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, 20162019

 

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.

 

 

Title of eachcEach Classlass

Trading Symbol

Name of Each Exchange on Which Registered

American Depositary Shares,

Representing Common Stock

each representing two shares of our Common Stock, without par value

CCU

Name of each exchange
on which registered
New York Stock Exchange

Common Stock

N/A*

New York Stock Exchange*

CCU

Santiago Stock Exchange

Chile Electronic 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_____

 

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, a non-accelerated filer, or an emerging growth company. See definitions of “accelerated filer”, “large accelerated filer”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer X Accelerated filer    Non-accelerated filer__Emergingfiler __Emerging growth company__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____

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 


 
 

Table of Contents
   Page 
Introduction   i 
Forward Looking Statements ii 
PART I   3 
ITEM 1: Identity of Directors, Senior Management and Advisers 3 
ITEM 2: Offer Statistics and Expected Timetable 3 
ITEM 3: Key Information 3 
A. Selected Financial Data 3 
B. Capitalization and Indebtedness 5 
C. Reasons for the Offer and Use of Proceeds 5 
D. Risk Factors 6 
ITEM 4: Information on the Company 15 
A. History and Development of the Company 15 
B. Business Overview 24 
 1) Summary 24 
 2) Overview 25 
 3) The Beverage Market 27 
 4) Production and Marketing 31 
 5) Raw Materials and other Supplies 44 
 6) Sales, Transportation and Distribution 45 
 7) Seasonality 49 
 8) Geographical Markets 52 
 9) Competition 53 
 10) Government Regulation 56 
C. Organizational Structure 60 
D. Property, Plants and Equipment 61 
E. Environmental Matters 64 
ITEM 4A: Unresolved Staff Comments 65 
ITEM 5: Operating and Financial Review and Prospects 65 
A. ADJUSTED OPERATING RESULT 66 
B. Liquidity and Capital Resources 73 
C. Research and Development 76 
D. Trend Information 77 
E. Off Balance Sheet Arrangements 78 
F. Contractual Obligations 79 
ITEM 6: Directors, Senior Management and Employees 80 
A. Directors and Senior Management 80 
B. Compensation 85 
C. Board Practices 86 

 

30444.00900


 1) Directors Committee 87 
 2) Audit Committee 89 
D. Employees 90 
E. Share Ownership 91 
ITEM 7: Major Shareholders and Related Party Transactions 91 
A. Major Shareholders 91 
B. Related Party Transactions 92 
C. Interests of Experts and Counsel 99 
ITEM 8: Financial Information 99 
A. Consolidated Statements and Other Financial Information 99 
B. Significant Changes 101 
ITEM 9: The Offer and Listing 101 
A. Offer and Listing Details 101 
B. Plan of distribution 102 
C. Markets  102 
D. Selling Shareholders 102 
E. Dilution  103 
F. Expenses of the Issue 103 
ITEM 10: Additional Information 103 
A. Share Capital 103 
B. Memorandum and Articles of Association 103 
C. Material Contracts 107 
D. Exchange Controls 107 
E. Taxation  109 
F. Dividends and Paying Agents 116 
G. Statement by Experts 116 
H. Documents on Display 116 
I. Subsidiary Information 117 
ITEM 11: Quantitative and Qualitative Disclosures about Market Risk 117 
A. Qualitative Information About Market Risk 117 
B. Quantitative Information About Market Risk 120 
ITEM 12: Description of Securities Other than Equity Securities 123 
PART II   124 
ITEM 13: Defaults, Dividend Arrearages and Delinquencies 124 

ITEM 14: Material Modifications to the Rights of Security Holders and Use of Proceeds

124 
ITEM 15: Controls and Procedures 124 
ITEM 16A: Audit Committee Financial Expert 125 

ii


Table of Contents
Page
Introduction 
Forward Looking Statements ii 
PART I 
ITEM 1: Identity of Directors, Senior Management and Advisers 
ITEM 2: Offer Statistics and Expected Timetable 
ITEM 3: Key Information 
ITEM 4: Information on the Company 15 
ITEM 4A: Unresolved Staff Comments 56 
ITEM 5: Operating and Financial Review and Prospects 56 
ITEM 6: Directors, Senior Management and Employees 75 
ITEM 7: Major Shareholders and Related Party Transactions 86 
ITEM 8: Financial Information 92 
ITEM 9: The Offer and Listing 94 
ITEM 10: Additional Information 96 
ITEM 11: Quantitative and Qualitative Disclosures about Market Risk 110 
ITEM 12: Description of Securities Other than Equity Securities 115 
PART II 116 
ITEM 13: Defaults, Dividend Arrearages and Delinquencies 116 
ITEM 14: Material Modifications to the Rights of Security Holders and Use of Proceeds 116
ITEM 15: Controls and Procedures 116 
ITEM 16A: Audit Committee Financial Expert 117
ITEM 16B: Code of Ethics117 125
ITEM 16C: Principal Accountant Fees and Services118 126
ITEM 16D: Exemptions from the Listing Standards for Audit Committees118 126
ITEM 16E: Purchases of Equity Securities by the Issuer and Affiliated Purchasers118 126
ITEM 16F: Change in Registrant'sRegistrant’s Certifying Accountants118 126
ITEM 16G: Corporate Governance120 127
ITEM 16H: Mine Safety Disclosure122 129
PART III122 129
ITEM 17: Financial Statements122 129
ITEM 18: Financial Statements122 129
ITEM 19: Exhibits123 130

iii


 
 

Introduction

 

In this annual report on Form 20-F, all references to “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, 2014, 20152017, 2018 and 2016.2019. 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-123F-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

i


 
 

Forward Looking Statements

 

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”, and Section 21E of the Securities and Exchange Act of 1934, which we refer to as the “Exchange 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”; “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”, “Item 4: Information on the Company” and “Item 5: Operating and Financial Review and Prospects”.

·

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, social 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”, “Item 4: Information on the Company” and “Item 5: Operating and Financial Review and 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 publicallypublicly 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

ii


 
 

PART I

ITEM 1: Identity of Directors, Senior Management and Advisers

Not applicable.

ITEM 2: Offer Statistics and Expected Timetable

Not applicable.

ITEM 3: Key Information

A.  Selected Financial Data

 

The following table presents selected consolidated financial data as of December 31, 20162018 and 2015,2019 and for the years ended December 31, 2016, 20152017, 2018 and 20142019, which has been derived from our consolidated financial statements prepared in accordance with IFRS and included elsewhere in this annual report, and as ofDecember 31, 2014, 20132015, 2016 and 2012,2017 and for the years ended December 31, 20132015 and 20122016, 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 notes and “Item 5: Operating and Financial Review and Prospects” included elsewhere in this annual report.

 

 

IFRS

 

Year ended December 31,

(millions of CLP)(1)

1. Income Statement Data:

2015

2016

2017

2018

2019

 

Net sales

1,498,372

1,558,898

1,698,361

1,783,282

 1,822,541

 

Gross profit

813,296

817,078

899,622

923,271

 914,223

 

Other Income by Function(2)

6,577

5,144

6,718

 228,455

 22,585

 

Other Expenses(3)

(2,372)

(2,027)

(2,662)

 (1,428)

 (1,428)

 

Exceptional Items (EI)(4)

-

-

-

-

 -

 

MSD&A(5)

(612,565)

(619,543)

(668,783)

(681,576)

 (704,571)

 

Adjusted Operating Result(6)

204,937

200,652

234,894

468,722

 230,808

 

Other Gains (Losses)

8,512

(8,346)

(7,717)

4,030

 3,157

 

Net Financial Expenses

(15,256)

(14,627)

(19,115)

(7,766)

(14,603)

 

Results as per Adjustment Units

(3,283)

(2,247)

(111)

742

 (8,255)

 

Equity and Income from Joint Ventures

(5,228)

(5,561)

(8,914)

(10,816)

 (16,432)

 

Foreign Currency Exchange Differences

958

457

(2,563)

3,300

 (9,054)

 

Income Taxes

(50,115)

(30,246)

(48,366)

(136,127)

 (39,976)

 

Net income for the year:

140,526

140,082

148,108

322,085

145,646

 

Attributable to:

 

   

 

 

Equity Holders of the Parent Company

120,808

118,457

129,607

306,891

  130,142

 

Non-Controlling Interests

19,717

21,624

18,501

15,194

  15,504

 

 

 

 

   

 

 

Basic and Diluted Income per Share

326.95

320.59

350.76

830.55

352.21

 

Basic and Diluted Income per ADS(7)

653.90

641.17

701.52

1,661.10

704.42

 

Dividend per Share (8)

163.5

176.3

178.9

498.3

255.0

 

Dividend per ADS in US$(7)(8)

0.47

0.53

0.59

1.49

0.62

 

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

        

 

 

 

Year ended December 31,

 

IFRS

 

2012

2013

2014

2015

2016

 

 

 

 

 

(million of CLP)(1)

 

 

1. Income Statement Data:

 

 

 

Net sales

 

1,075,690

1,197,227

1,297,966

1,498,372

1,558,898

 

Gross margin

582,603

660,530

693,429

813,296

817,078

 

Other income by function

5,585

5,509

25,464

6,577

5,144

 

Other expenses(2)

-1,756

-1,260

-1,743

-2,372

-2,027

 

Exceptional Items (EI)(3)

-

-2,989

-1,628

-

-

 

MSD&A(4)

 

-405,243

-473,524

-535,603

-612,565

-619,543

 

Adjusted Operating Result(5)

181,188

188,266

179,920

204,937

200,652

 

Other gains (losses)

-4,478

959

4,037

8,512

-8,346

 

Net financing expenses

-9,362

-15,830

-10,821

-15,256

-14,627

 

Results as per adjustment units

-5,058

-1,802

-4,159

-3,283

-2,247

 

Equity and income from joint ventures

-177

309

-899

-5,228

-5,561

 

Foreign currency exchange differences

-1,003

-4,292

-613

958

457

 

Income taxes

 

-37,133

-34,705

-46,674

-50,115

-30,246

 

 

 

 

 

 

 

 

 

Net income for the year:

123,977

132,905

120,792

140,526

140,082

 

Attributable to:

 

 

 

 

 

 

Equity holders of the Parent Company

114,433

123,036

106,238

120,808

118,457

 

Non-controlling interests

9,544

9,869

14,553

19,717

21,624

 

 

 

 

 

 

 

 

 

Basic and Diluted Income per share

359.28

370.81

287.52

326.95

320.59

 

Basic and Diluted Income per ADS(6)

718.57

741.61

575.04

653.90

641.17

 

Dividend per share (7)

179.6

166.5

161.8

163.5

176.3

 

Dividend per ADS in US$(6)(7)

0.76

0.61

0.52

0.47

0.53

 

Weighted average shares outstanding (000)

318,503

331,806

369,503

369,503

369,503

 

Shares outstanding as of December 31st (000)

318,503

369,503

369,503

369,503

369,503


 

 

YearEnded December 31,

  

Year ended December 31,

IFRS

 

2012

2013

2014

2015

2016

IFRS

2015

2016

2017

2018

2019

2. Balance Sheet Data:

2. Balance Sheet Data:

(Million of CLP)(1)

2. Balance Sheet Data:

(millions of CLP)(1)

 

 

 

 

  

 

 

Total assets

 

1,328,710

1,727,720

1,768,901

1,825,447

1,871,577

Total non-current liabilities

303,662

234,347

242,070

249,235

228,973

Total Financial debt (8)

263,997

263,251

199,853

180,901

184,624

Capital stock

 

231,020

562,693

562,693

562,693

Subtotal Equity attributable to equity holders of the parent company

613,220

988,676

1,025,588

1,057,816

1,077,298

Total shareholders' equity

710,518

1,084,244

1,148,500

1,187,522

1,200,293

Total Assets

Total Assets

1,825,447

1,872,027

1,976,229

2,405,865

     2,353,691

Total Non-Current Liabilities

Total Non-Current Liabilities

249,235

228,998

280,651

371,025

        427,481

Total Financial Debt (9)

Total Financial Debt (9)

180,901

184,624

214,593

290,952

        330,155

Capital Stock

Capital Stock

562,693

        562,693

Total Equity Attributable to Equity Holders of the Parent Company

Total Equity Attributable to Equity Holders of the Parent Company

1,057,816

1,077,298

1,101,077

1,280,127

1,328,054

Total Shareholders' Equity

Total Shareholders' Equity

1,187,522

1,200,656

1,226,829

1,389,116

     1,442,927

3. Other Data

3. Other Data

 

 

3. Other Data

 

 

Sales volume (in millions of liters):

 

Total volume

1,990.9

2,191.6

2,289.8

2,392.7

2,478.3

Sales Volume (in millions of liters):

Sales Volume (in millions of liters):

 

Total Volume

Total Volume

2,392.7

2,478.4

2,602.0

2,853.0

3,003.2

(1)

Except for the number of shares outstanding, per share and per ADS amounts and sales volume.

(1)

Except for the number of shares outstanding, per share and per ADS amounts and sales volume.

(2)

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)

 

In 2018, Other Income by Function includes the gain of CLP 208,842 million received from the Compañía Cervecerías Unidas Argentina S.A. and Anheuser-Busch InBev S.A./N.V.(“ABI”) transaction (the “Transaction”). See Note 30 to our consolidated financial statements included herein. For more details about the Transaction, see “Item 4: Information on the Company – A. History and Development of the Company” and Note 1 – Letter C of our consolidated financial statements included herein. 

(3)

EI are part of ‘Other expenses by function’ as presented in the Consolidated Statement of Income; 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 payment 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)

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)

Marketing, Sales, Distribution & Administrative expenses

(4)

EI are part of ‘Other expenses by function’ as presented in the Consolidated Statement of Income.

(5)

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— ADJUSTED OPERATING RESULT” for more details regarding Adjusted Operating Result and a reconciliation of the most directly applicable IFRS measure to Adjusted Operating Result.

(5)

Marketing, Sales, Distribution & Administrative expenses

(6)

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.

(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)

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.

(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)

Includes short-term and long-term financial debt (mainly bank loans, bonds and financial leasing).

 

 

(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 USD serve 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, 2019, at the observed exchange rate in effect as of April 24, 2020.

(9)

(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.

 

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 3, 20171, 2020 the U.S. dollarUSD observed exchange rate relating to March 31, 201730, 2020 was CLP 663.97852.03 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 20122015 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)

 

 

 

 

 

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

2016

645.22

730.31

676.70

669.47

October 2016

651.18

670.88

663.78

651.18

November 2016

650.72

679.24

667.18

673.54

December 2016

649.40

677.11

666.48

669.47

January 2017

646.19

673.36

660.51

646.19

February 2017

638.35

648.88

643.34

648.88

March 2017

650.98

669.52

661.86

663.97

 

 

 

 

 

Source: Bloomberg
(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.

 

 

 

Daily Observed Exchange Rate(1)

 

(CLP per USD)

 

Low(2)

High(2)

Average(3)

Period-end(4)

 

 

 

 

 

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

2019

649.22

828.25

702.88

748.74

October 2019

709.71

735.05

721.94

735.05

November 2019

735.05

828.25

778.23

812.13

December 2019

744.62

804.29

767.22

748.74

January 2020

754.16

799.11

774.94

799.11

February 2020

776.99

818.32

797.34

818.32

March 2020

809.81

867.83

840.38

852.03

Source: Bloomberg

 

 

 

 

(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 17, 2017,24th, 2020, the latest practicable date, was CLP 647.47859.95 per U.S. dollar.USD.

 

B.  Capitalization and Indebtedness

 

Not applicable.

 

C.  Reasons for the Offer and Use of Proceeds

 

Not applicable.


 

D.  Risk Factors

 

RISKS RELATING TO CHILE

 

We are substantially dependent on economic, political and social 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 generated64% of our sales revenues in 2016 was generated from our Chile Operating segment,24% came from2019, the International Business Operating segment which(which includes Argentina, Bolivia, Paraguay and Uruguay, andUruguay) contributed13 25% came from, and the Wine Operating segment.segment,including the domestic markets in Chile and Argentina, as well as exports, accounted for 12% 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) of3.42.9% between 20062009 and 2016,2019, and 1.6%1.1% in 2016.2019. 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 2010 and 2015.2009. Therefore, economic growth rates of past periods cannot be extrapolated to future performance.

 

Furthermore, Chile, as an emerging marketand open economy, is more exposed to unfavorable conditions in the international markets and to constant social demands, 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 beginning of a massive social movement during the fourth quarter of 2019 has increased uncertainty levels in Chile, which could affect economic growth through a deterioration of business and consumer confidence. This could have a negative effect on the demand of our products.  See “—Uncertainties about how Chile’s social situation will develop could negatively impact its economy and hence our results of operations and financial condition.”

Uncertainties about how Chile’s social situation will develop could negatively impact the Chilean economy and our results of operations and financial condition.

Beginning on October 18, 2019, protests spread throughout Chile, initially sparked over an increase in the Santiago metro system fares. Protestors vandalized metro stations and other public and private sector assets in Santiago and other major cities. The protests and associated violence have caused commercial disruptions throughout the country, especially in Santiago. A number of demands have been raised throughout the protests, which are generally related to increased economic inclusion and social equality. In response to these events, the government has announced a robust social agenda intended to increase basic pensions, expand social health coverage, increase the tax burden on wealthy taxpayers, reduce working hours, increase the minimum wage, and reduce and stabilize certain public service tariffs, including those related to public transport and electricity. To fund the social agenda, the government and part of the opposition reached an agreement, which introduces certain modifications to the tax reform bill of 2018 that eventually was passed by the Chilean Congress on January 2020.

In response to this social unrest, on November 15, 2019, the majority of the political parties in Chile reached an agreement, which among other items contemplated initial steps toward a potential amendment of the Chilean constitution.

In spite of these measures, the Chilean markets continue to be volatile, and social unrest and violence are still to be fully controlled. The long-term effects of the recent social unrest on the Chilean economy and a possible change in the Constitution are hard to predict and could result in an adverse effect on our results of operations and financial condition.


 

Currency fluctuations may affect our profitability.profitability

 

Because we purchase the majority of our supplies at prices set in U.S. dollarsUSD and we export wine in U.S. dollars,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. Therefore, any future changes in the value of the Chilean peso against said currencies would affect the revenues of our wine export business. Additionally, the cost of several of our raw materials, especially in the beer and non-alcoholic businesses are indexed to the U.S. dollar. The effect of the exchange rate variation on export revenues will have an opposite effectpartially offsets the FX impact on the cost of raw materials expressed in Chilean peso terms.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$ 209.9USD 205.8 billion as of December 31, 2016,2019, while Thethe New York Stock Exchange (“NYSE”) had a market capitalization of approximately US$26.5USD 27.8 trillion and the NASDAQ National Market (“NASDAQ”) had a market capitalization of approximately US$7.78USD 13.9 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 withdrawn 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”.

 


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, political and social 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, social and economic conditions prevailing in Argentina. From 1999 through 2002, Argentina suffered a prolonged recession, which culminated in an economic crisis. Although the economic situation in Argentina has improved since the economic crisis of 2002, we have been observing slowdowns of the economy, and therefore, cannot assure you that economic conditions in Argentina, will continue to improve or that our business will not be materially affected if Argentineas demand for beverage products generally depends on the prevailing economic conditions in the local market. In the past, Argentina has 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 2.1% and inflation was close to 40%. In 2017, GDP growth was 2.7% and inflation was close to 20%, showing a slight recovery in the economy. However, in 2018 Argentina once again entered into a recession and its GDP decreased by 2.5% and accumulated inflation reached 47.6%, while in 2019 the Argentine GDP contracted by 2.2% and inflation reached 53.8%. Consequently, given that the cumulative inflation rate exceeded 100% over the last three years, Argentina was deemed to be a hyperinflationary economy as of July 1, 2018 (see Note 2 to our consolidated financial statements included herein) pursuant to IAS 29.


If economic conditions in Argentina were to deteriorate.slow down, or contract further, if inflation were to accelerate further, or if the Argentine government’s measures to attract or retain foreign investment and international financing in the future to incentivize domestic economy activity are unsuccessful, such developments could adversely affect Argentina’s economic growth and in turn affect our financial health and results of operations.

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 government has regulated prices of consumer goods, including beverages, which has impacted our profitability. Even without government regulation, high inflation may impede our ability to 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 operating results.In 2016 Argentina experienced an average devaluation of theconsolidated financial results. Our Argentine peso versus the U.S. dollar of approximately 60% year over year. 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. In 20162019 the Argentine peso devaluated approximately 55% versusdepreciated 72% against the Chilean peso, which generatedUSD on average, and 59% as of the end of 2019. This resulted in a significant translation effect in our reported revenues, costs and expenses.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 the impact of the current macroeconomic challenges,Compañía Cervecerías Unidas Argentina S.A. (“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.

 

Argentina’s legal regime and economy are susceptible to changes that could adversely affect our Argentine operations.

The measuresMeasures taken by previous Argentine governments 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. 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.

In January 2006, the Argentine government 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 currenciesexchange rate negatively impacted the free import of goods and royalty payments by the Company, and also the repatriation of profits. This situation has changed following the installation of the new government in December 2015. We cannot assure you that the current or future Argentine governments will not implement legal and economic measures that could 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 2017 in Argentina a tax reform (the “Tax Reform Act”)law 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, aimed to gradually reduce the exciseincome tax rate for alcoholicprofits from 35% to 25% (30% for 2018 and sugar-containing beverages2019 and 25% from 2020 onwards), starting in Chile, forced us2018. In addition, dividends to implement price increases for certain categories, leadingbe distributed are subject to a possible decline in volume.

Furthermore, the Tax Reform Act establishes that as of 2017 Open Stock Corporations should calculate their taxes based on the “Partially Integrated System” without the possibilitywithholding tax subject to opt for the alternative “Attributed Income Regime”. The "Partially Integrated System" provides for a gradual increase from 0% to 13% (7% for 2018 and 2019 and 13% from 2020 onwards). In December 2019, anew law was passed which modified certain provisions of the 2017 tax law. Among other matters, it extended the 30% income tax rate and the 7% withholding rate on dividends for an additional year, through 2020. Thus, the 25% income tax rate and the 13% withholding rate on dividends, originally scheduled to apply in 2020, are scheduled to enter into force in 2021. In addition, regarding the Personal Property Tax, which applies to foreign shareholders who hold equity participations in Argentine companies, this reform increases the applicable rate from 0.25% to 0.50% in respect of the equity participation set forth 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 business year, and to 27% starting in the 2018 business year.Financial Statements.


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.

 

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 increaseraise prices in response to increases inhigher 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.

 

Consolidation in the beer industry may impact our market share.

 

In March 2004, Companhia de Bebidas das Américasall the countries where we operate, we compete with Anheuser-Busch InBev S.A./N.V. (“AmBev”ABI”) and Interbrew announced an agreement to merge, creatingits subsidiaries, 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.

In 2005, SAB Miller Plc merged with Grupo Empresarial Bavaria, a Colombian brewer with operations in Colombia, Peru, Ecuador and Panama, forming the then second-largest brewercompany in the world. In 2010SAB Miller 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.

During 2015, SAB Miller plc accepted an offer from AB Inbev to merge its operations. The merger has been approvedforegoing consolidation in the various countries where SAB Miller Plc and AB Inbev currently operate and integrationmarket, as well as any further consolidation of the companies has begun. With this we face a major challenge: we are witnessing one of the largest global mergers in the history of beer and 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. This mightour competitors, may increase thetheir pricing and/or investment power of our competitor,competitiveness, which could negatively affect our market share.share, and accordingly our 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 Ambev S.A. (“Ambev”), which in turn is a subsidiary ABI. In the past, and during 2016, Cervecería Chile has engaged inimplemented aggressive pricing.commercial practices. Additionally, during 2016 Cervecería Chile announced plans to expandis in the process of expanding its current production capacity in Chile. If Cervecería Chile were to amplifycontinues its aggressive price discountingcommercial practices and continue to expand its production capacity in the future and completes its expansion plans, we cannot assure given the current environmentyou that any such discountingthis or other competitive activities will not have a material adverse impacteffect on our profitability or market share.

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. y G. (“Quilmes”), a resultsubsidiary of the merger between AB Inbev and SAB Miller plc, become one player in the Argentine beer market.Ambev. 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 theboth production and distribution. Therefore, we cannot assure you that we will be able to grow or maintain our current market share in the Argentine beer market.

Substitution of fossil fuels by natural gas and taxes on carbon dioxide emissions could increase our energy costs.

In line with the sustainability objective of CCU S.A. for the year 2020, in order to reduce carbon dioxide emissions, we continue with the substitution of fossil fuels with natural gas in our industrial facilities. 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. A series of investment projects is under evaluation, with the aim of reducing emissions and thereby exempting us from this tax in 2018, but we cannot assure we will be able to meet this goal.

