payments of loan from related parties | - | (717,900) | (750,000) | |
Dividends paid | (74,825,181) | (75,128,211) | (69,819,729) | |
Other cash movements | 819,269 | 36,190 | 913,318 | |
Net cash flows used in financing activities |
| (52,963,862) | (53,001,198) | (95,059,905) |
Net decrease in cash equivalents, before the effect of changes in exchange rate | 177,347,168 | 35,545,854 | (60,052,947) | |
Effects of changes in exchange rates on Cash and cash equivalents |
| (28,377,720) | 465,565 | 1,531,891 |
Increase (decrease) in cash an cash equivalents |
| 148,969,448 | 36,011,419 | (58,521,056) |
Cash and cash equivalents, beginning of the year |
| 170,044,602 | 134,033,183 | 192,554,239 |
Cash and cash equivalents, final of the year | 8 | 319,014,050 | 170,044,602 | 134,033,183 |
F-9
The accompanying notes 1 to 36 are an integral part of these consolidated financial statements. |
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
A)Company information
Compañía Cervecerías Unidas S.A. (CCU,(hereinafter also “CCU”, “the Company” or the Company or the“the Parent Company)Company”) was incorporated in Chile as an open stock company, and it is registered in the Securities RecordRegistry of the Comisión para el Mercado Financiero (CMF) (ex Superintendencia de Valores y Seguros de Chile (Localor Local Superintendence of Equity Securities, SVS)(SVS)) under Nº 0007, and consequently, the Company is subject to Regulationoverseen by the SVS.CMF. The Company’s shares are quotedtraded in Chile on the Santiago Stock Exchange Electronic Stock Exchange and ValparaísoElectronic Stock Exchange. The Company is also registered with the United States of America Securities and Exchange Commission (SEC) and it quotes its American Depositary Shares (ADS) on’s are traded in the New York Stock Exchange (NYSE). There was an amendmentamendment to the Deposit Agreement dated December 3, 2012, between the Company, JP Morgan Chase Bank, NA and all holders of ADRs. According to this Amendment,ADRs, whereby there was ana change in the ADS ratio change from 1 ADS to 5 common shares to a new ratio of 1for each ADS to 2 common shares. There was no change to CCU's underlying ordinary shares. This action wasshares for each ADS, effective onas of December 20, 2012.
CCU is a diversified beverage company, with operations mainly in Chile, Argentina, Uruguay, Paraguay, Colombia and Bolivia. CCU is the largest Chilean brewery, the second largest brewery in Argentina, the second largest producer of soft drinks in Chile, the second-largest wine producer in Chile, the largest bottlerproducer of bottled mineral water, nectar and nectarsport drinks in Chile and one of the largest pisco producerproducers in Chile. It also participates in the business of Home and Office Delivery (“HOD”), in a business ofinvolving home delivery of purified water in bottles through the use of dispensers, and in the rum and candy industry in Chile. It participates in the industry of the ciders, spirits and wines in Argentina and also participates in the industry of mineral water and soft drinks and beer distribution in Uruguay, Paraguay, Colombia and Bolivia.
In Chile and abroad, CCU and its subsidiaries areCompañía Cervecerías Unidas S.A. is under the ownerscontrol of a wide range of brands, underInversiones y Rentas S.A. (IRSA), which market our products. In the domestic market, its portfolio of brands in the beer category consists among others of Cristal, Cristal Light, Cristal Cero, 0°, Escudo, Kunstmann, Austral, Dolbeck, Royal Guard, Morenita, Dorada and Lemon Stones. It holds exclusive license to produce and market Heineken, Sol and Coors. In Chile, the Company is the exclusive distributordirect and indirect owner of Tecate and Blue Moon beer.
In Argentina, CCU produces beers in its plants located in the cities of Salta, Santa Fé and Luján. Its main brands are Schneider, Imperial, Palermo, Santa Fé, Salta, Córdoba and are the holders of exclusive license for the production and marketing of Budweiser, Heineken, Amstel and Sol. CCU also imports Guiness and Kunstmann. Additionally, exports beer to different countries in the region mainly under the Schneider, Heineken and Budweiser brands. In Argentina, CCU is the exclusive distributor60% of the energy drink Red Bull. Besides, participates in the cider business, controlling of Saenz Briones. In these categories, its portfolio brands are Sidra Real and “1888”. Also participates in the spirits business, whichCompany’s shares. IRSA is marketed under the brand El Abuelo, as well as import other liquors from Chile.
In Uruguay, the Company participates in the mineral waters and soft drinks business with Native and Nix brand, respectively. In addition, it sells beers imported under Heineken, Schneider and Kuntsmann brand and cider Sidra Real.
In Paraguay, the Company participates in the non-alcoholic beverages and beer business since December 2013. Its portfolio of non-alcoholic brands consists of Pulp, Watt's and La Fuente. These brands include own, licensed and imported. In the beer business, the Company imports Heineken, Coors Light, Coors 1873, Schneider, Paulaner and Kunstmann, brands.
In Colombia, CCU participates in the business of beers and malts since November 2014. Its portfolio of beers include licensed and imported Heineken, Amstel, Murphys and Buckler brands. Its has of exclusive license for the importation, distribution and production of Heineken. It holds exclusive license to produce and market Coors and Coors Light.
In Bolivia, the Company participates in the non-alcoholic and alcoholic business since May 2014. Its portfolio of non-alcoholic brands consist of Mendocina, Free cola, Sinalco, Cordillera and Real. These brands include own and licensed. The alcoholic brands consist of Real and Capital. It has of exclusive license for the importation and distribution of Heineken and the energy drink Monster.
Within the non-alcoholic, in Chile Operating segment, CCU has the Bilz,Pap, Kem, Kem Xtreme, Nobis, Cachantun, Cachantun Más, Mas Woman and Porvenir brands. Regarding the HOD category, CCU has the Manantial brand. The Company, directly or through its subsidiaries, has license agreements with Pepsi, 7up, Mirinda, Gatorade, Adrenaline Red, Sobe LifeWater, Lipton Ice Tea, Ocean Spray, Crush, Canada Dry Limón Soda, Canada Dry Ginger Ale, Canada Dry Agua Tónica, Nestlé Pure Life, Perrier, Watt´s and Frugo. In Chile,CCU is the exclusive distributor of the energy drink Red Bull.
Besides, throught of joint operation also owns the Sprim and Fructus and the licencse Vivo and Caricia brands.
In the spirits, in Chile Operating segment, in the category of pisco, CCU owns the brand Mistral, Campanario, Horcón Quemado, Control C, Tres Erres, La Serena and Ruta cocktail, and their respective extensions. In rum category Company owns thebrands Sierra Morena and their extensions and Cabo Viejo. The Company has the Fehrenberg brand and is exclusive distributor in Chile of Pernod Ricard’s products.
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In theWine Operating segment, through its subsidiary Viña San Pedro Tarapacá S.A. (“VSPT”), produces wines and sparkling, which are sold in the domestic and overseas markets exporting to more than 80 countries.Its main brands are Altaïr, Sideral, Cabo de Hornos, Kankana del Elqui, Tierras Moradas, 1865, Castillo de Molina, Épica, 35 Sur Reserva, 35 Sur, Urmeneta, GatoNegro, Gato, Manquehuito Pop Wine, San Pedro Exportación. The brands´s portfolio of Viña Tarapacá includes: TaraPakay, Gran Reserva, Gran Tarapacá, León de Tarapacá and Tarapacá Varietal. The brands´s portfolio of Viña Santa Helena includes: Parras Viejas, Vernus, Selección del Directorio, Siglo de Oro, Santa Helena Varietal, Alpaca, Gran Vino and Santa Helena. VSPT also participates in Chile and international market with vines Misiones de Rengo, Viña Mar, Casa Rivas, Leyda and Finca La Celia and Tamari in Argentina.
The joint venture in Foods Compañíbetween Quiñenco S.A. and Heineken Chile Limitada, a de Alimentos CCU S.A. ("Foods"), who participates in the business of snacks and food in Chile, sold Calaf and Natur brands to Empresas Carozzi S.A. Foods maintains its share of the brand Nutra Bien.
The detail of the described licenses appears below:
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(1) After the initial termination date, license is automatically renewed under the same conditions (Rolling Contract)company controlled by Heineken Americas B.V., each year forwith a period of 10 years, unless notice of non-renewal is given.
(2) Renewable for periods of two years, subject to the compliance of the contract conditions .
(3) If Renewal criteria have been satisfied, renewable through December, 2025, thereafter shall automatically renew every year for a new term of 5 years (Rolling Contract).
(4) After the initial termination date, license is automatically renewed under the same conditions (Rolling Contract), each year for a period of 5 years, subject to the compliance of the contract conditions.
(5) License renewable for one period of 5 years, subject to the compliance of the contract conditions.
(6) License renewable for periods of 5 years, subject to the compliance of the contract conditions.
(7) Renewable for an additional period equal to the duration of the Shareholders Agreement of Bebidas CCU-PepsiCo SpA., subject to the compliance of the contract conditions.
(8) License for 10 years, automatically renewable for periods of 5 years, unless notice of non-renewal.
(9) License for 10 years, automatically renewable on the same terms (Rolling Contract), each year for a period of 10 years, unless notice of non-renewal is given.
(10) After the initial termination date, License is automatically renewable each year for a period of 5 years (Rolling Contract), unless notice of non-renewal is given.
(11) Indefinite contract, notice of termination 6 months in advance. The earliest possible effective date of termination is October 31, 2018.
(12) Indefinite contract, subject to the compliance of the contract conditions 50% equity participation.
The Company’s address and main office is located in Santiago, Chile, at Avenida Vitacura Nº 2670, Las Condes district and its tax identification number (Rut) is 90,413,000-1.
As of December 31, 2018 the Company had a total 8,797 employees detailed as follows:
| Number of employes | |
| Parent company | Consolidated |
Senior Executives | 10 | 14 |
Managers and Deputy Managers | 79 | 420 |
Other workers | 283 | 8,363 |
Total | 372 | 8,797 |
These Consolidated Financial Statements include: Statement of Financial Position, Statement of Income, Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Cash Flows (direct method), and the Accompanying Notes with disclosures.
In the accompanying Statement of Financial Position, assets and liabilities that are classified as current, are those with maturities equal to or less than twelve months, and those classified as non-current, are those with maturities greater than twelve months. In turn, in the Consolidated Statement of Income, expenses are classified by function, and the nature of depreciation and personnel expenses is identified in footnotes. The Consolidated Statement of Cash Flows is presented using the direct method.
The figures in the Consolidated Statement of Financial Position and their explanatory notes are presented compared to the previous year (2017) and the Consolidated Statement of Income, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and their explanatory notes are presented compared with 2017 and 2016.
These Consolidated Financial Statements are presented in thousands of Chilean pesos (ThCh$) and have been prepared from the accounting records of Compañía Cervecerías Unidas S.A. and its subsidiaries. All amounts have been rounded to thousand Chilean pesos, except when otherwise indicated.
F-10
F-11
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
The Company’s functional currency and presentation currency is the Chilean peso, except for some subsidiaries in Chile, Argentine, Uruguay, Paraguay and Bolivia that use the US Dollar, Argentine peso, Uruguayan Peso, Paraguayan guaraní and Bolivian, respectively. The functional currency of joint operations in Colombia and associates in Perú, are the Colombian peso and the Sol, respectively. However they use the Chilean peso as the presentation currency for consolidation purposes.
Subsidiaries whose functional currency is not the Chilean peso, have converted their financial statement from their functional currency to the Group’s presentation currency, which is the Chilean peso. The following exchange rates have been used: for the Consolidated Statement of Financial Position and the Consolidated Statement of Changes in Equity, net at the year-end exchange rate, and for the Consolidated Statements of Income, Consolidated Statements of Comprehensive Income and the Consolidated Statement of Cash Flows at the transaction date exchange rate or at the average monthly exchange rate, as appropriate, with the exception of subsidiaries that operate in hyperinflationary economies (SeeNote 4 – Accounting changes).
B)Brands and licensing
In Chile, its portfolio of brands in the beer category consists of its own CCU brands, international licensing brands and distribution of Craft brands. CCU’s own brands which correspond to national products, produced, marketed and distributed by Cervecería CCU, which include the following brands, among others, Cristal, Cristal Cero 0°, Cristal Cero Radler, Escudo, Royal Guard, Morenita, Dorada, Andes, Bavaria and Stones in its Lemon, Maracuyá and Apple varieties. The international licensing brands, of which some are produced and other are imported, marketed and distributed by Cervecería CCU, include, among others, the Tecate, Coors, Heineken and Sol brands. The Craft distribution brands, which are beer that is created and produced in their original breweries and are marketed and distributed in partnership with Cervecera CCU, Austral, Kunstmann, Szot, Guayacán, D´olbek and Blue Moon beer.
In the Chile operating segment, in the non-alcoholic beverages category, CCU has the Bilz, Pap, Pop Candy, Kem, Kem Xtreme, Nobis, Cachantun, Mas, Mas Woman and Porvenir brands. In the HOD category, CCU has the Manantial brand. The Company, directly or through its subsidiaries, has licensing agreements with Pepsi, 7up, Mirinda, Gatorade, Adrenaline Red, Sobe Life Water, Lipton Ice Tea, Ocean Spray, Crush, Canada Dry Limón Soda, Canada Dry Ginger Ale, Canada Dry Agua Tónica, Nestlé Pure Life, Watt’s, Watt´s Selección and Frugo. In Chile, CCU is the exclusive distributor of the Red Bull energy drink and Perrier water. Through a joint venture it also has its own brands, Sprim and Fructus and a license for the Vivo and Caricia brands.
Aditionally, in the Chile operating segment, in the pisco and cocktails categories, CCU owns the Mistral, Campanario, Horcón Quemado, Control C, Tres Erres, Espíritu de los Andes, La Serena, Iceberg, Ruta Cocktail, Cusqueño Sour, Sol de Cuba, brands, together with the respective line extensions, as applicable. In the rum category, the Company owns the Sierra Morena (and their extensions) and Cabo Viejo brands. In the liquor category, the Company has the Fehrenberg and Barsol (quebranta grapes distillate) brands and is the exclusive distributor in Chile of Pernod Ricard whisky, vodka and others liquors in the traditional channel. Finally, in the cider category, the Company owns the Cygan brand.
In Argentina, CCU produces beer in its plants located in Salta, Santa Fé and Luján. Its main brands are Schneider, Imperial, Palermo, Bieckert, Santa Fé, Salta, Córdoba and it is the holder of exclusive license for the production and marketing of Miller, Heineken, Amstel and Sol. CCU also imports Kunstmann and Blue Moon brands, and exports beer to different countries, mainly under the Schneider, Heineken and Imperial brands. Until April, 2018 in Argentina, CCU was the exclusive license for the production and marketing of Budweiser beer (seeletter C), under this Note) and from this date CCU owns the Isenbeck, Diosa, Iguana and Báltica brands and also incorporated, in the form of exclusive licensing agreements, in its portfolio Warsteiner and Grolsch brands. Aditionally, until December 31, 2017 in Argentina, CCU was the exclusive distributor of the Red Bull energy drink. Besides, participates in the cider business, with control of Saenz Briones, marketing the leading market brands “Sidra Real”, “La Victoria” and “1888”. Also participates in the spirits business, which it market under the El Abuelo brand, in adittion of importing other liquors from Chile, as well as also sells and distributes of Eugenio Bustos and La Celia wines belonging to the bodega Finca La Celia (subsidiary in Argentina of the Chilean subsidiary Viña San Pedro de Tarapacá S.A. (VSPT)).
In Uruguay, the Company participates in the mineral water and soft drinks business with the Nativa and Nix brands, flavored waters with the Nativa brand, soft drinks with the Nix brand and nectars with Watt´s brand,inisotonic drink with the FullSport brand and energy drink with the Thor brand. In addition, it sells imported beer under the Heineken, Schneider, Imperial and Kuntsmann brands.
In Paraguay, the Company participates in the non-alcoholic and alcoholic drink business. Its portfolio of non-alcoholic brands consists of Pulp, Watt's, Puro Sol, La Fuente, Zuma and the Full Power isotonic drink. These brands include its own,licensed and imported brands. The Company in the beer business is owner of Sajonia brand and imports Heineken, Schneider, Paulaner, Sol and Kunstmann, brands.
F-11
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
In the Wine operating segment, through its subsidiary Viña San Pedro Tarapacá S.A. (“VSPT”), CCU produces wines and sparkling wines, which are sold in the domestic and overseas markets, exporting to more than 80 countries.The main brands of Viña San Pedro are Altaïr, Cabo de Hornos, Sideral, 1865, Castillo de Molina, Épica, 35 Sur, GatoNegro, Gato, Manquehuito and San Pedro Exportación. Viña Tarapacá’s brands include: Gran Reserva Etiqueta Azul, Gran Reserva Etiqueta Negra, Gran Reserva Etiqueta Blanca, Tarapacá Reserva, León de Tarapacá and Tarapacá Varietal. Viña Santa Helena’s brands portfolio includes: Selección del Directorio, Siglo de Oro, Santa Helena Varietal, Alpaca, Gran Vino and Santa Helena.Viña San Pedro Tarapacá S.A. is also present in the domestic and international markets with the Misiones de Rengo, Viña Mar, Casa Rivas and Leyda vineyards in Chile and with the Finca La Celia and Tamari vineyards in Argentina.
In December 2018, Viña San Pedro de Tarapacá S.A. signed an agreement to acquire a part of the Pernod Ricard wine business in Argentina. The purchase agreement, which is subject to local regulatory approval, includes the brands of Argentine wines Graffigna, Colón and Santa Silvia, which represent approximately 1.5 million cases of 9-liter wine bottles per year. Bodegas Graffigna has a winery in the province of San Juan, two fields in the same province, and a field in Mendoza.
Since November 2014, in Colombia, CCU participates in the beer business through its joint venture with Central Cervecera de Colombia S.A.S. (“CCC”). Its portfolio includes the imported Heineken brand. Its has exclusive licensing contracts for importing, distributing and producing Heineken beer in Colombia. In October 2015 Coors and Coors Light brands were incorporated to CCC’s brand portfolio through licensing contract for the production and/or marketing of those brands. As of April and July of 2016, the Tecate and Sol brands were incorporated, respectively, with a licensing contract to produce and/or market them. During April 2017 the Miller and Miller Genuine Draft (MGD) brands were incorporated with a licensing contract to produce and market them.
In Bolivia, through its subsidiary Bebidas Bolivianas BBO S.A. (BBO), the Company participates in the non-alcoholic and alcoholic beverage business since May 2014. Its portfolio of non-alcoholic brands, both owned and licensed, includes the Mendocina, Free cola, Sinalco, Real and Natur-all brands. The alcoholic brands are Real, Capital and Cordillera. In addition BBO markets imported Heineken beer.
F-12
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
The described licenses are detailed as follows:
Main brands under license | |
Licenses | Validity Date |
Aberlour, Absolut, Ballantine's, Beefeater, Blender´s Pride, Borzoi, Chivas Reagal, Cuvee MUMM, Dubonnet, Elyx, G.H. MUMM, Havana Club, Jameson, Kahlúa, Level, Long John, Longmorn, Malibu, Martell, Olmeca, Orloff, Passport, Pernod, Perrier Jouet, Ricard, Royale Salute, Sandeman, Scapa, Strathisla, The Glenlivet, Wyborowa, 100 Pipers, in Chile (1) | June 2019 |
Adrenaline, Adrenaline Rush (9) | February 2028 |
Amstel in Argentina (2) | July 2022 |
Austral in Chile (4) | July 2020 |
Blue Moon in Chile (5) | December 2021 |
Coors in Chile (6) | December 2025 |
Coors in Colombia (7) | December 2020 |
Crush, Canada Dry (Ginger Ale, Agua Tónica and Limón Soda) in Chile (8) | December 2023 |
Frugo in Chile | Indefinitely |
Gatorade in Chile (9) | December 2043 |
Grolsch in Argentina (16) | May 2028 |
Heineken in Bolivia (10) | December 2024 |
Heineken in Chile, Argentina and Uruguay (11) | 10 years renewables |
Heineken in Colombia (12) | March 2028 |
Heineken in Paraguay | May 2023 |
Miller and Miller Genuine Draft in Colombia (15) | December 2026 |
Miller in Argentina (12) | December 2026 |
Nestlé Pure Life in Chile (8) | December 2022 |
Paulaner in Paraguay | April 2019 |
Pepsi, Seven Up and Mirinda in Chile | December 2043 |
Red Bull in Chile (13) | Indefinitely |
Schneider in Paraguay | May 2023 |
Sol in Chile and Argentina (11) | 10 years renewables |
Sol in Colombia (3) | March 2028 |
Sol in Paraguay | January 2023 |
Té Lipton in Chile | March 2020 |
Tecate in Colombia (3) | March 2028 |
Warsteiner para Argentina (17) | May 2028 |
Watt´s in Uruguay | 99 years |
Watt's (nectars, fruit-based drinks and other) rigid packaging, except carton in Chile | Indefinitely |
Watt's in Paraguay (14) | July 2026 |
(1) | Renewable for periods of 3 years. |
(2) | After the initial termination date, license is automatically renewed under the same conditions (Rolling Contract), each year for a period of 10 years, unless notice of non-renewal is given. |
(3) | The contract will remain in effect as long as the Heineken license agreeemente for Colombia remains in force. |
(4) | Renewable for periods of two years, subject to the compliance of the contract conditions. |
(5) | If Renewal criteria have benn satisfied, renewable through December, 2025, thereafter shall automatically renew every year for a new term of 5 years (Rolling Contract). |
(6) | After the initial termination date, license is automatically renewed under the same conditions (Rolling Contract), each year for a period of 5 years, subject to the compliance of the contract conditions. |
(7) | License renewable for one period of 5 years, subject to the compliance of the contract conditions. |
(8) | License renewable for periods of 5 years, subject to the compliance of the contract conditions. |
(9) | License was renewed for a period equal to the duration of the Shareholders Agreement of Bebidas CCU-PepsiCo SpA. |
(10) | License for 10 years, automatically renewable for periods of 5 years, unless notice of non-renewal. |
(11) | License for 10 years, automatically renewable on the same terms (Rolling Contract), each year for a period of 10 years, unless notice of non-renewal is given. |
(12) | After the initial termination date, License is automatically renewable each year for a period of 5 years (Rolling Contract), unless notice of non-renewal is given. |
(13) | Indefinite contract, notice of termination 6 months in advance. |
(14) | Sub-license is renewed automatically and successively for two periods of 5 years each, subject to the terms and conditions stipulated in the International Sub-license agreement of December 28, 2018 between Promarca Internacional Paraguay S.R.L. and Bebidas del Paraguay S.A. |
(15) | Distribution will begin in April 2017 and the begin of local production is estimated by October 2019. |
F-13
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
(16)Till May, 2019, it shall be produced on behalf of CICSA by Cervecería Argentina SA Isenbeck and sold by Cervecería and Maltería Quilmes S.A.
(17)Till May, 2019, it shall be produced on behalf of CICSA by Cervecería Argentina SA Isenbeck and sold by Cervecería and Maltería Quilmes S.A. Prior to the expirty of its term, Parties shall negociate its continuity for five (5) more years.
C)Early termination Budweiser license
The general aspects of the transaction are described below:
a)Description of the Transaction.
According to the Material Event reported on September 6, 2017, the CMF was informed that CCU and Compañía Cervecerías Unidas Argentina S.A. (CCU-A), entity organized under the laws of the Republic of Argentina and a subsidiary of CCU, have agreed with Anheuser-Busch InBev S.A./N.V. (ABI and together with CCU-A the "Parties"), an offer letter ("Term Sheet") which, among other matters, contemplates the early termination of license agreement in Argentina for the brand "Budweiser", signed between CCU-A and Anheuser-Busch, Incorporated (today Anheuser-Busch LLC, a subsidiary of ABI) dated March 26, 2008 (the "License Agreement").
As agreed to in the Early Termination of the License Agreement (the “Transaction”), ABI directly or its subsidiaries (hereinafter together referred to as the “ABI Group”), pays to CCU-A the amount of US$ 306,000,000.
The Transaction also includes the transfer from ABI to CCU-A of: (a) ownership of the brands Isenbeck and Diosa. This does not include the production plant owned by Cervecería Argentina S.A. Isenbeck (CASA Isenbeck) located in Zárate, province of Buenos Aires, Argentina (which will continue to operate under the ownership of ABI Group), nor the contracts with its employees and/or distributors, nor the transfer of any liabilities of CASA Isenbeck; (b) the ownership of the following registered brands in Argentina: Norte, Iguana and Báltica; and (c) the obligation of ABI to make its reasonable best efforts to cause that certain international premium beer brands are licensed to CCU-A (together with the brands identified in letter (b) above and with the brand Diosa referred to as the "Group of Brands") in Argentine territory.
In order to establish a smooth transition of the brands that are transferred by virtue of the Transaction, the Parties will enter into the following contracts (all together with the Early Termination referred to as the “Transaction”):
I.Contract by virtue of which CCU-A will produce for the ABI Group part or all of the volume of the beer Budweiser, for a period of up to one year;
II.Contract by virtue of which the ABI Group will produce for CCU-A part or all of the volume of the beer Isenbeck and Diosa for a period of up to one year;
III.Contract by virtue of which the ABI Group will produce and distribute the Group of Brands, on behalf of CCU-A, for a period of maximum three years; and
IV.Other agreements, documents and/or contracts that the Parties deem necessary for the Transaction (the “Transaction Documents”).
In summary, this agreement with ABI consists of the early termination of the license agreement of the Budweiser brand in exchange for a portfolio of brands representing similar volumes, plus different payments of up to US$ 400,000,000 before taxes, over a period of up to three years.
b)Status of the Transaction:
On March 14, 2018, CCU reported as a Material Event that CCU-A had been notified of the resolution of the Secretario de Comercio del Ministerio de Producción de la Argentina (SECOM), which, based on the favorable opinion of the Comisión Nacional de Defensa de la Competencia (CNDC), approved the Transaction. The resolution established that the Parties must submit to the CNDC, for review and approval, drafts of contracts that contained all of the terms and conditions of the Transaction (the "Contracts"). On March 16, 2018, the Parties filed the Contracts with the CNDC.
On April 27, 2018, CCU-A was notified of the resolution of the CNDC that approved the Contracts, thus fulfilling the condition established in the Term Sheet, becoming binding and therefore, the parties were legally obliged to close the Transaction. The signature of the respective contracts took place on May 2, 2018.
F-14
As a consequence of the closing of the Transaction:
b.1) CCU-A early terminated the license agreement with ABI in Argentina for the brand “Budweiser”.
b.2) CCU-A received a payment from ABI of US$ 306,000,000, equivalents to ThCh$ 185,648,399 before taxes (SeeNote 30 – Other income by function).
b.3) ABI transferred to CCU-A (i) the ownership of the Isenbeck and Diosa brands and certain assets related to said brands (not including the production plant owned by Cervecería Argentina S.A. Isenbeck, nor the contracts with its employees and/or distributors, nor the transfer of any liabilities of said entity); and (ii) ownership of the following registered trademarks in Argentina: Norte, Iguana and Báltica. The five brands mentioned above were valued at US$ 44,044,000, equivalents to ThCh$ 26,721,236 (SeeNote 17 – Intangible assets other than goodwilland Note 30 – Other income by function).
As of December 31, 20152018, the Company had a totalnet effect of 8,100 employees according to the following detail:
| Number of employes | |
| Parent company | Consolidated |
Main Executives | 86 | 400 |
Professionals and techniciens | 252 | 2,138 |
Workers | 27 | 5,562 |
Total | 365 | 8,100 |
aforementioned compensations generated in the consolidated results of Compañía Cervecerías Unidas S.A. isand subsidiaries a Net income attributable to the equity holders of the parent of ThCh$ 157,358,973, shown in (SeeNote 6 – Financial information as per operating segments).
b.4) CCU-A was granted the licenses of the Warsteiner and Grolsch brands for the Argentine territory (these brands, together with Isenbeck, Diosa, Norte, Iguana and Báltica, the “Brands”);
b.5) CCU-A received an ABI payment of US$ 10,000,000, equivalents to ThCh$ 6,109,800, before taxes, for the production of Budweiser of one year, which will be reflected in results under Other income by function as performance obligations are met, of which as of December 31, 2018 have been recognized in Other income by function US$ 6,451,629, equivalents to ThCh$ 4,840,167; and
b.6) CCU-A will receive from ABI annual payments of up to US$ 28,000,000, equivalents to ThCh$ 17,107,440, before taxes, for a period of up to three years, depending on the controlvolume and the timing of Inversiones y Rentas S.A. (IRSA)the transition to CCU-A of the production and/or commercialization of the Brands, which will be reflected in the results, under Net sales, Cost of sales and MSD&A, as the performance obligations are met, of which as of December 31, 2018 have been recognized in results an amount of US$ 19.802.868 , which isequivalents to ThCh$ 14,251,811.
This transaction did not result in impairment of the directproductive assets of the Company.
F-15
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
D)Direct and indirect owner of 60% of the Company shares. IRSA is currently a joint venture between Quiñenco S.A. and Heineken Chile Limitada, a company controlled by Heineken Americas B.V, each with a 50% equity participation.significant subsidiaries
The consolidated financial statements include the following direct and indirect significant subsidiaries where the percentage of participation represents the economic interestsinterest at thea consolidated level:
Subsidiary | Tax ID | Country of origin | Functional currency | Share percentage direct and indirect | |||
As of December 31, 2015 | As of December 31, 2014 | ||||||
Direct | Indirect | Total | Total | ||||
Cervecera CCU Chile Limitada | 96,989,120-4 | Chile | Chilean pesos | 99.7500 | 0.2499 | 99.9999 | 99.9999 |
Embotelladora Chilenas Unidas S.A. (4) | 99,501,760-1 | Chile | Chilean pesos | 97.7746 | 2.1592 | 99.9338 | 99.9433 |
Cía. Cervecerías Unidas Argentina S.A. | 0-E | Argentina | Argentine pesos | - | 99.9923 | 99.9923 | 99.9923 |
Viña San Pedro Tarapacá S.A. | 91,041,000-8 | Chile | Chilean pesos | - | 64.6980 | 64.6980 | 64.6980 |
Compañía Pisquera de Chile S.A. | 99,586,280-8 | Chile | Chilean pesos | 46.0000 | 34.0000 | 80.0000 | 80.0000 |
Transportes CCU Limitada | 79,862,750-3 | Chile | Chilean pesos | 98.0000 | 2.0000 | 100.0000 | 100.0000 |
CCU Investments Limited | 0-E | Islas Cayman | Chilean pesos | 99.9999 | 0.0001 | 100.0000 | 100.0000 |
Inversiones INVEX DOS CCU Limitada | 76,126,311-0 | Chile | Chilean pesos | 99.6451 | 0.3548 | 99.9999 | 99.9997 |
CRECCU S.A. | 76,041,227-9 | Chile | Chilean pesos | 99.9602 | 0.0398 | 100.0000 | 100.0000 |
Fábrica de Envases Plásticos S.A. | 86,150,200-7 | Chile | Chilean pesos | 90.9100 | 9.0866 | 99.9966 | 99.9966 |
Southern Breweries Establishment | 0-E | Vaduz-Liechtenstein | Chilean pesos | 50.0000 | 49.9553 | 99.9553 | 99.9553 |
Comercial CCU S.A. | 99,554,560-8 | Chile | Chilean pesos | 50.0000 | 49.9866 | 99.9866 | 99.9866 |
CCU Inversiones S.A. (1) | 76,593,550-4 | Chile | Chilean pesos | 98.8398 | 1.1334 | 99.9732 | 99.9732 |
Millahue S.A. | 91,022,000-4 | Chile | Chilean pesos | 99.9621 | - | 99.9621 | 99.9621 |
Aguas CCU-Nestlé Chile S.A. (2) | 76,007,212-5 | Chile | Chilean pesos | - | 50.0716 | 50.0716 | 50.0716 |
CCU Inversiones II Limitada (3) | 76,349,531-0 | Chile | Chilean pesos | 80.0000 | 19.9946 | 99.9946 | 99.9946 |
Compañía Cervecera Kunstmann S.A. | 96,981,310-6 | Chile | Chilean pesos | 50.0007 | - | 50.0007 | 50.0007 |
Inversiones INVEX TRES Limitada | 76,248,389-0 | Chile | Chilean pesos | 99.0000 | 0.9884 | 99.9884 | 99.9884 |
Milotur S.A. | 0-E | Uruguay | Uruguayan pesos | 100.0000 | - | 100.0000 | 100.0000 |
Coralina S.A. | 0-E | Uruguay | Uruguayan pesos | 100.0000 | - | 100.0000 | 100.0000 |
Marzurel S.A. | 0-E | Uruguay | Uruguayan pesos | 100.0000 | - | 100.0000 | 100.0000 |
Bebidas del Paraguay S.A. (3) | 0-E | Paraguay | Paraguayan guarani | 50.0050 | - | 50.0050 | 50.0050 |
Distribuidora del Paraguay S.A. (3) | 0-E | Paraguay | Paraguayan guarani | 49.9590 | - | 49.9590 | 49.9590 |
Bebidas Ecusa SpA. (4) | 76,517,798-7 | Chile | Chilean pesos | - | 99.9338 | 99.9338 | - |
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Subsidiary | Tax ID | Country of origin | Functional currency | Share percentage direct and indirect | |||
As of December 31, 2018 | As of December 31, 2017 | ||||||
Direct % | Indirect % | Total % | Total % | ||||
Aguas CCU-Nestlé Chile S.A. | 76,007,212-5 | Chile | Chilean Pesos | - | 50.0917 | 50.0917 | 50.0917 |
Cervecera Guayacán SpA. (***) (13) | 76,035,409-0 | Chile | Chilean Pesos | - | 25.0006 | 25.0006 | - |
CRECCU S.A. | 76,041,227-9 | Chile | Chilean Pesos | 99.9602 | 0.0398 | 100.0000 | 100.0000 |
Cervecería Belga de la Patagonia S.A. (***) | 76,077,848-6 | Chile | Chilean Pesos | - | 25.5034 | 25.5034 | 25.5034 |
Inversiones Invex CCU Dos Ltda. | 76,126,311-0 | Chile | Chilean Pesos | 99.8516 | 0.1484 | 100.0000 | 100.0000 |
Inversiones Invex CCU Tres Ltda. (8) | 76,248,389-0 | Chile | Chilean Pesos | 99.9999 | 0.0001 | 100.0000 | 100.0000 |
Bebidas CCU-PepsiCo SpA. (***) | 76,337,371-1 | Chile | Chilean Pesos | - | 49.9888 | 49.9888 | 49.9866 |
CCU Inversiones II Ltda. (16) | 76,349,531-0 | Chile | US Dollar | 99.7133 | 0.2867 | 100.0000 | 99.9999 |
Bebidas Carozzi CCU SpA. (***) | 76,497,609-6 | Chile | Chilean Pesos | - | 49.9917 | 49.9917 | 49.9917 |
Bebidas Ecusa SpA. | 76,517,798-7 | Chile | Chilean Pesos | - | 99.9834 | 99.9834 | 99.9834 |
Promarca Internacional SpA. (***) | 76,574,762-7 | Chile | US Dollar | - | 49.9917 | 49.9917 | 49.9917 |
CCU Inversiones S.A. (10) | 76,593,550-4 | Chile | Chilean Pesos | 99.0242 | 0.7533 | 99.7775 | 99.9733 |
Inversiones Internacionales SpA. | 76,688,727-9 | Chile | US Dollar | - | 80.0000 | 80.0000 | 80.0000 |
New Ecusa S.A. | 76,718,230-9 | Chile | Chilean Pesos | - | 99.9834 | 99.9834 | 99.9834 |
Promarca S.A. (***) | 76,736,010-K | Chile | Chilean Pesos | - | 49.9917 | 49.9917 | 49.9917 |
CCU Inversiones III SpA. (14) | 76,933,685-0 | Chile | US Dollar | - | 99.9950 | 99.9950 | - |
Vending y Servicios CCU Ltda. | 77,736,670-K | Chile | Chilean Pesos | - | 99.9779 | 99.9779 | 99.9738 |
Inversiones Invex CCU Ltda. | 78,418,890-6 | Chile | US Dollar | 6.7979 | 93.1941 | 99.9920 | 99.9905 |
Transportes CCU Ltda. | 79,862,750-3 | Chile | Chilean Pesos | 98.0000 | 2.0000 | 100.0000 | 100.0000 |
Fábrica de Envases Plásticos S.A. | 86,150,200-7 | Chile | Chilean Pesos | 90.9100 | 9.0866 | 99.9966 | 99.9966 |
Millahue S.A. | 91,022,000-4 | Chile | Chilean Pesos | 99.9621 | - | 99.9621 | 99.9621 |
Viña San Pedro Tarapacá S.A. (*) (10) | 91,041,000-8 | Chile | Chilean Pesos | - | 82.9870 | 82.9870 | 67.1992 |
Manantial S.A. (2) | 96,711,590-8 | Chile | Chilean Pesos | - | 50.5507 | 50.5507 | 50.5507 |
Viña Altaïr SpA. (6) | 96,969,180-9 | Chile | Chilean Pesos | - | 82.9870 | 82.9870 | 67.1992 |
Cervecería Kunstmann S.A. | 96,981,310-6 | Chile | Chilean Pesos | 50.0007 | - | 50.0007 | 50.0007 |
Cervecera CCU Chile Ltda. | 96,989,120-4 | Chile | Chilean Pesos | 99.7500 | 0.2499 | 99.9999 | 99.9999 |
Embotelladoras Chilenas Unidas S.A. | 99,501,760-1 | Chile | Chilean Pesos | 99.0670 | 0.9164 | 99.9834 | 99.9834 |
Viña Valles de Chile S.A. | 99,531,920-9 | Chile | Chilean Pesos | - | 82.9870 | 82.9870 | 67.1992 |
Comercial CCU S.A. | 99,554,560-8 | Chile | Chilean Pesos | 50.0000 | 49.9888 | 99.9888 | 99.9866 |
Viña Orgánica SPT S.A. (11) | 99,568,350-4 | Chile | Chilean Pesos | - | - | - | 67.1992 |
Compañía Pisquera de Chile S.A. | 99,586,280-8 | Chile | Chilean Pesos | 46.0000 | 34.0000 | 80.0000 | 80.0000 |
Andina de Desarrollo SACFAIMM | 0-E | Argentina | Argentine Pesos | - | 59.1971 | 59.1971 | 59.1970 |
Cía. Cervecerías Unidas Argentina S.A. (9) | 0-E | Argentina | Argentine Pesos | - | 99.9936 | 99.9936 | 99.9924 |
Compañía Industrial Cervecera S.A. (1) | 0-E | Argentina | Argentine Pesos | - | 99.9950 | 99.9950 | 99.9949 |
Finca Eugenio Bustos S.A. (4) | 0-E | Argentina | Argentine Pesos | - | - | - | 67.1992 |
Finca La Celia S.A. | 0-E | Argentina | Argentine Pesos | - | 82.9870 | 82.9870 | 67.1992 |
Los Huemules S.R.L. | 0-E | Argentina | Argentine Pesos | - | 74.9979 | 74.9979 | 74.9979 |
Sáenz Briones y Cía. S.A.I.C. | 0-E | Argentina | Argentine Pesos | - | 89.9150 | 89.9150 | 89.9150 |
Bebidas Bolivianas BBO S.A. (12) | 0-E | Bolivia | Bolivians | - | 51.0000 | 51.0000 | - |
International Spirits Investments USA LLC (7) | 0-E | United States | US Dollar | - | 80.0000 | 80.0000 | 80.0000 |
Inversiones CCU Lux S.à r.l. (15) | 0-E | Luxemburgo | US Dollar | - | 99.9999 | 99.9999 | - |
Southern Breweries C.S.C. (3) | 0-E | Luxemburgo | US Dollar | 37.7810 | 62.2141 | 99.9951 | 99.9942 |
Bebidas del Paraguay S.A. (5) (**) | 0-E | Paraguay | Paraguayan Guaranies | - | 50.0049 | 50.0049 | 50.0049 |
Distribuidora del Paraguay S.A. (**) | 0-E | Paraguay | Paraguayan Guaranies | - | 49.9589 | 49.9589 | 49.9589 |
Sajonia Brewing Company S.R.L. (5) (***) | 0-E | Paraguay | Paraguayan Guaranies | - | 25.5025 | 25.5025 | 25.5025 |
Andrimar S.A. | 0-E | Uruguay | Uruguayan Pesos | - | 99.9999 | 99.9999 | 99.9999 |
Coralina S.A. | 0-E | Uruguay | Uruguayan Pesos | - | 99.9999 | 99.9999 | 99.9999 |
Marzurel S.A. | 0-E | Uruguay | Uruguayan Pesos | - | 99.9999 | 99.9999 | 99.9999 |
Milotur S.A. | 0-E | Uruguay | Uruguayan Pesos | - | 99.9999 | 99.9999 | 99.9999 |
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(*)Listed company in Chile.
(**) SeeNote 1 – General Information, letter E),Subsidiaries with direct or indirect participation of less than 50%
(***) Subsidiaries in which we have an interest of more or equal than 50% through one or more subsidiaries of the Company.
F-16
F-12
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
In addition to what is shown in the preceding table, presented above, belowthe following are the percentages of participation with voting rights, in each of the subsidiaries as of December 31, 2015 and 2014, respectively.subsidiaries. Each shareholder has one vote per share which he ownsowned or represents.represented. The percentage of participation with voting rights represents the sum of the direct participation and indirect participation viathrough a subsidiary.
Subsidiary | Tax ID | Country of origin | Functional currency | Share percentage with voting rights | |
As of December 31, 2015 | As of December 31, 2014 | ||||
% | % | ||||
Cervecera CCU Chile Limitada | 96,989,120-4 | Chile | Chilean pesos | 100.0000 | 100.0000 |
Embotelladora Chilenas Unidas S.A. (4) | 99,501,760-1 | Chile | Chilean pesos | 99.9338 | 99.9444 |
Cía. Cervecerías Unidas Argentina S.A. | 0-E | Argentina | Argentine pesos | 100.0000 | 100.0000 |
Viña San Pedro Tarapacá S.A. | 91,041,000-8 | Chile | Chilean pesos | 64.6980 | 64.6980 |
Compañía Pisquera de Chile S.A. | 99,586,280-8 | Chile | Chilean pesos | 80.0000 | 80.0000 |
Transportes CCU Limitada | 79,862,750-3 | Chile | Chilean pesos | 100.0000 | 100.0000 |
CCU Investments Limited | 0-E | Islas Cayman | Chilean pesos | 100.0000 | 100.0000 |
Inversiones INVEX DOS CCU Limitada | 76,126,311-0 | Chile | Chilean pesos | 100.0000 | 100.0000 |
CRECCU S.A. | 76,041,227-9 | Chile | Chilean pesos | 100.0000 | 100.0000 |
Fábrica de Envases Plásticos S.A. | 86,150,200-7 | Chile | Chilean pesos | 100.0000 | 100.0000 |
Southern Breweries Establishment | 0-E | Vaduz-Liechtenstein | Chilean pesos | 100.0000 | 100.0000 |
Comercial CCU S.A. | 99,554,560-8 | Chile | Chilean pesos | 100.0000 | 100.0000 |
CCU Inversiones S.A. (1) | 76,593,550-4 | Chile | Chilean pesos | 99.9737 | 99.9737 |
Millahue S.A. | 91,022,000-4 | Chile | Chilean pesos | 99.9621 | 99.9621 |
Aguas CCU-Nestlé Chile S.A. (2) | 76,007,212-5 | Chile | Chilean pesos | 50.1000 | 50.1000 |
CCU Inversiones II Limitada (3) | 76,349,531-0 | Chile | Chilean pesos | 100.0000 | 100.0000 |
Compañía Cervecera Kunstmann S.A. | 96,981,310-6 | Chile | Chilean pesos | 50.0007 | 50.0007 |
Inversiones INVEX TRES Limitada | 76,248,389-0 | Chile | Chilean pesos | 100.0000 | 100.0000 |
Milotur S.A. | 0-E | Uruguay | Uruguayan pesos | 100.0000 | 100.0000 |
Coralina S.A. | 0-E | Uruguay | Uruguayan pesos | 100.0000 | 100.0000 |
Marzurel S.A. | 0-E | Uruguay | Uruguayan pesos | 100.0000 | 100.0000 |
Bebidas del Paraguay S.A. (3) | 0-E | Paraguay | Paraguayan guarani | 50.0050 | 50.0050 |
Distribuidora del Paraguay S.A. (3) | 0-E | Paraguay | Paraguayan guarani | 49.9590 | 49.9590 |
Bebidas Ecusa SpA. (4) | 76,517,798-7 | Chile | Chilean pesos | 99.9338 | - |
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Subsidiary | Tax ID | Country of origin | Functional currency | Share percentage with voting rights | |
As of December 31, 2018 | As of December 31, 2017 | ||||
% | % | ||||
Aguas CCU-Nestlé Chile S.A. | 76,007,212-5 | Chile | Chilean Pesos | 50.0917 | 50.0917 |
Cervecera Guayacán SpA. (***) (13) | 76,035,409-0 | Chile | Chilean Pesos | 25.0006 | - |
CRECCU S.A. | 76,041,227-9 | Chile | Chilean Pesos | 100.0000 | 100.0000 |
Cervecería Belga de la Patagonia S.A. (***) | 76,077,848-6 | Chile | Chilean Pesos | 25.5034 | 25.5034 |
Inversiones Invex CCU Dos Ltda. | 76,126,311-0 | Chile | Chilean Pesos | 100.0000 | 100.0000 |
Inversiones Invex CCU Tres Ltda. (8) | 76,248,389-0 | Chile | Chilean Pesos | 100.0000 | 100.0000 |
Bebidas CCU-PepsiCo SpA. (***) | 76,337,371-1 | Chile | Chilean Pesos | 49.9888 | 49.9866 |
CCU Inversiones II Ltda. (16) | 76,349,531-0 | Chile | US Dollar | 100.0000 | 100.0000 |
Bebidas Carozzi CCU SpA. (***) | 76,497,609-6 | Chile | Chilean Pesos | 49.9917 | 49.9917 |
Bebidas Ecusa SpA. | 76,517,798-7 | Chile | Chilean Pesos | 99.9834 | 99.9834 |
Promarca Internacional SpA. (***) | 76,574,762-7 | Chile | US Dollar | 49.9917 | 49.9917 |
CCU Inversiones S.A. (10) | 76,593,550-4 | Chile | Chilean Pesos | 99.7775 | 99.9733 |
Inversiones Internacionales SpA. | 76,688,727-9 | Chile | US Dollar | 80.0000 | 80.0000 |
New Ecusa S.A. | 76,718,230-9 | Chile | Chilean Pesos | 99.9834 | 99.9834 |
Promarca S.A. (***) | 76,736,010-K | Chile | Chilean Pesos | 49.9917 | 49.9917 |
CCU Inversiones III SpA. (14) | 76,933,685-0 | Chile | US Dollar | 100.0000 | - |
Vending y Servicios CCU Ltda. | 77,736,670-K | Chile | Chilean Pesos | 99.9779 | 99.9738 |
Inversiones Invex CCU Ltda. | 78,418,890-6 | Chile | US Dollar | 99.9920 | 99.9905 |
Transportes CCU Ltda. | 79,862,750-3 | Chile | Chilean Pesos | 100.0000 | 100.0000 |
Fábrica de Envases Plásticos S.A. | 86,150,200-7 | Chile | Chilean Pesos | 100.0000 | 100.0000 |
Millahue S.A. | 91,022,000-4 | Chile | Chilean Pesos | 99.9621 | 99.9621 |
Viña San Pedro Tarapacá S.A. (*) (10) | 91,041,000-8 | Chile | Chilean Pesos | 82.9870 | 67.1992 |
Manantial S.A. (2) | 96,711,590-8 | Chile | Chilean Pesos | 50.5507 | 50.5507 |
Viña Altaïr SpA. (6) | 96,969,180-9 | Chile | Chilean Pesos | 82.9870 | 67.1992 |
Cervecería Kunstmann S.A. | 96,981,310-6 | Chile | Chilean Pesos | 50.0007 | 50.0007 |
Cervecera CCU Chile Ltda. | 96,989,120-4 | Chile | Chilean Pesos | 100.0000 | 100.0000 |
Embotelladoras Chilenas Unidas S.A. | 99,501,760-1 | Chile | Chilean Pesos | 99.9834 | 99.9834 |
Viña Valles de Chile S.A. | 99,531,920-9 | Chile | Chilean Pesos | 82.9870 | 67.1992 |
Comercial CCU S.A. | 99,554,560-8 | Chile | Chilean Pesos | 100.0000 | 100.0000 |
Viña Orgánica SPT S.A. (11) | 99,568,350-4 | Chile | Chilean Pesos | - | 67.1992 |
Compañía Pisquera de Chile S.A. | 99,586,280-8 | Chile | Chilean Pesos | 80.0000 | 80.0000 |
Andina de Desarrollo SACFAIMM | 0-E | Argentina | Argentine Pesos | 100.0000 | 100.0000 |
Cía. Cervecerías Unidas Argentina S.A. (9) | 0-E | Argentina | Argentine Pesos | 100.0000 | 100.0000 |
Compañía Industrial Cervecera S.A. (1) | 0-E | Argentina | Argentine Pesos | 100.0000 | 100.0000 |
Finca Eugenio Bustos S.A. (4) | 0-E | Argentina | Argentine Pesos | - | 67.1992 |
Finca La Celia S.A. | 0-E | Argentina | Argentine Pesos | 82.9870 | 67.1992 |
Los Huemules S.R.L. | 0-E | Argentina | Argentine Pesos | 74.9979 | 74.9979 |
Sáenz Briones y Cía. S.A.I.C. | 0-E | Argentina | Argentine Pesos | 100.0000 | 100.0000 |
Bebidas Bolivianas BBO S.A. (12) | 0-E | Bolivia | Bolivians | 51.0000 | - |
International Spirits Investments USA LLC (7) | 0-E | United States | US Dollar | 80.0000 | 80.0000 |
Inversiones CCU Lux S.à r.l. (15) | 0-E | Luxemburgo | US Dollar | 99.9999 | - |
Southern Breweries C.S.C. (3) | 0-E | Luxemburgo | US Dollar | 100.0000 | 100.0000 |
Bebidas del Paraguay S.A. (5) (**) | 0-E | Paraguay | Paraguayan Guaranies | 50.0049 | 50.0049 |
Distribuidora del Paraguay S.A. (**) | 0-E | Paraguay | Paraguayan Guaranies | 49.9589 | 49.9589 |
Sajonia Brewing Company S.R.L. (5) (***) | 0-E | Paraguay | Paraguayan Guaranies | 25.5025 | 25.5025 |
Andrimar S.A. | 0-E | Uruguay | Uruguayan Pesos | 99.9999 | 99.9999 |
Coralina S.A. | 0-E | Uruguay | Uruguayan Pesos | 99.9999 | 99.9999 |
Marzurel S.A. | 0-E | Uruguay | Uruguayan Pesos | 99.9999 | 99.9999 |
Milotur S.A. | 0-E | Uruguay | Uruguayan Pesos | 99.9999 | 99.9999 |
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(*)Listed company in Chile.
(**) SeeNote 1 – General Information, letter E),Subsidiaries with direct or indirect participation of less than 50%
(***) Subsidiaries in which we have an interest of more or equal than 50% through one or more subsidiaries of the Company.
F-17
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
The main movements in the ownership of the subsidiaries included in these consolidated financial statements are the following:
(1) Compañía Industrial Cervecera S.A.
On January 7, 2016, subsidiary Compañía Industrial Cervecera S.A. (CICSA), acquired 50.99% of the stock rights of Los Huemules S.R.L (LH). As a consequence of the above mentioned the shareholders of Los Huemules S.R.L. are Cervecería Kunstmann S.A. (CK) and CICSA with 49.01% and 50.99%, respectively. The final amount of this transaction was
ThCh$ 118,092. Subsequently, on March 16, 2017, the stock rights of Los Huemules S.R.L. were transferred from CICSA to CCK, leaving final interest at CICSA with 50.0001% and CCK with 49.9999%.
(2) Manantial S.A.
On January 29, 2016, subsidiaries Aguas CCU-Nestlé Chile S.A. (Aguas) and Embotelladoras Chilenas Unidas S.A. (ECUSA) acquired 48.07% and 0.92% of the shares of Manantial S.A. (Manantial) respectively, exercising the call option granted in the Shareholders’ Agreement of Manantial. As a consequence, Compañía Cervecerías Unidas S.A. is currently the indirect owner of 100% of the shares of Manantial, becoming the only direct shareholders of Manantial: (i) Aguas with 99.08% of the capital stock, and (ii) ECUSA with 0.92% of the capital stock. The total amount of this transaction was ThCh$ 19,111,686.
(3) Southern Breweries S.C.S. (SB SCS) (Ex Southern Breweries Limited)
On August 26, 2016, subsidiaries Saint Joseph Investments Limited and South Investments Limited merged with CCU Cayman Limited, which became the legal continuer.
On the other hand, in October 2016, Southern Breweries Establishment, a subsidiary of CCU in Liechtenstein, became a stock company under the name "Southern Breweries Aktiengesellschaft" and on October 18, 2016 it was re-domiciled to the Cayman Islands. Subsequently, in November 2016, the bylaws of that company were modified and its name was changed to "Southern Breweries Limited". Finally, the aforementioned subsidiary CCU Cayman Limited merged with Southern Breweries Limited, which became the legal continuer. The transactions mentioned above had no effects on the results of the Company.
On December 7, 2018, Southern Breweries Limited (Subsidiary of CCU) was re-domicilied from Cayman Islands to Luxembourg and changed its name to Southern Breweries S.á.r.l., later and once the subsidiary was stablished in Luxembourg it was converted from S.á.r.l. to S.C.S. Finally, the Company sold one share of SB SCS to the subsidiary Inversiones CCU Lux S.á r.l. by an amount of US $ 2,600.
(4) Finca Eugenio Bustos S.A.
On December 5, 2016, the Board of Directors resolved the dissolution of Finca Eugenio Bustos S.A., which was formalized on May 18, 2018 before the Public Registry of Commerce of Argentina.
(5)Bebidas del Paraguay S.A. andSajonia Brewing Company S.R.L.
On December 29, 2016, the Company paid committed capital ofThCh$ 2,226,656 in Bebidas del Paraguay S.A. and this transaction does not change the percentage of participation.
F-18
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
As explained inNote 15 – Business combinations, on March 31, 2016, through its subsidiary Bebidas del Paraguay S.A., acquired 51% of the stock rights of paraguayan company Sajonia Brewing Company S.R.L. (formerly Artisan SRL). The amount of this transaction was ThCh$ 641,489 (equivalents to US$ 1,000,000). During 2017, the Company has determined the fair values of assets and liabilities for this business combination as follows:
Assets and Liabilities | Fair Value |
ThCh$ | |
Cash and cash equivalents | 462,873 |
Trade and other current receivables | 9,813 |
Inventories | 19,552 |
Total current assets | 492,238 |
Intangible assets other than goodwill | 259,712 |
Property, plant and equipment (net) | 79,126 |
Total non-current assets | 338,838 |
Total activos | 831,076 |
Trade and other current payables | 7,063 |
Total current liabilities | 7,063 |
Deferred tax liabilities | 25,948 |
Total non-current liabilities | 25,948 |
Total liabilities | 33,011 |
Total Shareholders' Equity | 798,065 |
Non-controlling interests | 391,052 |
Net identifiable assets acquired | 407,013 |
Goodwill | 234,476 |
Investment Value | 641,489 |
(6) Viña Altaïr SpA. and Viña del Mar de Casablanca S.A.
On May 31, 2017, subsidiary Viña del Mar Casablanca S.A. merged with Viña Altaïr SpA., which became the legal continuer. The transactions mentioned above had no significant effects on the results of the Company.
(7) International Spirits Investments USA LLC
On June 2017, Compañía Pisquera de Chile S.A. (CPCh), through its subsidiary International Spirits Investments USA LLC, it incorporated in its portfolio the Peruvian brand BarSol, acquired the 40% of stock rights of Americas Distilling Investments LLC, which is the owner of the brand and productive assets in Perú.
(8) CCU Investment Limited and Inversiones Invex CCU Tres Ltda.
On October 30, 2017, subsidiary CCU Investments Limited merged with Inversiones Invex CCU Tres Ltda., which became the legal continuer. The transactions mentioned above had no effects on the results of the Company.
(9) Compañía Cervecerías Unidas Argentina S.A.
As a result of the early termination of Budweiser license, as described inNote 1 – General information, letter C), and based on the Audited Financial Statements as of and for the year ended on April 30, 2018 of the subsidiary Compañía Cervecerías Unidas Argentina S.A., on June 5, 2018, held the Ordinary and Extraordinary General Assembly of such subsidiary, agreed the distribution of dividends for a total amount of ARS 5,141,760,000 (equivalent to ThCh$ 129,858,280), according with the stock rights of their shareholders, which are domiciled in Chile, distributed to Inversiones Invex CCU Limitada the amount of ARS 4,146,778,022.40 (equivalent to ThCh$ 104,729,404 (80.65 %)) and Inversiones Invex CCU Dos Limitada the amount of ARS 994,981,977.60 (equivalent to ThCh$ 25,128,876 (19.35%)). According to the above mentioned, the distribution of dividends to the Chilean shareholders, is based on the realized result to April 30, 2018 of the subsidiary Compañía Cervecerías Unidas Argentina S.A.
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Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
(10) CCU Inversiones S.A. and Viña San Pedro Tarapacá S.A. (VSPT).
In September and November, 2012, the Company,On December 12, 2017, CCU, through its subsidiary CCU Inversiones S.A., acquired the 2.5% of the shares of VSPT for a total amount of ThCh$ 7,800,000, equivalent to 1,000,000,000 shares. As a result of the above, the indirect participation of CCU, through CCU Inversiones S.A., exceeded two-thirds of VSPT´s shares, therefore, the provisions of article 199 bis of Law N° 18,045, the Chilean Securities Market Law (LMV) apply, which imposes the obligation to initiate, within 30 days from the date of such acquisition, a tender offer for the remaining shares (Offer) under the terms of said regulations. The price to be offered for the shares subject to the Offer was set at $ 7.8 per share. In compliance with the above, on December 27, 2017 the tender offer initiation notice was published, which period runs from December 28, 2017 until January 26, 2018, inclusive, under the terms and conditions set forth in the aforementioned regulations. On January 29, 2018, the outcome notice of the tender offer was published, acquiring CCU Inversiones S.A. an additional 10.4430% interest15.79% of said subsidiary for the amount of ThCh$ 49,222,782, equivalent to 6,310,613,119 shares, thus resulting in an 83.01% stake in VSPT.
On January 29, 2018, the Company acquired an additional 0.18% of subsidiary CCU Inversiones S.A. for an amount of ThCh$ 49,400,000, equivalent to 934,774,763 shares, thus resulting in an 99.02% stake in this subsidiary.
(11) Viña Orgánica SPT S.A.
On July 31, 2018, subsidiary Viña Orgánica SPT S.A. merged with Viña San Pedro Tarapacá S.A. for ThCh$ 12,521,899 increasing its ownership interest to 60.4488%. , which became the legal continuer and beginning from August 1, 2018. The transactions mentioned above had no significant effects on the results of the Company.
(12) Bebidas Bolivianas BBO S.A. (BBO)
On May 7, 2014, the Company acquired 34% of the stock rights of Bebidas Bolivianas BBO S.A.(BBO) a Bolivian and a closed stock company that produces soft drinks and beers in three plants located in Santa Cruz de la Sierra and Nuestra Señora de la Paz cities.
Subsequently, during 2013,on August 9, 2018, the Company acquired an additional 4.2664% interest the 17% of the shares of BBOfor an amount of
US$ 8,500,000, equivalents to ThCh$ 5,627,425 increasing its ownership interest to 64.7153%5,457,935, thus resulting in an 51% stake in BBO (seeNote 15 – Business combinations). As theThe Company has controldeterminated the fair values of assets and liabilities for this subsidiary, the difference of ThCH$ 7,254,957 and ThCh$ 2,527,217 generated between purchase price and the equity method value was recorded under the item Other reserves in Equity in 2012 and 2013, respectively.
(2) Aguas CCU-Nestlé S.A.
On December 24, 2012, the Company, through the subsidiary Aguas CCU-Nestlé S.A., acquired 51.01% of shares of Manantial S.A. for ThCh$ 9,416,524. Manantial S.A. isa Chilean company that specializes in purified water in bottlesfor home and office, use through dispensers referred to internationallybusiness combinations as HOD (Home and Office Delivery). Subsequently, on June 7, 2013, the Company paid the outstanding balance of ThCh$ 1,781,909.follows:
Assets and Liabilities | Fair Value |
ThCh$ | |
Total current assets | 3,942,346 |
Total non-current assets | 22,748,015 |
Total Assets | 26,690,361 |
Total current liabilities | 5,393,779 |
Total non-current liabilities | 8,854,809 |
Total liabilities | 14,248,588 |
Net identifiable assets acquired | 12,441,773 |
Non-controlling interests | (6,096,469) |
Goodwill | 10,376,570 |
Investment value | 16,721,874 |
As a result of the previously mentioned fair values intangibles and goodwill have been generated, which are exposed inNote 17 – Intangible assets other than goodwilland Note 18 – Goodwill.
On September 20, 2018, the Company paid committed capital of US$ 1,530,029 (equivalent toThCh$ 1,044,688) in BBO, since both partners concurred with the same capital contributions, the percentages of participation were maintained.
(13) Cervecera Guayacán SpA.
On August 31, 2018, the subsidiary Cervecería Kunstmann S.A. (CK) acquired an additional 30.0004% of the stock rights of Cervecera Guayacán SpA. for an amount of ThCh$ 361,560, equivalent to 39,232 shares and the subscription and payment
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F-13
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
of ThCh$ 470,711, equivalent to 49,038 shares. As a consequence above mentioned CKhas the 50.0004% stake in Cervecera Guayacán SpA. (see(3)Note 15 – Business combinations). The Company has determinated the fair values of assets and liabilities for this business combination as follows:
Assets and Liabilities | Fair Value |
ThCh$ | |
Total current assets | 507,149 |
Total non-current assets | 1,355,220 |
Total Assets | 1,862,369 |
Total current liabilities | 238,265 |
Total non-current liabilities | 306,828 |
Total liabilities | 545,093 |
Net identifiable assets | 1,317,276 |
Non-controlling interests | (658,633) |
Goodwill | 456,007 |
Investment value | 1,114,650 |
As a result of the previously mentioned fair values intangibles and goodwill have been generated, which are exposed inNote 17 – Intangible assets other than goodwilland Note 18 – Goodwill.
(14) CCU Inversiones III SpA.
On september 13, 2018, the subsidiary Southern Breweries S.C.S. (ex Southern Breweries Limited) incorporated the company CCU Inversiones III SpA. in Chile, whose purpose will be to make all kinds of investments, in any type of goods, foreign currency, financial instruments and commercial paper, including shares or social rights in companies incorporated in Chile or abroad, among others.
(15) Inversiones CCU Lux S.á r.l.
On November 13, 2018, the subsidiary Inversiones CCU Lux S.á r.l. was created in Luxembourg, where the subsidiary CCU Inversiones II Ltda. made the total stock payment of Euros 12,000 (12,000 shares), equivalent to ThCh$ 9,252.
(16) CCU Inversiones II Limitada
On December 17, 2018, the Company made a capital contribution to the subsidiary CCU Inversiones II Ltda., through the shareholding contribution of the Bolivian subsidiary, Bebidas Bolivianas BBO S.A. for an amount of
US$ 40,294,696, equivalents to ThCh $ 27,659,891.
