[Call Starts Abruptly] these statements should be taken in conjunction with the additional information about risks and uncertainties set forth in CCU’s annual report in Form 20-F filed with the U.S. Security and Exchange Commission and in the annual report submitted to the CMF and available on our website.

It is my pleasure to introduce Patricio Jottar..

Thank you, Claudio, and thank you all for joining us today. In the second quarter of 2021, CCU continued with a positive momentum by posting a strong improvement in volumes and financial results, not only versus last year, but also versus pre-pandemic figures.

The later has been the result of our capability to adapt and operate in a challenging scenario with the COVID-19 pandemic through the execution of our regional plan with three points, the safety for people, operation continuity and financial health, and the successful implementation for strategy, which focuses on maintaining and gain business scale and market share along with a gradual recovering profitability as we have shown since the fourth quarter 2020.

Regarding our consolidated performance revenues jumped 14.6% during the quarter posted by a 30.5% growth in volumes and 13.2% higher average prices in Chilean pesos.

The sharp volume expansion was explained by a recovery and consumption a solid sales execution and the strength of our portfolio of brands in terms of a financial results consolidated EBITDA more than tripled versus last year and EBITDA margin improved from 6.2$ to 13.1%.

The better financial results was mainly driven by the increase in consolidated volumes as mentioned above, efficiency gains from the ExCCelencia CCU program with MSD&A expenses a percentage of net sales decreasing from 45.8% to 39.6% and 463 basis points expansion in gross margin, mainly due to positive mix effects and the implementation of revenue management initiatives, and positive net externally fixed from the appreciation of the Chilean peso against the U.S.

dollar affecting favor where U.S. dollar denominated costs partially compensated by one export revenues in foreign currency and a higher cost in raw material in line with the sharp rally of the commodities during the year. In all net income totalize the gain of 18,968 million Chilean pesos versus our last year.

The Chile operating segment, our top-line expanded 54.3% due to 40.2% growth in volumes driven by all main categories and 10.1% high average prices. The high average prices were associated with both positive and mix effects, mainly based on a strong performance of premium brands in beer and revenue management initiatives.

Gross profits, grew 65.7% and gross margin improved from 46.1 to 49.5% mainly as a result of the revenue expansion mentioned above efficiencies in manufacturing, on the positive mix external effect from the appreciation of the Chilean peso, against the U.S. dollar affecting favorably, our U.S. dollar denominated costs.

This was partially offset by higher cost in raw material. MSD&A expenses grew 32.2%, consistent with the higher volume and marketing activities in line with pre pandemic levels although as percentage of net sales, MSD&A improved from 42.4% to 36.4% due to cost control initiatives to the ExCCelencia CCU program.

In all, EBITDA expanded 136 points on percent on – excuse me, in all EBITDA expanded 136.1% and EBITDA margin improved from 12% to 18.3%.

In additional business operate – in International Business Operating segment, which includes Argentina, Bolivia, Paraguay and Uruguay, posted a 58.2% rise in revenues due to an increase of 39.1% in average prices in Chilean pesos and 13.7% higher volumes.

Volume growth was mostly driven by Argentina, although all the other countries posted positive growth. Better average prices in Chilean pesos were explained by revenue management initiatives and positive mix effects in the portfolio, which more than offset negative currency translation effects.

In addition, our efforts in pricing allowed us to compensate higher U.S. dollar-denominated costs from the depreciation of the Argentine peso against the U.S. dollar and higher cost in raw materials posting a gross profit expansion of 114.4% and an improvement in gross margin from 32.7% to 44.3%.

MSD&A expenses as a percentage of net sales improved from 69% to 54.4% due to efficiencies from the ExCCelencia CCU program. Altogether EBITDA improved 18.2% versus last year. The Wine Operating segment, reported an 11% rise in revenue due to a 7.4% expansion in volumes and a 3.4% growth in average prices.

Volumes were driven by domestic markets and exports, both posting middle single digit growth the highest price in Chilean pesos were mainly a consequence of a better mix, which more than offset the appreciation of the Chilean pesos against the U.S. dollar and its negative impact on the experts – on export revenues.