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 August 2016, labor reform Law 20,940 was approvedall the countries where we operate, we are exposed to changes in Chile, and went into effect as of April 2017. The labor reform has resulted in a more regulated labor market. The main elements of the labor reform aremarket that could affect our profitability and future growth. These changes could include fluctuations in the following:

·Collective bargaining coverage is expanded to certain employees who were prevented from exercising this right, such as apprentices, temporary workers and others.
·Benefits obtained by a union 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 currently in effect would constitute a floor for the negotiation of new conditions of employment. The parties can agree to lower this floor for the negotiation if justified by the financial situation of the company or business as of the date of discussions.


·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, guarantee public service levels and basic needs of the population, prevent environmental or sanitary damage, and protect the equipment.
·Matters that may be subject to collective bargaining agreements are expanded, allowing the negotiation of more flexible workdays, and others.
·Unions may annually request from large companies information regarding the remunerations and duties associated with each category of employees.

labor supply, as well as changes in labor legislation, among others. 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.

 

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 fulfill 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, Ball, which has production plants in both countries. However, cansif necessary, we could also be importedimport aluminum cans from other Ball 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 several suppliers located in China, Mexico and US and ina single supplier, 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. While we have adopted policies for the responsible and sustainable useirrigation of water, a failureour fields. Any failures in our water supply, regulatory changes that limit the use of this resource, water scarcity or a contamination of our wellswater sources, could negatively affect our sales and profitability.

 

TheAs a commitment with the environment and natural resources, the Company has defined long-term policies to develop a responsible and sustainable use of water. Through its 2020 Environmental Vision plan, initiated in 2010, the Company has reduced the consumption of this resource by approximately 46% per liter produced as of 2019. Furthermore, through the new 2030 Environmental Vision plan, the Company commits to continue optimizing the consumption of water per liter produced, by reaching a 60% decrease in the next ten years.

Additionally, the Chilean Congress is currently discussing the passing of a bill that provides,which establishes, among others, forother things, a new regime for the constitution of temporaryrights to use water rights, which will applytemporarily, applicable to future water rights that are granted. The bill would also introducegranted, a deadline for regularization and registration of rights and introduces an expiration system of revocationfor the non-use of water, rights, for those not in use.as well as the regulation of the environmental, scenic, landscape and social function of the waters. This bill couldproject may undergo modifications during its discussion in theCongress.

Furthermore, decrees issued byDirección General de Aguas (the Chilean Congress. After its enactment, regulations will be requiredwater authority) declared prohibition zones for the implementationconstitution of rights to use groundwater, establishing the new regime. If enacted during 2017, relevant regulations will be dictated for effectsobligation to create communities ofgroundwater, which in turn could restrict the exercise of the new implementation of this bill. The implementation of the new regime could impact future applications for water rights forthat the Company or could mean we would lose water rights that we do not currently use but have available for future growth.owns as well as the change in its extraction points.


 

The supply, production and logistics chain is keycritical 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, utility shutdowns such as customs and ports, planning errors of our suppliers, riots,terrorism, safety failures, complaints by communities, safety failures, or other factors which are beyond our control.

Catastrophic events in the regions in which we operate could have a significant adverse effect on our financial condition.

Natural disasters, climate change impact events, pandemics 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 significant effect on our business, operational results, and financial position.

Chile has been affected in the past by several natural disasters, including large floods, mudslides and forest fires. These events did not have a significant effect on our operations, although a future catastrophic event could have a significant effect on our business, results of operations and financial condition.

Health crises, pandemics or the outbreak of contagious diseases at a global or regional level could have a negative impact on our operations and financial position.

A health crisis, pandemic or the outbreak of disease at a global or regional level, such as the case of the recent outbreak of COVID-19, which was declared a pandemic by the World Health Organization in March 2020, could have a negative impact on our operations and financial position. The above-mentioned circumstances could impede the normal operation of the Company, limit our production and distribution capacity, and/or generate a contraction in the demand for our products. The degree of impact on our operations will depend on factors that we cannot predict, such as the duration, spread, and severity of the health crisis.

Any prolonged restrictive measures put in place in order to control an outbreak of a contagious disease or other adverse public health development in any of our targeted markets may have a material and adverse effect on our business operations.  The ultimate severity of the Coronavirus outbreak is uncertain at this time and therefore we cannot predict the impact it may have on the world, the economies where we operate or the financial markets, and consequently in ourfinancial condition or results of operations.

As of the date of this report, we continue selling, producing and distributing our products, all across our business operations.  Given the high degree of uncertainty about the spread of COVID-19 or regarding future measures that may be adopted across the countries where we operate, we cannot predict the impact the pandemic may have on our operations in the near future, and therefore, any future adverse effects it may have on our results of operations and financial condition.

 

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.


 

Possible regulations for labeling materials and promotionadvertising of alcoholic beverages and other food products in Chilethe countries in which we operate could adversely affect us.

 

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 regardingand Law N° 20,869 of 2015, relating to the nutritional compositionNutritional Composition of food productsFoods and its promotion. Boththeir Advertising and the complementary regulations, in force since June 2016, establish certain restrictions on promotion material, labeling,the advertising, labelling and commercializationmarketing of these products that have beenfoods classified as being “high”"high" in calories or any of thecertain 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 regulation change came into force on June 27, 2016 and affectedwhich affects a part of our portfolio of non-alcoholic portfolio.beverages. We cannot assure you that this regulation will not have an impact on our sales volumes and, therefore, inon our results.

 

Currently aA 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 promotionadvertising 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 advertising and the prohibition of participation inadvertising during sports and cultural events, among others. A regulatory change of this nature willwould affect our alcoholalcoholic beverages portfolio and certain marketing activities.

 

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.

 

Possible regulations of the promotion of alcoholic beverages in Argentina could adversely affect us.

On November 24, 2016 Law 5,708 was implemented in the city of Buenos Aires, Argentina. This law restricts the promotion of alcoholic beverages on the street and at the points of sale, and prohibits the alcoholic beverage companies from sponsoring cultural, sports, or educational events that have free access to the public, as well as the promotion of alcoholic beverages through official media channels of the city of Buenos Aires. We cannot assure you that this regulation will not have an adverse impact on our volumes and therefore on our results.


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. On this topic, on June 1, 2016 Law N° 20,920 was enacted and established a framework for waste management and extended producer responsibility, and stimulation of recycling (“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. We are awaitingOn November 30, 2017, the enactmentRegulations on Procedures of standardsthe REP Law were published. During 2018, regulations were issued that will establishestablished the procedures of targets for priority productscollection, valorization and other associated obligations along with establishing the procedure, requirementsfor tires, and criteriawe expect regulations for the authorization ofcollection, valorization and other associated obligations for packaging materials to be issued in 2020. See “Item 4: Information on the control of waste, among others. These regulations should be enacted within one year as of the publication of said law.Company – E. Environmental Matters.”

 

Modifications introducedAdditionally, the congress is discussing a bill that would limit the creation of disposable products, regulating single-use plastics and strengthening returnability. This bill would: require plastic bottles to be made with 25% recycled material by this law2025, and those incorporated50% by the year 2030; require large retail businesses (including e-commerce and delivery applications) to have returnable packaging among its products; prohibit establishments that sell food from using any kind of non-recyclable single-use containers for deliveries; and establish a “popular action” component in the regulations will involve new costsauditing of such obligations. As mentioned, the bill is still under discussion and investmentscould undergo changes by the Company.congress.

 

Our products are taxed withThe Chilean congress is also currently discussing a bill on climate change, theLey Marco de Cambio Climático, which aims to establish principles, governance, management instruments and adequate financing mechanisms, to allow for an economic development low in greenhouse gas emissions, reduce vulnerability and increase resilience, in order to guarantee the compliance of climate change international commitments made by Chile. This project includes, in addition to the establishment of a long-term climate strategy, the creation of adaptation and mitigation plans, which would include a monitoring system and be subject to review every 5 years, to which regional action plans may be added.

CCU has been actively participating through the associations that represent the different taxes, particularlyindustrial sectors, in public and private 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 15gr./240ml. of sugar and 10% for non-alcoholic beverages containing 15gr./240ml. or less of sugar. An increase in the rateimplementation of these new regulations. Furthermore, the Company through its 2030 Environmental Vision will commit to continue reducing greenhouse gas emissions per liter produced in order to reach a 50% reduction on such emissions, as well as continue optimizing water consumption per liter produced, until we reach a 60% reduction.  We are also committed to reaching a 100% valorization of industrial solid waste, 75% use of renewable energy, 100% ofreusable, recyclable or any other tax could negatively affect our salescompostable packaging, and profitability.aiming for packaging to be made outon averageof 50% recycled material.


 

Catastrophic events inAlthough none of the regions in which we operate could haveabove environmental regulations, as they currently stand, represent a material adverse effect on our financial condition.

Natural disasters, climate change, terrorism, pandemics, strikes or other catastrophic events could impair our abilitymeaningful risk 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 material effect on our business, operational results, and financial position.

In 2016 Chile was affected by several natural disasters, including the large floods, mudflows and forest fires in the southern regions during January and February 2017. These events did not have a significant effect on ourCompany's operations, however, apossible future catastrophic eventregulations could have a significant effect on our business, results of operations and financial condition.business.

 

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 maintain a good relationship with our clients and consumers, our financial results may suffer.

 

It is important to ensure a good service level to our clients provided by our sales force, and adjust new product launches and innovations to the needs and preferences of our consumers.

If we are unable to finance our operations we may be adversely affected.

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, 2017,2020, 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, 2015 to December 31, 2016, the daily average value ofexchange rates for each period, the Chilean peso relative toappreciated by 4.1% in 2017, depreciated by 1.4% in 2018 and depreciated 9.7% in 2019. When comparing the U.S. dollar increased by3.5% in nominal terms, whereas the year end value decreased by 6% based on the observed exchange rate for U.S. dollars on those dates.as of the end of each period, the Chilean peso appreciated by 8.2% in 2017, depreciated 13.0% in 2018 and depreciated 11.2% in 2019. 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”.

 

For example, since our consolidated financial statements are reported in Chilean pesos,CLP, a decline in the value of the Chilean pesoCLP against the dollarUSD 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 fluctuate during any period of time when the ADS depositary cannot convert a foreign currency into dollars,USD, a holder of our ADSs may lose some of the value of the distribution. Also, since dividends in Chile are subject to withholding taxes,withholdingtaxes, 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.

 

ADS 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 notice of a shareholders’ meeting from the Depositarydepositary and may then exercise their voting rights by instructing the Depositary,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 Depositarydepositary fails to receive timely voting instructions from some or all ADS holders, the Depositarydepositary will assume that ADS holders agree to give a discretionary proxy to a person designated by us to vote their ADSs on their behalf. Furthermore, ADS holders may not receive voting materials in time to instruct the Depositarydepositary to vote. Accordingly, ADS holders may not be able to properly exercise their voting rights.


 

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 Depositarydepositary 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 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.

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.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(the “Chilean Corporations Act”) and theits ordinance (Reglamento de Sociedades Anónimasnimas), 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 relating to shares of our common stock will be taxable in Chile and in the United States. See “Item 10: Additional Information – E. Taxation – Chilean Tax Considerations – Capital Gains” and “– United States FederalIncomeTaxFederal Income Tax Considerations – Taxation of Capital 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.


 

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 are a public corporation (sociedad anónima abierta) organized by means of a public deed dated January 8, 1902,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 Valparaíso). 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 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 19715,19711, 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.  The SEC 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.

 


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.

 

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 marketingcommercialization 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 99.93%99.98% of ECUSA’s shares. In January 2001, ECUSA and Schweppes Holdings 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”.

 


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 Compañía Cervecerías Unidas Argentina S.A. (“CCU Argentina”).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. for US$8 million. AfterAs of mid-1998, 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.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.

 

In November 2000, we acquired a 50% stake inand Malterías Unidas S.A. (currently Maltexco S.A.) became joint owners (50% each) of Cervecería Austral S.A. (“Cervecería Austral”), a Chilean company located in the city of Punta Arenas.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 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 theMagallanes 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, of which we contributed approximately CLP 13,402 million.

 

Further, inIn 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 CCKCK that allowed us to consolidate this subsidiary into our consolidated financial statements sinceas 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 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%.

 

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% interestininterest in IRSA. Therefore, Quiñenco and Heineken Chile Ltda. are the only two current shareholders of IRSA, with 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.


 

In August 2003, VSP 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 January 2004, we entered the sweet snacks business by means of a joint venture between CCU Inversiones S.A. and Industria Nacional de Alimentos 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 brownies and other high quality home-made productshigh-quality baked goods under the brand Nutrabien.

 

In October 2004, VSP acquired the well-known Manquehuito Pop Wine brand, a 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 be partially used for stock option programs. During October and 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.This new company owns, among others, the brands “Watt’s”, “Watt’s Ice Frut”, “Yogu Yogu” and “Shake a Shake” in Chile. Promarca granted both of its shareholders (New Ecusa S.A., a  former subsidiary of ECUSA, which as of the date of this annual report has been merged into ECUSA, and Watt´sWatt’s Dos S.A., a subsidiary of Watt´sWatt’s S.A.), for an indefinite period, the exclusive licenses for the production and sale of the different product categories.


 

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, VSP 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, VSP owns 100% of said company. Between April and June 2007, VSP’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 licencelicense 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. In January 2016,Chile, and CPCh sold itssuch interest in Bauzá 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”), 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 notificationnotice from Nestlé Waters Chile S.A. exercisingwhereby it exercised its irrevocable option to buy 29.9% of Aguas CCUCCU’s equity, withinpursuant to the scopeterms and conditions of the association contract.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 Nestlé Watersboth companies, the latter being the surviving company under the name Aguas CCU-Nestlé Chile S.A. and Aguas CCU. The current shareholders of Aguas CCU are ECUSA (50.10%) and Nestlé Chile S.A. (49.90%).


 

In 2008, the licensing contract, was extended until 2025, whichthat grants CCU Argentina the exclusive right to produce, package, commercialize and distribute Budweiser beer in Argentina.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 US$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.

 

OnIn November 2008, CCU and its affiliate VSP entered into a Merger Agreement with Compañía Chilena de Fósforos S.A. and its subsidiaries Terciados 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 Viña San Pedro Tarapacá S.A. (“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 VT 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 expireswas set to expire in 2025 (in 2015(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).expired in 2015. Currently, CCU´sCCU’s subsidiaries Inversiones Invex CCU Ltda. and Inversiones Invex CCU Dos Ltda. own 80.649% and 19.351%, respectively, of CCU Argentina´sArgentina’s share capital. CCU Argentina owns 66.68%77.005% of CICSA´sCICSA’s share capita,capital, Inversiones Invex CCU Dos Ltda owns the remaining 33.32%22.995%.

 

In December 2010, CICSA acquired equity interests in Saénz Briones y Cía SAICa. 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 the merger by absorption of Sidra laLa Victoria S.A. merged with and into Saénz Briones y Cía SAIC and was executed. S.A.I.C.

 

In August 2011, the board of directors of VSPT agreed to spin-off Viña Valles de Chile S.A. (“VDC”), a corporation owned, in equal parts, by VSPT and Sociedad Agrícola y Ganadero Río Negro Limitada (“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.

 

In September 2012, CCU acquired 100% of the shares of the 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 that engages in the production and marketingcommercialization 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.

 

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 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”), 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 import,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 an additional stake of the outstanding shares of VSPT. VSPTVSPT.VSPT is formed by the wineries San Pedro, Tarapacá, Santa Helena, Viña Leyda, Misiones de Rengo, Viña Mar, Casa Rivas, FLC,Finca La Celia, and Bodega Tamarí. These.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 inleadersin 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.AS.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 the Bolivian market through a partnership with Grupo Monasterio, acquiring 34% of Bebidas Bolivianas BBO S.A. (“BBO”). BBO produces and commercializes alcoholic and non-alcoholic beverages in Bolivia. CCU's initial stake in BBO iswas 34%, which was obtained by a capital injection, and which contemplatescontemplated 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 includesincluded contracts that will allow BBO to operate CCU’s brands in Bolivia. The Company has recorded this investment under joint ventures and associated companies. In 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 allowsallowed CICSA to import and distribute on an exclusive basis,Corona andNegra 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$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 agreed to initiate a joint venture for the manufacturing, commercialization and distribution of beer and malt based non-alcoholic beverages in Colombia. The joint venture iswas established through a company named Central Cervecera de Colombia S.A.S. (“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 CCC, a trademark license agreements granted to CCC by CCU and Grupo Postobón, a shared services agreement governing services to be provided by Postobón to CCC, and an exclusive license granted by Heineken to CCC for the import, production and distribution of Heineken products in Colombia. As of September 2015, CCC also has anexclusive contract for theto import, productionproduce and distribution ofdistribute 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 and Sol as of July 1, 2017.

 

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 is 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% participationstake in Alimentos Nutrabien S.A.Nutrabien. During 2016, Foods acquired the remaining 50% stake of Alimentos Nutrabien S.A. 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, Compañía Cervecerías Unidas S.A.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,Watt’s, among others, entered into an “International Association Agreement” in order to expand the brand Watt´sWatt’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.beer in Paraguay.

 

In 2016, CCC acquired the brand and assets related to the craft beer brand “3 cordilleras”Cordilleras” of Artesana Beer Company S.A. in Colombia.  CCC is reported under Joint venturesVentures and associated companies.Associated Companies.

In 2017, we began producing and commercializing Miller Genuine Draft (“MGD”) in Argentina.

As of April 2017, CCC also has a license agreement to commercialize and distribute the Miller Lite and Miller Genuine Draft brands in Colombia.

In June 2017, CPCh incorporated to its portfolio the Peruvian pisco brand BarSol, 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.

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 16, 2017, CCU, through its subsidiary CCU Inversiones ll Ltda., acquired 50% of Zona Franca Central Cervecera S.A.S. (“ZF CC”), a company 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. Until November 2019, the main purpose of ZF CC was to act exclusively as an industrial user of one or more free-trade zones, providing toll manufacturing services to CCC, which was the company that produced, marketed and distributed beer and malt beverages. Since November 2019, ZF CC is  producing and selling to CCC, which continues to market and distribute our products.

In December 2017, CCU, through its subsidiary CCU Inversiones S.A., increased its stake in VSPT 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 in exchange 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.


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 in 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.

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 be used to transport CCU’s products in Santiago. CCU’s goal is for electric trucks to represent 50% of the fleet by 2030.

At the end of 2018, CCU finalized the construction of the new distribution center for non-alcoholic beverages as 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.

In 2019, CCU started the construction of the production plant for non-alcoholic beverages, as part of the CCU Renca Project, and it is expected to be operational by the end of 2020. This project incorporates the latest technology for efficient and sustainable production and distribution.

On May 31, 2019, CCU, through its subsidiary Viña San Pedro Tarapacá S.A., completed the purchase of the wine assets of Pernod Ricard Argentina SRL, which included the brands Graffigna, Colón and Santa Silvia.

On August 8, 2019, CCU announced that CPCh, acting through the companies Inversiones Internacionales SpA and International Spirits Investments USA LLC, communicated to LDLM Investments LLC their decision to start a process of selling their total participation in Americas Distilling Investments LLC, owner of the Peruvian company Bodega San Isidro SRL and Barsol brand.

In December 2019, as part of our 2030 Environmental Vision, CCU committed for the next ten years to: (i) continue reducing greenhouse gas emissions per liter produced to reach a 50% reduction, (ii) continue optimizing water consumption per liter produced, until a 60% reduction is achieved, (iii) 100% valorization of industrial solid waste, (iv) use 75% renewable energy, (v) use 100% reusable, recyclable or compostable packaging, and (vi) aim for our packaging to be made on average of 50% recycled material.  

 

CAP


ITAL EXPENDITURESCapital Expenditures

Thecash flows related tocapital 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 cash flows related to capital expenditures for the last three years were CLP230,080 125,765 million,CLP 131,731131,440 million and
CLP 128,883140,488 million, respectively, totaling CLP
490,694 397,693 million of which CLP389,750290,710 million was invested in Chile and CLP100,945 106,983million outside Chile.

 

In recent years, cash flows related to 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 2014,85%2017, 74% of cash flows relatedour capital expenditures were allocated to our capital expenditure wasoperations in 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.increases to support increased sales volume.

 

During 2015,79%2018, 75% of cash flows relatedour capital expenditures were allocated to our capital expenditure wasoperations in 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.

 

During 2016, 69%2019, 70% of cash flows relatedour capital expenditures were allocated to our capital expenditure wasoperations in Chile. These investments were requirednecessary to improve our capacity and productive efficiencies, as well as the quality of our logistics and distribution processes, including the completion of the process of changing pallets from wood to plastic. Also, we have started the construction of a new production plant for non-alcoholic beverages in Santiago, automated our winemaking process and expanded our ability to process grapes for our wine operations and started to invest in our business in Argentina with additional capacity to support the increasedgreater sales volume of our categories experienced in 2015, with investments related to increasing bottling capacity, new lines, replacement of obsolete lines and marketing assets. We also invested in warehouse adaptation and stores throughout Chile in order to optimize the distribution of our products and new categories.volumes.

 

The cash flow related tofollowing table shows our majorprimary capital expenditures for the period 20142017 - 2016 are shown in the following table.2019. See “Item 5: Operating and Financial Review and Prospects – B. Liquidity and Capital Resources – Capital Expenditures” for the 20172020 - 20202023 period.

CLP Million

2017

2018

2019

Chile

93,452

98,683

98,577

Abroad

32,313

32,757

41,911

Total

125,765

131,440

140,488

 

 
CLP million201420152016
Chile196,599103,86089,291
Abroad33,48127,87239,593
Total230,080131,731128,883


 

 

B.Business Overview

1)Summary

 

CCU is a diversifiedmulti-category beverage company operatingwith operations in Chile, Argentina, Bolivia, Colombia, Paraguay and Uruguay. CCU is one of the largest Chilean brewer,players in each one of the second-largest Chilean carbonatedbeverage categories in which it participates in Chile, including beer, soft drinks, producer, the largest Chileanmineral and bottled water, juice, wine and nectar producer, and the largest pisco, producer. Itamong others. CCU is the second-largest Argentine brewer in Argentina and also participates in the cider, spirits and wine industries. In Uruguay and Paraguay, the Company is present in the beer, mineral and bottled water, soft drinks and juice categories. In Bolivia, CCU participates in the beer, water, and soft drinks, industries in Uruguay, Paraguayjuice and Bolivia, andmalt beverage categories. In Colombia, the Company participates in the beer industry in Colombia. CCU is one of the largest Chilean wine producers, and the second-largest Chilean wine exporter.malt beverage industry. The Company´sCompany’s principal licensing, distribution and / or joint venture agreements include Heineken Brouwerijen B.V., Anheuser-Busch Incorporated, PepsiCo Inc., Seven-up International, Schweppes Holdings Limited, Société des Produits Nestlé S.A., Pernod Ricard Chile S.A., Watt´sPromarca 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. 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. Corporate revenues and expenses are presented separately as Other.

 

In 2015 the Committee of International Business was created, which brought together management of business activities in Argentina, Uruguay and Paraguay. Following this, the Río de la Plata Operating segment (consisting of the business activities referred to above) was renamed the International Business Operating segment. The Committee of International Business also represents and looks after the interests associated with investments in  Bolivia and Colombia, which continue to report their results under Equity and incomeIncome of JVs and are associated on a consolidated basis.

 

CCU has launched itscompleted the 2016-18 Strategic Plan, 2016 - 2018, which is based on two pillars: Growth and Efficiencies, with a focus on our core categories beer and non-alcoholic beverages. We aim to grow profitably in all our categories and businesses, and atincluded, among other initiatives, the same time we will seek efficiencies with determination, by executing our “ExCCelencia CCU” Program. As part of the ExCCelencia CCU program, duringprogram. During 2016 we implemented the integration of the route-to-market of the beer and non-alcoholic category in Chile throughout the whole 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.

 

In 2016At the Company took important stepsend of 2018, CCU launched the 2019-21 Strategic Plan, which continues to be based on our three Strategic Pillars: Growth, Profitability and 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 areaintegral development of environmental sustainability, including (1)our employees; and 6) taking care of our planet through the inaugurationdevelopment and implementation of the first satellite natural gas regasification plant at our CCU plant in Temuco, which will allow the conversion from heavy oil to natural gas, decreasing the plant’s CO2 emissions by 20%, (2) inauguration of the mini hydroelectric power plant in Isla de Maipo, which will generate 250 kilowatts of electrical power to supply the operation of the winery of Viña Tarapacá, and (3) inauguration of the biogas plant, in Molina, which only works with solid waste from the harvest.2030 Environmental Vision.


 

 

2) Overview

Overview:Chile Operating segment

We estimate that our weighted volume market share1 for the Chile Operating segment was approximately 40.9%42.7%, 41.6%43.4% and 42.3%43.8% in 2014, 20152017, 2018 and 2016,2019, respectively. The calculation of the weighted average for past periods includes markets and industries that CCU entered at a later date. Weighted volume market share includes all categories in which CCU participates in the Chilean domestic market, excluding winesHOD and HOD,powder drinks according to Nielsen figures.