E)Subsidiaries with direct or indirect participation of less than 50%
As explainedThese Consolidated Financial Statements incorporate as a subsidiary to Distribuidora del Paraguay S.A., a company inNote 20, the Company participates which we have a total participation of 50% of shares of Central Cervecera de Colombia S.A.S.49.9589%.
As explained inNote 8, during December 2013, the Company acquired 50.005% and 49.959% of the stock of Bebidas del Paraguay S.A. (BdP) and Distribuidora del Paraguay S.A., respectively. This transaction allows (DdP) are considered to be one economic group that shares their operational and financial strategy, leaded by the Company, participates insame management team that seeks compliance with the beerstrategic plan defined simultaneously for both entities. Additionally BdP produces different brands owned by it. DdP is its sole and exclusive customer, which is responsible for the distribution business, and production and marketing of non-alcoholic drinks, watersBdP’s products. The administrative and nectars. The total amountcommercial integration added to its operational and financial dependence of DdP explain the reason why BdP proceeds to present this transaction was ThCh$ 11,254,656. Subsequently, on June 9, 2015, the Company paidentity as a committed capitalsubsidiary of ThCh$ 7,414,290.CCU.
(4) Embotelladoras Chilenas Unidas S.A.F-21
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
On November 16, 2015,formed a new company called Bebidas ECUSA SpA.,where the subsidiary Embotelladoras Chilenas Unidas S.A. has the 99.9338% of participation. The purpose of this companyis the distribution, transport, import, export and marketing in general, on all types of soft drinks.
F) Below we briefly describe the companies that qualify as joint operations:
Promarca S.A. is a closed stock company with itswhose main activity beingis the acquisition, development and administration of trademarks and their corresponding licenseslicensing to their operators.
OnDecember 31, 2015,2018, Promarca S.A. recorded a profit of ThCh$ 4,708,3184,581,922 (ThCh$ 4,646,6204,524,117 in 20142017 and ThCh$ 4,540,3354,812,696 in 2013)2016), which in accordance with the Company´sCompany’s policies is 100% distributable.
At the Extraordinary Shareholders’ Meetings of Promarca S.A. held on June 2016, the shareholders agreed to increase paid-in capital (jointly the "Capital Increase"). The Capital Increase was subscribed in equal parts by subsidiary New Ecusa S.A. and Watt’s Dos S.A., the only shareholders, who maintained their current 50% interest, through a contribution of ThCh$ 8,199,240 and 100% of the shares of Promarca Internacional SpA (whose line of business is the exploitation and development of the Watt’s brands in Argentina, Paraguay, Uruguay and Bolivia). As of June 2016, Promarca Internacional SpA. became a wholly owned subsidiary of Promarca S.A. During June 30, 2016, the fair values of the assets and liabilities of Promarca Internacional SpA. were determined, as follows:
Assets and Liabilities | Fair Value | |||
ThCh$ | ||||
Intangible assets other than goodwill | 11,229,149 | |||
Total non-current assets | 11,229,149 | |||
Total Assets | 11,229,149 | |||
Deferred tax liabilities | 3,029,909 | |||
Total current liabilities | 3,029,909 | |||
Net identifiable assets acquired | 8,199,240 | |||
Amount paid | 8,199,240 | |||
As a result of the previously mentioned fair values and in accordance with rights of Promarca S.A. in the joint venture, intangibles have been generated in the amount of ThCh$ 5,614,575, which are described inNote 17 – Intangible assets other than goodwill.
(b) Compañía Pisquera Bauzá S.A.
On December 2, 2011, the subsidiary Compañía Pisquera de Chile S.A. (CPCh) signed a license agreement for the commercializationmarketing and distribution of the piscoPisco Bauzá brand Bauzá in Chile. In addition, this transaction included the acquisition by CPCh of 49% of Compañía Pisquera Bauzá S.A. (CPB), owner of the Bauzá brand Bauzá in Chile. The Bauzá family Bauzá ownsmaintains 51% ownership of that company and all of its productive assets, thereby continuing the linkwhich will continue to be associated to the production of piscoPisco Bauzá maintaining its quality, origin and premium character..
On January 7, 2016, CPCh sold its 49% interest to Agroproductos Bauzá S.A. (Agroproductos Bauzá). SeeNote 14- Non-current assets of disposal groups classified as held for sale.
(c) Bebidas CCU-Pepsico SpA.(BCP)
The line of business of this company is manufacture, produce, process, transform, transport, import, export, purchase, sell and in general market all types of concentrates.
On December 31, 2015, CPB2018, BCP recorded a profit of ThCh$ 82,6631,137,233 (ThCh$ 109,2071,078,916 in 20142017 and ThCh$ 133,6351,066,005 in 2013)2016), which in accordance with the Company´sCompany’s policies is 100% distributable.
At the end of December 31, 2015 this joint operation was classified to Assets of disposal group held for sale (seeNote 25).
(c) Bebidas CCU-Pepsico SpA.
On October 23, 2013, a new company called Bebidas CCU-PepsiCo SpA (BCP) was incorporated, which is defined as an joint operation, where the subsidiary Embotelladoras Chilenas Unidas S.A. has the 50% of participation. The capital of this entity amounts to ThCh$ 1,000. The purpose of this company is the manufacture, production, processing, transformation, transport, import, export, purchase, sale and in general comercialization of all type of concentrates. Its operations commencedonJanuary 1, 2014.
On December 31, 2015, BCP recorded a profit of ThCh$ 802,418 (ThCh$ 789,648 in 2014), which in accordance with the Company´s policies is 100% distributable.
(d) Bebidas Carozzi CCU SpA.(BCCCU)
On November 26, 2015, the Company, through its subsidiary ECCUSA, entered into a joint arrangement that qualifies as a joint operation, in the company called Bebidas Carozzi CCU SpA. (BCCCU). CCU and Empresas Carozzi S.A. participate as only shareholders in equal parts. The purpose of this company is the production, marketing and distribution of instant beverage powder drinks in the national territory. The total disbursement by ECCUSA in this transaction was an amount
On December 31, 2018, BCCCU recorded a profit of ThCh$ 211,263,169 (ThCh$ 2,278,345 in 2017 and ThCh$ 797,268 in 2016),846,500 (seeNote 19). Its operations commenced on December 1, 2015. which in accordance with the Company’s policies is 100% distributable.
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F-14
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
On December 31, 2015, BCCCU recorded a profit of ThCh$ 402,228, which in accordance with the Company´s policies is 100% distributable.
The companies mentioned above (letter a) to d)) meet the conditions stipulated in IFRS 11 to be considered "joint operations", assince the primary assets in both entities are trademarks, the contractual arrangements establishes that the parties to the joint arrangement share all interests in the assets relating to the arrangement in a specified proportion and their income is 100% royaltyfrom royalties charged to the joint operators fromfor the sale of products using these trademarks.
Significant accounting policies adopted for the preparation of these consolidated financial statements are described below:
The accompanying consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), issued by the International Accounting Standard Board (IASB), which have been applied uniformly toconsistently in the periodsyears presented.
The consolidated financial statements cover the following periods: Statement of Financial Position as ofDecember 31, 2015, 2014 and January 1, 2014, Statement of changes in Equity, Statement of Income, Statement of Comprehensive Income and Statement of Cash Flow Except for the years ended December 31, 2015, 2014 and 2013.standards included in
The amounts shown inNote 4 - Accounting Changes, which explains the attached financial statements are expressed in thousandstreatment that was applied for each of Chilean pesos, which is the Company’s functional currency. All amounts have been rounded to thousand pesos, except when otherwise indicated.them.
The consolidated financial statements have been prepared on thea historical basis, as modified by the subsequent valuation of financial assets and financial liabilities (including derivative instruments) at fair value through profit and loss.value.
The preparation of the consolidated financial statementsConsolidated Financial Statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires that management uses its professional judgment in the process of applying the Company’s accounting policies. SeeNote 3- Estimates and application of professional judgment for disclosure of significant accounting estimates and judgments.
All IFRS standards, amendments and enhancements whose adoption was required by January 1, 2018, have been adopted by the Company, without significant impacts on the financial statements as of December 31, 2018, including what is mentioned inNote 4 – Accounting changes for IFRS 9 and IFRS 15.
At the date of issuance of these consolidated financial statements the following Standards, Amendments, Improvements and Interpretations to existing IFRS standards have been published. published to existing standards that have not taken effect and that the Company has not adopted in advance.
These standardstandards are required to be applied as following:by the following dates:
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Amendments to IFRS 3 | Definition of a Business. | January, 1, 2020 |
IFRS 16 |
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IFRS 17 | Insurance Contracts. | January, 1, 2021 |
IFRIC 23 | Uncertainty over Income Tax Treatments. | January, 1, 2019 |
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(1) As explained inNote 4, the Company has early adopted the amendment IAS 16 and IAS 41.
F-23
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
The Company estimates that the adoption of these new Standards, Improvements, Amendments and Interpretations as describedmentioned in the table above will not have a material impact on the consolidated financial statementsConsolidated Financial Statements upon initial application, except by the application of IFRS 16, Standards for which the Company has performed the following analysis:
Nature of the change:
- | The Company at the date of issuance of these Consolidated Financial Statements have not apply of standard IFRS 16, this standard will apply the annual period since January 1, 2019, date from its mandatory adoption. |
- | This standard requires that the lease contracts currently classified as operational, with maturities greater than 12 months, have an accounting treatment similar to financial leases. In general terms, this means that an asset must be recognized for the right-to-use the assets subject to operational lease contracts and a liability, equivalent to the present value of the payments associated with the contract. As for the effects on the result, the monthly lease payments will be replaced by the depreciation of the asset and the recognition of a financial expense. If the case of the lease modifications such as lease value, term, index of readjustment, associated interest rate, etc., the lessee will recognize the amount of the new measurement of the lease liability as an adjustment to the asset for the right-to-use. |
- | The only exceptions are short-term and low-value leases in accordance with the IFRS 16. |
Evaluation methodology:
- | The Company has carried out a survey of lease agreements in accordance with the guidelines provided by IFRS 16. |
- | The information has been standardized according to the main characteristics of each contract, such as: description, contract payment flows, start and end date of the contract, term, renewal method, currency, readjustability index, among others. |
- | The current value of the obligations has been determined based on the payment flow of each of the contracts, discounting these at the implicit rate associated with them and in the case of not having it, at the average indebtedness rate that the Company would obtain by requesting financing from banking institutions of each economic environment in which the Company operates. |
Impacts:
For lease commitments whose analysis is within the scope of IFRS 16, the Company estimates to recognize assets for right of use and an lease liability for an amount of approximately ThCh$22,627,871as of January 1, 2019.
Adoption of IFRS16
The Company will apply the simplified transition approach and will not restate the comparative amounts for the IFRS 15, IFRS 16 and the Amendment of IAS 12, because the Company is in the process of analysis of the possible impact.year 2018.
Subsidiaries
Subsidiaries are the entities over which the Company is empoweredhas power to direct their financial and operationaloperating policies, which generally is generally the result of ownership of overmore than half of the voting rights. Subsidiaries are consolidated as from the date on which control was obtained by the Company, and they are excluded from consolidation as of the date the Company loses such control.
The acquisition method is used for the accounting of acquisition of subsidiaries. The acquisition cost is the fair value of the assets delivered, of the equity instruments issued and of the liabilities incurred or assumed as of the exchange date. The identifiable assets acquired, as well as the identifiable liabilities and contingencies assumed in a business combination are initially valued at their fair value on the acquisition date, independently fromregardless the scope of minority interests.Goodwillinterests.Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized as income.
F-24
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Joint operations
As explained inNote 11- General information, in thosefor the joint arrangements that qualify as joint operations, the Company recognisesrecognizes its share of the assets, liabilities gains (losses) from operational activitiesand income in respect ofto its interest in the joint operations in accordance with IFRS 11.
Intercompany transaction
Intercompany transactions, balances and unrealized gains from transactions between the Group’sCompany’s entities are eliminated duringin consolidation. Unrealized losses are also eliminated, unless the transaction provides evidence of an impairment of the asset transferred. Whenever necessary, the subsidiaries accounting policies of subsidiaries are amended to ensure uniformity with the policies adopted by the Company.
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Non-controlling Interest
The non-controllingNon-controlling interest is presented in the Equity section of the StatementConsolidated Stament of Financial Position. The net income attributable to equity holder of the parent and the non-controlling interest are each disclosed separately in the Consolidated Statement of Income after net income.
Investments accounted byfor using the equity method
Joint ventures and associates
The Company maintains investments in joint arrangements that qualify as joint ventures, which correspond to a contractual agreement by which two or more parties carry out an economic activity that is subject to joint control, and normally involves the establishment of a separate entity in which each party has a share based on a shareholders’ agreement. In addition, the Company maintains investments in associates which are defined as those entities thatin which the investor hasdoes not have significant influence and isare not a subsidiary or is a joint venture.
The Company accounts for its participation in joint arrangementarrangements that qualify as joint ventures and in associates using the equity method. The financial statements of the joint venturesventure are prepared for the same year, under accounting policies consistent with those of the Company. Adjustments are made to conformagree any difference in accounting policies that may exist towith the Company´sCompany’s accounting policies.
Whenever the Company contributes or sells assets to the companies under joint control or associate,associates, any part of the income or loss originated byarising from the transaction is recognized based on how the asset is realized. WheneverWhen the Company purchases assets of suchfrom those companies, it does not recognize its share in the income or loss of the joint venture as regardsin respect to such transaction until the asset is sold or realized by the joint venture.realized.
The Company has defined three operating segments which are essentially defined with respect to its revenues in the geographic areas of commercial activity: 1.- Chile, 2.- International business and 3.- Wine.
These operating segments mentioned are consistent with the way the Company is managed and how results will be reported by CCU. These segments reflect separate operating results which are regularly reviewed by each segment chief operating decision maker in order to make decisions about the resources to be allocated to the segment and assess its performance(SeeNote 7)6 - Financial information as per operating segment).
The segments performance is measured according to several indicators, of which OR (Operating(Adjust Operating Result), OR before Exceptional Items (EI), ORBDA (Operating(Adjust Operating Result Before Depreciation and Amortization), ORBDA before EI, ORBDA margin (ORBDA’s % of total revenues for the operating segment), the volumes and Net sales. Sales between segments are conducted using terms and conditions at current market rates.
The Company defined the Adjusted Operating Result as the IncomesNet incomes (losses) before Other gains (losses), Net financial cost, Equity and income from joint ventures and associates, Foreign currency exchange differences, Results as per adjustment units and Income tax, and the ROADA,ORBDA, for the Company purposes, is defined as Adjusted Operating Result before Depreciation and Amortization.
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Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
MSD&A, included Marketing, Selling, Distribution and Administrative expenses.
Corporate revenues and expenses are presented separately within the Other segment.other.
Presentation and functional currency
The Company uses the Chilean peso ($(Ch$ or CLP) as its functional currency and for the presentation of its financial statements. The functional currency has been determined considering the economic environment in which the Company carries out its operations and the currency in which the main cash flows are generated. The functional currency of the Argentine,Argentinian, Uruguayan and Paraguayan subsidiaries is the Argentine peso,Peso, Uruguayan pesoPeso, Paraguayan Guarani and Paraguayan guarani,Bolivian, respectively. The functional currency of the joint venture an associates in Colombia and Bolivia areis the Colombian peso and Boliviano, respectively.Peso.
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Transactions and balances
Transactions in foreign currencies and adjustment units (“Unidad de Fomento” or “UF”) are initially recorded at the exchange rate of the corresponding currency or adjustment unit as of the date on which the transaction occurs. The Unidad de Fomento (UF) is a Chilean inflation-indexed peso-denominated monetary unit. The UF rate is set daily in advance based on changes in the previous month’s inflation rate. At the close of each Consolidated Statement of Financial Position, the monetary assets and liabilities denominated in foreign currencies and adjustment units are translated into Chilean pesos at the exchange rate of the corresponding currency or adjustment unit. The exchange difference arising, both from the liquidation of foreign currency transactions, as well as from the valuation of foreign currency monetary assets and liabilities, is included in statement of income, in Foreign currency exchange differences, while the difference arising from the changes in adjustment units are recorded in the statement of income as Result as per adjustment units.
For consolidation purposes, the assets and liabilities of the subsidiaries whose functional currency is different from the Chilean peso and not operating in countries whose economy is considered hyperinflationary, are translated into Chilean pesos by using the exchange rates valid as ofprevailing at the date of the consolidated financial statements, and theConsolidated Financial Statements while exchange differences originated by the translationconversion of the assets and liabilities, are recorded in Equityunder Reserve under the Currency Translation Reserves item. The incomeof exchange differences on translation within Other equity reserves. Incomes, costs and expenseexpenses are translated at the average monthly average exchange rate for the corresponding terms as differences since thererespective fiscal years. These exchange rates have not beensuffered significant fluctuations in the exchange rates during each month.these months.
The results and financial situation in CCU Group's entities, which have a functional currency different from the presentation currency, being their functional currency the currency of a hyperinflationary economy (as the case of subsidiaries in Argentina as from 1 July 2018 as described inNote 4 – Accounting changes), are converted into the presentation currency as established in IAS 21 and IAS 29. The comparative figures, as the Group's presentation currency is the currency of a non-hyperinflationary economy, are not changed with respect to those that were presented as current amounts of year in question, within the Financial Statements of the preceding period, that is, these amounts are not adjusted for subsequent changes that have occurred in the price level or exchange rates.
F-26
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
The exchange rates of the primary foreign currencies, and adjustment units and index used in the preparation of the consolidated financial statements as ofDecember 31, 2015, 2014 and 2013are detailed as follows:
Chilan Pesos as per unit of foreign currency or adjustable unit | As of December 31, 2015 | As of December 31, 2014 | As of December 31, 2013 | |||||||
Ch$ | ||||||||||
Chilean Pesos as per unit of foreign currency or adjustable unit | Chilean Pesos as per unit of foreign currency or adjustable unit | As of December 31, 2018 | As of December 31, 2017 | As of December 31, 2016 | ||||||
Ch$ | ||||||||||
Foreign currencies |
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US Dollar | USD | 710.16 | 606.75 | 524.61 | USD | 694.77 | 614.75 | 669.47 | ||
Euro | EUR | 774.61 | 738.05 | 724.30 | EUR | 794.75 | 739.15 | 705.60 | ||
Argentine Peso | ARG | 54.46 | 70.96 | 80.45 | ARS | 18.43 | 32.96 | 42.13 | ||
Uruguayan Peso | UYU | 23.71 | 24.90 | 24.49 | UYU | 21.44 | 21.34 | 22.82 | ||
Canadian Dollar | CAD | 509.62 | 491.05 | 498.38 | ||||||
Sterling Pound | GBP | 1,053.02 | 944.21 | 866.41 | GBP | 882.36 | 832.09 | 826.10 | ||
Paraguayan guarani | PYG | 0.12 | 0.13 | 0.11 | ||||||
Paraguayan Guarani | PYG | 0.12 | 0.11 | 0.12 | ||||||
Bolivians | BS | 103.67 | 88.45 | 76.47 | BOB | 101.28 | 89.61 | 97.59 | ||
Colombian peso | COP | 0.22 | 0.25 | 0.27 | ||||||
Adjustment Units |
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Unidad de fomento* | UF | 25,629.09 | 24,627.10 | 23,309.56 | ||||||
Colombian Peso | COP | 0.21 | 0.21 | 0.22 | ||||||
Adjustment units |
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Unidad de fomento (*) | UF | 27,565.79 | 26,798.14 | 26,347.98 | ||||||
Unidad de indexada (**) | UI | 86.19 | 79.62 | 80.15 | ||||||
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*(*) The Unidad de Fomento (UF) is a Chilean inflation-indexed, Chilean peso-denominated monetary unit. The UF rate is set daily in advance based on changes in the previous month´s inflation rate.
(**) The Unidad Indexada (UI) is a Uruguay inflation-indexed, Uruguayan peso-denominated monetary unit. The UI rate is set daily in advance based on changes in the previous month´s inflation rate.
Index used in hyperinflationary economies | As of December 31, 2018 | As of December 31, 2017 | As of December 31, 2016 | |||
Argentina Consumer Price Index |
| 183.13 | 124.80 | 100.00 | ||
Index percentage variation of Argentina Consumer Price Index |
| 47.5% | 24.8% | - | ||
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Cash and cash equivalents includes available cash, available, bank balances, time deposits at financial entities, investments in mutual funds and financial instruments acquired under re-saleresale agreements, as well as highly liquid short-term investments, withall at a high liquidity,fixed interest rate, normally with an original maturity of up to three months.
Other financial assets include money market securities, derivativesderivative contracts and time deposits at financial entities with a maturity overmaturing in more than 90 days.
IFRS 9 – Financial instruments, replaces the IAS 39 – Financial instruments, for the annual periods beginning on January 1, 2018 and which brings together three aspects of accounting and which are: classification and measurement; impairment and hedge accounting.
F-27
F-18
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
Financial assets
The Company recognizes a financial asset in its Consolidated Statement of Financial Position according to the following:as follows:
As of the date of the initial recognition, Managementmanagement classifies its financial assetsassets: (i) at fair value through profit and loss (ii) Trade and (ii) collectible creditsother current receivables and accounts, depending(iii) hedging derivatives. The classification depends on the purpose for which the financial assets were acquired. For those instruments not classified at fair value through income,Income, any cost attributable to the transaction is recognized as part of the assetasset’s value.
The fair value of the instruments that are actively quotedtraded in formal markets is determined by the quotedtraded price as ofon the financial statement closing date. For those investments without an active market, the fair value is determined using valuation techniquetechniques including (i) the use of recent market transactions, (ii) references to the current market value of another financial instrument of similar characteristics, (iii) discounted cash flowflows and (iv) other valuation models.
After the initial recognition, the Company values the financial assets as described below:
Accounts receivableTrade and other current receivables
Trade receivable credits or accounts are recognized according to their invoice value.
The Company purchases credit insurance covering approximately 90% and 99% of individually significant accounts receivable balances for the domestic market and the international market, of total trade receivable, respectively, net of a 10% deductible.
An impairment of accounts receivable balances is recorded when there is an objective evidence that the Company not will be capable to collect amounts according to the original terms. Some indicators that an account receivable has impairment are the financial problems, initiation of a bankruptcy, financial restructuring and age of the balances of our customers.
Estimated losses from bad debts are determined by applying differentiated percentages, taking into account maturityis measured in an amount equal to the "expectations of credit losses", using the simplified approach established in IFRS 9 and in order to determine whether or not there is impairment from portfolio, a risk analysis is carried out according to the historical experience (three years) on the uncollectability, which is adjusted according to macroeconomic variables, in order to obtain sufficient prospective information for the estimation and considering other factors of aging until reaching 100% of the balance in most of the debts older than 180 days, with the exception of those cases that in accordance with current policies, losses are estimated due to partial deterioration based on a case by case analysis. Additionally, the company maintains credit insurance for individually significant accounts receivable. Impairment losses are recorded in the Consolidated Statemet of Income in the period incurred.
Current trade receivable credits and accounts are initially recognized at their nominal value and are not discounted because they do not differ significantly from their fair value. The Company has determined that the calculation of the amortized cost is not materially different from the invoiced amount because the transactions do not have significant associated costs.
Financial liabilities
The Company recognizes a financial liability in its Consolidated Statement of Financial Position according to the following:as follows:
DebtsInterest-bearing loans and financial liabilities that accrue interestsobligations
LoansInterest-bearing loans and financial obligations accruing interest are initially recognized at the fair value of the resources obtained, less incurred costs incurredthat are directly attributable to the transaction. After initial recognition, interest-bearing loans and obligations accruing interest are measured at their amortized cost. The difference between the net amount received and the value to be paid is recognized in the Consolidated Statement of Income duringover the term of the loan, using the effective interest rate method.
Interest paid and accrued related to debtsloans and obligations used in a financingto finance its operations appearare presented under financial cost.finance costs.
LoansInterest-bearing loans and obligations accruing interest with a maturitymaturing within twelve month periodmonths are classified as current liabilities, unless the Company has the unconditional right to defer the payment of the obligation for at least a twelve month periodmonths after the financial statement closing date.date of the Consolidated Financial Statement.
F-28
F-19
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
Trade accounts payable and other payables
Accounts payableTrade and other accounts payablepayables are initially recognized at their nominal value because they do not differ significantly from their fair value. The Company has determined that no significant differences exist between the carrying value and amortized cost using the effective interest rate method.
Derivative Instruments
All derivative financial instruments are initially recognized as of the date of the agreement and subsequently measured at their fair value as of the date of the financial statements.derivative contract and subsequently re-measured at their fair value. Gains and losses resulting from fair value measurement are recorded in the Consolidated Statement of Income as gains or losses due to fair value of financial instruments, unless the derivative instrument qualifies is designated and is effective as a hedging instrument.
The Financial Instruments at fair value through profit and loss include financial assets classified as held for trading and financial assets which have been designated as such by the Company. Financial assets are classified as held for trading when acquired withfor the purpose of selling them within ain the short term. DerivativeThe fair value of derivative financial instruments are classified as heldthat do not qualify for trading unless they are classified as hedge instruments.accounting is immediately recognized in the consolidated statement of income under Other gains (losses). The fair value of these derivatives is recorded under Other financial assets and Other financial liabilities.
Derivative instruments classified as hedges are accounted for as cash flow hedges.
In order to classify a derivative as a hedging instrument for accounting purposes, the Company documents (i) as of the transaction date or at designation time, the relationship or correlation between the hedging instrument and the hedged item, as well as the risk management purposes and strategies, (ii) the assessment, both at designation date as well as on a continuing basis, whether the derivative instrument used in the hedging is highly transaction effective to offset changes in fair value or in theinception cash flows of the hedged item. A hedge is considered effective when changes in the fair value or in the cash flows of the underlying directly attributable to the risk hedged are offset with the changes in fair value, or in the cash flows of the hedging instrument with effectiveness between 80% to 125%. See Note 4 - Accounting changes.
The total fair value of a hedging derivatives arederivative is classified as assets or financial liabilities in Other non-current if the maturity of the hedged item is more than 12 months and as other assets or current liabilities if the remaining maturity of the hedged item is less than 12 months. The effect on resultsineffective portion of these instruments can be viewed in Other gains (losses) of the Consolidated Statements of Income. The effective portion of the change in the fair value of derivative instruments that are designated and qualified as cash flow hedges are initially recognized in Cash Flow Hedge Reserve in a separate component of Equity. The income or loss related to the ineffective portion is immediately recognized in the Consolidated Statement of Income. The amounts accumulated in Equity are reclassified in Income during the same period in which the corresponding hedged item is reflected in the Consolidated Statement of Income. When a cash flow hedge ceases to comply with the hedge accounting criteria, any accumulated income or loss existing in Equity remains in Equity and is recognized when the expected transaction is finally recognized in the Consolidated Statement of Income. When it is estimated that an expected transaction will not occur, the accumulated gain or loss recorded in Equity is immediately recognized in the Consolidated Statement of Income.
Derivative instruments are classified as held for trading unless they are classified as hedge instruments.
Deposits for returns of bottles and containers
Deposits for returns of bottles and containers corresponds to the liabilities registered by the guarantees of money received from customers for bottles and containers placed at their disposal and represents the value that will be returned to the customer when it returns the bottles to the Company in good condition along with the original document.invoice. This value is determined by the estimation of the bottles and containers in circulation that are expected to be returned to the Company in the course of time based on the historic experience, physical counts held by clients and independent studies over the quantities that are in the hands of end consumers, valued at the average weighted guarantees for each type of bottles and containers.
The Company does not intend to make significant repayment of these deposits within the next 12 months. Such amounts are classified within current liabilities, under the line Other financial liabilities, since the Company does not have the legal ability to defer this payment for a period exceeding 12 months. This liability is not discounted, since it is considered a payable on demand, with the original documentinvoice and the return of the respective bottles and containers and it does not have adjustability or interest clauses of any kind in its origin.
F-29
F-20
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
AtAs of each financial statement date the Company assesses ifwhether a financial asset or financial group of financial assets is impaired.
The Company assesses impairment of accounts receivable collectively by grouping the financial assets according to similar risk characteristics, which indicate the debtor’s capacity to comply with their obligations under the agreed upon conditions. When there is objective evidence that a loss due to impairment has been incurred in the accounts receivable, the loss amount is recognized in the Consolidated Statement of Income, as Administrative expenses.
In the event that during subsequent periodsIf the impairment loss amount decreases during subsequent periods and such decrease maycan be objectively related to an event occurringoccurred after impairment recognition of the impairment, lossthe previously recognized impairment loss is reversed.
Any subsequent impairment reversal is recognized in Income provided that the book valuecarrying amount of the asset does not exceed its value as of the date the impairment was recognized.
Inventories are stated at the lower of cost acquisition or production cost and net realizable value. The production cost of finished products and of products under processing includes raw material, direct labor, indirect manufacturing expenses based on a normal operational capacity and other costs incurred to place the products at the locations and in the conditions necessary for sale, net of discounts attributable to inventories.
The net realizable value is the estimated sale price in the normal course of business, less marketing and distribution expenses. When market conditions cause the production cost to be higher than its net realizable value, an allowance for assets deterioration is registered for the difference in value. This allowance for inventory deterioration also includes amounts related to obsolete items due to low turnover, technical obsolescence and products withdrawn from the market.
The inventories and cost of products sold, is determined using the Weighted Average Cost (WAC). The Company estimates that most of the inventories have a high turnover.
The materials and raw materials purchased from third parties are valued at their acquisition cost; once used, they are incorporated in finished products using the WAC methodology.
Under thecurrent Biological current assets, the Company includes the costs associated with agricultural activities (grapes), which are capitalized up to the harvestharvesting date, at which timewhen they become part of the inventory cost for subsequentssubsequent processes. The Company considers that the costs associated with agricultural activities represent a reasonable approximation to their fair value. According toNote 4 until December 31, 2014 and January 1, 2014, the Biological current assets are recorded under Inventories. The above mentioned implies only a reclassification andhas no impact on its value, Net income or Equity.
Other non-financial assets mainly includes disbursementsprepayments associated with advertising related to commercial advertising preparation that iscontracts regarding the making of commercials which are work in process but hasprogress and have not yet been shown (current and non-current), payments to insurances and advances to suppliers in relation with certain purchases of property, plant and equipmentequipment. Additionally paid guarantees related with leases and materials to suppliers and current and non-current advertising agreements.be consumed related to industrial safety implements.
F-30
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Property, plant and equipment items are recorded at their historic cost, less accumulated depreciation and impairment losses. The cost includes both the disbursements directly attributable to the asset acquisition or construction, as well as the financing interest directly related to certain qualified assets, which are capitalized during the construction or acquisition period, as long as these assets qualify for these purposes considering the period necessary to complete and prepare the assets to be operative. Disbursements after the purchase or acquisition are only capitalized when it is likely that the futureeconomic benefits associated to the investment will flow towardsto the Company, and costs may be reasonably measured. Subsequent disbursements related to repairs and maintenance are recorded as expenseexpenses when incurred.
F-21
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Property,Depreciation of property, plant and equipment depreciation,items, including the assets under financial lease, is calculated on a straight line basis over the estimated useful lifelives of the fixed assets,property, plant and equipment items, taking into account their estimated residual value. When an asset is formed by significant components with different useful lives, each part is separately depreciated. Property, plant and equipment useful lives and residual values estimates are reviewed and adjusted at each financial statement closing date, if necessary.
Property,The estimated useful lives of property, plant and equipment estimated useful lives are detailed as follows:
Type of Assets | Number of years |
Land | Indefinite |
Buildings and Constructions | 20 to 60 |
Machinery and equipment | 10 to 25 |
| 5 to 10 |
Other equipment (coolers and mayolicas) | 5 to 8 |
Glass containers, and plastic containers | 3 to 12 |
Vines in production | 30 |
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Gains and losses resulting from the sale of properties, plants and equipment are calculated comparing their book values against the related sales proceeds and are included in the Consolidated Statement of Income.
Biological assets held by Viña San Pedro Tarapacá S.A. (VSPT) and its subsidiaries consist of vines underin formation and underin production. The harvestedHarvested grapes are used for the later production of wines.subsequent wine production.
Vines under production are valued at the historic cost, less depreciation and any impairment loss.
Depreciation of undervines in production vines is recorded on ausing the straight-line basis based onmethod over the 30-years30-year estimated average estimated production useful life, which is periodically assessed. Vines underin formation are not depreciated until they start production.producing.
Costs incurred in acquiring and planting new vines are capitalized.
When the book valuecarrying amount of an asset ofa property, plant and equipment item exceeds its recoverable amount, thisvalue, it is reduced immediately written down to its recoverable amount (See(See Note 2.17)2 - Summary of significant accounting policies 2.17).
As described inNote 4, during year 2015, the Company has early adopted the amendment of IAS 16 and 41, therefore vines under formation and under production are recorded in Properties, plant and equipment. Until December 31, 2014 and January 1, 2014, these were recorded under the Biological non-current assets. This early application implies only a reclassification and has not impact on its value, Net income or Equity.
Lease agreements are classified as financialfinance leases when the agreement transfers to the Company substantially all the risks and rewards inherent to ownership of the asset, ownership, according to International Accounting Standard No.in accordance with IAS 17 “Leases”. For those agreements that qualify as financialfinance leases, at the initial dateand an asset and a liability are recognized atas of the inception date for a value equivalent to the lower of the fair value of the leased asset andor the present value of future lease payments.payments, whichever is lower. Subsequently, lease payments are allocated between the financial expensefinance cost and reduction of the obligation, reduction, so thatin order to obtain a constant interest rate on the obligation balance is obtained.of the obligation.
Lease agreements that do not qualify as financialfinance leases are classified as operating leases. LeaseOperating lease payments of operating leases are charged to income on a straight line basisusing the straight-line method over the lifeterm of the lease.
F-31
F-22
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
Investment property consistsconsist of land and buildingbuildings held by the Company withfor the purpose of generating appreciation and are not to be used in the normal course of business, and are recorded at historichistorical cost less any impairment loss, if any. Investmentloss. Depreciation of investment property, depreciationexcluding land, is calculated on a straight line basisusing the straight-line method over the estimated useful life of such property,the asset, taking into account thetheir estimated residual value of such property.value.
Commercial Trademarkstrademarks
The Company’s commercial trademarks correspond toare intangible assets with an indefinite useful lifelives that are presented at their historichistorical cost, less any impairment loss. The Company believes that through investing in marketing, investments trademarks maintain their value, consequently they are considered as having an indefinite useful lifelives and they are not amortizable. SuchThese assets are subject totested for impairment tests on a yearly basis, or when existing factors exist indicatingindicate a likely loss of value (See(Note 2.17).2 - Summary of significant accounting policies 2.17).
Software Programprogram
Software Programprogram licenses acquired are capitalized at the value of the costs incurred forin their acquisition and preparationin preparing the software for the use of the specific programs.use. Such costs are amortized over their estimated useful lives (4 to 7 years). The maintenance costs of the software programs are recognized as an expense in the year duringin which they are incurred.
Water rights
Water rights acquired by the Company correspond to the right to use existing water from natural sources, and are recorded at their attributed cost as of the date of transition to IFRS. Since such rights are perpetual they are not amortizable, however they are tested for impairment annually, or when factors exist that indicate a likely loss of value (See Note 2 - Summary of significant accounting policies 2.17).
Distribution rights
Corresponds to rights acquired to distribute different products. These rights are amortized over their estimated useful lives.
Research and development
Research and development expenses are recognized in the period incurred.
Water Rights
Water Rights acquired by the Company correspond to the existing exploitation rights of water from natural sources, and they are recorded at their attributed cost as of the transition date to IFRS. Given that such rights are perpetual they are not amortizable, nevertheless they are annually subject to impairment assessment, or when factors exist that indicate a likely loss of value(See Note 2.17).
Goodwill represents the excess of costthe consideration transferred the amount of a business combinationany non-controlling interes in the acquiree and the acquisition date fair vale of any previous equity interest in the acquiree over the Company’s share in the fair value of identifiablethe net idetificable assets liabilities and contingent liabilities as of the acquisition date,acquiree, and is accounted for at its cost value less accumulated impairment losses. Goodwill related to joint venture acquisitions is included in the investment accounting value.
For the purposes of impairment tests, goodwill is assigned Cash Generating Units (CGU) that areis expected to benefit from the synergies of a business combination. Each unit or group of units (CGU - SeeSee Note 22)18 - Goodwill) represents the lowest level inside the Company at which goodwill is monitored for internal administration purposes, which is not larger than a business segment. The cash generating units to which the goodwill is assigned are tested for impairment annually or with a higher frequency, when there are signs indicating that a cash generating unit could experience impairment or some of the significant market conditions have changed.
Goodwill in the acquisition of joint ventures is assessed for impairment as part of the investment, provided that there are signs indicatingindications that the investment may be impaired.
F-32
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
An impairment loss is recognized for the amount thatby which the book valuecarrying amount of the cash generating unit exceeds its recoverable value, the recoverable value being the higher ofwhich is the fair value of the cash generating unit, less selling costs to sell andor its value in use.use, whichever is higher.
An impairment loss is first assigned inallocated to goodwill to reduce its book value,carrying amount, and then to other assets in the cash generating unit. AOnce recognized, impairment loss islosses are not reversed in the following years.
F-23
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The Company annually assesses the existence of non-financial asset impairment indicators on non-financial assets.indicators. When indicators exist, the Company estimates the recoverable amount of the impaired asset. In caseIf it is not possible tocannot estimate the recoverable amount of the impaired asset at an individual level, the Company estimates the recoverable amount of the cash generating unit to which the asset belongs.
For intangible assets with indefinite useful life intangible assets,lives which are not amortized, the Company performs all required testtesting to ensure that the carrying amount does not exceed the recoverable value.
The recoverable amountvalue is defined as the higher of the fair value, less selling cost to sell and theor value in use. The valueuse, whichever is higher. Value in use is determined by estimating future cash flows associated withto the asset or withto the cash generating unit, discounted from its current value by using interest rates before taxes, which reflect the time value of money and the specific risks of the asset. InIf the eventcarrying amount of the asset book value exceeds its recoverable amount, the Company records an impairment loss in the Statement of Income.
For otherthe rest of non-financial assets differentother than goodwill and intangibles with indefinite useful life,lives, the Company assesses the existence of impairment indicators when somean event or change in business circumstances indicateindicates that the book valuecarrying amount of the asset may not be recoverable and impairment is recognisedrecognized when the book valuecarrying amount is higher than itsthe recoverable value.
The Company annually assesses ifwhether the impairment indicators of non-financial assets for which impairment losses were recorded during prior years have disappeared or decreased. In the event of such situation, the recoverable amount of the specific asset is recalculated and its book valuecarrying amount is increased, if necessary. Such increase is recognized in the Statement of Income as reversal of impairment losses. The increase in the value of the previously impaired asset is recognized only when it is originated by changes in the assumptions used to calculate the recoverable amount. The increase in the asset amount increase resulting from thedue to reversal of the impairment loss is limited to the amount that would have been recorded had the impairment not occurred.
The Company register as non-current assets of disposal groups classified as held for sale as Property, plant and equipment expected to be recovered primarily through sale, rather than through continuing use, for which active sale negotiations have begun and it is estimated that they will be sold within twelve months following the closing date are classified as assets of a disposal group held for sale.begun.
These assets are measured at the lower of their book valuecarrying amount and the estimated fair value, less costs to sell.selling costs. From the moment in which the assets are classified as non-current assets of a disposal group classified held for sale they are no longer depreciated.
Income taxes areThe income tax account is composed by theof current income tax associated to legal income tax obligations and the deferred taxes recognized according to International Accounting Standard Nº 12 – Income Taxes.in accordance with IAS 12. Income tax is recognized in the Consolidated Statement of Income by Function, except when it is related to entriesitems recorded directly recorded in Equity, in which case the tax effect is also recognized in Equity.
Income Tax Obligation
Income tax obligations are recognized in the financial statements on the basis of the best estimates of the taxable profits as of the financial statement closing date, and the income tax rate valid as of that date in the countries where the Company operates.operates.
F-33
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Deferred Tax
Deferred taxes are those the Company expects to pay or to recover in the future, due to temporary differences between the book valuecarrying amount of assets and liabilities (carrying amount for financial reporting purposes) and the corresponding tax basis of such assets and liabilities used to determine the profits subject to taxes. Deferred tax assets and liabilities are generally recognized for all temporary differences, and they are calculated at the rates that will be valid on the date the liabilities are paid or the assets realized.
F-24
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Deferred tax is recognized foron temporary differences arising from investments in subsidiaries and associates, except in those cases where the Company is able to control the date on which temporary differences will be reversed, and it is likely that they will not be reverted in the foreseeable future. Deferred tax assets, including those originated byarising from tax losses are recognized provided it is likely that in the future there arewill be taxable profits against which deductible temporary differences maycan be charged.offset.
Deferred tax assets and liabilities are offset when there is a legal right to offset tax assets against tax liabilities, and the deferred tax is related to the same taxable entity and the same taxingtax authority.
Employees Vacation
The Company accrues the expense associated with staff vacation when the employee earns the benefit.
Employees Bonuses
The Company recognizes a liability and an expense for bonuses when it’s contractually obligated, it is estimated that, depending on the income requirement at a given date, bonuses will be paid out at the end of the year.
Severance Indemnity
The Company recognizes a liability for the payment of irrevocable severance indemnities, originated from the collective and individual agreements entered into with employees. Such obligation is determined based on the actuarial value of the accrued cost of the benefit, a method which considers several factors in the calculation, such as estimates of future continuance, mortality rates, future salary increases and discount rates. The determined value is shown at its present value by using the accrued benefits for years of service method. The discount rates are determined by reference to market interest rates curves. The current losses and gains are directly recorded in Income.
According to the amendment of IAS 19, the actuarial gains and losses are recognized directly in Other Comprehensive Income, under Equity and, according to the accounting policies of the Company, financial costs related to the severance indemnity are directly recorded under Financialfinancial cost in the Consolidated Statement of Income.
Provisions are recognized when: (i) the Company has a current obligation, legal or implicit obligation, as a result of past events, (ii) it is probable that monetary resources will be required to settle the obligation and (iii) the amounts can be reasonably established. The amounts recognized as provisions as of the financial statementsstatement closing date, are Management´sManagement’s best estimates, and consider the necessary disbursements to liquidate the obligation.
The concepts used by which the Company establishesto establish provisions charged against Incomeincome correspond mainly to civil, labourlabor and taxation proceedings that could affect the Company (See(See Note 29)23 - Other provisions).
Revenues areRevenue is recognized when it is likely that economic benefits will flow to the Company and these can be measured reliably.reliably measured. Income is measured at the fair value of the economic benefits received or to be received, and they areis presented net of valued added taxes,tax, specific taxes, returns, discounts and rebates.
Sales of goods
F-34
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Goods sold are recognized after the Company has transferred to the buyer all the risks and benefits inherent in theto ownership of suchthe goods, and it doesdo not holdhave the right to dispose of them; inthem. In general, this means that sales are recorded atwhen the transfer of risks and benefits of ownership are transferred to clients,the customer, pursuant to the terms agreed in the commercial agreements.agreements and once the performance obligation is satisfied.
In relation to IFRS 15, the Company has applied the criteria established in this standard for these Consolidated Financial Statements, as indicated inNote 4 - Accounting changes, letter a).
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Sale of products in the domestic market
The Company obtains its revenues, both in Chile and Argentina, mainly from the sales of beers, soft drinks, mineral waters, purified water, juices,nectars, wines, cider and spirits, products that are distributed through retail establishments, wholesale distributors and supermarket chains. Nonechains, and none of which act as commercial agents of the Company. Such revenues in the domestic markets, net of the value added tax, specific taxes, returns, discounts and rebates to clients, are recognized when products are delivered, together with the transfer of all risks and benefits related to them.them and once the performance obligation is satisfied.
Exports
In general, the Company´sCompany’s sales delivery conditions for sale are the basis for revenue recognition related to exports.
The structure of revenue recognition is based on the grouping of Incoterms, mainly in the following groups:
• "FOB (Free on Board) shipping point", by which buyer organizes and pays for transportation, consequently the sales occur
• | "FOB (Free on Board) shipping point", by which the buyer organizes and pays for transportation, consequently the sales occurs and revenue is recognized upon delivery of the merchandise to the transporter hired by the buyer. |
• | “CIF (Cost, Insurance & Freight) and similar", by which the Company organizes and pays for external transportation and some other expenses, although CCU ceases being responsible for the merchandise after delivering it to the marine or air shipping company in accordance with the relevant terms. The sale occurs and revenue is recognized upon the delivery of
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In the case of discrepancies between the commercial agreements and Incoterms, the first one willformer shall prevail.
The revenue recognition related to exports are recorded net of specific taxes, returns, discounts and rebates to clients, are recognized when products are delivered, together with the transfer of all risks and benefits related to them and once the performance obligation is satisfied.
The Company enters into commercial agreements with its clients, distributors and supermarkets through which they establish: (i) volume discounts and other client variables, (ii) promotional discounts that correspond to an additional rebate on the price of the products sold by reason ofdue to commercial initiatives development (temporary promotions), (iii) payment for services payment and rendering of counter-services (advertising and promotionpromotional agreements, use of preferential spaces and others) and (iv) shared advertising, which corresponds to the Company’s participation in advertising campaigns, promotionpromotional magazines and opening of new sales locations.
Volume discounts and promotional discounts are recognized as a reduction in the salesselling price of the products sold. Shared advertising contributions are recognized when the advertising activities agreed upon with the distributor have been carried out, and they are recorded as marketing expenses incurred, under Other expenses by function.
The commitmentsCommitments with distributors or importers in the exports area are recognized on the basis of existing trade agreements.
The costsCost of sales includeincludes the production cost of the products sold and other costs incurred to place inventories inat the locations and under the conditions necessary for the sale. Such costs mainly include raw materialmaterials costs, packing costs, production staff labourlabor costs, production-related assetsasset depreciation, returnable bottles depreciation, license payments, operationaloperating costs and plant and equipment maintenance costs.
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Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Other incomes by function mainly include incomes from sale of fixed assets and other assets, recovery of claims, leases and payments related to advance term license.
Other expenses by function mainly include mainly advertising and promotion expenses, depreciation of assets sold, selling expenses, marketing costs (sets, signs, neon signs at client’scustomer facilities) and marketing and sales staff remuneration and compensations.compensation.
Distribution costs include all the necessary costs to deliver products to clients.customers.
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AdministrationAdministrative expenses include the support unitsunit staff remuneration and compensation, depreciation of offices, equipment, facilities and furniture used for these functions, non-current assetsasset amortization and other general and administrationadministrative expenses.
Environmental liabilities are recorded based on the current interpretation of environmental laws and regulations, or when an obligation is likely to occur and the amount of such liability can be calculated reliably.reliably calculated.
Disbursements related to environmental protection are charged to the Consolidated Statements of Income by Function as incurred, except for investments in infrastructure designed to comply with environmental requirements, which are recordedaccounted for following the accounting policies for property, plant and equipment.
The Company has early adopted the amendment of IAS 16 and IAS 41. For comparison purposes of this Consolidated Financial Statements, the Company, had restated the originally figures reported at December 31, 2014 and January 1, 2014.This early application implies only a reclassification and has not impact on its value, Net income or Equity.
Below are the reclassifications that only affecting the Consolidated Statement of Financial Position:
a)OnDecember 31, 2014:
Current assets | Previously Reportedat December 31, 2014 | Reclassification | Total at December 31, 2014 (Restated) | ||
ThCh$ | ThCh$ | ThCh$ | |||
Inventories | 175,179,189 | (7,633,591) | 167,545,598 | ||
Biological current assets | - | 7,633,591 | 7,633,591 | ||
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Non-current assets | Previously Reported at December 31, 2014 | Reclassification | Total at December 31, 2014 (Restated) | ||
ThCh$ | ThCh$ | ThCh$ | |||
Property, plant and equipment (net) | 833,171,234 | 18,084,408 | 851,255,642 | ||
Biological assets | 18,084,408 | (18,084,408) | - | ||
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b) January 1, 2014:
Current assets | At January 1, 2014 | Reclassification | Total at January 1, 2014 (Restated) | ||
ThCh$ | ThCh$ | ThCh$ | |||
Inventories | 153,085,845 | (6,130,652) | 146,955,193 | ||
Biological current assets | - | 6,130,652 | 6,130,652 | ||
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Non-current assets | At January 1, 2014 | Reclassification | Total at January 1, 2014 (Restated) | ||
ThCh$ | ThCh$ | ThCh$ | |||
Property, plant and equipment (net) | 680,994,421 | 17,662,008 | 698,656,429 | ||
Biological assets | 17,662,008 | (17,662,008) | - | ||
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The costs associated with agricultural activities (grapes) for an amount of ThCh$ 7,633,591 and ThCh$ 6,130,652 as of December 31, 2014 and January 1, 2014, respectively, were presented under the Inventories. Beginning the year 2015, according to IAS 41, these are presented under the Biological current assets.
The vines under formation and under production for an amount of ThCh$ 18,084,408 and ThCh$ 17,662,008 as of December 31, 2014 and January 1, 2014, respectively, were presented under the Biological assets. Beginning the year 2015, according to Amendment of IAS 16 and IAS 41, these are presented under Property, plant and equipment.
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The preparation of Financial statement preparationStatement requires estimates and assumptions from Management affecting the amounts included in the consolidated financial statementsConsolidated Financial Statements and their related notes. The estimates made and the assumptions used by the Company are based on the historical experience, changes in the industry and the information supplied by external qualified sources. Nevertheless, final results could differ from the estimates under certain conditions.
Significant estimates and accounting policies are defined as those that are important to correctly reflect the Company’s financial position and income, and/or those that require a high level of judgment by Management.
The primary estimates and professional judgments relate to the following concepts:
• The valuation of goodwill acquired to determine the existence of losses due to potential impairment(Note 2.16 and Note 22)
• | The valuation of goodwill acquired to determine the existence of losses due to potential impairment(Note 2 - Summary of significant accounting policies (2.16)and Note 18- Goodwill)
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• | The valuation of commercial trademarks to determine the existence of potential losses due to potential impairment (Note 2 - Summary of significant accounting policies (2.17)andNote 17 – Intangible assets other than goodwill). |
• | The assumptions used in the current calculation of liabilities and obligations to employees(Note 2 - Summary of significant accounting policies (2.20)and Note 25 – Employee benefits). |
• | Useful lives of property, plant and equipment (Note 2 - Summary of significant accounting policies (2.12)and Note 19 – Property, plant and equipment) and intangibles (Note 2 - Summary of significant accounting policies (2.15) and Note 17- Intangible assets other than goodwill). |
• | The assumptions used for calculating the fair of value financial instruments(Note 2 - Summary of significant accounting policies (2.7)and Note 7 – Financial instruments). |
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Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
• | The likelihood of occurrence and amounts estimated in an uncertain or contingent manner(Note 2 - Summary of significant accounting policies (2.21)andNote 23 – Other provisions). |
• | The valuation of current Biological assets(Note 2 - Summary of significant accounting policies (2.10)andNote 13 – Biological assets). |
Such estimates are based on the best available information of the events analysedanalyzed to date in these consolidated financial statements.
However, it is possible that events that may occur in the future thatmay result in adjustments to such estimates, which would be recorded prospectively.
a) The Company adoptedaccounting policies described in the earlyConsolidated Financial Statements as of December 31, 2018 reflect the modifications made by IFRS 15 and IFRS 9 which went into effect as of January 1, 2018. The following is an explanation of the initial impact of the application of Amendment to IAS 16 and 41 in 2015. This change in accounting policy implies that Biological assets (vines under formation and under production) are reclassified to Property, plant and equipment from Biological assets. Additionally, the costs associated with agricultural activities are reclassified to Biological current assets from Inventories. Until December 31, 2014 and January 1, 2014 these were presented under Biological assets (vines under formation and under production) and Inventories, respectively. The effects of this accounting policy are explained inNote 2.29. For comparison purposes these change was applied retroactively to 2014.rules:
-In relation with IFRS 9, the Company has made an evaluation of its impacts which included the determination of gaps between criteria of classification and measurement of financial instruments with respect to the criteria currently used and the determination of the impact of moving to a model of expected credit losses to determine the impairment of its financial assets.
Based on the evaluation, we have determined that there are no significant changes impacting the classification and measurement of the Company’s financial assets as a result of the application of IFRS 9. We haven’t identified significant impacts on accounting policies for financial liabilities, since the new requirements only impacts accounting for liabilities, other than derivative financial instruments, which are designated at fair value through profit or loss, on which the Company, as of January 1, 2018, does not have, nor has there been debt renegotiations that could be affected by the new clarifications about the accounting treatment regarding modification of liabilities; however for derivative financial instruments that are recognized at fair value through profit or loss the effect as of January 1, 2018, the Company has determined an increase of ThCh$ 1,307, net of deferred taxes, which was recorded under Retained earnings in Equity as of January 1, 2018.
In relation to the new impairment model, the standard requires the recognition of impairment losses based on expected credit losses (ECL), instead of only incurred credit losses as indicated in IAS 39. Based on the evaluations performed on the portfolio of Trade receivables as of January 1, 2018, the Company determined a decrease of ThCh$ 128,029, net of deferred taxes, which was recorded under Retained earning in Equity as of January 1, 2018 and additionally modified, as of said date, the respective accounting policy.
The Company has adopted to continue using the IFRS 9’s exception that allows continuing the record of hedge accounting according to IAS 39.
The date of adoption of this new standard is mandatory as of January 1, 2018. The Company applied this rule prospectively, using the practical resources allowed by the standard and given that the effects are not significant the comparative balances for the year 2017 will not be restated.
As of January 1, 2018, financial assets and liabilities are classified as fair value with changes in profit or loss, measured at amortized cost and at fair value in other comprehensive income, without affecting the classification maintained by the Company.
-In relation with IFRS 15, the basic principle of IFRS 15 is an entity recognizes income from ordinary activities, in a way that represents the transfer of goods or services committed to customers, in exchange for an amount that reflects the compensation, in which the entity, expects to have entitled in change these goods or services. An entity shall recognize revenue from ordinary activities in accordance with that basic principle by applying the following 5 steps which are:
Step 1 – Identify the contract (or contracts) with the customer.
Step 2 - Identify performance obligations in the contract.
Step 3 - Determine the price of the transaction.
Step 4 - Assign the price of the transaction between performance obligations.
F-37
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Step 5 - Recognize income from ordinary activities when (or as) the entity satisfies a performance obligation.
The Company has carried out an evaluation of the 5 steps indicated above and no new performance obligations have been identified or different from those already presented in the Consolidated Financial Statements and additionally has determined there are no significant changes in the recognition of income, since these are recorded to the extent that it is likely the economic benefits flow to the Company and can be measured reliably, with determined prices that are measured at the fair value of the economic benefits received or to be received, once the performance obligation is satisfied and income is presented net of valued added tax, specific taxes, returns, discounts and rebates.
The Company adopted IFRS 15 based on the modified retrospective approach. These was no impact of adoption and no adjustment to the opening balance of retained earnings was made.
b)Financial reporting in hyperinflationary economies
Inflation in Argentina has shown significant increases since the beginning of 2018. The cumulative inflation rate of three years, calculated using different combinations of consumer price indices, has exceeded 100% for several months, and it’s still increasing. The cumulative three-year inflation calculated using the general price index has already exceeded 100%. Therefore, as prescribed by IAS 29, Argentina was declared a hyperinflationary economy as of July 1, 2018.
According to aforementioned, IAS 29 must be applied by all entities whose functional currency is the Argentine peso for the accounting periods ended after July 1, 2018, as if the economy had always been hyperinflationary. In this regard, IAS 29 requires that the Financial Statements of an entity whose functional currency is the currency of a hyperinflationary country be restated in terms of the current purchasing power at the end of the reporting period. The above mentioned implies that the restatement of non-monetary items must be made from their date of origin, last restatement, valuation or another particular date in some very specific cases and considering that the Financial Statements are prepared under the historical cost criteria.
The adjustment factor used in each case is obtained based on the combined index of the National Consumer Price Index (IPC), with the Wholesale Price Index (IPIM), published by the National Institute of Statistics and Census of the Argentine Republic (INDEC), according to the series prepared and published by the Argentine Federation of Professional Councils of Economic Sciences (FACPCE).
For consolidation purposes, for subsidiaries whose functional currency is the Argentine peso, paragraph 43 of IAS 21 has been considered, which requires that the Financial Statements of a subsidiary that has a functional currency of a hyperinflationary economy to be restated in accordance with IAS 29, before being converted so that they are included in the Consolidated Financial Statements. The comparative amounts presented previously (2017 for the purposes of the Consolidated Statement of Financial Position and years 2017 and 2016 for the Consolidated Statement of Incomes by Function, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows) in Chilean pesos) have not been restated.
Re-expression due to hyperinflation will be recorded until the period in which the economy of the entity ceases to be considered as a hyperinflationary economy; at that time, adjustments made for hyperinflation will be part of the cost of non-monetary assets and liabilities.
The comparative amounts in the Company’s Financial Statements are presented in a stable currency and they are not adjusted by inflationary changes.
The application by first time of IAS 29 gave rise to a positive adjustment of ThCh$ 92,241,004, net of taxes, which have been charged to the "Reserve of exchange differences on translation" account (Other comprehensive income). On the other hand, during fiscal year 2018, the application of this standard generated a gain in net monetary position of ThCh$ 2,312,604 (before tax), which is recognized in the Consolidated Statement of Incomes under "Result as per adjustment units". Additionally, since the Argentine economy was declared as hyperinflationary, a loss of ThCh$ 6,086,727 was recorded in results for the year, generated by the inflation adjustment and translation at the year-end exchange rate as of December 31, 2018.
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Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
The most significant effects on the non-monetary items restated, after rating the Argentine economy in a situation of hyperinflation are the following:
ThCh$ | |
Current assets | 1,905,102 |
Non-current assets | 118,989,487 |
Current liabilities | - |
Non-current liabilities | (27,149,456) |
Total Shareholders' Equity | 93,745,133 |
Non-controlling interests | (1,504,129) |
Equity attributable to equity holders of the parent | 92,241,004 |
c) During the year ended on December 31, 2015,2018, there have been no other significant changes in the use of accounting principles or relevant changes in any accounting estimates with regard to previous years that have affected these consolidated financial statements.
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Risk administrationManagement
In those companies withoutwhere CCU has a significant non-controllingcontrolling interest, the Company’s Administration and Finance OfficerManagement provides a centralized service for the group’s companies to obtain financing and administration of exchange rate,rates, interest rate,rates, liquidity, inflation, raw materialmaterials and loancredit risks. Such activity operates according toin accordance with a framework of policies and procedures framework, which is regularly reviewed to comply withensure it fulfils the purpose of administratingmanaging the risk originatedrisks by the business needs.
In those companies with a significant non-controlling interest (VSPT, CPCh,CPCH, Aguas CCU-Nestlé S.A., Bebidas del Paraguay S.A., Cervecería Kunstmann S.A. and Cervecera Kunstmann) eachBebidas Bolivianas BBO S.A.) the responsibility for this service lies with the respective Board of Directors and respective Administration and Finance Officer exercises such responsibility.Management Area. When necessary,applicable, the Board of Directors and Directors Committee has the final responsibility for establishing and reviewing the risk administration structure, as well as for the review ofreviewing significant changes made to the risk administrationmanagement policies.
According to theIn accordance with financial risk policies, the Company uses derivativederivate instruments only for the purpose of covering exposureshedging exposure to the interest rate and exchangeExchange rate risks originated byarising from the Company’s operations and its financing sources.sources of financing. The Company does not acquire derivative facilities withderivate instruments for speculative or investment purposes nevertheless,purposes. Nevertheless, some derivatives are not treated as hedges for accounting purposespurpose because they do not qualify as such. Transactions with derivativederivate instruments are exclusively carried out by staff under theAdministration and Finance Managementstaff and Internal Audit Management regularly reviews the control environment of this function. The relationshipRelationships with Credit Rating Agenciescredit rating agencies and the monitoring of financial restrictions (covenants) are also administeredmanaged by Finance Management.Administration and Finance.
The Company’s main risk exposure is related to the exchange rates, interest rates, inflation and raw material pricesmaterials price (commodities), taxes, client’strade accounts receivable and liquidity. For the purposeSeveral types of managingfinancial instruments are used to manage the risk originated by such exposures, several financial instruments are used.these exposures.
For each of the following points, where applicable, the sensitivity analysisanalyses developed are merely for illustrativeillustration purposes, since in practice the sensitized variables rarely change without affecting each other and without affecting other factors that were considered as constants.constant and which also affect the Company’s financial position and results.
F-39
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Exchange rate risk
The Company is exposed to exchange rate risks originated by: a) its net exposure to foreign currency assets and liabilities, b) exports sales, c) the purchase of raw material,materials, products and capital investments effected in foreign currencies, or indexed in such currencies, and d) the net investment of subsidiaries in Argentina, Uruguay and Paraguay.foreign countries. The Company’s greatest exchange rate exposure is to the variation ofon the Chilean peso as compared to the US Dollar, Euro, Argentine Peso, Uruguayan Peso,, Paraguayan Guarani, Bolivian Peso and Colombian peso and Boliviano.
Peso.
As of December 31, 2015,2018, the Company maintained foreign currency obligations amounting to ThCh$ 49,785,54888,218,862 (ThCh$ 46,780,40669,160,367 in 2014)2017), mostly denominated in US Dollars. Foreign currency obligations (ThCh$ 16,626,496 in 201525,403,961 as of December 31, 2018 and ThCh$ 19,838,96510,945,398 as of December 31, 2017) represent a 9% (6% in 2014) represent 10% (11% in 2014)2017) of the total of Otherother financial liabilities. The remaining 90% (89%91% (94% in 2014)2017) is mainly denominated in inflation-indexedUnidades de Fomento (inflation-indexed Chilean pesos (seemonetary unit – see inflation risk section). In addition, the Company maintainshas assets in foreign currency assets forin the amount of ThCh$72,887,721 234,306,916 (ThCh$ 57,086,683140,345,944 in 2014)2017) that mainly correspond to exportsnet investments of subsidiaries in foreign countries and export accounts receivable.
Regarding the operations of foreign subsidiaries, operations, the net liability exposure liability in US Dollars and other currencies amounts to ThCh$ 1,368,068 (ThCh$ 1,932,014 in 2014)7,871,677 (net liability ThCh$ 7,894,180 as of December 31, 2017).
To protect the value of the net foreign currency assets and liabilities position of its Chilean operations, the Company enters into derivative agreementsderivate contracts (currency forwards) to ease any variation in the Chilean peso as compared to other currencies.
As of December 31, 2015,2018, the Company’s mitigate net asset exposure of the Company in Chile in foreign currencies, in Chile, after the use of derivativederivate instruments, is a liability amounting toassets in the amount of ThCh$ 757,256 (ThCh$ 2,588,0531,364,230 (liability in 2014)the amount of ThCh$ 1,026,554 as of December 31, 2017).
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OfAs of December 31, 2018, of the Company’s total sales, both in Chile and abroad, 8% (8%7% (7% in 20142017 and 8% in 2013)2016) corresponds to export sales made in foreign currencies, mainly US Dollars and EuroEuros and approximately 61% (62% in 2017 and 63% 2016) of the total direct costs 54% (55% in 2014 and 57% in 2013) correspondscorrespond to raw materials and products purchased in foreign currencies, or indexed to such currencies. The Company does not hedge the eventualpossible variations in the expected cash flows from such transactions.
The Company is also exposed to movementsfluctuations in exchange rates relating to the conversion from Argentine Pesos,Peso, Uruguayan Pesos,Peso, Paraguayan Guaranis, BoliviansGuaraní, Bolivian Peso and Colombian PesosPeso to Chilean Pesos with respect to assets, liabilities, income and expenses of its subsidiaries in Argentina, Uruguay, Paraguay and Paraguay,Bolivia, associated in BoliviaPerú and joint venturesjoin venture in Colombia. The Company does not coverhedge the risks associated withto the conversion of its subsidiaries, whichwhose effects are recorded in Equity.
equity.