Gross profits was up 6.5% and gross margin decreased from 39.5% to 37.9% in line with a higher cost of wine due to the harvest level of 2020. MSD&A expenses as a percentage of net sales improved from 26.8% to 25.6%. Thanks to efficiencies driven by the ExCCelencia CCU program.

In all EBITDA recorded, a 4.1% increase while EBITDA margin decreased from 17.8% to 16.7%. In Colombia finally, where we have a joint venture with Postobon, we finished the positive first half of the year with a volume – with a volume expansion over 40% gains in market share and improvement in our financial results.

Specifically during the quarter, we expanded volumes over 50% with growth in all main brands and categories, standing out the performance in premium beer. Now, I will be glad to answer any questions you may have..

[Operator Instructions] We’ll take our first question from Fernando Olvera with Bank of America..

Hi, good morning, everyone. Thanks for taking my question. I have two if I may, but first one is related to Chile.

In your opinion, what explains the selling volume growth as you witnessed in the quarter? And in line with this, can you comment on the volume growth between alcoholic and nonalcoholic beverages? And how do you expect them to behave in the remaining of the year? And I have another question, I’ll wait..

Thank you Fernando. I listened to your voice with a lot of echo. I didn’t understand the question..

Yes. He’s asking about our solid growth during the quarter, I think, Fernando. And the other hand, I think how we for the rest of the year..

Okay. Okay. Thank you. Again, I listened to you with a lot of echo. This is the reason I didn’t understood you – I didn’t understand you perfectly. But I mean, as you know Fernando and all the group, Chilean consumers and Chilean population have been receiving a lot of money in our pockets for two reasons.

Number one, because of all the expense of the government and the direct subsidies to people. And secondly, because we have been allowed to retire money or to withdraw money from our pension from our pension funds. All together, I mean, pay – money retire from pension funds has been $50 billion and subsidies from government about around $20 billion.

So together $70 billion is equivalent to the total expenses of government in a regular year pre-pandemic. So, it’s a lot of money on one hand. And on the other hand, there are mainly expenses that have been restricted as restaurants, travels, vacations, et cetera, et cetera. So that most of that money has been concentrated on consumption.

And this is the reason why our volumes have been extraordinary high. I mean, at the same time, of course, we are doing our job. We are executing the correctly we’re keeping on gaining market share in the different categories. But the real reason behind the –behind this expansion is what I’m explaining.

How much is going to last? Probably for semester, a year, 18 months, but no more than that. So, I think that it’s wise to imagine that these trends will not continue in the future. Having said that we are gaining scale and we expect to keep our scale and not to lose our scale, I’m going to make our best effort to continue growing.

But I think that that it’s more wise and serious to imagine that this trend probably is going to last in Q3, eventually in Q4, but for 2022, my recommendation is to be much more careful regarding this..

Okay. I hope you hear me better. And….

Excuse me Fernando, now I’m listening you perfectly..

Okay. Okay, great. Thank you. And in that sense, can you comment what was the growth between alcoholic and non-alcoholic beverages? I mean….

Yes.

We grew – I mean, as you know, we present the segment of Chile or the Chilean segment together because we operate Chile as one segment multi-category same self sales force, same truck, same managers, having said that , we are growing a lot in both segments in Q2 we grew a little bit less than 40%, India and a little bit more than 40% in nonalcoholic.

.

Okay. Great. And my second question is related to costs. Can you comment, what is your outlook for the remaining of the year and 2022? And what are the different measures that you are implementing to mitigate the increase in raw material costs? Thank you so much..

I mean, I will give you a general answer, then I will ask Felipe Dubernet to discuss on the details on cost.

I mean, that’s, you know, perfectly, and as I mentioned, in my introduction, we are facing strong pressures on cost of raw material in one hand, and an exchange rate on the other, I mean exchange rate in Q2 was not too high, but today But today, exchange change rate until – before the beginning of this conference, the Chilean peso was 785, I mean to buy a dollar, which is very high.