 

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, which are primarily marketed under different proprietary brands and licensed brands. In the beer category, weWe are the exclusive producer and distributor of Heineken, Sol and Coors beer in Chile; the exclusive distributor of imported Tecate beer and Blue Moon beer and we distributeproduce and producedistribute Kunstmann and Austral beer in Chile via distribution or license agreements.

 

Our non-alcoholic beverages in Chile include carbonated soft drinks (both cola and non-cola), nectars and juices, sports and energy drinks, ice tea; and water, which includesinclude mineral, purified and flavored bottled water (including HOD),water. These include both categories consisting of our proprietary brands and brands produced under license, from PepsiCo (carbonated and non-carbonated soft drinks), Schweppes Holdings (carbonated soft drinks) and Promarca (nectars(juice and fruitfruit-flavored beverages). In the energy drinks business, we are the exclusive distributor of Red Bull energy drinks in 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.

 

We also produce and distribute pisco and cocktails, rum, flavored alcoholic beverages (“FABs”) and spiritscider in Chile. In addition, we have the distribution ofdistribute Pernod Ricard products, through the traditional channel, which excludes supermarkets with centralized distribution.such as whisky, vodka, rum, gin and other spirits, in non-supermarket retail stores.

 

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(on-premise 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, and 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 whole country, and at the same time, the Company incorporated into the Chile Operating segment the business activities performed by the Strategic Service Units (“SSU”),SSU, which include Transportes CCU, Comercial CCU, CRECCU S.A. and Plasco. 

 

Comercial CCU is responsible for the sale of all of the Company’s whole portfolio of products through a uniquesingle sales force inthe Metropolitan Region including the capital Santiago, and several other large cities such as Viña del Mar, Rancagua, La Serena, and Concepción,those areas where this synergic sales model is more efficient. Additionally, product distribution is handled by our subsidiary Transportes CCU. To the south of Coyhaique,Comercial Patagona Limitada (“Comercial Patagona”) handles our sales and distribution are performed by Comercial Patagona S.A. 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.

As part of CCU’s innovation and digital transformation initiatives, we broadened our remote sale platforms through the launch of a modern online sales website in Chile during 2019, called "La Barra", providing a new experience for consumers through home delivery of our portfolio. During 2019, through La Barra we delivered products to over 24,000 households in Chile. In addition, we began to develop a similar platform in Argentina.

In Argentina, Bolivia, Paraguay and Uruguay and Paraguay these operations are carried out bywe use our own sales force, as well as third party distributors.

 


Plasco, a subsidiary of CCU, produces nearly all of the returnableplastic caps and non-returnableinjected preforms we use to produce plastic bottles used byin the Chile operatingOperating segment.

 

Overview:International Business Operating segment

We estimate that our weighted volume market share1 for the International Business Operating segment was approximately 12.9%14.7%, 13.8%15.8% and 14.0%16.7% in 2014, 20152017, 2018 and 2016,2019, respectively, including beer and ciders in Argentina according to Nielsen;Ernst and Young for 2018 and 2019 and according to Nielsen (including cider) for 2017; beer, carbonated soft drinks, beer, nectar,juice, mineral water and flavored water in Uruguay, according to IDRetail; and beer, carbonated soft drinks, nectarjuice and mineral water in Paraguay, according to CCR; and in Bolivia beer and malt, according to Ciesmori, and carbonated soft drinks according to internal estimates.


1The calculation of the weighted average for past periods includes markets and industries that CCU entered at a later date.date, and since 2018 figures include our operations in Bolivia. The 2018 figure amounts to 20.0% if Bolivia is not considered in the calculation.

 


We produce and/or import, sell and distribute beer under proprietary brands and licensed brands in Argentina, UruguayBolivia, Paraguay and Paraguay.Uruguay. We also produce, sell and distribute cider in Argentina.

 

In Argentina, we are the exclusive producer and distributor of Heineken, Amstel, Sol, BudweiserGrolsch, Warsteiner and Miller beer brands; and the exclusive distributor of imported Kunstmann and Blue Moon beer brands. Also, from Argentina we export Imperial to Uruguay; Schneider and Kunstmann beers, our proprietary brands, and Heineken to Bolivia, Paraguay and Uruguay. Additionally, through our subsidiaries in Paraguay and Bolivia, we have the license to distribute beer under the Heineken Coors, Paulaner, Schneider and Kunstmann brands.brand.

 

In Uruguay, CCU, through its subsidiaries, produceproduces and distributedistributes mineral and flavored bottled water under the Nativa and Nativa MAS brand, and 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. Also, we produceexport Watt’s juice and Full Sport to Paraguay. As of 2019, we started to distribute Watt´s in Uruguay.imported wine, from VSPT, under the brand Misiones de Rengo, Finca La Celia and Eugenio Bustos.

 

In Paraguay, CCU, through its subsidiaries, produceproduces and distributedistributes 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 license to produce and distribute nectarsjuice under the Watt’s brand. In addition to imported beer distribution in Paraguay, the companyCompany entered into craft beer market production with the Sajonia brand, an important local brand.

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. BBO also participates with Mendocina in the water category and Natur-All in 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 market1share was 18.3%18.2%, 18.0%17.7% and 18.1%17.7% in 2014, 20152017, 2018 and 2016,2019, respectively. The calculation of the weighted average for past periods includes markets and industries that CCU entered at a later date.  In 20162019 VSPT’s sales amounted to approximately 29.4%29.9% of total measured domestic industry sales by volume in Chile, according to Nielsen, and 12.9%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 and San Juan, Argentina. As of January 2017 the carton packaging line of our plant in Lontué has been moved to Molina, as part of our efficiency plan. As a result of this change Lontué continues to serve as one of our storage locations.

 

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 beer and soft drinks consumption decline.


 

Overview:Joint Ventures and Associated companiesCompanies

CCU participatesis equal joint owner with Maltexco S.A. (former Malterías Unidas S.A.) of 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 sweet snacks businessagreement, 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 Magallanes Region, where selling and distribution is carried out by means of a joint venture between our CCU Inversiones S.A. and Industria Nacional de Alimentos S.A.Comercial Patagona Ltda., a subsidiary of Quiñenco, with Cervecería 50% interest each in Foods Compañía de Alimentos CCU S.A. (“Foods”), parent company of Alimentos Nutrabien S.A. Foods initially owned 50% of Alimentos Nutrabien S.A., which specializes in brownies and other high quality home-made products under the brand Nutrabien. During 2016, Foods acquired the remaining 50% stake of Alimentos Nutrabien S.A.

In Bolivia, CCU participates through 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.Austral.

 

In 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 for theto import, productionproduce and distribution ofdistribute Heineken, productsAmstel, Murphys, Buckler, Coors Light, Tecate and Coors LightSol in Colombia. In 2016, CCC acquired the brand and assets related to the craft beer brand “3 cordilleras”Cordilleras” of Artesana Beer Company S.A.


The calculation As of April 2017, the Miller Lite and Miller Genuine Draft brands were incorporated by means of a license agreement for the development and/or marketing of these brands in Colombia. In August 2017, through its subsidiary CCU Inversiones ll Ltda., CCU acquired 50% of the weighted averageshares of ZF CC, in which Grupo Postobón holds the remaining 50%. Until November 2019, the main purpose of ZF CC was to act exclusively as an industrial user of one or more free-trade zones in Colombia, providing toll manufacturing services to CCC, which was the company that produced, marketed and distributed beer and malt beverages. Since November 2019, ZF CC is producing and selling to CCC, which continues to market and distribute our products. In February 2019, CCC launched Andina, our first mainstream beer brand produced locally in the new brewery, located north of Bogota, in the municipality of Sesquile, Cundinamarca. Also, CCC began producing in the plant our licensed global brands, including Heineken and Tecate, among others. In July 2019, CCC launched our first malt-based soft drink, Natumalta, aligned with Grupo Postobón's leadership in soft drinks in Colombia. At the end of October of 2019, we launched Andina Light, and at the end of 2019, a new contract was signed with Coors Brewring Company D/B/A Molson Coors International ("MCI"), for past periods includes marketsthe production, marketing and industries that CCU entered at a later date.distribution of the Miller Lite and Miller Genuine Draft brands.   

 


3)

The Beverage Market

 

The Beverage Market:Chile Operating segment

We estimate that annual beer consumption in Chile was 787856 million liters in 20162019 or approximately 4346 liters per capita. The following table shows our estimates for total and per capita consumption levels for beer in Chile for the years 20122015 - 2016:2019:

Year

Total Beer Sales Volume(1)

Per Capita

 

(in millions of liters)

(liters)

2012

681

39

2013

723

41

2014

745

42

2015

767

43

2016

787

43

(1) Source: Canadean, Global Beverage Forecast of March 2017. Figures have been rounded.

Year

Total Beer Sales Volume(1)

Per Capita

 

(in millions of liters)

(liters)

2015

767

43

2016

780

43

2017

799

43

2018

821

44

2019

856

46

(1)Source: GlobalData, Quarterly Beverage Forecast. Figures have been rounded.

 

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 carbonated mineral bottled water. The non-carbonated beverages are fruit nectars and juices, functional drinks and 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:

 

 

 

 
 

TotalNon-Alcoholic Beverage Sales Volume (1)

  

Per Capita(1)

 
 

(in millions of liters)

  

(liters)

 

Year

CarbonatedSoft drinks

Nectar & Juices

Functional drinks(3)

Water(2)

 

CarbonatedSoft drinks

Nectar & Juices

Functional drinks(3)

Water(2)

 

2012

2,340

394

39

496

 

134

23

2

28

2013

2,376

425

53

556

 

135

24

3

32

2014

2,296

429

56

596

 

129

24

3

33

2015

2,270

417

67

638

 

126

23

4

35

2016

2,249

424

78

677

 

124

23

4

37

(1)  Source: Canadean, Global Beverage Forecast of March 2017.

 

(2) Includes HOD, packaged water, flavored water, enhanced water.

 

(3) Includes Sports drinks, Energy drinks, Iced tea and Iced coffee.

 
 

Total Non-Alcoholic Beverage

 

Sales Volume(1)

 

Per Capita

 

(in millions of liters)

 

(liters)

Year

Carbonated Soft drinks

Nectar & Juices(2)

Functional drinks(3)

Water(4)

 

CarbonatedSoft drinks

Nectar & Juices(2)

Functional drinks(3)

Water(4)

 

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

2019

2,180

416

99

750

 

116

22

5

40

(1)Source: GlobalData, Quarterly Beverage Forecast. Figures have been rounded.

(2) Includes Nectars, juices and still drinks

(3) Includes Sports drinks, Energy drinks, ice tea and ice coffee.

(4) Includes HOD, packaged water, flavored water, enhanced water.

 

 

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

2014

2015

2016

2017

2018

2019

Colas

55%

54%

54%

55%

57%

Non-colas

45%

46%

46%

45%

43%

Total

100%

100%

 

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)

Per Capita

 

(in millions of liters)

(liters)

2012

63

4

2013

68

4

2014

70

4

2015

71

4

2016

71

4

(1) Source: Canadean, Global Beverage Forecast of March 2017.

 

Total Spirits

 

Year

Sales Volume(1)

Per Capita

 

(in millions of liters)

(liters)

2015

71

4

2016

71

4

2017

72

4

2018

76

4

2019

79

4

(1)Source: GlobalData, Quarterly Beverage Forecast. Figures have been rounded.

 

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 15gr./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


The Beverage Market:International Business Operating segment

The Argentine beer market is estimated by us to be around 2.3 times the size of Chile’s.Chile’s beer industry. Traditionally, beer and wine have been the principal alcoholic beverages consumed in the country. We estimate that annual beer consumption in Argentina was 1,8122,003 million liters in 20162019 or approximately 4245liters per capita, reflecting a 3.3% industry decrease for 2016.capita.

 

The table below sets forth our estimates of total and per capita beer, functional, spirits and cider consumption which are the categories we participate in Argentina during each of the last five years:

 

Argentina

 

Total Sales Volume

 

Per Capita

 

(in millions of liters)

 

(liters)

Year

Beer

Functional Drinks

Spirits

Cider

 

Beer

Functional Drinks

Spirits

Cider

2012

1,870

105

128

94

 

45

3

3

2

2013

1,849

112

129

97

 

44

3

3

2

2014

1,833

117

130

94

 

43

3

3

2

2015

1,875

124

130

93

 

43

3

3

2

2016

1,812

118

134

87

 

42

3

3

2

Source: Canadean, Global Beverage Forecast of March 2017.

 

 

Argentina

 

 

Total Sales Volume(1)

 

Per Capita

 

 

(in millions of liters)

 

(liters)

 

Year

Beer

Spirits

Cider

 

Beer

Spirits

Cider

 

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

 

   2019(2)

2,003

162

77

 

45

4

2

 

(1)Source: GlobalData, Quarterly Beverage Forecast. Figures have been rounded.

(2) Internal estimates for beer category.

 

             

 


Excise taxes forIn 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 TypeCategory

Current Excise TaxesTax

Non-Alcoholic BeveragesBeer

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

4.17%4.0% - 8.7%

Alcoholic Beverages

Beer

8.7%

Whisky

25%

10-29% alcohol content

25%

30% or more alcohol content

25%

Wine-cider

0%8.0%

 

In Uruguay, we participate in the beer and non-alcoholic beverages categories since our entrance to the market in 2012. The table below sets forth our estimates of total and per capita beer and non-alcoholic categoriesbeverage consumption in which we participateUruguay in Uruguay:the last five years:

                                                        

 

Uruguay

 

Total Sales Volume

 

Per Capita

 

(in millions of liters)

 

(liters)

Year

Beer

Carbonated Soft drinks

Nectar & Juices

Water(1)

 

Beer

Carbonated Soft drinks

Nectar & Juices

Water(1)

2012

100

383

27

268

 

29

112

8

78

2013

100

395

29

305

 

29

115

9

89

2014

104

395

31

329

 

30

114

9

95

2015

106

386

33

360

 

31

111

10

104

2016

107

373

32

387

 

31

107

9

111

Source: Canadean, Global Beverage Forecast of March 2017.

     

(1) Includes HOD, packaged water, flavored water, enhanced water.

  
 

Uruguay

 

Total Sales Volume(1) 

 

Per Capita

 

(in millions of liters)

 

(liters)

Year

Beer

Carbonated Soft drinks

Nectar & Juices(2)

Water(3)

 

Beer

Carbonated Soft drinks

Nectar & Juices(2)

Water(3)

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

2019

108

355

35

506

 

31

101

10

144

(1)Source: GlobalData, Quarterly Beverage Forecast. Figures have been rounded.

(2)Includes Nectars, juices and still drinks

  

(3) Includes HOD, packaged water, flavored water, enhanced water.

  


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 categoriesbeverage consumption in whichParaguay in the last five years:

 

Paraguay

 

Total Sales Volume(1)

 

Per Capita

 

(in millions of liters)

 

(liters)

Year

Beer

Carbonated Soft drinks

Nectar & Juices(2)  

Water(3)

 

Beer

Carbonated Soft drinks

Nectar & Juices(2)  

Water(3)

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

2019

329

584

77

368

 

46

82

11

51

(1)Source: GlobalData, Quarterly Beverage Forecast. Figures have been rounded.

(2) Includes Nectars, juices and still drinks

   

(3) Includes HOD, packaged water, flavored water, enhanced water.

  

In Bolivia, we participate in Paraguay: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 and 2019:

 

 

Paraguay

 

Total Sales Volume

 

Per Capita

 

(in millions of liters)

 

(liters)

Year

Beer

Carbonated Soft drinks

Nectar & Juices

Water(1)

 

Beer

Carbonated Soft drinks

Nectar & Juices

Water(1)

2012

280

546

54

214

 

43

84

8

33

2013

285

543

59

231

 

44

83

9

35

2014

289

554

60

261

 

43

83

9

39

2015

290

541

62

284

 

43

80

9

42

2016

296

535

65

302

 

43

78

9

44

Source: Canadean, Global Beverage Forecast of March 2017.

     

(1) Includes HOD, packaged water, flavored water, enhanced water.

  
 

Bolivia

 

Total Sales Volume(1)

 

Per Capita

 

(in millions of liters)

 

(liters)

Year

Beer

Carbonated Soft drinks

Water(2)

 

Beer

Carbonated Soft drinks

Water(2)

2018

389

1,116

231

 

35

100

21

2019

347

1,053

229

 

31

93

20

(1) Source: GlobalData, Quarterly Beverage Forecast. Figures have been rounded.

(2) Includes HOD, packaged water, flavored water, enhanced water.

 

The Beverage Market:Wine Operating segment

We estimate wine consumption in Chile was approximately 13 liters per capita in 2016. Given that the Chilean wine industry is fragmented, no single wine producer accounts for the majority of production and/or sales.Theleading 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 y 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)

2012

226

13

2013

227

13

2014

225

13

2015

231

13

2016

233

13

(1) Source: Canadean, Global Beverage Forecast of March 2017.

Year

Total Volume (1)

Per Capita

 

(in millions of liters)

(liters)

2015

231

13

2016

233

13

2017

236

13

   2018(2)

235

13

2019

240

13

(1) Source: GlobalData, Quarterly Beverage Forecast. Figures have been rounded.

(2) Internal estimates.

 

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 fromproducedfrom 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

Production and Marketing:Chile Operating segment

The production, marketing and sales of beverages in Chile generated Netnet sales of CLP 835,4301,047,119 million,
CLP 909,460
1,109,574 million and CLP 997,3761,164,304 million in 2017, 2018 and 2019, respectively, or 64.4%61.7%, 60.7%62.2% and 64.0%63.9% of our totalCCU’s consolidated Net sales in 2014, 2015 and 2016, respectively.those years. Our sales by volume in Chile increased 4.5%4.9% in 2016.2019.

 

Under each license agreement, we have the 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 strongly believe that we are in compliance with the quality of all of our license agreements.

 

Our brand Cristal is our principal andthe best selling beer brand in Chile, followed closely by Escudo, the second most popular beer in the country. Other relevant brands are: Royal Guard, our single, proprietary premium beer brand; Morenita, in theour dark beers;beer brand; Dorada, as our convenience brand; and Stones, a flavored sweetened beer, with 2.5% alcohol content. From time to time, we introduce innovations inand brand extensions to our most relevant brands, highlighting during 20162019 the following: Cristal Radler, Szot, GuayacánSummer Lager, Escudo Negra and MaracuyáEscudo Ambar, Royal Guard Pacific IPA, Austral 1520,Kunstmann Hazy IPA, Kölsch and Oktoberfest, Coors Original (stubby bottle) and Red Citrus Stones. Royal Scotch Ale as of April 2017.

 

In October 2001, Cervecería Austral entered into a license agreement with our subsidiary Cervecera CCU Chile Limitada (“Cervecería CCU”)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, as well as produceChile. 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 our beer division.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 Brouwerijen 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. Heineken beer is one of the leading brandbrands in the premium segment in Chile, the beer segment with the highest growth in Chile in recent years. In 2018, CCU launched Heineken 0.0 in Chile, the first country in Latin America to offer this non-alcoholic premium brand.

 

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 inIn 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. Since 2105brand in 2014. As of 2015, we started to produce Sol beer brand in our facilities. Similar to the Heineken brand, weWe have an exclusive 10ten year license, automatically renewable license on the same termsa yearly basis, for ten-year periods (rolling contract), each year for a period of 10 years, unless notice of non-renewal is given for Chile and Argentina.given. In addition, we also have the license to import, sell and distribute Tecate in Chile, under this licensing agreement.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.

 


 

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

Heineken(1)

Cristal Cer0,0°(2)

 

AustralHeineken 0.0(1)(2)(3)(6)

Escudo

 

KunstmannAustral(1)

Morenita

 

Polar Imperial(1)

Stones

Kunstmann

Andes

Bavaria

D'olbek

Stones

 

Sol(1)

 

 

Coors(3)

 

Tecate(4)

 

Blue Moon(4)

 

Szot(5)

Guayacán(5)

 

 

(1) Produced under license.

(2) Non-alcoholic beer.

(3) Imported/Produced under license.

(4) Imported.

(5) Distribution contract.

(6) Commercialization began in February 2018 and the production in Chile is expected to begin in July 2020.

 

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.

 

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

2014

2015

2016

2018

2018

2019

 

 

 

 

 

 

Returnable(1)

44%

42%

 37%

 30%

 30%

 25%

Non-returnable(2)

52%

55%

 59%

 67%

 67%

72%

Returnable kegs(3)

3%

4%

4% 

4%

4%

3%

Total

100%

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 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

2014

2015

2016

Premium

18%

20%

21% 

Mainstream

78%

76%

75% 

Convenience

4%

4%

 4%

Total

100%

100%

100%


Category

2017

2018

2019

Premium

21%

23%

24%

Mainstream

75%

73%

71%

Convenience

 4%

 4%

 5%

Total

100%

100%

100%

 

Our soft drinks includesinclude proprietary brands, in addition to brands produced under license from PepsiCo, Inc,Inc., Schweppes Holdings LtdLtd. 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 a line of bottledtwo proprietary mineral water since 1960, under our two proprietary brand names,brands, Cachantun and Porvenir, which are bottled and distributed nationally from our two naturalat their sources, located within the central region of Chile (Casablancain Coinco (O’Higgins Region) and Coinco)Casablanca (Valparaíso Region).  We also producecommercialize Nestlé Pure Life, a brand of purified water, Mas and distribute purified waters under license from Societé des Produits Nestlé S.A. and others, and distributeMas 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, The 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 The 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”, was executed between ECUSA and Schweppes Holdings Ltd,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 compliance with the contract conditions. The contract was renewed until December 31, 2023.

 

In August, 2002, we began importing, selling and distributing Gatorade, a 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 tothat 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 February 2005, we launched Mas, a sugar free product made of mineral water, calcium and flavor, creating a new category of flavored water.

 

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 terminateswas set to expire on March 31, 2020.2020, however, on October 30, 2019, the parties extended its term until December 31, 2030.

 

The license agreement for nectarjuice products withunder the brand Watt’s, which granted us exclusive production rights, was first signed in June 19771987 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 were 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 (New Ecusa S.A., a former subsidiary ofECUSA, which as of the date of this annual report has been merged into ECUSA, and Watt´sWatt’s Dos 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.

 

Since December 2007, through our subsidiary Aguas CCU, we produce and sell 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. And sinceSince 2012, under the Manantial brand we carry out the business of home and office delivery of purified water in bottles with the use of dispensers (HOD).


 

 

OnIn October 2013, CCU together with its subsidiary ECUSA executed a series of contracts and agreements with PepsiCo Inc. and affiliates, which 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 long-term relationship duration. Pursuant to these agreements, which taketook 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 to the ready-to-mix category intothrough a joint operation agreement with Carozzi, for the production, commercialization, and distribution of instant powder drinks under the brands Sprim, Fructus, Vivo and Caricia, and inCaricia. In December 2015 we started to distribute Red Bull in Chile. Aligned with our innovation process in non-alcoholic beverages during 2016,2017, we strengthened our positioncontinue to strengthen Pepsi Zero, launched late 2016 in the light segment with the launches of PepsiChilean market, by increasing consumer interest through new packaging formats. From time to time, we and our partners introduce innovations and brand extensions to our most relevant brands. For example, in 2019, we and our partners introduced 7UP Zero, Crush Zero, Canada Dry Limon Soda ZeroKem introduced Piña Maracuyá limited version, Pop (Pap brand extension) candy cane flavor and Ocean Spray Light.Watt’s Selección Cranberry.