As of December 31, 2015,2018, the net investment in foreign subsidiaries, associatedassociates and joint ventures amountedamounts to ThCh$ 133,554,918,247,679,930, ThCh$ 14,276,937958,474 and ThCh$ 18,718,832121,448,016, respectively (ThCh$ 127,753,473,133,134,842, ThCh$ 12,757,8747,406,020 and ThCh$ 1,445,478 in 2014)71,070,399 as of December 31, 2017).
Exchange rate sensitivity analysis
The exchange rateeffect of foreign currency translation differences effect recognized in the Consolidated Statement of Income for the year ended as of December 31, 2015,2018, related to the foreign currency denominated assets and liabilities denominated in foreign currency, was an incomea gain of ThCh$ 957,565 (and a loss3,299,657 (loss of ThCh$ 613,1812,563,019 in 20142017 and a gain of ThCh$ 4,292,119456,995 in 2013)2016). Considering the exposure as of December 31, 2015,2018 and assuming a 10% increase (or decrease) in the exchange rate, and maintainingkeeping constant all other variables such as interest rates constant, it is estimated that the effect overon the Company’s net income would be lossa net income after taxes of ThCh$ 58,68799,589 (a loss of ThCh$ 204,45676,478 in 20142017 and a lossgain of ThCh$ 85,506289,448 in 2013).2016) associated of the owners of the controller.
Considering that approximately 8%7% of the Company’Company’s sales relates torevenue comes from export sales carried out in Chile (8%(7% in 20142017 and 2013)8% in 2016), in currencies different from theother than Chilean Peso, and that approximately 61% (62% in approximately 54% (55%2017 and 63% in 2014 and 57% in 2013)2016) of the Company’s direct costs are in or indexed to the US Dollar and assuming that the functional currencies will be appreciated or (depreciated)appreciate (depreciate) by 10% as comparedin respect to the set of foreign currencies, when maintainingUS Dollar, and keeping all other variables constant, the rest of the variables the hypothetical effect on the
F-40
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Company’s income would be income (loss)a loss after taxes of ThCh$ 10,380,193 income (loss) fromThCh$ 10,004,37922,116,350 (ThCh$ 18,772,323 in 20142017 and ThCh$ 9,320,80413,908,457 in 2013)2016).
The Company can also be affected by changes in the variationExchange rate of the exchange rate ofcountries where theits foreign subsidiaries operate, since the resultincome is converted to Chilean Pesos at the average Exchange rate of each month. The resultoperating income of the operations in the foreign subsidiaries during the year 2015 wereas of December 31, 2018 was net income of ThCh$ 32,141,475 (ThCh $ 29,235,46256,533,194 (ThCh$ 46,395,490 in 20142017 and ThCh $ 26,738,414ThCh$ 23,057,091 in 2013)2016). Therefore, a depreciation (or appreciation)(appreciation) of 10% in the exchange rate of the Argentine Peso, the Uruguayan Peso, and the Paraguayan Guarani and the Bolivian peso against the Chilean Peso, would beresult in a loss (income) before taxtaxes of ThCh$ 3,214,1475,653,319 (ThCh$ 2,923,5464,639,549 in 20142017 and ThCh$ 2,673,8412,305,709 in 2013)2016).
The net investment in foreign subsidiaries, associatedassociates and joint ventures as of December 31, 2018, amounted to ThCh$ 133,554,918,247,679,930, ThCh$ 14,276,937958,474 and ThCh$ 18,718,832,121,448,016, respectively (ThCh$ 127,753,473,133,134,842, ThCh$ 12,757,8747,406,020 and ThCh$ 1,445,478871,070,399 in 2014)2017). Assuming a 10% increase or decrease in the Argentine Peso, Uruguayan Peso, Paraguayan Guarani, BoliviansBolivian Peso and Colombian Peso against the Chilean Peso, and maintaining constant all the rest of theother variables constant, the increase (decrease) would hypothetically result in Net income (loss) of ThCh$ 16,655,06937,008,642 (ThCh$ 14,195,68321,161,126 in 2014)2017 and ThCh$ 17,869,963 in 2016) recorded as a credit (charge) against Equity.
to equity.
The companyCompany does not cover thehedge risks associated with theto currency conversion of the financial statements of its subsidiaries that have othera different functional currency, whose effects are reportedrecorded in Equity.equity.
Interest ratesrate risk
The interestInterest rate risk mainly originatedoriginates from the Company’s financing sources. The main exposure is related to LIBOR and BADLAR variable interest rate obligations indexed obligations.
to the London Inter Bank Offer Rate (“LIBOR”) and the Buenos Aires Deposits of Large Amounts Rate (“BADLAR”)
As of December 31, 2015,2018, the Company had a total ThCh$ 20,206,6088,576,258 in variable interest debt indexed to LIBOR (ThCh$ 13,690,9876,560,842 in 2014)2017). Consequently, as of December 31, 2015,2018, the company’s financing structure is comprised bymade up of (without considering the effects of cross currency swaps effect)approximately 3% (3% in approximately 12% (7% in 2014) in2017) debt with variable interest rates,rate, and 88% (93%97% (97% in 2014)2017) in debt with fixed interest rates.
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To administer themanage interest rate risk, the Company has a policy that intendswhich seeks to reduce the volatility of its financial expense,finance cost, and to maintain anand ideal percentage of its debt in fixed rate instruments. The financial position is mainly set by the use of short-term and long-term, debt, as well as derivativederivate instruments such as cross currency interest rate swaps and cross interest rate swaps.
As of December 31, 2015,2018, after considering the effect of interest rates and currency swaps, approximately 97% (100%99.8% (99% in 2014)2017) of the Company’s long-term debt hasis at fixed interest rates.
The terms and conditions of the Company’s obligations as of December 31, 2015,2018, including exchangeExchange rates, interest rates, maturities and effective interest rates, are detailed inNote 27.21 – Other financial liabilities.
Interest ratesrate sensitivity analysis
The total financial expensecost recognized in the Consolidated Statement of Income for the twelve monthmonths ended as of December 31, 2015,2018, related to short-termshort and long-term debtsdebt amounted to ThCh$ 23,101,32923,560,662 (ThCh$ 22,957,48224,166,313 in 20142017 and ThCh$ 24,084,22620,307,238 in 2013)2016). Assuming a reasonably possible increase of 100 base point increase (or decrease)bps in the Interest rate,variable interest rates and maintaining constant all other variables it is estimated thatconstant, the effect over the Company’s incomeincrease would behypothetically result in a loss before taxes of ThCh$ 41,872.5,059 (ThCh$ 17,176 in 2017 and ThCh$ 34,228 in 2016).
Inflation risk
The Company maintains a series of Unidadagreements indexed to Unidades de Fomento*Fomento (UF) indexed agreements with third parties, as well as UF indexed financial debt which means that the Company is exposed to fluctuations in the UF, fluctuations, generating increasesan increase in the value of thethose agreements and inflation adjustable liabilities inif the event it experiences growth.UF increases due to inflation. This risk is partially mitigated by the Company’s policy of keeping the unitary net sales per unit in UF constant as long as the market conditions allow it.it, and taking cross currencyswaps if the if the market conditions are favorable to the Company.
F-41
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Inflation in Argentina has shown significant increases since the beginning of 2018. The cumulative inflation rate of three years, calculated using different combinations of consumer price indices, has exceeded 100% for several months, and it’s still increasing. The cumulative three-year inflation calculated using the general price index has already exceeded 100%. Therefore, as prescribed by IAS 29, Argentina was declared a hyperinflationary economy as of July 1, 2018.
* The Unidad de Fomento (UF) is a Chilean inflation-indexed, peso-denominated monetary unit. The UF rate is set daily based on changes in the previous month´s inflation rate.
Inflation sensitivity analysis
The income for total adjustment unitIncome from indexation units recognized in the Consolidated Statement of Comprehensive Income for the twelve monthtwelve-months ended as of December 31, 2015,2018, related to UF indexed short-termshort and long-term debt, is a gain of ThCh$ 742,041 (a loss of ThCh$ 110,539 in 2017 and resulted in a loss of ThCh$ 3,282,736 (ThCh$ 4,159,1312,246,846 in 2014 and ThCh$ 1,801,765 in 2013)2016). Assuming a reasonably possible 3% increase (decrease) ofin the Unidad de Fomento by approximately 3% and maintaining constantkeeping all the rest of theother variables such as interest rates constant, the aforementioned increase (decrease) would hypothetically result in a loss (income) of ThCh$ 3,065,7473,380,752 (ThCh$ 3,035,3711,419,965 in 20142017 and ThCh$ 2,999,4673,062,661 in 2013)2016) in the Consolidated Statement of Income.
Raw material pricePrice risk
The main exposure to the raw material pricematerials Price variation is related to barley, malt, and maltcans used in the production of beer, concentrates, sugar and plastic containers used in the production of soft drinks and bulk wine and grapes for the manufacturing of wine and spirits.
Barley, malt and cans
In Chile, the Company obtains its barley and malt supply from both from local producers and the international market. Long-term supply agreements are entered into with local producers where the barley price is set annually according to market prices, which are used to determine the price of malt price according to the agreements. The purchasespurchase commitments made expose the Company to a raw materialmaterials price fluctuation risk. During 2015,2018, the Company purchased 46,620 tons (52,720in Chile did not acquire barley (0 tons in 2014)2017) and 73,498 tons of barley and 53,890 tons (37,315malts (68,000 tons in 2014) of malt.2017). CCU Argentina acquires malt mainly malt from local producers. SuchThese raw materials represent approximately 9 % (12%5% (6% in 2014)2017 and 7% in 2016) of the direct cost of the Chile Operating segment.
OfAs of December 31, 2018, in the Chile Operation segment, the cost of Chilecans represented approximately 12% of direct costs (12% in 2017 and 15% in 2016). In the International Business Operating segment, the cost of cans representsrepresented approximately 12%38% of the direct cost in 2015 (12% in 2014). Meanwhile in International business Operating segment the cans cost represent approximately 30% of the direct cost of raw materials costs as of December 31, 2018 (33% in 2015 (20%2017 and 34% in 2014)2016).
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Concentrates, Sugar and plastic containers
The main raw materials used in the production of non-alcoholic beverages are concentrates,concentrated, which are mainly acquired from licensees,licenses, sugar and plastic resin for the manufacturing of plastic bottles and containers. The Company is exposed to price fluctuation risks ofinvolving these raw materials, which jointly represent approximately 29% in 201527% (29% in 20142017 and 27%30% in 2013)2016) of the direct cost of the Chile Operating segment. The companyCompany does not engage in hedging the purchases of raw materials.materials purchases.
Grapes and wine
The main raw materialmaterials used by the subsidiary VSPTViña San Pedro Tarapacá S.A. for wine production are grapes harvested grapes from its own productionvineyards and grapes and wines acquiredwine acquires from third parties through long termlong-term and spot contracts. ForIn the last 12 months, approximately 31%26% (22% in 2017) of theVSPT’s total wine of VSPT supply comescame from its own vineyards. In theRegarding our export business the ownmarket, and considering our focus on this market, approximately 41% (34% in 2017) of our wine supply for 2015 was 48% (37% for 2014).export came from our own vineyards.
The remaining 69% (77%74% (78% in 2014)2017) supply iswas purchased from third parties through long termlong-term and spot contracts. During 2015,In the last 12 months, the subsidiary VSPT acquired 55%63% (69% in 2014)2017) of the necessary grapes and wine from third parties through spot contracts. It also acquired 14%Additionally, the long-term transactions were 11% (9% in 2017) of its grape needs in 2015 from long term agreements (8% in 2014).the total supply.
We mustshould consider that as of December 31, 2015, the2018, wine represents 57% (59%64% (61% in 2014)2017 and 56% in 2016) of the total direct cost of the Wine Operating Segment, meaning that the supplysegment, and supplies purchased tofrom third parties represents 31% of the direct cost.represented 38% (42% in 2017).
Raw material price sensitivity Analysis
The totalF-42
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Raw material Price sensitivity analysis
Total direct costcosts in the Consolidated Statement of Income for 2015 amountsthe twelve months ended as of December 31, 2018, amounted to ThCh$ 485,391,583650,386,343 (ThCh$ 433,749,832586,223,676 in 20142017 and ThCh$ 382,645,778540,692,964 in 2013)2016). Assuming a reasonably possible 8% increase (decrease) in the direct cost of each Operating segment of 8% and maintaining constantkeeping all the rest of theother variables such as exchange rates constant, the aforesaid increase (decrease) would hypothetically result into a loss (income) before taxes of ThCh$ 24,078,37030,150,723 (ThCh$ 21,875,40528,604,884 in 20142017 and ThCh$ 20,363,65328,075,829 in 2013)2016) for the Chile Operating segment, ThCh$ 8,444,33113,545,233 (ThCh$ 5,925,78610,404,929 in 20142017 and ThCh$ 5,421,4378,089,082 in 2013)2016) for the International Business Operating segment ThCh$ 6,736,734 (ThCh$ 6,414,035 in 2014 and ThCh$ 6,180,9518,734,204 (ThCh$ 8,215,317 in2013) 2017 and ThCh$ 7,222,786 in 2016) for the Wine Operatingoperating segment.
Credit risk
The credit risk to which the Company is exposed to originates from: a) the commercialtrade accounts receivable maintained withfrom retail clients, wholesalecustomers, whole sale distributors and supermarket chains ofin the domestic markets;market; b) accounts receivable from exports; and c) financial facilitiesinstruments maintained with Banks and financial institutions, such as demand deposits, mutual fundsfund investments, facilitiesinstrument acquired under resale commitments and derivatives.
Domestic market
The credit risk related to commercial collectibletrade accounts ofreceivable from domestic markets is administeredmanaged by the LoanCredit and Collection Administration Officer,Collections Management Department, and it is monitored by the LoanCredit Committee of each business unit. The domestic market mainly refers to accounts receivables in Chile and represents 63% of total trade accounts receivable (66% in 2017 and 55% in 2016). The Company has a wide client base of customers that isare subject to the policies, procedures and controls established by the Company. The loanCredit limits are established for all clientscustomers on the basis of an internal qualificationrating and their payment performance.behavior. Outstanding commercialtrade accounts receivable are regularly monitored. In addition, the Company acquires loan insurances coveringpurchases credit insurance that covers 90% of the individually significant accounts receivable balances, a coverage that as of December 31, 2015, amounts2018, is equivalent to 88% (87%84% (88% in 2014)2017) of the total accounts receivable.
Overdue, but not impaired, commercialtrade accounts receivable corresponds to clientsreceivables represent customers that show delays ofare less than 21.422 days (18.2 daysoverdue (30 in 2014)2017).
As of December 31, 2015,2018, the Company hadhas approximately 998 clients (904 clients1,294 customers (1,205 customers in 2014) indebted in over2017) with more than Ch$ 10 million in debt each, that togetherwhich altogether represent approximately 85% (86%86% (85% in 2014)2017) of the total commercialtrade accounts receivable. There were 217 clients (195 clientsare 261 customers (240 customers in 2014)2017) with balances overin excess of Ch$ 50 million each, representing approximately 74% (76%75% (74% in 2014)2017) of the total accounts receivable. The 93%receivable.The 90% (94% in 2014)2017) of suchthose accounts receivable are covered by credit insurance.
The Company sells its products through retail customers, wholesale distributors and supermarket chains, with a credit worthiness of 99% (99% in 2017).
As of December 31, 2018, the loan insurance.Company has no significant guarantees from its customers.
The Company believes that no additional credit risk provisions are needed toother than the individual and collective provisions determined atas of December 31, 2015, as2018, that amount to ThCh$ 6,059,201 (ThCh$ 4,154,752 in 2017) are needed since a large percentage of these are covered by insurance.
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Exports market
The loancredit risk related to accounts receivable forfrom exports is administeredmanaged by VSPTthe Head of LoanCredit and Collection,Collections at VSPT and it is monitored by VSPT Administration and Finance Officer. The CompanyManagement. VSPT’s export trade accounts receivable represent 12% of total trade accounts receivable (12% in 2017). VSPT has a large clientwide base of customers, in overmore than eighty countries, which are subject to the policies, procedures and controls established by the Company.VSPT. In addition, the CompanyVSPT acquires loancredit insurance covering 99% (98%to cover 99.5% (99.7% in 2014)2017) of theindividually significant accounts receivable; and as of December 31, 2018 more than 90% (90% in 2017) of total accounts receivable.receivable are covered. Pending paymentpayments of commercialtrade accounts receivable isare regularly monitored. Apart from the loancredit insurance, having diversified sales in different countries decreases the loancredit risk.
As of December 31, 2015,2018, there were 69 clients (72 clients58 customers (63 customers in 2014) indebted for over2017) with more than ThCh$ 65,000 of debt each, which represent 88% (87%92% (91% in 2014)2017) of theVSPT´s total export market accounts receivable of the export market.receivable.
Overdue
F-43
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
With regards to VSPT’s export customers, overdue, but notno impaired, commercialtrade accounts receivable corresponds to clientsreceivables are customers that show delays ofare less than 1928 days(32 overdue (20 days average in 2014)2017).
The Company estimatesbelieves that no loancredit risk provisions are necessary in addition toother than the individual and collective provisions determined as of December 31, 2015.2018. See analysis of accounts receivables maturitiesreceivable aging and losses due to impairment of accounts receivables (Note 15)(Note 10 – Trade and other receivables).
The Company has policies limitingFinancial investments and derivatives
Financial investments correspond to time deposits, which are financial instruments acquired with repurchase agreements at fixed interest rate, maturing in less than three months placed in financial institutions in Chile, so there are not exposed to significant market risk. Derivatives are measured at fair value and traded only in the Chilean market. As of 2018, the amendment to IFRS 9, which requires changes to the valuation of derivative financial instruments considering the counterparty loan risk exposure with respect to financial institutions,(CVA and such exposures are frequently monitored. Consequently, the Company does not have significant risk concentration with any specific financial institutions as of December 31, 2015.DVA), is applied.
Tax risk
Our businesses are taxed with different duties, particularly with excise taxes on the consumption of alcoholic and non-alcoholic beverages.
The Argentine excise tax is 8.7% for beer, and the Chilean excise tax is 20.5% for beer and wine (15% in 2014), 31.5% for spirits (27% in 2014), 18% for sugar content non alcoholic beverages and 10% for no sugar content non alcoholic beverages (13% in 2014). In Uruguay the excise tax is 22% for beer, 19% for sugar content non alcoholic beverages, 12% for no sugar content non alcoholic beverages and 8% for bottled water. As for Paraguay, the excise tax is 9% for beer and 5% for sugar content non alcoholic beverages and bottled water.
An increase in the rate of these or any other tax could negatively affect our sales and profitability.
Liquidity risk
The Company administersmanages liquidity risk at a consolidated level. The cashCash flows originated from operationaloperating activities beingare the main liquidity source.source of liquidity. Additionally, the Company has the ability to issue debt and equity instruments in the capitalcapitals market according tobased on our needs.
ToIn order to manage short-term liquidity, the Company considers projected cash flows for a twelve monthstwelve-month moving period and maintains cash and cash equivalents available to meet its obligations.
Based on the current operationaloperating performance and its liquidity position, the Company estimates that cash flows originated by operatingfrom operation activities and theavailable cash available shallwill be sufficient to finance working capital, capital investments, interest payments, dividend paymentspayment and debt payment requirementsrequirement for the next 12-month12-months period and in the foreseeable future.
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
A summary of theThe Company’s financial liabilities with their maturitiesexpiring as of December 31, 20152018 and 2014,2017, based on the non-discounted contractual cash flows appears below:are summarized as follows:
As of December 31, 2015 | Book value | Contractual flows maturities | ||||||||||
Less than 1 year | Between 1 and 5 years | More than 5 years | Total | |||||||||
ThCh$ | ThCh$ | |||||||||||
Other financial liabilities no derivative |
| |||||||||||
As of December 31, 2018 | Book value (*) | Contractual flows maturities | ||||||||||
0 to 3 months | 3 months to 1 year | Over 1 year to 3 years | Over 3 years to 5 years | Over 5 years | Total | |||||||
ThCh$ | ||||||||||||
Other financial liabilities no derivatives |
|
| ||||||||||
Bank borrowings | 76,050,091 | 33,250,667 | 52,025,633 | - | 85,276,300 | 113,360,982 | 4,171,430 | 38,017,422 | 20,574,967 | 59,839,650 | 3,381,796 | 125,985,265 |
Bond payable | 74,508,233 | 5,606,949 | 28,255,440 | 64,742,891 | 98,605,280 | 139,362,478 | 2,349,873 | 4,855,854 | 18,896,434 | 18,053,262 | 167,691,118 | 211,846,541 |
Financial leases obligations | 17,559,874 | 1,505,697 | 5,148,941 | 28,871,228 | 35,525,866 | 17,912,134 | 241,724 | 725,183 | 1,911,683 | 1,909,956 | 23,078,634 | 27,867,180 |
Deposits for return of bottles and containers | 12,503,170 | - | 12,503,170 | 13,967,995 | - | 13,967,995 | - | 13,967,995 | ||||
Sub-Total | 180,621,368 | 52,866,483 | 85,430,014 | 93,614,119 | 231,910,616 | 284,603,589 | 6,763,027 | 57,566,454 | 41,383,084 | 79,802,868 | 194,151,548 | 379,666,981 |
Derivative financial liabilities |
|
|
|
| ||||||||
Derivative financial instruments | 4,997,124 | 4,997,124 | - | - | - | 4,997,124 | ||||||
Derivative hedge liabilities | 107,698 | 107,876 | - | - | 107,876 | 1,351,530 | 639,032 | 620,516 | 424,299 | - | 1,683,847 | |
Derivative financial instruments | 171,470 | 171,471 | - | 171,471 | ||||||||
Sub-Total | 279,168 | 279,347 | - | - | 279,347 | 6,348,654 | 5,636,156 | 620,516 | 424,299 | - | 6,680,971 | |
Total | 180,900,536 | 53,145,830 | 85,430,014 | 93,614,119 | 232,189,963 | 290,952,243 | 12,399,183 | 58,186,970 | 41,807,383 | 79,802,868 | 194,151,548 | 386,347,952 |
As of December 31, 2014 | Book value | Contractual flows maturities | ||||||||||
Less than 1 year | Between 1 and 5 years | More than 5 years | Total | |||||||||
ThCh$ | ThCh$ | |||||||||||
Other financial liabilities no derivative |
| |||||||||||
As of December 31, 2017 | Book value (*) | Contractual flows maturities | ||||||||||
0 to 3 months | 3 months to 1 year | Over 1 year to 3 years | Over 3 years to 5 years | Over 5 years | Total | |||||||
ThCh$ | ||||||||||||
Other financial liabilities no derivatives |
|
| ||||||||||
Bank borrowings | 95,822,149 | 51,813,214 | 52,789,648 | - | 104,602,862 | 98,510,577 | 5,159,746 | 22,871,796 | 23,799,505 | 60,322,863 | - | 112,153,910 |
Bond payable | 73,937,639 | 5,485,283 | 23,204,531 | 71,545,695 | 100,235,509 | 72,782,747 | 1,127,076 | 4,523,346 | 18,137,303 | 19,380,469 | 48,315,616 | 91,483,810 |
Financial leases obligations | 17,392,945 | 1,681,160 | 5,228,658 | 28,911,336 | 35,821,154 | 17,814,875 | 354,543 | 1,034,396 | 2,552,580 | 2,551,761 | 27,644,377 | 34,137,657 |
Deposits for return of bottles and containers | 11,787,424 | 11,787,424 | - | 11,787,424 | 13,228,328 | - | 13,228,328 | - | 13,228,328 | |||
Sub-Total | 198,940,157 | 70,767,081 | 81,222,837 | 100,457,031 | 252,446,949 | 202,336,527 | 6,641,365 | 41,657,866 | 44,489,388 | 82,255,093 | 75,959,993 | 251,003,705 |
Derivative financial liabilities |
|
|
|
| ||||||||
Derivative financial instruments | 10,416,675 | - | 10,416,675 | |||||||||
Derivative hedge liabilities | 228,376 | 161,879 | (307,947) | - | (146,068) | 1,840,188 | 698,685 | 1,142,524 | - | 1,841,209 | ||
Derivative financial instruments | 684,317 | 684,317 | - | - | 684,317 | |||||||
Sub-Total | 912,693 | 846,196 | (307,947) | - | 538,249 | 12,256,863 | 11,115,360 | 1,142,524 | - | 12,257,884 | ||
Total | 199,852,850 | 71,613,277 | 80,914,890 | 100,457,031 | 252,985,198 | 214,593,390 | 17,756,725 | 42,800,390 | 44,489,388 | 82,255,093 | 75,959,993 | 263,261,589 |
(*) View current and non-current book value inNote 67 – Financial Instruments.
F-.45
F-35
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
The following are the book values of each financial instrument category at the closing of each year:
| As of December 31, 2015 | As of December 31, 2014 | ||
| Current | Non current | Current | Non current |
| ThCh$ | ThCh$ | ThCh$ | ThCh$ |
Cash and cash equivalents | 192,554,239 | - | 214,774,876 | - |
Other financial assets | 13,644,105 | 80,217 | 6,483,652 | 343,184 |
Accounts receivable - trade and other receivable | 252,225,937 | - | 238,602,893 | - |
Acoounts receivable from related companies | 4,788,930 | 445,938 | 11,619,118 | 522,953 |
Total financial assets | 463,213,211 | 526,155 | 471,480,539 | 866,137 |
Bank borrowings | 27,714,998 | 48,335,093 | 49,137,896 | 46,684,253 |
Bonds payable | 3,155,239 | 71,352,994 | 3,029,425 | 70,908,214 |
Financial leases obligations | 321,416 | 17,238,458 | 518,139 | 16,874,806 |
Derivative financial instruments | 171,470 | - | 684,317 | - |
Derivative hedge liabilities | 107,698 | - | 161,092 | 67,284 |
Deposits for return of bottles and containers | 12,503,170 | - | 11,787,424 | - |
Total other non-financial liabililities (*) | 43,973,991 | 136,926,545 | 65,318,293 | 134,534,557 |
Account payable- trade and other payable | 227,736,803 | 1,645,098 | 203,782,805 | 369,506 |
Accounts payable to related entities | 11,624,218 | - | 10,282,312 | - |
Total financial liabilities | 283,335,012 | 138,571,643 | 279,383,410 | 134,904,063 |
|
|
|
|
|
(*) SeeNote 27 - Other financial liabilities.
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|
a)Composition of financial assets and liabilities:
The following tables show the fair values, based on the financial instrument categories, as compared to the book value included in the Consolidated Statements of Financial Position:
| As of December 31, 2015 | As of December 31, 2014 | ||
| Book Value | Fair Value | Book Value | Fair Value |
| ThCh$ | ThCh$ | ThCh$ | ThCh$ |
Cash and cash equivalents | 192,554,239 | 192,554,239 | 214,774,876 | 214,774,876 |
Other financial assets | 13,724,322 | 13,724,322 | 6,826,836 | 6,826,836 |
Accounts receivable - trade and other receivable | 252,225,937 | 252,225,937 | 238,602,893 | 238,602,893 |
Acoounts receivable from related companies | 5,234,868 | 5,234,868 | 12,142,071 | 12,142,071 |
Total financial assets | 463,739,366 | 463,739,366 | 472,346,676 | 472,346,676 |
Bank borrowings | 76,050,091 | 77,380,452 | 95,822,149 | 98,167,470 |
Bonds payable | 74,508,233 | 80,087,449 | 73,937,639 | 80,134,117 |
Financial leases obligations | 17,559,874 | 29,104,078 | 17,392,945 | 28,975,321 |
Derivative financial instruments | 171,470 | 171,470 | 684,317 | 684,317 |
Derivative hedge liabilities | 107,698 | 107,698 | 228,376 | 228,376 |
Deposits for return of bottles and containers | 12,503,170 | 12,503,170 | 11,787,424 | 11,787,424 |
Total other non-financial liabililities (*) | 180,900,536 | 199,354,317 | 199,852,850 | 219,977,025 |
Account payable- trade and other payable | 229,381,901 | 229,381,901 | 204,152,311 | 204,152,311 |
Accounts payable to related entities | 11,624,218 | 11,624,218 | 10,282,312 | 10,282,312 |
Total financial liabilities | 421,906,655 | 440,360,436 | 414,287,473 | 434,411,648 |
|
|
|
|
|
The book value of current accounts receivables, cash and cash equivalents and other financial assets and liabilities approximate fair value due to the short-term nature of such facilities, and in the case of accounts receivable, due to the fact that any collection loss is already reflected in the impairment loss provision.
The fair value of non-derivative financial assets and liabilities that are not quoted in active markets are estimated through the use of discounted cash flows calculated on market variables observed as of the date of the financial statements. The fair value of derivative instruments is estimated through the discount of future cash flows, determined according to information observed in the market or to variables and prices obtained from third parties.
The fair value of bank borrowings and Bonds payable have hierarchy level 2 of fair value.
b)Financial instruments as per category:
As of December 31, 2015 | Fair value with changes in income | Cash and cash equivalents and loans and accounts receivables | Hedge derivatives | Total |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |
Financial assets |
|
|
|
|
Derivative financial instruments | 9,365,572 | - | 816,622 | 10,182,194 |
Marketable securities and investments in other companies | 3,542,128 | - | - | 3,542,128 |
Total other financial assets | 12,907,700 | - | 816,622 | 13,724,322 |
Cash and cash equivalents | - | 192,554,239 | - | 192,554,239 |
Accounts receivable-trade and other receivables | - | 252,225,937 | - | 252,225,937 |
Account receivable from to related companies | - | 5,234,868 | - | 5,234,868 |
Total | 12,907,700 | 450,015,044 | 816,622 | 463,739,366 |
F-37
|
As of December 31, 2015 | Fair value with changes in income | Hedge derivatives | Financial libilities measured at amortized cost | Total |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |
Financial liabilities |
|
|
|
|
Bank borrowings | - | - | 76,050,091 | 76,050,091 |
Bonds payable | - | - | 74,508,233 | 74,508,233 |
Financial leases obligations | - | - | 17,559,874 | 17,559,874 |
Deposits for return of bottles and containers | - | - | 12,503,170 | 12,503,170 |
Derivative financial instruments | 171,470 | 107,698 | - | 279,168 |
Total others financial liabililities | 171,470 | 107,698 | 180,621,368 | 180,900,536 |
Account payable- trade and other payable | - | - | 229,381,901 | 229,381,901 |
Accounts payable to related entities | - | - | 11,624,218 | 11,624,218 |
Total | 171,470 | 107,698 | 421,627,487 | 421,906,655 |
As of December 31, 2014 | Fair value with changes in income | Cash and cash equivalents and loans and accounts receivables | Hedge derivatives | Total |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |
Financial assets |
|
|
|
|
Derivative financial instruments | 5,467,620 | - | 343,184 | 5,810,804 |
Marketable securities and investments in other companies | 1,016,032 | - | - | 1,016,032 |
Total other financial assets | 6,483,652 | - | 343,184 | 6,826,836 |
Cash and cash equivalents | - | 214,774,876 | - | 214,774,876 |
Accounts receivable-trade and other receivables | - | 238,602,893 | - | 238,602,893 |
Account receivable from to related companies | - | 12,142,071 | - | 12,142,071 |
Total | 6,483,652 | 465,519,840 | 343,184 | 472,346,676 |
As of December 31, 2014 | Fair value with changes in income | Hedge derivatives | Financial libilities measured at amortized cost | Total |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |
Financial liabilities |
|
|
|
|
Bank borrowings | - | - | 95,822,149 | 95,822,149 |
Bonds payable | - | - | 73,937,639 | 73,937,639 |
Financial leases obligations | - | - | 17,392,945 | 17,392,945 |
Deposits for return of bottles and containers | - | - | 11,787,424 | 11,787,424 |
Derivative financial instruments | 684,317 | 228,376 | - | 912,693 |
Total others financial liabililities | 684,317 | 228,376 | 198,940,157 | 199,852,850 |
Account payable- trade and other payable | - | - | 204,152,311 | 204,152,311 |
Accounts payable to related entities | - | - | 10,282,312 | 10,282,312 |
Total | 684,317 | 228,376 | 413,374,780 | 414,287,473 |
F-38
|
Derivative Instruments
The detail of maturities, number of derivative agreements, contracted nominal amounts, fair values and the classification of such derivative instruments as per type of agreement at the closing of each year is as follows:
| As of December 31, 2015 | As of December 31, 2014 | ||||||
Number agreements | Notional amounts thousand | Asset | Liability | Number agreements | Notional amounts thousand | Asset | Liability | |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |||||
Cross interest rate swaps USD/USD | 1 | 10,094 | - | 107,698 | 2 | 18,185 | - | 184,999 |
Less than a year | 1 | 10,094 | - | 107,698 | 1 | 8,185 | - | 117,713 |
Between 1 and 5 years | - | - | - | - | 1 | 10,000 | - | 67,286 |
Cross currency interest rate swaps USD/EURO | 2 | 12,353 | 816,622 | - | 1 | 4,499 | 343,184 | 43,377 |
Less than a year | 1 | 4,477 | 736,405 | - | - | 63 | - | 43,377 |
Between 1 and 5 years | 1 | 7,877 | 80,217 | - | 1 | 4,436 | 343,184 | - |
Forwards USD | 27 | 148,404 | 9,276,156 | 117,151 | 30 | 93,709 | 5,467,620 | 570,413 |
Less than a year | 27 | 148,404 | 9,276,156 | 117,151 | 30 | 93,709 | 5,467,620 | 570,413 |
Forwards Euro | 7 | 11,981 | 57,834 | 52,368 | 8 | 11,975 | - | 98,507 |
Less than a year | 7 | 11,981 | 57,834 | 52,368 | 8 | 11,975 | - | 98,507 |
Forwards CAD | 4 | 1,500 | 18,192 | 1,951 | 1 | 870 | - | 1,622 |
Less than a year | 4 | 1,500 | 18,192 | 1,951 | 1 | 870 | - | 1,622 |
Forwards GBP | 3 | 865 | 13,390 | - | 2 | 1,060 | - | 13,775 |
Less than a year | 3 | 865 | 13,390 | - | 2 | 1,060 | - | 13,775 |
Total derivative instruments | 44 |
| 10,182,194 | 279,168 | 44 |
| 5,810,804 | 912,693 |
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|
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|
|
|
These derivative agreements have been entered into as a hedge of exchange rate risk exposure. In the case of forwards, the Company does not comply with the formal requirements for hedging classified; consequently their effects are recorded in Income, in Other gains (losses), separately from the hedged item.
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In the case of Cross Currency Interest Rate Swaps and the Cross Interest Rate Swaps, these qualify as cash flow hedges of the flows related to loans from Banco de Chile and Banco Scotiabank. See additional disclosures inNote 27.
As of December 31, 2015 | |||||||
Entity | Nature of risks covered | Rights | Obligations | Fair value of net asset (liabilities) | Maturity | ||
Currency | Amount | Currency | Amount | Amount | |||
ThCh$ | ThCh$ | ThCh$ | |||||
Scotiabank | Interest rate and exchange rate in bank obligations | USD | 5,700,299 | EUR | 5,589,172 | 111,127 | 18-06-2018 |
Banco de Chile | Interest rate and exchange rate in bank obligations | USD | 3,205,865 | EUR | 2,500,370 | 705,495 | 11-07-2016 |
Banco de Chile | Interest rate on bank loans | USD | 7,227,245 | USD | 7,334,943 | (107,698) | 07-07-2016 |
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|
As of December 31, 2014 | |||||||
Entity | Nature of risks covered | Rights | Obligations | Fair value of net asset (liabilities) | Maturity | ||
Currency | Amount | Currency | Amount | Amount | |||
ThCh$ | ThCh$ | ThCh$ | |||||
Scotiabank | Interest rate on bank loans | USD | 4,862,197 | USD | 4,870,405 | (8,208) | 22-06-2015 |
Banco de Chile | Interest rate and exchange rate on bank loans | USD | 2,718,035 | EUR | 2,418,228 | 299,807 | 11-07-2016 |
Banco de Chile | Interest rate on bank loans | USD | 6,128,184 | USD | 6,304,976 | (176,792) | 07-07-2016 |
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The financial instruments recorded at fair value in the Statement of Financial Position are classified as follows, depending on the method used to obtain their fair values:
Level 1 Fair values obtained through direct reference to quoted market prices, without any adjustment.
Level 2 Fair values obtained through the use of valuation models accepted in the market and based on prices different from those of Level 1, which may be directly or indirectly observed as of the measurement date (adjusted prices).
Level 3 Fair values obtained through internally developed models or methodologies that use information which may not be observed or which is illiquid.
F-40
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The fair value of financial instruments recorded at fair value in the Consolidated Financial Statements, are as follows:
As of December 31, 2015 | Recorded fair value | Fair value hierarchy | ||
Level 1 | Level 2 | Level 3 | ||
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |
Derivative financial instruments | 9,365,572 | - | 9,365,572 | - |
Market securities and investments in other companies | 3,542,128 | 3,542,128 | - | - |
Derivative hedge assets | 816,622 | - | 816,622 | - |
Fair value financial assets | 13,724,322 | 3,542,128 | 10,182,194 | - |
Derivative hedge liabilities | 107,698 | - | 107,698 | - |
Derivative financial instruments | 171,470 | - | 171,470 | - |
Fair value financial liabilities | 279,168 | - | 279,168 | - |
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As of December 31, 2014 | Recorded fair value | Fair value hierarchy | ||
Level 1 | Level 2 | Level 3 | ||
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |
Derivative financial instruments | 5,467,620 | - | 5,467,620 | - |
Market securities and investments in other companies | 1,016,032 | 1,016,032 | - | - |
Derivative hedge assets | 343,184 | - | 343,184 | - |
Fair value financial assets | 6,826,836 | 1,016,032 | 5,810,804 | - |
Derivative hedge liabilities | 228,376 | - | 228,376 | - |
Derivative financial instruments | 684,317 | - | 684,317 | - |
Fair value financial liabilities | 912,693 | - | 912,693 | - |
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During year ended as ofDecember 31, 2015, the Company has not made any significant instrument transfer between levels 1 and 2.
The Company uses two credit assessment systems for its clients: a) Clients with loan insurance are assessed according to the external risk criteria (trade reports, non-compliance and protested documents that are available in the local market), payment capability and equity situation required by the insurance company to grant a loan coverage; b) All other the clients are assessed through an ABC risk model, which considers internal risk (non-compliance and protested documents), external risk (trade reports, non-compliance and protested documents that are available in the local market) and payment capacity and equity situation. The uncollectible rate during the last two years has not been significant.
F-41
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The Company has defined three Operating segments, essentially defined with respect to its revenues in the geographic areas of commercial activity: 1. Chile, 2. International business and 3. Wine.
From the fourth quarter of 2015 onwards, was created the Committee of International Business, which brings together management of the business activities regarding the geographical areas Argentina, Uruguay and Paraguay. Following this change, the Río de la Plata Operating segment (consisting of the business activities referred to) will be renamed into the International Business Operating Segment. The Committee of International Business will at the same time represent and look after the interests associated with the investments in Bolivia and Colombia, which will continue to report its results under Equity and income of JVs and associated on a consolidated basis.3.Wine.
These Operating segments mentioned are consistent with the way the Company is managed and how results are reported by CCU. These segments reflect separate operating results which are regularly reviewed by each segmentthe chief operating decision maker in order to make decisions about the resources to be allocated to the segment and assess its performance.
Operating segment |
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Chile | Beers, non-alcoholic beverages, spirits and |
International | Beers, cider, non-alcoholic beverages and spirits in Argentina, Uruguay, Paraguay and |
Wines | Wines, mainly in export markets to more 80 countries. |
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Corporate revenues and expenses are presented separately within the Other, segment. Inin addition this segmentin the other presents the elimination of transactions between segments.
The Company does not have any customers representing more than 10% of consolidated revenues.
The detail of the segments is presented in the following tables.tables:
F-46
F-42
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
a) Information as per operating segments for the years ended as ofDecember 31, 20152018 and 2014:2017:
| Chile Operating segment | International business segment operation | Wines operating segment | Others | Total | Chile | International Business | Wines | Others | Total | ||||||||||
| 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2018 | 2017 | 2018 (4) | 2017 | 2018 | 2017 | 2018 (4) | 2017 | 2018 (5) | 2017 |
| ThCh$ | ThCh$ | ||||||||||||||||||
Sales revenue external customers | 885,769,609 | 813,639,952 | 400,051,022 | 292,152,707 | 184,169,165 | 168,139,809 | - | 1,469,989,796 | 1,273,932,468 | 1,080,974,052 | 1,020,763,055 | 473,972,819 | 457,178,413 | 201,305,759 | 200,455,713 | - | - | 1,756,252,630 | 1,678,397,181 | |
Other income | 10,238,408 | 9,100,957 | 4,708,728 | 3,992,902 | 5,214,674 | 3,918,028 | 8,220,109 | 7,021,944 | 28,381,919 | 24,033,831 | 15,754,493 | 14,667,777 | 9,404,839 | 2,740,533 | 4,190,594 | 3,105,064 | (2,320,219) | (549,761) | 27,029,707 | 19,963,613 |
Sales revenue between segments | 6,013,177 | 7,600,483 | 953,967 | 3,522,074 | 131,209 | 290,716 | (7,098,353) | (11,413,273) | - | 12,845,646 | 11,688,658 | 548,184 | 398,100 | 1,022,378 | 893,005 | (14,416,208) | (12,979,763) | - | - | |
Net sales | 902,021,194 | 830,341,392 | 405,713,717 | 299,667,683 | 189,515,048 | 172,348,553 | 1,121,756 | (4,391,329) | 1,498,371,715 | 1,297,966,299 | 1,109,574,191 | 1,047,119,490 | 483,925,842 | 460,317,046 | 206,518,731 | 204,453,782 | (16,736,427) | (13,529,524) | 1,783,282,337 | 1,698,360,794 |
Change % | 8.6 | - | 35.4 | - | 10.0 | - | 15.4 | - | 6.0 | - | 5.1 | - | 1.0 | - | 5.0 | - | ||||
Cost of sales | (420,297,983) | (383,558,625) | (162,665,341) | (136,174,602) | (105,956,281) | (97,523,601) | 3,844,354 | 12,720,013 | (685,075,251) | (604,536,815) | (501,255,744) | (483,604,499) | (230,068,601) | (190,387,412) | (133,271,578) | (126,244,373) | 4,584,531 | 1,497,629 | (860,011,392) | (798,738,655) |
% of Net sales | 46.6 | 46.2 | 40.1 | 45.4 | 55.9 | 56.6 | - | 45.7 | 46.6 | 45.2 | 46.2 | 47.5 | 41.4 | 64.5 | 61.7 | - | 48.2 | 47.0 | ||
Gross margin | 481,723,211 | 446,782,767 | 243,048,376 | 163,493,081 | 83,558,767 | 74,824,952 | 4,966,110 | 8,328,684 | 813,296,464 | 693,429,484 | 608,318,447 | 563,514,991 | 253,857,241 | 269,929,634 | 73,247,153 | 78,209,409 | (12,151,896) | (12,031,895) | 923,270,945 | 899,622,139 |
% of Net sales | 53.4 | 53.8 | 59.9 | 54.6 | 44.1 | 43.4 | - | 54.3 | 53.4 | 54.8 | 53.8 | 52.5 | 58.6 | 35.5 | 38.3 | - | 51.8 | 53.0 | ||
MSD&A (1) | (328,488,527) | (317,765,236) | (216,098,525) | (154,299,739) | (51,070,291) | (50,284,130) | (16,907,433) | (13,253,897) | (612,564,776) | (535,603,002) | (407,242,869) | (383,169,121) | (210,591,361) | (225,341,789) | (52,408,689) | (53,941,735) | (11,332,903) | (6,330,835) | (681,575,822) | (668,783,480) |
% of Net sales | 36.4 | 38.3 | 53.3 | 51.5 | 26.9 | 29.2 | - | 40.9 | 41.3 | 36.7 | 36.6 | 43.5 | 49.0 | 25.4 | 26.4 | - | 38.2 | 39.4 | ||
Other operating income (expenses) | 688,920 | 722,478 | 3,315,892 | 20,173,967 | 44,823 | 238,952 | 155,675 | 2,585,913 | 4,205,310 | 23,721,310 | 1,586,173 | 2,438,416 | 223,078,626 | 678,153 | 1,828,938 | 251,765 | 532,889 | 687,209 | 227,026,626 | 4,055,543 |
Operating result before Exceptional Items (EI) | 153,923,604 | 129,740,009 | 30,265,743 | 29,367,309 | 32,533,299 | 24,779,774 | (11,785,648) | (2,339,300) | 204,936,998 | 181,547,792 | ||||||||||
Change % | 18.6 | - | 3.1 | - | 31.3 | - | 12.9 | - | ||||||||||||
% of Net sales | 17.1 | 15.6 | 7.5 | 9.8 | 17.2 | 14.4 | - | 13.7 | 14.0 | |||||||||||
Exceptional Items (EI) (2) | - | (1,214,505) | - | (412,995) | - | (1,627,500) | ||||||||||||||
Operating result (3) | 153,923,604 | 129,740,009 | 30,265,743 | 28,152,804 | 32,533,299 | 24,779,774 | (11,785,648) | (2,752,295) | 204,936,998 | 179,920,292 | ||||||||||
Adjusted operating result (2) | 202,661,751 | 182,784,286 | 266,344,506 | 45,265,998 | 22,667,402 | 24,519,439 | (22,951,910) | (17,675,521) | 468,721,749 | 234,894,202 | ||||||||||
Change % | 18.6 | - | 7.5 | - | 31.3 | - | 13.9 | - | 10.9 | - | 488.4 | - | (7.6) | - | 99.5 | - | ||||
% of Net sales | 17.1 | 15.6 | 7.5 | 9.4 | 17.2 | 14.4 | - | 13.7 | 13.9 | 18.3 | 17.5 | 55.0 | 9.8 | 11.0 | 12.0 | - | 26.3 | 13.8 | ||
Net financial expense | - | (15,255,586) | (10,820,891) | - | (7,766,206) | (19,115,361) | ||||||||||||||
Equity and income of associates and joint ventures | - | (5,228,135) | (898,607) | - | (10,815,520) | (8,914,097) | ||||||||||||||
Foreign currency exchange differences | - | 957,565 | (613,181) | - | 3,299,657 | (2,563,019) | ||||||||||||||
Results as per adjustment units | - | (3,282,736) | (4,159,131) | - | 742,041 | (110,539) | ||||||||||||||
Other gains (losses) | - | 8,512,000 | 4,036,939 | - | 4,029,627 | (7,716,791) | ||||||||||||||
Income before taxes |
| 190,640,106 | 167,465,421 |
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| 458,211,348 | 196,474,395 | |||||||||||||
Income taxes | (50,114,516) | (46,673,500) | ||||||||||||||||||
Tax income (expense) | (136,126,817) | (48,365,976) | ||||||||||||||||||
Net income for year |
| 140,525,590 | 120,791,921 |
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| 322,084,531 | 148,108,419 | |||||||||||||
Non-controlling interests | 19,717,455 | 14,553,471 | 15,193,739 | 18,501,066 | ||||||||||||||||
Net income attributable to equity holders of the parent |
| 120,808,135 | 106,238,450 |
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| 306,890,792 | 129,607,353 | |||||||||||||
Depreciation and amortization | 45,766,393 | 38,832,969 | 14,334,415 | 11,194,117 | 7,568,991 | 7,115,790 | 13,897,003 | 11,464,690 | 81,566,802 | 68,607,566 | 63,148,804 | 64,807,818 | 19,798,708 | 15,568,301 | 7,935,006 | 7,505,440 | 2,406,676 | 4,317,945 | 93,289,194 | 92,199,504 |
ORBDA before EI | 199,689,997 | 168,572,978 | 44,600,158 | 40,561,426 | 40,102,290 | 31,895,564 | 2,111,355 | 9,125,390 | 286,503,800 | 250,155,358 | ||||||||||
Change % | 18.5 | - | 10.0 | - | 25.7 | - | 14.5 | - | ||||||||||||
% of Net sales | 22.1 | 20.3 | 11.0 | 13.5 | 21.2 | 18.5 | - | 19.1 | 19.3 | |||||||||||
ORBDA (4) | 199,689,997 | 168,572,978 | 44,600,158 | 39,346,921 | 40,102,290 | 31,895,564 | 2,111,355 | 8,712,395 | 286,503,800 | 248,527,858 | ||||||||||
ORBDA (3) | 265,810,555 | 247,592,104 | 286,143,214 | 60,834,299 | 30,602,408 | 32,024,879 | (20,545,234) | (13,357,576) | 562,010,943 | 327,093,706 | ||||||||||
Change % | 18.5 | - | 13.4 | - | 25.7 | - | 15.3 | - | 7.4 | - | 370.4 | - | (4.4) | - | 71.8 | - | ||||
% of Net sales | 22.1 | 20.3 | 11.0 | 13.1 | 21.2 | 18.5 | - | 19.1 | 24.0 | 23.6 | 59.1 | 13.2 | 14.8 | 15.7 | - | 31.5 | 19.3 | |||
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(1) MSD&A included Marketing, Selling, Distribution and Administrative expenses.
(2) Exceptional Items are income or expenses that do not occur regularly as part of the normal activities of the Company. It’s presented separately because its important items for the understanding the normal operations of the Company due to importance or nature.During the year 2014, the Company has considered thisAdjusted operating result as an Exceptional Items related to different restructuring process of operating segments.
(3)Operating result (For(for management purposes we have defined as earningsNet income before other gains (losses), net financial expense, equity and income of joint venture, foreign currency exchange differences, result as per adjustment units and income taxes).
(4)(3) ORBDA (For(for management purpose we have defined as Adjusted Operating Result before Depreciation and Amortization).
(4)The net impact, related to early termination of Budweiser license, on International Business Operating segment earnings was a one-time gain of ThCh$ 211,228,960 in ORBDA and a loss in Other for an amount of ThCh$ 2,386,517.
(5)The net impact, related to early termination of Budweiser license (SeeNote 1 – General information, letter C),on CCU’s consolidated earnings was a one-time gain of ThCh$ 208,842,443 inORBDA and ThCh$ 157,358,973 in Net income attributable to equity holder of the parent.
F-47
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
b) Information as per operating segments for the years ended as ofDecemberendedDecember 31, 20142017 and 2013:2016:
| Chile Operating segment | International business segment operation | Wines operating segment | Others | Total | Chile | International Business | Wines | Others | Total | ||||||||||
| 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 |
| ThCh$ | ThCh$ | ||||||||||||||||||
Sales revenue external customers | 813,639,952 | 751,079,523 | 292,152,707 | 274,029,865 | 168,139,809 | 146,938,005 | - | 1,273,932,468 | 1,172,047,393 | 1,020,763,055 | 973,220,715 | 457,178,413 | 366,778,056 | 200,455,713 | 195,322,270 | - | 1,678,397,181 | 1,535,321,041 | ||
Other income | 9,100,957 | 8,560,450 | 3,992,902 | 7,405,658 | 3,918,028 | 4,524,947 | 7,021,944 | 4,688,062 | 24,033,831 | 25,179,117 | 14,667,777 | 15,630,481 | 2,740,533 | 2,783,615 | 3,105,064 | 5,851,015 | (549,761) | (688,444) | 19,963,613 | 23,576,667 |
Sales revenue between segments | 7,600,483 | 5,555,707 | 3,522,074 | 999,777 | 290,716 | 792,495 | (11,413,273) | (7,347,979) | - | 11,688,658 | 8,524,493 | 398,100 | 546,972 | 893,005 | 228,767 | (12,979,763) | (9,300,232) | - | ||
Net sales | 830,341,392 | 765,195,680 | 299,667,683 | 282,435,300 | 172,348,553 | 152,255,447 | (4,391,329) | (2,659,917) | 1,297,966,299 | 1,197,226,510 | 1,047,119,490 | 997,375,689 | 460,317,046 | 370,108,643 | 204,453,782 | 201,402,052 | (13,529,524) | (9,988,676) | 1,698,360,794 | 1,558,897,708 |
Change % | 8.5 | - | 6.1 | - | 13.2 | - | 8.4 | - | 5.0 | - | 24.4 | - | 1.5 | - | 8.9 | - | ||||
Cost of sales | (383,558,625) | (343,230,330) | (136,174,602) | (113,264,790) | (97,523,601) | (92,864,092) | 12,720,013 | 12,662,578 | (604,536,815) | (536,696,634) | (483,604,499) | (471,151,686) | (190,387,412) | (157,485,547) | (126,244,373) | (112,938,261) | 1,497,629 | (244,422) | (798,738,655) | (741,819,916) |
% of Net sales | 46.2 | 44.9 | 45.4 | 40.1 | 56.6 | 61.0 | - | 46.6 | 44.8 | 46.2 | 47.2 | 41.4 | 42.6 | 61.7 | 56.1 | - | 47.0 | 47.6 | ||
Gross margin | 446,782,767 | 421,965,350 | 163,493,081 | 169,170,510 | 74,824,952 | 59,391,355 | 8,328,684 | 10,002,661 | 693,429,484 | 660,529,876 | 563,514,991 | 526,224,003 | 269,929,634 | 212,623,096 | 78,209,409 | 88,463,791 | (12,031,895) | (10,233,098) | 899,622,139 | 817,077,792 |
% of Net sales | 53.8 | 55.1 | 54.6 | 59.9 | 43.4 | 39.0 | - | 53.4 | 55.2 | 53.8 | 52.8 | 58.6 | 57.4 | 38.3 | 43.9 | - | 53.0 | 52.4 | ||
MSD&A (1) | (317,765,235) | (275,202,656) | (154,299,739) | (142,972,002) | (50,284,131) | (46,036,147) | (13,253,897) | (9,312,740) | (535,603,002) | (473,523,545) | (383,169,121) | (373,407,847) | (225,341,789) | (191,413,501) | (53,941,735) | (52,007,092) | (6,330,835) | (2,714,311) | (668,783,480) | (619,542,751) |
% of Net sales | 38.3 | 36.0 | 51.5 | 50.6 | 29.2 | 30.2 | - | 41.3 | 39.6 | 36.6 | 37.4 | 49.0 | 51.7 | 26.4 | 25.8 | - | 39.4 | 39.7 | ||
Other operating income (expenses) | 722,478 | 1,385,111 | 20,173,967 | 1,038,067 | 238,952 | (166,311) | 2,585,913 | 1,991,965 | 23,721,310 | 4,248,832 | 2,438,416 | 1,734,871 | 678,153 | (394,820) | 251,765 | 732,689 | 687,209 | 1,043,939 | 4,055,543 | 3,116,679 |
Operating result before Exceptional Items (EI) | 129,740,010 | 148,147,805 | 29,367,309 | 27,236,575 | 24,779,773 | 13,188,897 | (2,339,300) | 2,681,886 | 181,547,792 | 191,255,163 | ||||||||||
Change % | (12.4) | - | 7.8 | - | 87.9 | - | (5.1) | - | ||||||||||||
% of Net sales | 15.6 | 19.4 | 9.8 | 9.6 | 14.4 | 8.7 | - | 14.0 | 16.0 | |||||||||||
Exceptional Items (EI) (2) | - | (780,458) | (1,214,505) | (543,111) | - | (275,700) | (412,995) | (1,390,060) | (1,627,500) | (2,989,329) | ||||||||||
Operating result (3) | 129,740,010 | 147,367,347 | 28,152,804 | 26,693,464 | 24,779,773 | 12,913,197 | (2,752,295) | 1,291,826 | 179,920,292 | 188,265,834 | ||||||||||
Adjusted operating result (2) | 182,784,286 | 154,551,027 | 45,265,998 | 20,814,775 | 24,519,439 | 37,189,388 | (17,675,521) | (11,903,470) | 234,894,202 | 200,651,720 | ||||||||||
Change % | (12.0) | - | 5.5 | - | 91.9 | - | (4.4) | - | 18.3 | - | 117.5 | - | (34.1) | - | 17.1 | - | ||||
% of Net sales | 15.6 | 19.3 | 9.4 | 9.5 | 14.4 | 8.5 | - | 13.9 | 16 | 17.5 | 15.5 | 9.8 | 5.6 | 12.0 | 18.5 | - | 13.8 | 12.9 | ||
Net financial expense | - | (10,820,891) | (15,830,056) | - | (19,115,361) | (14,627,170) | ||||||||||||||
Equity and income of associates and joint ventures | - | (898,607) | 308,762 | - | (8,914,097) | (5,560,522) | ||||||||||||||
Foreign currency exchange differences | - | (613,181) | (4,292,119) | - | (2,563,019) | 456,995 | ||||||||||||||
Results as per adjustment units | - | (4,159,131) | (1,801,765) | - | (110,539) | (2,246,846) | ||||||||||||||
Other gains (losses) | - | 4,036,939 | 958,802 | - | (7,716,791) | (8,345,907) | ||||||||||||||
Income before taxes |
| 167,465,421 | 167,609,458 |
|
| 196,474,395 | 170,328,270 | |||||||||||||
Income taxes | (46,673,500) | (34,704,907) | ||||||||||||||||||
Tax income (expense) | (48,365,976) | (30,246,383) | ||||||||||||||||||
Net income for year |
| 120,791,921 | 132,904,551 |
|
| 148,108,419 | 140,081,887 | |||||||||||||
Non-controlling interests | 14,553,471 | 9,868,543 | 18,501,066 | 21,624,399 | ||||||||||||||||
Net income attributable to equity holders of the parent |
| 106,238,450 | 123,036,008 |
|
| 129,607,353 | 118,457,488 | |||||||||||||
Depreciation and amortization | 38,832,969 | 37,534,253 | 11,194,117 | 9,957,053 | 7,115,790 | 7,238,886 | 11,464,690 | 9,516,304 | 68,607,566 | 64,246,496 | 64,807,818 | 61,736,849 | 15,568,301 | 11,928,705 | 7,505,440 | 7,078,872 | 4,317,945 | 2,783,619 | 92,199,504 | 83,528,045 |
ORBDA before EI | 168,572,979 | 185,682,058 | 40,561,426 | 37,193,628 | 31,895,563 | 20,427,783 | 9,125,390 | 12,198,190 | 250,155,358 | 255,501,659 | ||||||||||
Change % | (9.2) | - | 9.1 | - | 56.1 | - | (2.1) | - | ||||||||||||
% of Net sales | 20.3 | 24.3 | 13.5 | 13.2 | 18.5 | 13.4 | - | 19.3 | 21.3 | |||||||||||
ORBDA (4) | 168,572,979 | 184,901,600 | 39,346,921 | 36,650,517 | 31,895,563 | 20,152,083 | 8,712,395 | 10,808,130 | 248,527,858 | 252,512,330 | ||||||||||
ORBDA (3) | 247,592,104 | 216,287,876 | 60,834,299 | 32,743,480 | 32,024,879 | 44,268,260 | (13,357,576) | (9,119,851) | 327,093,706 | 284,179,765 | ||||||||||
Change % | (8.8) | - | 7.4 | - | 58.3 | - | (1.6) | - | 14.5 | - | 85.8 | - | (27.7) | - | 15.1 | - | ||||
% of Net sales | 20.3 | 24.2 | 13.1 | 13.0 | 18.5 | 13.2 | - | 19.1 | 21.1 | 23.6 | 21.7 | 13.2 | 8.8 | 15.7 | 22.0 | - | 19.3 | 18.2 | ||
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(1) MSD&A included Marketing, Selling, Distribution and Administrative expenses.
(2) Exceptional Items are income or expenses that do not occur regularly as part of the normal activities of the Company. It’s presented separately because its important items for the understanding the normal operations of the Company due to importance or nature.For the year 2013, the Companyhas considered thisAdjusted operating result as an Exceptional items (EI) related to restructuring process which implied the early retirement of managers replaced internally, promotions and the sole and exceptional payments of incentives to the leaving and remaining personnel.
(3)Operating result (For(for management purposes we have defined as earningsNet income before other gains (losses), net financial expense, equity and income of joint venture, foreign currency exchange differences, result as per adjustment units and income taxes).
(4)(3) ORBDA (For(for management purpose we have defined as Adjusted Operating Result before Depreciation and Amortization).
F-48
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
Sales information by geographic location
Net sales per geographical location | For the years ended as of December 31, | For the years ended as of December 31, | ||||
2015 | 2014 | 2013 | 2018 | 2017 | 2016 | |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |||
Chile | 1,081,835,420 | 991,938,043 | 907,947,965 | 1,289,513,013 | 1,226,668,091 | 1,176,972,109 |
Argentina | 366,886,701 | 264,631,403 | 279,342,525 | 421,607,095 | 413,466,737 | 329,585,488 |
Uruguay | 14,432,950 | 11,204,806 | 9,936,020 | 17,708,773 | 16,402,136 | 15,204,331 |
Paraguay | 35,216,644 | 30,192,047 | - | 43,565,171 | 41,823,830 | 37,135,780 |
Bolivia (3) | 10,888,285 | - | - | |||
Foreign countries | 493,769,324 | 471,692,703 | 381,925,599 | |||
Total | 1,498,371,715 | 1,297,966,299 | 1,197,226,510 | 1,783,282,337 | 1,698,360,794 | 1,558,897,708 |
(1)Includes net sales correspond to Corporate Support Unit and eliminations between geographical locations. Additionally, includes net sales made in Chile of the Wines Operating segment.
See distribution of domestic(2)Includes net sales made by the subisiaries Finca La Celia S.A. and exports revenues inLos Huemules SRL., registered under the Wines Operating segment and Chile Operating segment, respectively.
(3)SeeNote 915 – Business combinations, letter a).
Depreciation and amortization as per operating segmentsSales information by customer
Property, plant and equipment depreciation and amortization of software | For the years ended as of December 31, | ||
2015 | 2014 | 2013 | |
ThCh$ | ThCh$ | ThCh$ | |
Chile Operating segment | 45,766,393 | 38,832,969 | 37,534,253 |
International business segment operation | 14,334,415 | 11,194,117 | 9,957,053 |
Wines operating segment | 7,568,991 | 7,115,790 | 7,238,886 |
Others (1) | 13,897,003 | 11,464,690 | 9,516,304 |
Total | 81,566,802 | 68,607,566 | 64,246,496 |
(1)Others includes depreciation and amortization corresponding to the Corporate Support Units and Strategic Service Units.
|
Capital expenditures as per operating segments
Capital expenditures (property, plant and equipment and software additions) | For the years ended as of December 31, | ||
2015 | 2014 | 2013 | |
ThCh$ | ThCh$ | ThCh$ | |
Chile Operating segment | 72,292,561 | 85,904,965 | 70,441,360 |
International business segment operation | 27,871,662 | 33,481,407 | 29,779,226 |
Wines operating segment | 10,052,863 | 12,686,080 | 4,839,881 |
Others (1) | 21,513,836 | 98,007,700 | 19,498,562 |
Total | 131,730,922 | 230,080,152 | 124,559,029 |
(1)Others includes the capital investments corresponding to the Corporate Support Units and Strategic Service Units.
Assets as per operating segments
Assets per segment | As of December 31, 2015 | As of December 31, 2014 |
ThCh$ | ThCh$ | |
Chile Operating segment | 685,295,557 | 653,728,891 |
International business segment operation | 256,319,478 | 275,037,618 |
Wines operating segment | 308,288,465 | 297,145,081 |
Others (1) | 573,453,051 | 542,989,483 |
Total | 1,823,356,551 | 1,768,901,073 |
(1)Others includes goodwill and the assets corresponding to the Corporate Support Units and Strategic Service Units.