Suddenly in order to offset this we need to do revenue management initiatives, number one, to improve our mix, number two, and to be very efficient in terms of in terms of MSD&A.

And we are doing this, I mean, as we know that the current level of volume is something transitory and that sooner than later we’ll move to a match normal growth, we have been very careful on these, on hiring people, on keeping our MSD&A under tight control.

I mean, we are managing MSD&A as if we’re not growing in our volumes in order to be, to be prepared for the future and regarding direct cost also, we are doing our best effort in order to make a revenue management initiatives in terms of promotions, discounts, to increase the percentage of premium products in our portfolio.

As an example, here, we have the figures premiumization. For example, in Q2 here, I have in beer in Chile, premium account for more than 40% of our volumes while in Q2 of 2020, it represented just 23% of our volumes. And same thing in all the different categories.

Because again, we need to be prepared for a future scenario, which is not going to be as good as 2021. Having said that and regarding particularly particular raw material, I prefer Felipe, you to discuss this..

As you probably know, Fernando it’s a global pressure on raw material costs. As an example, aluminum year-on-year increased 60% PET or resins more than 40%. And so on, you have also international, freights increasing a lot. We saw, containers from China. The actual cost is about $10,000 per container.

So this will last at least for more than one year, this is what we expect. And so this outlook, along with this, we are facing, as compared to last year, a more favorable exchange rate that somewhat compensate that, but it’s not in our control. But by saying that especially in the Chilean peso and also the Argentine peso are very volatile.

So the exchange rate until is volatile for other cautious and more than international. So at the end, we will continue to face inflationary pressures due to raw materials. So and the actions are the ones that Patricio highlighted..

Great. Great. Thank you so much..

Thank you, Fernando..

We’ll take our next question from Felipe Ucros with Scotiabank..

Well, Patricio and Felipe. Congratulations on the results. Maybe let me start with one on the implied price mix and maybe I can follow up on Chilean market shares. So one, the first one, obviously they’re very solid on your international operation.

When I look at it on a currency basket basis, it looks like you were able to increase prices in Argentina very aggressively, but obviously there’s also mix effect in there. So I was just wondering if you could break that out for us and give us a bit of color on what’s happening on price enforcement or controls in Argentina.

And then, then I’ll follow up with Chilean market shares. Thanks..

Yes. I mean, in Argentina – thank you, Felipe, for your question. Argentina we have been able to cope with, with inflation in our structural prices. And at the same time, we’re improving, we are improving our mix bolts-on premium, which is growing. And we have a shift from returnable bottles to cans.

And cans are more expensive per liter than returnable bottles, as you know, but the margin is less attractive than bottle. So all together, we are moving along with inflation along with our costs..

Excellent. And maybe on Chilean market shares. Just wondering, I know this is difficult because Nielsen and the other surveyors are having a tough time delivering an apples-to-apples comparison. But just wondering, how you’re seeing, the market share picture and beer in Chile given the distribution changes at your competitor. Thanks..

Yes. You’re right. I mean, in Nielsen, it’s not completely precise because they have a, good reading on what happens in supermarket, but not to the best reading on what happens in mom-and-pops.

Having said that if you compare our market share in Q2 2021 is slightly higher than our market share in Q2 2020, but they prefer to say that our market share has been stable, in the last many months and years. And we have been able to cope against the competition with its new distribution..

Excellent color, thank you. And you know what I’ll stop it here. So other analysts can ask questions and maybe I’ll get back on the queue if they don’t ask my third question. Thank you..

Indeed. Thank you, Felipe..

[Operator Instructions] We’ll take our next question from Mohammed Ahmad with FGP..

Hi guys. Hope you guys are well. Thank you for taking my question. Just comparing to 2019, I know you answered through to Felipe that you’re a stable.

So partly you’ve answered the questions already, but if you could confirm some of the volume changes versus 2019 Q2, but actually the first half of 2019 versus first half 2021, because even there, I see 18% growth, which is impressive and you’ve given reasons for it, but I just want to know if the market has grown that much, or maybe in certain segments, you have grown faster to get that kind of numbers, particularly beer versus no beer.