 

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 2016:2019:

 

Brand

Product Category

CategoryOwnership

Affiliation(1)

Bilz

Soft Drink, Non-Cola

Non-Cola Proprietary

CCU Proprietary

Pap

Soft Drink, Non-Cola

Non-Cola Proprietary

CCU Proprietary

Pop Candy

Soft Drink

Non-Cola Proprietary

CCU Proprietary

Kem

Soft Drink, Non-Cola

Non-Cola Proprietary

CCU

Kem Xtreme

Soft Drink, Non-Cola

Proprietary

CCU

Nobis

Soft Drink, Non-Cola

Non-Cola Proprietary

CCU Proprietary

Canada Dry Ginger Ale

Soft Drink, Non-Cola

Non-Cola Licensed

Schweppes

Canada Dry Agua Tónica

Soft Drink, Non-Cola

Non-Cola Licensed

Schweppes

Canada Dry Limón Soda

Soft Drink, Non-Cola

Non-Cola Licensed

Schweppes

Crush

Soft Drink, Non-Cola

Non-Cola Licensed

Schweppes

Pepsi

Soft Drink, Cola

Cola Licensed

PepsiCo

Seven-Up

Soft Drink, Non-Cola

Non-Cola Licensed

PepsiCo

Lipton Ice Tea

Ice Tea

Non-Cola Licensed

PepsiCo

Mirinda

Soft Drink, Non-Cola

Non-Cola Licensed

PepsiCo

Gatorade

Isotonic

FunctionalLicensed

PepsiCo

Ocean Spray

NectarsJuices

Licensed

PepsiCoPepsiCo

Adrenaline Red

Energy

Licensed

PepsiCo

Life Water

Functional Drink

Licensed

PepsiCo

Red Bull

Energy

Licensed

Red Bull

Frugo

Soft DrinkFruit-flavored beverage

Licensed

Promarca

Watt’s

NectarsJuice

Licensed

Promarca

Watt’s Light

Juice

Licensed

Promarca

Watt’s Selección

NectarsJuice

Licensed

Promarca

Cachantun

Mineral Water

Proprietary

Aguas CCU

Mas

Flavored Water

Proprietary

Aguas CCU

Mas Woman

Flavored Water

Proprietary

Aguas CCU

Porvenir

Mineral Water

Proprietary

Aguas CCU

Perrier

Mineral Water

Licensed

Nestlé

Nestlé Pure Life

Purified Water

Licensed

Nestlé & others

Manantial

HOD

Proprietary

Manantial

Vivo

Ready-to-mix

Licensed

Bebidas Carozzi CCU

Fructus

Ready-to-mix

Proprietary

Bebidas Carozzi CCU

Sprim

Ready-to-mix

Proprietary

Bebidas Carozzi CCU

Caricia

Ready-to-mix

Licensed

Bebidas Carozzi CCU

(1)CCU indirectly owns indirectly 50% of Promarca S.A. and 50.1% of Aguas CCU.

ECUSA owns 50% of Bebidas Carozzi CCU. Aguas CCU and ECUSA own 99.08% and 0.92% of Manantial, respectively.

    ECUSA owns 50% of Bebidas Carozzi CCU.


 

 

During the last three years, we sold our non-alcoholic beverageproducts in the following packaging formats:

 

Soft drinks

 

Mineral, purified and flavored water

Soft drinks

 

 

Mineral, purified and flavored water

Container

2014

2015

2016

 

2014

2015

2016

2017

2018

2019

 

2017

2018

2019

Returnable(1)

28%

27%

 28%

 

28%

28%

 28%

 29%

 20%

19%

 

 28%

 29%

Non-returnable(2)

70%

71%

 69%

 

72%

72%

 72%

 67%

 77%

 77%

 

 72%

 71%

“Post-Mix”(3)

2%

2%

2%

 

    -    

    -    

    -    

4%

3%

3%

 

        -

        -

Total

100%

100%

100%

 

100%

100%

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.

(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).

(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.

(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.

(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.

(3)Post-mix cylinders are sold specifically to on premise locations for fountain machines.

(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

2014

2015

2016

2017

2018

2019

Carbonated soft drinks

 

 

 

 

Colas

 

 

 

 

Licensed

16%

15%

16% 

16%

18%

19%

Non-colas

 

 

 

 

Proprietary

36%

35%

34% 

33%

32%

32%

Licensed

23%

22% 

23%

23%

23%

Non-carbonated soft drinks

 

 

 

 

Nectars

 

Juices

 

 

 

Licensed

22%

22% 

21%

21%

21%

Others(1)

 

 

 

 

Licensed

3%

4%

6%

6%

6%

5%

 

 

 

 

Soft drinks total

100%

100% 

100%

100%

100%

Mineral water

 

 

 

 

Proprietary

44%

43%

41% 

40%

39%

38%

Licensed

0%

0% 

0%

0%

0%

Purified water

 

 

 

 

Licensed

8%

11%

12% 

14%

14%

15%

Flavored water

 

 

 

 

Proprietary

20%

19%

18%

19%

19%

HOD

28%

27%

28% 

28%

28%

29%

Total Bottled Water

100%

100%

100%

100%

(1) Includes functional drinks and teas.

(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, 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 brandbrands of piscos and cocktails extensions and flavors. For example, during 20162019 we introduced Campanario Sparkling Sour and its Mango sour version. Sabor Andino Sour.


Our spirits wereare 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.

 

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.

 

In 2018 CPCh entered the cider category with the launch of Cygan, a beverage made from green and red apples, with an alcohol content of 4.5° and 64 calories per 100 ml.

The following table shows our parent pisco, cocktail and FAB brands:


 

Pisco and Cocktails

FAB

Premium

Mainstream

Convenience

 

   

 

Control C

Campanario

La Serena

Mistral Ice

Mistral

Mistral IceRuta Cocktail

 

Bauzá Ice(1)

MOAI

Bauzá Ice(1)Sol de Cuba

 

Iceberg

Horcón Quemado

RutaSabor Andino Sour

 

Sierra Morena Ice

Tres Erres

Bauzá(1)

(1) In January 2016 CPCh divested its interest in Compañía Pisquera Bauzá S.A.

 

 

 

Bauzá(1)

Espíritu de los Andes

 

                            

(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.  

On August 8, 2019, CCU announced that CPCh, acting through the companies Inversiones Internacionales SpA. and International Spirits Investments USA LLC, communicated to LDLM Investments LLC their decision to start a process of selling their total participation in Americas Distilling Investments LLC, owner of the Peruvian company Bodega San Isidro SRL and Barsol brand.

Production and Marketing:International Business Operating segment

Our operation in International Business Operating segment generated Net sales of CLP 299,668460,317 million, CLP 405,714483,926 million and CLP 370,109464,487 million in 2017, 2018 and 2019, respectively, representing 23.1%27.1%, 27.1% and 23.7%25.5% 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, produces beers at its plantsowns and operates breweries located in the cities of Salta, Santa Fe and Luján. Our main beer brands areinclude Schneider, Imperial, Palermo, Santa Fe, Salta, and Córdoba and we hold exclusive license agreements for the production and marketingcommercialization of Budweiser,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 Budweiser. See “Item 4: Information on the Company – A. History and Development of the Company.”  CCU Argentina imports the Kunstmann brand.and Blue Moon beer brands. Furthermore, itCCU Argentina exports beer to several countries, mainly under the brands Schneider, Imperial and Heineken. Also, CCU is the exclusive distributor in Argentina of Red Bull energy drink.

 


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 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, in which 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.

 

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, 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 and Nativa MAS 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 in 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 agreement will be in force until the 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 has an initial term of 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 AmBevAmbev 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 AmBevAmbev and, under such contract CICSA brewed beer for AmBevAmbev during the peak demand season of 2008-2009.

 

The license agreement between CCU Argentina and Anheuser-Busch LLC (See “Item 4: Information on the Company – A. History and Development of the Company”), which providesprovided CCU Argentina with the exclusive rightexclusiveright 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 LLC. Under the license agreement, CCU Argentina is obligated to purchase certain raw materials from Anheuser-Busch Incorporated or from suppliers approved by Anheuser-Busch LLC. We began distribution of our locally produced BudweiserUruguay in December 1996. See “– Sales, Transportation and Distribution”2014). In addition, the license agreement is subject to certain specified market share targets and marketing expenditures. 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.

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 (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 November 2011, we signedorder to achieve an addendum toorderly transition of the importaforementioned brands, the Transaction provides that ABI will carry out the production and distribution contract with Cervecería Modelo S.A. de C.V., including a clause that specified the automatic renewal of the contractIguana, Norte and Báltica on behalf of CCU Argentina, for a period of four years at the endof 2014 provided that CICSA would meet certain minimum purchases goal. In that case, the agreement would last until December 31, 2018.up to three years.


 

 

In 2011, weAugust 2016 CICSA signed a license and distribution agreement with Coors Brewing Company to manufacture, package, commercialize and distribute the Miller brands in Argentina. We started to export Schneider beercommercialize and distribute Miller Genuine Draft in April 2017, and to Paraguay through Bebidas del Paraguay,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. We also participate in 2013the liquor business, under the El Abuelo brand, in addition to Uruguay through Milotur.importing other liquors from Chile and distributing the wine brands Eugenio Bustos and La Celia. Since June 2019, we have added the Colon and Graffigna brands belonging to the Finca La Celia S.A. winery to our wine portfolio (Argentine subsidiary of Chilean subsidiary VSPT).

 

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 requiresrequired 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 CICSA and Quilmes, 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.

 

On November 29, 2012, CICSAIn 2011, the Company started to export Schneider beer to Paraguay through 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 Heineken beer in Argentina and Paraguay. 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.

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.

In 2013 we started exporting Heineken to Uruguay through Milotur and in 2015 to Bolivia through BBO.

In June 2014, CICSA reached agreements with Cervecería Modelo S.A. de C.V. 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 USD 34.2 million.

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 10 years in Argentina, 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 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 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.

In August 2016 CICSA signed a license and distribution agreement with Coors Brewing Company to manufacture, package, commercialize and distribute the Miller brands in Argentina. We started to commercialize and distribute Miller Genuine Draft in April 2017, and plan to start production of the brand in our own facilities as of May 2017.

In addition, 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.


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 10 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 nectars. In addition, we import Heineken, Schneider and Kunstmann beer, as well as the cider brand Real.

Milotur.In Paraguay we participate in the beer 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 craft brewery related to the beer brand Sajonia.


In 2018, the Company increased its stake from 34% to 51% in BBO.In Bolivia, CCUparticipates in the non-alcoholic beverages and beer business, with two plants located in the city of Santa Cruz de la Sierra. In non-alcoholic beverages, it participates in the soft drinks business with the brands Mendocina, Free Cola, Sinalco and Malta Real. The latter is a soft drink with sugar based on malt, but without alcohol. BBO, with Mendocina, also participates in the water category and Natur-All in juices. In beers, it has the brands Real, Capital and Cordillera. In addition, it markets the imported Heineken brand.

 

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.

The following table shows our principalproprietary parent beer brands, brands produced imported, commercialized and/or distributed under license in Argentina in 2016:and brands imported under license for the Argentinean market:

 

Premium

Mainstream

Convenience

beer brands

beer brandsMainstream

beer brandsConvenience

Heineken(1)

Budweiser(1)(3)

Córdoba

Sol(1)

Salta

Palermo

Kunstmann(2)

Santa Fe

Bieckert

Imperial

Schneider

Báltica(4)

Amstel(1)

Norte(4)

Diosa

Miller Genuine Draft

Isenbeck(4)

Grolsch(1)

Iguana(4)

Warsteiner(1)

 

 

GuinnessBlue Moon(2)(3)

Negra Modelo(2)(3)

Corona(2)(3)

Otro Mundo(4)

Miller(5)

(1) Produced under license.Licensed.

(2) Imported.

(3) Up to June 2014.

(4) Up to August 2015.

  

(5)(3)As Due to the early termination of April 2017.the Budweiser license agreement, since May 2, 2018, CCU Argentina ceased the commercialization of this brand, andl produces Budweiser, on behalf of ABI, for a period of up to one year.

(4) As from May 2, 2018, ABI carries out the production and distribution of Iguana, Norte and Báltica, on behalf of CCU Argentina, for a period of up to three years.

 

In 2019 CCU launched the Nativa MAS brand in the flavored water category. Also in 2019, we began to export wine to Uruguay, from our subsidiary Viña San Pedro Tarapacá S.A. under the brands Misiones de Rengo, Eugenio Bustos and Finca La Celia . The following table shows our proprietary parent beer, wine, water 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

Misiones de Rengo

Wine

Proprietary(1)

CCU

Eugenio Bustos

Wine

Proprietary(1)

CCU

Finca La Celia

Wine

Proprietary(1)

CCU

Nix

Soft Drink

Proprietary

CCU

Watt´s

Juice

Licensed(2)

Promarca

Nativa

Water

Proprietary

CCU

Nativa MAS

Flavored water

Proprietary

Aguas CCU

Nix

Water

Proprietary

CCU

FullSport

Sport Drink

Proprietary

CCU

Thor

Energy Drink

Proprietary

CCU

(1) Imported

(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 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(3)

Flavored Water

Proprietary

CCU

FullSport

Sport Drink

Proprietary(1)

CCU

(1) Imported.

(2)CCU indirectly owns 50% of Promarca.

(3) Produced until February 2019.

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.

Cordillera

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

 

2014

2015

2016

2017

2018

2019

Premium

18%

19%

21%

26%

31%

33%

Mainstream

62%

62%

60%

47%

43%

Convenience

20%

19%

17%

14%

23%

24%

Total

100%

100%

100%

100%

100%

 

 


 

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 in the following packaging formats:

Container

Percentage of Total Beer Sold in Argentina

 

Percentage of Total Beer Sold in Argentina

2014

2015

2016

2017

2018

2019

Returnable(1)

81%

76%

72% 

63%

51%

44%

Non-returnable(2)

18%

23%

27% 

36%

48%

55%

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.

 

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 172,349204,454 million, CLP 189,515206,519 million and CLP 201,402212,322 million in 2017, 2018 and 2019, respectively, or 13.3%12.0%, 12.6%11.6% and 12.9%11.6% of our totalCCU’s consolidated Net sales in the last three years, respectively.those years.

VSPT is composed of sevensix 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 1,0641,057 hectares. As of December 31, 2016,2019, VSPT’s vineyards covered an aggregate of 3,4893,918 hectares in Chile, distributed among 10 different plantations. The winery also has 339336 hectares under long-term leases. In Argentina, we haveVSPT has another 379826 planted hectares located in the province of Mendoza.Mendoza and San Juan.

 

The following table indicates the breakdown of Wine Operating segment’s volume in the domestic and export markets, including sales from FLC and Tamarí in Argentina:

Year

DomesticVolume

ExportVolume(1)

Total Volume

 

 

(in millions of liters)

 

2012

60

72

132

2013

61

70

131

2014

62

71

133

2015

62

76

138

2016

64

78

142

(1) Includes Argentinian operations and bulk sales.

 

Year

Domestic Volume

Export Volume(1)

Total Volume

 

(in millions of liters)

2015

62

76

138

2016

64

78

142

2017

68

75

143

2018

68

71

139

2019

67

74

141

(1) Includes Argentinean operations and bulk sales.

According to Nielsen, the Wine Operating segment’s share by value of Chile’s formal wine market was approximately 27.2% in 2014, 27.4% in 2015 and 28.7% in 2016. According to the Wines of Chile Association, Wine Operating segment’s share of Chile’s total wine export sales by volume was 13.6%, 13.5% and 12.9% in the last three years, respectively.

 

Viña San Pedro, Viña Tarapacá, Viña Leyda, Viña Santa Helena, Viña Misiones de Rengo, Viña Mar Viña Casa Rivas in Chile and Finca La Celia and TamaríGraffigna in Argentina, produce and market premium, varietal and popular-priced wines.Thewines.


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 Selected Vineyard

X

 

1865 Selected Blend

X

 

1865 Selected Collection

X

 

 

Castillo de Molina

X

 

 

Épica

X

 

 

35 South

X

 

 

Urmeneta

X

 

 

Gato Negro

X

 

 

Gato

X

 

Manquehuito

 

 

 

X

 

San Pedro Exportación

X

 

9Lives

X

Viña Tarapacá

 

 

Tarapakay

X

 

 

Gran Reserva Etiqueta Azul

X

 

 

Gran Reserva Etiqueta Negra

X

 

 

Tarapacá Gran Reserva

X

 

 

Gran Tarapacá

X

Tarapacá Reserva

X

Tarapacá Varietal

 

 

X

 

 

Tarapacá Reserva

X

Tarapacá Varietal

X

León de Tarapacá

X

 

Viña Santa Helena

 

 

Parras ViejasSanta Helena Gran Reserva

X

 

 

VernusSanta Helena Reserva

X

Selección del Directorio

X

Siglo de Oro

X

 

 

Santa Helena Varietal

 

 

X

Alpaca

X

Gran Vino

 

X

 

Santa Helena Gran Vino

X

Santa Helena Dulce

X

Alpaca

 

 

 

Alpaca Orgánico

X

Alpaca Premium

X

Alpaca Varietal

X

Viña Misiones de Rengo

 

 

Misiones de Rengo Black

X

 

 

Misiones de Rengo Cuvée

X

 

 

Misiones de Rengo Reserva

X

 

 

Misiones de Rengo Varietal

X

 

Misiones de RengoEspumante

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

 

 

LaLa Celia Supremo

X

 

 

 

 

LaLa Celia

X

 

 

 

La Consulta

X

 

 

 

La Finca

 

 

X

 

 

Eugenio BastosBustos

 

 

X

 

TamariGraffigna

 

Tamarí Zhik

X

 

 

 

 

Tamarí ReservaGraffigna

 

X

Graffigna GR

X

 

 

       


 

 

The following table presents our breakdown of total sales volume in thousands of liters by category of the Wine Operating segment during 2016:2019:

Category

Domestic

Export(1)

Total

(in thousands of liters)

Premium

6,496

8,303

14,799

Varietal

7,256

58,129

65,386

Popular-Priced

50,718

7,911

58,629

Bulk

0

3,583

3,583

Total

64,470

77,927

142,397

(1) IncludesArgentinean operations and bulk wine

Category

Domestic

Export(1)

Total

 

(in thousands of liters)

Premium

8,292

6,688

14,980

Varietal

7,812

59,986

67,798

Popular-Priced

50,700

6,255

56,955

Bulk

-

967

967

Total

66,803

73,895

140,700

(1) Includes Argentinean operations and bulk wine.

 

 

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 Lontué1, 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

 

 

2014

2015

2016

Carton

54%

51%

49%

Glass Bottles

46%

49%

51%

Bag-in-Box

    -    

    -    

    -    

Total

100%

100%

100%

Container

Percentage of Total Domestic
Wine Sold in Chile

 

2017

2018

2019

Carton

47%

48%

48%

Glass Bottles

53%

52%

52%

Bag-in-Box

-

-

-

Total

100%

100%

100%

 

 

Export Market.According to industry sources, exports of Chilean wine increased from approximately 43 million liters in 1990 to 908869 million liters in 2016,2019, at a compounded annual growth rate of 12%11%. During 20152018 and 2016,2019, Chilean wine exports reached 877849 million liters and 908869 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 68 million liters in 2014, 7372 million liters of wine in 2015, and 742017, 68 million liters of wine in 2016.2018 and 64 million liters of wine in 2019. During 2016,2019, VSPT exported wine to more than 80 countries worldwide. Exports accounted for Netnet sales of CLP 108,064116,534 million, CLP 123,544111,672 million and CLP 131,168112,718 million in the last three years, respectively. In 2016,2019, 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
Wine Volume from Chile

 

2017

2018

2019

Glass Bottles

91%

91%

92%

Bulk

-

-

-

Bag in box

9%

9%

8%

Total

100%

100%

100%

Container

Percentage of Total ExportWine Volume from Chile

2014

2015

2016

Glass Bottles(1)

85%

86%

86%

Bulk

3%

4%

4%

Bag in box

13%

10%

10%

Total

100%

100%

100%

(1)    Includes jugs.

 


1As of January 2017 Lontué continues as storage location only.


Raw5)Raw Materials and other Supplies

 

The main raw materials that we use are sugar, soft drink concentrates, fruit pulps, malt, rice, hops, grapes and water. The sugar and fruit pulps that we use are from local 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 international suppliers in spot transactions.

 

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 springs 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.

 

The 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 main 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.CS.A.I.C. in Chile, and Rigolleau S.A,S.A., Cattorini Hnos S A I C F E I,S.A.I.C.F.E.I. and Owens Illinois Argentina S.A. in Argentina. During 2016,2019, all of our aluminum cans were purchased from global suppliers, Ball Chile S.A. and Ball Argentina S.A. We buy our labels, films and corrugated cartons mainly from local suppliers. The majority of our PETpolyethylene terephthalate (“PET”) resins are imported from 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-Busch facilities in the United States, respectively, to verify the quality of the product. 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.  See “Item 4: Information on the Company – A. History and Development of the Company.”

 

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.

 

Standard and customary commercial terms and conditions are widely used in all our contracts and supply agreements. Strategic alliances and supplier diversification allow us to ensure lowreduce dependency fromon a single supplier of rawofraw 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 40.0%42.5% of the grapes used for export wines from our own vineyards during 2016.2019. Of the wine sold in the domestic market, 9.7%approximately 11.5% are grapes from our vineyards.In 2016,vineyards. In 2019, approximately 40.7%38.3% of the wine used in domestic and export sales was purchased from ten  local producers: Vinícola Patacón SpA, Agrícola y Comercial Bodegas de las Mercedes Ltda., Vitivinícola Melior Ltda., Anatolio Segundo Albornoz Vargas, Cooperativa AgríCorretajes Torres y Cía. Ltda., Coop.Agrícola y Pisquera Elqui Ltda., ViñedosUreta Export Fine Wines Ltda., Aguilera y Vinos S.A., Corretajes Torres y Cia Ltda., Comercial y AgríBarrios SpA, Vitivinícola S.A, RR WineMelior Ltda., Viñedos Gurfinkel Ltda. VSPTand Viña 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 from SIG Combibloc Inc. and are assembled in VSPT’s own automated packing lines.

 


6)Sales, Transportation and 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 2529 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 far south of Chile, Chile’s Region XII. are managed on a consolidated basis by Transportes CCU.

Comercial Patagona Limitada is a subsidiary of Cervecería Austral and, as of July 2002, is responsible for the salessale and distribution of our products and those of Cervecería Austral in Chile’s extreme south. Today the Magallanes Region.Comercial Patagona Limitada does the selling for all our products, reaching 870reaches 1,043 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

2017

2018

2019

Off-premise retail

37%

37%

38%

On-premise retail

15%

12%

10%

Wholesalers

15%

17%

18%

Supermarkets

33%

33%

34%

Total

100%

100%

100%

     

 

In October 2005, we launched Comercial CCU, a subsidiary responsible for a single sales force dedicated to selling our 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 Comercial 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.

 

As of August 2016, following the restructuring in Chile that encompassed combining the route-to-market of the beer and non-alcoholic categories in the whole country, Comercial CCU also covers the beer and non-alcoholic category in the Metropolitan Region including the capital Santiago, and several other large cities such as Viña del Mar, Rancagua, La Serena, and Concepción.

 

For areas not covered by Comercial CCU we have dedicated sales forces. Together with Comercial CCU we have a total sales force of 1,044 persons,995 people, reaching 127,062112,009 points of sale, related to the Chile Operating segment. In 2019, as previously mentioned, we broadened our remote sales platforms through the launch of a modern e-commerce website in Chile, "La Barra", reaching 24,200 households with our on-line portfolio (www.labarra.cl). None of our customers accounted for more than 2.2%2.5% of our total sales by volume, with the exception of threefour large supermarket chains that represented in the aggregate 27.6%32.1% of our total sales by volume. One of these supermarket chains represented over 10.0% of our total sales by volume.

 

Our customers make payment for our products either in cash or checks at the time of delivery or in accordance with one of several types of credit arrangementarrangements that we offer. Payment onSales through credit sales for the Chile Operating segment are generally due 28 days from the date of delivery. Credit salesarrangements accounted for 40.0%41.8%, 39.8%42.4% and 40.8%41.0% of our sales in Chile during 2014, 20152017, 2018 and 2016,2019, respectively. Losses on credit sales in Chile have not been significant.

 

Product distribution is carried out by Transportes CCU throughout the country or by Comercial Patagona Limitada in its territory.

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 Transportes CCU.

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

2014

2015

2016

Off-premise retail

41%

41%

40% 

On-premise retail

10%

11%

 12%

Wholesalers

14%

14%

 14%

Supermarkets

35%

34%

 34%

Total

100%

100%

 100%

International Business Operating segment

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, 2019, we have the capacity to reach 159,197190,826 points of sale in Argentina with our direct and indirect sales force. We have six owned or leased warehouses. Approximately 54%69% of our beer in Argentina is sold and/or distributed through third-party sales and distribution chains, including two independent Coca ColaCoca-Cola bottlers who distribute our products mainly in the north and south of the country, representing in the aggregate 20%18% of our total sales by volume.  As of December 31, 2016, we hadWe have a direct sales force and four logistics operators which soldsells our beer products to approximately 36,099 customers within Salta, San Juan, San Luis, Mendoza, Córdoba, Santa Fé, Rosario, and Buenos Aires City, in addition to 7775 regional and national supermarket chains throughout the country. None of our retail customers individually accounted for more than 4.3%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 from direct sales to wholesalers within the outer Buenos Aires Metropolitan Area.Area and Salta.

 

In Argentina, though most beer is sold through 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

 

 

Argentina

Distribution Channels

2014

2015

2016

2017

2018

2019

Wholesalers/distributors

50%

49%

 54%

 68%

70%

69%

Retailers

33%

31%

 28%

 16%

12%

12%

Supermarkets

17%

20%

 19%

 17%

19%

19%

Total

100%

100%

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 2016,2019, we reachedmaintained approximately 15,20017,940 points of sale through 25 distributors.sale.