Assets per geographic location
Assets per geographical location | As of December 31, 2015 | As of December 31, 2014 |
ThCh$ | ThCh$ | |
Chile | 1,555,550,811 | 1,480,587,584 |
Argentina | 188,897,724 | 211,886,432 |
Uruguay | 25,703,157 | 23,971,219 |
Paraguay | 53,204,859 | 52,455,838 |
Total | 1,823,356,551 | 1,768,901,073 |
Liabilites as per operating segments
Liabilites per segments | As of December 31, 2015 | As of December 31, 2014 |
ThCh$ | ThCh$ | |
Chile Operating segment | 328,182,912 | 370,380,118 |
International business segment operation | 97,680,139 | 125,647,902 |
Wines operating segment | 102,780,420 | 99,164,051 |
Others (1) | 107,190,935 | 25,209,084 |
Total | 635,834,406 | 620,401,155 |
(1)Others includes liabilites corresponding to the Corporate Support Units and Strategic Service Units.
|
Operating Segment’s additional information
The Consolidated Statement of Income classified according to the Company’s operations management is as follows:
CONSOLIDATED STATEMENT OF INCOME | Notes | For the years ended December 31, | ||
2015 | 2014 | 2013 | ||
ThCh$ | ThCh$ | ThCh$ | ||
Sales revenue external customers |
| 1,469,989,796 | 1,273,932,468 | 1,172,047,393 |
Other income |
| 28,381,919 | 24,033,831 | 25,179,117 |
Net sales | 9 | 1,498,371,715 | 1,297,966,299 | 1,197,226,510 |
Change % |
| 15.4 | 8.4 | - |
Cost of sales |
| (685,075,251) | (604,536,815) | (536,696,634) |
% of Net sales |
| 45.7 | 46.6 | 44.8 |
Gross margin |
| 813,296,464 | 693,429,484 | 660,529,876 |
% of Net sales |
| 54.3 | 53.4 | 55.2 |
MSD&A (1) |
| (612,564,776) | (535,603,002) | (473,523,545) |
% of Net sales |
| 40.9 | 41.3 | 39.6 |
Other operating income (expenses) |
| 4,205,310 | 23,721,310 | 4,248,832 |
Operating result before Exceptional Items (EI) |
| 204,936,998 | 181,547,792 | 191,255,163 |
Change % |
| 12.9 | (5.1) | - |
% of Net sales |
| 13.7 | 14.0 | 16.0 |
Exceptional Items (EI) (2) |
| - | (1,627,500) | (2,989,329) |
Operating result (3) |
| 204,936,998 | 179,920,292 | 188,265,834 |
Change % |
| 13.9 | (4.4) | - |
% of Net sales |
| 13.7 | 13.9 | 15.7 |
Net financial expense | 11 | (15,255,586) | (10,820,891) | (15,830,056) |
Equity and income of associates and joint ventures | 20 | (5,228,135) | (898,607) | 308,762 |
Foreign currency exchange differences | 11 | 957,565 | (613,181) | (4,292,119) |
Results as per adjustment units | 11 | (3,282,736) | (4,159,131) | (1,801,765) |
Other gains (losses) | 13 | 8,512,000 | 4,036,939 | 958,802 |
Income before taxes |
| 190,640,106 | 167,465,421 | 167,609,458 |
Income taxes | 26 | (50,114,516) | (46,673,500) | (34,704,907) |
Net income for year |
| 140,525,590 | 120,791,921 | 132,904,551 |
Non-controlling interests | 32 | 19,717,455 | 14,553,471 | 9,868,543 |
Net income attributable to equity holders of the parent |
| 120,808,135 | 106,238,450 | 123,036,008 |
Depreciation and amortization |
| 81,566,802 | 68,607,566 | 64,246,496 |
ORBDA before EI |
| 286,503,800 | 250,155,358 | 255,501,659 |
Change % |
| 14.5 | (2.1) | - |
% of Net sales |
| 19.1 | 19.3 | 21.3 |
ORBDA (4) |
| 286,503,800 | 248,527,858 | 252,512,330 |
Change % |
| 15.3 | (1.6) | - |
% of Net sales |
| 19.1 | 19.1 | 21.1 |
|
|
|
|
|
See definition of (1), (2), (3) and (4) in information as per Operating segment.
|
(4) The following is a reconciliation of our income operational activities, the most directly comparable IFRS measure to Operating Result for the years ended on December 31, 2015, 2014 and 2013:
| For the years ended December 31, | ||
2015 | 2014 | 2013 | |
ThCh$ | ThCh$ | ThCh$ | |
Income from operational activities | 213,448,998 | 183,957,231 | 189,224,636 |
Add (Subtract): |
|
|
|
Results derivative contracts | (9,839,675) | (4,152,548) | (2,390,493) |
Marketable securities to fair value | (36,280) | 103,306 | 107,914 |
Other | 1,363,955 | 12,303 | 1,323,777 |
Exceptional Items (EI) (2) | - | 1,627,500 | 2,989,329 |
Operating result before EI | 204,936,998 | 181,547,792 | 191,255,163 |
Exceptional Items (EI) (2) | - | (1,627,500) | (2,989,329) |
Operating result (1) | 204,936,998 | 179,920,292 | 188,265,834 |
See definition of (1) and (2) in information as per Operating segment.
|
a) Bebidas del Paraguay S.A. and Distribuidora del Paraguay S.A.
Year 2013 Acquisitions
During December 2013, the Company acquired 50.005% and 49.96% of the stock of Bebidas del Paraguay S.A. and Distribuidora del Paraguay S.A., respectively. This transaction allows the Company, to participate in the beer distribution business, and production and marketing of non-alcoholic drinks, waters and nectars. The total amount of this transaction was ThCh$ 11,254,656.
On June 9, 2015 the committed equity of ThCh$7,414,290 was paid.
For the acquisition of the Paraguayan companies, the Company have been determined the fair values of the assets, liabilities and contingent liabilities, generating goodwill and trademarks for an amount of ThCh$ 5,566,003 andThCh$ 3,658,167, respectively, among others (Note 21 and 22).
On December 23, 2014, the Company signed a contract with its subsidiary CCU Inversiones II Limited, in which the last acquired all of stock of Bebidas del Paraguay S.A. and Distribuidora del Paraguay S.A.
Bebidas del Paraguay S.A. (BdP) and Distribuidora del Paraguay S.A. (DdP) are considered as an economic group that share operational and financial strategy. BdP manufactures products with different brands of its property. DdP is sole and exclusive customer, which is responsible for the distribution and marketing of its products, reason why BdP is it consolidates DdP.
It is expected that the acquisition of these companies increases their productive capacities, through the expansion of their productive assets, growth in market share through the various brands market and participation in local and foreign markets, as well as operational improvements as a result of synergies obtained in the operational and administrative functions.
b) Manantial S.A.
Year 2013 Acquisitions
On June 7, 2013, the Company proceeded to pay outstanding balance of ThCh$ 1,781,909 related to the acquisition of Manantial S.A.
c)As of December 31, 2015, the Company has not made business combinations.
| For the years ended as of December 31, | ||
Net Sales | 2018 | 2017 | 2016 |
|
| ThCh$ | ThCh$ |
Domestic sales | 1,664,613,889 | 1,572,617,473 | 1,429,152,068 |
Exports sales | 118,668,448 | 125,743,321 | 129,745,640 |
Total | 1,783,282,337 | 1,698,360,794 | 1,558,897,708 |
Sales information by product category
Sales information by product category | For the years ended as of December 31, | ||
2018 | 2017 | 2016 | |
ThCh$ | ThCh$ | ThCh$ | |
Alcoholic business | 1,206,506,503 | 1,158,451,078 | 1,041,923,724 |
Non-alcoholic business | 549,746,127 | 519,946,103 | 493,397,317 |
Others (1) | 27,029,707 | 19,963,613 | 23,576,667 |
Total | 1,783,282,337 | 1,698,360,794 | 1,558,897,708 |
(1)Others consist mainly of sales of by-products and packaging including bottles, pallets, and glasses.
Depreciation and amortization as per operating segments
Depreciation and amortization | For the years ended as of December 31, | ||
2018 | 2017 | 2016 | |
ThCh$ | ThCh$ | ThCh$ | |
Chile operating segment | 63,148,804 | 64,807,818 | 61,736,849 |
International Business operating segment | 19,798,708 | 15,568,301 | 11,928,705 |
Wines operating segment | 7,935,006 | 7,505,440 | 7,078,872 |
Others (1) | 2,406,676 | 4,317,945 | 2,783,619 |
Total | 93,289,194 | 92,199,504 | 83,528,045 |
(1)Includes depreciation and amortization corresponding to the Corporate Support Units.
F-49
Compañía Cervecerías Unidas S.A. and Notes to the Consolidated Financial Statements December 31, 2018 |
Cash flows Operating Segments
Cash flows Operating Segments |
| For the years ended as of December 31, | ||
| 2018 | 2017 | 2016 | |
| ThCh$ | ThCh$ | ThCh$ | |
Cash flows from (used in ) Operating activities |
| 429,313,131 | 262,161,431 | 190,014,348 |
Chile operating segment |
| 157,294,023 | 161,413,504 | 152,862,350 |
International business operating segment |
| 228,740,495 | 58,773,027 | 13,065,093 |
Wines operating segment |
| 14,340,011 | 16,167,068 | 32,949,789 |
Others (1) |
| 28,938,602 | 25,807,832 | (8,862,884) |
|
|
|
|
|
Cash flows from (used in ) Investing Activities |
| (199,002,101) | (173,614,379) | (155,007,390) |
Chile operating segment |
| (98,325,850) | (78,746,298) | (57,119,431) |
International business operating segment |
| (35,475,310) | (32,312,751) | (40,032,866) |
Wines operating segment |
| (16,749,301) | (10,870,574) | (13,499,538) |
Others (1) (*) | (48,451,640) | (51,684,756) | (44,355,555) | |
|
|
|
|
|
Cash flows from (used in ) Financing Activities |
| (52,963,862) | (53,001,198) | (95,059,905) |
Chile operating segment |
| (78,048,783) | (65,996,567) | (90,636,820) |
International business operating segment |
| (100,573,425) | (8,217,846) | 18,820,789 |
Wines operating segment |
| 3,741,241 | (15,171,642) | (18,841,106) |
Others (1) |
| 121,917,105 | 36,384,857 | (4,402,768) |
|
|
|
|
|
(1)Others includes Corporate Support Units, due to cash flows are managed by CCU.
(*) Includes contribution to joint ventures. SeeNote 8 - Cash and cash equivalents.
Capital expenditures as per operating segments
Capital expenditures (property, plant and equipment and software additions) | For the years ended as of December 31, | |||
2018 | 2017 | 2016 | ||
ThCh$ | ThCh$ | ThCh$ | ||
Chile operating segment |
| 78,887,075 | 80,866,369 | 53,809,780 |
International Business operating segment |
| 32,756,828 | 32,312,751 | 39,592,739 |
Wines operating segment |
| 16,961,638 | 10,948,212 | 14,767,858 |
Others (1) |
| 2,834,881 | 1,638,148 | 20,713,048 |
Total |
| 131,440,422 | 125,765,480 | 128,883,425 |
(1)Others includes the capital investments corresponding to the Corporate Support Units.
F-50
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Assets as per operating segments
Assets as per Operating segment | As of December 31, 2018 | As of December 31, 2017 |
ThCh$ | ThCh$ | |
Chile operating segment | 1,183,145,732 | 1,045,791,551 |
International Business operating segment | 463,913,523 | 274,766,962 |
Wines operating segment | 341,959,321 | 315,298,950 |
Others (1) | 416,846,340 | 340,371,624 |
Total | 2,405,864,916 | 1,976,229,087 |
(1)Includes assets corresponding to the Corporate Support Units.
Assets per geographic location
Assets per geographical location | As of December 31, 2018 | As of December 31, 2017 |
ThCh$ | ThCh$ | |
Chile (1) | 1,924,196,897 | 1,689,394,491 |
Argentina (2) | 373,091,516 | 213,714,384 |
Uruguay | 26,925,415 | 25,015,615 |
Paraguay | 53,126,091 | 48,104,597 |
Bolivia (3) | 28,524,997 | - |
Total | 2,405,864,916 | 1,976,229,087 |
(1)Includes the assets corresponding to the Corporate Support Units and eliminations between geographic location and investments in associates and joint ventures. Additionally, includes part of Wines Operating segment and excludes its argentine subsidiary Finca La Celia S.A.
(2)Includes the assets of the subisiaries Finca La Celia S.A. and Los Huemules SRL., registered under the Wines Operating segment and Chile Operating segment, respectively.
(3)SeeNote 15 – Business combinations, letter a).
Liabilities as per operating segments
Liabilities as per Operating segment | As of December 31, 2018 | As of December 31, 2017 |
ThCh$ | ThCh$ | |
Chile operating segment | 457,517,605 | 388,121,093 |
International Business operating segment | 172,893,966 | 119,351,344 |
Wines operating segment | 112,427,830 | 95,094,080 |
Others (1) | 273,909,572 | 146,833,962 |
Total | 1,016,748,973 | 749,400,479 |
(1)Others includes liabilities corresponding to the Corporate Support Units.
F-51
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Operating Segment’s additional information
The Consolidated Statement of Income classified according to the Company’s operations management is as follows:
CONSOLIDATED STATEMENT OF INCOME | Notes | For the years ended December 31, | ||
2018 (*) | 2017 | 2016 | ||
ThCh$ | ThCh$ | ThCh$ | ||
Sales revenue external customers |
| 1,756,252,630 | 1,678,397,181 | 1,535,321,041 |
Other income |
| 27,029,707 | 19,963,613 | 23,576,667 |
Net sales |
| 1,783,282,337 | 1,698,360,794 | 1,558,897,708 |
Change % |
| 5.0 | 8.9 | - |
Cost of sales |
| (860,011,392) | (798,738,655) | (741,819,916) |
% of Net sales |
| 48.2 | 47.0 | 47.6 |
Gross margin |
| 923,270,945 | 899,622,139 | 817,077,792 |
% of Net sales |
| 51.8 | 53.0 | 52.4 |
MSD&A (1) |
| (681,575,822) | (668,783,480) | (619,542,751) |
% of Net sales |
| 38.2 | 39.4 | 39.7 |
Other operating income (expenses) |
| 227,026,626 | 4,055,543 | 3,116,679 |
Adjusted operating result (2) |
| 468,721,749 | 234,894,202 | 200,651,720 |
Change % |
| 99.5 | 17.1 | - |
% of Net sales |
| 26.3 | 13.8 | 12.9 |
Net financial expense | 32 | (7,766,206) | (19,115,361) | (14,627,170) |
Equity and income of associates and joint ventures | 16 | (10,815,520) | (8,914,097) | (5,560,522) |
Foreign currency exchange differences | 32 | 3,299,657 | (2,563,019) | 456,995 |
Results as per adjustment units | 32 | 742,041 | (110,539) | (2,246,846) |
Other gains (losses) | 31 | 4,029,627 | (7,716,791) | (8,345,907) |
Income before taxes |
| 458,211,348 | 196,474,395 | 170,328,270 |
Tax income (expense) | 24 | (136,126,817) | (48,365,976) | (30,246,383) |
Net income for year |
| 322,084,531 | 148,108,419 | 140,081,887 |
Non-controlling interests | 28 | 15,193,739 | 18,501,066 | 21,624,399 |
Net income attributable to equity holders of the parent |
| 306,890,792 | 129,607,353 | 118,457,488 |
Depreciation and amortization | 29 | 93,289,194 | 92,199,504 | 83,528,045 |
ORBDA (3) |
| 562,010,943 | 327,093,706 | 284,179,765 |
Change % |
| 71.8 | 15.1 | - |
% of Net sales |
| 31.5 | 19.3 | 18.2 |
|
|
|
|
|
(*) Thenet impact, related to early termination of Budweiser license (SeeNote 1 – General information, letter C), on CCU’s consolidated earnings was a one-time gain of ThCh$ 208,842,443 in ORBDA and ThCh$ 157,358,973 in Net income attributable to equity holder of the parent.
See definition of (1), (2) and (3) in information as per Operating segment under this Note.
F-52
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
The following is a reconciliation of our Net income, the main comparable IFRS measure to Adjusted Operating Result for the years ended December 31, 2018, 2017 and 2016:
| For the years ended December 31, | ||
2018 (*) | 2017 | 2016 | |
ThCh$ | ThCh$ | ThCh$ | |
Net income of year | 322.084.531 | 148,108,419 | 140,081,887 |
Add (Subtract): |
|
| |
Other gains (losses) | (4.029.627) | 7,716,791 | 8,345,907 |
Finance income | (15.794.456) | (5,050,952) | (5,680,068) |
Finance costs | 23.560.662 | 24,166,313 | 20,307,238 |
Share of net loss of joint ventures and associates accounted for using the equity method | 10.815.520 | 8,914,097 | 5,560,522 |
Foreign currency exchange differences | (3.299.657) | 2,563,019 | (456,995) |
Result as per adjustment units | (742.041) | 110,539 | 2,246,846 |
Tax income (expense) | 136.126.817 | 48,365,976 | 30,246,383 |
Adjusted operating result | 468.721.749 | 234,894,202 | 200,651,720 |
Depreciation and amortization | 93.289.194 | 92,199,504 | 83,528,045 |
ORBDA | 562.010.943 | 327,093,706 | 284,179,765 |
(*) Thenet impact, related to early termination of Budweiser license (SeeNote 1 – General information, letter C), on CCU’s consolidated earnings was a one-time gain of ThCh$ 208,842,443 in ORBDA and ThCh$ 157,358,973 in Net income attributable to equity holder of the parent.
The following is a reconciliation of the consolidated amounts presented for MSD&A with the comparable amounts presented on the face of our consolidated statement of income:
| For the years ended December 31. | ||
2018 | 2017 | 2016 | |
ThCh$ | ThCh$ | ThCh$ | |
Consolidated statement of income |
|
|
|
Distribution costs | (314,391,183) | (290,227,129) | (270,835,822) |
Administrative expenses | (152,376,458) | (142,514,649) | (155,322,295) |
Other expenses by function | (216,236,609) | (238,704,061) | (195,412,109) |
Other expenses included in ´Other expenses by function´ | 1,428,428 | 2,662,359 | 2,027,475 |
Total MSD&A | (681,575,822) | (668,783,480) | (619,542,751) |
Segment information by joint ventures and associates
The Administration of the Company review the financial situation and result of the all of their joint ventures and associated that is described inNote 16 – Investments accounted for using equity method.
F-53
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Financial instruments categories
The carrying amounts of each financial instrument category as of each year-end are detailed as follows:
As of December 31, 2018 | As of December 31, 2017 | |||
| Current | Non current | Current | Non current |
| ThCh$ | ThCh$ | ThCh$ | ThCh$ |
Derivative financial instruments | 11,522,482 | - | 3,158,391 | - |
Market securities and investments in other companies | 11,010,433 | - | 7,565,805 | - |
Derivative hedge assets | 212,554 | 3,325,079 | - | 1,918,191 |
Total other financial assets | 22,745,469 | 3,325,079 | 10,724,196 | 1,918,191 |
Accounts receivable - trade and other receivable (net) | 320,702,339 | 3,363,123 | 286,213,598 | 3,974,395 |
Accounts receivable from related parties | 3,048,841 | 190,865 | 5,810,764 | 258,471 |
Total accounts receivables | 323,751,180 | 3,553,988 | 292,024,362 | 4,232,866 |
Sub-Total financial assets | 346,496,649 | 6,879,067 | 302,748,558 | 6,151,057 |
Cash and cash equivalents | 319,014,050 | - | 170,044,602 | - |
Total financial assets | 665,510,699 | 6,879,067 | 472,793,160 | 6,151,057 |
Bank borrowings | 38,160,178 | 75,200,804 | 24,623,746 | 73,886,831 |
Bonds payable | 4,081,175 | 135,281,303 | 3,306,135 | 69,476,612 |
Financial leases obligations | 365,972 | 17,546,162 | 176,586 | 17,638,289 |
Deposits for return of bottles and containers | 13,967,995 | - | 13,228,328 | - |
Total financial liabilities measured at amortized cost | 56,575,320 | 228,028,269 | 41,334,795 | 161,001,732 |
Derivative financial instruments | 4,997,124 | - | 10,416,675 | - |
Derivative hedge liabilities | 1,194,502 | 157,028 | 1,840,188 | - |
Total financial derivative liabilities | 6,191,626 | 157,028 | 12,256,863 | - |
Total other financial liabilities (*) | 62,766,946 | 228,185,297 | 53,591,658 | 161,001,732 |
Account payable- trade and other payable | 303,380,168 | 12,413 | 281,681,553 | 541,783 |
Accounts payable to related parties | 6,936,910 | - | 10,069,043 | - |
Total commercial obligations and other accounts payable | 310,317,078 | 12,413 | 291,750,596 | 541,783 |
Total financial liabilities | 373,084,024 | 228,197,710 | 345,342,254 | 161,543,515 |
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(*) SeeNote 21 - Other financial liabilities.
F-54
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Fair value of Financial instruments
The following tables show fair values, based on financial instrument categories, compared to the carrying amount included in the Consolidated Statements of Financial Position:
a)Financial assets and liabilities are detailed as follows:
| As of December 31, 2018 | As of December 31, 2017 | ||
| Book Value | Fair Value | Book Value | Fair Value |
| ThCh$ | ThCh$ | ThCh$ | ThCh$ |
Derivative financial instruments | 11,522,482 | 11,522,482 | 3,158,391 | 3,158,391 |
Market securities and investments in other companies | 11,010,433 | 11,010,433 | 7,565,805 | 7,565,805 |
Derivative hedge assets | 3,537,633 | 3,537,633 | 1,918,191 | 1,918,191 |
Total other financial assets | 26,070,548 | 26,070,548 | 12,642,387 | 12,642,387 |
Accounts receivable - trade and other receivable (net) | 324,065,462 | 324,065,462 | 290,187,993 | 290,187,993 |
Accounts receivable from related parties | 3,239,706 | 3,239,706 | 6,069,235 | 6,069,235 |
Total accounts receivables | 327,305,168 | 327,305,168 | 296,257,228 | 296,257,228 |
Sub-Total financial assets | 353,375,716 | 353,375,716 | 308,899,615 | 308,899,615 |
Cash and cash equivalents | 319,014,050 | 319,014,050 | 170,044,602 | 170,044,602 |
Total financial assets | 672,389,766 | 672,389,766 | 478,944,217 | 478,944,217 |
Bank borrowings | 113,360,982 | 117,211,707 | 98,510,577 | 102,062,465 |
Bonds payable | 139,362,478 | 187,276,391 | 72,782,747 | 79,559,896 |
Financial leases obligations | 17,912,134 | 24,278,897 | 17,814,875 | 29,314,234 |
Deposits for return of bottles and containers | 13,967,995 | 13,967,995 | 13,228,328 | 13,228,328 |
Total financial liabilities measured at amortized cost | 284,603,589 | 342,734,990 | 202,336,527 | 224,164,923 |
Derivative financial instruments | 4,997,124 | 4,997,124 | 10,416,675 | 10,416,675 |
Derivative hedge liabilities | 1,351,530 | 1,351,530 | 1,840,188 | 1,840,188 |
Total financial derivative liabilities | 6,348,654 | 6,348,654 | 12,256,863 | 12,256,863 |
Total other financial liabilities (*) | 290,952,243 | 349,083,644 | 214,593,390 | 236,421,786 |
Account payable- trade and other payable | 303,392,581 | 303,392,581 | 282,223,336 | 282,223,336 |
Accounts payable to related parties | 6,936,910 | 6,936,910 | 10,069,043 | 10,069,043 |
Total commercial obligations and other accounts payable | 310,329,491 | 310,329,491 | 292,292,379 | 292,292,379 |
Total financial liabilities | 601,281,734 | 659,413,135 | 506,885,769 | 528,714,165 |
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(*) SeeNote 21 - Other financial liabilities.
The carrying amount of current accounts receivable, cash and cash equivalents and other financial assets and liabilities approximate their fair value due to their short-term nature, and in the case of accounts receivable, due to the fact that any collection loss is already reflected in the impairment loss provision.
The fair value of non-derivative financial assets and liabilities that are not quoted in active markets are estimated through the use of discounted cash flows calculated on market variables observed as of the date of the financial statements. The fair value of derivative instruments is estimated through the discount of future cash flows, determined according to information observed in the market or to variables and prices obtained from third parties.
The fair value of bank borrowings and Bonds payable has hierarchy level 2 of fair value.
F-55
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
b)Financial instruments by category:
As of December 31, 2018 | Fair value with changes in income | Financial assets measured at amortized cost | Hedge derivatives | Total |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |
Financial assets |
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|
|
Derivative financial instruments | 11,522,482 | - | - | 11,522,482 |
Marketable securities and investments in other companies | 11,010,433 | - | - | 11,010,433 |
Derivative hedge assets | - | - | 3,537,633 | 3,537,633 |
Total other financial assets | 22,532,915 | - | 3,537,633 | 26,070,548 |
Cash and cash equivalents | - | 319,014,050 | - | 319,014,050 |
Trade and other receivable (net) | - | 324,065,462 | - | 324,065,462 |
Accounts receivable from related parties | - | 3,239,706 | - | 3,239,706 |
Total financial assets | 22,532,915 | 646,319,218 | 3,537,633 | 672,389,766 |
As of December 31, 2018 | Fair value with changes in income | Hedge derivatives | Financial liabilities measured at amortized cost | Total |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |
Financial liabilities |
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Bank borrowings | - | - | 113,360,982 | 113,360,982 |
Bonds payable | - | - | 139,362,478 | 139,362,478 |
Financial leases obligations | - | - | 17,912,134 | 17,912,134 |
Deposits for return of bottles and containers | - | - | 13,967,995 | 13,967,995 |
Derivative financial instruments | 4,997,124 | - | - | 4,997,124 |
Derivative hedge liabilities | - | 1,351,530 | - | 1,351,530 |
Total other financial liabilities | 4,997,124 | 1,351,530 | 284,603,589 | 290,952,243 |
Account payable- trade and other payable | - | - | 303,392,581 | 303,392,581 |
Accounts payable to related parties | - | - | 6,936,910 | 6,936,910 |
Total financial liabilities | 4,997,124 | 1,351,530 | 594,933,080 | 601,281,734 |
As of December 31, 2017 | Fair value with changes in income | Financial assets measured at amortized cost | Hedge derivatives | Total |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |
Financial assets |
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Derivative financial instruments | 3,158,391 | - | - | 3,158,391 |
Marketable securities and investments in other companies | 7,565,805 | - | - | 7,565,805 |
Derivative hedge assets | - | - | 1,918,191 | 1,918,191 |
Total other financial assets | 10,724,196 | - | 1,918,191 | 12,642,387 |
Cash and cash equivalents | - | 170,044,602 | - | 170,044,602 |
Trade and other receivable (net) | - | 290,187,993 | - | 290,187,993 |
Accounts receivable from related parties | - | 6,069,235 | - | 6,069,235 |
Total financial assets | 10,724,196 | 466,301,830 | 1,918,191 | 478,944,217 |
F-56
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
As of December 31, 2017 | Fair value with changes in income | Hedge derivatives | Financial liabilities measured at amortized cost | Total |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |
Financial liabilities |
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Bank borrowings | - | - | 98,510,577 | 98,510,577 |
Bonds payable | - | - | 72,782,747 | 72,782,747 |
Financial leases obligations | - | - | 17,814,875 | 17,814,875 |
Deposits for return of bottles and containers | - | - | 13,228,328 | 13,228,328 |
Derivative financial instruments | 10,416,675 | - | - | 10,416,675 |
Derivative hedge liabilities | - | 1,840,188 | - | 1,840,188 |
Total other financial liabilities | 10,416,675 | 1,840,188 | 202,336,527 | 214,593,390 |
Account payable- trade and other payable | - | - | 282,223,336 | 282,223,336 |
Accounts payable to related parties | - | - | 10,069,043 | 10,069,043 |
Total financial liabilities | 10,416,675 | 1,840,188 | 494,628,906 | 506,885,769 |
The detail of maturities, number of derivative agreements, contracted nominal amounts, fair values and the classification of such derivative instruments by type of agreement at the closing of each year are detailed as follows:
| As of December 31, 2018 | As of December 31, 2017 | ||||||
Number agreegments | Nominal amounts thousand | Asset | Liability | Number agreegments | Nominal amounts thousand | Asset | Liability | |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |||||
Cross currency interest rate swaps CLP/USD | 1 | 2,000 | 3,325,079 | 1,194,502 | 1 | 2,000 | 1,918,191 | 1,484,538 |
Less than a year | - | - | 1,194,502 | - | - | - | 1,484,538 | |
Between 1 and 5 years | 2,000 | 3,325,079 | - | 2,000 | 1,918,191 | - | ||
Cross currency interest rate swaps USD/EURO | 1 | 11,600 | 212,554 | 157,028 | 1 | 7,872 | - | 355,650 |
Less than a year |
| - | 212,554 | - |
| 7,872 | - | 355,650 |
Between 1 and 5 years | 11,600 | - | 157,028 |
| - | - | - | |
Total | 2 |
| 3,537,633 | 1,351,530 | 2 |
| 1,918,191 | 1,840,188 |
Forwards USD | 32 | 269,371 | 11,264,711 | 3,832,634 | 27 | 245,641 | 3,095,825 | 9,722,619 |
Less than a year | 269,371 | 11,264,711 | 3,832,634 | 245,641 | 3,095,825 | 9,722,619 | ||
Forwards Euro | 10 | 79,326 | 225,815 | 1,153,302 | 14 | 65,598 | 44,474 | 694,056 |
Less than a year | 79,326 | 225,815 | 1,153,302 | 65,598 | 44,474 | 694,056 | ||
Forwards CAD | 3 | 2,650 | 28,381 | 3,986 | 3 | 1,750 | 15,530 | - |
Less than a year |
| 2,650 | 28,381 | 3,986 | 1,750 | 15,530 | - | |
Forwards GBP | 4 | 1,030 | 3,575 | 7,202 | 2 | 480 | 2,562 | - |
Less than a year | 1,030 | 3,575 | 7,202 | 480 | 2,562 | - | ||
Total | 49 |
| 11,522,482 | 4,997,124 | 46 |
| 3,158,391 | 10,416,675 |
Total instruments | 51 |
| 15,060,115 | 6,348,654 | 48 |
| 5,076,582 | 12,256,863 |
These derivative agreements have been entered into as a hedge of exchange rate risk exposure. In the case of forwards, the Company does not comply with the formal requirements for hedging designation; consequently their effects are recorded in Income, in Other gains (losses).
F-57
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
In the case of Cross Currency Interest Rate Swaps and the Cross Interest Rate Swaps, these qualify as cash flow hedges of the cash flows related to loans from Banco de Chile and Scotiabank Chile. See additional disclosures inNote 21 – Other financial liabilities.
As of December 31, 2018 | |||||||
Entity | Nature of risks covered | Rights | Obligations | Fair value of net asset (liabilities) | Maturity | ||
Currency | Amount | Currency | Amount | Amount | |||
ThCh$ | ThCh$ | ThCh$ | |||||
Scotiabank Chile | Flow interest rate and exchange rate on bank bonds | USD | 8,256,869 | EUR | 8,201,343 | 55,526 | 06-18-2021 |
Banco de Chile | Flow interest rate on bank bonds | UF | 60,388,039 | CLP | 58,257,462 | 2,130,577 | 09-15-2021 |
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Entity | Nature of risks covered | Rights | Obligations | Fair value of net asset (liabilities) | Maturity | ||
Currency | Amount | Currency | Amount | Amount | |||
ThCh$ | ThCh$ | ThCh$ | |||||
Scotiabank Chile | Flow interest rate and exchange rate on bank bonds | USD | 4,860,845 | EUR | 5,216,495 | (355,650) | 06-18-2018 |
Banco de Chile | Flow interest rate on bank bonds | UF | 60,640,827 | CLP | 60,207,174 | 433,653 | 09-15-2021 |
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The Consolidated Statement of Other Comprehensive Income includes under the caption cash flow hedge, for the years ended December 31, 2018, a credit before income taxes of ThCh$ 63,008 (ThCh$ 5,661 and ThCh$ 84,962, in 2017 and 2016, respectively), related to the fair value of Cross Currency Interest Swap and Cross Interest Rate Swap derivatives instruments.
The financial instruments recorded at fair value in the Statement of Financial Position are classified as follows, depending on the method used to obtain their fair values:
| For the years ended as of December 31, | ||
| 2015 | 2014 | 2013 |
| ThCh$ | ThCh$ | ThCh$ |
Domestic sales | 1,374,282,584 | 1,188,231,333 | 1,102,834,492 |
Exports sales | 124,089,131 | 109,734,966 | 94,392,018 |
Total | 1,498,371,715 | 1,297,966,299 | 1,197,226,510 |
Level 1 | Fair values obtained through direct reference to quoted market prices, without any adjustment. |
Level 2 | Fair values obtained through the use of valuation models accepted in the market and based on prices other than those of Level 1, which may be directly or indirectly observed as of the measurement date (adjusted prices). |
Level 3 | Fair values obtained through internally developed models or methodologies that use information which may not be observed or which is illiquid. |
F-58
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
The fair value of financial instruments recorded at fair value in the Consolidated Financial Statements, is detailed as follows:
Assets held for sale are detailed as follows:
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Non-current assets of disposal groups classified as held for sale | As of December 31, 2018 | As of December 31, 2017 |
ThCh$ | ThCh$ | |
Land | 1,894,078 | 1,786,879 |
Contructions | 718,203 | 473,975 |
Machinerys | 168,326 | 44,857 |
Total | 2,780,607 | 2,305,711 |
a) Bebidas Bolivianas BBO S.A.
On May 7, 2014, the Company acquired 34% of the stock rights of Bebidas Bolivianas BBO S.A. a Bolivian closed stock company that produces soft drinks and beers in three factories located in the cities of Santa Cruz de la Sierra and Nuestra Señora de la Paz.The amount of this transaction wasUS$ 24.303.000, equivalents toThCh$ 13,776,885. On December 9, 2015, the Company paid an increased of capital for an amount of US$ 2,720,000, equivalents to ThCh$ 1,921,245. On June 8, 2016 and November 17, 2016, the Company paid an increased of capital for an amount of US$ 2,221,696, equivalents to ThCh$ 1,510,420 and US$ 1,019,970, equivalents to ThCh$ 663,951, respectively. This transaction did not change the percentage of participation because both partners concurred with the same capital contributions.
Subsequently, on August 9, 2018, the Company acquired an additional 17% of the shares of BBOfor an amount of US$ 8,500,000, equivalents to ThCh$ 5,457,935, remaining with a 51% stake in BBO.
The Company has determinated the fair values of assets and liabilities for this business combination (seeNote 1 – General information, letter D).
On September 20, 2018, the Company paid committed capital of US$ 1,530,029 (equivalent to ThCh$ 1,044,688) in BBO, since that both partners concurred with the same capital contributions, the percentages of participation were maintained.
b) Cervecera Guayacán SpA.
On August 31, 2018, the subsidiary Cervecería Kunstmann S.A. (CK) acquired an additional 30.0004% of the stock rights of Cervecera Guayacán SpA., for an amount of ThCh$ 361,560, equivalent to 39,232 shares and the subscription and payment of ThCh$ 470,711, equivalent to 49,038 shares. As a consequence above mentioned CKhas the 50.0004% stake in Cervecera Guayacán SpA.
The Company has determinated the fair values of assets and liabilities for this business combination (seeNote 1 – General information, letter D).
c) Sajonia Brewing Company S.R.L.
On March 31, 2016, subsidiary Bebidas del Paraguay S.A. acquired 51% of the stock rights of Sajona Brewing Company S.R.L (Paraguayan company). The purpose of this company is the production and marketing of Sajonia brand beer. The amount of this transaction was ThCh$ 641,489 (equivalents to US$ 1,000,000).
The Company has determinated the fair values of assets and liabilities for this business combination (seeNote 1 – General information, letter D).
It is expected that the acquisition of this company allows transforming the brand into a reference in the segment of craft beer, increasing its productive capability and distribution network, forming part of the brands portfolio of BBO and BdP. According with the above mentioned, BdP begins to participate in the production of beer, with its own brand and with great growth prospects.
F-80
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Compañía Cervecerías Unidas S.A. and subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018
As of December 31, 2018, the Company has no other business combinations.
The Company maintained the following other non-financial assets:
| As of December 31, 2015 | As of December 31, 2014 |
| ThCh$ | ThCh$ |
Insurance paid | 3,512,317 | 2,841,121 |
Advertising | 7,474,579 | 7,885,301 |
Advances to suppliers | 7,438,102 | 9,098,153 |
Guarantees paid | 328,242 | 318,105 |
Consumables | 526,645 | 453,548 |
Dividends receivable | 150,343 | 36,044 |
Recoverable taxes (1) | 1,303,925 | 1,610,979 |
Stock rights (2) | 21,846,500 | - |
Other | 2,141,174 | 2,144,091 |
Total | 44,721,827 | 24,387,342 |
Current | 17,654,373 | 18,558,445 |
Non current | 27,067,454 | 5,828,897 |
Total | 44,721,827 | 24,387,342 |
(1) Correspond to a minimum presumed income tax and an exporter credit of the subsidiaries in Argentine.
(2)See Note 1.
Joint ventures and Associates
As ofDecemberofDecember 31, 20152018 and 2014,2017, the Company recorded investments qualifying as joint venture and associates.
The share value of the investments in joint ventures and associates isare detailed as follows:
| As of December 31, 2015 | As of December 31, 2014 |
ThCh$ | ThCh$ | |
Cervecería Austral S.A. (1) | 5,043,071 | 4,957,494 |
Foods Compañía de Alimentos CCU S.A. (2) | 11,582,085 | 12,837,774 |
Bebidas Bolivianas S.A. (3) | 14,276,937 | 12,757,874 |
Central Cervecera de Colombia S.A.S. (4) | 18,718,832 | 1,445,478 |
Other companies | 374,338 | - |
Total | 49,995,263 | 31,998,620 |
| Percentage of participation | As of December 31, 2018 | As of December 31, 2017 |
% | ThCh$ | ThCh$ | |
Cervecería Austral S.A. | 50,00 | 7,327,949 | 6,126,384 |
Foods Compañía de Alimentos CCU S.A. | 50,00 | 12,012,276 | 5,792,242 |
Central Cervecera de Colombia S.A.S. | 50,00 | 40,681,482 | 50,374,322 |
Zona Franca Central Cervecera S.A.S. | 50,00 | 80,766,534 | 20,696,077 |
Total joint ventures |
| 140,788,241 | 82,989,025 |
Bebidas Bolivianas BBO S.A. (1) | 34,00 | - | 14,641,870 |
Other companies (2) |
| 1,229,540 | 1,639,385 |
Total associates |
| 1,229,540 | 16,281,255 |
Total |
| 142,017,781 | 99,270,280 |
(1)SeeNote 15 – Business combinations, letter a).
(2)SeeNote 15 – Business combinations, letter b).
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The above mentioned values include the goodwill generated throughin the acquisition of the following joint ventures,venture and associate, which are presented net of any impairment loss:
| As of December 31, 2015 | As of December 31, 2014 |
| As of December 31, 2018 | As of December 31, 2017 |
ThCh$ |
| ThCh$ | ThCh$ | ||
Cervecería Austral S.A. | 1,894,770 | 1,894,770 |
| 1,894,770 | 1,894,770 |
Bebidas Bolivianas S.A. | 9,581,614 | 8,186,271 | |||
Bebidas Bolivianas BBO S.A. (1) |
| - | 8,294,324 | ||
Total | 11,476,384 | 10,081,041 |
| 1,894,770 | 10,189,094 |
(1)SeeNote 15 – Business combinations, letter a).
F-81
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
The resultsresult accrued in joint ventures and associates are detailed as follows:
| For the years ended as of December 31, | For the years ended as of December 31, | ||||
2015 | 2014 | 2013 | 2018 | 2017 | 2016 | |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |||
Cervecería Austral S.A. | 247,180 | 157,836 | 221,662 | 1,638,811 | 952,235 | 754,326 |
Foods Compañía de Alimentos CCU S.A. | (1,251,392) | (16,476) | 87,100 | 792,376 | 165,905 | (519,536) |
Bebidas Bolivianas S.A. | (1,557,886) | (1,039,967) | - | |||
Central Cervecera de Colombia S.A.S. | (2,668,179) | - | - | (11,804,950) | (8,646,651) | (3,969,699) |
Other companies | 2,142 | - | - | |||
Zona Franca Central Cervecera S.A.S. | (391,465) | 87,583 | - | |||
Total joint ventures | (9,765,228) | (7,440,928) | (3,734,909) | |||
Bebidas Bolivianas BBO S.A. (1) | (921,812) | (1,459,916) | (1,805,548) | |||
Other companies (2) | (128,480) | (13,253) | (20,065) | |||
Total associates | (1,050,292) | (1,473,169) | (1,825,613) | |||
Total | (5,228,135) | (898,607) | 308,762 | (10,815,520) | (8,914,097) | (5,560,522) |
(1)SeeNote 15 – Business combinations, letter a).
(2)SeeNote 15 – Business combinations, letter b).
Changes in investments in joint ventures and associates during such periods are detailed as follows:
| As of December 31, 2015 | As of December 31, 2014 | As of December 31, 2018 | As of December 31, 2017 |
| ThCh$ | ThCh$ | ||
Balance at the beginning of year | 31,998,620 | 17,563,028 | 99,270,280 | 64,404,946 |
Business combination effect | 23,387,006 | 15,222,363 | ||
Participation in the joint ventures and associates (losses) | (5,228,135) | (898,607) | ||
Other payments to acquire interests in joint ventures | 59,505,559 | 49,312,890 | ||
Cash flows used to purchase non-controlling interests | - | 1,149,689 | ||
Participation in the joint ventures and associates (loss) | (10,815,520) | (8,914,097) | ||
Dividends received | (150,343) | (39,096) | (423,994) | (353,150) |
Other changes | (11,885) | 150,932 | ||
Business combinations (1) | (14,144,241) | - | ||
Others | 8,625,697 | (6,329,998) | ||
Total | 49,995,263 | 31,998,620 | 142,017,781 | 99,270,280 |
Following are the significant matters regarding the investments accounted by the equity method:(1)SeeNote 15 – Business combinations, letter a) and b).
Significant matters regarding investments accounted for using the equity method are detailed as follows:
(1) Cervecería Austral S.A.
A closed stock company that operates as a beer manufacturing facility in the southern end of Chile, beingwhich is the southernmost brewery in the world.
(2)Foods Compañía de Alimentos CCU S.A.S.A. (Foods),
A closed stock company devoted to the production and marketing of food products such as like cookies and other baked goods, caramels, candy and cereal, among others.
On November 26, 2015, Foods, signed an agreement of sale with Empresas Carozzi S.A., under which the first sold to the second machinery, equipment and brands related to products marketed under the brands Natur and Calaf. The amount of this transaction was ThCh$ 14,931,000 and CCU recognized a net loss after taxes for an amount of ThCh$ 1,034,638, corresponding to their participation.
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(3) Bebidas Bolivianas S.A.
On May 7, 2014, the Company acquired 34% of the stock rights of Bebidas Bolivianas S.A. a Bolivian andis a closed stock company that produces soft drinksparticipated in the business of snacks and beersfoods in three plants located in Santa Cruz de la SierraChile. At the end of 2015, Foods sold the Calaf and Nuestra Señora de la Paz cities.The amountNatur brands to Empresas Carozzi S.A. In addition Foods was the main shareholder of this transaction was ThCh$ 13,776,885.Alimentos Nutrabien S.A. and owned the Nutra Bien brand. On December 9, 2015,17, 2018, Foods and subsidiary CCU Inversiones S.A. sold 100% of the Company paid an increasedshares of capital for an amount of USD 2,720,000 (equivalentsAlimentos Nutrabien S.A. to ThCh$ 1,921,244).Ideal S.A.
(4)(3) Central Cervecera de Colombia S.A.S. and Zona Franca Central Cervecera S.A.S.
On November 10, 2014, CCU, directly and through its subsidiaries CCU Inversiones II Limitada, and Grupo Postobón have established a joint arrangements through a company named Central Cervecera de Colombia S.A.S. (the "Company"), in which CCU and Grupo Postobón participate as equal shareholders. The purpose of this Company is the beer and non-alcoholic drinks production, marketing and distribution based on malt.malt (Products).
Subsequently, on August 16, 2017, CCU, through its subsidiary CCU Inversiones ll Limitada, acquired 50% of the shares of of a company incorporated in Colombia called Zona Franca Central Cervecera S.A.S. (ZF CC), which relates to a jointagreements and that qualifies as a joint operations, in which CCU and Grupo Postobon participate as equal shareholders. The Parties will invest in the Company an approximate amount of this transaction was US$ 400,000,000, following a gradual investment plan conditioned10,204, equivalents to ThCh$ 6,432. The purpose of ZF CC is acting exclusively as industrial user of one or more free zones, providing tolling services to CCC, and this latter company will produce, market and distribute Products.
F-82
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
For the fulfillment of certain milestones. At the date of issuance of these consolidated financial statements CCU Inversiones II Limitada paid US$ 33,901,562.11 (US$ 2,411,019.21 in 2014). The partnershippurposes above, previous associations involves the construction of a beer production plant, with anan annual total capacity of 3,000,000 hectoliters.
The summarized financial informationParties will also invest in CCC and ZF CC an approximate amount of these companies as ofDecember 31, 2015 and 2014, appearsUS$ 200,000,000 in detail inNote 7.equal parts, following a gradual investment plan agreed by the parties.
As of December 31, 2018 and 2017, the total amount contributed to CCC and ZF CC was US$ 236,857,949 (equivalents to ThCh$ 153,149,320) and US$ 144,740,179 (equivalents to ThCh$ 93,643,761).
The Company does not have any contingent liabilities related to joint ventures and associates as ofDecember 31, 2015.2018.
The figures for each entityAs of December 31, 2018, 2017 and 2016, the significant items of the financial statements of 100% of each in summary formjoint ventures and associates are summarized as follows:
| As of December 31, 2015 | As of December 31, 2014 | As of December 31, 2013 | ||
Joint Ventures | Associated | Joint Ventures | Associated | Joint Ventures | |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | |
Net sales | 59,187,508 | 18,310,272 | 46,399,652 | 8,470,716 | 31,261,730 |
Operating result | (6,796,020) | (4,039,249) | 212,503 | (2,882,721) | 238,819 |
Net income for year | (6,803,143) | (4,573,734) | (392,427) | (2,920,431) | 620,549 |
Depreciation and amortization | (1,998,935) | (534,485) | (1,936,455) | 1,091,414 | (1,416,740) |
Current assets | 57,908,034 | 9,326,003 | 15,625,609 | 6,987,602 | 13,610,219 |
Non-current assets | 29,453,402 | 31,393,842 | 39,076,178 | 17,664,655 | 32,411,942 |
Current liabilities | 6,233,586 | 6,086,146 | 17,550,702 | 4,467,768 | 13,385,478 |
Non-current liabilities | 3,720,129 | 9,494,421 | 2,725,097 | 5,244,421 | 1,285,096 |
|
|
|
|
|
|
| Joint ventures | Joint ventures | Associates |
| As of December 31, 2018 | As of December 31, 2017 | |
| ThCh$ | ThCh$ | ThCh$ |
Assets and Liabilities |
|
|
|
Current assets | 206,761,242 | 49,960,930 | 5,540,894 |
Non-current assets | 246,997,507 | 150,837,264 | 26,609,731 |
Current liabilities | 172,143,127 | 35,339,239 | 4,444,262 |
Non-current liabilities | 2,893,856 | 1,994,220 | 9,037,112 |
|
|
|
|
| Joint ventures | Joint ventures | Associates | Joint ventures | Associates |
| For the years ended as of December 31, | ||||
| 2018 | 2017 | 2016 | ||
| ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ |
Income Statement (Summarized) |
|
|
|
|
|
Net sales | 70,296,729 | 57,417,288 | 19,760,918 | 63,926,397 | 19,733,853 |
Operating result | (21,173,985) | (18,606,383) | (4,086,973) | (11,913,526) | (4,159,093) |
Net income for year | (19,886,274) | (14,352,788) | (4,462,733) | (7,287,727) | (4,712,596) |
Other comprehensive income | (24,720,721) | (27,052,015) | (5,761,515) | (3,451,487) | (7,965,214) |
Depreciation and amortization | (2,656,715) | (2,618,567) | (2,818,923) | (2,104,820) | (2,698,849) |
|
|
|
|
|
|
F-83
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
The intangible assets movement during the years ended as of December 31, 2014 and 2015 wasare detailed as follows:
| Trademarks | Software programs | Water rights | Distribution rights | Total | Trademarks | Software programs | Water rights | Distribution rights | Total |
ThCh$ | ThCh$ | |||||||||
As of January 1, 2014 |
| |||||||||
As of January 1, 2017 |
|
| ||||||||
Historic cost | 56,088,048 | 19,199,598 | 925,356 | 1,024,457 | 77,237,459 | 65,160,928 | 28,364,765 | 2,091,059 | 763,017 | 96,379,769 |
Accumulated amortization | - | (12,639,953) | - | (563,575) | (13,203,528) | - | (18,072,174) | - | (373,440) | (18,445,614) |
Book Value | 56,088,048 | 6,559,645 | 925,356 | 460,882 | 64,033,931 | 65,160,928 | 10,292,591 | 2,091,059 | 389,577 | 77,934,155 |
| ||||||||||
As of December 31, 2014 |
| |||||||||
As of December 31, 2017 |
|
| ||||||||
Additions | - | 2,292,555 | 988,783 | 21,933 | 3,303,271 | - | 3,498,499 | 158,968 | - | 3,657,467 |
Additions by business combination (1) | 3,658,167 | - | 568,666 | 4,226,833 | ||||||
Amortization of the year | - | (1,718,514) | - | (45,718) | (1,764,232) | |||||
Effect of conversion amortization | - | 79,405 | - | 7,512 | 86,917 | |||||
Divestitures (cost) | (226) | (103,675) | - | (103,901) | ||||||
Divestitures (amortization) | - | 103,675 | - | 103,675 | ||||||
Amortization of year | - | (2,873,115) | - | (173,294) | (3,046,409) | |||||
Conversion effect | (1,025,947) | (141,556) | - | (62,322) | (1,229,825) | (1,355,703) | (260,268) | - | (103,287) | (1,719,258) |
Effect of conversion (amortization) | - | 167,026 | - | 39,725 | 206,751 | |||||
Changes | (1,355,929) | 532,142 | 158,968 | (236,856) | (901,675) | |||||
Book Value | 58,720,268 | 7,071,535 | 1,914,139 | 950,953 | 68,656,895 | 63,804,999 | 10,824,733 | 2,250,027 | 152,721 | 77,032,480 |
| ||||||||||
As of December 31, 2014 |
| |||||||||
As of December 31, 2017 |
|
| ||||||||
Historic cost | 58,720,268 | 21,353,252 | 1,914,139 | 1,046,487 | 83,034,146 | 63,804,999 | 31,499,321 | 2,250,027 | 659,730 | 98,214,077 |
Accumulated amortization | - | (14,281,717) | - | (95,534) | (14,377,251) | - | (20,674,588) | - | (507,009) | (21,181,597) |
Book Value | 58,720,268 | 7,071,535 | 1,914,139 | 950,953 | 68,656,895 | 63,804,999 | 10,824,733 | 2,250,027 | 152,721 | 77,032,480 |
| ||||||||||
As of December 31, 2015 |
| |||||||||
Additions | - | 3,160,435 | - | 104,739 | 3,265,174 | |||||
Transfers (2) | (3,266,332) | - | (3,266,332) | |||||||
Divestitures (amortization) | - | 3,748 | - | 3,748 | ||||||
As of December 31, 2018 |
|
| ||||||||
Additions (1) | 16,647,981 | 3,431,842 | 784,900 | - | 20,864,723 | |||||
Additions for business combinations (cost) (2) | 7,168,245 | 67,119 | - | 7,235,364 | ||||||
Divestitures (cost) | - | (3,748) | - | (3,748) | - | (92,415) | - | (92,415) | ||
Amortization of the year | - | (1,814,784) | - | (126,877) | (1,941,661) | |||||
Effect of conversion amortization | - | 164,652 | - | 22,210 | 186,862 | |||||
Amortization of year | - | (2,999,205) | - | (39,751) | (3,038,956) | |||||
Conversion effect | (2,235,479) | (297,814) | - | (247,219) | (2,780,512) | (1,251,533) | (164,197) | - | (44,251) | (1,459,981) |
Effect of conversion (amortization) | - | (212,119) | - | (23,841) | (235,960) | |||||
Others increase (decreased) (3) | 18,117,445 | 323,268 | - | 218,174 | 18,658,887 | |||||
Changes | 40,682,138 | 446,708 | 692,485 | 110,331 | 41,931,662 | |||||
Book Value | 53,218,457 | 8,284,024 | 1,914,139 | 703,806 | 64,120,426 | 104,487,137 | 11,271,441 | 2,942,512 | 263,052 | 118,964,142 |
| ||||||||||
As of December 31, 2015 |
| |||||||||
As of December 31, 2018 |
|
| ||||||||
Historic cost | 53,218,457 | 24,212,125 | 1,914,139 | 904,006 | 80,248,727 | 104,487,137 | 35,157,353 | 2,942,512 | 833,653 | 143,420,655 |
Accumulated amortization | - | (15,928,101) | - | (200,200) | (16,128,301) | - | (23,885,912) | - | (570,601) | (24,456,513) |
Book Value | 53,218,457 | 8,284,024 | 1,914,139 | 703,806 | 64,120,426 | 104,487,137 | 11,271,441 | 2,942,512 | 263,052 | 118,964,142 |
(1) SeeCorresponds mainly to the brands mentioned inNote 81 – General information, letter C)Business Combinations.
(2) SeeNote 2515 – AssetsBusiness combinations.
(3) Corresponds to the financial effect of disposal group held for salethe application IAS 29 "Financial reporting in hyperinflationary economies”. SeeNote 4 - Accounting changes, letter b).
There are no restrictionrestrictions or any pledge againstpledges on intangible assets.
F-84
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
The detail of the Trademarks appears below:cash generating unit associates to thetrademarks are detailed as follows:
Segment | Cash Generating Unit | As of December 31, 2015 | As of December 31, 2014 | Cash Generating Unit | As of December 31, 2018 | As of December 31, 2017 |
(CGU) | ThCh$ | (CGU) | ThCh$ | |||
Chile | Embotelladoras Chilenas Unidas S.A. | 19,280,007 | 19,280,007 | Embotelladoras Chilenas Unidas S.A. | 31,659,575 | 31,476,163 |
| Manantial S.A. | 1,166,000 | 1,166,000 | |||
Compañía Pisquera de Chile S.A. | 1,363,782 | 4,630,114 | Compañía Pisquera de Chile S.A. | 1,363,782 | 1,363,782 | |
Compañía Cerveceria Kunstmann S.A. | 286,518 | 286,518 | Cervecería Kunstmann S.A. (3) | 1,091,223 | 286,518 | |
Sub-Total | 20,930,307 | 24,196,639 | Sub-Total | 35,280,580 | 34,292,463 | |
International Business | CCU Argentina S.A. and subsidiaries | 6,171,061 | 8,040,335 | CCU Argentina S.A. and subsidiaries (1) | 36,807,884 | 3,735,289 |
Marzurel S.A., Coralina S.A. and Milotur S.A. | 2,932,762 | 3,079,360 | Marzurel S.A., Coralina S.A. and Milotur S.A. | 2,651,576 | 2,639,301 | |
Bebidas del Paraguay S.A. and Distribuidora del Paraguay S.A. | 3,440,608 | 3,658,167 | Bebidas del Paraguay S.A. and Distribuidora del Paraguay S.A. | 3,558,832 | 3,356,895 | |
Sub-Total | 12,544,431 | 14,777,862 | Bebidas Bolivianas BBO S.A. (2) | 6,363,540 | - | |
| Sub-Total | 49,381,832 | 9,731,485 | |||
Wines | Viña San Pedro Tarapacá S.A. | 19,743,719 | 19,745,767 | Viña San Pedro Tarapacá S.A. | 19,824,725 | 19,781,051 |
Sub-Total | 19,743,719 | 19,745,767 | Sub-Total | 19,824,725 | 19,781,051 | |
Total |
| 53,218,457 | 58,720,268 |
| 104,487,137 | 63,804,999 |
(1)SeeNote 1 – General Information, letter C).
(2)SeeNote 15 – Business combinations, letter a).
(3)SeeNote 15 – Business combinations, letter b).
Management has not identifiedfound any evidence of impairment of intangible assets. Respect to trademarksThe same methodology described inNote 18 - Goodwill, has been used fortrademarks with indefinite useful life, used the same methodology which is designated inNote 22.lives.
F-85
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
The goodwill movements during the years ended as of December 31, 2015 and 2014 wasis detailed as follows:
| Goodwill |
| ThCh$ |
As of January 1, |
|
Historic cost |
|
Book Value |
|
|
|
|
|
Conversion effect |
|
Changes | (2,309,077) |
Book Value |
|
As of December 31, |
|
Historic cost |
|
Book Value |
|
|
|
| |
Additions for business combinations (1) | 10,832,577 |
Other increases (decreases) (2) |
|
Conversion effect |
|
Changes | 28,427,427 |
Book Value |
|
As of December 31, |
|
Historic cost |
|
Book Value |
|
(1) SeeNote 15 – Business combinations.
(2) Corresponds to the financial effect of the application IAS 29 "Financial reporting in hyperinflationary economies”. SeeNote 4 - Accounting changes, letter b).
F-86
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
(1) SeeNote 8 –Business Combinations
(2) SeeNote 25 – Assets of disposal group held for sale
There are no restrictions or pledges against on goodwill.
Goodwill fromon investments acquired in business combinations is assigned as of the acquisition date to the Cash Generating Units (CGU), or group of CGUs that it is expected will benefit from the business combination synergies. The book valuecarrying amount of the goodwill of the investments assigned to the CGUs insidewithin the CompanyCompany’s segments are:is detailed as follows:
Segment | Cash Generating Unit | As of December 31, 2015 | As of December 31, 2014 | Cash Generating Unit | As of December 31, 2018 | As of December 31, 2017 |
(CGU) | ThCh$ | (CGU) | ThCh$ | |||
Chile | Embotelladoras Chilenas Unidas S.A. | 9,083,766 | 9,083,766 | Embotelladoras Chilenas Unidas S.A. | 25,257,686 | 25,257,686 |
| Manantial S.A. | 8,879,245 | 8,879,245 | |||
Manantial S.A. | 8,879,245 | 8,879,245 | Compañía Pisquera de Chile S.A. | 9,808,550 | 9,808,550 | |
Compañía Pisquera de Chile S.A. | 9,808,550 | 12,664,795 | Los Huemules S.R.L. | 8,679 | 47,443 | |
Los Huemules S.R.L. | 47,443 | 47,443 | Cervecería Kunstmann S.A. (1) | 456,007 | - | |
Sub-Total | 27,819,004 | 30,675,249 | Sub-Total | 44,410,167 | 43,992,924 | |
International Business | CCU Argentina S.A. and subsidiaries | 8,864,697 | 11,557,934 | CCU Argentina S.A. and subsidiaries | 24,863,266 | 5,355,254 |
Marzurel S.A., Coralina S.A. and Milotur S.A. | 7,701,975 | 6,580,451 | Marzurel S.A., Coralina S.A. and Milotur S.A. | 4,839,916 | 6,956,760 | |
Bebidas del Paraguay S.A. and Distribuidora del Paraguay S.A. | 6,514,631 | 5,566,003 | Bebidas del Paraguay S.A. and Distribuidora del Paraguay S.A. | 5,236,732 | 5,896,392 | |
Sub-Total | 23,081,303 | 23,704,388 | Bebidas Bolivianas BBO S.A. (2) | 11,278,676 | - | |
| Sub-Total | 46,218,590 | 18,208,406 | |||
Wines | Viña San Pedro Tarapacá S.A. | 32,400,266 | 32,400,266 | Viña San Pedro Tarapacá S.A. | 32,416,144 | 32,416,144 |
Sub-Total | 32,400,266 | 32,400,266 | Sub-Total | 32,416,144 | ||
Total |
| 83,300,573 | 86,779,903 |
| 123,044,901 | 94,617,474 |
(1)SeeNote 15 – Business combinations, letter b).
(2)SeeNote 15 – Business combinations, letter a).
|
Goodwill assigned to the CGU is submittedsubject to impairment tests annually or with a higher frequency in case there are indications that any of the CGU could experience impairment. The recoverable amount of each CGU is determined as the higher of value in use or fair value less costs to sell. To determine the value in use, the Company has used cash flow projections over a 5-year span, based on the budgets and projections reviewed by the Management for the same term and with an average grown-rate of 3%. The rates used to discount the projected cash flows reflect the market assessment of the specific risks related to the corresponding CGU. The pre-tax discount rates used range from a 9.6%8.99% to 13.3%13.28%. Given the materiality of the amounts involved, it was not considered relevant to describe additional information in this Note. A reasonable change in assumptions would not result in an impairment to goodwill.
As December 31, 2015, the2018, the Company has not identified any evidence of impairment of goodwill.goodwill.