Thank you..

Yes, indeed. Look in the Chili operating segment. We grew our volumes. This is first half, no? Yes. First half six months to send them. Here I have the answer Mohammad regarding volumes from the Chili operating segment. This is nonalcoholic beer and spirits.

First half of 2021, compared with the first half of 2019, we grew our consolidated volumes by 17.7% in international business by 2%. I mean the wine operating segment by 16.8%.

And in Chile operating segment, that was a stable margin. So the market grew that much socially stable market share..

Yes. Market share were slightly higher, we have been rather stable in beer, growing a little bit on non-alcohol or nonalcoholic.

In fact, do we have the breakdown of these figures in beer and on nonalcoholic here, gentlemen?.

I actually get with the [indiscernible]..

Let me check. But we have grown more in beer than in nonalcoholic. Having said that, because the capital of beer has been growing..

Yes. But in both in nonalcoholic and beer, we are growing Mohammed against 2019..

In fact, here we have in beer, so we have grown in two years, roughly speaking a little bit more than 40%..

Thank you guys..

No, excuse me. This is quarter two, 2021 compared with 2019 quarter two and year-to-date and year-to-date 31%. The first semester compared with first semester 31%, quarter compared with quarter 41%..

Sorry. The voice was breaking up a little bit.

So am I to understand that you said beer has grown 31% versus first half of 2019?.

Yes. And nonalcoholic roughly 11%..

That’s it..

Remember that Mohammed that nonalcoholic suffer much than beer last year also..

Okay. Well, we also have speeds….

Hello?.

Hello. Yes..

Okay. I got it. That’s okay. Thank you. Thank you very much for your answer. I’ll get back on the queue.

Okay..

Perfect. Thank you..

[Operator Instructions] We’ll take a follow-up from Felipe Ucros with Scotiabank..

Great. Thanks guys. So I can do a follow-up maybe on Columbia, you guys had very strong results on the operation with a very strong rise in volume. So I was just wondering if you can give us a little more color on what’s going on in the ground there in terms of market share, price and maybe utilization of the plan.

All those would be great if we could get some color. Thank you..

Thank you. Felipe, as we mentioned when we entered into Colombia, we designed our plan. Our plan for 3.2, 3.3, 3.4, depending on mix volume or hectoliters of total volume. And we are running this year, but a little bit more than 2 million hectoliters. That is what we expect to sell in this year. So we have a 60% utilization of the plant.

We have been growing market share. As I mentioned before margins are good in the industry prices growing up in line with inflation. And again, we are doing our best efforts, to increase our volumes and to complete the capacity of the plant. Because if we do this, we will be having a good profitability.

That was – we began this operation still, our purpose and we are moving in the right direction..

Okay. Great. Thanks for the color guys. Congratulations again..

Thank you, Felipe. Remember that, in Columbia, we operate in two segments, beer and malt. Beer representing more than 80% of the total volume and malt less than 20%. When I say that this is the total volume, and this is the total volume of the plant for both categories, beer and malt..

Understood. Thanks for excellent clarifications..

Good..

Thank you. We’ll take our next question from Antonia Winman [ph] with LarrainVial. .

Anthonia [indiscernible]..

Thank you for taking my question that I was also want to know a little bit more about Colombia but I think that everything is clear. Thank you..

Thank you, Antonia.

With no additional questions in queue. I’d like to turn the call back over to our speakers for any additional or closing remarks..

Thank you very much for closing. I’d like to say that during the second quarter of 2021 in a still challenges scenario due to the pandemic. CCU delivered a solid performance in volumes and financial results, improving versus both last year and pre-pandemic figures.

Looking ahead, we’ll continue investing in the key aspects of the business in order to keep executing the strategy that we have been carving out, which is continue building strong brands and portfolio and putting our efforts in maintaining and gaining business scale and market share while recovering profitability related to revenue management initiatives and efficiencies, particularly in an inflationary scenario.

Thank you very much again..

That will conclude today’s call. We appreciate your participation..