 


In the last three years, the percentage mix of the above distribution channels for our beer and non-alcoholic products in Uruguay was as follows:

Uruguay

 

Uruguay

 

Distribution Channels

2014

2015

2016

2017

2018

2019

Indirect

81%

84%

 84%

87%

86%

86%

Retailers

-

-

-

 

Supermarkets

19%

16%

 16%

12%

14%

14%

Total

100%

100%

100%

100%

   

 

In Paraguay, we have four distribution centers strategically located that enable us to attend with ourand a direct sales force approximately 23,066 points of sale, including all supermarket chains. Supported byforce. Together with a network of distributors and wholesalers, we reach a total of approximately 33,78830,683 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

 

Paraguay

 

Distribution Channels

2014

2015

2016

2017

2018

2019

Indirect

27%

30%

 31%

18%

14%

9%

Retailers

50%

48%

48%

64%

66%

68%

Supermarkets

23%

22%

 21%

18%

20%

22%

Total

100%

100%

100%

100%

100%

    

 

In Bolivia, we have four distribution centers and a direct sales force. We reach a total of 40,522 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

2019

Off-premise retail

43%

37%

On-premise retail

15%

12%

Wholesalers

38%

47%

Supermarkets

4%

4%

Total

100%

100%

   

 

Our International Business segment customers either make payments for our products either in cash or checks at the time of delivery or throughin accordance with one of our variousseveral types of credit arrangements.arrangements that we offer. In Argentina, payment onsales through 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 Argentinaarrangements accounted for 89%, 88% and 88% of total sales during 2016, while in2017, 2018 and 2019, respectively. In Bolivia, sales through credit arrangements accounted for 17%, 13% and 14% of total sales, respectively. In Uruguay, and Paraguay theysales through credit arrangements accounted for 100% and 35% of total sales during 2017, 2016 and 2019. In Paraguay, sales through credit arrangements accounted for  40%, 38% and 43% of total sales during 2017, 2018 and 2019, respectively. Losses on sales through credit arrangements in the International Business segment have not been significant.

 


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 25 warehouses29 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

2014

2015

2016

2017

2018

2019

Off-premise retail

34%

33%

31%

29%

28%

 

28%

On-premise retail

5%

5%

5%

5%

Wholesalers

22%

24%

25%

26%

29%

28%

Supermarkets

39%

38%

39%

39%

38%

39%

Total

100%

100%

100%

100%

 

 

We reach a total of 29,33933,732 points of sale with our dedicated sales force of 72 persons,74 people, together with the sales force of Comercial CCU. We do not maintain any long-term contractual arrangements for the sale of wine with any of our customers.

 

Export.VSPT has a presence in more than 80 countries. In order to increase its presence in the international market, we have distribution agreements with key distributors, such as Pernod Ricard in Sweden, Finland Norway and Estonia;Norway; Shaw Ross International in the U.S.; Asahi in Japan; Interfood and EPICE in Brasil; DGSBrazil; and BaarsmaDelta Wines  in The Netherlands and Denner in Switzerland.Netherlands. In Canada we have distribution agreements with Phillipe Dandurand wines and Mark Anthony Group, in Korea with Keumyang and Hitejinro, as well as agreements with other distributors.

 

Our Wine Operating segment customers make payment for our products either in cashor checksat the time of delivery or in accordance with one of several types of credit arrangements that we offer.Sales through credit arrangements accounted for 83.9%, 83.5% and 83.4% of total sales during 2017, 2018 and 2019, respectively. Losses on credit sales have not been significant.


7)Seasonality

 

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

Sales Volume

(millions of liters)

 

 

 

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

474.0

28%

 

2nd quarter

362.3

21%

 

3rd quarter

367.3

22%

 

4th quarter

484.5

29%

 

Total
 

1688.2

100%

2016

1st quarter

511.1

29%

 

2nd quarter

341.8

19%

 

3rd quarter

380.2

22%

 

4th quarter

531.2

30%

 

Total

1764.3

100%

Seasonality Chile Operating segment

      

Year

Quarter

 

Sales Volume

 

% of Annual

   

(millions of liters)

 

Sales Volume

      

 

 

 

 

 

 

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

 

1,886.8

 

100%

 

 

 

 

 

 

2019

1st quarter

 

543.3

 

27%

 

2nd quarter

 

391.7

 

20%

 

3rd quarter

 

444.2

 

22%

 

4th quarter

 

600.9

 

30%

 

Total

 

1,980.2

 

100%

 

 

 

 

 

 

 

 


 

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 Annual

Sales Volume

(millions of liters)

 

    

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%

2016

1st quarter

158.3

27%

 

2nd quarter

98.1

17%

 

3rd quarter

128.6

22%

 

4th quarter

190.2

33%

 

Total

582.4

100%

Seasonality International Business Operating segment

      

Year

Quarter

 

Sales Volume

 

% of Annual

   

(millions of liters)

 

Sales Volume

      

 

 

 

 

 

 

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%

 

 

 

 

 

 

2019

1st quarter

 

238.3

 

27%

 

2nd quarter

 

162.9

 

18%

 

3rd quarter

 

203.9

 

23%

 

4th quarter

 

284.8

 

32%

 

Total

 

889.9

 

100%

 

 


 

Seasonality: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., the highest selling quarters correspond to autumn and winter 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

    

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%

 

 

 

 

2019

1st quarter

29.4

21%

 

2nd quarter

36.2

26%

 

3rd quarter

39.5

28%

 

4th quarter

34.4

25%

 

Total

139.5

100%

    


8)Geographical Markets

 

Our principal beverages production facilitiesChile is our primary market in terms of sales, followed by Argentina. In 2017, 2018 and 2019, Chile represented  72%, 72% and 74%, respectively, of CCU’s consolidated Net sales, while Argentina, in the same time periods, represented 24%, 24% and 21%, respectively.

 

Net Sales for the year

 

2017

2018

2019

 

(millions of CLP)

Chile(1)

1,226,668

1,289,513

1,342,370

Argentina(2)

413,467

421,607

390,444

Uruguay

16,402

17,709

17,806

Paraguay

41,824

43,565

47,149

Bolivia

-

10,888

24,773

Total

1,698,361

1,783,282

1,822,541

(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 2017, 2018 and 2019, the surrounding areas (referred to as the Metropolitan Region) account for approximately 41%domestic market represented 93% of the populationCCU’s consolidated net sales in each of these years.

 

Net Sales for the year

 

2017

2018

2019

 

(millions of CLP)

Domestic

1,572,617

1,664,614

1,702,110

Exports

125,743

118,668

120,431

Total

1,698,361

1,783,282

1,822,541

CCU’s Wine Operating segment exports wine from Chile and accounted for approximately 40% of our sales in Chile by volume in 2016. We also have one additional beer and non-alcoholic production facility in Temuco and two other beer facilities, in Valdivia (Kunstmann) and 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. We own two mineral water sources in Chile located in areas near Santiago: Coinco and Casablanca. All of our mineral water products are bottled at their respective sources and distributed throughout the country. Currently most of our brands are primarily supplied and distributed from these production facilities.

world. The following table provides the distribution of Wine Operating segment’s exports from Chile and Argentina during 2016in 2019 by geographical markets:market:

 

Market

Volume(1)

Percentage of
Total Exports

 

(thousands of liters)

Europe

20,198

30%

Latin America

18,326

28%

USA and Canada

8,218

12%

Asia and Oceania

19,770

30%

Others

147

0%

Total

66,653

100%

(1) Includes Argentinean operations, excludes bulk wine.

Market

Volume(1)

Percentage ofTotal Exports

 

(thousands of liters)

Europe

23,018

31%

Latin America

17,904

24%

USA and Canada

9,396

13%

Asia and Oceania

23,412

31%

Others

614

1%

Total

74,344

100%

(1) Includes Argentinean operations, excludes bulkwine

 

The Metropolitan Region represented approximately 38% of total domestic sales of Wine Operating segment products by volume in 2016.


 

9)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, according to internal valuations, an estimated average industry volume growth rate of 4.4% over the last ten years.

beers. Our largest competitor in the beer business is Cervecería Chile (a subsidiary of AB InBev)Ambev S.A.), 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.

 

Another relevant player in the beer market in Chile is Viña Concha y Toro, through its subsidiary Distribuidora Peumo, which imports Miller Genuine Draft and distributes Estrella Damm since 2018. 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 and its affiliates. The two principal soft drinksdrink players in Chile are the licensees of The Coca-Cola Company and us. The 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.

 

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 The Coca-Cola Company licenseesEmbotelladora Andina S.A., in Chile).which 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.

 

With respect to pisco, our mainThe spirits market in Chile is also highly competitive, characterized by a wide range of locally produced and imported products. Our largest competitor is Capel, which produces pisco locally 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 of mid-2019, Capel’s products began to be distributed by Embotelladora Andina and Embotelladora Embonor.  We also compete against Diageo Chile Limitada, which imports premium spirits such as Johnnie Walker whiskey and Smirnoff vodka, among others. As of mid-2018, Diageo’s products were distributed by Embotelladora Andina and Embotelladora Embonor. We also compete against several other smaller importers of international brands, as well as third-party distributors.local producers of pisco. In January 2016 CPCh divested its interest in Compañía Pisquera Bauzá S.A. Following this change, Bauzá became a relatively small competitor compared to Capel.

 

On August 8, 2019, CCU announced that CPCh, acting through the companies Inversiones Internacionales SpA. and International Spirits Investments USA LLC, communicated to LDLM Investments LLC their decision to start a process of selling their total participation in Americas Distilling Investments LLC”), owner of the Peruvian company Bodega San Isidro SRL and Barsol brand.


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(1)

Chile Operating segment Volume market share(1)

2012

38.1%

2013

40.0%

2014

40.9%

2015

41.6%

41.6%

2016

42.3%

42.3%

2017

42.7%

2018

43.4%

2019

43.8%

(1) Source: Nielsen. The calculation of the weighted average for past periods includes markets and industries that CCU entered at a later date.date.Excludes HOD and powder drinks.

 


Competition:International Business Operating segment

Since 2003, after the agreement between Quilmes and AmBev,Ambev, the Argentine beer market consisted of three principal brewing groups: AmBev-Quilmes,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 AmBevAmbev brewery in Luján producing three beer brands: Palermo, Bieckert and Imperial, which had previously belonged to Quilmes. These assets were sold by AmBev-QuilmesAmbev-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, beer, carbonated soft drinks, nectar, mineral and flavored water in Uruguay, and beer, carbonated soft drinks, nectar and mineral water in Paraguay). 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 (1)

2012

10.9%

2013

11.6%

2014

12.9%

2015

13.8%

2016

14.0%

(1)The calculation of the weighted average for past periods includes markets and industries that CCU entered at a later date.

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, 2016, Quilmes had five breweries in Argentina with an estimated total annual production capacity of 1,600 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 SAB Miller), 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.Ambev. This merger was finally approved in March 2000, creating one of the largest beverage producers in the world.

 

In May 2002, AmBevAmbev and Quilmes announced that pursuant to an agreement between both parties, AmBevAmbev 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, AmBevAmbev 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 AmBevAmbev can purchase at the end of a seven-year period the remaining Quilmes shares owned by the current controlling group, the Bemberg family, with AmBevAmbev shares. The Bemberg family had the option to sell to AmBevAmbev 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 AmBevAmbev and Quilmes divest themselves of certain brands and the AmBevAmbev 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, AmBevAmbev 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 SAB 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 becomebecame one player. See “Risk Factors – Risks Relating to Our Business – ConsolidationThis 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”.swap agreement with CCU Argentina S.A. and Compañía Industrial Cervecera S.A.

 

In 2016 AB Inbev sold the Miller brands Lite 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 (5) years if the renewal criteria have been satisfied.

 

Our beer brandsOn September 6, 2017, CCU and CCU Argentina reached an agreement with ABI for the early termination of the Budweiser license in Argentina also face competition from other alcoholic beverages, such as winein exchange for a portfolio of brands and spirits, as well as from non-alcoholic beverages, such as soft drinks.several payments. See “Item 4: Information on the Company – A. History and Development of the Company”.

 

The following table shows estimates of the market share of our International Business Operating segment including: beer and cider for 2015 through 2017, and beer for 2018 and 2019 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)

2015

13.8%

2016

14.0%

2017

14.7%

   2018(2)

15.8%

2019

16.7%

(1)Sources: Nielsen for Argentina until 2017 and Ernst and Young for 2018 and 2019. ID Retail for Uruguay, CCR for Paraguay, internal estimates and Ciesmori for Bolivia. The calculation of the weighted average for past periods includes markets and industries that CCU entered at a later date.

(2)Figures include our operation in Bolivia; excluding Bolivia, the 2018 figure is 20.0%.

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 2016,2019, Concha y Toro and Santa Rita had a volume market share of approximately 28.0%29.0% and 31.4%30.3%, 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 12.9%12.3% in 2016,2019, excluding bulk wine. Our other principalmain Chilean competitors, namelymainly Viña Concha y Toro, Viña Santa Rita and Viña Santa Carolina, had market shares of 33.6%represented 30.6%, 4.9%5.3% and 4.5%, respectively.respectively, of total Chilean wine exports in 2019, excluding bulk wine.

 

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)

2015

18.0%

2016

18.1%

2017

18.2%

2018

17.7%

2019

17.7%

(1)According to Nielsen figures for domestic wine and Viñas de Chile for export figures.

Year

Wine Operating segment Volume market share(1)

2012

17.3%

2013

17.6%

2014

18.3%

2015

18.0%

2016

18.1%

(1)The calculation of the weighted average for past periods includes markets and industries that CCU entered at a later date.


 

 

10)   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”.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.

 

According to Law N°19,925 enacted in 2004, which amended and restated the Act on Sale and Consumption of Alcoholic Beverages (former Law N°17,105), 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 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 Agrícola 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 (theReglamento 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 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°20,869 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 andlabelingand 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 regulationreducing the maximum permitted calorie level (see table below), entered into effect in June 2019.  We have taken measures to comply with this regulation and mitigate the impact of this new law.We cannot assure you that this regulation will not have an impact on our sales volumes and, therefore, on our results.

 

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, enacted in 2004, and fully operative by February 2006, established the structure and powers for the current Sanitary Authority. The Ministry of Health’s Regional Offices, which constitute the Sanitary Authorities, 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 marketing 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, and 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 Law, 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 the 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.8a.m., and establishes harsh penalties for infringement. Additionally, Regulatory DecreeLaw688/2009 regulates 5,708 also establishes further advertising requirements for the advertising of alcoholic beverages.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.

 

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 subsidiaries are principally governed by Law N° 16,060, which regulates all commercial companies.

 

The main applicable laws are Decree 315/94 containing the National Bromatological Regulations, Code of Children and Adolescents regulating aspects related to sale and advertising of alcoholic beverages, Law N°17,849 and its Regulatory Decree 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.workers, Law N° 19,855 regulating problematic consumption of alcoholic beverages, and  Decree N° 272/18, effective as of March 1, 2020, with respect to food labeling.

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 S.A. 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, Law N° 6,446/2019 which establishes the obligation to identify the final beneficiaries of the companies and creates two special registries, the Administrative Registry of Legal Entities and the  Administrative Registry of Final Beneficiaries of Paraguay, and Decree N° 3,241/2020 regulating such Law N° 6,446/2019, 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.

Government Regulation in Bolivia

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 theconstitution 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.

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. 

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).

Furthermore, both CCC and ZF CC must comply with the free zone regime, including Law No. 1004 of 2005, Decree No. 1165 of 2019, Decree N° 2,147 of 2016, Decree N° 1,054 of 2019, Resolution No. 46 of 2019 and its general development master plan approved by the Ministry of Commerce, Industry and Tourism.

In addition, the specific rules relating to the activities and business that each company carries out are applicable to these companies, the main ones being: Law N° 9 of 1979, which establishes the conditions that raw materials for the production of alcoholic beverages must satisfy, Law N° 124 of 1994, which regulates the sale and consumption of alcoholic beverages and their advertising and establishes that the minimum age for the purchase of alcoholic beverages at the national level is 18 years of age, 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, Decree N° 780 of 2016, which establishes, in the field of alcoholic beverages, the obligation to emphasize in advertising and related legends the prohibition of the sale of alcoholic beverages to minors, as well as the specifications that must be included in their packaging and labels, Decree N° 1,506 of 2014, Decree N° 216 of 2019 and Circular N° 486 of 2016, establishing the health requirements associated with the manufacture, processing, packaging, storage, distribution, marketing, sale, import or export of alcoholic beverages, and Law N° 223 of 1995 and Law N° 1,816 of 2016 regulating local taxes applicable to the production and distribution of alcoholic beverages, including beer, in Colombian territory. 

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.


C.Organizational Structure

 

Ownership Structure as of March 31, 20172020


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. In 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.), 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 SMSociedad Matriz SAAM S.A. (one of the main 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 165 breweries inwhich markets and sells more than 70300 brands in 190 countries and 73,500has more than 85,000 employees worldwide. Heineken group’s beer volume was 200.1241.4 million hectoliters during 2016, and its principal brands are Heineken and Amstel.2019.


 

The following table provides our significant subsidiaries as of December 2016:2019:

 

Subsidiaries

Country

Total Ownership Interest

Cervecería CCU

Chile

100.00%

CCU Argentina

Argentina

99.99%

ECUSA

Chile

99.98%

VSPT(1)

Chile

64.70%   82.99%

(1)Compañía Cervecerías Unidas S.A. indirectly, through CCU Inversiones S.A., has an aggregate 83.01% controlling interest in VSPT.


D.

D.Property, Plants and Equipment

 

Set forth below is information concerning our production facilities as of December 31, 2016,2019, all of which are owned and operated by us or our subsidiaries.

 

For the Chile Operating segment, we had an aggregated Supply Capacity per month1 of 440.1 of 339.6 million liters, including Manantial, with a Utilized Capacity during peak month2 of 60.72%63.0%. Utilized Capacity During Peak Month is equal to production output as a percentage of Nominal Installed Production Capacity during our peak month for each respective plant. The annual Nominal Installed Capacity for this segment is 37.448.4 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 principal production facilities:

Chile Operating segment

Plant

Type of Plant

Santiago

Beer

Santiago

Non-alcoholic beverages

Temuco

Mixed

Valdivia

Beer

Punta Arenas(*)

Beer

Antofagasta

Non-alcoholic beverages

Coinco

Non-alcoholic beverages

Casablanca

Non-alcoholic beverages

Manantial

Non-alcoholic beverages

Pisco Elqui

Spirits

Sotaquí

Spirits

Monte Patria

Spirits

Salamanca

Spirits

Ovalle

Spirits

(*) Production in the Punta Arenas facility is under licensing agreements and, accordingly, we do not consolidate this facility.


1Supply 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. 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.

2Utilized Capacity During Peak Month

Set forth below is equal toa list of our 15 principal production output asfacilities:

Chile Operating segment

Location

Type of Plant

Santiago- Quilicura

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 project, which is currently being developed, includes a percentage of Nominal Installed Production Capacity during our peak monthnew distribution center and a new production plant for each respective plant.non-alcoholic beverages, both incorporating the latest technologies for efficient and sustainable production and distribution. See “Item 5: Operating and Financial Review and Prospects – B. Liquidity and Capital Resources – Capital Expenditures.” 


 

For the International Business Operating segment, we had an aggregated Supply Capacity per month of 106111.3 million liters with a Utilized Capacity during peak month of 74%76.5%. The annual Nominal Installed Capacity for the International business is 9.912.2 million hectoliters.

 

Our International Business Operating segment total facilities size is 282,761403,656 square meters (total built area including warehousing logistics activities).


Set forth below is a list of our 10 principal production facilities:

International Business Operating segment

PlantLocation

Country

Type of Plant

Buenos Aires (Luján)

Argentina

Beer

Santa Fé

Argentina

Beer

Salta

Beer

LujánArgentina

Beer

Río NegroSajonia

CiderParaguay

Beer

PilarSanta Cruz

Bolivia

Beer

Pan de Azúcar

Uruguay

Non-alcoholic beverages

San Antonio

Paraguay

Non-alcoholic beverages

Santa Cruz

Bolivia

Non-alcoholic beverages

Allen

Argentina

Cider

Ciudadela

Cider

Pan de Azúcar

San AntonioArgentina

Non-alcoholic beveragesCider

Non-alcoholic beverages

 

For the Wine Operating segment, we had an aggregated Nominal Filling Capacity of 73,32093,540 liters per hour and a Storage Capacity in Tanks and Barrels of 89.3103.0 million liters. The total facilities size is 153,706153,837 square meters.

 

Set forth below is a list of our five principal production and two storage facilities:

 

WineOperating segment

PlantLocation

Country

Type of Plant

Molina

Wine Production

 

TotihueMolina

Chile

Wine Production

Totihue

Chile

Wine Production

Isla de Maipo

Wine ProductionChile

Wine Production

Finca La Celia

Argentina

Wine Production

San Juan

Argentina

Wine Production

Lontué

Wine StorageChile

Wine Storage

Viña Mar

Chile

Wine Storage

Our two principal production facilities through joint ventures are set forth below (see “Item 4: Information on the Company – B. Business Overview – Overview – Joint Ventures and Associated Companies”):

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.


In addition to our production plants listed above, we have 35 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

Punta Arenas

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


 

E.Environmental Matters

 

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 fulfilled atrespects.

Over the years, we have implemented specific action plans in each relevant stage all requirements prescribedof our operations through the Environmental Vision 2020, which seeks to achieve three objectives within the decade (2010 - 2020): a reduction of greenhouse gas emissions (“GHG”) per hectoliter by them.20%, a reduction of water consumption per hectoliter by 33%, and reach 100% in the valorization of industrial solid waste.

ThroughIn 2019, we continued making progress in our Environmental Vision 2020 plan, with a 29.2% reduction in greenhouse gases emissions per liter produced (the goal is 20%); a 45.8% decrease in water consumption per liter produced (the goal is 33%); and a 98.8%  valorization of solid industrial waste (the goal is 100%). To support this last objective, we continued working on the enactmentZero Waste to Landfill Clean Production Agreement (“CPA”). Related to the reduction of Law N°20,417greenhouse gas emissions, we obtained the Gold Label of Energy Efficiency in 2010Plasco and Law N°20,600the Silver Label of Energy Efficiency in 2012 (amending Law N°19,300),Temuco Plant from the Ministry of Energy and the Energy Sustainability Agency, respectively. Additionally, we were recognized with the Quantification, Reduction and Excellence Labels of HuellaChile, a Program of the Ministry of Environment, which recognizes the efforts in the management of GHG emissions.

Also in 2019, we renewed our commitment to environmental matters, by launching our 2030 Environmental Vision, which implies an even more challenging plan including three new areas of action 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 responsiblecovering 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.

In addition tofirst time the new institutional framework, a digital system was created in order to gather and report periodic information called “Register of Emissions and Transfer of Pollutants” (Registro de Emisiones y Transferencia de Contamintantes or RETC). The referred system is necessary to proceed with both, waste and emissions declarations.The waste declarations cover Hazardous Wastes Declarations (Declaración de Residuos Peligrosos or SIDREP), the National Waste Declaration System (Sistema Nacional de Declaración de Residuos or SINADER) and the National Hazardous Substances Storage Declaration System (Sistema Nacional de Declaración de Instalaciones que Almacenan Sustancias Peligrosas or DASUSPEL).Meanwhile the emissions declaration covers the form required to report our stationary sourced emissions, in compliance with DS N°138.

In line with the above, 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 payments must be managed through recycling, recovery or final disposal through an individual or collective Waste Management System. Regarding the latter, the authority will impose collection goals through specific regulations that are still under development.

Relating 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 a Supreme Decree. For the former category, the Ministry must establish decontamination plans, andsix countries where we operate. Thus, we committed for the latter category, it must establish prevention plans.

Due to the high levels of air pollution in the Santiago Metropolitan Area, the relevant authorities have implemented a decontamination plan, which includes different types of measures depending on the air quality levels, some ofwhich can be directly imposed on industries. In the case of emergency situations, those companies comprising the industries classified as producing the highest levels of particle andnext ten years to: (i) continue reducing greenhouse gas emissions must suspend their activities. We are in compliance with current regulations applicableper liter produced to bothreach a 50% reduction, (ii) continue optimizing water consumption per liter produced, until a 60% reduction is achieved, (iii) 100% valorization of industrial solid waste, (iv) use 75% renewable energy, (v) use 100% reusable, recyclable or compostable packaging, and (vi) aim for our beer and soft drink facilities in the Santiago Metropolitan Area in all material respects.


On October 4, 2016, a decontamination plan for Santiago City was approved (“Santiago Respira”). Santiago Respira includes new measurespackaging to reduce levelsbe made on average 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 listCervecería CCU´s industrial plant located in Quilicura. Therefore during 2017, we are required to report our emissions on a monthly basis. Based on those reports, the Chilean Tax Authority (SII) will determine the tax amount payable on 2018. Our improvement plan for 2017 includes actions that are aimed at reducing our emissions below the 50 MW limit established by SII.