F-87
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
The movement of Property, plant and equipment ismovements are detailed as follows:
| Land, buildings and contruction | Machinery and equipment | Bottles and containers | Other Equipment | Assets under contruction and vines under formation | Furniture, accesories and vehicles | Assets under finance lease | Under production vines | Total | Land, buildings and contruction | Machinery and equipment | Bottles and containers | Other Equipment | Assets under contruction | Furniture, accesories and vehicles | Assets under finance lease | Under production vines | Total |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ||||||||||||||
As of January 1, 2014 |
|
| ||||||||||||||||
As of January 1, 2017 |
|
|
| |||||||||||||||
Historic cost | 453,487,502 | 349,828,341 | 161,171,871 | 97,514,125 | 89,374,472 | 46,791,929 | 16,605,170 | 28,664,297 | 1,243,437,707 | 584,830,357 | 453,735,402 | 196,174,306 | 129,190,151 | 114,775,040 | 70,251,593 | 13,926,785 | 29,436,746 | 1,592,320,380 |
Accumulated depreciation | (123,108,099) | (218,430,772) | (85,972,361) | (68,502,303) | - | (33,715,569) | (2,240,127) | (12,812,047) | (544,781,278) | (162,399,793) | (259,578,488) | (115,697,641) | (86,460,883) | - | (48,764,711) | (1,351,211) | (13,962,931) | (688,215,658) |
Book Value | 330,379,403 | 131,397,569 | 75,199,510 | 29,011,822 | 89,374,472 | 13,076,360 | 14,365,043 | 15,852,250 | 698,656,429 | 422,430,564 | 194,156,914 | 80,476,665 | 42,729,268 | 114,775,040 | 21,486,882 | 12,575,574 | 15,473,815 | 904,104,722 |
|
| |||||||||||||||||
As of December 31, 2014 |
|
| ||||||||||||||||
Additions | - | 212,498,423 | - | 212,498,423 | ||||||||||||||
Additions of historic cost by business combintation | 10,427,012 | 12,835,099 | - | 3,418,895 | 36,673 | 1,183,127 | - | 27,900,806 | ||||||||||
Additions of acumulated depreciation by business combination | (1,389,726) | (7,479,822) | - | (1,432,178) | - | (976,481) | - | (11,278,207) | ||||||||||
Transfers | 100,881,784 | 36,903,635 | 31,891,992 | 16,780,869 | (198,536,632) | 10,054,122 | 214,720 | 1,809,510 | - | |||||||||
Conversion effect historic cost | (3,282,317) | (4,921,609) | (4,702,605) | (1,528,664) | (318,097) | (230,044) | - | (20,437) | (15,003,773) | |||||||||
Write off (cost) | (1,209,647) | (1,572,892) | (806,633) | (869,736) | - | (1,107,114) | (4,543) | (415,903) | (5,986,468) | |||||||||
Write off (depreciation) | 1,662 | 1,413,756 | 788,331 | 868,292 | - | 880,419 | 2,310 | 231,641 | 4,186,411 | |||||||||
Capitalized interests | 189,738 | 888,636 | - | (68,078) | - | 1,010,296 | ||||||||||||
Depreciation | (13,108,407) | (17,346,363) | (18,438,461) | (7,772,824) | - | (5,888,407) | (435,795) | (1,179,010) | (64,169,267) | |||||||||
Conversion effect depreciation | 360,239 | 1,784,979 | 1,700,078 | 850,194 | - | 184,539 | - | 42,677 | 4,922,706 | |||||||||
Others increase (decreased) | (1,577,324) | 1,465,411 | 2,208,005 | (643,234) | (567,720) | 28,620 | (392,983) | - | 520,775 | |||||||||
Transfers to Investment Property (cost) | (534,384) | - | (559,440) | - | (1,093,824) | |||||||||||||
Transfers to Investment Property (depreciation) | 12,590 | - | 12,590 | |||||||||||||||
Divestitures (cost) | (912,917) | (8,793,380) | (751,727) | (2,887,307) | - | (525,145) | (7,538) | - | (13,878,014) | |||||||||
Divestitures (depreciation) | 424,428 | 8,619,785 | 694,205 | 2,761,160 | - | 451,775 | 5,406 | - | 12,956,759 | |||||||||
Book Value | 420,662,134 | 155,194,804 | 87,782,695 | 38,557,289 | 101,859,601 | 17,131,771 | 13,746,620 | 16,320,728 | 851,255,642 | |||||||||
As of December 31, 2014 |
|
| ||||||||||||||||
Historic cost | 557,500,819 | 388,454,274 | 189,538,674 | 111,860,840 | 101,859,601 | 56,290,001 | 16,367,167 | 30,037,467 | 1,451,908,843 | |||||||||
Accumulated depreciation | (136,838,685) | (233,259,470) | (101,755,979) | (73,303,551) | - | (39,158,230) | (2,620,547) | (13,716,739) | (600,653,201) | |||||||||
Book Value | 420,662,134 | 155,194,804 | 87,782,695 | 38,557,289 | 101,859,601 | 17,131,771 | 13,746,620 | 16,320,728 | 851,255,642 | |||||||||
As of December 31, 2015 |
|
| ||||||||||||||||
As of December 31, 2017 |
|
|
| |||||||||||||||
Additions | - | 123,581,249 | - | 123,581,249 | - | 118,850,131 | - | - | 118,850,131 | |||||||||
Transfers | 24,332,658 | 53,855,456 | 21,539,178 | 12,777,031 | (121,954,867) | 8,596,245 | 8,750 | 845,549 | - | 29,368,004 | 43,963,753 | 20,642,995 | 18,784,331 | (124,150,216) | 10,802,816 | - | 588,317 | - |
Conversion effect historic cost | (6,736,100) | (10,797,668) | (11,546,968) | (4,002,063) | (460,019) | (511,782) | (2,578) | (180,003) | (34,237,181) | (4,642,067) | (10,260,721) | (10,182,025) | (3,613,420) | (720,676) | (379,481) | (1,605) | (100,852) | (29,900,847) |
Write off (cost) | (747,359) | (289,708) | (3,742,613) | (1,918,945) | - | (1,156,594) | (18,734) | - | (7,873,953) | (144,577) | (681,120) | (2,192,467) | (2,301,087) | - | (778,317) | - | - | (6,097,568) |
Write off (depreciation) | 394,898 | 184,171 | 3,456,971 | 1,909,228 | - | 636,696 | 12,858 | - | 6,594,822 | 122,890 | 609,546 | 1,942,571 | 2,241,388 | - | 613,585 | - | - | 5,529,980 |
Capitalized interests | 579,382 | 1,434,338 | - | (926,744) | - | 1,086,976 | - | 1,042,045 | - | - | 1,042,045 | |||||||
Depreciation | (16,319,675) | (23,241,987) | (20,568,254) | (9,738,483) | - | (6,504,278) | (290,871) | (1,009,087) | (77,672,635) | (16,782,519) | (28,140,337) | (23,072,705) | (13,920,736) | - | (6,262,416) | (43,108) | (1,002,696) | (89,224,517) |
Conversion effect depreciation | 828,924 | 4,905,696 | 5,480,844 | 2,894,015 | - | 353,900 | 256 | 81,519 | 14,545,154 | 609,002 | 4,833,334 | 6,522,113 | 3,733,259 | - | 92,238 | 519 | 54,154 | 15,844,619 |
Others increase (decreased) | (314,605) | (1,065,596) | 783,920 | 226,420 | (4,709) | 150,953 | (23,262) | - | (246,879) | (101,686) | 1,048,526 | 18,981 | 7,257 | (1,189,435) | (35,064) | (138,391) | 59,875 | (329,937) |
Divestitures (cost) | (416,892) | (1,536,631) | (11,721,918) | (1,758,026) | - | (1,512,864) | (283) | (1,063,451) | (18,010,065) | |||||||||
Divestitures (depreciation) | 489,274 | 1,193,606 | 10,980,342 | 1,624,423 | - | 965,423 | 165 | 629,647 | 15,882,880 | (434,512) | (322,483) | (45,081,934) | (27,295) | - | (614,206) | - | (521,685) | (47,002,115) |
Transfers to assets held for sale (cost) | (2,682,692) | - | (2,682,692) | |||||||||||||||
Transfers to assets held for sale (depreciation) | 443,892 | - | 443,892 | |||||||||||||||
Divestitures (depreciation) | 326,742 | 322,483 | 43,718,122 | 26,267 | - | 363,484 | - | 339,817 | 45,096,915 | |||||||||
Changes | 8,321,277 | 11,372,981 | (7,684,349) | 4,929,964 | (6,168,151) | 3,802,639 | (182,585) | (583,070) | 13,808,706 | |||||||||
Book Value | 420,513,839 | 179,836,481 | 82,444,197 | 40,570,889 | 102,094,511 | 18,149,470 | 13,432,921 | 15,624,902 | 872,667,210 | 430,751,841 | 205,529,895 | 72,792,316 | 47,659,232 | 108,606,889 | 25,289,521 | 12,392,989 | 14,890,745 | 917,913,428 |
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As of December 31, 2015 |
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As of December 31, 2017 |
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Historic cost | 569,642,008 | 428,398,944 | 185,024,437 | 117,920,217 | 102,094,511 | 60,844,400 | 16,447,490 | 29,639,562 | 1,510,011,569 | 608,854,028 | 485,770,049 | 159,541,057 | 142,280,575 | 108,606,889 | 79,120,713 | 13,816,109 | 29,367,600 | 1,627,357,020 |
Accumulated depreciation | (149,128,169) | (248,562,463) | (102,580,240) | (77,349,328) | - | (42,694,930) | (3,014,569) | (14,014,660) | (637,344,359) | (178,102,187) | (280,240,154) | (86,748,741) | (94,621,343) | - | (53,831,192) | (1,423,120) | (14,476,855) | (709,443,592) |
Book Value | 420,513,839 | 179,836,481 | 82,444,197 | 40,570,889 | 102,094,511 | 18,149,470 | 13,432,921 | 15,624,902 | 872,667,210 | 430,751,841 | 205,529,895 | 72,792,316 | 47,659,232 | 108,606,889 | 25,289,521 | 12,392,989 | 14,890,745 | 917,913,428 |
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As of December 31, 2018 |
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Additions | - | 123,230,196 | - | - | 123,230,196 | |||||||||||||
Additions of historic cost by business combination | 12,734,666 | 7,481,173 | 4,940,095 | 3,656,444 | 99,432 | 824,392 | - | - | 29,736,202 | |||||||||
Additions of acumulated depreciation by business combination | (762,783) | (7,432,623) | (2,384,378) | (2,509,968) | - | (752,521) | - | - | (13,842,273) | |||||||||
Transfers | 39,838,515 | 45,234,574 | 26,616,253 | 16,798,523 | (137,622,837) | 6,919,683 | - | 2,215,289 | - | |||||||||
Conversion effect historic cost | (5,754,382) | (14,801,093) | (20,321,228) | (6,309,411) | (1,509,220) | (583,483) | (10,977) | (159,909) | (49,449,703) | |||||||||
Write off (cost) | (72,907) | (2,578,367) | (3,449,791) | (13,306,471) | - | (1,797,179) | - | - | (21,204,715) | |||||||||
Write off (depreciation) | 5,707 | 2,397,406 | 2,541,051 | 13,063,328 | - | 1,270,646 | - | - | 19,278,138 | |||||||||
Capitalized interests | - | 609,921 | - | - | 609,921 | |||||||||||||
Depreciation | (17,056,082) | (27,288,968) | (23,911,356) | (14,882,856) | - | (6,023,071) | (21,175) | (1,017,002) | (90,200,510) | |||||||||
Conversion effect depreciation | 707,133 | 6,290,990 | 12,688,447 | 5,358,799 | - | 285,779 | 2,406 | 92,393 | 25,425,947 | |||||||||
Others increase (decreased) (1) | 26,611,361 | 31,138,091 | 19,091,618 | 2,850,058 | 4,240,542 | 297,792 | (43,183) | 673,686 | 84,859,965 | |||||||||
Divestitures (cost) | (2,476,636) | (790,001) | (5,687,343) | (2,573,198) | (226,716) | (4,051,693) | - | (1,206,401) | (17,011,988) | |||||||||
Divestitures (depreciation) | 85,208 | 264,080 | 4,249,122 | 2,417,657 | - | 3,960,623 | - | 945,333 | 11,922,023 | |||||||||
Changes | 53,859,800 | 39,915,262 | 14,372,490 | 4,562,905 | (11,178,682) | 350,968 | (72,929) | 1,543,389 | 103,353,203 | |||||||||
Book Value | 484,611,641 | 245,445,157 | 87,164,806 | 52,222,137 | 97,428,207 | 25,640,489 | 12,320,060 | 16,434,134 | 1,021,266,631 | |||||||||
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As of December 31, 2018 |
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Historic cost | 679,853,030 | 551,888,633 | 180,757,354 | 143,550,263 | 97,428,207 | 80,841,052 | 13,842,797 | 30,862,740 | 1,779,024,076 | |||||||||
Accumulated depreciation | (195,241,389) | (306,443,476) | (93,592,548) | (91,328,126) | - | (55,200,563) | (1,522,737) | (14,428,606) | (757,757,445) | |||||||||
Book Value | 484,611,641 | 245,445,157 | 87,164,806 | 52,222,137 | 97,428,207 | 25,640,489 | 12,320,060 | 16,434,134 | 1,021,266,631 |
(1) Corresponds to the financial effect of the application IAS 29 "Financial reporting in hyperinflationary economies”. SeeNote 4 - Accounting changes, letter b).
F-88
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
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The balance of the land at the end of each year is as follows:
| As of December 31, 2015 | As of December 31, 2014 | As of December 31, 2018 | As of December 31, 2017 |
| ThCh$ | ThCh$ | ||
Land | 227,849,584 | 228,846,045 | 249,548,928 | 225,840,815 |
Total | 227,849,584 | 228,846,045 | 249,548,928 | 225,840,815 |
Capitalized interest as of December 31, 2015,2018, amounted to ThCh$ 1,086,976609,921 (ThCh$ 1,010,2961,042,045 in 2014)2017), using an annually capitalization rate of 4.17% for both years.3.71% (4.25% in 2017).
The Company, through its subsidiariessubsidiary Viña San Pedro Tarapacá S.A., has biological assets corresponding to vines that produce grapes. The vines are segmented into those under formation and those under production, and they are grown both on leased and owned land.
The grapes harvested from these vines are used in the manufacturing of wine, which is marketed both in the domestic market and abroad.
As ofDecemberofDecember 31, 2015,2018, the Company maintained approximately 4,245,4,917 hectares of which 3,967 hectares3,884 are for vines in production stage. Of the total hectares mentioned above, 3,6483,546 correspond to own land and 319338 to leased land.
The vines under formation are recorded at historic cost, and only start being depreciated when they are transferred to the production phase, which occurs in the majority of cases in the third year after plantation, when they start producing grapes commercially (in volumes that justify their production-oriented handling and later harvest).
During 2015,2018, the production plant vines yield approximately 60.152.4 million kilos of grapes (42.5(43.9 million kilos of grapes in 2014)2017).
As part of the risk administration activities, the subsidiaries use insurance agreements for the damage caused by nature or other to their biological assets. In addition, either productive or under formation vines are not affected by title restrictions of any kind, nor have they been pledged as a guarantee for financial liabilities.
For production vines depreciation is carried out on a linear basis and it is based on the 30-years average estimated production useful life, which is periodically assessed. Vines under formation are not depreciated until they start production.
By the nature of business of the Company, in the value of the assets it is not considered to start an allowance for cost of dismantling, removal or restoration.
In relation to the impairment losses of property, plant and equipment, the administrationManagment has not perceived evidence of impairment with respect to these at December 31, 2015.2018.
The depreciation for the year ended as of December 31, 2018 and 2017, recognized in net incomes and other assets is as follows:
| As of December 31, 2018 | As of December 31, 2017 |
| ThCh$ | ThCh$ |
Recognized in net incomes | 87,471,320 | 86,557,532 |
Recognized in others assets | 2,729,190 | 2,666,985 |
Total | 90,200,510 | 89,224,517 |
Assets under finance lease:
The book valuecarrying amount of land and buildings relates to finance lease agreements for the Parent Company and its subsidiaries. Such assets will not be owned by the Company until the corresponding purchase options are exercised.
| As of December 31, 2015 | As of December 31, 2014 | As of December 31, 2018 | As of December 31, 2017 |
| ThCh$ | ThCh$ | ||
Land | 4,511,623 | 4,511,623 | 3,266,096 | 3,215,075 |
Buildings | 9,333,443 | 9,449,575 | 8,985,051 | 9,101,182 |
Machinery and equipment | 1,061,907 | 1,352,085 | 68,913 | 76,732 |
Total | 14,906,973 | 15,313,283 | 12,320,060 | 12,392,989 |
InNote 27,21 – Other financial liabilities, letter bB)includes the detail of the lease agreements, and it also reconciles the total amount of the future minimum lease payments and their current value as regards such assets, the purchase options originated at CCU S.A., Compañí and Cervecería Cervecera Kunstmann S.A. and Manantial S.A.
F-89
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
Investment property movements are detailed as follows:
| Lands | Buildings | Total |
ThCh$ | ThCh$ | ThCh$ | |
As of January 1, 2017 |
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Historic cost | 4,729,639 | 2,279,475 | 7,009,114 |
Depreciation | - | (755,287) | (755,287) |
Book Value | 4,729,639 | 1,524,188 | 6,253,827 |
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As of December 31, 2017 |
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Additions | - | 17,588 | 17,588 |
Depreciation | - | (49,909) | (49,909) |
Convertion effect (depreciation) | (270,804) | (165,236) | (436,040) |
Conversion effect | - | 30,893 | 30,893 |
Changes | (270,804) | (157,664) | (428,468) |
Book Value | 4,458,835 | 1,366,524 | 5,825,359 |
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As of December 31, 2017 |
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Historic cost | 4,458,835 | 2,131,827 | 6,590,662 |
Depreciation | - | (765,303) | (765,303) |
Book Value | 4,458,835 | 1,366,524 | 5,825,359 |
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As of December 31, 2018 |
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Additions | - | 3,613 | 3,613 |
Depreciation | - | (49,728) | (49,728) |
Convertion effect (depreciation) | (429,377) | (269,737) | (699,114) |
Conversion effect | - | 68,416 | 68,416 |
Other increases (decreases) (1) | 2,695,795 | 871,615 | 3,567,410 |
Changes | 2,266,418 | 624,179 | 2,890,597 |
Book Value | 6,725,253 | 1,990,703 | 8,715,956 |
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As of December 31, 2018 |
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Historic cost | 6,725,253 | 2,737,318 | 9,462,571 |
Depreciation | - | (746,615) | (746,615) |
Book Value | 6,725,253 | 1,990,703 | 8,715,956 |
Changes in(1) Corresponds to the movementfinancial effect of the investment property during the years endedapplication IAS 29 "Financial reporting in hyperinflationary economies”. SeeasNote 4 - Accounting changes, letter b)of December 31, 2014 and 2015 is as follows:.
| Lands | Buildings | Total |
ThCh$ | ThCh$ | ThCh$ | |
As of January 1, 2014 |
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Historic cost | 5,590,369 | 1,964,783 | 7,555,152 |
Depreciation | - | (653,691) | (653,691) |
Book Value | 5,590,369 | 1,311,092 | 6,901,461 |
As of December 31, 2014 |
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Additions | 275,001 | - | 275,001 |
Transfers from PPE (Cost) | 243,505 | 850,319 | 1,093,824 |
Transfers from PPE (acumulated depreciation) | - | (12,590) | (12,590) |
Depreciation | - | (65,208) | (65,208) |
Convertion effect (Cost) | (248,418) | (39,897) | (288,315) |
Conversion effect (depreciation) | - | 13,440 | 13,440 |
Book Value | 5,860,457 | 2,057,156 | 7,917,613 |
As of December 31, 2014 |
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Historic cost | 5,860,457 | 2,775,205 | 8,635,662 |
Depreciation | - | (718,049) | (718,049) |
Book Value | 5,860,457 | 2,057,156 | 7,917,613 |
As of December 31, 2015 |
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Additions | - | 4,148 | 4,148 |
Transfers from PPE (cost) | (275,000) | - | (275,000) |
Depreciation | - | (60,450) | (60,450) |
Convertion effect (Cost) | (488,315) | (291,926) | (780,241) |
Conversion effect (depreciation) | - | 31,932 | 31,932 |
Book Value | 5,097,142 | 1,740,860 | 6,838,002 |
As of December 31, 2015 |
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Historic cost | 5,097,142 | 2,487,425 | 7,584,567 |
Depreciation | - | (746,565) | (746,565) |
Book Value | 5,097,142 | 1,740,860 | 6,838,002 |
Investment property includes twenty land properties, two offices and one apartment, situated in Chile, which are maintained for appreciation purposes, with one land property, two offices and one apartment of them being leased and generating ThCh$ 172,243158,235 revenue during year 20152018 (ThCh$ 153,283193,839 in 20142017 and ThCh$110,333 251,545 in 2013)2016). Additionally, there are three land properties in Argentina, which are leased and generated an income for ThCh$ 127,09397,312 for year 20152018 (ThCh$ 117,661135,064 in 20142017 and ThCh$ 134,103131,389 in 2013)2016). In addition, the expenses associated with such investment properties amounted to ThCh$ 120,34050,874 for the year ended as of December 31, 20152018 (ThCh$ 190,67060,452 in 20142017 and ThCh$ 161,91571,090 in 2013)2016).
The fair value, of investment property that represent 90%89% of the book value,carrying amount is ThCh$ 18,365,934.13,332,435.
Management has not detected any evidence of impairment of Investmentinvestment property.
The Company does not maintain any pledge or restriction over investment property items.
F-90
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
During the last quarter of 2009, the Board of Tamarí S.A. (merged with Finca la Celia S.A. as of April 1, 2011)authorized the sale of fixed assets which includes the winery with facilities for processing and storage of wines as well as of acres that surround it and the guest house. This decision is based primarily on the advantage of consolidating the operations of processing and packaging of wines from the Wine Group subsidiaries VSPT facilities in Finca La Celia, generating significant synergies for the Group.
During 2010, the Company hired a specialist broker for such assets. Subsequently, on December 13, 2011, a sales reservation contract was signed for all of the assets.
During December 2014, the subsidiary Sidra La Victoria S.A. authorized the sale of property located in Cipolletti city, Provincia de Río Negro, Argentina. During November 2015 this property was sold and a gain before tax of ThCh$ 1,977,432 was recognize.
During September 2015, the subsidiary Saenz Briones S.A. authorized the sale of property located in Luján de Cuyo city, Provincia de Mendoza, Argentina.
Besides, during 2015, the subsidiary Viña Valles de Chile S.A. (legal and continuing successor of Viña Misiones de Rengo S.A.) authorized the sale of certanis fixed asstes located in Rengo city, Provincia de Cachapoal, Sexta Región.
On January 7, 2016, the shareholders of Compañía Pisquera Bauzá S.A. came to an agreement in which Compañía Pisquera de Chile S.A. (subsidiary of Compañía Cervecerías Unidas S.A.) has sold its interest of 49% to Agroproductos Bauzá S.A. The price of the transaction amounted to UF 150,000 (equivalent to ThCh$ 3,844,364 on December 31, 2015).
Previously, in October 2015, the Board Director of CPCh agreed to order the Administration to obtain an agreement with Agroproductos Bauzá in terms which were reflected in the before mentioned transaction. The consequence the aforementioned was CPCh recorded a provision before taxes for an amount of ThCh$ 1,401,253, charged to the result for the year 2015. This amount is presented under Other gains/losses in the Consolidated Statement of Income.
As described inNote 2.18, non-current assets held for sale have been recorded at the lower of book value and estimated sale valueDecember 31, 2015.
AtDecember 31, 2015 and 2014, the items of assets held for sale are the following:
Assets of disposal group held for sale | As of December 31, 2015 | As of December 31, 2014 |
ThCh$ | ThCh$ | |
Land | 1,855,980 | 196,818 |
Contructions | 544,863 | 467,833 |
Machinery | 74,109 | 94,109 |
Joint agreement (Trade surplus , net of deferred taxes) | 3,844,364 | - |
Total | 6,319,316 | 758,760 |
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Tax accounts receivable
The detail of the taxes receivables is the following:
| As of December 31, 2015 | As of December 31, 2014 |
| ThCh$ | ThCh$ |
Refundable tax previous year | 1,773,573 | 658,744 |
Taxes under claim | 3,661,253 | 2,808,110 |
Argentinean tax credits | 3,756,333 | 3,910,500 |
Monthly provisions | 4,592,593 | 9,394,028 |
Payment of absorbed profit provision | 33,276 | 975,477 |
Other credits | 1,447,192 | 1,666,555 |
Total | 15,264,220 | 19,413,414 |
Taxes accounts payable
The detail of taxes payable taxes is as follows:
| As of December 31, 2015 | As of December 31, 2014 |
| ThCh$ | ThCh$ |
Chilean income taxes | 7,689,139 | 6,718,638 |
Monthly provisional payments | 3,488,085 | 4,113,611 |
Chilean unique taxes | 224,045 | 48,810 |
Estimated Argentine minimum gain subsidiaries taxes | 796,755 | 816,076 |
Total | 12,198,024 | 11,697,135 |
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Tax expense
The detail of the income tax and deferred tax expense for the years ended as ofDecember 31, 2015, 2014 and 2013, is as follows:
| For the years ended as of December 31, | |||
| 2015 | 2014 | 2013 | |
| ThCh$ | ThCh$ | ThCh$ | |
Income as per deferred tax related to the origin and reversal of temporary differences | (454,933) | 992,342 | 101,216 | |
Prior year adjustments | 3,204,656 | 4,763,242 | 7,857,107 | |
Effect of change in tax rates | (1,066,964) | (1) | (14,520,287) | - |
Tax benefits (loss) | 248,559 | 527,447 | (2,225,971) | |
Total deferred tax expense (1) | 1,931,318 | (8,237,256) | 5,732,352 | |
Current tax expense | (48,168,474) | (34,522,795) | (35,137,106) | |
Prior period adjustments | (3,877,360) | (3,913,449) | (5,300,153) | |
(Loss) Income from income tax | (50,114,516) | (46,673,500) | (34,704,907) |
(1) On September 29, 2014 Act No. 20,780 was published in Chile, regarding the so called “Tax reform” which introduces amendments, among others, to the Income tax system. The said Act provides that corporations will apply by default the "Partially Integrated System", unless a future Extraordinary Shareholders Meeting agrees to opt for the "Attributed Income Regime”. The Act provides for the "Partially Integrated System" a gradual increase in the First Category Income tax rate, going from 20% to 21% for the business year 2014, to 22.5% for the business year 2015, to 24% for the business year 2016, to 25.5% for the business year 2017 and to 27% starting 2018 business year.
The effect of the new tax rate of 21%, applicable from January 1, 2014, resulted in charges of ThCh$ 1,359,437 against income in 2014.
The difference between assets and liabilities for deferred taxes which occur as a direct effect of the increase in the First Category Income tax rate introduced by Act No. 20,780, has been accounted against to Net income. As of December 31, 2014, the total effect registered against the Net income was an amount of ThCh$ 14,520,287.
The deferred taxes related to items charged or credited directly to Consolidated Statement of Comprehensive Income are as follows:
| For the years ended as of December 31, | |||
| 2015 | 2014 | 2013 | |
| ThCh$ | ThCh$ | ThCh$ | |
Net income from cash flow hedge | (17,563) | 39,470 | (51,304) | |
Actuarial gains and losses deriving from defined benefit plans | 314,541 | 501,689 | 105,151 | |
Charge to equity | 296,978 | 541,159 | 53,847 |
Effective Rate
The Company’s income tax expense as ofDecember 31, 2015, 2014 and 2013 represents 26.4%, 27.9% and 20.7%, respectively of income before taxes. The following is reconciliation between such effective tax rate and the statutory tax rate valid in Chile.
| For the years ended as of December 31, | |||||
2015 | 2014 | 2013 | ||||
ThCh$ | Tax rate % | ThCh$ | Tax rate % | ThCh$ | Tax rate % | |
Income before taxes | 190,640,106 | - | 167,465,421 | - | 167,609,458 | - |
Income tax using the statutory rate | (42,894,024) | 22.5 | (35,167,738) | 21.0 | (33,521,892) | 20.0 |
Adjustments to reach the effective rate |
|
|
|
|
|
|
Tax effect of permanent differences and non-taxable items, net | (3,202,337) | 1.7 | (70,944) | 0.1 | (1,307,033) | 0.7 |
Effect of change in tax rate | (1,066,964) | 0.6 | (14,520,287) | 8.6 | - | - |
Effect of tax rates abroad | (2,278,489) | 1.2 | 2,235,676 | (1.3) | (2,432,936) | 1.5 |
Prior year adjustments | (672,702) | 0.4 | 849,793 | (0.5) | 2,556,954 | (1.5) |
Income tax, as reported | (50,114,516) | 26.4 | (46,673,500) | 27.9 | (34,704,907) | 20.7 |
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Deferred taxes
Deferred tax assets and liabilities included in the Balance Sheet were as follows:
| As of December 31, 2015 | As of December 31, 2014 |
| ThCh$ | ThCh$ |
Deferred tax assets |
|
|
Accounts receivable impairment provision | 712,135 | 721,772 |
Employee benefits and other non taxable expenses | 10,402,580 | 7,984,756 |
Inventory impairment provision | 894,231 | 886,694 |
Severance indemnity | 5,044,560 | 4,592,647 |
Inventory valuation | 1,060,489 | 1,143,039 |
Amortization of intangibles | 1,785,174 | 1,021,992 |
Other assets | 8,927,120 | 8,401,374 |
Tax loss carryforwards | 5,703,304 | 5,454,745 |
Total assets from deferred taxes | 34,529,593 | 30,207,019 |
Deferred taxes liabilities |
|
|
Fixed assets depreciation | 39,673,300 | 36,618,758 |
Capitalized software expense | 1,852,161 | 1,694,859 |
Agricultural operation expense | 4,348,021 | 3,493,499 |
Manufacturing indirect activation costs | 3,867,574 | 3,777,813 |
Intangibles | 8,654,342 | 10,524,509 |
Land | 28,756,600 | 30,479,610 |
Other liabilities | 994,965 | 929,652 |
Total liabilities from deferred taxes | 88,146,963 | 87,518,700 |
Total | (53,617,370) | (57,311,681) |
No deferred taxes have been recorded for the temporary differences between the taxes and accounting value generated by investments in subsidiaries; consequently deferred tax is not recognized for the Translation Adjustments or investments in Joint Ventures and Associates.
In accordance with current tax laws in Chile, taxable losses do not expire and can be applied indefinitely. Regarding Argentina, taxable losses expire after 5 years.
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Debts and financial liabilities classified based onaccording to the type of obligation and their classifications in the consolidated balance sheetConsolidated Financial Statements are detailed as follows:
| As of December 31, 2018 | As of December 31, 2017 | ||||
| As of December 31, 2015 | As of December 31, 2014 | Current | Non current | Current | Non current |
| ThCh$ | ThCh$ | ThCh$ | ThCh$ | ||
Bank borrowings (*) | 76,050,091 | 95,822,149 | 38,160,178 | 75,200,804 | 24,623,746 | 73,886,831 |
Bonds payable (*) | 74,508,233 | 73,937,639 | 4,081,175 | 135,281,303 | 3,306,135 | 69,476,612 |
Financial leases obligations (*) | 17,559,874 | 17,392,945 | 365,972 | 17,546,162 | 176,586 | 17,638,289 |
Derivative financial instruments (**) | 4,997,124 | - | 10,416,675 | - | ||
Derivative hedge liabilities (**) | 1,194,502 | 157,028 | 1,840,188 | - | ||
Deposits for return of bottles and containers | 12,503,170 | 11,787,424 | 13,967,995 | - | 13,228,328 | - |
Derivatives (**) | 171,470 | 684,317 | ||||
Liability coverage (**) | 107,698 | 228,376 | ||||
Total | 180,900,536 | 199,852,850 | 62,766,946 | 228,185,297 | 53,591,658 | 161,001,732 |
Current | 43,973,991 | 65,318,293 | ||||
Non current | 136,926,545 | 134,534,557 | ||||
Total | 180,900,536 | 199,852,850 |
(*) SeeNote 5 – Risk administration.
(**) SeeNote 67 – Financial instruments.
F-91
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
The maturities and interest rates of suchthese obligations are detailed as follows:
Current loan and financial obligation
As ofDecember 31, 20152018:
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| Undiscounting amounts according to maturity |
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Debtor Tax ID | Company | Debtor country | Lending party Tax ID | Creditor name | Creditor country | Currency | 0 to 3 months | 3 months to 1 year | Over 1 year to 3 years | Over 3 years to 5 years | Over 5 years | Total | Amortization rate | Interest Rate |
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| ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ |
| % |
Bank borrowings |
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0-E | Finca La Celia S.A | Argentina | O-E | Banco Supervielle | Argentina | USD | - | 128,459 | - | - | - | 128,459 | At maturity | 6.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco Patagonia | Argentina | $ARG | 272,706 | - | - | - | - | 272,706 | At maturity | 28.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco Patagonia | Argentina | $ARG | 106,222 | - | - | - | - | 106,222 | At maturity | 28.50 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco Patagonia | Argentina | $ARG | 420,665 | - | - | - | - | 420,665 | At maturity | 28.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco Patagonia | Argentina | $ARG | 1,857 | 7,389 | 3,095 | - | - | 12,341 | Quarter | 15.25 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco Patagonia | Argentina | $ARG | 506,450 | - | - | - | - | 506,450 | At maturity | 27.50 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | 151,260 | - | - | - | - | 151,260 | At maturity | 29.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | - | 486,804 | - | - | - | 486,804 | At maturity | 29.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco Patagonia | Argentina | $ARG | 405,927 | - | - | - | - | 405,927 | At maturity | 25.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco BBVA | Argentina | $ARG | 535,283 | - | - | - | - | 535,283 | At maturity | 29.50 |
91.041.000-8 | Viña San Pedro Tarapaca S.A. (1) | Chile | 97.004.000-5 | Banco de Chile | Chile | USD | 28,782 | 3,150,341 | - | - | - | 3,179,123 | At maturity | 1.92 |
91.041.000-8 | Viña San Pedro Tarapaca S.A. (2) | Chile | 97.004.000-5 | Banco de Chile | Chile | USD | 66,496 | 7,101,600 | - | - | - | 7,168,096 | At maturity | 1.90 |
91.041.000-8 | Viña San Pedro Tarapaca S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | UF | - | 56,243 | - | 9,739,054 | - | 9,795,297 | At maturity | 2.70 |
91.041.000-8 | Viña San Pedro Tarapaca S.A. (1) | Chile | 97.018.000-1 | Scotiabank | Chile | USD | - | 2,977 | 5,590,024 | - | - | 5,593,001 | At maturity | 1.15 |
99.586.280-8 | Compañía Pisquera de Chile S.A | Chile | 97.030.000-7 | Banco Estado | Chile | CLP | 449,879 | - | 15,978,778 | - | - | 16,428,657 | At maturity | 6.86 |
96.711.590-8 | Manantial S.A. | Chile | 97.004.000-5 | Banco de Chile | Chile | UF | 15,123 | 46,470 | 109,544 | - | - | 171,137 | Monthly | 4.80 |
96.711.590-8 | Manantial S.A. | Chile | 97.004.000-5 | Banco de Chile | Chile | UF | 8,529 | 26,304 | 75,692 | 16,855 | - | 127,380 | Monthly | 5.48 |
96.711.590-8 | Manantial S.A. | Chile | 97.004.000-5 | Banco de Chile | Chile | UF | 7,004 | 21,588 | 12,375 | - | - | 40,967 | Monthly | 5.36 |
96.711.590-8 | Manantial S.A. | Chile | 97.004.000-5 | Banco de Chile | Chile | CLP | 13,500 | 40,500 | 108,000 | 72,000 | - | 234,000 | Monthly | 6.00 |
96.711.590-8 | Manantial S.A. | Chile | 97.004.000-5 | Banco de Chile | Chile | CLP | 19,000 | 57,000 | 88,668 | - | - | 164,668 | Monthly | 7.59 |
96.711.590-8 | Manantial S.A. | Chile | 97.004.000-5 | Banco de Chile | Chile | CLP | 14,000 | 42,000 | 112,000 | 32,667 | - | 200,667 | Monthly | 5.88 |
96.711.590-8 | Manantial S.A. | Chile | 97.004.000-5 | Banco de Chile | Chile | CLP | 22,500 | 67,500 | 180,000 | 112,500 | - | 382,500 | Monthly | 5.76 |
96.711.590-8 | Manantial S.A. | Chile | 76.645.030-K | Banco Itaú | Chile | CLP | 23,690 | 56,839 | - | - | - | 80,529 | Monthly | 6.66 |
96.711.590-8 | Manantial S.A. | Chile | 76.645.030-K | Banco Itaú | Chile | CLP | 7,704 | 23,532 | 68,516 | 50,621 | - | 150,373 | Monthly | 6.12 |
96.711.590-8 | Manantial S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | CLP | 200,000 | - | - | - | - | 200,000 | At maturity | 5.26 |
96.711.590-8 | Manantial S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | CLP | 254,313 | - | - | - | - | 254,313 | At maturity | 4.38 |
96.711.590-8 | Manantial S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | CLP | 35,843 | 36,436 | - | - | - | 72,279 | Monthly | 7.56 |
96.711.590-8 | Manantial S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | CLP | - | 150,000 | - | - | - | 150,000 | Monthly | 5.40 |
96.711.590-8 | Manantial S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | CLP | - | 255,510 | - | - | - | 255,510 | At maturity | 4.22 |
96.711.590-8 | Manantial S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | CLP | 18,029 | 55,418 | 158,974 | 138,117 | - | 370,538 | Monthly | 5.02 |
0-E | Milotur S.A. | Uruguay | O-E | Nuevo Banco Comercial | Uruguay | USD | 25,991 | 71,036 | - | - | - | 97,027 | Monthly | 5.50 |
0-E | Milotur S.A. | Uruguay | O-E | Banco Itaú | Uruguay | UYI | - | 344,850 | 1,701,800 | - | - | 2,046,650 | Monthly | 6.00 |
96.981.310-6 | Compañia Cervecera Kunstmann S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | CLP | - | 515,083 | - | - | - | 515,083 | At maturity | 4.34 |
96.981.310-6 | Compañia Cervecera Kunstmann S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | CLP | - | 618,100 | - | - | - | 618,100 | At maturity | 4.34 |
96.981.310-6 | Compañia Cervecera Kunstmann S.A. | Chile | 97.004.000-5 | Banco de Chile | Chile | CLP | - | 1,030,538 | - | - | - | 1,030,538 | At maturity | 4.38 |
96.981.310-6 | Compañia Cervecera Kunstmann S.A. | Chile | 97.018.000-1 | Scotiabank | Chile | USD | 7,229 | 453,561 | - | - | - | 460,790 | At maturity | 1.90 |
96.981.310-6 | Compañia Cervecera Kunstmann S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | CLP | 180,724 | 555,208 | 1,589,858 | 1,378,183 | - | 3,703,973 | Monthly | 5.02 |
96.981.310-6 | Compañia Cervecera Kunstmann S.A. | Chile | 97.018.000-1 | Scotiabank | Chile | CLP | - | 1,028,447 | - | - | - | 1,028,447 | At maturity | 4.08 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco BNA | Argentina | $ARG | 345,777 | 927,294 | 2,472,784 | 1,236,392 | - | 4,982,247 | Monthly | 15.00 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco BNA | Argentina | $ARG | 173,166 | 392,114 | 697,088 | - | - | 1,262,368 | Monthly | 25.19 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco BBVA | Argentina | $ARG | 560,011 | 1,633,640 | 1,089,584 | - | - | 3,283,235 | Quarter | 26.00 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco Galicia | Argentina | $ARG | 1,272,502 | 1,815,157 | 5,446,285 | - | - | 8,533,944 | Quarter | 29.40 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco Macro | Argentina | $ARG | 44,130 | 136,150 | 75,639 | - | - | 255,919 | Monthly | 15.25 |
0-E | Saenz Briones & Cía SAIC | Argentina | 0-E | Banco Citibank | Argentina | $ARG | 65,596 | 121,022 | - | - | - | 186,618 | Monthly | 15.25 |
Sub-Total |
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| 6,259,888 | 21,455,110 | 35,558,704 | 12,776,389 | - | 76,050,091 |
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| Undiscounting amounts according to maturity |
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Debtor Tax ID | Company | Debtor country | Registration or ID No. Instrument | Creditor country | Currency | 0 to 3 months | 3 months to 1 year | Over 1 year to 3 years | Over 3 years to 5 years | Over 5 years | Total | Amortization rate | Interest Rate | |
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| ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ |
| % |
Bonds payable |
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90.413.000-1 | Compañía Cervecerías Unidas S.A. | Chile | 388 18/10/2004 BONO SERIE E | Chile | UF | - | 2,539,921 | 4,953,915 | 5,095,419 | 10,251,636 | 22,840,891 | Semiannual | 4.00 | |
90.413.000-1 | Compañía Cervecerías Unidas S.A. | Chile | 573 23/03/2009 BONO SERIE H | Chile | UF | 615,318 | - | - | 2,252,581 | 48,799,443 | 51,667,342 | Semiannual | 4.25 | |
Sub-Total |
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| 615,318 | 2,539,921 | 4,953,915 | 7,348,000 | 59,051,079 | 74,508,233 |
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| Undiscounting amounts according to maturity |
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Debtor Tax ID | Company | Debtor country | Lending party Tax ID | Creditor name | Creditor country | Currency | 0 to 3 months | 3 months to 1 year | Over 1 year to 3 years | Over 3 years to 5 years | Over 5 years | Total | Amortization rate | Interest Rate |
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| ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ |
| % |
Financial leases obligations |
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0-E | Finca La Celia S.A | Argentina | O-E | Banco Supervielle | Argentina | $ARG | 1,267 | 3,900 | 6,147 | - | - | 11,314 | Monthly | 17.50 |
96.711.590-8 | Manantial S.A. | Chile | 97.000.600-6 | Banco de Creditos e Inversiones | Chile | UF | 5,371 | 16,386 | 9,292 | - | - | 31,049 | Monthly | 5.06 |
96.711.590-8 | Manantial S.A. | Chile | 97.004.000-5 | Banco de Chile | Chile | UF | 10,764 | 16,845 | 13,524 | - | - | 41,133 | Monthly | 9.31 |
96.711.590-8 | Manantial S.A. | Chile | 97.053.000-2 | Banco Security | Chile | UF | 21,598 | 25,628 | 12,867 | - | - | 60,093 | Monthly | 6.81 |
90.413.000-1 | Compañía Cervecerías Unidas S.A. | Chile | 99.012.000-5 | Consorcio Nacional de Seguros S.A | Chile | UF | 12,499 | 38,806 | 113,757 | 225,991 | 16,628,473 | 17,019,526 | Monthly | 7.07 |
96.981.310-6 | Compañía Cervecera Kunstmann S.A | Chile | 97.004.000-5 | Banco de Chile | Chile | UF | 42,822 | 23,183 | 12,799 | - | - | 78,804 | Monthly | 5.58 |
96.981.310-6 | Compañía Cervecera Kunstmann S.A | Chile | 97.030.000-7 | Banco Estado | Chile | UF | 23,716 | 72,672 | 196,552 | - | - | 292,940 | Monthly | 4.33 |
76.077.848-6 | Cervecera Belga de la Patagonia | Chile | 97.015.000-5 | Banco Santander de Chile | Chile | UF | 1,455 | 4,504 | 13,097 | 5,959 | - | 25,015 | Monthly | 6.27 |
Sub-Total |
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| 119,492 | 201,924 | 378,035 | 231,950 | 16,628,473 | 17,559,874 |
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Total |
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| 6,994,698 | 24,196,955 | 40,890,654 | 20,356,339 | 75,679,552 | 168,118,198 |
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(1) This obligation is hedged by a Cross Currency Interest Rate Swap agreement(Note 6).
(2) This obligation is hedged by a Cross Interest Rate Swap agreement(Note 6).
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As of December 31, 2014:
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| Undiscounting amounts according to maturity |
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Debtor Tax ID | Company | Debtor country | Lending party Tax ID | Creditor name | Creditor country | Currency | 0 to 3 months | 3 months to 1 year | Over 1 year to 3 years | Over 3 years to 5 years | Over 5 years | Total | Amortization rate | Interest Rate |
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| ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ |
| % |
Bank borrowings |
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0-E | Finca La Celia S.A | Argentina | O-E | Santader RIO | Argentina | USD | 338,173 | - | - | - | - | 338,173 | At maturity | 4.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Santader RIO | Argentina | USD | 338,173 | - | - | - | - | 338,173 | At maturity | 4.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Supervielle | Argentina | USD | - | 73,057 | - | - | - | 73,057 | At maturity | 4.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Supervielle | Argentina | USD | - | 79,145 | - | - | - | 79,145 | At maturity | 4.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Supervielle | Argentina | USD | - | 76,101 | - | - | - | 76,101 | At maturity | 4.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Supervielle | Argentina | USD | - | 75,844 | - | - | - | 75,844 | At maturity | 4.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Fondo para la Transformación y Crec. | Argentina | $ARG | - | 2,114 | - | - | - | 2,114 | Semiannual | 6.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco Patagonia | Argentina | $ARG | 581,393 | - | - | - | - | 581,393 | At maturity | 28.50 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco Patagonia | Argentina | $ARG | 569,746 | - | - | - | - | 569,746 | At maturity | 30.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco Patagonia | Argentina | $ARG | 327,034 | - | - | - | - | 327,034 | At maturity | 28.50 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco Patagonia | Argentina | $ARG | 174,129 | - | - | - | - | 174,129 | At maturity | 26.50 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco Patagonia | Argentina | $ARG | 3,725 | 13,226 | 13,708 | - | - | 30,659 | Quarter | 15.25 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco Patagonia | Argentina | $ARG | 131,476 | - | - | - | - | 131,476 | At maturity | 26.50 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | 29,711 | - | - | - | - | 29,711 | At maturity | 28.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | 29,711 | - | - | - | - | 29,711 | At maturity | 28.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | 29,711 | - | - | - | - | 29,711 | At maturity | 28.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | 29,711 | - | - | - | - | 29,711 | At maturity | 28.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | 29,711 | - | - | - | - | 29,711 | At maturity | 28.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | 29,711 | - | - | - | - | 29,711 | At maturity | 28.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | 29,711 | - | - | - | - | 29,711 | At maturity | 28.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | 29,711 | - | - | - | - | 29,711 | At maturity | 28.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | 29,711 | - | - | - | - | 29,711 | At maturity | 28.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | 29,711 | - | - | - | - | 29,711 | At maturity | 28.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | 29,711 | - | - | - | - | 29,711 | At maturity | 28.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | 29,711 | - | - | - | - | 29,711 | At maturity | 28.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | 29,640 | - | - | - | - | 29,640 | At maturity | 26.50 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | 29,640 | - | - | - | - | 29,640 | At maturity | 26.50 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | 177,838 | - | - | - | - | 177,838 | At maturity | 26.50 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | 29,711 | - | - | - | - | 29,711 | At maturity | 28.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco San Juan | Argentina | $ARG | 29,711 | - | - | - | - | 29,711 | At maturity | 28.00 |
0-E | Finca La Celia S.A | Argentina | O-E | BBVA | Argentina | $ARG | 402,311 | - | - | - | - | 402,311 | At maturity | 28.00 |
0-E | Finca La Celia S.A | Argentina | O-E | Banco Patagonia | Argentina | $ARG | 43,659 | - | - | - | - | 43,659 | At maturity | 24.00 |
91.041.000-8 | Viña San Pedro Tarapaca S.A. (1) | Chile | 97.004.000-5 | Banco de Chile | Chile | USD | 23,097 | - | 2,691,604 | - | - | 2,714,701 | At maturity | 1.79 |
91.041.000-8 | Viña San Pedro Tarapaca S.A. (2) | Chile | 97.004.000-5 | Banco de Chile | Chile | USD | 53,348 | - | 6,067,500 | - | - | 6,120,848 | At maturity | 1.79 |
91.041.000-8 | Viña San Pedro Tarapaca S.A. (2) | Chile | 97.018.000-1 | Scotiabank | Chile | USD | 1,438 | 4,854,000 | - | - | - | 4,855,438 | At maturity | 1.19 |
91.041.000-8 | Viña San Pedro Tarapaca S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | EUR | - | 4,590,673 | - | - | - | 4,590,673 | At maturity | 0.59 |
91.041.000-8 | Viña San Pedro Tarapaca S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | UF | - | 54,044 | - | 9,358,298 | - | 9,412,342 | At maturity | 2.70 |
99.586.280-8 | Compañía Pisquera de Chile S.A | Chile | 97.030.000-7 | Banco Estado | Chile | CLP | 448,895 | - | 15,949,982 | - | - | 16,398,877 | At maturity | 6.86 |
96.711.590-8 | Manantial S.A. | Chile | 97.004.000-5 | Banco de Chile | Chile | UF | 14,752 | 42,394 | 120,811 | 48,426 | - | 226,383 | Monthly | 4.80 |
96.711.590-8 | Manantial S.A. | Chile | 97.004.000-5 | Banco de Chile | Chile | UF | 7,798 | 23,813 | 68,838 | 53,562 | - | 154,011 | Monthly | 5.48 |
96.711.590-8 | Manantial S.A. | Chile | 97.004.000-5 | Banco de Chile | Chile | UF | 6,392 | 19,613 | 39,365 | - | - | 65,370 | Monthly | 5.36 |
96.711.590-8 | Manantial S.A. | Chile | 97.004.000-5 | Banco de Chile | Chile | CLP | 1,654 | 2,266 | - | - | - | 3,920 | Monthly | 9.12 |
96.711.590-8 | Manantial S.A. | Chile | 97.004.000-5 | Banco de Chile | Chile | CLP | 19,000 | 57,000 | 152,000 | 12,667 | - | 240,667 | Monthly | 7.59 |
96.711.590-8 | Manantial S.A. | Chile | 97.004.000-5 | Banco de Chile | Chile | CLP | 14,000 | 42,000 | 112,000 | 88,667 | - | 256,667 | Monthly | 5.88 |
96.711.590-8 | Manantial S.A. | Chile | 76.645.030-K | Banco Itaú | Chile | CLP | 9,214 | 3,107 | - | - | - | 12,321 | Monthly | 7.32 |
96.711.590-8 | Manantial S.A. | Chile | 76.645.030-K | Banco Itaú | Chile | CLP | 7,426 | 17,873 | - | - | - | 25,299 | Monthly | 7.56 |
96.711.590-8 | Manantial S.A. | Chile | 76.645.030-K | Banco Itaú | Chile | CLP | 22,178 | 68,690 | 80,528 | - | - | 171,396 | Monthly | 6.66 |
96.711.590-8 | Manantial S.A. | Chile | 76.645.030-K | Banco Itaú | Chile | CLP | 62,759 | 192,305 | - | - | - | 255,064 | At maturity | 4.38 |
96.711.590-8 | Manantial S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | CLP | - | 251,734 | - | - | - | 251,734 | Monthly | 0.37 |
96.711.590-8 | Manantial S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | CLP | 5,834 | 14,043 | - | - | - | 19,877 | Monthly | 0.63 |
96.711.590-8 | Manantial S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | CLP | 33,596 | 104,022 | 72,279 | - | - | 209,897 | Monthly | 0.63 |
96.711.590-8 | Manantial S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | CLP | - | 200,852 | - | - | - | 200,852 | Monthly | 0.63 |
96.711.590-8 | Manantial S.A. | Chile | 76.645.030-K | Banco Itaú | Chile | CLP | 18,792 | - | - | - | - | 18,792 | Monthly | 0.50 |
0-E | Milotur S.A. | Uruguay | O-E | Nuevo Banco Comercial | Uruguay | USD | 23,418 | 69,795 | 93,672 | - | - | 186,885 | Monthly | 5.50 |
0-E | Milotur S.A. | Uruguay | O-E | Nuevo Banco Comercial | Uruguay | UYU | 601,212 | - | - | - | - | 601,212 | At maturity | 17.00 |
0-E | Milotur S.A. | Uruguay | O-E | Nuevo Banco Comercial | Uruguay | UYU | 357,814 | - | - | - | - | 357,814 | At maturity | 1.12 |
0-E | Milotur S.A. | Uruguay | O-E | Nuevo Banco Comercial | Uruguay | UYU | 138,532 | - | - | - | - | 138,532 | At maturity | 17.00 |
0-E | Milotur S.A. | Uruguay | O-E | Nuevo Banco Comercial | Uruguay | UYU | 643,409 | - | - | - | - | 643,409 | At maturity | 16.80 |
96.981.310-6 | Compañia Cervecera Kunstmann S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | CLP | - | 515,411 | - | - | - | 515,411 | At maturity | 4.50 |
96.981.310-6 | Compañia Cervecera Kunstmann S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | CLP | - | 618,493 | - | - | - | 618,493 | At maturity | 4.50 |
96.981.310-6 | Compañia Cervecera Kunstmann S.A. | Chile | 97.004.000-5 | Banco de Chile | Chile | CLP | - | 1,034,167 | - | - | - | 1,034,167 | At maturity | 4.92 |
96.981.310-6 | Compañia Cervecera Kunstmann S.A. | Chile | 97.018.000-1 | Scotiabank | Chile | USD | 2,413 | - | 387,514 | - | - | 389,927 | At maturity | 1.90 |
96.981.310-6 | Compañia Cervecera Kunstmann S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | CLP | 1,303,864 | - | - | - | - | 1,303,864 | At maturity | 3.22 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco BBVA | Argentina | $ARG | 1,541,623 | 4,401,173 | - | - | - | 5,942,796 | Quarter | 15.00 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco BNA | Argentina | $ARG | 445,789 | 1,208,180 | 3,221,814 | 3,221,813 | - | 8,097,596 | Monthly | 15.00 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco Macro | Argentina | $ARG | 54,865 | 177,392 | 335,073 | - | - | 567,330 | Monthly | 15.25 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco BBVA | Argentina | $ARG | 690,557 | 1,418,990 | 4,257,610 | - | - | 6,367,157 | Quarter | 26.00 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco Citibank | Argentina | $ARG | 14,494,421 | - | - | - | - | 14,494,421 | At maturity | 26.00 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco Santander Río | Argentina | $ARG | 3,063,385 | - | - | - | - | 3,063,385 | At maturity | 29.00 |
0-E | Saenz Briones SA | Argentina | 0-E | HSBC | Argentina | $ARG | 2,724 | - | - | - | - | 2,724 | At maturity | 20.00 |
0-E | Saenz Briones SA | Argentina | 0-E | Banco Citibank | Argentina | $ARG | 93,631 | 236,522 | 236,522 | - | - | 566,675 | Monthly | 15.25 |
0-E | Saenz Briones SA | Argentina | 0-E | Banco Patagonia | Argentina | $ARG | 829,136 | - | - | - | - | 829,136 | At maturity | 30.00 |
Sub-Total |
|
|
|
|
|
| 28,599,857 | 20,538,039 | 33,900,820 | 12,783,433 | - | 95,822,149 |
|
|
|
|
|
| Registration or ID No. Instrument |
|
| Undiscounting amounts according to maturity |
|
| ||||||
Debtor Tax ID | Company | Debtor country | Creditor country | Currency | 0 to 3 months | 3 months to 1 year | Over 1 year to 3 years | Over 3 years to 5 years | Over 5 years | Total | Amortization rate | Interest Rate | ||
|
|
|
|
| ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ |
| % | ||
Bonds payable |
|
|
|
|
|
|
|
|
|
|
|
|
| |
90.413.000-1 | CCU S.A | Chile | 388 18/10/2014 BONO SERIE E | Chile | UF | - | 2,437,294 | 4,741,076 | 4,818,518 | 12,313,550 | 24,310,438 | Semiannual | 4.00 | |
90.413.000-1 | CCU S.A | Chile | 573 23/03/2009 BONO SERIE H | Chile | UF | 592,131 | - | - | 2,149,320 | 46,885,750 | 49,627,201 | Semiannual | 4.25 | |
Sub-Total |
|
|
|
|
|
| 592,131 | 2,437,294 | 4,741,076 | 6,967,838 | 59,199,300 | 73,937,639 |
|
|
|
|
|
|
|
|
| Undiscounting amounts according to maturity |
|
| |||||
Debtor Tax ID | Company | Debtor country | Lending party Tax ID | Creditor name | Creditor country | Currency | 0 to 3 months | 3 months to 1 year | Over 1 year to 3 years | Over 3 years to 5 years | Over 5 years | Total | Amortization rate | Interest Rate |
|
|
|
|
|
|
| ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ |
| % |
Financial leases obligations |
|
|
|
|
|
|
|
|
|
|
|
|
| |
0-E | Finca La Celia S.A | Argentina | O-E | Supervielle | Argentina | $ARG | 1,475 | 4,620 | 11,088 | 2,466 | - | 19,649 | At maturity | 17.50 |
96.711.590-8 | Manantial S.A. | Chile | 97.000.600-6 | Banco de Creditos e Inversiones | Chile | UF | 7,058 | 15,218 | 29,841 | - | - | 52,117 | Monthly | 0.42 |
96.711.590-8 | Manantial S.A. | Chile | 97.004.000-5 | Banco de Chile | Chile | UF | 20,250 | 42,944 | 37,825 | - | - | 101,019 | Monthly | 0.50 |
96.711.590-8 | Manantial S.A. | Chile | 97.030.000-7 | Banco Estado | Chile | UF | 12,160 | 6,585 | - | - | - | 18,745 | Monthly | 1.17 |
96.711.590-8 | Manantial S.A. | Chile | 97.053.000-2 | Banco Security | Chile | UF | 31,538 | 79,780 | 57,744 | - | - | 169,062 | Monthly | 0.55 |
90.413.000-1 | CCU S.A | Chile | 99.012.000-5 | Consorcio Nacional de Seguros S.A | Chile | UF | 22,926 | 38,773 | 102,087 | 117,043 | 16,135,005 | 16,415,834 | Monthly | 7.07 |
96.981.310-6 | Compañía Cervecera Kunstmann S.A | Chile | 97.004.000-5 | Banco de Chile | Chile | UF | 38,866 | 101,818 | 75,724 | - | - | 216,408 | Monthly | 6.43 |
96.981.310-6 | Compañía Cervecera Kunstmann S.A | Chile | 97.030.000-7 | Banco Estado | Chile | UF | 21,843 | 66,935 | 189,245 | 92,241 | - | 370,264 | Monthly | 4.33 |
76.077.848-6 | Cervecera Belga de la Patagonia | Chile | 97.015.000-5 | Banco Santander de Chile | Chile | UF | 1,306 | 4,044 | 11,760 | 12,737 | - | 29,847 | Monthly | 6.27 |
Sub-Total |
|
|
|
|
| 157,422 | 360,717 | 515,314 | 224,487 | 16,135,005 | 17,392,945 |
|
| |
Total |
|
|
|
|
|
| 29,349,410 | 23,336,050 | 39,157,210 | 19,975,758 | 75,334,305 | 187,152,733 |
|
|
|
|
|
|
|
|
| Maturity (*) |
|
|
| |
Debtor Tax ID | Company | Debtor country | Lending party Tax ID | Creditor name | Creditor country | Currency | 0 to 3 months | 3 months to 1 year | Total | Type of amortization | Interest Rate |
|
|
|
|
|
|
| ThCh$ | ThCh$ | ThCh$ |
| (%) |
Bank borrowings |
|
|
|
|
|
|
|
|
|
| |
76,035,409-0 | Cervecera Guayacán SpA. | Chile | 76,645,030-K | Banco Itaú Corpbanca | Chile | CLP | 1,091 | 3,578 | 4,669 | Monthly | 4.87 |
91,041,000-8 | Viña San Pedro Tarapacá S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | UF | - | 10,535,493 | 10,535,493 | At maturity | 2.70 |
91,041,000-8 | Viña San Pedro Tarapacá S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | USD | - | 5,670,991 | 5,670,991 | At maturity | 2.90 |
91,041,000-8 | Viña San Pedro Tarapacá S.A. | Chile | 97,018,000-1 | Scotiabank Chile | Chile | USD | - | 10,576,858 | 10,576,858 | At maturity | 2.96 |
91,041,000-8 | Viña San Pedro Tarapacá S.A. (1) | Chile | 97,018,000-1 | Scotiabank Chile | Chile | USD | 11,007 | - | 11,007 | At maturity | 3.38 |
91,413,000-1 | Compañía Cervecerías Unidas S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | - | 309,108 | 309,108 | At maturity | 4.56 |
99,586,280-8 | Compañía Pisquera de Chile S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | 326,560 | - | 326,560 | At maturity | 4.68 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | UF | 10,829 | 7,300 | 18,129 | Monthly | 5.48 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 13,500 | 40,500 | 54,000 | Monthly | 6.00 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 18,868 | 18,666 | 37,534 | Monthly | 5.88 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 22,500 | 67,500 | 90,000 | Monthly | 5.76 |
96,711,590-8 | Manantial S.A. | Chile | 76,645,030-K | Banco Itaú Corpbanca | Chile | CLP | 9,192 | 28,382 | 37,574 | Monthly | 6.12 |
96,711,590-8 | Manantial S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | 28,669 | 64,826 | 93,495 | Monthly | 5.02 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 16,666 | 50,000 | 66,666 | Monthly | 4.44 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 20,833 | 62,501 | 83,334 | Monthly | 4.42 |
96,711,590-8 | Manantial S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | 73,030 | 224,475 | 297,505 | Monthly | 4.92 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 41,700 | 125,100 | 166,800 | Monthly | 4.92 |
96,711,590-8 | Manantial S.A. | Chile | 76,645,030-K | Banco Itaú Corpbanca | Chile | CLP | 39,951 | 90,476 | 130,427 | Monthly | 4.73 |
96,711,590-8 | Manantial S.A. | Chile | 76,645,030-K | Banco Itaú Corpbanca | Chile | CLP | 37,588 | 115,166 | 152,754 | Monthly | 4.42 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 31,200 | 93,600 | 124,800 | Monthly | 5.16 |
96,981,310-6 | Cervecería Kunstmann S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 45,100 | - | 45,100 | At maturity | 4.92 |
96,981,310-6 | Cervecería Kunstmann S.A. | Chile | 97,018,000-1 | Scotiabank Chile | Chile | CLP | - | 2,016,815 | 2,016,815 | At maturity | 3.98 |
96,981,310-6 | Cervecería Kunstmann S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 6,536 | - | 6,536 | At maturity | 4.56 |
96,981,310-6 | Cervecería Kunstmann S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | 210,510 | 647,019 | 857,529 | Monthly | 5.02 |
96,981,310-6 | Cervecería Kunstmann S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | - | 1,026,099 | 1,026,099 | At maturity | 3.64 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco de la Nación Argentina | Argentina | ARS | 226,995 | 278,924 | 505,919 | Monthly | 32.50 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco Galicia | Argentina | ARS | 506,614 | 545,956 | 1,052,570 | Quarterly | 23.00 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Superville | Argentina | USD | - | 210,829 | 210,829 | At maturity | 6.00 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Patagonia | Argentina | USD | 245,193 | - | 245,193 | At maturity | 6.20 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Patagonia | Argentina | USD | - | 208,701 | 208,701 | At maturity | 4.30 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Patagonia | Argentina | USD | 210,949 | - | 210,949 | At maturity | 5.25 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Patagonia | Argentina | USD | 210,101 | - | 210,101 | At maturity | 6.50 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Patagonia | Argentina | ARS | 388,865 | - | 388,865 | At maturity | 49.00 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco San Juan | Argentina | ARS | - | 643,278 | 643,278 | Quarterly | 68.00 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco San Juan | Argentina | ARS | - | 136,453 | 136,453 | Quarterly | 68.00 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco San Juan | Argentina | ARS | - | 116,959 | 116,959 | Quarterly | 68.00 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco San Juan | Argentina | ARS | - | 38,986 | 38,986 | Quarterly | 68.00 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco BBVA | Argentina | ARS | 736,905 | - | 736,905 | At maturity | 64.00 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Patagonia | Argentina | ARS | 238,536 | - | 238,536 | At maturity | 66.50 |
0-E | Bebidas Bolivianas BBO S.A. | Bolivia | 0-E | Banco Mercantil Santa Cruz S.A. | Bolivia | BOB | 38,735 | - | 38,735 | Quarterly | 5.00 |
0-E | Milotur S.A. | Uruguay | 0-E | Banco Itaú | Uruguay | UI | 110,633 | 326,783 | 437,416 | Monthly | 4.80 |
Sub-Total |
|
|
|
|
|
| 3,878,856 | 34,281,322 | 38,160,178 |
|
|
Financial leases obligations |
|
|
|
|
|
|
|
|
|
| |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Supervielle | Argentina | ARS | 797 | 2,391 | 3,188 | Monthly | 17.00 |
90,413,000-1 | Compañía Cervecerías Unidas S.A. | Chile | 99,012,000-5 | Consorcio Nacional de Seguros S.A. | Chile | UF | 87,629 | 267,426 | 355,055 | Monthly | 3.95 |
76,077,848-6 | Cervecera Belga de la Patagonia S.A. | Chile | 97,015,000-5 | Banco Santander | Chile | UF | 2,090 | 5,639 | 7,729 | Monthly | 6.27 |
Sub-Total |
|
|
|
|
| 90,516 | 275,456 | 365,972 |
|
|
(1) This obligation is hedged by a Cross Currency Interest Rate Swap agreement(Note 67 – Financial instruments).
(2) (*) SeeNote 5 – Risk administration non-discounted contractual cash flows.
|
|
|
|
|
|
| Maturity (*) |
|
|
| |
Debtor Tax ID | Company | Debtor country | Registration | ID No. Instrument | Creditor country | Currency | 0 to 3 months | 3 months to 1 year | Total | Type of amortization | Interest Rate |
|
|
|
|
|
|
| ThCh$ | ThCh$ | ThCh$ |
| (%) |
Bonds payable |
|
|
|
|
|
|
|
|
|
| |
90,413,000-1 | Compañía Cervecerías Unidas S.A. (1) | Chile | Bond H | 573 03/23/2009 | Chile | UF | 665,357 | 2,486,177 | 3,151,534 | Semiannual | 4.25 |
90,413,000-1 | Compañía Cervecerías Unidas S.A. | Chile | Bond J | 898 28/06/2018 | Chile | UF | 929,641 | - | 929,641 | Semiannual | 2.90 |
Sub-Total |
|
|
|
|
| 1,594,998 | 2,486,177 | 4,081,175 |
|
|
(1)This obligation is hedged by a Cross Currency Interest Rate Swap agreement(Note 7 – Financial instruments).
(*) SeeNote 65 – Risk administration non-discounted contractual cash flows.
F-).92
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
As of December 31, 2017:
|
|
|
|
|
|
| Maturity (*) |
|
|
| |
Debtor Tax ID | Company | Debtor country | Lending party Tax ID | Creditor name | Creditor country | Currency | 0 to 3 months | 3 months to 1 year | Total | Type of amortization | Interest Rate |
|
|
|
|
|
|
| ThCh$ | ThCh$ | ThCh$ |
| (%) |
Bank borrowings |
|
|
|
|
|
|
|
|
|
| |
91,041,000-8 | Viña San Pedro Tarapacá S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | USD | - | 4,961,271 | 4,961,271 | At maturity | 1.75 |
91,041,000-8 | Viña San Pedro Tarapacá S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | UF | 58,809 | - | 58,809 | At maturity | 2.70 |
91,041,000-8 | Viña San Pedro Tarapacá S.A. (1) | Chile | 97,018,000-1 | Scotiabank Chile | Chile | USD | 4,238 | 4,839,005 | 4,843,243 | At maturity | 2.42 |
91,413,000-1 | Compañía Cervecerías Unidas S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | - | 324,308 | 324,308 | At maturity | 4.56 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | UF | 17,425 | 29,507 | 46,932 | Monthly | 4.80 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | UF | 9,956 | 30,704 | 40,660 | Monthly | 5.48 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 13,500 | 40,500 | 54,000 | Monthly | 6.00 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 12,667 | - | 12,667 | Monthly | 7.59 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 19,170 | 42,000 | 61,170 | Monthly | 5.88 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 22,500 | 67,500 | 90,000 | Monthly | 5.76 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 37,500 | - | 37,500 | Monthly | 5.40 |
96,711,590-8 | Manantial S.A. | Chile | 76,645,030-K | Banco Itaú Corpbanca | Chile | CLP | 8,641 | 26,677 | 35,318 | Monthly | 6.12 |
96,711,590-8 | Manantial S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | 20,028 | 61,526 | 81,554 | Monthly | 5.02 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 16,667 | 49,999 | 66,666 | Monthly | 4.44 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 20,834 | 62,500 | 83,334 | Monthly | 4.42 |
96,711,590-8 | Manantial S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | 69,530 | 213,527 | 283,057 | Monthly | 4.92 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 41,700 | 125,100 | 166,800 | Monthly | 4.92 |
96,711,590-8 | Manantial S.A. | Chile | 76,645,030-K | Banco Itaú Corpbanca | Chile | CLP | 38,678 | 86,121 | 124,799 | Monthly | 4.73 |
96,711,590-8 | Manantial S.A. | Chile | 76,645,030-K | Banco Itaú Corpbanca | Chile | CLP | 35,966 | 110,127 | 146,093 | Monthly | 4.42 |
99,586,280-8 | Compañía Pisquera de Chile S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | 326,560 | - | 326,560 | At maturity | 4.68 |
96,981,310-6 | Cervecería Kunstmann S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | - | 2,021,408 | 2,021,408 | At maturity | 5.35 |
96,981,310-6 | Cervecería Kunstmann S.A. | Chile | 97,018,000-1 | Scotiabank Chile | Chile | CLP | 16,600 | - | 16,600 | At maturity | 4.50 |
96,981,310-6 | Cervecería Kunstmann S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 6,708 | - | 6,708 | At maturity | 4.68 |
96,981,310-6 | Cervecería Kunstmann S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | 200,248 | 614,849 | 815,097 | Monthly | 5.02 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco de la Nación Argentina | Argentina | ARS | 300,889 | 561,283 | 862,172 | Monthly | 26.63 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco de la Nación Argentina | Argentina | ARS | 80,679 | 26,371 | 107,050 | Monthly | 27.81 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco Galicia | Argentina | ARS | 925,670 | 1,594,645 | 2,520,315 | Quarterly | 23.00 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco de la Nación Argentina | Argentina | ARS | 3,944 | 1,975,917 | 1,979,861 | At maturity | 20.00 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Superville | Argentina | USD | - | 185,739 | 185,739 | At maturity | 2.50 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Santander Río | Argentina | USD | 184,728 | - | 184,728 | At maturity | 5.00 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Macro | Argentina | USD | - | 185,339 | 185,339 | At maturity | 2.70 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Macro | Argentina | USD | - | 184,652 | 184,652 | At maturity | 2.50 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Patagonia | Argentina | USD | 185,018 | - | 185,018 | At maturity | 2.55 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Patagonia | Argentina | USD | - | 215,408 | 215,408 | At maturity | 3.20 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Patagonia | Argentina | ARS | 399,014 | - | 399,014 | At maturity | 31.77 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Patagonia | Argentina | ARS | 292,589 | - | 292,589 | At maturity | 31.50 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Patagonia | Argentina | ARS | 250,005 | - | 250,005 | At maturity | 31.50 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco San Juan | Argentina | ARS | - | 67,356 | 67,356 | Quarterly | 25.50 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco San Juan | Argentina | ARS | - | 674,403 | 674,403 | Quarterly | 27.00 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco San Juan | Argentina | ARS | - | 66,398 | 66,398 | Quarterly | 26.00 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Comafi | Argentina | ARS | 368,143 | - | 368,143 | At maturity | 24.50 |
0-E | Finca La Celia S.A. | Argentina | 0-E | BBVA | Argentina | ARS | 498,676 | - | 498,676 | At maturity | 32.00 |
0-E | Milotur S.A. | Uruguay | 0-E | Banco Itaú | Uruguay | UI | 403,857 | 288,469 | 692,326 | Monthly | 6.00 |
Sub-Total |
|
|
|
|
| 4,891,137 | 19,732,609 | 24,623,746 |
|
| |
Financial leases obligations |
|
|
|
|
|
|
|
|
|
| |
76,077,848-6 | Cervecera Belga de la Patagonia S.A. | Chile | 97,015,000-5 | Banco Santander | Chile | UF | 6,231 | - | 6,231 | Monthly | 6.27 |
90,413,000-1 | Compañía Cervecerías Unidas S.A. | Chile | 99,012,000-5 | Consorcio Nacional de Seguros S.A. | Chile | UF | 14,986 | 47,281 | 62,267 | Monthly | 7.07 |
96,981,310-6 | Cervecería Kunstmann S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | UF | 26,989 | 73,384 | 100,373 | Monthly | 4.33 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Supervielle | Argentina | ARS | 577 | - | 577 | Monthly | 17.50 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Supervielle | Argentina | ARS | 419 | 406 | 825 | Monthly | 17.50 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Supervielle | Argentina | ARS | 1,561 | 4,752 | 6,313 | Monthly | 17.00 |
Sub-Total |
|
|
|
|
| 50,763 | 125,823 | 176,586 |
|
|
(1) This obligation is hedged by a Cross Currency Interest Rate Swap agreement(Note 7 – Financial instruments).
(*) SeeNote 5 – Risk administration non-discounted contractual cash flows.
|
|
|
|
|
|
| Maturity (*) |
|
|
| |
Debtor Tax ID | Company | Debtor country | Registration | ID No. Instrument | Creditor country | Currency | 0 to 3 months | 3 months to 1 year | Total | Type of amortization | Interest Rate |
|
|
|
|
|
|
| ThCh$ | ThCh$ | ThCh$ |
| (%) |
Bonds payable |
|
|
|
|
|
|
|
|
|
| |
90,413,000-1 | Compañía Cervecerías Unidas S.A. | Chile | Bond E | 388 10/18/2004 | Chile | UF | 41,232 | 2,617,308 | 2,658,540 | Semiannual | 4.00 |
90,413,000-1 | Compañía Cervecerías Unidas S.A. (1) | Chile | Bond H | 573 03/23/2009 | Chile | UF | 647,595 | - | 647,595 | Semiannual | 4.25 |
Sub-Total |
|
|
|
|
| 688,827 | 2,617,308 | 3,306,135 |
|
|
(1)This obligation is hedged by a Cross Currency Interest Rate Swap agreement(Note 7 – Financial instruments).
(*) SeeNote 5 – Risk administration non-discounted contractual cash flows.
F-93
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Non-current loan and financial obligation
As ofDecember 31, 2018:
|
|
|
|
|
|
| Maturity (*) |
|
|
| ||
Debtor Tax ID | Company | Debtor country | Lending party Tax ID | Creditor name | Creditor country | Currency | Over 1 year to 3 years | Over 3 years to 5 years | Over 5 years | Total | Type of amortization | Interest Rate |
|
|
|
|
|
|
| ThCh$ | ThCh$ | ThCh$ | ThCh$ |
| (%) |
Bank borrowings |
|
|
|
|
|
|
|
|
|
|
| |
76,035,409-0 | Cervecera Guayacán SpA. | Chile | 76,645,030-K | Banco Itaú Corpbanca | Chile | CLP | 10,049 | 11,077 | 43,764 | 64,890 | Monthly | 4.87 |
91,041,000-8 | Viña San Pedro Tarapacá S.A. (1) | Chile | 97,018,000-1 | Scotiabank Chile | Chile | USD | 8,059,332 | - | - | 8,059,332 | At maturity | 3.38 |
91,413,000-1 | Compañía Cervecerías Unidas S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | - | 39,826,440 | - | 39,826,440 | At maturity | 4.56 |
99,586,280-8 | Compañía Pisquera de Chile S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | - | 16,000,000 | - | 16,000,000 | At maturity | 4.68 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 18,000 | - | - | 18,000 | Monthly | 6.00 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 22,500 | - | - | 22,500 | Monthly | 5.76 |
96,711,590-8 | Manantial S.A. | Chile | 76,645,030-K | Banco Itaú Corpbanca | Chile | CLP | 13,048 | - | - | 13,048 | Monthly | 6.12 |
96,711,590-8 | Manantial S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | 52,210 | - | - | 52,210 | Monthly | 5.02 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 27,780 | - | - | 27,780 | Monthly | 4.44 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 48,610 | - | - | 48,610 | Monthly | 4.42 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 41,300 | - | - | 41,300 | Monthly | 4.92 |
96,711,590-8 | Manantial S.A. | Chile | 76,645,030-K | Banco Itaú Corpbanca | Chile | CLP | 51,671 | - | - | 51,671 | Monthly | 4.73 |
96,711,590-8 | Manantial S.A. | Chile | 76,645,030-K | Banco Itaú Corpbanca | Chile | CLP | 92,344 | - | - | 92,344 | Monthly | 4.42 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 114,800 | - | - | 114,800 | Monthly | 5.16 |
96,981,310-6 | Cervecería Kunstmann S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 2,000,000 | - | - | 2,000,000 | At maturity | 4.92 |
96,981,310-6 | Cervecería Kunstmann S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 400,000 | - | - | 400,000 | At maturity | 4.56 |
96,981,310-6 | Cervecería Kunstmann S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | 520,654 | - | - | 520,654 | Monthly | 5.02 |
0-E | Bebidas Bolivianas BBO S.A. | Bolivia | 0-E | Banco Mercantil Santa Cruz S.A. | Bolivia | BOB | 1,743,952 | 1,743,952 | 3,487,900 | 6,975,804 | Quarterly | 5.00 |
0-E | Milotur S.A. | Uruguay | 0-E | Banco Itaú | Uruguay | UI | 871,421 | - | - | 871,421 | Monthly | 4.80 |
Sub-Total |
|
|
|
|
| 14,087,671 | 57,581,469 | 3,531,664 | 75,200,804 |
|
| |
Financial leases obligations |
|
|
|
|
|
|
|
|
|
|
| |
90,413,000-1 | Compañía Cervecerías Unidas S.A. | Chile | 99,012,000-5 | Consorcio Nacional de Seguros S.A. | Chile | UF | 747,756 | 801,372 | 15,995,307 | 17,544,435 | Monthly | 3.95 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Supervielle | Argentina | ARS | 1,727 | - | - | 1,727 | Monthly | 17.00 |
Sub-Total |
|
|
|
|
| 749,483 | 801,372 | 15,995,307 | 17,546,162 |
|
|
(1)This obligation is hedged by a Cross Currency Interest Rate Swap agreement(Note 7 – Financial instruments).
(*) SeeNote 5 – Risk administration non-discounted contractual cash flows.
|
|
|
|
|
|
| Maturity (*) |
|
|
| ||
Debtor Tax ID | Company | Debtor country | Registration | ID No. Instrument | Creditor country | Currency | Over 1 year to 3 years | Over 3 years to 5 years | Over 5 years | Total | Type of amortization | Interest Rate |
|
|
|
|
|
|
| ThCh$ | ThCh$ | ThCh$ | ThCh$ |
| (%) |
Bonds payable |
|
|
|
|
|
|
|
|
|
|
| |
90,413,000-1 | Compañía Cervecerías Unidas S.A. (1) | Chile | Bond H | 573 03/23/2009 | Chile | UF | 9,976,415 | 9,984,905 | 32,519,081 | 52,480,401 | Semiannual | 4.25 |
90,413,000-1 | Compañía Cervecerías Unidas S.A. | Chile | Bond J | 898 06/28/2018 | Chile | UF | - | - | 82,800,902 | 82,800,902 | Semiannual | 2.90 |
Sub-Total |
|
|
|
|
| 9,976,415 | 9,984,905 | 115,319,983 | 135,281,303 |
|
|
(1)This obligation is hedged by a Cross Currency Interest Rate Swap agreement(Note 7 – Financial instruments).
(*) SeeNote 5 – Risk administration non-discounted contractual cash flows.
As of December 31, 2017:
|
|
|
|
|
|
| Maturity (*) |
|
|
| ||
Debtor Tax ID | Company | Debtor country | Lending party Tax ID | Creditor name | Creditor country | Currency | Over 1 year to 3 years | Over 3 years to 5 years | Over 5 years | Total | Type of amortization | Interest Rate |
|
|
|
|
|
|
| ThCh$ | ThCh$ | ThCh$ | ThCh$ |
| (%) |
Bank borrowings |
|
|
|
|
|
|
|
|
|
|
| |
91,041,000-8 | Viña San Pedro Tarapacá S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | UF | 10,183,293 | - | - | 10,183,293 | At maturity | 2.70 |
91,413,000-1 | Compañía Cervecerías Unidas S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | - | 39,750,482 | - | 39,750,482 | At maturity | 4.56 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | UF | 17,624 | - | - | 17,624 | Monthly | 5.48 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 72,000 | - | - | 72,000 | Monthly | 6.00 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 32,667 | - | - | 32,667 | Monthly | 5.88 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 112,500 | - | - | 112,500 | Monthly | 5.76 |
96,711,590-8 | Manantial S.A. | Chile | 76,645,030-K | Banco Itaú Corpbanca | Chile | CLP | 50,621 | - | - | 50,621 | Monthly | 6.12 |
96,711,590-8 | Manantial S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | 138,116 | - | - | 138,116 | Monthly | 5.02 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 94,445 | - | - | 94,445 | Monthly | 4.44 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 131,944 | - | - | 131,944 | Monthly | 4.42 |
96,711,590-8 | Manantial S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | 297,505 | - | - | 297,505 | Monthly | 4.92 |
96,711,590-8 | Manantial S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 208,100 | - | - | 208,100 | Monthly | 4.92 |
96,711,590-8 | Manantial S.A. | Chile | 76,645,030-K | Banco Itaú Corpbanca | Chile | CLP | 171,638 | - | - | 171,638 | Monthly | 4.73 |
96,711,590-8 | Manantial S.A. | Chile | 76,645,030-K | Banco Itaú Corpbanca | Chile | CLP | 245,098 | - | - | 245,098 | Monthly | 4.42 |
96,981,310-6 | Cervecería Kunstmann S.A. | Chile | 97,018,000-1 | Scotiabank Chile | Chile | CLP | 2,000,000 | - | - | 2,000,000 | At maturity | 4.50 |
96,981,310-6 | Cervecería Kunstmann S.A. | Chile | 97,004,000-5 | Banco de Chile | Chile | CLP | 400,000 | - | - | 400,000 | At maturity | 4.68 |
96,981,310-6 | Cervecería Kunstmann S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | 1,378,183 | - | - | 1,378,183 | Monthly | 5.02 |
99,586,280-8 | Compañía Pisquera de Chile S.A. | Chile | 97,030,000-7 | Banco del Estado de Chile | Chile | CLP | - | 16,000,000 | - | 16,000,000 | At maturity | 4.68 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco de la Nación Argentina | Argentina | ARS | 748,377 | - | - | 748,377 | Monthly | 26.63 |
0-E | Compañía Industrial Cervecera S.A. | Argentina | 0-E | Banco Galicia | Argentina | ARS | 1,854,238 | - | - | 1,854,238 | Quarterly | 23.00 |
Sub-Total |
|
|
|
|
| 18,136,349 | 55,750,482 | - | 73,886,831 |
|
| |
Financial leases obligations |
|
|
|
|
|
|
|
|
|
|
| |
76,077,848-6 | Cervecera Belga de la Patagonia S.A. | Chile | 97,015,000-5 | Banco Santander | Chile | UF | - | 6,991 | - | 6,991 | Monthly | 6.27 |
90,413,000-1 | Compañía Cervecerías Unidas S.A. | Chile | 99,012,000-5 | Consorcio Nacional de Seguros S.A. | Chile | UF | 136,371 | 156,348 | 17,329,787 | 17,622,506 | Monthly | 7.07 |
0-E | Finca La Celia S.A. | Argentina | 0-E | Banco Supervielle | Argentina | ARS | 8,792 | - | - | 8,792 | Monthly | 17.00 |
Sub-Total |
|
|
|
|
| 145,163 | 163,339 | 17,329,787 | 17,638,289 |
|
|
(*) SeeNote 5 non-discounted contractual cash flows.
F-94
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
|
|
|
|
|
|
| Maturity (*) |
|
|
| ||
Debtor Tax ID | Company | Debtor country | Registration | ID No. Instrument | Creditor country | Currency | Over 1 year to 3 years | Over 3 years to 5 years | Over 5 years | Total | Type of amortization | Interest Rate |
|
|
|
|
|
|
| ThCh$ | ThCh$ | ThCh$ | ThCh$ |
| (%) |
Bonds payable |
|
|
|
|
|
|
|
|
|
|
| |
90,413,000-1 | Compañía Cervecerías Unidas S.A. | Chile | Bond E | 388 10/18/2004 | Chile | UF | 5,327,846 | 5,359,626 | 5,359,627 | 16,047,099 | Semiannual | 4.00 |
90,413,000-1 | Compañía Cervecerías Unidas S.A. (1) | Chile | Bond H | 573 03/23/2009 | Chile | UF | 7,258,889 | 9,702,632 | 36,467,992 | 53,429,513 | Semiannual | 4.25 |
Sub-Total |
|
|
|
|
| 12,586,735 | 15,062,258 | 41,827,619 | 69,476,612 |
|
|
(1)This obligation is hedged by a Cross Currency Interest Rate Swap agreement(Note 7 – Financial instruments).
(*) SeeNote 5 – Risk administration non-discounted contractual cash flows.
Details of the fair value of bank borrowings, financial leases obligations and bonds payable are described inNote 67.
The effective interest rates of bond obligations are as follows:
Bonds Serie A 3.96%
Bonds Serie E 4.52%
Bonds Serie H 4.26%
Bonds Serie I 3.18%
Bonds Serie E | 4.51% |
Bonds Serie H | 4.27% |
Bonds Serie J | 2.89% |
The debtsDebts and financial liabilities are stated in several currencies and they accrue fixed and variable interest rates. The details of suchThese obligations classified as perby currency and interest type (excluding the effect of cross currency interest rate swap agreements) are detailed as follows:
| As of December 31, 2015 | As of December 31, 2014 | As of December 31, 2018 | As of December 31, 2017 | ||||
| Fixed Interest Rate | Variable Interest Rate | Fixed Interest Rate | Variable Interest Rate | Fixed Interest Rate | Variable Interest Rate | Fixed Interest Rate | Variable Interest Rate |
| ThCh$ | ThCh$ | ThCh$ | ThCh$ | ||||
US Dollar | 686,276 | 15,940,220 | 1,557,305 | 13,690,987 | 17,333,622 | 8,070,339 | 6,102,155 | 4,843,243 |
Chilean Pesos | 25,840,175 | - | 21,537,298 | - | 65,221,552 | - | 65,836,938 | - |
Argentine Pesos | 17,146,915 | 4,266,388 | 42,866,462 | - | ||||
Argentinean Pesos | 3,357,467 | 505,919 | 8,987,505 | 1,717,599 | ||||
Unidades de Fomento | 102,191,574 | - | 101,169,041 | - | 167,823,319 | - | 100,928,433 | - |
Euros | - | - | 4,590,673 | - | ||||
Uruguayan Pesos | - | - | 1,740,967 | - | ||||
UYI | 2,046,650 | - | - | - | ||||
UI | 1,308,837 | - | 692,326 | - | ||||
Total | 147,911,590 | 20,206,608 | 173,461,746 | 13,690,987 | 262,059,336 | 8,576,258 | 182,547,357 | 6,560,842 |
The terms and conditions of the main interest accruing obligations as of December 31, 2015, were2018, are detailed as follows:
A) Bank Borrowings
Banco Estado – Bank Loans
a) | OnJuly 27, 2012, the subsidiary Compañía Pisquera Chile S.A. (CPCh) signed a bank loan with the Banco del Estado de Chile for a total of ThCh$ 16,000,000, for a period of 5 years, with maturity on July 27, 2017. |
a) On July 27, 2012, the subsidiary Compañía Pisquera Chile S.A. (CPCh) signed a bank loan with the Banco Estado for a total of ThCh$ 16,000,000, for a period of 5 years, with maturity on July 27, 2017.
This loan accrues interest at an annual fixed rate of 6.86% and an effective rate of 7.17%. The Company amortized interest semi-annually, and the capital amortization consists of a single payment at the end of the established term. |
On July 27, 2017 this loan was renewed for 5 years, with maturity on July 27, 2022. This loan accrues interest at an annual fixed rate of 4.68%. The Company amortized interest semi-annually, and the capital amortization consists of a single payment at the end of the established term |
This obligation is subject to certain reporting obligations in addition to complying with the following financial ratios,which will be measured on the half-yearly financial statements of CPCh: |
- | Maintain a Financial Expense Coverage not less than 3, calculated as the relationship between Gross Margin less Marketing costs, Distribution and Administration expenses, plus Other income by function, less Other expenses by function, plus Depreciation and Amortization, divided by Financial costs. |
- | Maintain a debt ratio of no more than 3, measured as Total liabilities divided by Equity. |
- | Maintain an Equity higher than UF 770,000. |
This loan accrues interest at an annual fixed rate of 6.86% and an effective rate of 7.17%. The Company amortizes interest semi-annually, and the capital amortization consists of a single payment at the end of the established term.
This obligation is subject to certain reporting obligations in addition to complying with the following financial ratios,F-which will be measured on the half-yearly financial statements of CPCh:95
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
(a)Maintain a Financial Expense Coverage not less than 3, calculated as the relationship between Gross Margin less Marketing costs, Distribution and Administration expenses, plus Other income by function, less Other expenses by function, plus Depreciation and Amortization, divided by Financial costs.
(b)Maintain a debt ratio of no more than 2.5, measured as Total liabilities divided by Equity.
(c)Maintain an Equity higher than UF 770,000.
In addition, this loan obliges CPCh to comply with certain restrictions of affirmative nature, including maintaining insurance, maintaining the ownership of essential assets, and also to comply with certain restrictions, such as not to pledge, mortgage or grant any kind of encumbrance or real right over any fixed asset with an individual accounting value higher than UF 10,000, except under the terms established by the agreement, among other.
As of December 31, 2015,2018, the Company was in compliance with the financial covenants and specific requirements of this loan.
b)
|
b) On April 25, 2012, the subsidiary CompañíCervecería Cervecera Kunstmann S.A. signed a bank loan with Banco del Estado de Chile for a total of ThCh$ 500,000, at a fixed interest rate; maturing on April 25, 2013. 2013, the date on which it was renewed, maturing on April 25, 2014.
The subsidiary amortizes interest and capital in a single payment at the end of the established term.
Subsequently this loan was renewed for one year, maturing on April 25, 2014. It was renewed for one year, maturing on April 25, 2015. Subsequently this loan was renewed for one year, maturing on April 27, 2016.
This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization consists of a single payment at the end of the established term.
On April 25, 2014 it27, 2016, this loan was renewed for one year, maturing on April 25, 2015.paid.
On April 24, 2015 it was renewed for one year, maturing on April 27, 2016.
c)On April 25, 2013, the subsidiary CompañíCervecería Cervecera Kunstmann S.A. signed a bank loan with Banco del Estado de Chile for a total of ThCh$ 600,000, at a fixed interest rate; maturing on April 25, 2014.
The subsidiary amortizes interest and capital in a single payment at the end of the established term.
It was renewed for one year, maturing on April 25, 2015. Subsequently this loan was renewed for one year, maturing on April 27, 2016.
This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization consists of a single payment at the end of the established term.
On April 25, 2014 it was renewed for one year, maturing on April 25, 2015.
On April 24, 2015 it was renewed for one year, maturing on April 27, 2016.
d)On April 23, 2012, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Estado for a total of ThCh$ 3,000,000, maturing on July 19, 2012.
On July 19, 2012 the previous loan was renewed for a period of 71 days, maturing on September 28, 2012. Subsequently, on the same time this loan was renewed for a period of 84 days, maturing on December 21, 2012. On December 21, 2012, this loan was renewed for 60 days, maturing on February 19, 2013, renewed again for 94 days, maturing on May 24, 2013.
This loan accrued interest at an annual rate. The subsidiary amortized interest and capital amortization consists of a single payment at the end of the established term.
On May 24, 2013, this loan was paid.
e) On July 19, 2012, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Estado for a total of ThCh$ 1,000,000, maturing on September 28, 2012. Subsequently this loan was renewed for a period of 84 days, maturing on December 21, 2012. It was renewed for 60 days, maturing in February 19, 2013, renewed again for 94 days, maturing on May 24, 2013.
This loan accrued a fixed interest at an annual rate. The subsidiary amortized interest and capital amortization consists of a single payment at the end of the established term.
On May 24, 2013, this loan was paid.
f) On June 16, 2014, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Estado for a total of 6,200,000 euros, maturing on June 16, 2015.
This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization consists of a single payment at the end of the established term.
On June 17, 2015, payment of the loan was made.
g)On October 15, 2014, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Estado for a total of UF 380,000, maturing on October 15, 2019.
This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest semi-annually and capital amortization consists of a single payment at the end of the established term.
h)On December 3, 2014, the subsidiary Compañía Cervecera Kunstmann S.A. signed a bank loan with Banco Estado for a total of ThCh$ 1,300,000, maturing on March 31, 2015.
This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization consists of a single payment at the end of the established term.
On May 29, 2015 theApril 27, 2016, this loan was renewed for a term of 3 months, maturing on July 28, 2015.paid.
d) On July 17, 2015, payment of the loan was made.
Banco de Chile – Bank Loans
a) On July 11, 2011,October 15, 2014, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco del Estado de Chile for a total of US$ 4,436,100,UF 380,000, maturing on July 11, 2016.October 15, 2019.
This loan accrues interest at a compound floating rate Libor plus 180 days plus a fixed margin. The subsidiary amortizes interest semi-annually, and capital amortization consists of a single payment at the end of the established term.
This debt was changed to Euros and a fixed interest rate through a currency US$-Euro and interest rate swap agreements (Cross Currency Interest Rate Swap). For details of the Company`s hedge strategies seeNote 5 and 6.
b) On July 7, 2011, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco de Chile for a total of US$ 10,000,000, maturing on July 7, 2016.
This loan accrues interest at a compound floating rate Libor plus 180 days plus a fixed margin. The subsidiary amortizes interest semi-annually, and capital amortization consists of a single payment at the end of the established term.
The interest rate risk to which the subsidiary is exposed as result of this loan is mitigated by the use of cross interest rate swap agreements (interest rate fixed). For details of the Company`s hedge strategies seeNote 5 and6.
|
The aforementioned loans oblige the Company to comply with the same covenants as the Series A Bond as indicated in letter D)Restrictions in this Note.
c) On April 24, 2014, the subsidiary Compañía Cervecera Kunstmann S.A. signed a bank loan with Banco de Chile for a total of ThCh$ 1,000,000, maturing on April 24, 2015.
This loan accrued interest at an annual rate. The subsidiary amortizes interest and capital consists of a single payment at the end of the established term.
On April 24, 2015 the loan was renewed for a term of 1 year, maturing on April 21, 2016.
d) On April 24, 2015, the subsidiary Compañía Cervecera Kunstmann SA He signed a bank loan with Banco de Chile for a total of ThCh$ 600,000 for a period of three months expiring on July 24, 2015.
This loan bears interest at a fixed interest rate. The subsidiary pays the interest and principal in a single payment at the end of the deadline.
On July 24, 2015, payment of the loan was made.
Banco Scotiabank – Bank Loans
a) On June 21, 2012, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Scotiabank for a total of US$ 3,897,940, maturing on June 20, 2013.
This loan accrued interest at a compound floating rate Libor plus 180 days plus a fixed margin. The subsidiary amortized interest quarterly and capital amortization consists of a single payment at the end of the established term.
This debt was changed to Euros and a fixed interest rate through a currency US$-Euro and interest rate swap agreements (Cross Currency Interest Rate Swap). For details of the Company`s hedge strategies seeNote 5 and 6.
On June 20, 2013, this loan was paid.
b) On June 21, 2012, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Scotiabank for a total of US$ 11,000,000, maturing on June 21, 2013.
This loan accrued interest at a compound floating rate Libor plus 180 days plus a fixed margin. The subsidiary amortized interest semi-annually and capital amortization consists of a single payment at the end of the established term.
On June 21, 2013, this loan was paid.
c) On June 21, 2013, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Scotiabank for a total of US$ 8,000,000, maturing on June 22, 2015.
This loan accrues interest at a compound floating rate Libor plus 90 days plus a fixed margin. The subsidiary amortizes interest quarterly and capital amortization consists of a single payment at the end of the established term.
The interest rate risk to which the subsidiary is exposed as result of this loan is mitigated by the use of cross interest rate swap agreements (interest rate fixed). For details of the Company`s hedge strategies seeNote 5 and 6.
On June 22, 2015, payment of the loan was made.
d) On September 4, 2014, the subsidiary Compañía Cervecera Kunstmann S.A. signed a bank loan with Banco Scotiabank for a total of US$ 638,674, maturing on September 4, 2016.
This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest semi-annually and capital amortization consists of a single payment at the end of the established term.
e)On July 15, 2015, the subsidiary Cervecería Kunstmann S.A. signed a bank loan with Banco del Estado de Chile for a total of ThCh$ 4,000,000, at a fixed interest rate maturing on July 14, 2020.
The subsidiary amortizes interest and capital monthly until the end of the established term.
This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization consists of a single payment at the end of the established term.
f)On May 26, 2016, the subsidiary Aguas CCU-Nestlé Chile S.A. signed a bank loan with Banco del Estado de Chile for a total of ThCh$ 5,300,000, at a fixed interest rate, maturing on November 22, 2016.
The subsidiary amortizes interest and capital of a single payment at the end of the established term.
On November 22, 2016,this loan was paid.
F-96
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
eg)On April 13, 2017, Compañía Cervecerías Unidas S.A. signed a bank loan with Banco del Estado de Chile for a total of ThCh$ 40,000,000, at a fixed interest rate, maturing on April 13, 2022.
The Company amortizes interest semi-annually, and the capital amortization consists in a single payment at the end of the established term.
This obligation is subject to certain reporting obligations in addition to complying with the following financial ratios:
a.Maintain at the end of each semester an indebtedness ratio measured over the consolidated financial statements not higher than 1.5, defined as the ratio of Total Adjusted Liabilities and Total Adjusted Equity. The Total Adjusted Liabilities are defined as Total Consolidated Liabilities less Dividends provisioned, according to policy included in the Statement of Changes in Equity, plus the amount of all guarantees issued by the Company and its subsidiaries that are cautioned by real guarantees, except as noted in the contract. Total Adjusted Equity is defined as Total Equity plus Dividends provisioned account, according to policy included in the Statement of Changes in Equity.
b.Maintain a Financial Expense Coverage measured at the end of each semester and retroactively for periods of 12 months, not less than 3, calculated as the ratio of Adjusted ORBDA1 and Finance Costs account. Adjusted ORBDA means ORBDA as calculated by the Company in accordance with particular debt instruments in order to measure such instruments’ financial covenants and is defined as: (i) the sum of Gross Margin and Other income by function accounts; (ii) less (absolute numbers) Distribution costs, Administrative expenses and Other expenses by function accounts; and (iii) plus (absolute numbers) Depreciation and Amortization recorded on the Note Nature of the costs and expenses.
c.Maintain at the end of each semester, assets free of liens for an amount equal to at least 1.2, defined as the ratio of Total Assets free of lien and Finance Debt free of lien. Total Assets free of lien are defined as Total Assets less assets pledged as collateral for cautioned obligations of third parties. Finance Debt free of lien are defined as the sum of Bank loan, Bonds payable and Lease obligations contained under Note Other financial liabilities.
d.Maintain at the end of each semester a minimum equity of ThCh$ 312,516,750, meaning Equity Attributable to Equity Holders of the Parent plus the Dividends provisioned account, according to policy included in the Statement of Changes in Equity.
e.To maintain, either directly or indirectly, ownership over more than 50% of the subscribed and paid-up shares and over the voting rights of the following companies: Cervecera CCU Chile Ltda. and Embotelladoras Chilenas Unidas S.A.
f.Maintain a nominal installed capacity for the production manufacturing of beer and soft drinks, equal or higher altogether than 15.9 million hectolitres a year.
g.To maintain, either directly or through a subsidiary, ownership of the trademark "CRISTAL", denominative for beer class 32 of the international classifier, and not to transfer its use, except to its subsidiaries.
As of December 31, 2018, the Company was in compliance with the financial covenants required for this loan.
h)On July 3, 2017, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco del Estado de Chile for a total of US$ 8,000,000, at a fixed interest rate, maturing on July 3, 2018.
The subsidiary amortizes interest monthly, and capital amortization consists in a single payment at the end of the established term.
On July 3, 2018,this loan was paid.
i)On April 23, 2018, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco del Estado de Chile for a total of US$ 8,000,000, at a fixed interest rate, maturing on April 23, 2019.
The subsidiary amortizes interest and capital amortization consists in a single payment at the end of the established term.
1) ORBDA, for the Company purposes, is defined as Adjusted Operating Result before Depreciation and Amortization.
F97
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
j)On April 17, 2018, the subsidiary Cervecería Kunstmann S.A. signed a bank loan with Banco del Estado de Chile for a total of ThCh$ 1,000,000, at a fixed interest rate, maturing on April 17, 2019.
The subsidiary amortizes interest and capital amortization consists in a single payment at the end of the established term.
k)On April 26, 2018, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco del Estado de Chile for a total of ThCh$ 3,500,000, at a fixed interest rate, maturing on May 25, 2018.
On May 25, 2018 the loan was renewed, maturing on July 3, 2018.
The subsidiary amortizes interest and capital amortization consists in a single payment at the end of the established term.
On July 3, 2018,this loan was paid.
Banco de Chile – Bank Loans
a) | On July 11, 2011, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco de Chile for a total of US$ 4,436,100. It accrues interest at a compound floating rate Libor at 180 days plus a fixed margin, maturing on July 11, 2016. |
The subsidiary amortizes interest semi-annually, and capital amortization consists of a single payment at the end of the established term. |
This debt was changed to Euros and a fixed interest rate through a currency US$-Euro and interest rate swap agreements (Cross Currency Interest Rate Swap). For details of the Company`s hedge strategies seeNote 5 – Risk administrationandNote 7 – Financial instruments. |
On July 11, 2016,this loan was paid. |
b) | On July 7, 2011, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco de Chile for a total of US$ 10,000,000. It accrues interest at a compound floating rate Libor at 180 days plus a fixed margin, maturing on July 7, 2016. |
The subsidiary amortizes interest semi-annually, and capital amortization consists of a single payment at the end of the established term. |
The interest rate risk to which the subsidiary is exposed as result of this loan is mitigated by the use of cross interest rate swap agreements (interest rate fixed). For details of the Company`s hedge strategies seeNote 5 – Risk administrationandNote 7 – Financial instruments. |
On July 7, 2016,this loan was paid. |
c) | On July 7, 2016, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco de Chile for a total of ThCh$ 7,271,000, at a fixed interest rate, maturing on July 3, 2017. |
The subsidiary amortizes interest and capital consists in a single payment at the end of the established term. |
This debt was changed to US$ and a fixed interest rate through a currency CLP-US$ and interest rate swap agreements (Cross Currency Interest Rate Swap). For details of the Company`s hedge strategies seeNote 5 – Risk administrationandNote 7 – Financial instruments. |
On July 3, 2017,this loan was paid. |
d) | On April 24, 2014, the subsidiary Cervecería Kunstmann S.A. signed a bank loan with Banco de Chile for a total of ThCh$ 1,000,000, at a fixed interest rate, maturing on April 24, 2015. |
F-98
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
The subsidiary amortizes interest and capital consists in a single payment at the end of the established term. |
On April 24, 2015 the loan was renewed for a term of 1 year, maturing on April 21, 2016. |
On April 22, 2016,this loan was paid. |
e) | On April 20, 2016, the subsidiary Cervecería Kunstmann S.A. signed a bank loan with Banco de Chile for a total of ThCh$ 2,000,000, at a fixed interest rate, maturing on April 20, 2018. |
The subsidiary amortizes interest and capital consists in a single payment at the end of the established term. |
On April 20, 2018, the loan was renewed, maturing on July 19, 2018. |
On July 19, 2018, the loan was renewed, maturing on July 19, 2021. |
f) | On August 25, 2016, the subsidiary Cervecería Kunstmann S.A. signed a bank loan with Banco de Chile for a total of ThCh$ 400,000, at a fixed interest rate, maturing on August 24, 2018. |
The subsidiary amortizes interest and capital consists in a single payment at the end of the established term. |
On August 24, 2018, the loan was renewed, maturing on August 24, 2020. |
Scotiabank Chile – Bank Loans
a)On September 4, 2014, the subsidiary Cervecería Kunstmann S.A. signed a bank loan with Scotiabank Chile for a total of US$ 638,674, at a fixed interest rate, maturing on September 4, 2016.
The subsidiary amortizes interest semi-annually and capital amortization consists of a single payment at the end of the established term.
On August 24, 2016, this loan was paid.
b)On June 17, 2015, the subsidiary Viña San Pedro Tarapacá S.A. it signed a bank loan with Scotiabank Chile for a total of US$ 7,871,500,7,871,500. It accrues interest at a compound floating rate Libor at 90 days plus a fixed margin, with a term of three years maturing on June 18, 2018.
This loan bears interest at a floating interest rate composed dollar Libor at 90 days plus a fixed margin. The companysubsidiary pays quarterly interest and amortization of capital consists of a single payment at the end of the deadline.
The interest rate risk to which the subsidiary is exposed as result of this loan is mitigated by the use of cross interest rate swap agreements (interest rate fixed). For details of the Company`sCompany’s hedge strategies seeNote 5 – Risk aministrationand6Note 7 – Financial instruments.
The aforementioned loans oblige the Company to comply with the covenants indicated in letter D) Restriction in On June 18, 2018,this Note.loan was paid.
f) c)On June 18, 2018, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Scotiabank Chile for a total of US$ 11,600,000, It accrues interest at a compound floating rate Libor at 90 days plus a fixed margin, with a term of three years maturing on June 18, 2021.
The subsidiary pays quarterly interest and amortization of capital consists of a single payment at the end of the deadline.
The interest rate risk to which the subsidiary is exposed as result of this loan is mitigated by the use of cross interest rate swap agreements (interest rate fixed). For details of the Company’s hedge strategies seeNote 5 – Risk aministrationand Note 7 – Financial instruments.
d)On April 24, 2015, the subsidiary CompañíCervecería Cervecera Kunstmann SA HeS.A. signed a bank loan with Scotiabank Chile for a total of US $ThCh$ 1,000,000, at a fixed interest rate, with a term of one year expiring atmaturity on April 22, 2016.
F-99
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
The subsidiary amortizes interest semi-annually and capital amortization consists in a single payment at the end of the established term. |
On June 22, 2016, this loan was paid. |
e) | On April 20, 2016, the subsidiary Cervecería Kunstmann S.A. signed a bank loan with Scotiabank Chile for a total of ThCh$ 2,000,000, at a fixed interest rate, with a term of one year maturity on April 20, 2017. |
The subsidiary amortizes interest semi-annually and capital amortization consists in a single payment at the end of the established term. |
On April 20, 2017 the loan was renewed for a term of 2 years, maturing on April 20, 2019. |
f) | On July 3, 2018, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Scotiabank Chile for a total of US$ 15,000,000, at a fixed interest rate, with a term of three years maturing on July 3, 2019. |
The subsidiary amortizes interest and capital in a single payment at the end of the established term. |
Scotiabank Azul Chile (Former Banco BBVA Chile) – Bank Loans
a) | On January 29, 2018, Compañía Cervecerías Unidas S.A. signed a bank loan with Scotiabank Azul Chile for a total of ThCh$ 60,000,000, at a fixed interest rate, maturing on May 29, 2018. |
The Company amortizes interest monthly and capital consists in a single payment at the end of the established term. |
On May 29, 2018, the loan was renewed, maturing on July 27, 2018. |
On July 27, 2018, the loan was renewed, maturing on August 24, 2018. |
On August 24, 2018,this loan was paid. |
b) | On July 3, 2018, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Scotiabank Azul Chile for a total of ThCh$ 4,500,000, at a fixed interest rate, maturing on December 3, 2018. |
The Company amortizes interest and capital consists in a single payment at the end of the established term. |
On December 3, 2018,this loan was paid. |
Banco Consorcio – Bank Loans
a) | On May 17, 2018, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Consorcio for a total of ThCh$ 6,000,000, at a fixed interest rate, maturing on July 3, 2018. |
The Company amortizes interest monthly and capital consists in a single payment at the end of the established term. |
On July 3, 2018,this loan was paid. |
Banco BBVA Francés S.A. – Bank Loan with Compañía Industrial Cervecera S.A. (CICSA)
a) | On June 18, 2014, the subsidiary CICSA signed a bank loan with BBVA Bank for a total of 90 million argentinean pesos, maturing on November 18, 2017. |
This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization quarterly. |
On November 18, 2017, this loan was paid. |
F-100
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Banco de la Nación Argentina – Bank Loan with Compañía Industrial Cervecera S.A. (CICSA)
a) On December 28, 2012, CICSA signed a bank loan for a total of 140 million of argentinean pesos for a period of 7 years, maturing on November 26, 2019, and whose loan is delivered in two stages, where the first was carried out on December 28, 2012, for a total of 56 million argentinean pesos and the second on June 28, 2013, for a total of 84 million of Argentinean pesos.
This loan accrues interest at an annual rate of 15% fixed by first 36 months.Having completed that term, accrues interest at a compound floating rate BADLAR in pesos plus a fixed spread of 400 basis points and to this effect will be taken BADLAR rate published by the Central Bank of the Republic of Argentina, corresponding to five working days prior to the start of the period, subject to the condition that does not exceed the lending rate of portfolio general of Banco de la Nación Argentina, in whose case shall apply this. Interest will be paid monthly.
The subsidiary amortizes capital in 74 consecutive and equal, once the grace period of 10 months from the date of disbursement.
This loan is guaranteed by CCU S.A., through a Stand By issued by the Banco del Estado de Chile to Banco de la Nación Argentina (seeNote 34 – Contingencies and commitments).
b)On April 20, 2015, the subsidiary CICSA signed a bank loan for a total of 24 million of argentinean pesos, maturing on April 4, 2018.
This loan accrues interestat a compound floating rate BADLAR in pesos plus a fixed spread of 500 basis points and subject to the condition that does not exceed the lending rate of portfolio general of Banco de la Nación Argentina, in whose case shall apply this. Interest will be paid monthly.
The subsidiary amortizes capital in 30 monthly, once the grace period of 6 months from de date of disbursement.
On April 4, 2018,this loan was paid.
c) On May 26, 2017, the subsidiary CICSAsigned a bank loan for a total of 60 million of argentinean pesos, maturing on May 22, 2018.
This loan accrues a fixed interest at an annual rate.rate of 20%. The subsidiary amortizes monthly interest semi-annuallyand and capital amortization consists of a single payment at the end of the established term.
Banco Santander Chile – Bank Loans
a) On June 17, 2013, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Santander Chile for a total of US$ 8,000,000, maturing on June 17, 2014.
This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization consists of a single payment at the end of the established term.
On June 17, 2014, May 22, 2018,this loan was paid.
b) On June 17, 2013, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Santander Chile for a total of 6,200,000 Euros, maturing on June 17, 2014.
This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization consists of a single payment at the end of the established term.
On June 17, 2014, this loan was paid.
BBVA Banco Francés S.A.; HSBC Bank Argentina S.A.; Banco de Galicia y Buenos Aires S.A.; La Sucursal de Citibank NA established in Argentinian Republic; Banco de La Provincia de Buenos AiresSantander Río S.A. – Syndicated Bank Loan with Compañía Industrial Cervecera S.A. (CICSA)
On October 5, 2012,April 20, 2015, the subsidiary CICSA signed a syndicated bank loan for a total of 187.5150 million Argentine Pesos,argentinean pesos, maturing on October 5, 2015.April 20, 2018.
On September 15, 2016 the subsidiary signed an addendum to the original contract in order to increase the loan capital to 183.33 million argentinean pesos, modify the interest rate, the maturity and schedule of repayment of capital and dates of payment, being the new maturity on September 15, 2019.
On July 14, 2017, the subsidiary signed a new addendum to the original contract in order to modify the interest rate to fixed interest at an annual nominal rate of 23%. The rest of the conditions remained unchanged.
The proportional participation of banks lenders is as follows:
a)BBVA Bank French S.A., with 55 million Argentine Pesos of pro rata participation.
b)Banco de la Provincia de Buenos Aires, with 54 million Argentine Pesos.
c)HSBC Bank Argentina S.A., with 43.5 million Argentine Pesos of pro rata participation.
d)(a) Banco de Galicia y Buenos Aires S.A., with 2091.66 million Argentine Pesosargentinean pesos of pro rata participation.
(b)Banco Santander Río, with 91.66 million argentinean pesos of pro rata participation.
e)Citibank NA established in Argentinian Republic, with 15 million Argentine Pesos of pro rata participation.
This loan accrues interest at an annual rate fixed of 15.01% 23%whose payment is madewill make monthly. The subsidiary amortizesCICSA amortised capital in 924 consecutive and equal quarterly quotes,variable monthly installments, once completed the 12-month grace period of 12 months from the date of disbursement.signature of the addendum.
F-101
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
This loan obliges the subsidiary to meet specific requirements and financial covenants related to their Consolidated Financial Statements, which according to agreement of the parties are as follows:
a)a. Maintain a capability of repayment measure at the end of each quarter less than or equal to 3, calculated as the financial debt over Adjusted EBITDAORBDA12.Adjusted EBITDA means EBITDA.AdjustedORBDA meansORBDA as calculated by the Company in accordance with particular debt instruments in order to measure such instruments’ financial covenants and is defined as: Operating result before Interest, Income taxes, Depreciation and Amortization for the period of 12 months immediately prior to the date of calculation.
b)b. Maintain a Financial Expense Coverage measured at the end of each quarter and retroactively for periods of 12 months, not less than 2.5, calculated as the ratio of Adjusted EBITDAAdjustedORBDA (as defined in paragraph (a)) and Financial Costs account.
c)c. Maintain at the end of each quarter an indebtedness ratio not higher than 1.5, defined as the ratio Financial Liabilities over the Equity meaning the Equity at the time of calculation, as it arises from their Financial Statements and in accordance with generally accepted accounting principles in the Argentinian Republic.Republic of Argentina.
d)d. Maintain at the end of each quarter a minimum Equity of 600 million of Argentine Pesos.argentinean pesos.
As of December 31, 2015,2018, the Company was in compliance with the financial covenants and specific requirements of this loan.
Banco de la Nación ArgentinaMercantil Santa Cruz S.A. – Bank Loan with Compañía Industrial Cervecera S.A. (CICSA)loans
a)On December 28, 2012, CICSA signedJune 26, 2017, the subsidiary Bebidas Bolivianas BBO S.A.signed a bank loan with Banco Mercantil Santa Cruz S.A. for a total of 140 million of Argentine pesos for68,877,500 Bolivian, at a period of 7 years,fixed interest rate, maturing on November 26,May 1, 2027.
The subsidiary amortizes quarterly interest and and capital amortization begins on September 10, 2019 and whosein a quarterly basis.
b) On December 18, 2017,the subsidiary Bebidas Bolivianas BBO S.A.signed a bank loan is delivered in two stages, where the first was carried out on December 28, 2012,with Banco Mercantil Santa Cruz S.A. for a total of 56 million argentine pesos and the second on June 28, 2013, for a total of 84 million of Argentine pesos.
This loan accrues interest at an annual rate of 15% fixed by first 36 months.Having completed that term, accrues interest6,860,000 Bolivian, at a compound floatingfixed interest rate, BADLAR in pesos plus a fixed spread of 400 basis points and to this effect will be taken BADLAR rate published by the Central Bank of the Argentina Republic, corresponding to five working days prior to the start of the period, subject to the condition that does not exceed the lending rate of portfolio general of Banco de la Nación Argentina, in whose case shall apply this.maturing on December 13, 2018.
The subsidiary amortizes interest and capital in 74 consecutive and equal, once the grace period of 10 months from the date of disbursement.quarterly.
This On September 14, 2018, the loan is guaranteed by CCU S.A., through a Stand By issued by the Banco Estado de Chile in favor of Banco de la Nación Argentina (seeNote 35).was paid.
b)c) On April 20, 2015, May 14, 2018,the subsidiary CICSA signedBebidas Bolivianas BBO S.A.signed a bank loan with Banco Mercantil Santa Cruz S.A. for a total of 24 million of argentine pesos,6,860,000 Bolivian, at a fixed interest rate, maturing on April 4, 2018.May 9, 2019.
This loan accrues interestat a compound floating rate BADLAR in pesos plus a fixed spread of 500 basis points and subject to the condition that does not exceed the lending rate of portfolio general of Banco de la Nación Argentina, in whose case shall apply this.
The subsidiary amortizes interest and capital in 30 monthly, once the grace period of 6 months from de date of disbursement.quarterly.
ThisOn September 27, 2018, the loan is guaranteed by CCU S.A., through a Stand By issued by the Banco Estado de Chile (seeNote 35).was paid.
c)d) On June 26, 2015, 22, 2018,the subsidiary CICSA signedBebidas Bolivianas BBO S.A.signed a bank loan with Banco Mercantil Santa Cruz S.A. for a total of 30 million of argentine pesos,6,180,400 Bolivian, at a fixed interest rate, maturing on December 26, 2015.13, 2019.
This loan accrues a fixed interest at an annual rate of 23%. The subsidiary amortizes monthly interest and capital quarterly.
On September 20, 2018, the capital amortization in 6 monthly.loan was paid.
21EBITDA (Earnings Before Interest, Taxes,ORBDA, for the Company purposes, is defined as Adjusted Operating Result before Depreciation and Amortization).Amortization.
F-102
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
Banco BBVA Francés S.A. – Bank Loan with Compañía Industrial Cervecera S.A. (CICSA)
On June 18, 2014, the subsidiary CICSA signed a bank loan with BBVA Bank for a total of 90 million argentine pesos, maturing on June 19, 2017.
This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization quarterly.
Banco de Galicia y Buenos Aires S.A.; Banco Santander Río S.A.; – Syndicated Bank Loan with Compañía Industrial Cervecera S.A. (CICSA)
On April 20, 2015, the subsidiary CICSA signed a syndicated bank loan for a total of 150 million argentine pesos, maturing on April 20, 2018.
The proportional participation of banks lenders is as follows:
(a) Banco de Galicia y Buenos Aires S.A., with 75 million argentine pesos of pro rata participation.
(b)Banco Santander Río, with 75 million argentine pesos of pro rata participation.
This loan accrues interest at an annual rate of 29.4% fixed by first 12 months and thereafteraccrues interest at a compound floating rate BADLAR in pesos plus a fixed spread of 360 basis points and the payments will be quarterly. The capital amortization will payment in 9 quarterly,once the grace period of 12 months from de date of disbursement.
This loan obliges the subsidiary to meet specific requirements and financial covenants related to their Consolidated Financial Statements, which according to agreement of the parties are as follows:
a)Maintain a capability of repayment measure at the end of each quarter less than or equal to 3, calculated as the financial debt over Adjusted EBITDA2.Adjusted EBITDA means EBITDA as calculated by the Company in accordance with particular debt instruments in order to measure such instruments’ financial covenants and is defined as: Operating result before Interest, Income taxes, Depreciation and Amortization for the period of 12 months immediately prior to the date of calculation.
b)Maintain a Financial Expense Coverage measured at the end of each quarter and retroactively for periods of 12 months, not less than 2.5, calculated as the ratio of Adjusted EBITDA (as defined in paragraph (a)) and Financial Costs account.
c)Maintain at the end of each quarter an indebtedness ratio not higher than 1.5, defined as the ratio Financial Liabilities over the Equity meaning the Equity at the time of calculation, as it arises from their Financial Statements and in accordance with generally accepted accounting principles in the Argentinian Republic.
d)Maintain at the end of each quarter a minimum Equity of 600 million of Argentine Pesos.
As of December 31, 2015, the Company was in compliance with the financial covenants and specific requirements of this loan.
2EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization).
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B) Financial Lease Obligations
The most significant financial lease agreements are as follows:
CCU S.A.
In December, 2004, the Company sold a piece of land previously classified as investment property. As part of the transaction, the Company leased eleven floors of a building under construction on the mentioned piece of land.
The building was completed during 2007, and on June 28, 2007, the Company entered into a 25-years lease agreement with Compañía de Seguros de Vida Consorcio Nacional de Seguros S.A., for a total amount of UF 688,635.63, with an annual interest rate of 7.07%. The current value of the agreement amounted to ThCh$ 10,403,632 as of December 31, 2007. The agreement also grants CCU the right or option to acquire the assets contained in the agreement (real estate, furniture and facilities) as from month 68 of the lease. The lease rentals committed are according to the conditions prevailing in the market. For Chilean GAAP purposes, in
In 2004 the Company recognized a ThCh$ 3,108,950 gain for the building portion not leased by the Company, and a ThCh$ 2,276,677 liability deferred through completion of the building, when the Company recorded the transaction as financial lease.
On February 28, 2018, the Company carries out an amendment to the contract with Compañía Cervecera Kunstmannde Seguros de Vida Consorcio Nacional de Seguros S.A., Manantial S.A.recording a balance debt of UF 608,375, with 3.95% annual interest and maturity on February 5, 2048.
Subsidiary Finca La Celia S.A.:
Other lease agreements are as follows:
Type | Institution | Contract Date | Currency | ThCh$ | Number of quotas | Anual Interest % | Purchase option (UF) |
Compañía Cervecera Kunstmann S.A. | |||||||
Production Plant | Banco de Chile | 19-04-05 | UF | 20,489 | 168 | 8.30% | 302 |
Land Lote 2 C | Banco de Chile | 26-06-07 | UF | 7,716 | 121 | 5.80% | 85 |
Land Lote 2 D | Banco de Chile | 25-03-08 | UF | 15,000 | 97 | 4.30% | 183 |
Land Lote 13F1 | Banco Estado | 10-10-12 | UF | 22,341 | 72 | 4.33% | 348 |
Manantial S.A. | |||||||
Dispensers | Banco de Crédito e Inversiones | 04-01-12 | UF | 4,275 | 37 | 5.06% | 116 |
Dispensers | Banco de Chile | 05-12-11 | UF | 1,073 | 37 | 5.98% | 311 |
Vehicles | Banco de Chile | 27-08-12 | UF | 1,265 | 25 | 12.63% | 51 |
Vehicles | Banco Estado | 15-09-11 | UF | 5,342 | 25 | 14.01% | 208 |
Computers | Banco Security | 23-08-11 | UF | 2,387 | 37 | 6.99% | 65 |
Dispensers | Banco Security | 09-08-11 | UF | 20,845 | 37 | 6.62% | 563 |
Finca La Celia S.A. | |||||||
Automotor | Banco Supervielle | 10-06-14 | $ARG | 10,814 | 45 | 17.50% | 6,250 |
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Type | Institution | Contract Date | Currency type or reset unit | Amount | Number of quotas | Anual Interest (%) | |
Contract (Thousands) | Purchase option (UF) | ||||||
Automotor | Banco Supervielle - Argentina | 06-07-2017 | ARS | 9,963 | 398 | 36 | 17.00 |
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The following is a detailAs of December 31, 2018 future payments and the current value of the financialfinance lease obligations are detailed as ofDecember 31, 2015:follows:
Lease Minimum Future Payments | As of December 31, 2015 | As of December 31, 2018 | ||||
Gross Amount | Interest | Current Value | Gross Amount | Interest | Value | |
ThCh$ | ThCh$ | ThCh$ | ||||
Less than one years | 1,505,697 | 1,184,281 | 321,416 | |||
Between one and five year | 5,148,941 | 4,538,956 | 609,985 | |||
Over five years | 28,871,228 | 12,242,755 | 16,628,473 | |||
0 to 3 months | 241,724 | 151,208 | 90,516 | |||
3 months to 1 year | 725,183 | 449,727 | 275,456 | |||
Over 1 year to 3 years | 1,911,683 | 1,162,200 | 749,483 | |||
Over 3 years to 5 years | 1,909,956 | 1,108,584 | 801,372 | |||
Over 5 years | 23,078,634 | 7,083,327 | 15,995,307 | |||
Total | 35,525,866 | 17,965,992 | 17,559,874 | 27,867,180 | 9,955,046 | 17,912,134 |
F-103
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
C) Bonds Payable
Series A Bonds – Subsidiary Viña San Pedro Tarapacá S.A.
On June 13, 2005, the subsidiary Viña San Pedro Tarapacá S.A. recorded in the Securities Record a bond issue for a total UF 1,500,000 at a 20-years term maturing on July 15, 2025. Such issue was placed in the local market on July 20, 2005, with a premium amounting to ThCh$ 227,378. This obligation accrues interest at a fixed annual rate of 3.8% and amortizes interest and capital semi-annually.
On December 17, 2010, took place the Board of Bondholders Serie A, which decided to modify the issued Contract of such bonds in order to update certain references and adapt it to the new IFRS accounting standards. The amendment of the issued Contract is dated December 21, 2010 and has the repertory No. 35739-2010 in the Notary of Ricardo San Martín Urrejola. Because of these changes, the commitment of this subsidiary is to comply with certain financial ratios that will be calculated only on the Consolidated Financial Statements. These financial ratios and other conditions are describe in letter D).
On July 21, 2011 the subsidiary made a partial prepayment for 750 Series A Bonds (of the 1,500 issued) equivalent toUF 513,750, according to Section Twelve of Clause Four for the Issue Contract Bond issued by public deed dated April 28, 2005. Additionally, the subsidiary recognized in the Consolidated Income Statement of that date an expenditure ofThCh$ 103,735, for expenses associated with the issuance of this debt.
On November 7, 2014, the subsidiary made a total prepayment for Series A Bonus for an amount of ThCh$ 9,778,759 and recognized in the Consolidated Income Statement of that date an expenditure of ThCh$ 117,200.
At the time of this total prepayment, the subsidiary was in compliance with the financial covenants required for this public issue detailed in letter D).
Series E Bonds – CCU S.A.
On October 18, 2004, under number 388 the Company recorded in the Securities Record the issue of 20-year term public bonds for a total UF 2,000,000 maturing on December 1, 2024. This issue was placed in the local market on December 1, 2004, with a discount amounting to ThCh$ 897,857. This obligation accrues interests at a fixed annual rate of 4.0%, and it amortizes interest and capital semi-annually.
On December 17, 2010, took place the Board of Bondholders Serie E, which decided to modify the issued Contract of those bonds in order to update certain references and adapt it to the new IFRS accounting standards. The amendment of the issued Contract is dated December 21, 2010 and has the repertory No. 35738-2010 in the Notary of Ricardo San Martín Urrejola. Because of these changes, the commitment of the Company is to comply with certain financial ratios that will be calculated only on the Consolidated Financial Statements. These financial ratios and other conditions are as follows:
(a)a. Maintain at the end of each quarter an indebtedness ratio measured over the consolidated financial statements not higher than 1.5, defined as the ratio of Total Adjusted Liabilities and Total Adjusted Equity. Total Adjusted Liabilities is defined as Total Liabilities less Dividends provisioned, according to policy included in the Statement of Changes in Equity, plus the amount of all guarantees granted by the Issuer or its subsidiaries that are cautioned by real guarantees, except as noted in the contract. Total Adjusted Equity is defined as Total Equity plus Dividends provisioned, according to policy included in the Statement of Changes in Equity.
(b)b. Maintain a Financial Expense Coverage measured at the end of each quarter and retroactively for periods of 12 months, not less than 3, calculated as the ratio of Adjusted EBITDAORBDA3 and Financial Costs account. Adjusted EBITDAORBDA means EBITDAORBDA as calculated by the Company in accordance with particular debt instruments in order to measure such instruments’ financial covenants and is defined as: (i) the sum of Gross Margin and Other income by function accounts; (ii) less (absolute numbers) Distribution costs, Administrative expenses and Other expenses by function accounts; and (iii) plus (absolute numbers) Depreciation and Amortization recorded on the Note Nature of the costs and expenses.
(c)c. Maintain at the end of each quarter, assets free of liens for an amount equal to at least 1.2, defined as the ratio of Total Assets free of lien and Total Adjusted Liabilities free of lien. Is defined as Total Assets free of lien are defined as Total Assets less assets pledged as collateral for cautioned obligations of third parties. Total Adjusted Liabilities free of lien are defined as Total Liabilities less Dividends provisioned according to policy contained in the Statement of Changes in Equity.
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(d)d. Maintain at the end of each quarter a minimum equity of ThCh$ 312,516,750, meaning Equity Attributable to Equity Holders of the Parent plus the Dividends provisioned account, according to policy contained in the Statement of Changes in Equity. This requirement will increase in the amount resulting from each revaluation of property, plant and equipment to be performed by the Issuer.
(e)e. To maintain, either directly or indirectly, ownership over more than 50% of the subscribed and paid-up shares and over the voting rights of the following companies: Cervecera CCU Chile Limitada, Embotelladoras Chilenas Unidas S.A. and Viña San Pedro Tarapacá S.A., except in the cases and under the terms established in the agreement.
(f)f. To maintain, either directly or through a subsidiary, ownership of the trademark "CRISTAL", denominative for beer class 32 of the international classifier, and not to transfer its use, except to its subsidiaries.
(g)g. Not to make investments in facilities issued by related parties, except in the cases and under the terms established in the agreement.
(h)h. Neither sells nor transfer assets from the issuer and its subsidiaries representing over 25% of the assets total of the consolidated financial statements.
As ofDecember 31, 2015 and December 31, 2014,On October 8, 2018, the Company wasredeemed all of the Series E Bonds, before their scheduled maturity, in complianceaccordance with the financial covenants requiredprovisions of: the Fifth Clause No. 10 and other applicable terms of the Issuance Contract; General Standard No. 30 of the CMF; and the Securities Market Law. The bonds were redeemed, according to the value of the Unidad de Fomento on the day of the early redemption, at the value equivalent to the unpaid balance of the capital, plus interest accrued and not
3ORBDA, for this public issue.the Company purposes, is defined as Adjusted Operating Result before Depreciation and Amortization.
F-104
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
paid in the period comprised between the day following the expiration date of the last installment of interest paid and the date set for the redemption, amounting to a total of UF 659,199.6 (equivalent to ThCh$ 18,043,633).
Series H and I Bonds – CCU S.A.