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.50%  recycled material.  

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.

 

During 2016, VSPT Wine Group was recognized as the “Green Company of the Year”,  VSPT Wine Group was recognized as a leader in the Implementation of Renewable Energies by the British magazine The Drinks Business in the 2016 Green Awards, one of the most important prizes in terms of sustainability.

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.thoseregulations. Examples of new laws and regulations recently enacted are: (i) the National Register of Chemical Substances (Decree 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 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 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 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. 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.

 


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 the 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.

 

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

Overview

 

We face certain key challenges and risks associated with our business. These risks include competition within the marketplace, managing operating costs and the integration 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.

 

Circular Letter N° 856

On September 29, 2014 Act N°20,780 was published in Chile, regarding the Tax Reform Act which introduced amendments, among others, to the income tax system. The Tax Reform Act establishes that as of 2017 Open Stock Corporations should calculate their taxes based on the “Partially Integrated System” without the possibility to opt for the alternative “Attributed Income Regime”. The "Partially Integrated System" provides for 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 business year, and to 27% starting in the 2018 business year.

The difference between assets and liabilities for deferred taxes that occur as a direct effect of the increase in the First Category Income tax rate introduced by Act N°20,780 and according to 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.


 

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”).

A.  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, Adjusted 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 is aand ORBDA are non-IFRS financial measure, andmeasures.  Adjusted Operating Result reflects a subtotal in Note 76 under Operating segment´ssegment’s additional information (page F-51)F-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 Net Incomeincome before other gains (losses), net financial expense,expenses, equity and income of joint ventures, foreign currency exchange differences, result as per adjustment units and income taxes. Ortaxes (or alternatively, Adjusted Operating Result can be defined as "Income“Income from Operational Activities"operational activities” excluding "Other“Other gains/(losses)"”).  For management purposes, ORBDA is defined as Adjusted Operating Result before depreciation and amortization.

 

The Company believes that the use of "Adjusted“Adjusted Operating Result"Result” provides investors with a better understanding of the day-to-day performance of the Company, because elements included under "Other“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 segmentssegment is assessed by this measure, and for the same reason this measure is used by each segment´ssegment’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 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 easily comparable to other similar figures 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” hasResult and ORBDA have important limitations as an analytical tool.tools. For example, “Adjusted Operating Result” doesthey 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. 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 S.A. and Plasco. Prior to December 2015, the revenue and expenses of the Strategic Service Units were reported under Others. However, for comparability purposes, these revenues and expenses have been restated and are now allocated to the Chile Operating segment. For an overview of the restatements see F-46 and F-47 of our Consolidated Financial Statements.

 


 

 

 

 

Year Ended December 31,

 

 

2014

 

2015

 

2016

 

(in millions of CLP, except percentages)

Net sales

 

 

 

 

 

 

 

 

 

Chile Operating segment(1)

 

835,430

64.4%

 

909,460

60.7%

 

997,376

64.0%

International Business Operating segment(2)

 

299,668

23.1%

 

405,714

27.1%

 

370,109

23.7%

Wine Operating segment(3)

 

172,349

13.3%

 

189,515

12.6%

 

201,402

12.9%

Other

 

-9,480

-0.7%

 

-6,317

-0.4%

 

-9,989

-0.6%

Total

 

1,297,966

100.0%

 

1,498,372

100.0%

 

1,558,898

100.0%

Adjusted Operating Result(4)

 

 

 

 

 

 

 

 

 

Chile Operating segment(1)

 

132,876

73.9%

 

155,331

75.8%

 

154,551

77.0%

International Business Operating segment(2)

 

28,153

15.6%

 

30,266

14.8%

 

20,815

10.4%

Wine Operating segment(3)

 

24,780

13.8%

 

32,533

15.9%

 

37,189

18.5%

Other

 

-5,888

-3.3%

 

-13,193

-6.4%

 

-11,903

-5.9%

Total

 

179,920

100.0%

 

204,937

100.0%

 

200,652

100.0%

 

 

 

 

 

 

 

 

 

 

Volume

 

 

 

 

 

 

 

 

 

Chile Operating segment(1)

 

1,621.6

70.8%

 

1,688.2

70.6%

 

1,764.3

71.2%

International Business Operating segment(2)

 

537.5

23.5%

 

569.7

23.8%

 

575.2

23.2%

Wine Operating segment(3)

 

130.6

5.7%

 

134.8

5.6%

 

138.8

5.6%

Total

 

2,289.8

100.0%

 

2,392.7

100.0%

 

2,478.3

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, Uruguay and Paraguay.

(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.

 

Year Ended December 31,

 

2017

2018

2019

 

(in millions of CLP, except percentages)

Net sales

 

 

 

 

 

 

Chile Operating segment(1)

 1,047,119

61.7%

1,109,574

62.2%

1,164,304

63.9%

International Business Operating segment(2)

     460,317

27.1%

483,926

27.1%

  464,487

25.5%

Wine Operating segment(3)

     204,454

12.0%

206,519

11.6%

   212,322

11.6%

Other/eliminations(5)

     (13,530)

 (0.8)%

(16,736)

(0.9)%

  (18,573)

 (1.0)%

Total

 1,698,361

100.0%

1,783,282

100.0%

1,822,541

100.0%

 

 

 

 

 

 

 

Adjusted Operating Result(4)

 

 

 

 

 

 

Chile Operating segment(1)

     182,784

77.8%

202,662

43.2%

  200,429

86.8%

International Business Operating segment(2)

       45,266

19.3%

266,345

56.8%

    19,653

8.5%

Wine Operating segment(3)

       24,519

10.4%

22,667

4.8%

     28,477

12.3%

Other/eliminations(5)

     (17,676)

 (7.5)%

(22,952)

(4.9)%

  (17,750)

 (7.7)%

Total

     234,894

100.0%

468,722

100.0%

  230,808

100.0%

 

 

 

 

 

 

 

Volume (in million liters)

 

 

 

 

 

 

Chile Operating segment(1)

      1,786.3

68.7%

1,886,8

66.1%

   1,980.2

65.9%

International Business Operating segment(2)

         672.6

25.8%

827,3

29.0%

      889.9

29.6%

Wine Operating segment(3)

         143.1

5.5%

138,9

4.9%

       139.5

4.6%

Other/eliminations(5)

 

 

 

 

        (6.4)

 

Total

      2,602.0

100.0%

2,853.0

100.0%

 ��  3,003.2

100.0%

(1) Includes beers, non-alcoholic beverages, spirits and shared services units in Chile.

(2) Includes beers, cider, non-alcoholic beverages, malt and spirits in Argentina, Bolivia (from August 2018), Paraguay and Uruguay.

(3) Includes domestic volumes in Chile and Argentina 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.

(5) Considers the non-allocated corporate overhead expenses and eliminations of transactions and volumes between operating segments.

       

 

 

 


The following is a reconciliation of our Net Income;income; the most directly comparable IFRS measure to Adjusted Operating Result and ORBDA for the years ended December 31, 2012, 2013, 2014, 2015, 2016, 2017, 2018 and 2016.

2019.

 

 

For the years ended December 31,

For the years ended December 31,

2015

2016

2017

2018

2019

2012

2013

2014

2015

2016

(in million CLP)

(in CLP million)

    

Net income of year

123,977

132,905

120,792

140,526

140,082

140,526

140,082

148,108

322,085

145,646

Add (Subtract):

 

  

 

 

Other gains (losses)

4,478

-959

-4,037

-8,512

8,346

(8,512)

8,346

7,717

 (4,030)

    (3,157)

Financial Income

-7,693

-8,254

-12,137

-7,846

-5,680

(7,846)

(5,680)

(5,051)

 (15,794)

  (13,118)

Financial costs

17,055

24,084

22,957

23,101

20,307

23,101

20,307

24,166

 23,561

     27,720

Share of net loss of joint ventures and associates accounted for using the equity method

177

-309

899

5,228

5,561

5,228

5,561

8,914

 10,816

     16,432

Foreign currency exchange differences

1,003

4,292

613

-958

-457

(958)

(457)

2,563

 (3,300)

       9,054

Result as per adjustment units

5,058

1,802

4,159

3,283

2,247

3,283

2,247

111

 (742)

       8,255

Income taxes

37,133

34,705

46,674

50,115

30,246

50,115

30,246

48,366

 136,127

     39,976

Adjusted Operating result(1)

181,188

188,266

179,920

204,937

200,652

204,937

200,652

234,894

 468,722

  230,808

Exceptional Item (EI)

-

2,989

1,628

-

-

-

 -

              -

Adjusted Operating result before (EI)

181,188

191,255

181,548

204,937

200,652

204,937

200,652

234,894

 468,722

  230,808

Depreciation and amortization

54,760

64,246

68,608

81,567

83,528

81,567

83,528

92,200

 93,289

  105,021

ORBDA before (EI)

235,948

255,502

250,155

286,504

284,180

286,504

284,180

327,094

 562,011

  335,829

Exceptional Item (EI)

-

-3

-1,628

-

-

-

 -

          -

ORBDA(2)

235,948

255,499

248,528

286,504

284,180

286,504

284,180

327,094

 562,011

  335,829

(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.

(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.

(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.

 

 

 

 


 

The following table presents our Income statement and as a percentage of Net sales:for the periods noted below:

 

Year Ended December 31,

Year Ended December 31,

 

2014

 

2015

 

2016

2017

2018

2019

 

(millions of CLP, except percentages)

(millions of CLP, except percentages)

Net sales

 

1,297,966

100.0%

 

1,498,372

100.0%

 

1,558,898

100.0%

   1,698,361

100.0%

 1,783,282

100.0%

     1,822,541

100.0%

Cost of sales

 

-604,537

46.6%

 

-685,075

45.7%

 

-741,820

47.6%

(798,739)

47.0%

(860,011)

48.2%

(908,318)

49.8%

Gross margin

 

693,429

53.4%

 

813,297

54.3%

 

817,078

52.4%

Gross profit

       899,622

53.0%

 923,271

51.8%

       914,223

50.2%

Other income by function

 

25,464

2.0%

 

6,577

0.4%

 

5,144

0.3%

           6,718

0.4%

 228,455

12.8%

         22,585

1.2%

Other expenses(1)

 

-1,743

0.1%

 

-2,372

0.2%

 

-2,027

0.1%

          (2,662)

0.2%

 (1,428)

0.1%

         (1,428)

0.1%

Exceptional Items (EI)(2)

 

-1,628

0.1%

 

-

 

-

                    -

-

 -

-

                   -

-

MSD&A(3)(2)

 

-535,603

41.3%

 

-612,565

40.9%

 

-619,543

39.7%

(668,783)

39.4%

(681,576)

38.2%

(704,571)

38.7%

Adjusted Operating Result(4)(3)

 

179,920

13.9%

 

204,937

13.7%

 

200,652

12.9%

       234,894

13.8%

 468,722

26.3%

       230,808

12.7%

Net financing expenses

 

-10,821

0.8%

 

-15,256

1.0%

 

-14,627

0.9%

Net Financial Expenses

       (19,115)

1.1%

 (7,766)

0.4%

       (14,603)

0.8%

Results as per adjustment units

 

-4,159

0.3%

 

-3,283

0.2%

 

-2,247

0.1%

             (111)

0.0%

 742

0.0%

         (8,255)

0.5%

Exchange rate differences

 

-613

0.0%

 

958

-0.1%

 

457

0.0%

          (2,563)

0.2%

 3,300

0.2%

         (9,054)

0.5%

Equity and income from joint ventures

 

-899

0.1%

 

-5,228

0.3%

 

-5,561

0.4%

          (8,914)

0.5%

 (10,816)

0.6%

      (16,432)

0.9%

Other gains/(losses)

 

4,037

0.3%

 

8,512

0.6%

 

-8,346

-0.5%

          (7,717)

0.5%

 4,030

0.2%

           3,157

0.2%

Income before taxes

 

167,465

12.9%

 

190,640

12.7%

 

170,328

10.9%

       196,474

11.6%

 458,211

25.7%

       185,622

10.2%

Income taxes

 

-46,674

3.6%

 

-50,115

3.3%

 

-30,246

1.9%

       (48,366)

2.8%

 (136,127)

7.6%

       (39,976)

2.2%

Net income for the year

 

120,792

9.3%

 

140,525

9.4%

 

140,082

9.0%

       148,108

8.7%

 322,085

18.1%

       145,646

8.0%

Attributable to:

 

 

 

 

 

 

 

 

 

 

 

  

 

 

Equity Holders of Parent Company

 

106,238

8.2%

 

120,808

8.1%

 

118,457

7.6%

       129,607

7.6%

 306,891

17.2%

       130,142

7.1%

Non controlling interest

 

14,553

1.1%

 

19,717

1.3%

 

21,624

1.4%

         18,501

1.1%

 15,194

0.9%

          15,504

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.

(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.

(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.

(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.

             

(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) 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.

(3) The difference between the MSD&A presented in this table and the total of ´Distribution costs´, ´Administrative expenses´ and ´Other expenses by function´ of the Consolidated Statement of Income (F-8) for an amount of CLP 3,371 million, CLP 2,372 million, and 2,027 for the years 2014, 2015 and 2016 respectively, is the total of Other expenses for an amount of CLP 1,743 million, CLP 2,372 million, and CLP 2,072 million for the years 2014, 2015 and 2016 respectively, and Exceptional Items for an amount of CLP 1,628 million, CLP 0 million, and CLP 0 million for the years 2014, 2015 and 2016 respectively.

(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.

 

 

 

 

 


 

FISCAL YEAR ENDED DECEMBER 31, 20162019 COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 20152018

The 2018 Income Statement reflects both ongoing operations and the impact of the CCU Argentina – ABI transaction (“the Transaction”), which had a positive impact of CLP 208,842 million on Adjusted Operating Result and CLP 157,359 million in Net income in 2018.  See “ Item 4: Information of the Company – A. History and Development of the Company.” See also Note 1 – Letter C of our consolidated financial statements included herein.  

The major occurrencesmain highlights of the Income Statement for the fiscal year ended 20162019 were: (a) the 60%Net sales growth of 2.2%, driven by 5.3% higher volumes, partially offset by 2.9% lower average devaluationprices in CLP terms; (b) a decrease of the Argentine peso against the US dollar and 55% against the Chilean peso during 2016; (b) the continuous execution of the “ExCCelencia CCU” program; (c) the combination of the route-to-market50.8% in Adjusted Operating Result, explained by a 92.6% decline in the beerInternational Business Operating segment, due to the Transaction, and non-alcoholic categoriesthe 1.1% decrease in Chile; (d) the new “Labeling Law”Chile Operating segment, partially compensated by the 25.6% increase in the Wine Operating segment, and (c) a decrease in Net income of 57.6%, which establishes certain restrictions on promotion material, labeling, and commercialization of non-alcoholic beverages and  products that have been classified as being “high” in calories or that contain any ofmainly associated with the defined critical nutrients, such as sodium, sugar and saturated fats. abovementioned reasons.

Net sales

Our Net sales wereincreased 2.2% to CLP 1,558,8981,822,541 million in 2016 compared to2019, from CLP 1,498,3721,783,282 million in 2015, representing an increase of 4.0%, primarily2018, due to 5.3% higher salesconsolidated volumes, partially offset by 2.9% lower average prices. Volume growth was mostly supported by a 7.6% and higher average prices4.9% increase in the International Business and Chile andOperating segments, respectively, while the Wine Operating segments.segment grew 0.5%. The 2.9% lower average price in CLP was primarily explained by the sharp depreciation of the ARS against the CLP, which resulted in a 10.8% lower average price in CLP terms from the International Business Operating segment. Net sales performance of each of our Operating segments during 20162019 is described below:

Chile: Net sales increased 9.7%4.9% to CLP 997,3761,164,304 million as a result of 4.5%in 2019, from CLP 1,109,574 million in 2018, due to 4.9% higher sales volume coupled with 4.9%volumes. Average prices were flat during the year, given that higher average prices. Higher sales volumes were fueled partially by promotional activities performed throughout the year as well as the successful implementation of the combined route-to-market in beer and non-alcoholic beverages, which led to improve execution at the points of sale. Average prices increased due towere partially offset with revenue management initiatives and the incorporation of high value brandspositive mix effects. The volume growth was explained by our continuous improvement in brand equity, innovation and commercial execution, allowing us to the portfolio.gain market share in our main categories.

International Business: Net sales decreased 8.8%4.0% to CLP 370,109464,487 million in 2019, from
CLP 483,926 million in 2018 as a result of 1.0% higher sales volumes offset by 9.6%10.8% lower average prices in CLP, partially offset by 7.6% higher sales volumes. The consolidation, as a consequenceof August 9, 2018, of BBO, our subsidiary in Bolivia, also contributed to volume growth this year. Excluding this effect, volumes grew 3.9% mostly driven by Argentina. The increase in sales volumes was mostly supported by our convenience packaging strategy together with our continuous improvement in brand equity, innovation and commercial execution. The lower average price in CLP terms was primarily explained by the sharp depreciation of the devaluation ofARS against the Argentine peso against Chilean peso.CLP, not fully compensated with price increases in local currency, which ended below inflation.

Wine: Our Net sales of wine increased 6.3%2.8% to CLP 201,402212,322 million in 2016,2019, from CLP 189,515206,519 million in 2015.2018. The increase in Net sales was achieved due tothe result of 2.3% higher average prices, primarily as a 3.0% higher sales volume and a 3.2% increaseconsequence of the stronger USD on export revenues, while volumes increased 0.5%, largely associated with weaker exports, partially compensated by the Argentine domestic market, related with the recently acquired brands in average prices. This was due to both the domestic business, where we once again consolidated our leading position in market value, and the growth in the export businesses, combined with price increases and the strengthening of our distribution to our strategic markets.Argentina.

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, utilities, and the costs of operating and maintaining plants and equipment.

Our Cost of sales in 2016 was CLP 741,820 million comparedincreased 5.6% to CLP 685,075908,318 million in 2015, an 8.3%2019, from CLP 860,011 million in 2018, mostly due to a 5.3% increase compared to 2015.in sales volumes, given that the Cost of sales per hectoliter expanded 0.3%. As a percentage of Net sales, Cost of sales increased to 47.6%49.8% in 20162019, from 45.7%48.2% in 2015.2018, mainly related to the depreciation of the CLP and the ARS against the USD and its impact in our USD-denominated costs. The Cost of sales for our Operating segments during 20162019 is described below:


Chile:The Cost of sales for our Chile Operating segment increased 14.5%7.7% to CLP 471,152540,048 million in 2016,2019, from CLP 411,375501,256 million in 2015.2018, driven primarily by the increase in sales volumes, given that the Cost of sales per hectoliter grew by 2.7%. The increase in the Cost of sales per hectoliter was explained by higher USD-linked costs from the depreciation of the CLP against the USD, partially compensated by efficiencies in manufacturing and procurement and lower costs of aluminum and PET. In all, Cost of sales as a percentage of Net sales expanded to 46.4% in 2019 from 45.2% in 2018.

International Business: Cost of sales increased 8.2% to CLP 248,881 million in 2019, from
CLP 230,069 million in 2018, mainly driven by volume growth and the impact on USD-denominated costs. Cost of sales per hectoliter in CLP increased 0.6%, primarily due to the impact of the sharp depreciation of the ARS against the USD on USD-linked costs, as well as the effects of inflation in Argentina, partially offset by currency translation effects, given the devaluation of the ARS against the CLP, and efficiencies gains in manufacturing and procurement. As a result, Cost of sales as a percentage of Net sales increased to 47.2%53.6% in 20162019 from 45.2%47.5% in 2015, primarily due to the incorporation of high value brands, and the 3.5% average currency devaluation in Chile during the year compared to last year, partially offset by the results of the industrial and procurement initiatives of the efficiency program “ExCCelencia CCU”.2018.

International Business:TheWine: Cost of sales of our International Business Operating segment decreased 3.2%3.4% to CLP 157,486128,764 million in 2016,2019, from CLP 162,665133,272 million in 2015.2018. Cost of sales asper hectoliter was down 3.8%, largely associated with a percentage of Net sales increased to 42.6% in 2016 from 40.1% in 2015. This was mainly due to the average devaluation of the local currency against the USD in 2016 when compared to 2015: 60% in Argentina, 11% in Uruguay and 9% in Paraguay. This was partially offset by the results of the industrial and procurement initiatives of the efficiency program “ExCCelencia CCU”.

Wine:The Cost of sales for our Wine Operating segment increased 6.6% to CLP 112,938 million in 2016, from CLP 105,956 million in 2015. Cost of sales, as a percentage of Net sales, increased from 55.9% in 2015 to 56.1% in 2016, mostly due to thelower cost of grapes of the 2016wine, following a more normalized harvest which had challenging weather conditions but was partially offset by the results of the industrial initiatives of the efficiency program.

Gross margin

Our Gross margin increased 0.5% to CLP 817,078 million in 2016, from CLP 813,296 millionChile in 2015.2018 and 2019. As a percentage of Net sales, Cost of sales decreased to 60.6% in 2019 from 64.5% in 2018.

Gross profit

Our Gross profit decreased 1.0% to CLP 914,223 million in 2019, from CLP 923,271 million in 2018. Gross margin decreased to 52.4%50.2% in 20162019 from 54.3%51.8% in 2015.2018.


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 1.1%3.4% to CLP 619,543704,571 million in 2016,2019, from CLP 612,565681,576 million in 2015.2018. As a percentage of Net sales, our MSD&A decreasedwere up 44 bps to 39.7%38.7% in 20162019, from 40.9%38.2% in 2015.2018. The MSD&A performance of each Operating segment during 20162018 is described below:

Chile: The MSD&A expenses of our Chile Operating segment increased 8.7%5.4% to CLP 373,408429,093 million in 2016,2019, from CLP 343,381407,243 million in 2015. Nevertheless,2018, driven primarily by the increase in sales volumes. As a percentage of Net sales, MSD&A remained almost flat at 36.9% in 2019 compared to 36.7% in 2018.

International Business: MSD&A expenses decreased 0.2% to CLP 210,156 million in 2019, from CLP 210,591 million in 2018. However, as a percentage of Net sales, MSD&A decreasedincreased to 37.4%45.2% in 20162019 from 37.8%43.5% in 2015, mainly2018, primarily due to the results ofnegative impact from the efficiency plan “ExCCelencia CCU” especiallyhigh inflation in the logistics front.Argentina.

International Business:Wine: The MSD&A of our International Business Operating segment decreased 11.4%grew 6.1% to CLP 191,41455,596 million in 2016,2019, from CLP 216,09952,409 million in 2015, mainly due to the currency translation effect and efficiencies captured.2018. As a percentage of Net sales, our MSD&A decreasedworsened to 51.7%26.2% in 20162019 from 53.3%25.4% in 2015, partially explained by the results of the logistics initiatives of the "ExCCelencia CCU" program.

Wine: The MSD&A of our Wine Operating segment increased 1.8% to CLP 52,007 million in 2016, from CLP 51,070 million in 2015. Nevertheless, MSD&A as a percentage of Net sales, decreased to 25.8% in 2016 from 26.9% in 2015, primarily due to our “ExCCelencia CCU” plan.2018.

Other Operating Income/operating income/(expenses) and Exceptional items

The Other operating income/(expenses) decreased 25.9% in 201690.7% to CLP 3,11721,157 million in 2019, from CLP 4,205227,027 million in 2015. In 2016, we incurred restructuring costs2018. 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 CLP 980 million from our operation in Uruguay, where we moved to an indirect distribution model. Due to greater efficiencies of the indirect distribution model, we expect to recover these costs within two years.2018, partially offset by higher other operating income during 2019.

Adjusted Operating Result

Our Adjusted Operating Result decreased 2.1%dropped 50.8% to CLP 200,652230,808 million in 2016, as compared to2019, from CLP 204,937468,722 million in 20152018, and our Adjusted Operating Result as a percentage of Net Sales decreasedsales declined to 12.7% in 2019, from 13.7% to 12.9% 26.3%in 2016. 2018. The results of 2018 include a one-time operating gain of CLP 208,842 million from the Transaction. See “Item 5. A. Adjusted Operating Result.”


The Adjusted Operating Result performance of each of our Operating segments during 20162018 is described below:

Chile: The Adjusted Operating Result for the Chile Operating segment decreased 0.5%1.1% to CLP 154,551200,429 million within 2019 from
CLP 202,662 million in 2018. Consequently, the Adjusted Operating Result margin decreased 17.2% in 2019 from 18.3% in 2018, mainly explained by higher Costs of sales as a 9.7% increase inpercentage of Net sales but offset with an increasedriven by the depreciation of 14.5%the CLP against the USD and its impact on USD-linked costs.