On March 23, 2009, under number 573, the Company recorded in the Securities Record the issue of bonds Series H and I for a combined total of UF 52 million, with 5 and 21 years terms, respectively. Emissions of both series wereterms. Emission was placed in the local market on April 2, 2009. The issuance of the Bond I was UF 3 million with maturity on March 15, 2014, with a discount amounting toThCh$ 413,181, and accrues interest at an annual fixed rate of 3.0%, with amortize interest semi-annually and excluding the capital (bullet). The issuance of the Bond H was UF 2 million with maturity on March 15, 2030, with a discount amounting to ThCh$ 156,952, and accrues interest at an annual fixed rate of 4.25%, with amortizes interest and capital semi-annually.
By deed dated December 27, 2010 issued in the Notary of Ricardo San Martín Urrejola, under repertoires No. 36446-2010, and 36447-2010, were amended Issue Contract Series H, and I, respectively, in order to update certain references and to adapt to the new IFRS accounting rules.
The current issue was subscribed with Banco Santander Chile as representative of the bond holders and as paying bank, and it requires that the Company complies with the following financial covenants on its Consolidated Financial Statements and other specific requirements:
a. |
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b. | Maintain a Financial Expense Coverage measured at the end of each quarter and retroactively for periods of 12 months, not less than 3, calculated as the ratio of Adjusted ORBDA4and Financial Costs account. Adjusted ORBDA means ORBDA as calculated by the Company in accordance with particular debt instruments in order to measure such instruments’ financial covenants and is defined as: (i) the sum of Gross Margin and Other income by function accounts; (ii) less (absolute numbers) Distribution costs, Administrative expenses and Other expenses by function accounts; and (iii) plus (absolute numbers) Depreciation and Amortization recorded on the Note Nature of the cost and expenses. |
c. | Maintain at the end of each quarter, assets free of liens for an amount equal to, at least, 1.2, defined as the ratio of Total Assets free of lien and Financial Debt free of lien. Total Assets free of lien are defined as Total Assets less assets pledged as collateral for cautioned obligations of third parties. Financial Debt free of lien is defined as the sum of lines Bank Loans, Bonds payable and Finance lease obligations contained in Note Other financial liabilities of the Consolidated Financial Statements. |
d. | Maintain at the end of each quarter a minimum equity of ThCh$ 312,516,750, meaning Equity Attributable to Equity Holders of the Parent plus the Dividends provisioned account, according to policy included in the Statement of Changes in Equity. This requirement will increase in the amount resulting from each revaluation of property, plant and equipment to be performed by the Issuer. |
e. | To maintain, either directly or indirectly, ownership over more than 50% of the subscribed and paid-up shares and over the voting rights of the following companies: Cervecera CCU Chile Limitada and Embotelladoras Chilenas Unidas S.A. |
f. | Maintain a nominal installed capacity for the production manufacturing of beer and soft drinks, equal or higher altogether than 15.9 million hectolitres a year, except in the cases and under the terms of the contract. |
g. | To maintain, either directly or through a subsidiary, ownership of the trademark "CRISTAL", denominative for beer class 32 of the international classifier, and not to transfer its use, except to its subsidiaries. |
h. | Not to make investments in facilities issued by related parties, except in the cases and under the terms established in the agreement. |
4ORBDA, for the Company purposes, is defined as Total Equity plus Dividends provisioned account, according to policy included in the Statement of Changes in Equity.Adjusted Operating Result before Depreciation and Amortization.
(b)Maintain a Financial Expense Coverage measured at the end of each quarter and retroactively for periods of 12 months, not less than 3, calculated as the ratio of Adjusted EBITDA and Financial Costs account. Adjusted EBITDA means EBITDA as calculated by the Company in accordance with particular debt instruments in order to measure such instruments’ financial covenants and is defined as: (i) the sum of Gross Margin and Other income by function accounts; (ii) less (absolute numbers) Distribution costs, Administrative expenses and Other expenses by function accounts; and (iii) plus (absolute numbers) Depreciation and Amortization recorded on the Note Nature of the cost and expenses.
(c)F-Maintain at the end of each quarter, assets free of liens for an amount equal to, at least, 1.2, defined as the ratio of Total Assets free of lien and Financial Debt free of lien. Total Assets free of lien are defined as Total Assets less assets pledged as collateral for cautioned obligations of third parties. Financial Debt free of lien is defined as the sum of lines Bank Loans, Bonds payable and Finance lease obligations contained in Note Other financial liabilities of the Consolidated Financial Statements.105
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
(d)Maintain atThe inflationary risk associated to the endinterest rate in which this Bond H is exposed, is mitigated by the use of each quarter a minimum equity of ThCh$ 312,516,750, meaning Equity Attributable to Equity Holderscross interest rate swap agreements (interest rate fixed). For details of the Parent plus the Dividends provisioned account, according to policy included in the Statement of Changes in Equity. This requirement will increase in the amount resulting from each revaluation of property, plant Company’s hedge strategies seeNote 5 – Risk administrationand equipment to be performed by the Issuer.Note 7 – Finacial instruments.
(e)To maintain, either directly or indirectly, ownership over more than 50% of the subscribed and paid-up shares and over the voting rights of the following companies: Cervecera CCU Chile Limitada and Embotelladoras Chilenas Unidas S.A.
(f)Maintain a nominal installed capacity for the production manufacturing of beer and soft drinks, equal or higher altogether than 15.9 million hectolitres a year, except in the cases and under the terms of the contract.
(g)To maintain, either directly or through a subsidiary, ownership of the trademark "CRISTAL", denominative for beer class 32 of the international classifier, and not to transfer its use, except to its subsidiaries.
(h)Not to make investments in facilities issued by related parties, except in the cases and under the terms established in the agreement.
On March 17, 2014, the Company paid the total Serie I Bonds, equivalent UF 3,000,000.
As ofDecemberofDecember 31, 2015 and December 31, 2014,2018, the Company was in compliance with the financial covenants required for this public issue.
Series J Bonds – CCU S.A.
On June 28, 2018, CCU S.A. registered in the Securities Register, under the number 898, the issuance of its Series J Bond, bearer and dematerialized, for a total of UF 3 million with maturity on August 10, 2043. The Series J bonds will accrue on the unpaid capital expressed in Unidades de Fomento, an annual interest of 2.9%, compounded, due, calculated on the basis of equal semesters of 180 days, equivalent to 1.4396% semi-annual. Interest will accrue as of August 10, 2018, will be paid semiannually as of February 10, 2019 and the capital will be paid at the end of the bond term.
The issue was subscribed with Banco BICE as the representative of the bond holders and the payer bank and requires the Company to comply with the following financial indicators with respect to its Interim Consolidated Financial Statements and other specific requirements:
a. | Maintain at the end of each quarter a level of consolidated net financial debt, reflected in each of its quarterly Consolidated Financial Statements, not greater than 1.5 times, defined as the ratio between Net Financial Debt and Total Adjusted Equity. The Net Financial Debt is defined as the difference between / x / the unpaid amount of the "Financial Debt", that is, the sum of the accounts, current and non-current, Bank loans, Obligations with the public and Obligations for financial leases , contained in the Note Other financial liabilities, and / and / the balance of the item Cash and cash equivalents. Total Adjusted Equity, which is defined as the sum of / x / Total Equity and / and / the sum of the accounts Interim Dividends, Dividends provisioned according to policy, as well as all other accounts related to the provision of dividends, contained in the Consolidated Statement of Changes in the Issuer's Equity. |
b. | The Issuer must maintain a consolidated financial expense coverage of not less than three times, defined as the ratio between ORBDA and Financial Expenses. ORBDA5is the sum of the accounts Gross margin and Other income per function, minus the accounts Distribution expenses, Administrative expenses and Other expenses per function and plus the Depreciation and Amortization line recorded in the Note Costs and Expenses by Nature. Financial Expenses refers to the account of the same name referred to in the Consolidated Statement of Income by Function. The Consolidated Financial Expenses Coverage Ratio will be calculated for the period of twelve consecutive months prior to the date of the corresponding Consolidated Financial Statements, including the closing month of said Consolidated Financial Statements. |
c. | Maintain an Adjusted Equity at a consolidated level for an amount of at least equal to ThCh$ 312,516,750. For these purposes, Adjusted Equity corresponds to the sum of / i / the Equity account attributable to the owners of the controlling entity in the Consolidated Statement of Financial Position, and / ii / the sum of the accounts Interim Dividends, Dividends provisioned according to policy, as well as all other accounts relating to the provision of dividends, contained in the Consolidated Statement of Changes in Equity. |
d. | Maintain Lien-Free Assets for an amount equal to at least 1.2 times the unpaid amount of the Financial Debt without collateral. For these purposes, the assets and debts will be valued at book value. The following shall be understood: / a / Assets Free of Liens is the difference between / i / the Total Assets account in the Consolidated Statement of Financial Position, and / ii / the assets given as guarantees indicated in the Note on Contingencies and Commitments of the Consolidated Financial Statements; and / b / Financial Debt is defined in the Issuance Contract. |
e. | Maintain, directly or indirectly, the ownership of more than fifty percent of the social rights and of the subscribed and paid shares, respectively, of: / a / Cervecera CCU Chile Limitada and / b / Embotelladoras Chilenas Unidas S.A. |
f. | Not sell, nor allow the sale of, nor assign the ownership of, nor transfer and / or in any way alienate, either through a transaction or a series of transactions, directly or indirectly, assets of the Company’s property and/or its subsidiaries necessary to maintain in Chile, directly and / or through one or more Subsidiaries, a nominal installed capacity for the production, without distinction of Beers and / or Analcoholic Beverages and / or Nectars and / or Mineral and / or Packaged Waters, hereinafter the "Essential Businesses" ", Equal to and not inferior to, either with respect to one or more of the aforementioned categories or all of them together, 15.9 million hectoliters per year. |
5ORBDA, for the Company purposes, is defined as Adjusted Operating Result before Depreciation and Amortization.
D) Restriction of subsidiary Viña San Pedro Tarapacá S.A.F-
The subsidiary Viña San Pedro Tarapacá S.A. mustcomply with certain financial ratios that will be calculated only on its Consolidated Financial Statements. These financial ratios and other conditions are as follows:106
(a)Control over subsidiaries representing at least 30% of the consolidated Adjusted EBITDA of the issuer. Adjusted EBITDA. Adjusted EBITDA means EBITDA as calculated by the Company in accordance with particular debt instruments in order to measure such instruments’ financial covenants and is defined as: (i) the sum of Gross Margin and Other income by function accounts; (ii) less (absolute numbers) Distribution costs, Administrative expenses and Other expenses by function accounts; and (iii) plus (absolute numbers) Depreciation and Amortization recorded in the Note Nature of the costs and expenses.
(b)Not to enter into investments in instruments issued by related parties different from its subsidiaries.
(c)Neither sells nor transfers essential assets that jeopardize the continuance of its current purpose.
(d)Maintain at the end of each quarter an indebtedness ratio measured over the consolidated financial statements not higher than 1.2, defined as the ratio of Total Adjusted Liabilities and Total Adjusted Equity. The Total Adjusted Liabilities is defined as Total Liabilities less Dividends provisioned, according to policy contained in the Statement of Changes in Equity, plus the amount of all guarantees, debts or obligations of third parties not within the liabilities and outside the Issuer or its subsidiaries that are cautioned by real guarantees granted by the Issuer or its subsidiaries. Total Adjusted Equity is defined as Total Equity plus Dividends provisioned, according to policy contained in the Statement of Changes in Equity.
(e)Maintain a Financial Expense Coverage measured at the end of each quarter and retroactively for periods of 12 months, not less than 3, calculated as the ratio of Adjusted EBITDA (as defined in paragraph (a)) and Financial Costs account.
(f)Maintain at the end of each quarter a minimum equity of ThCh$ 83,337,800, meaning Equity Attributable to Equity Holders of the Parent plus the Dividends provisioned account, according to policy included in the Statement of Changes in Equity. This requirement will increase in the amount resulting from each revaluation of property, plant and equipment to be performed by the Issuer.
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
g.To maintain, directly or through a Subsidiary, the ownership of the trademark "CRISTAL", brand or word, for beer, in class 32 of the International Classifier of Products and Services for the registration of trademarks.
h.Not to make investments in instruments issued by "related parties" other than the Company’s Subsidiaries, nor to carry out other operations outside its normal line of business, under conditions different from those established in the contract.
As of December 31, 2018, the Company was in compliance with the financial covenants required for this public issue.
F-107
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
F) Conciliation of finance obligations of Cash Flows
As of December 31, 2017 | Flows | Accrual of interest | Change in foreing currency and unit per adjustment | Others | As of December 31, 2018 | |||
| Payments | Acquisitions | ||||||
| Capital | Interest | ||||||
| ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ |
Other financial liabilities |
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Current | ||||||||
Bank borrowings | 24,623,746 | (93,311,712) | (7,329,217) | 92,806,210 | 7,751,402 | (2,102,985) | 15,722,734 | 38,160,178 |
Bond payable | 3,306,135 | (2,737,203) | (2,911,224) | - | 3,882,088 | 90,527 | 2,450,852 | 4,081,175 |
Financial leases obligations | 176,586 | (1,071,050) | (1,919) | - | 675,796 | (56,632) | 643,191 | 365,972 |
Total others financial liabililities current | 28,106,467 | (97,119,965) | (10,242,360) | 92,806,210 | 12,309,286 | (2,069,090) | 18,816,777 | 42,607,325 |
Non current | ||||||||
Bank borrowings | 73,886,831 | (207,714) | - | 8,703,343 | - | 396,858 | (7,578,514) | 75,200,804 |
Bond payable | 69,476,612 | (16,408,664) | - | 82,498,034 | - | 2,914,363 | (3,199,042) | 135,281,303 |
Financial leases obligations | 17,638,289 | (6,412) | - | - | - | 557,476 | (643,191) | 17,546,162 |
Total others financial liabililities non-current | 161,001,732 | (16,622,790) | - | 91,201,377 | - | 3,868,697 | (11,420,747) | 228,028,269 |
Total other financial liabilities | 189,108,199 | (113,742,755) | (10,242,360) | 184,007,587 | 12,309,286 | 1,799,607 | 7,396,030 | 270,635,594 |
| As of December 31, 2016 | Flows | Accrual of interest | Change in foreing currency and unit per adjustment | Others | As of December 31, 2017 | ||
| Payments | Acquisitions | ||||||
| Capital | Interest | ||||||
| ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ |
Other financial liabilities |
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Current | ||||||||
Bank borrowings | 39,079,561 | (22,241,073) | (7,146,384) | 16,927,169 | 7,492,719 | (3,435,455) | (6,052,791) | 24,623,746 |
Bond payable | 3,250,023 | - | (3,051,269) | - | 3,166,139 | 52,599 | (111,357) | 3,306,135 |
Financial leases obligations | 215,950 | (1,405,266) | (8,422) | - | 1,209,294 | 948 | 164,082 | 176,586 |
Total others financial liabililities current | 42,545,534 | (23,646,339) | (10,206,075) | 16,927,169 | 11,868,152 | (3,381,908) | (6,000,066) | 28,106,467 |
Non current | ||||||||
Bank borrowings | 29,606,398 | (844,687) | - | 40,850,000 | (306,747) | (1,470,924) | 6,052,791 | 73,886,831 |
Bond payable | 70,836,716 | (2,668,458) | - | - | - | 1,196,997 | 111,357 | 69,476,612 |
Financial leases obligations | 17,500,919 | (8,962) | - | - | - | 292,593 | (146,261) | 17,638,289 |
Total others financial liabililities non-current | 117,944,033 | (3,522,107) | - | 40,850,000 | (306,747) | 18,666 | 6,017,887 | 161,001,732 |
Total other financial liabilities | 160,489,567 | (27,168,446) | (10,206,075) | 57,777,169 | 11,561,405 | (3,363,242) | 17,821 | 189,108,199 |
F-108
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
| As of December 31, 2015 | Flows | Accrual of interest | Change in foreing currency and unit per adjustment | Others | As of December 31, 2016 | ||
| Payments | Acquisitions | ||||||
| Capital | Interest | ||||||
| ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ |
Other financial liabilities |
|
|
|
|
|
|
|
|
Current | ||||||||
Bank borrowings | 27,714,998 | (24,801,943) | (8,634,001) | 19,345,325 | 8,655,483 | (2,648,436) | 19,448,135 | 39,079,561 |
Bond payable | 3,155,239 | - | (3,093,163) | - | 3,216,241 | 15,879 | (44,173) | 3,250,023 |
Financial leases obligations | 321,416 | (1,530,851) | - | - | 1,205,019 | 9,427 | 210,939 | 215,950 |
Total others financial liabililities current | 31,191,653 | (26,332,794) | (11,727,164) | 19,345,325 | 13,076,743 | (2,623,130) | 19,614,901 | 42,545,534 |
Non current | ||||||||
Bank borrowings | 48,335,093 | (493,181) | - | 3,804,384 | 58,219 | (2,649,982) | (19,448,135) | 29,606,398 |
Bond payable | 71,352,994 | (2,615,542) | - | - | - | 2,055,091 | 44,173 | 70,836,716 |
Financial leases obligations | 17,238,458 | - | - | - | - | 473,400 | (210,939) | 17,500,919 |
Total others financial liabililities non-current | 136,926,545 | (3,108,723) | - | 3,804,384 | 58,219 | (121,491) | (19,614,901) | 117,944,033 |
Total other financial liabilities | 168,118,198 | (29,441,517) | (11,727,164) | 23,149,709 | 13,134,962 | (2,744,621) | - | 160,489,567 |
F-109
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
As ofDecember 31, 2015 and 2014, the total Accounts payable-tradeTrade and other payables are detailed as follows:
| As of December 31, 2018 | As of December 31, 2017 | ||||
| As of December 31, 2015 | As of December 31, 2014 | Current | Non current | Current | Non current |
| ThCh$ | ThCh$ | ThCh$ | |||
Suppliers | 179,926,026 | 159,782,385 | 247,335,760 | - | 224,330,195 | - |
Notes payable | 5,575,754 | 3,940,353 | 3,973,183 | 12,413 | 4,707,572 | 541,783 |
Trade an other current payables | 251,308,943 | 12,413 | 229,037,767 | 541,783 | ||
Withholdings payable | 43,880,121 | 40,429,573 | 52,071,225 | - | 52,643,786 | - |
Trade accounts payable withholdings | 52,071,225 | - | 52,643,786 | - | ||
Total | 229,381,901 | 204,152,311 | 303,380,168 | 12,413 | 281,681,553 | 541,783 |
Current | 227,736,803 | 203,782,805 | ||||
Non-current | 1,645,098 | 369,506 | ||||
Total | 229,381,901 | 204,152,311 |
As ofDecember 31, 2015 and 2014, the total provisionsProvisions recorded in the consolidated statement of financial position are detailed as follows:
| As of December 31, 2018 | As of December 31, 2017 | ||||
As of December 31, 2015 | As of December 31, 2014 | Current | Non current | Current | Non current | |
ThCh$ | ThCh$ | ThCh$ | ||||
Litigation | 1,343,374 | 1,023,895 | 405,069 | 488,562 | 349,775 | 950,920 |
Others | 636,584 | 1,596,196 | - | 6,937,197 | - | 289,469 |
Total | 1,979,958 | 2,620,091 | 405,069 | 7,425,759 | 349,775 | 1,240,389 |
Current | 503,440 | 410,259 | ||||
Non-current | 1,476,518 | 2,209,832 | ||||
Total | 1,979,958 | 2,620,091 |
The following was the changechanges in provisions during the years endedare detailed as of December 31, 2014 and 2015:follows:
| Litigation | Others | Total | Litigation (1) | Others | Total | ||||
ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ||||||
As of January 1, 2014 |
| 1,294,570 |
| 1,673,910 | 2,968,480 | |||||
As of December 31, 2014 |
|
|
|
|
| |||||
As of January 1, 2017 |
| 1,248,243 |
| 484,441 | 1,732,684 | |||||
As of December 31, 2017 |
|
|
|
|
| |||||
Incorporated | 622,320 | 151,966 | 774,286 |
| 1,028,505 |
| 14,386 | 1,042,891 | ||
Used | (751,636) | (1,668) | (753,304) |
| (652,280) |
| - | (652,280) | ||
Released | (71,667) | (175,968) | (247,635) |
| (81,249) |
| (142,291) | (223,540) | ||
Conversion effect | (69,692) | (52,044) | (121,736) |
| (242,524) |
| (67,067) | (309,591) | ||
As of December 31, 2014 |
| 1,023,895 |
| 1,596,196 | 2,620,091 | |||||
As of December 31, 2015 |
|
|
|
|
| |||||
Changes |
| 52,452 |
| (194,972) | (142,520) | |||||
As of December 31, 2017 |
| 1,300,695 |
| 289,469 | 1,590,164 | |||||
As of December 31, 2018 |
|
|
|
|
| |||||
Incorporated |
| 792,724 |
| 888 | 793,612 |
| 560,355 |
| 6,731,027 | 7,291,382 |
Used |
| (222,139) |
| - | (222,139) |
| (344,749) |
| - | (344,749) |
Released |
| (31,005) |
| (801,778) | (832,783) |
| (102,277) |
| (11,975) | (114,252) |
Conversion effect |
| (220,101) |
| (158,722) | (378,823) |
| (520,393) |
| (71,324) | (591,717) |
As of December 31, 2015 | (1) | 1,343,374 |
| 636,584 | 1,979,958 | |||||
Changes |
| (407,064) |
| 6,647,728 | 6,240,664 | |||||
As of December 31, 2018 |
| 893,631 |
| 6,937,197 | 7,830,828 |
(1) SeeNote 3534 – Contingencies and commitments.
F-110
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
The maturities of provisions at December 31, 2018, are detailed as follows:
| Litigation | Others | Total | ||
ThCh$ | ThCh$ | ThCh$ | |||
Less than one year |
| 405,069 |
| - | 405,069 |
Between two and five years |
| 314,784 |
| 6,937,197 | 7,251,981 |
Over five years |
| 173,778 |
| - | 173,778 |
Total |
| 893,631 |
| 6,937,197 | 7,830,828 |
The maturities of provisions at December 31, 2015, were2017, are detailed as follows:
| Litigation | Others | Total | Litigation | Others | Total | ||
ThCh$ | ThCh$ | ThCh$ | ||||||
Less than one year | 503,441 | - | 503,441 |
| 349,775 |
| - | 349,775 |
Between two and five years | 486,294 | 636,584 | 1,122,878 |
| 445,941 |
| 289,469 | 735,410 |
Over five years | 353,639 | - | 353,639 |
| 504,979 |
| - | 504,979 |
Total | 1,343,374 | 636,584 | 1,979,958 |
| 1,300,695 |
| 289,469 | 1,590,164 |
Litigation
The detailprovisions for Litigation and Other - current and non-current correspond to estimates made by the Administration, intended to cover eventual effects that may derive from the resolution of significant litigation proceedingstrials/claims or uncertainties to which the Company is exposed. Such trails/claims or uncertainties derive from transactions that are part of the normal course of CCU's business and the countries where it operates and whose details and scopes are not fully public knowledge, so that its detailed exposition could affect the interests of the Company and the progress of the resolution of these, according to the legal reserves of each administrative and judicial procedure. Therefore, based on the provisions of IAS 37 "Provisions, contingent liabilities and contingent assets", paragraph 92, although the amounts provisioned in relation to these trials/claims or uncertainties are indicated, no further detail of the same at the closing of these Financial Statements.
Significant litigation proceedings which the Company is exposed to at a consolidated level is describedare detailed in
Note 3534 – Contingencies and commitments.
Management believes that based on the development of such proceedings to date, the provisions established on a case by case basis are adequate to cover the eventualpossible adverse effects that could arise from these proceedings.
As ofCurrent tax assetsDecember 31, 2015 and 2014, the total Other non-financial liabilities
Taxes receivables are detailed as follows:
| As of December 31, 2015 | As of December 31, 2014 |
| ThCh$ | ThCh$ |
Parent dividend provisioned by the board | 24,387,190 | 23,278,681 |
Parent dividend provisioned according to policy | 36,016,878 | 36,500,001 |
Outstanding parent dividends | 723,259 | 520,145 |
Subsidiaries dividends according to policy | 9,725,015 | 7,764,386 |
Others | 89,802 | 833,550 |
Total | 70,942,144 | 68,896,763 |
Current | 70,942,144 | 68,896,763 |
Total | 70,942,144 | 68,896,763 |
| As of December 31, 2018 | As of December 31, 2017 |
| ThCh$ | ThCh$ |
Refundable tax previous year | 11,884,421 | 9,640,567 |
Taxes under claim (1) | 968,195 | 968,195 |
Argentinean tax credits | 440,172 | 4,813,614 |
Monthly provisions | 3,686,905 | 12,537,248 |
Payment of absorbed profit provision | - | 24,104 |
Other credits | 322,736 | 44,150 |
Total | 17,302,429 | 28,027,878 |
(1)This item includes claims for refund of first category taxes (Provisional payment of absorved profit) for an amount of ThCh$ 968,195 that was presented in April 2014 from the commercial year 2013.
F-111
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Current tax assets non current
Taxes receivables are detailed as follows:
| As of December 31, 2018 | As of December 31, 2017 |
| ThCh$ | ThCh$ |
Taxes under claim (1) | 1,173,281 | 1,173,281 |
Others (2) | 97,660 | 143,019 |
Total | 1,270,941 | 1,316,300 |
(1)This item includes claims for refund of first category taxes (Provisional payment of absorved profit) that was presented in April 2010 from the commercial year 2009.
(2)Corresponds to the minimum presumed income tax of Argentine subsidiaries, whose recovery period is estimated to be more than one year.
Current tax liabilities
Taxes payable are detailed as follows:
| As of December 31, 2018 | As of December 31, 2017 |
| ThCh$ | ThCh$ |
Chilean Tax income (expense) | 71,587,790 | 18,335,047 |
Monthly provisional payments | 3,946,196 | 3,970,511 |
Chilean unique taxes | 101,474 | 105,903 |
Other | 249,989 | 115,173 |
Total | 75,885,449 | 22,526,634 |
Tax expense
The income tax and deferred tax expense for the years ended as of December 31, 2018, 2017 and 2016, are detailed as follows:
| For the years ended as of December 31, | ||
| 2018 | 2017 | 2016 |
| ThCh$ | ThCh$ | ThCh$ |
Income as per deferred tax related to the origin and reversal of temporary differences | 9,930,675 | (500,800) | (878,629) |
Prior year adjustments | 484,985 | 569,212 | 3,838,136 |
Effect of change in tax rates | 23,903 | (50,071) | (856,612) |
Tax benefits (loss) | (1,795,446) | 611,282 | (765,292) |
Total deferred tax expense | 8,644,117 | 629,623 | 1,337,603 |
Current tax expense | (144,929,220) | (47,841,130) | (31,285,976) |
Prior period adjustments | 158,286 | (1,154,469) | (298,010) |
Total expenses (income) for current taxes | (144,770,934) | (48,995,599) | (31,583,986) |
(Loss) Income from income tax | (136,126,817) | (48,365,976) | (30,246,383) |
Deferred taxes related to items charged or credited directly to the Consolidated Statement of Comprehensive Income are detailed as follows:
| For the years ended as of December 31, | ||
| 2018 | 2017 | 2016 |
| ThCh$ | ThCh$ | ThCh$ |
Net income from cash flow hedge | (16,196) | 728 | (20,648) |
Actuarial gains and losses deriving from defined benefit plans | 339,533 | (47,228) | 659,198 |
Charge to equity | 323,337 | (46,500) | 638,550 |
F-112
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Effective Rate
The Company’s income tax expense as ofDecember 31, 2018, 2017 and 2016 represents 29.71%, 24.62% and 17.80%, respectively of income before taxes. The following is reconciliation between such effective tax rate and the statutory tax rate valid in Chile.
| For the years ended as of December 31, | |||||
2018 | 2017 | 2016 | ||||
ThCh$ | Rate % | ThCh$ | Rate % | ThCh$ | Rate % | |
Income before taxes | 458,211,348 |
| 196,474,395 |
| 170,328,270 |
|
Income tax using the statutory rate | (123,717,064) | 27.00 | (50,100,971) | 25.50 | (40,878,785) | 24.00 |
Adjustments to reach the effective rate |
|
|
|
|
|
|
Tax effect of permanent differences, net | (14,596,485) | 3.19 | 4,071,180 | (2.07) | 10,357,858 | (6.10) |
Effect of change in tax rate | 23,903 | (0.01) | (50,071) | 0.03 | (856,612) | 0.50 |
Effect of tax rates in Argentina and Uruguay | 1,519,558 | (0.33) | (1,700,857) | 0.86 | (1,308,482) | 0.80 |
Prior year adjustments | 643,271 | (0.14) | (585,257) | 0.30 | 2,439,638 | (1.40) |
Income tax, as reported | (136,126,817) | 29.71 | (48,365,976) | 24.62 | (30,246,383) | 17.80 |
Deferred taxes
Deferred tax assets and liabilities included in the Consolidated Financial Statements are detailed as follows:
| As of December 31, 2018 | As of December 31, 2017 |
| ThCh$ | ThCh$ |
Deferred taxes assets |
|
|
Accounts receivable impairment provision | 1,406,961 | 1,136,789 |
Other non-tax expenses | 8,825,378 | 10,597,985 |
Benefits to staff | 3,468,874 | 3,328,263 |
Inventory impairment provision | 352,183 | 401,487 |
Severance indemnity | 6,829,816 | 6,133,014 |
Inventory valuation | 2,143,768 | 2,228,552 |
Intangibles | 241,802 | 229,725 |
Other assets | 10,639,754 | 10,436,908 |
Tax loss carryforwards | 3,782,552 | 5,858,606 |
Total assets from deferred taxes | 37,691,088 | 40,351,329 |
|
|
|
Deferred taxes liabilities |
|
|
Property, plant and equipment depreciation | 51,471,109 | 45,380,381 |
Agricultural operation expenses | 7,150,018 | 7,130,896 |
Manufacturing indirect activation costs | 5,743,496 | 5,258,290 |
Intangibles | 16,614,440 | 11,736,406 |
Land | 25,408,185 | 23,313,756 |
Other liabilities | 2,112,923 | 1,530,382 |
Total liabilities from deferred taxes | 108,500,171 | 94,350,111 |
Total | (70,809,083) | (53,998,782) |
No deferred taxes have been recorded for temporary differences between the taxes and accounting value generated by investments in subsidiaries; consequently deferred tax is not recognized for the translation adjustments or investments in joint ventures and associates.
In accordance with current tax laws in Chile, tax losses do not expire and can be applied indefinitely. Argentina, Uruguay and Paraguay tax losses expire after 5 years and Bolivia tax losses expire after 3 years.
F-113
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Changes in deferred tax assets are detailed as follows:
Movement of deferred tax | ThCh$ |
As of January 1, 2017 | (54,950,823) |
Deferred taxes from tax loss carry forwards absortion | 629,623 |
Conversion effect | 369,646 |
Deferred taxes against equity | (47,228) |
Changes | 952,041 |
As of December 31, 2017 | (53,998,782) |
As of January 1, 2018 | |
Deferred taxes related to credited items (charged) directly to equity (1) | (24,537,164) |
Deferred taxes from tax loss carry forwards absortion | 8,644,117 |
Conversion effect | (967,300) |
Deferred taxes against equity | 339,533 |
Other deferred movements taxes | (289,487) |
Changes | (16,810,301) |
As of December 31, 2018 | (70,809,083) |
(1) Corresponds to the financial effect of the application IAS 29 "Financial reporting in hyperinflationary economies”. SeeNote 4 - Accounting changes, letter b).
On September 29, 2014 Act No. 20,780 was published in Chile, regarding the so called “Tax reform” which introduces amendments, among others, to the Income tax system. The said Act provides that corporations will apply by default the "Partially Integrated System", unless a future Extraordinary Shareholders Meeting agrees to opt for the "Attributed Income Regime”. The Act provides for the "Partially Integrated System" a gradual increase in the First Category Income tax rate, going from 20% to 21% for the business year 2014, to 22.5% for the business year 2015, to 24% for the business year 2016, to 25.5% for the business year 2017 and to 27% starting 2018 business year.
Additionaly, in Argentina a Tax Reform No. 27,430 was approved by the government, which, amongst other measures, increases the excise tax on several beverages, including beer from 8% to 14% on the producer price, that applies as of March 1st, 2018, and also gradually reduces for the reporting year 2018 the corporate income tax rate from 35% to 25% (30% for the year 2018 and 2019, and 25% as the year 2020). The effects as of December 31st, 2017 were recognized, without affecting significantly the Consolidated Financial Statements. Additionally, on earnings distributed as dividends a retention will apply that will gradually increase from 0% to 13% (7% for the year 2018 and 2019, and 13% as the year 2020), applicable as of the reporting results 2018.
This law also provides an option to revalue fixed assets excluding vehicles, on their values as of December 31, 2017, and it must be applied to all assets that belong to the same category. This revaluation can then be deducted as depreciation or as a tax cost when the good is sold. In the case of annual recurring depreciation, the remaining useful life of the assets to be re-evaluated can never be less than 5 years. In the case of sale in the first two years, the value of the revaluation to be considered is reduced by 60% (first year) or 30% (second year). These revalued assets will also be updated by inflation beginning from January 2018. In order to qualify for this benefit, a special tax must be paid on the revaluation value for December 31, 2017, with a rate ranging from 8% to 10%, depending on the category to which the revalued asset belongs. The Company has decided to use this option. As a result of the above, the Company has determined to record, in these Consolidated Financial Statements, a Net gain equivalent to ThCh$ 6,821,753.
F-114
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
The Company grants short term and employment termination benefits as part of its compensation policies.
The Parent Company and its subsidiaries maintainhave collective agreements with their employees, which establish the compensation and/or short–term and long-term benefits for their staff, the main features of which are described below:
i. §Short-term benefits are generally based on combined plans or agreements, designed to compensate benefits received, such as paid vacation, annual performance bonuses and compensation through annuities.
ii. §Long-term benefits are plans or agreements mainly intended to cover the post-employment benefits generated at the end of the labour relationship, be it by voluntary resignation or death of personnel hired.
The cost of such benefits is charged against income, in the “Personnel Expense” item.
As ofDecemberofDecember 31, 20152018 and 2014,2017, the total staff benefits recorded in the Consolidated Statement of Financial Position is detaileds as follows:
|
As of December 31, 2018 | As of December 31, 2017 | |||||
As of December 31, 2015 | As of December 31, 2014 | Current | Non current | Current | Non current | |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ||
Short term benefits | 21,617,103 | 17,943,771 | 31,600,044 | - | 26,050,387 | - |
Employment termination benefits | 19,043,559 | 17,437,222 | 194,119 | 26,901,088 | 182,106 | 23,517,009 |
Total | 40,660,662 | 35,380,993 | 31,794,163 | 26,901,088 | 26,232,493 | 23,517,009 |
Current | 21,712,059 | 17,943,771 | ||||
Non-current | 18,948,603 | 17,437,222 | ||||
Total | 40,660,662 | 35,380,993 |
Short-term benefits are mainly comprised of recorded vacation (on accruals basis), bonuses and share compensation. Such benefits are recorded when the obligation is accrued and are usually paid within a 12-month periods, consequently, they are not discounted.
As ofDecember 31, 2015 and 2014, theThe total short-term benefits recorded in the Consolidated Statement of Financial Position are detailed as follows:
Short-Term Employees’ Benefits | As of December 31, 2015 | As of December 31, 2014 | As of December 31, 2018 | As of December 31, 2017 |
ThCh$ | ThCh$ | |||
Vacation | 8,442,610 | 7,856,572 | 10,518,298 | 9,932,727 |
Bonus and compensation | 13,174,493 | 10,087,199 | 21,081,746 | 16,117,660 |
Total | 21,617,103 | 17,943,771 | 31,600,044 | 26,050,387 |
The Company records the staff vacation cost on an accrual basis.
The Company records a liability for the payment of an irrevocable severance indemnity, originated by collective and individual agreements entered into with certain groups of employees. Such obligation is determined by means of the current value of the benefit accrued cost, a method that considers several factors for the calculation such as estimates of future continuance, mortality rates, future salary increases and discount rates. The Company periodically evaluates the above-mentioned factors based on historical data and future projections, making adjustments that apply when checking changes sustained trend. The so-determined value is presented at the current value by using the severance benefits accrued method. The discount rate is determined by reference to market interest rates curves for high quality entrepreneurial bonds. The discount rate in Chile was 6.36% (6.00%5,69% (5,96% in 2014)2017) and in Argentina 39.26% (42.43%34,62% (24,55% in 2014)2017).
As ofDecember 31, 2015, the obligation recorded for severance indemnity is as follows:
Severance Indemnity | As of December 31, 2015 | As of December 31, 2014 |
ThCh$ | ThCh$ | |
Current | 94,956 | - |
Non-current | 18,948,603 | 17,437,222 |
Total | 19,043,559 | 17,437,222 |
F-115
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
The obligation recorded for severance indemnity is detailed as follows:
Severance Indemnity | As of December 31, 2018 | As of December 31, 2017 |
ThCh$ | ThCh$ | |
Current | 194,119 | 182,106 |
Non-current | 26,901,088 | 23,517,009 |
Total | 27,095,207 | 23,699,115 |
The change in the severance indemnity during the year ended as of December 31, 2014 and 2015 wasis detailed as follows:
Severance Indemnity |
|
ThCh$ | |
Balance as of January 1, |
|
Current cost of service |
|
Interest cost |
|
Actuarial |
|
Paid-up benefits |
|
Past service cost |
|
|
|
Others |
|
|
|
As of December 31, |
|
Current cost of service |
|
Interest cost |
|
Actuarial |
|
Paid-up benefits |
|
Past service cost |
|
From combinations (1) | 776,718 |
Conversion effect | (1,281,341) |
Others |
|
|
|
As of December 31, |
|
(1)SeeNote 15 – Business combinations, letter a).
The figures recorded in the Consolidated Statement of Income, as ofDecember 31, 2015, 2014 and 2013, are detailed as follows:
Expense recognized for severance indemnity | For the years ended as of December 31, | For the years ended as of December 31, | ||||
2015 | 2014 | 2013 | 2018 | 2017 | 2016 | |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |||
Current cost of service | 1,023,969 | 601,053 | 607,443 | 2,154,071 | 1,942,099 | 1,650,484 |
Past service cost | 131,204 | 1,090,429 | 430,120 | 306,746 | 604,337 | 342,039 |
Non-provided paid benefits | 4,377,570 | 5,916,192 | 2,860,262 | 6,547,694 | 6,023,869 | 7,851,201 |
Other | 646,501 | 335,808 | 1,333,466 | 175,005 | 269,377 | 1,114,112 |
Total expense recognized in Consolidated Statement of Income | 6,179,244 | 7,943,482 | 5,231,291 | 9,183,516 | 8,839,682 | 10,957,836 |
F-116
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Actuarial Assumptions
As mentioned inNote 2.202 - Summary of significant accounting policies, 2.20– Employees’ Benefits, the severance payment obligation is recorded at its actuarial value. The main actuarial assumptions used for the calculation of the severance indemnity obligation as ofDecember 31, 2015 and 2014, are detailed as follows:
Actuarial Assumptions | Chile | Argentina | ||||
As of December 31, | As of December 31, | As of December 31, | As of December 31, | |||
2015 | 2014 | 2015 | 2014 | |||
Mortality table | RV-2004 | RV-2004 | Gam'83 | Gam'83 | ||
Annual interest rate | 6.36% | 6.00% | 39.26% | 42.43% | ||
Voluntary employee turnover rate | 1.9% | 1.9% | n/a | n/a | ||
Company’s needs rotation rate | 5.3% | 5.3% | n/a | n/a | ||
Salary increase | 3.7% | 3.7% | 36.35% | 36.35% | ||
| Officers |
| 60 | 60 | 60 | 60 |
Estimated retirement age for | Other | Male | 65 | 65 | 65 | 65 |
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| Female | 60 | 60 | 60 | 60 |
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Actuarial Assumptions | Chile | Argentina | |||||
As of December 31, 2018 | As of December 31, 2017 | As of December 31, 2018 | As of December 31, 2017 | ||||
Mortality table | RV-2014 | RV-2014 | Gam,83 | Gam '83 | |||
Annual interest rate | 5,69% | 5,96% | 34,62% | 24,55% | |||
Voluntary employee turnover rate | 1,9% | 1,9% | "ESA 77 Ajustada" - 50% | "ESA 77 Ajustada" - 50% | |||
Company’s needs rotation rate | 5,3% | 5,3% | "ESA 77 Ajustada" - 50% | "ESA 77 Ajustada" - 50% | |||
Salary increase (*) | 3,7% | 3,7% | 28,27% | 18,68% | |||
Estimated retirement age for (*) | Officers |
| 60 | 60 | 60 | 60 | |
Other | Male | 65 | 65 | 65 | 65 | ||
Female | 60 | 60 | 60 | 60 |
(*)Average of the Company.
Sensitivity Analysis
The Following is a sensitivity analysis based on increased (decreased) of 1 percent on the discount rate:
Sensitivity Analysis | As of December 31, 2015 | As of December 31, 2014 | As of December 31, 2018 | As of December 31, 2017 |
ThCh$ | ThCh$ | |||
1% increase in the Discount Rate (Gain) | 1,164,165 | 1,073,272 | 1,623,794 | 1,457,410 |
1% decrease in the Discount Rate (Loss) | (1,344,213) | (1,245,219) | (1,880,258) | (1,684,968) |
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Personnel expense
The amounts recorded in the Consolidated Statement of Income for the years endedare detailed as ofDecember 31, 2015, 2014 and 2013, are as follows:
Personal expense | For the years ended as of December 31, | For the years ended as of December 31, | ||||
2015 | 2014 | 2013 | 2018 | 2017 | 2016 | |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |||
Salaries | 138,359,074 | 119,623,310 | 108,611,206 | 159,246,822 | 151,944,702 | 145,766,757 |
Employees’ short-term benefits | 24,693,325 | 18,128,043 | 19,887,127 | 31,528,110 | 27,588,955 | 23,189,206 |
Total expenses for short-term employee benefits | 190,774,932 | 179,533,657 | 168,955,963 | |||
Employments termination benefits | 6,179,245 | 7,943,482 | 5,231,291 | 9,183,516 | 8,839,682 | 10,957,836 |
Other staff expense | 28,683,507 | 23,636,629 | 21,280,818 | 32,183,184 | 32,485,170 | 30,971,754 |
Total (1) | 197,915,151 | 169,331,464 | 155,010,442 | 232,141,632 | 220,858,509 | 210,885,553 |
(1)See Note 1029 – Natures of cost and expense.
Note 32F-Non-controlling Interests
The detail of Non-controlling Interests is the following:
a.Equity117
Equity | As of December 31, 2015 | As of December 31, 2014 |
ThCh$ | ThCh$ | |
Viña San Pedro Tarapacá S.A. | 72,512,897 | 69,856,322 |
Bebidas del Paraguay S.A. | 20,403,140 | 21,903,962 |
Aguas CCU-Nestlé Chile S.A. | 19,891,176 | 16,389,004 |
Compañía Cervecera Kunstmann S.A. | 4,979,490 | 4,424,495 |
Compañía Pisquera de Chile S.A. | 4,699,612 | 4,653,894 |
Manantial S.A. | 3,767,028 | 3,353,256 |
Saenz Briones & Cía. S.A. | 962,286 | 1,145,657 |
Distribuidora del Paraguay S.A. | 1,949,490 | 701,002 |
Los Huemules S.R.L. | 395,469 | 116,892 |
Sidra La Victoria S.A. | - | 1,166 |
Others | 145,185 | 366,091 |
Total | 129,705,773 | 122,911,741 |
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
The total Other non-financial liabilities are detailed as follows:
| As of December 31, 2018 | As of December 31, 2017 |
| ThCh$ | ThCh$ |
Parent dividend provisioned by the board | 51,730,402 | 25,865,201 |
Parent dividend provisioned according to policy | 101,714,994 | 38,938,475 |
Outstanding parent dividends | 684,158 | 709,790 |
Subsidiaries dividends according to policy | 7,502,145 | 8,758,691 |
Total dividends payable | 161,631,699 | 74,272,157 |
Income received in advance (1) | 2,497,811 | - |
Others | 426,030 | 26,142 |
Total | 164,555,540 | 74,298,299 |
Current | 164,555,540 | 74,298,299 |
Total | 164,555,540 | 74,298,299 |
b.(1) ResultSeeNote 1 – General information, letter C).
| For the years ended as of December 31, | ||
Result | 2015 | 2014 | 2013 |
| ThCh$ | ThCh$ | ThCh$ |
Aguas CCU-Nestlé Chile S.A. | 7,052,867 | 5,408,750 | 4,870,501 |
Viña San Pedro Tarapacá S.A. | 9,182,843 | 6,003,439 | 3,319,366 |
Compañía Cervecera Kunstmann S.A. | 1,267,335 | 966,212 | 1,022,346 |
Manantial S.A. | 861,072 | 684,427 | 587,119 |
Compañía Pisquera de Chile S.A. | 592,506 | 889,482 | 765,624 |
Saenz Briones & Cía. S.A. | 128,407 | (58,433) | (733,068) |
Distribuidora del Paraguay S.A. | 1,144,911 | 429,527 | - |
Bebidas del Paraguay S.A. | (486,790) | 253,516 | - |
Los Huemules S.R.L. | (45,370) | (48,171) | (12,624) |
Sidra La Victoria S.A. | - | 175 | 123 |
Others | 19,674 | 24,547 | 49,156 |
Total | 19,717,455 | 14,553,471 | 9,868,543 |
Subscribed and paid-up Capital
The Extraordinary Shareholders´Meeting held on June 18, 2013, resolved to increase the capital of the Company in the amount of ThCh$ 340,000,000, through the issuance of 51,000,000 shares of common stock. Such shares are to be issued and paid within a period of 3 years as from June 18, 2013. Also, the Board of Directors, in accordance with the powers granted by the Extraordinary Shareholders´ Meeting, determined the price at which these shares were to be offered. Additionally, the above Extraordinary Shareholders´ Meeting agreed to recognize as part of the Paid-in Capital (Common Stock) the share premium for an amount of ThCh$ 15,479,173. Therefore, the Company´s capital, including the referred capital increase, amounts to ThCh$ 571,019,592, divided into 369,502,872 shares of common stock, without face value, which has been subscribed and paid and shall be subscribe and paid as follows:
-ThCh$ 231,019,592, divided into 318,502,872 shares, fully subscribed and paid prior to the date of the Extraordinary Shareholders´ Meeting.
-ThCh$ 340,000,000, divided into 51,000,000 shares, to be subscribed and paid.
On July 23, 2013 the Superintendencia de Valores y Seguros authorized the registration of such shares.
Subsequently, the Board of Director at the meeting held on September 12, 2013, set in $ 6,500 per share the price of the 51,000,000 shares to be placed during the preemptive-rights period, which extended from September 13 to October 12, 2013.
As of December 31, 2013, the referred capital increase has been fully subscribed and paid, amounting toThCh$ 331,673,754 and generated share premium and issuance and placement costs for ThCh$ 45,176 andThCh$ 5,055,392, respectively, which are net recorded under item "Other reserves", in Equity. Any difference between the issuance and placement costs of shares must be recognized as a less paid-in capital in the next Extraordinary Shareholders´ Meeting that modifies the capital of the company.
As of December 31, 20152018, December 31, 2017 and December 31, 2014,2016, the Company’s capital shows a balance of ThCh$ 562,693,346, divided into 369,502,872 shares of common stock without face value, entirely subscribed and paid-up. The Company has issued only one series of common shares. Such common shares are registered for trading at the Santiago Stock Exchange and the Chilean Electronic Stock Exchange and the Valparaíso Stock Exchange, and at the New York Stock Exchange /NYSE), evidenced by ADS (American DepositaryDeposcitary Shares), with an equivalence of two shares per ADS ((SeeSee Note 1 – General information).
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The Company has not issued any others shares or convertible instruments during the period, thus changing the number of outstanding shares as of December 31, 20152018 and 2014.2017 and 2016.
Capital Management
The main purpose, when managing shareholder’s capital, is to maintain an adequate credit risk profile and a healthy capital ratio, allowing the access of the Company to the capitals market for the development of its medium and long term purposes and, at the same time, to maximize shareholder’s return.
Income per share
The basic income per share is calculated as the ratio between the net income (loss) of the term corresponding to shares holders and the weighted average number of valid outstanding shares during such term.
The diluted earnings per share is calculated as the ratio between the net income (loss) for the period attributable to shares holders and the weighted average additional common shares that would have been outstanding if it had become all ordinary potential dilutive shares.
F-118
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
The information used for the calculation of the income as per each basic and diluted share is as follows:
Income per share | For the years ended as of December 31, | ||
2018 | 2017 | 2016 | |
Equity holders of the controlling company (ThCh$) | 306,890,792 | 129,607,353 | 118,457,488 |
Weighted average number of shares | 369,502,872 | 369,502,872 | 369,502,872 |
Basic income per share (in Chilean pesos) | 830.55 | 350.76 | 320.59 |
Equity holders of the controlling company (ThCh$) | 306,890,792 | 129,607,353 | 118,457,488 |
Weighted average number of shares | 369,502,872 | 369,502,872 | 369,502,872 |
Diluted income per share (in Chilean pesos) | 830.55 | 350.76 | 320.59 |
As of December 31, 2018, 2017 and 2016, the Company has not issued any convertible or other kind of instruments creating diluting effects.
Distributable net income
In accordance with Circular No 1945 from the CMF on November 4, 2009, the Board of Directors agreed that the net distributable income for the year 2009 will be that reflected in the financial statements attributable to equity holders of the parents,without adjusting it. The above agreement remains in effect for the year ended December 31, 2018.
Dividends
The Company’s dividends policy consists of annually distributing at least 50% of the net distributable profit of the year.
As of December 31, 2018, 2017 and 2016, the Company has distributed the following dividends:
Dividend Nº | Payment Date | Type of Dividend | Dividends per Share ($Ch) | Related to FY |
250 | 01-06-2017 | Interim | 66.0000 | 2015 |
251 | 04-26-2017 | Final | 97.47388 | 2015 |
252 | 01-05-2018 | Interim | 66.0000 | 2016 |
253 | 04-26-2018 | Final | 110.32236 | 2016 |
254 | 01-05-2018 | Interim | 70.0000 | 2017 |
255 | 04-26-2018 | Final | 108.88833 | 2017 |
256 | 01-04-2019 | Interim | 140.0000 | 2018 |
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On December 1, 2015, at the Ordinary Board Director Meeting it was agreed to pay the interim Dividend No. 250, amounting to ThCh$ 24,387,190 corresponding to Ch$66 per share. This dividend was paid on January 8, 2016.
On April 13, 2016, at the Shareholders Meeting it was agreed to pay the final Dividend No. 251, amounting toThCh$ 36,016,878 corresponding to Ch$ 97.47388 per share. This dividend was paid on April 22, 2016.
On December 6, 2016, at the Ordinary Board Director Meeting it was agreed to pay the interim Dividend No. 252, amounting to ThCh$ 24,387,190 corresponding to Ch$ 66 per share. This dividend was paid on January 6, 2017.
On April 12, 2017, at the Shareholders Meeting it was agreed to pay the final Dividend No. 253, amounting toThCh$ 40,764,427 corresponding to the 34.41% of Net income attibutable to Equity holders of the parent, equivalent to Ch$ 110.32236 per share. This dividend was paid on April 26, 2017.
On December 6, 2017, at the Ordinary Board Director Meeting it was agreed to pay the interim Dividend No. 254, amounting to ThCh$ 25,865,201 corresponding to Ch$ 70 per share. This dividend was paid on January 5, 2018.
F-119
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
On April 11, 2018, at the Shareholders Meeting it was agreed to pay the final Dividend No. 255, amounting toThCh$ 40,234,551 corresponding to the 31.04% of Net income attibutable to Equity holders of the parent, equivalent to Ch$ 108.88833 per share. This dividend was paid on April 26, 2018.
On December 5, 2018, at the Ordinary Board Director Meeting it was agreed to pay the interim Dividend No. 256, amounting to ThCh$ 51,730,402 corresponding to Ch$ 140 per share. This dividend was paid on January 4, 2019.
Consolidated Statement of Comprehensive Income
As of December 31, 2015, 2014 and 2013, the detail of the comprehensiveComprehensive income and expense of the term isexpenses are detailed as follows:
Other Income and expense charged or credited against net equity | Gross Balance | Tax | Net Balance | Gross Balance | Tax | Net Balance |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ||
Cash flow hedge (1) | 80,693 | (17,563) | 63,130 | |||
Conversion differences of international subsidiaries (1) | (29,678,944) | - | (29,678,944) | |||
Actuarial gains and losses on defined benefit plans reserves | (939,433) | 314,541 | (624,892) | |||
Total comprehensive income as of december 31, 2015 | (30,537,684) | 296,978 | (30,240,706) | |||
Gains (losses) on cash flow hedges (1) | 63,008 | (16,196) | 46,812 | |||
Gains (losses) on exchange differences on translation (1) | 37,990,079 | - | 37,990,079 | |||
Reserve of Actuarial gains and losses on defined benefit plans | (1,263,781) | 339,533 | (924,248) | |||
Total comprehensive income As of December 31, 2018 | 36,789,306 | 323,337 | 37,112,643 | |||
Other Income and expense charged or credited against net equity | Gross Balance | Tax | Net Balance | |||
ThCh$ | ThCh$ | |||||
Gains (losses) on cash flow hedges (1) | (5,661) | 728 | (4,933) | |||
Gains (losses) on exchange differences on translation (1) | (34,786,480) | - | (34,786,480) | |||
Reserve of Actuarial gains and losses on defined benefit plans | 19,669 | (47,228) | (27,559) | |||
Total comprehensive income As of December 31, 2017 | (34,772,472) | (46,500) | (34,818,972) | |||
Other Income and expense charged or credited against net equity | Gross Balance | Tax | Net Balance | Gross Balance | Tax | Net Balance |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ||
Cash flow hedge (1) | (155,258) | 39,470 | (115,788) | 84,962 | (20,648) | 64,314 |
Conversion differences of international subsidiaries (1) | (4,629,683) | - | (4,629,683) | |||
Actuarial gains and losses on defined benefit plans reserves | (1,884,054) | 501,689 | (1,382,365) | |||
Total comprehensive income as of december 31, 2014 | (6,668,995) | 541,159 | (6,127,836) | |||
Other Income and expense charged or credited against net equity | Gross Balance | Tax | Net Balance | |||
ThCh$ | ThCh$ | ThCh$ | ||||
Cash flow hedge (1) | 256,592 | (51,304) | 205,288 | |||
Conversion differences of international subsidiaries (1) | (17,054,187) | - | (17,054,187) | |||
Actuarial gains and losses on defined benefit plans reserves | (469,987) | 105,151 | (364,836) | |||
Total comprehensive income As of December 31, 2013 | (17,267,582) | 53,847 | (17,213,735) | |||
Conversion differences of subsidiaries abroad | (27,280,176) | - | (27,280,176) | |||
Reserve of Actuarial gains and losses on defined benefit plans | (2,355,384) | 659,198 | (1,696,186) | |||
Total comprehensive income As of December 31, 2016 | (29,550,598) | 638,550 | (28,912,048) |
(1) These concepts will be reclassified to the Statement of Income when itsit’s settled.
Income per shareThe movement of comprehensive income and expense is detailed as follows:
The basic income per share is calculated as the ratio between the net income (loss)a)As of the term corresponding to shares holders and the weighted average number of valid outstanding shares during such term.December 31, 2018:
Changes | Reserve of exchange differences on translation | Reserve of cash flow hedges | Reserve of Actuarial gains and losses on defined benefit plans | Total other reserves | |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | ||
Conversion of joint ventures and foreign subsidiaries | (55,755,054) | 63,008 | (1,263,781) | (56,955,827) | |
Deferred taxes | - | (16,196) | 339,533 | 323,337 | |
Inflation adjustment of subsidiaries in Argentina | 93,745,133 | - | - | 93,745,133 | |
Total changes in equity | 37,990,079 | 46,812 | (924,248) | 37,112,643 | |
Equity holders of the parent | 35,487,433 | 51,944 | (882,063) | 34,657,314 | |
Non-controlling interests | 2,502,646 | (5,132) | (42,185) | 2,455,329 | |
Total changes in equity | 37,990,079 | 46,812 | (924,248) | 37,112,643 |
The diluted earnings per share is calculated as the ratio between the net income (loss) for the period attributable to shares holders and the weighted average additional common shares that would have been outstanding if it had become all ordinary potential dilutive shares.
F-120
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
As of December 31, 2015, 2014 and 2013, the information used for the calculation of the income as per each basic and diluted share is as follows:
Income per share | For the years ended as of December 31, | ||||
2015 | 2014 | 2013 | |||
Equity holders of the controlling company (ThCh$) | 120,808,135 | 106,238,450 | 123,036,008 | ||
Weighted average number of shares | 369,502,872 | (1) | 369,502,872 | (2) | 331,806,416 |
Basic and diluted income per share (in Chilean pesos) | 326.95 | 287.52 | 370.81 | ||
Equity holders of the controlling company (ThCh$) | 120,808,135 | 106,238,450 | 123,036,008 | ||
Weighted average number of shares | 369,502,872 | 369,502,872 | (3) | 346,028,899 | |
Basic and diluted income per share (in Chilean pesos) | 326.95 | 287.52 | 355.57 |
(1)Determined considering 369,502,872 shares outstanding on December 31, 2015 and 2014.
(2)Determined considering 331,806,416 shares, equivalents to 318,502,872 shares outstanding on December 31, 2012, plus the weighted average of permanence of shares paid due to increase of capital described in this Note.
(3)Determined considering 346,028,899 shares, equivalents to 318,502,872 shares outstanding on December 31, 2012, plus the weighted average of permanence of shares issued due to increase of capital described in this Note.
As of December 31, 2015, 2014 and 2013, the Company has not issued any convertible or other kind of instruments creating diluting effects.
Distributable net Income
In accordance with Circular No 1945 from the SVS on November 4, 2009, the Board of Directors agreed that the net distributable profit for the year 2009 will be that reflected in the financial statements attributable to equity holders of the parents,without adjustment it. The above agreement remains in effect for the year ended December 31, 2015.
Dividends
The Company’s dividend policy consists of annually distributing at least 50% of the net distributable profit of the year.
As of December 31, 2015, 2014 and 2013, the Company has distributed the following dividends, either or final:
Dividend Nº | Payment Date | Type of Dividend | Dividends per Share | Related to FY |
245 | 19-04-2013 | Final | 116.64610 | 2012 |
246 | 10-01-2014 | Interim | 63.00000 | 2013 |
247 | 17-04-2014 | Final | 103.48857 | 2013 |
248 | 09-01-2015 | Interim | 63.00000 | 2014 |
249 | 23-04-2015 | Final | 98.78138 | 2014 |
250 | 08-01-2016 | Interim | 66.00000 | 2015 |
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On April 9, 2013, at the General Shareholders Meeting it was agreed to pay the final Dividend No. 245, amounting to ThCh$ 37,150,685 corresponding to $ 116.64610 per share. This dividend was paid on April 19, 2013.
On April 9, 2014, at the General Shareholders Meeting it was agreed to pay the final Dividend No. 247, amounting to ThCh$ 38,239,323 corresponding to $ 103.48857 per share. This dividend was paid on April 17, 2014.
On April 15, 2015, at the General Shareholders Meeting it was agreed to pay the final Dividend No. 249, amounting to ThCh$ 36,500,004 corresponding to $ 98.78138 per share. This dividend was paid on April 23, 2015.
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b)As of December 31, 2017:
Changes | Reserve of exchange differences on translation | Reserve of cash flow hedges | Reserve of Actuarial gains and losses on defined benefit plans | Total other reserves | |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | ||
Conversion of joint ventures and foreign subsidiaries | (34,786,480) | (5,661) | 19,669 | (34,772,472) | |
Deferred taxes | - | 728 | (47,228) | (46,500) | |
Total changes in equity | (34,786,480) | (4,933) | (27,559) | (34,818,972) | |
Equity holders of the parent | (32,982,829) | (10,837) | (32,794) | (33,026,460) | |
Non-controlling interests | (1,803,651) | 5,904 | 5,235 | (1,792,512) | |
Total changes in equity | (34,786,480) | (4,933) | (27,559) | (34,818,972) |
c)As of December 31, 2016:
Changes | Reserve of exchange differences on translation | Reserve of cash flow hedges | Reserve of Actuarial gains and losses on defined benefit plans | Total other reserves | |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | ||
Conversion of joint ventures and foreign subsidiaries | (27,280,176) | (399,559) | (2,355,384) | (30,035,119) | |
Deferred taxes | - | 89,983 | 659,198 | 749,181 | |
Reclassification to the result by function | - | 484,521 | - | 484,521 | |
Reclassification of deferred taxes related to other reserves | - | (110,631) | - | (110,631) | |
Total changes in equity | (27,280,176) | 64,314 | (1,696,186) | (28,912,048) | |
Equity holders of the parent | (25,123,546) | 41,607 | (1,623,299) | (26,705,238) | |
Non-controlling interests | (2,156,630) | 22,707 | (72,887) | (2,206,810) | |
Total changes in equity | (27,280,176) | 64,314 | (1,696,186) | (28,912,048) |
Other Reserves
The reserves that are a part of the Company’s equity are as follows:
Currency Translation Reserves: This reserve originated mainly from the translation of foreign subsidiaries’ and joint ventures financial statements which functional currency is different from the presentation currency of the Consolidated Financial Statements.Statements and inflation adjustment of subsidiaries in Argentina. As of December 31, 2015,2018, 2017 and 2016, it amounts to a negative reserve of ThCh$ 95,435,386 (ThCh$ 67,782,858 in 2014118,054,328 ThCh$ 153,541,761 and
ThCh$60,084,197 in 2013). 120,558,932, respectively.
Hedge reserve: This reserve originated from the hedge accounting application of financial liabilities for.liabilities. The reserve is reversed at the end of the hedge agreement, or when the transaction ceases qualifying hedge accounting, whichever is first. The reserve effects are transferred to income. As of December 31, 2015,2018, 2017 and 2016, it amounts to a negative reserve ofThCh$ 2,526 (ThCh$ 43,370 in 2014 and positive reserve of ThCh$ 65,109 in 2013),80,188, ThCh$ 28,244 and ThCh$ 39,081 respectively, net of deferred taxes.
Actuarial gains and losses on defined benefit plans reserves: This reserve originates from January 1, 2013, due applicationAs of December 31, 2018, 2017 and 2016 the amendment to IAS 19. The amount recorded is a negative reserve of ThCh$ 2,302,418 (ThCh$ 1,712,687 in 20144,840,574, ThCh$ 3,958,511 and ThCh$ 348,673 in 2013),3,925,717, respectively, net of deferred taxes.
Other reserves: As of December 31, 2015, 20142018, 2017 and 20132016 the amount is a negative reserve of ThCh$ 5,486,086,
28,233,512, ThCh$ 5,511,62920,603,251 and ThCh$5,514,048, 18,527,810, respectively. Such reserves relate mainly to the following concepts:
- Adjustment due to re-assessment of fixed assets carried out in 1979.1979 (increased for ThCh$ 4,087,396).
- Price level restatement of paid-up capital registered as of December 31, 2008, according to SVSCMF Circular Letter Nª456.456 (decreased for ThCh$ 17,615,333).
- Difference in purchase of shares of the subsidiary Viña San Pedro Tarapacá S.A. made during year 2012 and 2013 (Note 1)(decreased for ThCh$ 9,779,475).
- Difference in purchase of shares of the subsidiary Manantial S.A. made during year 2016 (decreased for ThCh$ 7,801,153).