International Business: The Adjusted Operating Result decreased 92.6% to CLP 19,653 million in Cost of sales and an 8.7% increase of MSD&A expenses.2019, from CLP 266,345 million in 2018. The Adjusted Operating Result margin decreased to 4.2% in 2019 from 17.1%55.0% in 2015 to 15.5%2018, mainly explained by the one-time operating gain from the Transaction in 2016, mostly as a result ofOther operating income. Excluding this gain, the slow economic environment and the increase in cost of sales as a result of the 3.5% average currency devaluation in Chile during 2016 compared to 2015.

International Business: The Adjusted Operating Result fordecreased 64.3% mainly due to negative external effects from the International Business Operating segment decreased 31.2% to CLP 20,815 million. The Adjusted Operating Result margin decreased from 7.5% in 2015 to 5.6% for 2016, mostly as a resultsharp depreciation of the slow economic environment, high levels of inflation, and the devaluation of the local currenciesARS against the USD and the CLP, and the high inflation in 2016 when compared to 2015.Argentina.

Wine: The Adjusted Operating Result from our wine Operating segment increased 14.3%25.6% to CLP 37,18928,477 million in 2016,2019, from
CLP 32,53322,667 million in 2015.2018. The Adjusted Operating Result margin increased 13.4% in 2019 from 17.2%11.0% in 2015 to 18.5% in 2016,2018, mainly due to our increased volumes and prices in CLP terms, combined with efficiencies obtained through the "ExCCelencia CCU" plan, partially offsetexplained by the increased costlower Costs of the grape.sales as a percentage of Net sales.

Other:The Adjusted Operating Result for Others improved to a loss of CLP 17,750 million in 2019, from a loss of CLP 13,19322,952 million in 20152018, mainly due to lower corporate expenses.

Net Financial Expenses

Our Net financial expenses increased 88.0% to a loss of CLP 11,90314,603 million in 2016,2019, from a loss of CLP 7,766 million in 2018, mainly due to an increase in unrealized gains.

Net Financing Expenses

Our Net financing expenses decreased 4.1% to CLP 14,627 million in 2016 as compared to CLP 15,256 million in 2015. This increase was mainly due to a lower debt level in Argentina, partially offset by a lower levellevels of Cash and cash equivalents in 2016.held during 2019 when compared with 2018, associated with the one-time operating gain from the Transaction.

Equity and income from joint ventures and associated companies

CCU has 50% or less participation in Cervecería Austral, Foods, BBO, CCC and in other companies. The share of the gain/loss in the referred companies decreasedincreased to a loss of CLP 5,56116,432 million in 2016,2019, from a loss of
CLP 5,22810,816 million in 20152018, mainly due to a lower resultsfinancial result in CCC and Foods, partially offset by a better result in Cervecería Austral.Colombia.


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 1,79017,309 million in 2016, as2019, compared to a net lossgain of CLP 2,3254,042 million in 2015.2018. This variation is primarilymainly due to a higher loss in Result as per adjustment units, and lower inflation during 2016 compared to 2015, partially offsetlargely explained by higher foreign currency exchange differences.the application of Hyperinflation accounting in Argentina.

Other gains (losses)

Our Other gains (losses) decreasedamounted to a net gain of CLP 3,157 million in 2019, from a net gain of CLP 8,5124,030 million in 2015 to a net loss of CLP 8,346 million in 2016. Mostly due to the negative results on our hedges related to the impact of foreign exchange rate fluctuations on taxes on our foreign currency denominated assets.2018. This lower result is mainly explained by higher non-operating expenses.

Income taxes

Our income taxes in 20162019 amounted to CLP 30,24639,976 million, translating into an effective consolidated tax rate of 17.8%. Income taxes in 2015 amountedcompared to CLP 50,115136,127 million translating into an effective consolidated tax rate of 26.3%.in 2018. The CLP 96,151 million Income tax decreaseddecrease was mostly explained by CLP 19,868 million due to a lowercontraction of 59.5% in consolidated taxable income and to the positive effect of foreign exchange fluctuations on taxes, the latter also explaining the decrease in the effective tax rate from 2016 to 2015.income.

Net income for the yearprior to non-controlling interests

Our Net income prior to minority shareholders in 20162019 decreased 0.3%,54.8% to CLP 145,646 million in 2019, from CLP 140,526322,085 million in 2015 to CLP 140,082 million in 2016.2018.  


Net income attributable to equity holders of the parent company

Our Net income attributable to equity holders of ourthe parent company decreased 1.9%declined 57.6% to CLP 130,142 million in 2019, from CLP 120,808306,891 million in 2015 to2018, mainly explained by the CLP 118,457157,359 million in 2016.gain at Net income level from the Transaction during 2018.

Net income attributable to Non-controlling interests

Non-controllingNet income attributable to non-controlling interests increased to CLP 15,504 million in 2019 from CLP 19,71715,194 million in 20152018, mainly due to CLP 21,624 milliona better result in 2016.our Wine Operating segment, partially compensated with a lower result in our International Business Operating segment.

 


FISCAL YEAR ENDED DECEMBER 31, 20152018 COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 20142017

The major occurrences ofSee “Item 5. Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the fiscal year ended 2015 were: (a) the 15% average devaluation of the Chilean peso and the 14% average devaluation of the Argentine peso during 2015; (b) decrease in commodity prices, especially oil, aluminum and sugar; (c) the implementation of the “ExCCelencia CCU” program.

Net sales

Our Net sales were CLP 1,498,372 million in 2015 compared to CLP 1,297,966 million in 2014, representing an increase of 15.4%, primarily due to higher sales volumes and higher average prices in all Operating segments. Net sales performance of each of our Operating segments during 2015 is described below:

Chile: Net sales increased 8.9% to CLP 909,460 million asDecember 31, 2018 for a result of 4.1% higher sales volume coupled with 4.6% higher average prices. Higher sales volumes were fueled partially by 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.

International Business: Net sales increased 35.4% to CLP 405,714 million, due to 6.0% higher sales volumes coupled with 27.7% higher average prices. Volumes and prices in Argentina, Uruguay and Paraguay where higher in 2015 than in 2014, compensating inflation and currency devaluation in those countries.

Wine: Our Net sales of wine increased 10.0% to CLP 189,515 million in 2015, from CLP 172,349 million in 2014. The increase in Net sales was achieved due to a 3.2% higher sales volume and a 6.5% increase in average prices, mainly due to the export side of the business, which showed good performance, mainly driven by the markets in Asia and Oceania.

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 2015 was CLP 685,075 million compared to CLP 604,537 million in 2014, a 13.3% increase compared to 2014. As a percentage of Net sales, Cost of sales decreased to 45.7% in 2015 from 46.6% in 2014. The Cost of sales for our Operating segments during 2015 is described below:

Chile: The Cost of sales for our Chile Operating segment increased 9.9% to CLP 411,375 million in 2015, from CLP 374,336 million in 2014. Cost of sales as a percentage of Net sales increased to 45.2% in 2015 from 44.8% in 2014, primarily 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.

Gross margin

Our Gross margin increased 17.3% to CLP 813,296 million in 2015, from CLP 693,429 million in 2014. As a percentage of Net sales, Gross margin increased to 54.3% in 2015 from 53.4% in 2014.

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 providedby third parties and other administrative expenses. Our MSD&A expenses increased 14.4% to CLP 612,565 million in 2015, from CLP 535,603 million in 2014. As a percentage of Net sales, our MSD&A decreased to 40.9% in 2015 from 41.3% in 2014. The MSD&A performance of each Operating segment during 2015 is described below:


Chile: The MSD&A expenses of our Chile Operating segment increased 4.5% to CLP 343,381 million in 2015 from CLP 328,766 million in 2014. Nevertheless, as a percentage of Net sales, MSD&A decreased to 37.8% in 2015 from 39.4% in 2014, mainly due to the results of the efficiency plan “ExCCelencia CCU”.

International Business: The MSD&A of our International Business Operating segment increased 40.1% to CLP 216,099 million in 2015, from CLP 154,300 million in. As a percentage of Net sales, our MSD&A increased to 53.3% in 2015 from 51.5% in 2014, partially explained by higher marketing expenses.

Wine: The MSD&A of our Wine Operating segment increased 1.6% to CLP 51,070 million in 2015, from CLP 50,284 million in 2014. Nevertheless, MSD&A as a percentage of Net sales, decreased to 26.9% in 2015 from 29.2% in 2014.

Other Operating Income/(expenses) and Exceptional items

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,comparative discussion for the termination of the contract that allowed us to importyears ended December 31, 2018 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.2017.

Adjusted Operating Result

Our Adjusted 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, Adjusted Operating Result increased by 27.3%, which means an EBIT margin expansion of 127 bps. The Adjusted Operating Result performance of each of our Operating segments during 2015 is described below:

Chile: The Adjusted Operating Result for the Chile Operating segment increased 16.9% to CLP 155,331 million due to an 8.9% increase in Net sales, partially offset by an increase of 4.5% in MSD&A expenses and an increase of 9.9% in Cost of sales. The Adjusted Operating Result margin increased from 15.9% in 2014 to 17.1% in 2015.

International Business: The Adjusted Operating Result for the International Business Operating segment increased 7.5% to CLP 30,266 million. The Adjusted Operating Result margin decreased from 9.4% in 2014 to 7.5% for in 2015. Excluding the above mentioned one-time effect compensation, the Adjusted Operating Result margin expansion was 437 bps.

Wine: The Adjusted Operating Result from our wine Operating segment increased 31.3% to CLP 32,533 million in 2015, from CLP 24,780 million in 2014. The Adjusted Operating Result margin increased from 14.4% in 2014 to 17.2% in 2015.

Other:The Adjusted Operating Result for this segment increased from a loss of CLP 5,888 million in 2014 to a loss of CLP 13,193 million in 2015, mainly due to a lower result in Corporate costs.

Net Financing Expenses

Our Net financing expenses increased 41.0% to CLP 15,256 million in 2015 as compared to CLP 10,821 million in 2014. This increase was primarily due to a lower level of Cash and cash equivalents in 2015.

Equity and income from joint ventures and associated

CCU has 50% or less participation in Cervecería Austral, Foods, BBO, CCC, and in other companies. The share of the gain/loss in the referred companies decreased to a loss of CLP 5,228 million in 2015, from a loss of CLP 899 million in 2014 mainly due to lower results in some of these joint ventures, including the divestments of the brands Calaf and Natur which generated a loss net of taxes of CLP 1,035 million.


 

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 2,325 million in 2015, as compared to a net loss of CLP 4,772 million in 2014. This variation is primarily due to higher foreign currency exchange differences and higher Result as per adjustment units, due to a lower inflation during 2015 compared to 2014.

Other gains (losses)

Our Other gains (losses) increased from a net gain of CLP4,037 million in 2014 to a net gain of CLP 8,512 million in 2015. The increase mainly resulted from gains related to hedges covering foreign exchange variations on taxes.

Income taxes

Our income taxes in 2015 amounted to CLP 50,115 million, translating into an effective consolidated tax rate of 26.3%. Income taxes in 2014 amounted to CLP 46,674 million translating into an effective consolidated tax rate of 27.9%. Income tax increased by CLP 3,441 million.

Net income for the year

Our Net income in 2015 increased 16.3%, from CLP 120,792 million in 2014 to CLP 140,526 million in 2015, primarily as a result of a 13.9% increase in Adjusted Operating Result.

Net income attributable to equity holders of parent

Our Net income attributable to equity holders of our parent company increased 13.7% from CLP 106,238 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.


 

B.  Liquidity and Capital Resources

 

Our principal source of liquidity has been cash generated by our operating activities, which amounted to
CLP 173,622262,161 million, CLP 219,511429,313 million and CLP 190,014242,320 million during the years 2014, 20152017, 2018 and 2016,2019, 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 20162019 were amounts collected from clients net of payments to suppliers of CLP 646,311850,064 million compared to CLP 649,767755,184 million in 20152018 and
CLP 532,878764,197 million in 2014.

2017.

In 2016,2019, our cash flows from financing activities totalled outflows of CLP 95,303199,420 million compared to outflows of CLP 82,83952,964 million in 20152018 and outflows of CLP 132,15653,001 million in 2014.2017. The principal components of cash flows used in financing activities consisted of dividends paid of CLP 69,820218,035 million in 2016,2019, including dividends paid relating to minority interests (CLP 66,14774,825 million in 20152018 and CLP 65,31675,128 million in 2014)2017), of the repayment of bank borrowingsloan payments of CLP 25,29527,050 million in 20162019 (CLP 54,797112,665 million in 20152018 and CLP 20,76625,754 million in 2014)2017), partially offset by the proceeds from short-term and long-term borrowings of CLP 23,15050,989 million in 20162019 (CLP 42,929184,008 million in 20152018 and CLP 37,36657,777 million in 2014)2017), and other cash movement outflowsinflows of CLP 1,9451,092 million in 2016 mainly due to the amortization of the series E bond (outflows2019 (inflows of CLP 2,526819 million in 20152018 and outflowsinflows of CLP 81,47136 million in 2014 mainly due to the payment of the series I bond)2017). Additionally, in 2018, we paid amount of CLP 19,11249,223 million for the acquisition of an additional 15.79% interests in ManantialViña San Pedro Tarapacá S.A. through own subsidiaries Aguas CCU-Nestlé ChileCCU InversionesS.A. (CLP 7,800 million in 2017 for the acquisition of an additional 2.5% interests in Viña San Pedro Tarapacá S.A. and Embotelladoras Chilenas Unidasthrough CCU Inversiones S.A.

).

In 2016,2019, our cash used in investment activities totalled CLP 155,007144,186 million compared to CLP 165,810199,002 million in 20152018 and CLP 238,970173,614 million in 2014.2017. The principal components of cash used in investment activities in 20162019 consisted of capital expenditures of CLP 128,883140,488 million (CLP 131,731131,440 million in 20152018 and CLP 230,080125,765 million in 2014)2017) and payments made to acquire interests in joint ventures, in non-controlling interests and to obtain control of subsidiaries or other businesses of CLP 29,85922,202 million (CLP 44,08465,325 million in 20152018 and CLP 15,22250,463 million in 2014)2017).

Partially offset by proceeds from other long term assets classified as investing of CLP 11,200 million in 2019. As of December 31, 2016,2019, we had CLP 58,34295,292 million (CLP 75,485122,695 million in 20152018 and CLP 131,55867,349 million in 2014)2017) in cash, overnight deposits, bank balances, time deposits and investments in mutual funds, which do not include CLP 75,448101,077 million (CLP 117,069196,319 million in 20152018 and CLP 83,217 million in 2014)102,696 millionin 2017) corresponding to securities purchased under resale agreements. Indebtedness, including accrued interest, amounted to CLP 160,490315,819 million as of December 31, 2016.2019. Short-term indebtedness included:


• CLP 39,08042,447 million of short-term bank borrowings,

• CLP 3,2506,745 million of bonds payable, and

• CLP 2164,857 million of financial lease obligations.liabilities.

 

As of December 31, 2016,2019, long-term indebtedness, excluding the current portion, comprised:

• CLP 29,60699,749 million of long-term obligations to banks,

• CLP 70,837133,807 million of long-term obligations to the public represented by bonds, and

• CLP 17,50128,213 million of long-term financial lease obligations.


In December 2004 the Company issued a bond (“E” series) for UF 2 million with a 20-year term to maturity in the local market. This obligation accrues interest at a fixed annual rate of UF+4.0% and amortizes capital on a constant semi-annual basis.liabilities.

 

In April 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:

 

 

I”H” Series

H”J” Series

UF amount

32 million

23 million

Term

521 years

2125 years

Amortization

Bullet

Semi-annual

since year 11

Bullet

Interest Rate

UF+3.00%4.25%

UF+4.25%2.90%

 

Additionally, during March 2014 we paid all outstanding amounts under the “I” Series bonds.

 

As of December 31, 2016,2019, 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 1.20 to 1.00 in VSPT and 2.50 to 1.00 in CPCh; to maintain a consolidated financial leverage ratio (the ratio of net financial debt to adjusted equity) lower than 1.50 in CCU; and 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 20,28821,799 million as of December 31, 2016)2019) 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, 2016, we2019, CCU met all ourof its financial debt covenants and had a consolidated interest coverage ratio of 13.99 to 1.00,12.11, a consolidated leverage ratio of 0.49 to 1.00.0.59 and consolidated financial leverage ratio of 0.07. The consolidated adjusted equity attributable to equity holders of the parent company as of December 31, 20162019 was CLP 1,136,5271,365,412 million. Our ratio of unpledged assets over unsecured liabilities was 3.06.7.45 (the ratio is 7.81 if IFRS-16 is not applied).

 

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, 2016.2019. 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:

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest - Bearing Debts(1) as of December 31, 2016

(millions of CLP, except percentages)

 

               

 

 

               

 

 

   

Contractual Flows Maturities

       

 

 

               

 

Fixed Rate

 

Averge Int.Rate

 

2017

 

2018

 

2019

 

2020

 

2021

 

Thereafter

 

TOTAL

CLP (UF)(2)

Bonds

4.2%

 

5,660

 

5,556

7,846

9,986

 

9,680

 

56,879

 

95,607

CLP (UF)(2)(3)

Banks

6.0%

 

1,775

1,620

11,588

1,153

 

1,153

 

28,639

 

45,929

CLP$

Banks

5.8%

 

28,794

2,660

2,660

313

 

313

 

-

 

34,740

US$

Banks

2.9%

 

1,086

-

-

-

 

-

 

-

 

1,086

Argentine pesos(4)

Banks

28.7%

 

9,686

4,378

2,683

-

 

-

 

-

 

16,747

Uruguayan pesos

Banks

6.0%

 

1,045

348

348

-

 

-

 

-

 

1,742

 

            

 

TOTAL

   

48,046

14,562

25,126

11,452

 

11,146

 

85,517

 

195,850

 

            

 

 

            

 

Variable rate

 

Averge Int.Rate

 

2017

2018

2019

2020

 

2021

 

Thereafter

 

TOTAL

US$

Banks

1.8%

 

108

5,332

-

-

 

-

 

-

 

5,440

Argentine pesos

Banks

16.6%

 

2,154

1,586

1,005

-

 

-

 

-

 

4,744

 

            

 

TOTAL

   

2,262

6,917

1,005

-

 

-

 

-

 

10,184

 

            

 

TOTAL

   

50,308

21,480

26,130

11,452

 

11,146

 

85,517

 

206,034

(1)   Including long-term debt obligations and capital lease obligations.

(2)   UF as of December 31, 2016
(3)   Includes Capital Lease Obligations for an amount of CLP 34,962 million
(4)   Includes Capital Lease Obligations for an amount of CLP 5 million
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest - Bearing Debts(1) as of December  31, 2019

(millions of CLP, except percentages)

 

              

 

ContractualFlows Maturities

Fixed Rate

Average Int.Rate

2020

 

2021

 

2022

 

2023

 

2024

 

Thereafter

 

TOTAL

CLP (UF) (2)

Bonds

3.3%

            9,812

 

            9,595

 

            9,379

 

            9,162

 

            8,946

 

       163,272

 

       210,165

CLP(UF)(2) (3)

Banks

3.5%

            3,681

 

            2,206

 

            2,206

 

            1,611

 

            1,611

 

         24,740

 

         36,054

CLP

Banks

4.1%

         18,883

 

         10,122

 

          59,929

 

            1,904

 

            1,846

 

            1,754

 

         94,440

USD

Banks

3.3%

         13,449

 

            9,715

 

          11,269

 

               315

 

               315

 

            1,840

 

         36,903

EUR

Banks

1.5%

               107

 

               101

 

               101

 

                 30

 

                  30

 

                   -  

 

               369

ARS

Banks

53.7%

            2,579

 

               116

 

                   -  

 

                   -  

 

                   -  

 

                   -  

 

            2,695

BOB

Banks

5.0%

                 42

 

            1,696

 

            1,696

 

            3,392

 

            3,392

 

               922

 

         11,141

UYU

Banks

4.9%

               719

 

               240

 

                   -  

 

                   -  

 

                   -  

 

                   -  

 

               958

 

              

 

Sub-total

  

         49,272

 

         33,792

 

          84,580

 

         16,414

 

          16,140

 

       192,529

 

       392,727

 

              

 

Variable rate

Average Int.Rate

2020

 

2021

 

2022

 

2023

 

2024

 

 Thereafter

 

 TOTAL

USD

Banks

3.1%

            7,720

 

                   -  

 

                   -  

 

                   -  

 

                   -  

 

                   -  

 

            7,720

ARS

Banks

55.0%

            4,385

 

                   -  

 

                   -  

 

                   -  

 

                   -  

 

                   -  

 

            4,385

 

              

 

Sub-total

  

         12,105

 

                   -  

 

                   -  

 

                   -  

 

                   -  

 

                   -  

 

         12,105

 

              

 

TOTAL

  

         61,378

 

         33,792

 

          84,580

 

         16,414

 

          16,140

 

       192,529

 

       404,832

(1) Including long-term debt obligations and capital lease obligations.

(2) UF as of December 31, 2019.

(3) Includes lease liabilities for an amount of CLP 43,256 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.CLP. As of December 31, 2016,2019, we had invested CLP 92,407124,733 million in 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, 2016:

2019:

 

Short-Term Financial Instruments

(in millions of CLP)

Time deposits

16,93517,768

Mutual Funds

255,888

Repos

75,448101,077

Total

92,407124,733


 

Capital Expenditures

During the year 2020, we plan to execute capital expenditures to support organic growth. On a consolidated basis, during 2020 we expect to invest CLP 184,914 million, mainly consisting of (i) CLP 103,172 million in production assets, which includes part of the construction of the new non-alcoholic plant in Santiago, Chile, and other investments to expand capacity in our businesses in Chile and Argentina, (ii) CLP 3,557 million in distribution assets, (iii) CLP 26,522 million in packaging and returnable packaging and (iv) CLP 23,980 million in marketing assets. Of the total investment planned for 2020, CLP 138,497 million will be allocated in Chile.

Our plans for capital expenditures through the period 2017-20202020-2023 are displayed in the following table:

 

CLP million2017201820192020

(CLP Million)

2020

2021

2022

2023

Chile138,102197,254127,74590,394

138,497

131,084

95,319

69,636

Abroad37,63743,37222,15523,130

46,417

42,017

38,990

29,073

Total175,739240,626149,899113,523

184,914

173,101

134,309

98,709

 

DuringBetween the years 2017 through 2020,2020-2023, we plan to makeexpend capital expenditures mainly to adapt, update and continue to increase production capacity, installing new packaging lines, enhancing environmental protection, optimizingoptimize our distribution system and warehouse facilities, investing in additionalmarketing assets and in returnable bottles and crates to replace obsolete inventories, adapting to new packaging formats and supporting industry volume growth.packaging. Capital expenditures are also directed toat improving facilities and offices in our plants, implementing information and management information systems and making additional investments in marketing assets.line with the development of our business.

 

We review our capital investment program periodically and changes to the program are made as appropriate. Accordingly, we cannot assure youensure that we will make any of these proposed capital expenditures at the anticipated level or at all. Moreover, given the current highly uncertain business environment, associated with the economic impact from the COVID-19 pandemic, the estimated figures presented above could differ. 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 the countries where we operate, interest rates, inflation and foreign exchange rates, competitive conditions and other factors. 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.

 

The 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 minimize capital costs, and at the same time debt levels and maturities compatible with our operational cash flow generation.

 

C.  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.

 

In May 2005, we entered into a technical assistance agreement withHeinekenwith 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”.

 

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”.


 

In addition to brands and production techniques, the Company constantly invests in new technologies and digital transformation in order to compete in a challenging environment. In this regard, during 2019 we started updating our operational platforms and developed artificial intelligence tools to optimize the use of information in the sale and distribution processes, among other initiatives.

 

D.    Trend Information

 

The Chilean economy grew 1.6%1.1% in 2016,2019, with an inflation rate of 2.8%3.0% and an average unemployment rate of 7.2%. AverageThese figures represent a weaker economic environment when compared with 2018, where GDP grew 4.0%, inflation was 2.6% and unemployment was 6.5%reached 6.9%, and also when compared with the average GDP growth of 2.9% between 2009 and 2019. Although our consolidated volumes have been resilient to weaker macroeconomic conditions in 2016. Wethe past, we cannot assure you that the consumption of our products will varynot be affected in the same proportion asfuture. Furthermore, the overall economic indicators, since there is no perfect correlation. The conditions in particular sectors of the economy may have different impactimpacts in our business. Factorsbusiness and factors such as competition and changes in relative prices among the various types of beverages can affect the consumption of our products.

 

The exchange rate between the CLP and the USD, has been subject to high volatility in the recent years. For example, when compared average exchange rates for each period, the CLP depreciated 9.7% in 2019, appreciated 1.4% in 2018, appreciated 4.1% in 2017 and depreciated 3.5% in 2016. Weaker economic conditions for the Chilean economy are usually related to a depreciation of the CLP. In August 2016, labor reform Law N°20,940 was approved, which resultsthis regard, we cannot rule out that the CLP will depreciate in a more rigid labor market, effective as of April 2017.the future eroding our profitability.