F-121
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
- | Difference in purchase of shares of the Alimentos Nutrabien S.A. made during year 2016 (decreased for ThCh$ 5,426,209). On December 17, 2018 Food's and subsidiary CCU Inversiones S.A. sold their participation over Alimentos Nutrabien S.A. The aforehead effect was accounted in result of the exercise. |
- | Difference in purchase of shares of the subsidiary Viña San Pedro Tarapacá S.A. made during year 2018 and 2017 (decreased for ThCh$ 13,054,114 and ThCh$ 2,075,441, respectively). |
Non-controlling Interests are detailed as follows:
a.Equity
Equity | As of December 31, 2018 | As of December 31, 2017 |
ThCh$ | ThCh$ | |
Viña San Pedro Tarapacá S.A. | 39,007,270 | 72,189,322 |
Bebidas del Paraguay S.A. | 18,803,673 | 17,624,239 |
Aguas CCU-Nestlé Chile S.A. | 24,118,966 | 20,347,714 |
Cervecería Kunstmann S.A. | 8,118,212 | 6,684,320 |
Compañía Pisquera de Chile S.A. | 5,109,395 | 4,898,600 |
Saenz Briones & Cía. S.A.I.C. | 1,179,410 | 680,303 |
Distribuidora del Paraguay S.A. | 4,445,452 | 2,806,825 |
Bebidas Bolivianas BBO S.A. (1) | 7,075,032 | - |
Other | 1,131,825 | 520,228 |
Total | 108,989,235 | 125,751,551 |
(1)SeeNote 15 – Business combinations, letter a).
b.Result
| For the years ended as of December 31, | ||
Result | 2018 | 2017 | 2016 |
| ThCh$ | ThCh$ | ThCh$ |
Aguas CCU-Nestlé Chile S.A. | 7,587,140 | 7,814,358 | 8,377,672 |
Viña San Pedro Tarapacá S.A. | 2,520,768 | 6,223,423 | 9,887,477 |
Cervecería Kunstmann S.A. | 2,772,074 | 1,979,976 | 1,636,906 |
Compañía Pisquera de Chile S.A. | 1,154,401 | 954,046 | 790,152 |
Saenz Briones & Cía. S.A.I.C. | 42,787 | 33,027 | 11,184 |
Distribuidora del Paraguay S.A. | 1,431,158 | 906,728 | 255,683 |
Bebidas del Paraguay S.A. | 210,568 | 580,406 | 576,986 |
Bebidas Bolivianas BBO S.A. (1) | (552,816) | - | - |
Other | 27,659 | 9,102 | 88,339 |
Total | 15,193,739 | 18,501,066 | 21,624,399 |
(1)SeeNote 15 – Business combinations, letter a).
F-122
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
c.The Summarized financial information of non controlling interest is detailed as follows:
| As of December 31, 2018 | As of December 31, 2017 |
| ||
| ||
| ||
| ThCh$ | ThCh$ |
Assets and Liabilities | ||
Current assets | 711,482,809 | 610,476,810 |
Non-currente assets | 829,511,196 | 746,352,848 |
Current liabilities | 399,409,388 | 337,171,241 |
Non-current liabilities | 149,602,171 | 159,841,007 |
|
|
|
Dividends paid | 3,212,105 | 10,150,528 |
|
|
|
The main significant Non-controlling interest is represented by Viña San Pedro Tarapacá S.A. with the following balances:
| As of December 31, 2018 | As of December 31, 2017 |
| ||
Assets and Liabilities | ||
| ||
| ThCh$ | ThCh$ |
Assets and Liabilities | ||
Current assets | 156,118,074 | 141,114,944 |
Non-currente assets | 185,841,247 | 174,184,006 |
Current liabilities | 80,877,682 | 63,872,711 |
Non-current liabilities | 31,550,148 | 31,221,369 |
|
|
|
| For the years ended as of December 31, | ||
Result | 2018 | 2017 | 2016 |
| ThCh$ | ThCh$ | ThCh$ |
Net sales | 206,518,731 | 204,453,782 | 201,402,052 |
Net income of year | 14,833,018 | 17,715,119 | 28,021,996 |
|
|
|
|
Dividends paid by Viña San Pedro Tarapacá S.A. amounted to ThCh$ 9,070,285, ThCh$ 13,602,317 and ThCh$ 17,682,375, for the years ended December 31, 2018, 2017 and 2016, respectively.
F-123
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Operational cost and expenses grouped by nature are detailed as follows:
| For the years ended as of December 31, | ||
Costs and expenses by nature | 2018 | 2017 | 2016 |
| ThCh$ | ThCh$ | ThCh$ |
Direct cost | 650,386,343 | 586,223,676 | 540,692,964 |
Personnel expense (1) | 232,141,632 | 220,858,509 | 210,885,553 |
Transportation and distribution | 243,907,283 | 235,265,049 | 230,047,942 |
Advertising and promotion | 118,003,908 | 129,603,036 | 105,938,586 |
Depreciation and amortization | 93,289,194 | 92,199,504 | 83,528,045 |
Materials and maintenance | 46,610,947 | 46,172,647 | 47,102,582 |
Energy | 29,309,465 | 25,940,847 | 24,444,163 |
Leases | 17,727,367 | 15,929,047 | 16,294,896 |
Other expenses | 111,639,503 | 117,992,179 | 104,455,411 |
Total | 1,543,015,642 | 1,470,184,494 | 1,363,390,142 |
(1)See Note 25 - Employee benefits.
Other income by function is detailed as follows:
For the years ended as of December 31, | |||
2018 | 2017 | 2016 | |
ThCh$ | ThCh$ | ThCh$ | |
Sales of fixed assets | 2,464,820 | 1,641,317 | 2,605,720 |
Lease expense | 266,335 | 535,555 | 382,934 |
Sale of glass | 731,111 | 1,334,123 | 549,787 |
Claims recovery | 831,230 | 761,290 | 589,396 |
Advance term license (1) | 213,400,487 | - | - |
Other | 10,761,071 | 2,445,617 | 1,016,317 |
Total | 228,455,054 | 6,717,902 | 5,144,154 |
(1)See brands inNote 1 – General information, letter C).
F-124
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Other gains (losses) items are detailed as follows:
Other gain and (loss) | For the years ended as of December 31, | ||
2018 | 2017 | 2016 | |
ThCh$ | ThCh$ | ThCh$ | |
Results derivative contracts (1) | 5,108,327 | (8,010,204) | (10,134,414) |
Marketable securities to fair value | (132,420) | 293,413 | 84,133 |
Other | (946,280) | - | 1,704,374 |
Total | 4,029,627 | (7,716,791) | (8,345,907) |
(1)Under this concept the Company (payment) or received cash flows amounting to ThCh$ 7,508,815 (payment), ThCh$ 11,391,103 (payment) and ThCh$ 9,698,871 received, corresponding to 2018, 2017 and 2016, respectively, and these were recorded in the Consolidated Cash Flow Statement, under Operational activities, in line item Other cash movements.
The financial results composition is detailed as follows:
Financial results | For the years ended as of December 31, | ||
2018 | 2017 | 2016 | |
ThCh$ | ThCh$ | ThCh$ | |
Finance income | 15,794,456 | 5,050,952 | 5,680,068 |
Finance costs | (23,560,662) | (24,166,313) | (20,307,238) |
Foreign currency exchange differences | 3,299,657 | (2,563,019) | 456,995 |
Result as per adjustment units | 742,041 | (110,539) | (2,246,846) |
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|
|
|
F-125
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
Current assets are denominated in the following currencies:
CURRENT ASSETS | As of December 31, 2015 | As of December 31, 2014 | As of December 31, 2018 | As of December 31, 2017 |
ThCh$ | ThCh$ | |||
Current assets |
|
|
|
|
Cash and cash equivalents | 192,554,239 | 214,774,876 | 319,014,050 | 170,044,602 |
CLP | 171,683,257 | 182,979,978 | 260,844,976 | 137,686,421 |
U.F. | - | 8,410,538 | ||
USD | 5,385,644 | 6,058,754 | 19,026,630 | 5,178,619 |
Euros | 955,840 | 974,179 | 954,640 | 182,966 |
$ARG | 5,701,754 | 11,728,422 | ||
ARS | 33,207,046 | 17,983,303 | ||
UYU | 948,816 | 536,097 | 548,975 | 718,348 |
PYG | 7,519,619 | 3,753,420 | 2,495,748 | 7,758,211 |
BOB | 1,259,765 | - | ||
Others currencies | 359,309 | 333,488 | 676,270 | 536,734 |
Other financial assets | 13,644,105 | 6,483,652 | 22,745,469 | 10,724,196 |
CLP | 1,052,312 | 1,016,032 | 1,284,308 | 1,669,678 |
USD | 12,495,117 | 5,467,620 | 20,990,836 | 8,992,300 |
Euros | 57,833 | - | 438,369 | 44,126 |
PYG | 7,261 | - | ||
Others currencies | 31,582 | - | 31,956 | 18,092 |
Other non-financial assets | 17,654,373 | 18,558,445 | 18,861,414 | 15,834,225 |
CLP | 12,083,128 | 11,576,191 | 14,998,511 | 11,758,075 |
U.F. | 29,882 | 28,826 | ||
UF | 282,494 | 275,568 | ||
USD | 972,718 | - | 860,506 | 791,191 |
Euros | 723,216 | - | 5,078 | 173,165 |
$ARG | 3,780,430 | 4,759,154 | ||
ARS | 2,061,473 | 2,593,125 | ||
UYU | 7,789 | 1,457,234 | 72,792 | 37,956 |
PYG | 57,210 | 737,040 | 434,399 | 205,145 |
Accounts receivable - trade and other receivables | 252,225,937 | 238,602,893 | ||
BOB | 146,161 | - | ||
Trade and other current receivables | 320,702,339 | 286,213,598 | ||
CLP | 158,757,937 | 151,677,364 | 191,891,137 | 183,758,319 |
U.F. | 7,102 | 2,021 | ||
UF | 1,394,916 | 138,261 | ||
USD | 25,498,590 | 19,030,421 | 34,113,849 | 27,810,990 |
Euros | 7,463,166 | 10,038,934 | 10,152,559 | 9,326,882 |
$ARG | 48,535,814 | 46,140,278 | ||
ARS | 65,748,507 | 54,194,474 | ||
UYU | 4,074,908 | 4,519,676 | 5,128,068 | 4,372,909 |
PYG | 6,111,636 | 5,477,622 | 8,588,066 | 5,495,532 |
BOB | 1,340,388 | - | ||
Others currencies | 1,776,784 | 1,716,577 | 2,344,849 | 1,116,231 |
Accounts receivable from related companies | 4,788,930 | 11,619,118 | ||
Accounts receivable from related parties | 3,048,841 | 5,810,764 | ||
CLP | 4,606,002 | 11,474,472 | 2,959,696 | 5,652,643 |
U.F. | 104,118 | 101,218 | ||
UF | 79,231 | 109,120 | ||
USD | 78,810 | 43,428 | 9,480 | 40,039 |
PYG | 434 | 8,962 | ||
Inventories | 174,227,415 | 167,545,598 | 228,062,237 | 201,987,891 |
CLP | 147,189,195 | 136,336,787 | 181,084,437 | 166,761,797 |
USD | 2,474,304 | 744,544 | 198,068 | 374,473 |
Euros | 237,848 | 189,100 | - | 17,363 |
$ARG | 18,850,888 | 22,684,784 | ||
ARS | 34,392,396 | 27,356,020 | ||
UYU | 1,645,888 | 1,508,208 | 2,403,427 | 1,966,752 |
PYG | 3,829,292 | 6,082,175 | 7,669,975 | 5,511,486 |
BOB | 2,313,934 | - | ||
Biological assets | 7,633,340 | 7,633,591 | 8,489,873 | 8,157,688 |
CLP | 7,130,962 | 7,209,981 | 7,914,384 | 7,666,639 |
$ARG | 502,378 | 423,610 | ||
Tax receivables | 15,264,220 | 19,413,414 | ||
ARS | 575,489 | 491,049 | ||
Current tax assets | 17,302,429 | 28,027,878 | ||
CLP | 11,080,218 | 14,443,142 | 13,262,197 | 21,407,803 |
$ARG | 4,184,002 | 4,970,272 | ||
Non-current assets held for sale | 6,319,316 | 758,760 | ||
ARS | 3,922,627 | 6,620,075 | ||
UYU | 117,605 | - | ||
Non-current assets of disposal groups classified as held for sale | 2,780,607 | 2,305,711 | ||
CLP | 5,890,543 | - | 1,884,958 | 2,046,178 |
$ARG | 428,773 | 758,760 | ||
ARS | 895,649 | 259,533 | ||
Total current assets | 684,311,875 | 685,390,347 | 941,007,259 | 729,106,553 |
| ||||
|
|
|
|
|
CLP | 519,473,554 | 516,713,947 | 676,124,604 | 538,407,553 |
U.F. | 141,102 | 8,542,603 | ||
UF | 1,756,641 | 522,949 | ||
USD | 46,905,183 | 31,344,767 | 75,199,369 | 43,187,612 |
Euros | 9,437,903 | 11,202,213 | 11,550,646 | 9,744,502 |
$ARG | 81,984,039 | 91,465,280 | ||
ARS | 140,803,187 | 109,497,579 | ||
UYU | 6,677,401 | 8,021,215 | 8,270,867 | 7,095,965 |
PYG | 17,525,018 | 16,050,257 | 19,188,622 | 18,979,336 |
BOB | 5,060,248 | - | ||
Others currencies | 2,167,675 | 2,050,065 | 3,053,075 | 1,671,057 |
Total current assets by currencies | 684,311,875 | 685,390,347 | 941,007,259 | 729,106,553 |
F-126
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
Non-Current assets are denominated in the following currencies:
NON-CURRENT ASSETS | As of December 31, 2015 | As of December 31, 2014 | As of December 31, 2018 | As of December 31, 2017 |
ThCh$ | ThCh$ | |||
Non-current assets |
|
|
|
|
Other financial assets | 80,217 | 343,184 | 3,325,079 | 1,918,191 |
Euros | 80,217 | 343,184 | ||
UF | 3,325,079 | 1,918,191 | ||
Trade and other non-current receivables | 3,363,123 | 3,974,395 | ||
CLP | 88,306 | 190,015 | ||
UF | 1,283,676 | 2,452,475 | ||
ARS | 1,804,963 | 1,331,905 | ||
PYG | 186,178 | - | ||
Other non-financial assets | 27,067,454 | 5,828,897 | 5,007,150 | 4,644,827 |
CLP | 24,880,950 | 3,303,040 | 4,278,605 | 3,493,654 |
USD | 80,137 | - | 173,693 | 664,290 |
$ARG | 1,839,876 | 1,762,652 | ||
ARS | 540,495 | 472,141 | ||
PYG | 266,491 | 763,205 | 14,357 | 14,742 |
Accounts receivable from related companies | 445,938 | 522,953 | ||
U.F. | 445,938 | 522,953 | ||
Accounts receivable from related parties | 190,865 | 258,471 | ||
UF | 190,865 | 258,471 | ||
Investments accounted for using the equity method | 49,995,263 | 31,998,620 | 142,017,781 | 99,270,280 |
CLP | 49,884,870 | 31,897,043 | 19,407,798 | 26,782,445 |
$ARG | 110,393 | 101,577 | ||
Intangible assets different than goodwill | 64,120,426 | 68,656,895 | ||
USD | 122,031,829 | 72,128,873 | ||
ARS | 578,154 | 358,962 | ||
Intangible assets other than goodwill | 118,964,142 | 77,032,480 | ||
CLP | 49,960,476 | 51,881,835 | 67,739,510 | 65,914,305 |
U.F. | 41,558 | 41,558 | ||
$ARG | 7,039,283 | 9,169,249 | ||
ARS | 37,960,927 | 4,385,112 | ||
UYU | 3,296,510 | 3,332,682 | 2,912,675 | 2,975,596 |
PYG | 3,782,599 | 4,231,571 | 3,848,057 | 3,757,467 |
BOB | 6,502,973 | - | ||
Goodwill | 83,300,573 | 86,779,903 | 123,044,901 | 94,617,474 |
CLP | 60,192,744 | 63,075,515 | 75,577,909 | 76,119,432 |
USD | 14,216,606 | 12,146,454 | 22,298,304 | 12,853,153 |
$ARG | 8,891,223 | 11,557,934 | ||
ARS | 24,889,792 | 5,381,779 | ||
PYG | 278,896 | 263,110 | ||
Property, plant and equipment (net) | 872,667,210 | 851,255,642 | 1,021,266,631 | 917,913,428 |
CLP | 763,339,926 | 733,238,733 | 830,151,351 | 808,313,408 |
$ARG | 76,412,324 | 91,003,978 | ||
USD | - | 1,681 | ||
Euros | - | 94,776 | ||
ARS | 142,669,147 | 78,183,157 | ||
UYU | 13,747,872 | 10,390,332 | 14,890,634 | 14,739,411 |
PYG | 19,167,088 | 16,622,599 | 18,030,887 | 16,580,995 |
BOB | 15,524,612 | - | ||
Investment property | 6,838,002 | 7,917,613 | 8,715,956 | 5,825,359 |
CLP | 4,401,400 | 5,783,933 | 4,332,690 | 4,862,410 |
$ARG | 2,436,602 | 2,133,680 | ||
ARS | 4,383,266 | 962,949 | ||
Deferred tax assets | 34,529,593 | 30,207,019 | 37,691,088 | 40,351,329 |
CLP | 29,392,503 | 23,496,860 | 32,989,545 | 36,530,783 |
$ARG | 5,032,803 | 6,622,426 | ||
ARS | 2,955,530 | 3,601,765 | ||
UYU | 10,801 | 10,206 | 223,831 | 180,761 |
PYG | 93,486 | 77,527 | 47,456 | 38,020 |
BOB | 1,474,726 | - | ||
Current tax assets non current | 1,270,941 | 1,316,300 | ||
CLP | 1,172,749 | 1,173,281 | ||
ARS | 98,192 | 143,019 | ||
Total non-current assets | 1,139,044,676 | 1,083,510,726 | 1,464,857,657 | 1,247,122,534 |
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|
|
|
|
|
CLP | 982,052,869 | 912,676,959 | 1,035,738,463 | 1,023,379,733 |
U.F. | 487,496 | 564,511 | ||
UF | 4,799,620 | 4,629,137 | ||
USD | 14,296,743 | 12,146,454 | 144,503,826 | 85,647,997 |
Euros | 80,217 | 343,184 | - | 94,776 |
$ARG | 101,762,504 | 122,351,496 | ||
ARS | 215,880,466 | 94,820,789 | ||
UYU | 17,055,183 | 13,733,220 | 18,027,140 | 17,895,768 |
PYG | 23,309,664 | 21,694,902 | 22,405,831 | 20,654,334 |
BOB | 23,502,311 | - | ||
Total non-current assets by currencies | 1,139,044,676 | 1,083,510,726 | 1,464,857,657 | 1,247,122,534 |
F-127
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
Current liabilities are denominated in the following currencies:
CURRENT LIABILITIES | As of December 31, 2015 | As of December 31, 2014 | As of December 31, 2018 | As of December 31, 2017 | ||||
Until 90 days | More than 91 days until 1 year | Until 90 days | More than 91 days until 1 year | Until 90 days | More the 91 days until 1 year | Until 90 days | More the 91 days until 1 year | |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |||||
Current liabilities |
|
|
|
| ||||
Other financial liabilities | 7,223,935 | 36,750,056 | 30,097,822 | 35,220,471 | 11,197,060 | 51,569,886 | 16,761,881 | 36,829,777 |
CLP | 1,239,182 | 17,035,281 | 1,947,212 | 14,909,387 | 1,579,060 | 19,510,742 | 1,621,976 | 17,844,529 |
U.F. | 764,199 | 2,888,550 | 777,020 | 2,933,255 | ||||
UF | 1,695,546 | 13,302,035 | 823,223 | 2,798,184 | ||||
USD | 303,416 | 10,957,905 | 1,392,180 | 5,303,949 | 4,509,884 | 16,667,379 | 10,096,603 | 10,571,414 |
Euros | 52,368 | - | 120,894 | 4,611,662 | 1,153,302 | - | 694,056 | 355,650 |
$ARG | 4,862,819 | 5,523,470 | 24,104,151 | 7,462,218 | ||||
UYU | - | - | 1,740,967 | - | ||||
UYI | - | 344,850 | - | - | ||||
ARS | 2,098,712 | 1,762,947 | 3,122,166 | 4,971,531 | ||||
UI | 110,633 | 326,783 | 403,857 | 288,469 | ||||
BOB | 38,735 | - | - | - | ||||
Others currencies | 1,951 | - | 15,398 | - | 11,188 | - | - | - |
Account payable - trade and other payables | 226,844,826 | 891,977 | 200,673,786 | 3,109,019 | ||||
Trade and other current payables | 297,834,912 | 5,545,256 | 280,932,266 | 749,287 | ||||
CLP | 148,162,838 | 303,060 | 133,274,464 | 3,109,019 | 177,575,915 | 1,796,915 | 169,971,096 | - |
U.F. | 9,933 | - | 3,995 | - | ||||
UF | - | 5,847 | - | |||||
USD | 17,676,381 | 566,572 | 14,012,905 | - | 43,335,127 | 2,746,757 | 34,814,603 | 498,752 |
Euros | 6,402,517 | - | 7,166,674 | - | 4,921,252 | 974,462 | 6,030,900 | 250,535 |
$ARG | 47,686,146 | - | 40,867,375 | - | ||||
ARS | 63,786,646 | 612 | 65,677,731 | - | ||||
UYU | 2,607,826 | - | 4,371,988 | - | 2,202,163 | - | 1,978,456 | - |
PYG | 3,874,709 | 22,345 | 976,385 | - | 2,367,325 | 26,444 | 2,179,652 | - |
BOB | 3,302,514 | - | - | - | ||||
Others currencies | 424,476 | - | - | - | 343,970 | 66 | 273,981 | - |
Accounts payable to related companies | 11,624,218 | - | 10,282,312 | - | ||||
Accounts payable to related parties | 6,651,051 | 285,859 | 10,069,043 | - | ||||
CLP | 4,267,123 | - | 5,783,103 | - | 4,042,438 | - | 4,616,727 | - |
USD | 151,578 | - | - | - | 903,988 | 285,859 | 3,980,612 | - |
Euros | 7,205,517 | - | 4,486,158 | - | 1,619,082 | - | 1,416,055 | - |
PYG | - | - | 13,051 | - | 11,267 | - | 9,077 | - |
Other short-term provisons | 382,152 | 121,288 | 380,912 | 29,347 | ||||
BOB | 11,879 | - | - | - | ||||
Others currencies | 62,397 | - | 46,572 | - | ||||
Other current provisions | 271,812 | 133,257 | 297,500 | 52,275 | ||||
CLP | - | 121,288 | - | 29,347 | 5,380 | 133,257 | - | 52,275 |
$ARG | 382,152 | - | 380,912 | - | ||||
Tax liabilities | 3,664,162 | 8,533,862 | 3,986,966 | 7,710,169 | ||||
ARS | 266,432 | - | 297,500 | - | ||||
Current tax liabilities | 56,895,995 | 18,989,454 | 18,162,016 | 4,364,618 | ||||
CLP | 3,932,875 | 18,989,454 | 5,663,732 | 4,364,618 | ||||
ARS | 52,201,867 | - | 12,383,112 | - | ||||
UYU | 249,988 | - | 115,172 | - | ||||
PYG | 511,265 | - | - | - | ||||
Provisions for employee benefits | 16,181,182 | 15,612,981 | 25,751,992 | 480,501 | ||||
CLP | 5,530,208 | 15,612,981 | 17,619,085 | 480,501 | ||||
ARS | 9,839,822 | - | 7,521,224 | - | ||||
UYU | 383,167 | - | 335,454 | - | ||||
PYG | 271,167 | - | 276,229 | - | ||||
BOB | 156,818 | - | - | - | ||||
Other non-financial liabilities | 2,479,960 | 162,075,580 | 25,891,422 | 48,406,877 | ||||
CLP | 3,487,812 | 5,802,277 | 3,803,137 | 3,872,219 | - | 162,075,580 | 25,865,201 | 48,406,877 |
USD | - | 26,747 | - | - | 2,467,789 | - | - | - |
$ARG | - | 2,704,838 | - | 3,837,950 | ||||
UYU | 176,350 | - | 183,829 | - | ||||
Employee benefits provisions | 21,388,736 | 323,323 | 17,702,626 | 241,145 | ||||
CLP | 16,558,870 | 323,323 | 13,490,145 | 241,145 | ||||
$ARG | 4,437,159 | - | 3,909,627 | - | ||||
UYU | 392,707 | - | 302,854 | - | ||||
Other non-financial liabilities | 28,440,259 | 42,501,885 | 24,104,387 | 44,792,376 | ||||
CLP | 28,350,457 | 42,501,885 | 23,278,681 | 44,789,042 | ||||
$ARG | 89,802 | - | 825,706 | - | ||||
PYG | - | - | - | 3,334 | ||||
ARS | 12,171 | - | 26,221 | - | ||||
Total current liabilities | 299,568,288 | 89,122,391 | 287,228,811 | 91,102,527 | 391,511,972 | 254,212,273 | 377,866,120 | 90,883,335 |
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| |||||||
|
|
|
|
| ||||
CLP | 202,066,282 | 66,087,114 | 181,576,742 | 66,950,159 | 192,665,876 | 218,118,929 | 225,357,817 | 71,148,800 |
U.F. | 774,132 | 2,888,550 | 781,015 | 2,933,255 | ||||
UF | 1,695,546 | 13,302,035 | 829,070 | 2,798,184 | ||||
USD | 18,131,375 | 11,551,224 | 15,405,085 | 5,303,949 | 51,216,788 | 19,699,995 | 48,891,818 | 11,070,166 |
Euros | 13,660,402 | - | 11,773,726 | 4,611,662 | 7,693,636 | 974,462 | 8,141,011 | 606,185 |
$ARG | 57,458,078 | 8,228,308 | 70,087,771 | 11,300,168 | ||||
ARS | 128,205,650 | 1,763,559 | 89,027,954 | 4,971,531 | ||||
UYU | 3,176,883 | - | 6,599,638 | - | 2,835,318 | - | 2,429,082 | - |
PYG | 3,874,709 | 22,345 | 989,436 | 3,334 | 3,161,024 | 26,444 | 2,464,958 | - |
UYI | - | 344,850 | - | - | ||||
UI | 110,633 | 326,783 | 403,857 | 288,469 | ||||
BOB | 3,509,946 | - | - | - | ||||
Others currencies | 426,427 | - | 15,398 | - | 417,555 | 66 | 320,553 | - |
Total current liabilities by currency | 299,568,288 | 89,122,391 | 287,228,811 | 91,102,527 | 391,511,972 | 254,212,273 | 377,866,120 | 90,883,335 |
F-128
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
Non-Current liabilities are denominated in the following currencies:
NON-CURRENT LIABILITIES | As of December 31, 2015 | As of December 31, 2014 | As of December 31, 2018 | As of December 31, 2017 | ||||||||
More than 1 year until 3 years | More than 3 year untl 5 years | More than 5 years | More than 1 year until 3 years | More than 3 year untl 5 years | More than 5 years | More than 1 year until 3 years | More than 3 year until 5 years | Over 5 years | More than 1 year until 3 years | More than 3 year until 5 years | Over 5 years | |
ThCh$ | ThCh$ | ThCh$ | ThCh$ | |||||||||
Non-current liabilities |
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Other financial liabilities | 40,890,654 | 20,356,339 | 75,679,552 | 39,224,496 | 19,975,758 | 75,334,303 | 24,970,597 | 68,367,746 | 134,846,954 | 30,868,247 | 70,976,079 | 59,157,406 |
CLP | 18,284,794 | 1,784,088 | - | 16,366,789 | 101,334 | - | 3,412,966 | 55,837,517 | 43,764 | 5,332,817 | 55,750,482 | - |
U.F. | 5,523,414 | 17,335,859 | 75,679,552 | 5,474,316 | 16,650,145 | 75,334,303 | ||||||
UF | 10,724,171 | 10,786,277 | 131,315,290 | 22,924,023 | 15,225,597 | 59,157,406 | ||||||
USD | 5,590,024 | - | 9,307,576 | - | 8,059,332 | - | - | |||||
$ARG | 9,790,622 | 1,236,392 | - | 8,075,815 | 3,224,279 | - | ||||||
UYI | 1,701,800 | - | - | |||||||||
Other accounys payable | 1,098,985 | 546,113 | - | 369,506 | - | |||||||
Euros | 157,028 | - | - | |||||||||
ARS | 1,727 | - | 2,611,407 | - | ||||||||
UI | 871,421 | - | - | |||||||||
BOB | 1,743,952 | 3,487,900 | - | |||||||||
Trade and other non-current payables | 5,142 | - | 7,271 | 541,783 | - | |||||||
CLP | 808,161 | 404,081 | - | - | - | 7,271 | 404,081 | - | ||||
U.F. | 6,760 | - | 6,496 | - | ||||||||
UF | - | 7,068 | - | |||||||||
USD | 284,064 | 142,032 | - | 363,010 | - | - | 130,634 | - | ||||
Other long term provisions | 712,806 | 410,073 | 353,639 | 1,484,317 | 489,969 | 235,546 | ||||||
BOB | 5,142 | - | - | |||||||||
Other non- current provisions | 239,300 | 281,654 | 6,904,805 | 735,410 | - | 504,979 | ||||||
CLP | - | 49,996 | 15,000 | - | 15,000 | 19,056 | - | 6,731,027 | 57,252 | - | ||
$ARG | 396,987 | 360,077 | 338,639 | 336,813 | 489,969 | 220,546 | ||||||
ARS | 81,026 | 281,654 | 173,778 | 544,254 | - | 504,979 | ||||||
UYU | 139,218 | - | 133,904 | - | ||||||||
Deferred tax liabilities | 23,241,269 | 14,084,656 | 71,174,246 | 27,074,149 | 9,333,081 | 57,942,881 | ||||||
CLP | 20,302,096 | 12,761,025 | 56,936,976 | 26,303,193 | 8,892,998 | 53,811,477 | ||||||
ARS | 2,839,763 | 1,315,431 | 10,490,282 | 735,208 | 431,503 | 2,703,872 | ||||||
UYU | 314,991 | - | 1,147,504 | - | 46,754 | - | 897,718 | - | 989,517 | |||
PYG | 828 | - | - | 52,656 | 8,200 | 422,346 | 35,748 | 8,580 | 438,015 | |||
Deferred tax liabilities | 21,787,421 | 8,622,777 | 57,736,765 | 20,617,913 | 7,491,363 | 59,409,424 | ||||||
BOB | - | 2,426,924 | - | |||||||||
Provisions employee benefits | 1,258,674 | - | 25,642,414 | 301,903 | - | 23,215,106 | ||||||
CLP | 21,175,080 | 8,219,255 | 51,820,864 | 19,850,278 | 6,979,606 | 51,690,008 | - | 22,959,627 | - | 20,052,918 | ||
$ARG | 601,313 | 400,875 | 4,288,716 | 767,635 | 511,757 | 5,713,866 | ||||||
UYU | - | - | 1,154,787 | - | 1,466,456 | |||||||
ARS | - | 2,682,787 | - | 3,162,188 | ||||||||
PYG | 11,028 | 2,647 | 472,398 | - | 539,094 | 391,302 | - | 301,903 | - | |||
Employee benefits provisons | 643,905 | - | 18,304,698 | 798,428 | - | 16,638,794 | ||||||
CLP | - | - | 15,369,150 | - | 14,202,830 | |||||||
$ARG | - | - | 2,935,548 | - | 2,435,964 | |||||||
PYG | 643,905 | - | 798,428 | - | ||||||||
BOB | 867,372 | - | - | |||||||||
Total non-current liabilities | 65,133,771 | 29,935,302 | 152,074,654 | 62,494,660 | 27,957,090 | 151,618,067 | 49,714,982 | 82,734,056 | 238,575,690 | 59,521,492 | 80,309,160 | 140,820,372 |
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CLP | 40,268,035 | 10,457,420 | 67,205,014 | 36,217,067 | 7,080,940 | 65,907,838 | 23,734,118 | 68,598,542 | 86,678,665 | 32,097,343 | 64,643,480 | 73,864,395 |
U.F. | 5,530,174 | 17,335,859 | 75,679,552 | 5,480,812 | 16,650,145 | 75,334,303 | ||||||
UF | 10,724,171 | 10,786,277 | 131,315,290 | 22,931,091 | 15,225,597 | 59,157,406 | ||||||
USD | 5,874,088 | 142,032 | - | 9,670,586 | - | 8,059,332 | - | 130,634 | - | |||
$ARG | 10,788,922 | 1,997,344 | 7,562,903 | 9,180,263 | 4,226,005 | 8,370,376 | ||||||
Euros | 157,028 | - | - | |||||||||
ARS | 2,922,516 | 1,597,085 | 13,346,847 | 3,890,869 | 431,503 | 6,371,039 | ||||||
UYU | 314,991 | - | 1,154,787 | 1,147,504 | - | 1,466,456 | 185,972 | - | 897,718 | 133,904 | - | 989,517 |
PYG | 655,761 | 2,647 | 472,398 | 798,428 | - | 539,094 | 443,958 | 8,200 | 422,346 | 337,651 | 8,580 | 438,015 |
UYI | 1,701,800 | - | - | |||||||||
UI | 871,421 | - | - | |||||||||
BOB | 2,616,466 | 1,743,952 | 5,914,824 | - | ||||||||
Total non-current liabilities by currency | 65,133,771 | 29,935,302 | 152,074,654 | 62,494,660 | 27,957,090 | 151,618,067 | 49,714,982 | 82,734,056 | 238,575,690 | 59,521,492 | 80,309,160 | 140,820,372 |
F-129
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
Operating lease agreements
The total amount of the Company’s obligations towith third parties relating to lease operating and services agreements that maycan not be terminated is detailed as follows:
Lease | As of December 31, 2018
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ThCh$ | |
Within 1 year |
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Between 1 and 5 years |
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Over 5 years |
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Total |
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Purchase and supply agreements
The total amount of the Company’s obligations to third parties relating to purchase and supply agreements as of December 31, 20152018 is detailed as follows:
Purchase and supply agreements | Purchase and supply agreements | Purchase and contract related to wine and grape | Purchase and supply agreements | Purchase and contract related to wine and grape |
ThCh$ | ThCh$ | |||
Within 1 year | 134,430,322 | 10,226,466 | 232,661,581 | 13,324,315 |
Between 1 and 5 years | 328,110,170 | 8,683,488 | 839,140,078 | 15,158,909 |
Over 5 years | 53,875,436 | 250,544 | 237,038,942 | 236,222 |
Total | 516,415,928 | 19,160,498 | 1,308,840,601 | 28,719,446 |
Capital investment commitments
As of December 31, 2015,2018, the Company had capital investment commitments related to Property, plantPlant and equipmentEquipment and intangiblesIntangibles (software) for approximately ThCh$ 81,696,975.39,412,982.
Litigation
The following are the most significant proceedings faced by the Company and its subsidiaries, including all thosepresentthosepresent a possible risk of occurrence and causes whose committed amounts, individually, are more than ThCh$ 25,000.Those losses25,000.Those losses contingencies for which an estimate cannot be made have been also considered.
F-130
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
ProceedingsTrials and claim
Subsidiary | Court |
| Description | Status | Estimated accrued loss contingency |
Comercial CCU S.A. | Labour Court. | Labor trial. | Appeal of first instance verdict. | ThCh$ 17,604 | |
Comercial CCU S.A. | Labour Court. | Labor trial. | Appeal of first instance verdict. | ThCh$ 21,268 | |
Comercial CCU S.A. | Labour Court. | Labor trial. | Appeal of first instance verdict. | ThCh $ 26,027 | |
Viña San Pedro Tarapacá S.A. | Labour |
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| ThCh$ 15,000 |
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Compañía Industrial Cervecera S.A. (CICSA) |
| Labur Court. | Labor |
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Compañía Industrial Cervecera S.A. (CICSA) |
| Labor trial. |
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Compañía Industrial Cervecera S.A. (CICSA) |
| Distributor claim for to the termination of distribution agreeent. |
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Compañía Industrial Cervecera S.A. (CICSA) |
| Labur Court. | Labor |
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Compañía Industrial Cervecera S.A. (CICSA) |
| Labor trial. |
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Compañía Industrial Cervecera S.A. (CICSA) |
| Labur Court. | Labor |
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Compañía Industrial Cervecera S.A. (CICSA) | Labur Court. | Labor trial. |
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Compañía Industrial Cervecera S.A. (CICSA) | Labur Court. | Labor trial. | Evidentiary stage. | US$ 24,000 | |
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F-131
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
Subsidiary | Court |
| Description | Status | Estimated accrued loss contingency |
Compañía Industrial Cervecera S.A. (CICSA) | Labur Court. | Labor trial. | Evidentiary stage. | US$ 39,000 | |
Compañía Industrial Cervecera S.A. (CICSA) | Several Tax claims. | Evidentiary stage. | US$ 383,000 | ||
Saenz Briones |
| Labur Court. | Labor |
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Saenz Briones |
| Labur Court. | Labor |
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Saenz Briones |
| Labur Court. | Labor |
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The Company and its subsidiaries have established provisions to allow for such contingencies for ThCh$ 1,343,374893,631 and ThCh$ 1,023,895,1,300,695, as of December 31, 20152018 and 2014,2017, respectively ((SeeSee Note 2923 – Other provisions).
Tax processes
At the date of issue of these consolidated financial statements, there are no material taxis notax litigation that involves significant passive or taxes in claim different to mentioned inlitigations.Note 24 – Income Tax.
Guarantees
As of December 31, 2015, the subsidiary Viña San Pedro Tarapacá S.A. (VSPT) has2018, CCU and its subsidiaries have not granted direct guarantees as part of its commontheir usual financing operations. Nevertheless, its VSPT has entered intoHowever, indirect guarantees as joint guarantors of financing operations by Finca La CeliaS.A.subsidiary,have been constituted, in the Republicform of Argentina.
A summarystand-by and general security product of thefinancing. The main terms of the indirect guarantees granted appearsconstituted are detailed below:
The loan obtained by the subsidiary CICSA in Argentina, as described inNote 21- Other financial liabilities, is guaranteed by CCU S.A. through a stand- by unrestricted issued by Banco del Estado de Chile:
Institution | Amount | Due date |
Banco de la Nación Argentina S.A. | US$ 2,000,000 | December 26, 2019 |
F-132
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
The subsidiary Finca La CeliaS.A.maintains financial debt with local banks in Argentina, guaranteed by VSPT through stand-by letters issued by Banco del Estado de Chile and they are within the financing policy framework approved by VSPT Board of Directors, according to the following detail:
Institution | Amount | Due date |
Banco Santander Río |
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Banco |
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Banco San Juan |
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Banco BBVA |
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Banco Patagonia | US$ 1,600,000 | June 30, 2019 |
Banco Patagonia | US$ 1,600,000 | July 7, 2021 |
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The mentioned stand-by letters were issued by VSPT according
Distribution of CCU´s main environmental costsin the Industrial Units, accumulated to the maturity of the financial debts negotiated with the Argentine banks, and they are within the financing policy framework approved by VSPT Board of Directors.December 2018:
- | Industrial Waste Water Treatment (IWWT):51.64% |
These expenses are mainly related to the maintenance and control of the respective Industrial Waste Water Treatment Plants (IWWT). | |
- | Solid Industrial Residues (SIR):33.31% |
These expenses are related to the handling and disposal of Solid Industrial Residues (SIR), including hazardous Waste (ResPel) and valorisation of recyclable residues. | |
- | Gas Emission Expenses: 1.05% |
These expenses are related to the calibration and verification of monitoring and operational instrumentation of stationary sources (mainly industrial boilers and electric generators) and their respective emissions, in order to provide compliance to rules and central and local government regulations. | |
- | Other Environmental Expenses:14.00% |
These expenses are related to the verification and compliance of Food Safety, Environmental Management and Operational Health & Safety Management Standards (ISO 22000, ISO 14000 and ISO 18001 OHSAS respectively) in CCU´s industrial sites and distribution centers, which are in different stages of implementation and certification. The implementation and certification of those three standards is a corporate goal of CCU. |
F-133
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
The loan obtainedmain expenses of each year, detailed by project, are the subsidiary CICSA in Argentina, as described inNote 27, is guaranteed by CCU S.A. through a stand- by unrestricted, 1 year term, renewable for equal period during the term of the loan.following:
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Company that made the disbursement | Project | Expenses | For the years ended as of December 31, | ||
2018 | 2017 | 2016 | |||
ThCh$ | ThCh$ | ThCh$ | |||
Cervecera CCU Chile Ltda. | IWWT | Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT). | 1,232,585 | 1,388,954 | 1,319,489 |
| SIR | Solid waste (SIR) and hazardous waste (ResPel) management. | 752,615 | 641,683 | 666,781 |
| Gases | Management of atmospheric emissions. | 36,581 | 16,687 | 21,655 |
| Others | Management of internal and external regulatory compliance. | 241,295 | 236,910 | 233,364 |
CCU Argentina S.A. | IWWT | Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT). | 879,730 | 930,683 | 820,999 |
| SIR | Solid waste (SIR) and hazardous waste (ResPel) management. | 501,979 | 527,248 | 560,710 |
| Gases | Management of atmospheric emissions. | 10,000 | 8,925 | 21,847 |
| Others | Management of internal and external regulatory compliance. | 101,691 | 201,726 | 141,379 |
Cervecería Kunstmann S.A. | IWWT | Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT). | 138,901 | 98,614 | 86,515 |
| SIR | Solid waste (SIR) and hazardous waste (ResPel) management. | 49,692 | 36,292 | 40,150 |
| Others | Management of internal and external regulatory compliance. | 46,123 | 37,623 | 45,876 |
Compañía Pisquera de Chile S.A. | IWWT | Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT). | 205,743 | 207,922 | 237,994 |
| SIR | Solid waste (SIR) and hazardous waste (ResPel) management. | 59,239 | 55,341 | 43,059 |
| Gases | Management of atmospheric emissions | 2,229 | - | - |
| Others | Management of internal and external regulatory compliance. | 11,583 | 14,280 | 12,582 |
Transportes CCU Ltda. | IWWT | Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT). | 18,346 | - | 9,792 |
| SIR | Solid waste (SIR) and hazardous waste (ResPel) management. | 459,512 | 388,198 | 288,856 |
| Gases | Management of atmospheric emissions. | 11,950 | 7,544 | 13,356 |
| Others | Management of internal and external regulatory compliance. | 206,114 | 155,951 | 141,138 |
VSPT S.A. | IWWT | Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT). | 395,845 | 417,134 | 454,828 |
| SIR | Solid waste (SIR) and hazardous waste (ResPel) management. | 87,132 | 202,204 | 165,697 |
| Others | Management of internal and external regulatory compliance. | 183,360 | 21,916 | 10,916 |
Embotelladoras Chilenas Unidas S.A. | IWWT | Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT). | 676,991 | 653,910 | 593,414 |
| SIR | Solid waste (SIR) and hazardous waste (ResPel) management. | 154,753 | 623,732 | 421,771 |
| Gases | Management of atmospheric emissions | 12,193 | 16,400 | 14,305 |
| Others | Management of internal and external regulatory compliance. | 110,952 | 119,226 | 156,295 |
Aguas CCU-Nestlé Chile S.A. | IWWT | Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT). | 50,354 | 19,453 | 35,550 |
| SIR | Solid waste (SIR) and hazardous waste (ResPel) management. | 57,158 | 10,818 | 3,910 |
| Gases | Management of atmospheric emissions | 270 | 400 | - |
| Others | Management of internal and external regulatory compliance. | 57,015 | 67,023 | 69,330 |
Fábrica de Envases Plásticos S.A. | SIR | Solid waste (SIR) and hazardous waste (ResPel) management. | 198,890 | 175,805 | 129,487 |
| Others | Management of internal and external regulatory compliance. | 17,323 | 21,973 | 21,410 |
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On July 11, 2013, the subsidiary in Argentina Saenz Briones & Cía. S.A. (SB) has signed a loan agreement with the Citibank Bank of Argentina, which restricted its ability to distribute profits in each year. The loan was by 10,000,000 argentine pesos and whose return was agreed in 9 (nine) quotes with different maturities. Until SB not pay this loan, plus interest or commissions, fees and expenses, may not make any payment to its shareholders (including, without limitation, distribution of profits or dividends, advances, withdrawals from account or similar, as well as any payment made in connection with rebuy it, rescue or redemption of all or part of its shares) for an amount that exceeds the 50% of the profits that the SB is legally empowered to distribute as dividends with regard to each of its years. It should be noted, for the purposes of the above restriction, that the last date of maturity of the loan is July 11, 2016.
Major Environmental costs accrued as of December 31, 2015, in the Industrial Units of CCU S.A. are distributed as follows:
-F-Industrial Waste Water Treatment (IWWT):58.0%134
These expenses are mainly related to the maintenance and control of the respective Industrial Waste Water Treatment Plants (IWWT).
-Solid Industrial Residues (SIR): 29.6%
These expenses are related to the handling and disposal of Solid Industrial Residues (SIR), including hazardous Waste (ResPel) and valorization of recyclable residues.
-Gas Emission Expenses:0.9%
These expenses are related to the calibration and verification of monitoring and operational instrumentation of stationary sources (mainly industrial boilers and electric generators) and their respective emissions, in order to provide compliance to rules and central and local government regulations.
-Other Environmental Expenses: 11.5%
These expenses are related to the verification and compliance of Food Safety, Environmental Management and Operational Health & Safety Management Standards (ISO 22000, ISO 14000 and ISO 18000 OHSAS respectively) in CCU´s industrial sites and distribution centers, which are in different stages of implementation and certification. The implementation and certification of those three standards is a corporate goal of CCU SA.
The most relevant investments during the year 2015, are listed below:
-Compañía Cervecera Kunstmann S.A.,construction of an industrial wastewater treatment plant in Valdivia which includes an anaerobic reactor with IC technology (UF 115,930).
-Aguas CCU-Nestlé, IWWT plant project in Coinco (UF 19,915), hazardous material storage improvement(UF 4,709), CO2, water and energy control equipment (UF 3,014), sanitary installation improvements (UF 141), two tanks for IWWT plant (UF 110).
-Cervecera CCU Chile Ltda.,Industrial Waste Water Treatment (IWWT) plant in Temuco stage 1 (UF 10,136), normalizing decree N° 78 (UF 7,704), fire detection system in Santiago (UF 3,695), IWWT plant improvement(UF 3,564), CO2 and NH3 sensors in Elaboration area (UF 2,571), improvement fire detection system in Temuco (UF 1,393), pavement improvement (UF 1,262), steam and biogas gauges (UF 818), sanitary installation improvements (UF 678), hot water flowmeters (UF 553), glass and solid waste containers (UF 478), boiler N° 2 economizer (UF 412), storage tank insulation (UF 301), and finally rain water piping (UF 217).
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
-Viña San Pedro Tarapacá S.A., FES project (second payment 2/3) (UF 3,614), Industrial Waste Water Treatment (IWWT) plant improvement (UF 2,653), IWWT plant Isla de Maipo (UF 1,564), IWW collecting chamber expansion (UF 96), vintage courtyard improvement (UF 96), floor and drain (UF 87), rain water channel (UF 53), and pH correction in IWWT plant (UF 50).
-Compañía Cervecerías Unidas Argentina S.A., IWWT plant Salta (UF 7,280), IWWT plant Salta second stage (UF 9,617) and warehouse SV fire network (UF 4,122).
-Embotelladora Chilenas Unidas S.A., boiler insulation (UF 1,314), CIP solutions recovery (UF 886), smoke detection system for offices (UF 789), plant emergency lighting (UF 400), emergency lighting (UF 164), emergency showers (UF 74), fire networks second stage (UF 70).
-Compañía Pisquera de Chile S.A., overhaul IWWT sludge equipment (UF 734), electrical network improvement in Salamanca (UF 392), IWWT plant in Salamanca (UF 281), IWWT plant in site Sotaquí (UF 255), solid waste extractor in site Elqui (UF 76) and a technological improvement project in sludge load system (UF 47).
-Transportes CCU Ltda., water improvement project in San Antonio (UF 365).
-Fabrica de Envases Plásticos S.A.,hazardous material storage (UF 2,396), electricity consumption meters by lines (UF 1,168) and replacement of lighting plant (UF 739).
-Cervecera Austral S.A., they have not carried out significant environmental investments to December 2015.
The main disbursements (investment) of theeach year, detailed by projects,project, are the following:
Company that made the disbursement | Project | Disbursment incurred during the years ended | |||||
As of December 31, 2015 | As of December 31, 2014 | ||||||
Expenditure | Investment | Committed amount in future periods | Estimated date completion of disbursements | Expenses | Investment | ||
ThCh$ | ThCh$ | ThCh$ |
| ThCh$ | ThCh$ | ||
CCU Chile Ltda. | Disposal of liquid , solid industrial waste and other | 1,966,752 | 535,842 | 329,941 | December 2016 | 1,924,508 | 4,224,403 |
CCU Argentina S.A. | Disposal of liquid , solid industrial waste and other | 1,862,559 | 116,134 | 422,561 | December 2016 | 1,847,522 | 85,013 |
Cía. Cervecera Kunstmann S.A. | Disposal of liquid , solid industrial waste and other | 143,482 | 2,958,767 | 12,416 | December 2016 | 132,350 | 62,898 |
Cía. Pisquera de Chile S.A. | Disposal of liquid , solid industrial waste and other | 318,419 | 9,712 | 36,035 | December 2016 | 295,382 | 137,593 |
Transportes CCU Ltda. | Disposal of liquid , solid industrial waste and other | 362,142 | - | 9,355 | December 2016 | 297,734 | 12,954 |
VSPT S.A. | Disposal of liquid , solid industrial waste and other | 559,209 | 136,181 | 74,293 | December 2016 | 491,104 | 508,254 |
Others | Disposal of liquid , solid industrial waste and other | 1,084,700 | 197,504 | 722,305 | December 2016 | 943,663 | 1,244,437 |
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As of December 31, 2018 | ||||||
Company that made the disbursement | Project | Concept | Status [Finished, In process] | Disbursements made | Amount committed future periods | Estimated Completion Date Disbursements |
| ThCh$ | ThCh$ | ||||
Cervecera CCU Chile Ltda. | IWWT | IWWT Plant expansion (Screw) Temuco | In process | - | 774 | 12-31-2019 |
IWWT | Closed wastewater torch Quilicura | In process | 23,810 | 704 | 12-31-2019 | |
IWWT | Stage 1 IWWT Plant Temuco | In process | 21,646 | 53,433 | 12-31-2019 | |
IWWT | Replacement anaerobic reactor cells Temuco | In process | 102,513 | 20,651 | 12-31-2019 | |
SIW | Raw material and L1, L3 waste management | Finished | 46,500 | - | Finished | |
Gases | Change Fuel FO6 to GNL Temuco | In process | 2,576 | 3,362 | 12-31-2019 | |
Gases | Boiler 1 and 2 economizer | In process | 70,767 | 15,841 | 12-31-2019 | |
Gases | Thermal Plant Improvements Quilicura | Finished | 2,958 | - | Finished | |
Gases | Recover biogas from IWWT Plant 2 Temuco | In process | 64,840 | 48,018 | 12-31-2019 | |
Gases | Replacement boiler 2 to Low Nox Quilicura | In process | 840,385 | 96,105 | 12-31-2019 | |
Others | SEC Certification of Biogas' plant Quilicura | In process | 133,016 | 2,740 | 12-31-2019 | |
Others | DS 10 compliance Quilicura | Finished | 29,083 | - | Finished | |
Others | Sanitary Permits Compliance Quilicura | In process | 2,342 | 2,032 | 12-31-2019 | |
Others | Normalization to DS 78 Quilicura | Finished | 8,723 | - | Finished | |
Others | Ammonia tank protection Temuco | Finished | 3,221 | - | Finished | |
Others | New NH3 standard | In process | - | 6,230 | 12-31-2019 | |
Others | Fire sensors | Finished | 39,141 | - | Finished | |
Others | DS 43 Hazardous substances | In process | 33,802 | 70,935 | 12-31-2019 | |
CCU Argentina S.A. | IWWT | IWWT Stage 3 Salta | In process | 330,610 | - | 12-31-2019 |
IWWT | Tanker EQ Lujan | In process | - | 141 | 12-31-2019 | |
Gases | Boiler 1 Economizer Lujan | In process | 4,088 | 7,191 | 12-31-2019 | |
Others | Installation Modification NH3 Salta | In process | 27,152 | 70,229 | 12-31-2019 | |
Cervecería Kunstmann S.A. | IWWT | New IWWT Plant – IC Technology | In process | 193,634 | 93,571 | 12-31-2019 |
SIW | Biofilter of Earthworms | In process | 86,619 | 3 | 12-31-2019 | |
Gases | Thermal energy saving plan | In process | 24,656 | 8,094 | 12-31-2019 | |
Gases | Electric energy saving plan | In process | 7,953 | 7,763 | 12-31-2019 | |
Others | FEI, Plant Insurance normalization | Finished | 52,085 | - | Finished | |
Cía. Pisquera de Chile S.A. | IWWT | IWWT Hydro Ejectors Montepatria | Finished | 41,925 | - | Finished |
IWWT | Washing water treatment plant | In process | - | 14,000 | 12-31-2019 | |
IWWT | Geo membrane HDPE replacement | Finished | 8,256 | - | Finished | |
Gases | Boiler 4 Ton/h Salamanca | In process | 312,841 | 10,771 | 12-31-2019 | |
Others | FEI Monte Patria | In process | 268,624 | 21,480 | 12-31-2019 | |
Others | Normative compliance de Coct | Finished | 4,040 | - | Finished | |
Others | DIA Salamanca Plant | In process | - | 22,634 | 12-31-2019 | |
VSPT S.A. | IWWT | IWWT adaptation Isla de Maipo | Finished | 1,989 | - | Finished |
IWWT | Hydrocarbons separation tank Isla de Maipo | In process | - | 627 | 12-31-2019 | |
IWWT | Sedimentation and accumulation IWWT Plant Isla de Maipo | Finished | 2,600 | - | Finished | |
IWWT | IWWT emergency pipe | Finished | 8,374 | - | Finished | |
IWWT | IWWT Plant Lighting | Finished | 1,937 | - | Finished | |
Gases | Insulation piping refrigeration / heating Molina | Finished | 14,860 | - | Finished | |
Gases | Insulation piping refrigeration Isla de Maipo | Finished | 6,233 | - | Finished | |
Gases | Power Meters | Finished | 510 | - | Finished | |
Others | Clousure of IWWT | Finished | 1,477 | - | Finished | |
Others | Container spill CIP-chemical products | In process | 9,429 | 2,561 | 12-31-2019 | |
Others | Sulfur Warehouse VI | In process | 5,880 | 1,010 | 12-31-2019 | |
Others | Fire incident workshop Isla de Maipo | Finished | 54,738 | - | Finished | |
Embotelladoras Chilenas Unidas S.A. | IWWT | Plant improvement of wastewater | In process | 45,698 | 9,543 | 12-31-2019 |
IWWT | Reverse osmosis plant water recovery | Finished | 6,000 | - | Finished | |
IWWT | Neutralization System IWWT Modelo | In process | 2,313 | 34,690 | 12-31-2019 | |
Gases | Offset NOX - NPX | Finished | 47,953 | - | Finished | |
Gases | Automatic Purges Boilers I Modelo | In process | 42,807 | 3,635 | 12-31-2019 | |
Gases | Condensate Recovery | Finished | 1,079 | - | Finished | |
Others | Chemical substances warehouse | In process | 8,400 | 28,371 | 12-31-2019 | |
Others | Certification steam networks, Antofagasta | Finished | 10,521 | - | Finished | |
Others | Normalization Cond. Santiago Plant | Finished | 4,601 | - | Finished | |
Others | New hazardous waste warehouse | In process | 16,659 | 3,502 | 12-31-2019 | |
Others | Authorization DS 10 | In process | 45,739 | 3,999 | 12-31-2019 | |
Others | Legal Regularization of tanks | In process | 57,188 | 3,105 | 12-31-2019 | |
Others | 2nd stage fire network Antofagasta | In process | 47,193 | 2,807 | 12-31-2019 | |
Others | Fire network | In process | 133,381 | 6,416 | 12-31-2019 | |
Others | Up grade ammonia system | In process | 58,209 | 9,389 | 12-31-2019 | |
Aguas CCU-Nestlé S.A. | IWWT | IWWT Plant Coinco | In process | 427,153 | 60,942 | 12-31-2019 |
Others | Flammable Warehouse Coinco | Finished | 95,685 | - | Finished | |
Others | Fire Brigade Equipment | Finished | 3,791 | - | Finished | |
Fábrica de Envases Plásticos S.A. | SIW | Improvement in Waste Management | In process | - | 2,921 | 12-31-2019 |
Gases | Control of electrical variables | In process | - | 50 | 12-31-2019 | |
Others | Bottle cap Plant Chiller | In process | 148,558 | 45,465 | 12-31-2019 | |
Others | RE 43 compliance | Finished | 17,043 | - | Finished | |
Others | Fire network improvement | In process | 144,145 | 34,339 | 12-31-2019 | |
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F-135
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, |
As of December 31, 2017 | ||||||
Company that made the disbursement | Project | Concept | Status [Finished, In process] | Disbursements made | Amount committed future periods | Estimated Completion Date Disbursements |
| ThCh$ | ThCh$ | ||||
Cervecera CCU Chile Ltda. | IWWT | IWWT Plant expansion (Screw) Temuco | In process | 2,941 | 774 | 12-31-2019 |
IWWT | Stage 1 IWWT Plant Temuco | In process | 259,733 | 38,639 | 12-31-2019 | |
IWWT | Replacement anaerobic reactor cells Temuco | In process | 19,960 | - | 12-31-2019 | |
SIW | Increase capacity of waste container | Finished | 7,632 | - | Finished | |
Gases | Change Fuel FO6 to GNL Temuco | In process | 58,432 | 5,930 | 12-31-2019 | |
Gases | Boiler 1 and 2 economizer | In process | 22,387 | 14,510 | 12-31-2019 | |
Gases | Thermal Plant Improvements Quilicura | In process | 26,387 | 2,948 | 12-31-2018 | |
Gases | Steam consumption improvements | Finished | 7,903 | - | Finished | |
Other | SEC Certification of Biogas' plant Quilicura | In process | 116,555 | 54,382 | 12-31-2019 | |
Other | DS 10 compliance Quilicura | In process | 102,219 | 14,643 | 12-31-2018 | |
Other | Sanitary Permits Compliance Quilicura | In process | 8,569 | 16,866 | 12-31-2019 | |
Other | Normalization to DS 78 Quilicura | In process | 127,078 | - | 12-31-2018 | |
Other | Ammonia tank protection Temuco | In process | 19,257 | 3,221 | 12-31-2018 | |
CCU Argentina S.A. | IWWT | IWWT Stage 2 Salta | Finished | 3,103 | - | Finished |
IWWT | IWWT Stage 3 Salta | In process | 153,169 | 109,047 | 12-31-2019 | |
Gases | Boiler 1 Economizer Luján | In process | 17,741 | - | 12-31-2019 | |
Other | NH3 adaptation installation Salta | In process | 9,102 | - | 12-31-2019 | |
Cervecería Kunstmann S.A. | IWWT | New IWWT Plant – IC Technology | In process | 814,127 | 112,745 | 12-31-2019 |
IWWT | IWWT Secondary plant and discharge | Finished | 461 | 66,820 | Finished | |
Other | FEI, Plant Insurance normalization | In process | 96,341 | 82,265 | 12-31-2018 | |
Compañía Pisquera de Chile S.A. | Gases | Boiler 4 Ton/h Salamanca | In process | 2,608 | 170,634 | 12-31-2019 |
Transportes CCU Ltda. | Other | Acoustic isolation | Finished | 1,106 | - | Finished |
VSPT S.A. | IWWT | IWWT adaptation IM | In process | 37,561 | 1,989 | 12-31-2018 |
IWWT | Hydrocarbons separation tank IM | In process | 929 | 627 | 12-31-2019 | |
IWWT | Sedimentation and accumulation IWWT Plant IM | In process | 4,035 | 1,477 | 12-31-2018 | |
IWWT | IWWT Pool aerators | Finished | 13,177 | 1,300 | Finished | |
IWWT | IWWT Plant Lighting | In process | 1,487 | 1,937 | 12-31-2018 | |
SIW | Compost Container | Finished | 2,750 | - | Finished | |
SIW | Compost Container (2) | Finished | 6,050 | - | Finished | |
SIW | Waste Container | Finished | 3,200 | - | Finished | |
Gases | Insulation piping refrigeration / heating Molina | In process | 779 | 14,860 | 12-31-2018 | |
Gases | Power Meters | In process | 8,417 | - | 12-31-2018 | |
Other | Close IWWT/Infrastructure | In process | 6,890 | - | 12-31-2018 | |
Other | Hazardous waste warehouse expansion | Finished | 8,424 | - | Finished | |
Other | Sulfur warehouse | Finished | 4,389 | - | Finished | |
Embotelladoras Chilenas Unidas S.A. | IWWT | Recovery solutions CIP | Finished | 3,473 | - | Finished |
Gases | Offset NOX - NPX | In process | 1,486 | 48,553 | 12-31-2018 | |
Gases | Condensate Recovery | In process | 47,224 | - | 12-31-2018 | |
Gases | Change Lighting System | Finished | 33,873 | - | Finished | |
Other | New hazardous waste warehouse | In process | 11,562 | 13,176 | 12-31-2019 | |
Other | Authorization DS 10 | In process | 27,576 | 5,274 | 12-31-2019 | |
Other | Legal Regularization of tanks | In process | 9,391 | 40,541 | 12-31-2019 | |
Other | Regularizations | In process | 93,766 | - | 12-31-2018 | |
Other | SEC Electric Regularization | Finished | 29,499 | - | Finished | |
Other | Up grade ammonia system | In process | 98,070 | 50,656 | 12-31-2019 | |
Aguas CCU-Nestlé S.A. | IWWT | IWWT Plant Coinco | In process | 262,719 | 226,538 | 12-31-2019 |
Other | Flammable Warehouse Coinco | In process | 4,939 | - | 12-31-2018 | |
Fábrica de Envases Plásticos S.A. | Gases | Control of electrical variables | In process | 3,288 | 50 | 12-31-2019 |
Other | RE 43 compliance | In process | 6,803 | 11,853 | 12-31-2018 | |
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F-136
Compañía Cervecerías Unidas S.A. and subsidiaries Notes to the Consolidated Financial Statements December 31, 2018 |
a) The Consolidated Financial Statements of CCU S.A., have been approved by the Board of Directors on February 2, 2016.27, 2019.
b)On January 7, 2016, the shareholders of Compañía Pisquera Bauzá S.A. came to an agreement in which Compañía Pisquera de Chile S.A. (subsidiary of Compañía Cervecerías Unidas S.A.) has sold its interest of 49% to Agroproductos Bauzá S.A. The price of the transaction amounted to UF 150,000 (equivalent to ThCh$ 3,844,364 on December 31, 2015). This investment at December 31, 2015, was recorded under Assets of disposal group held for sale (SeeNote 25).
c)On January 29, the subsidiaries AguasCCU-Nestlé Chile S.A. (“Aguas”) and Embotelladoras Chilenas Unidas S.A.(“ECUSA”) have acquired 48.07% and 0.92% of the shares of Manantial S.A. (“Manantial”) respectively, exercising the call option granted in the Shareholders’ Agreement of Manantial. As a consequence, Compañía Cervecerías Unidas S.A. is currently the indirect owner of 100% of the shares of Manantial, remaining as the only direct shareholders of Manantial: (i) Aguas with 99.08% of the capital stock, and (ii) ECUSA with 0.92% of the capital stock.
d) There are no others subsequent events between the closing date and the filing date of these Financial Statements (February 26, 2016)27, 2019) that could significantly affect their interpretation.
F-109
F-137