 

OnIn terms of regulations, on June 26, 2015 Decree N°13 of the Ministry of Health was published which modifiesmodified the Sanitary Food Products Regulations (DCOrdinance (Supreme Decree N° 977 of the Ministry of Health) and enforcesenforced 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 anySee “Item 4: Information of the defined critical nutrients, suchCompany – B. Business Overview – 10. Government Regulation - Government Regulation in Chile.”

In addition, 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 regulation change came into force on June 27, 2016 and affected part of our non-alcoholic portfolio. We have taken measures to mitigate the impactdate of this new law.

The Chilean Congress is currently discussingreport, there are a bill that provides, among others, for a new regimenumber 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 itsbills under discussion in the Chilean Congress. After its enactment,Congress that could impact our operation. For further information and a description of these bills, see “Item 3: Key Information – Risk Factors – Risk Relating to Our Business – Water supply is essential to the development of our businesses;” “Item 3: Key Information – Risk Factors – Risk Relating to Our Business – Possible regulations will be required for labeling materials and advertising of alcoholic beverages and other food products in the implementation of the new regime,countries in which is not expectedwe operate could adversely affect us;” and “Item 3: Key Information – Risk Factors – Risk Relating to occur during the year 2016. If enacted during 2017, respectiveOur Business – New applicable environmental regulations should be dictated for effects of the new implementation of this bill.could affect our business.”  

 

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 camein Chile comes from GNL Quinteros facilities, which imports gas from renewable sources at international prices. We do not foresee any shortages.

 

In 20162019, the Argentine economy contracted 3.8%by 2.2% and the country experienced inflation levelsArgentine peso depreciated 72.4% on average and 58.9% as of approximately 40%, and devaluation levelsthe end of 60%each period. Depreciation of the Argentine peso against the U.S. Dollar, impactingUSD may negatively affect our U.S. Dollar denominated costconsolidated financial results due to most of sales, and devaluation of 55% againstour raw material costs in Argentina are indexed to the Chilean peso, impacting our revenues from CCU Argentina reported in Chilean pesos. Future volatility of exchange rates ofUSD. Our Argentine subsidiaries use the Chilean peso and Argentine peso in any given periodas their functional currency and their financial statements are translated to CLP for consolidation purposes, which may affectproduce variations to the level ofCompany’s consolidated net income reported from our foreign operations under IFRS.and shareholders’ equity, due to translation effects.

 

Argentina has faced in the past, and continues to face, high inflation. The measuresincrease in inflationary risk may also erode macroeconomic growth and limit the availability of financing, causing a negative impact on our operations. In the years 2017, 2018 and 2019 inflation in Argentina was approximately 20%, 48% and 54%, 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 2 to our consolidated financial statements included herein).


Measures 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 materiallymaterial negative impact on the country´scountry’s economy. 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 changed following

Regarding the installationCOVID-19 pandemic, as of the new governmentdate of this report, we continue selling, producing and distributing our products, all across our business operations. As we expect the pandemic to continue to develop throughout the region, we have prepared a comprehensive contingency plan in December 2015. We cannot assure you thatorder to prioritize both the current Argentine government will not implement this typehealth and safety of all our workers and the people we relate with, as well as the continuance of our operations. To accomplish these objectives, we implemented protocols such as working remotely, actively promoting self-care measures and mandating new internal regulations relating to how our plants and distribution centers should be operated. For example, we are periodically sanitizing our facilities, minimizing physical interaction between workers, adding hand sanitation stations, and restricted access by third parties to our facilities unless it is strictly necessary, among other measures. Given the high degree of uncertainty about the spread of COVID-19 or regarding further measures that these will notmay be adopted across the countries where we operate, we cannot predict the impact the pandemic may have an adverse effect on our operations in Argentina.the near future, and therefore, any further adverse effects it may have on our results or financial condition. Prior to the pandemic CCU had a strong financial position with a healthy balance sheet with low financial debt. This condition should allow us, if necessary, to access the local or international debt markets.

 


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.
·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.

 

WeThe Company adopted IFRS 16 as of January 1, 2019 IFRS16. This standard requires that lease contracts must recognize an asset for the “Right of use assets” subject to operational lease contracts and a liability, which is equivalent to the present value of the payments associated to the contract.

During the initial measurement of lease agreements the Company excluded leases with remaining terms less than 12 months and leases with a value lower than US$ 5,000 (ThCH$ 3,747).

Short-term leases and low-value leases will be kept under the operating lease treatment, in which we record these payments made under operating leases as expenses, and none of our operating lease obligationsthem are reflected on our balance sheet.

We have no other off-balance sheet arrangements. See Note 34 to our audited consolidated financial statements included herein for a more detailed discussion of contingencies, including guarantees.

 


F.   Contractual Obligations

 

The following table summarizes our known contractual obligations as of December 31, 2016:

2019:

 

      
   

Payments due by period

  
   

(in million of CLP)

  

Contractual Obligations(1)

Total

Less than 1 year

1 - 3 years

3 - 5 years

More than 5 years

Long-Term Debt Obligations

171,067

48,889

45,007

20,293

56,879

Capital Lease Obligations(2)

34,967

1,419

2,603

2,306

28,639

Operating Lease Obligations(3)

482,101

175,604

239,761

32,682

34,053

Purchase Obligations(4)

484,323

137,417

240,128

62,209

44,570

Total

1,172,458

363,329

527,499

117,489

164,141

      

(1) Includes interest payments.

(2) Includes our obligations to lease our headquarters building (see Note 26 to the financial statements).

(3) includes real state property, vineyards and warehouse leases, as well as marketing contracts.

(4) Includes raw material purchase contracts.

Payments due by period

  

(in millions of CLP)

 

  

Contractual Obligations

Total

Less than 1 year

1 - 3 years

3 - 5 years

More than 5 years

Long-Term Debt Obligations(1)

361,576

55,403

111,720

28,505

165,949

Lease Liabilities(2)

43,256

5,975

6,652

4,049

26,580

Operating Lease Agreements(3)

122,815

56,055

41,538

13,398

11,825

Purchase Obligations(4)

1,485,950

254,066

667,738

488,205

75,941

Total

2,013,597

371,498

827,647

534,157

280,295

(1) Includes interest expense.

     

(2) Includes our obligations to lease our headquarters building (see Note 21 to the financial statements).

 

(3) In 2019 under this disclosure there are commitments related to service contracts, short-term and low-value lease agreements (see Note 34 to the financial statements).

(4) Includes raw material purchase contracts.

  
        

 

Critical Accounting Policies and Practices

A summary of our significant accounting policies isare included in Note 2 and Note 3 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 describedmentioned below.

 

a) Property,a.The valuation of goodwill acquired to determine the existence of losses due to potential impairment.

b.The valuation ofcommercial trademarks to determine the existence of losses due to potential impairment.

c.The assumptions used in the current calculation of liabilities and obligations to employees.

d.Useful lives of property, plant and equipment and bottles:intangibles.

e.The key judgments we must make underassumptions used for calculating the propertyfair of value financial instruments.

f.The likelihood of occurrence and equipment policy include the estimationamounts estimated in an uncertain or contingent matter.

g.The valuation 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.current Biological assets.

 

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 arerevised 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 purchase 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 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 financial statements.

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.

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, 2016, 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 5.52% in Chile and 31.88% 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.

e) Financial instruments:

Financial assets

The Company recognizes a financial asset in its Consolidated Statement of Financial Position according to the following:

As of the date of the initial recognition, Management classifies its financial assets (i) at fair value through profit and loss and (ii) collectible credits and accounts, depending on the purpose for which the financial assets wereacquired. For those instruments not classified at fair value through income, any cost attributable to the transaction is recognized as part of the asset value.


The fair value of the instruments that are actively quoted in formal markets is determined by the quoted price as of the financial statement closing date. For those investments without an active market, the fair value is determined using valuation technique 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 and (iv) other valuation models.

After the initial recognition the Company values the financial assets as described below:

Accounts receivable

Trade receivable credits or accounts are recognized according to their invoice value.

The Company acquires loan insurances covering approximately 90% and 99% of the individually significant accounts receivable balances, for the domestic market and the international market, respectively, of the total of accounts receivable, 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 maturity factors, 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.

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:

Debts and financial liabilities that accrue interests

Loans and financial obligations accruing interest are initially recognized at the fair value of the resources obtained, less costs incurred directly attributable to the transaction. After initial recognition, 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 during the term of the loan, using the effective interest rate method.

Interest paid and accrued related to debts and obligations used in a financing operations appear under financial cost.

Loans and obligations accruing interest with a maturity within twelve month period 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 period after the financial statement closing date.


Trade accounts payable and other payables

Accounts payable and other accounts payable are initially recognized at their nominal value because they do not differ significantly from fair value. The Company has determined that no significant differences exist between the carrying value and amortized cost using the effective interest 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 Statement of Income as gains or losses due to fair value of financial instruments, unless the derivative instrument is designated 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 with the purpose of selling them within a short term. Derivative financial instruments fair values that do not qualify for hedge accounting are immediately recognized in the consolidated statement of income under Other gains (losses). These derivatives fair values are recorded under Other financial assets or Other financial liabilities.

Derivative instruments are classified as held for trading unless they are classified as hedge instruments.

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%.

The total fair value of hedging derivatives are 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 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 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 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 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 Statement of Income.

f)Accounting changes:

During the year ended on December 31, 2016,2019, there have been no significantother 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.Consolidated Financial Statements. (See Note 4 to our Consolidated Financial Statements as of December 31, 2019).


 

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:

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

Marc BusainCarlos Molina

Vice Chairman of the Board

May 2018 (Vice Chairman)

April 20162012 (Director)

April 20162012

Francisco Pérez

Director

July 1998

February 1991

Carlos Molina

Director

April 2012

April 2012

Vittorio Corbo

Director

April 2012

April 2012

Pablo Granifo

Director

April 2013

April 2013

Rodrigo Hinzpeter

Director

July 2015

July 2015

Didier Debrosse

Director

July 2015

July 2015

José Miguel Barros

Director

April 2016

April 2016

John Nicolson(1)

Vice Chairman of the Board

November 2008 (Vice Chairman) October 2008 (Director)

October 2008

Jorge Luis Ramos(1)Rory Cullinan

Director

May 20112018

May 20112018

(1)Until April 13, 2016

Hemmo Parson

Director

May 2018

May 2018

 

 

Andrónico Luksic (63)(66), was appointed Chairmanchairman of the boardof Compañía Cervecerías Unidas S.A.in April 2013 and has served as a Directordirector since November 1986. He is currently the Chairmanchairman of the board of Cerveceríthe Company’s primary subsidiaries, including Cervecera CCU Chile Limitada, Embotelladoras Chilenas Unidas S.A., Companía CCU, ECUSA, CCUCervercerías Unidas Argentina S.A. and he is also a member of the board of CCC. HeCentral Cervecera de Colombia S.A.S. and Zona Franca Central Cervecera S.A.S. Mr. Luksic is also currently Chairman the chairman of the Boardboard of Quiñenco S.A. and LQ Inversiones Financieras S.A., Vice Chairmanvice chairman of the Boardboard 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.

 

Marc BusainCarlos Molina (49) was appointed(63), has served as our director of Compañía Cervecerías Unidas S.A since April 2012 and Vice Chairmanas vice chairman of the board in April 2016. since May 2018.He is also a member of the board of Cervecerídirectors 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 ECUSA, CCU ArgentinaS.A. and CCC. HeCompañía Pisquera de Chile S.A., and CEO of Corporación Dinámica Industrial, S.A. in Mexico.He has been withover 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 since 1995 where he is currently PresidentAmericas; planning and strategy for Femsa Cerveza; and board member of Heineken Americas.Kaiser in Brazil. Prior to that he served within Heinekenthese roles, Mr. Molina was a partner in Booz, Allen & Hamilton, a global business consulting firm. Mr. Molina meets the independence criteria under the Securities Exchange Act of 1934, as Managing Directoramended, the Sarbanes-Oxley Act of different countries including Mexico, France, Egypt2002 and Burundi. Hethe corporate governance rules of the New York Stock Exchange, and therefore holds the position of member of the audit committee.  Mr. Molina has a Master´s degree in EconomicsBBA (Bachelor of Business Administration) from the Vrije Universiteit Brussel.University of Houston, and an MBA from the University of Texas.

 

Francisco Pérez (59)(62),has served as director of Compañía Cervecerías Unidas S.A. since July 1998. He is Chief Executive Officer1998 and previously, between 1991 and 1998, he held the position ofchief executive officerof said Company. In 1998 hewas appointed chief executive officer of Quiñenco since 1998. PriorS.A., a position he holds to joining Quiñenco, he was our Chief Executive Officer between 1991 and 1998. date.He is a member of the board of several companies, including CerveceríCervecera CCU Chile Limitada, Embotelladoras Chilenas Unidas S.A., Viña CCU, CICSA, CCUSan Pedro Tarapacá S.A., Companía Cervercerías Unidas Argentina ECUSA, CPCh, CCC, IRSA,S.A., Compañía Pisquera de Chile S.A., Inversiones y Rentas S.A., Banco de Chile, Banchile Corredores de Seguros S.A., LQ Inversiones Financieras S.A.,VSPT, SM SAAM Sudamericana Agencias Aéreas y Marítimas S.A., Nexans, Hapag Lloyd and Hapag Lloyd. Also heInvexans Limited.He is also chairman of the board of CSAV (CompañCompañía Sud Americana de Vapores S.A.), ENEX (EmpresaEmpresa 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 (60), has served as our director since April 2012. He is also member of the board of Cervecería CCU, ECUSA, CCU Argentina, CICSA, VSPT, Foods, CCC 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 theseroles, 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 (74)(77),has served has ourheld 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 2012.2012, which he currently chairs. He is a Seniorpresident 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 Associate at(CASE) of Warsaw, Poland, and member of the Public Opinion Committee of the Centro de Estudios Públicos (CEP) in Santiago, Chile.Chile and a Fellow of the International Economic Association. He is also Chairmanwas 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 Directors of Banco Santander Chile Directorbetween 2014 and 2018, and director of Grupothe Santander-México Group, Banco Santander Mexico, and economic consultant to several large corporations in Chile and abroad.ENDESA Chile. He served inis 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 U.S.A.United States and Chile, was also PresidentChile.Mr. Corbo meets 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 Central BankNew York Stock Exchange, and therefore holds the position of Chile (2003-2007) and Directormember of Banco Santander S.A. (Spain) from 2011-2014 among other jobs. the audit committee.Mr. Corbo holds a Commercial Engineering degree (with maximum distinction)(in Business Administration) Economics from the Universidad de Chile and a Ph.D. in economicsEconomics from MIT.

 

Pablo Granifo (58)(61), was appointedhas served as directorof Compañía director inCervecerías Unidas S.A.since April 2013. He has been the Chairmanchairman of the board of Banco de Chile S.A. since 2007 and chairman of the Chairmanboard of VSPTViña San Pedro Tarapacá S.A. since 2013. He is a member of the board of CerveceríaCervecera CCU Chile Limitada and ECUSA.Embotelladoras Chilenas Unidas S.A. Additionally, he is Chairmanchairman 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.Empresa Nacional de Energía Enex S.A. He holds a degree in Business Administration degree from the Pontificia Universidad Católica de Chile.

 

Rodrigo Hinzpeter (51)(54), was appointedhas served as directorof Compañía director inCervecerías Unidas S.A. since July 2015. He is also member of the board of CerveceríCervecera CCU Chile Limitada, Embotelladoras Chilenas Unidas S.A., Companía CCU, CCUCervercerías Unidas Argentina ECUSAS.A. and IRSA.Inversiones y Rentas S.A. Since 2014 he has been the General Counselgeneral counsel of Quiñenco.enco S.A. He is also member of the board of Invexans S.A. and Tech Pack S.A. Before that he was MinisterSecretary of Interior Affairs (2010-2012) and, later, the Secretary of Defense forof the Government of Chile.Chile(2012-2014). He received hisholds a Law degree from the Pontificia Universidad Católica de Chile.

 

Didier Debrosse (60), was appointed as a director in July 2015. He is also member of the board of Cervecería CCU, ECUSA and CCU Argentina. 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 (53)(56), was appointed directorof Compañía Cervecerías a directorUnidas S.A. in April 2016. He is member of the board of various subsidiaries, including Cervecera CCU CPCh, ECUSAChile Limitada, Embotelladoras Chilenas Unidas S.A., Viña San Pedro Tarapacá S.A. and VSPT.Compañía Pisquera de Chile S.A. He is a Senior Managing Directorsenior managing director and Partnerpartner of Chilean Investment Bank Larrain VialLarrainVial S.A. He is currently a member of the Boardboard of Lipigas S.A., CDF, and Stel Chile S.A. Mr. Barros holds a Commercial Engineering 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.

 

John NicolsonHemmo Parson (63)(51), served was appointed director of Compañía Cervecerías our director from October 2008, and Vice Chairman from November 2008, until April 13, 2016.Unidas S.A. in May 2018. He served asis also member of the board of CerveceríCervecera CCU Chile Limitada, Embotelladoras Chilenas Unidas S.A. and Companía CCU, ECUSA, CCUCervercerías Unidas Argentina CICSA and CPCh.S.A. He is the Chairman of IRSA and he was President ofhas held various positions in 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.currently serving asLegal Director

Jorge Luis Ramos (64), served as our director from May 2011 until April 13, 2016. He wasofHeineken Americas. In addition, he is a member of the board of directors of CerveceríSurinaamse Brouwerij N.V. Mr. Parson holds a 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 MBAlaw degree from the University of Pennsylvania’s Wharton SchoolUtrecht.


Rory Cullinan(60),He has served as director of Business.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.

 

 


The principal business activities of our current and former 20162018 and 20172019 directors are summarized in the following table:

Directors

Business Activities

Andrónico Luksic

Chairman of CCU

Marc BusainCarlos Molina

PresidentDirector of Heineken AmericasCompanies

Francisco Pérez

Quiñenco’s CEO

Carlos Molina

Director of Companies

Vittorio Corbo

Economist and Director of Companies

Pablo Granifo

Chairman of Banco de Chile and VSPT

Rodrigo Hinzpeter

Manager Legal DepartmentGeneral Counselof Quiñenco

José Miguel Barros

Partner of LarrainVial

Hemmo Parson

Legal Director Heineken Americas

Rory Cullinan

Director of Companies

Didier Debrosse(1) (2)

President of Heineken Brazil

José Miguel BarrosMarc Busain(1)

DirectorPresident of Companies

John Nicolson

Former Vice Chairman of CCU

Jorge Luis Ramos

Director of Companies

Heineken Americas

At the shareholder’s(1) Resigned as director of CCU S.A., effective May 1, 2018.

(2) Retired  as President of Heineken Brazil as of March 1, 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 the Chilean Corporations Act.

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 the Chilean Corporations Act, 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 Hinzpeter, Didier Debrosse and José Miguel Barros.Barros, Hemmo Parson and Rory Cullinan. None of our directors is party to a service contract.

 


The following table sets forth certain information with respect to our senior management as registered atwith the SVS,CMF, as of April 12, 2017:24, 2020:

 

Senior Management

Position

Position Held Since

At Company Since

Patricio Jottar

Chief Executive Officer

July 1998

July 1998

Marisol Bravo

Corporate Affairs Senior DirectorOfficer

June 1994

July 1991

Felipe ArancibiaGabriela Ugalde

Chief Human Resources Officer

February 2014April 2018

April 2002

Diego Bacigalupo

Corporate Development Manager

January 2014

August 2013

Matías Bebin

General Manager CPCh

February 2014

October 2006

Felipe Benavides

General Counsel

March 2015

March 2015

Francisco Diharasarri

General ManagerCCU Chile

October 2003

June 19852018

Felipe Dubernet

Chief Financial Officer

February 2014

May 2011

Pedro HeraneFelipe Benavides

General Manager VSPT

April 2013

May 2010

Ronald Lucassen

Industrial Processes Corporate Manager

May 2014

May 2014

Martín Rodriguez

Head of Project Management OfficeCounsel

March 2015

March 2015

Jesús García

General Comptroller

May 2015

May 2015

Martín Rodríguez

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

Jesús GarcíaSebastián Landi

International Business Manager

November 2019

November 2019

Pedro Herane

General ComptrollerManager VSPT

April 2013

May 20052010

Domingo Jiménez

General Manager CPCh

August 2018

May 20052004

Ludovic AuvrayJuan Martin Vannicola

Corporate Industrial Processes Manager International Business

June 2015April 2020

June 2015

Alvaro Rio

Manager Comercial CCU

March 2015

January 1991

Alvaro Román

Manager TransportesCCU

March 2015

March 1999April 2020

 

 

Patricio Jottar (54)(57), has served as our Chief Executive Officerchief executive officer since 1998. Mr. Jottar is on the board of directors of a number 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 Kunstmann S.A., Bebidas CCU-Pepsico SpA, Bebidas del Paraguay S.A., Central Cervecera de Colombia S.A.S., Zona Franca Central Cervecera S.A.S., Distribuidora del Paraguay S.A., Foods Compañía de Alimentos CCU S.A and Promarca S.A. He is also currently a director of Aguas CCU, Comercial CCU, Cervecería CCU, CCU Argentina, CICSA, ECUSA, VSPT, Foods, Bebidas CCU-Pepsico SpA, CCK, Bebidas del Paraguay and CCC, and is Chairmanchairman of the Boardboard of CPCh, Transportes CCU and Promarca, among others.Compañía Pisquera de Chile S.A. Prior to joining us,the Company, he was Chief Executive Officerchief 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.

 


Marisol Bravo (57), is our Corporate Affairs Senior Director and has been with us since 1991. Prior to her current position, she was Head of Special Projects. 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 Arancibia (42), 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 (46) is our Manager International Business, and has held that position since July 2015. He is Chairman of the board of Andrimar, Coralina, Marzurel, Milotur in Uruguay and, of Bebidas del Paraguay, and member of the board of CCC 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 (37), 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, Manantial, BBO, Distribuidora 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.

Matías Bebin (34), 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 CPCh. 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 (41) is our General Counsel, and has held the position since March 2015. He is currently a member of the board of Aguas CCU and Andrimar, Coralina, Marzurel, Milotur in Uruguay. 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 (56), is the General Manager of CCU Chile and has been with us since 1985. Prior to his current position, General Manager of ECUSA and before that, he was General Manager of Cervecería CCU and General Manager of Plasco. He is also currently Chairman of the board of Aguas CCU, Comercial 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 (47)(50), ishas been our Chief Financial Officer, and has held that positionchief financial officer since February 2014. He has been with us sincejoined the Company in May 2011 as Procurementand was the procurement officer until January 2014. He is currently a member of the board of Plasco,several of CCU’s subsidiaries, including Aguas CCU-Nestlé Chile S.A., Comercial CCU S.A., Fábrica de Envases de Plásticos S.A. and CRECCU and Transportes CCU,S.A., among others. 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 receivedholds a degree in Civil Engineering from the Pontificia Universidad Católica de Chile.

Pedro Herane (47) 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 SPT. 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 atProcter & 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 (52), has been the Industrial Processes Corporate Manager since May 2014. Prior to this position, Ronald worked for Heineken since January 1990. He worked in The Netherlands as Production Manager in the Zoeterwoude Brewery and as Quality Manager in Den Bosch. Subsequently he has completed a number of international assignments, working as General Manager 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 Supply Chain Director Russia. He holds a Mechanical Engineering degree and a Master’s degree from the Technische Universiteit Delft.

Martín Rodriguez (56), is the Head of our Project Management Office, holding this new position since March 2015. He was at Quiñenco from 1999 to March 2015, as M&A Manager and Strategic Development Manager. He was a board member of Cervecería CCU, ECUSA and Foods until March 2015. He received a degree in Business and Administration from the Pontificia Universidad Católica de Chile, and holds a Master´s degree in Economics from the same University and an MBA from UCLA.

Fernando Sanchis (56), is the General Manager of CCU Argentina and has been with us since 1995. Prior to joining us, he was Chief Financial Officer of Embochile, a former PepsiCo bottler and held the same position at Uruguay’s PepsiCo’s bottler. He is also currently a board member of CCU Argentina, CICSA and Bebidas del Paraguay, among others. He received an accounting degree from the University of Buenos Aires in Argentina.

Alvaro Román(44),is our General Manager of Transportes CCU, and has held that position since May 2010. He has been with us since March 1999, where prior to his current role he held various positions in sales, marketing and business development. He received a degree in Civil Engineering from the Pontificia Universidad Católica de Chile.

Alvaro Río (56) is our General Manager of Comercial CCU, and has held that position since May 2010, and as part of the Senior Management since March 2015. Also, he is currently Chairman of the board of CRECCU S.A., amongst others. 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 (54) is our General Controller since(57), joined CCU as general comptroller in May 2015. He is currently a member of the board of PlascoCCU Inversiones II Ltda., Inversiones Invex CCU Dos Ltda., Inversiones Invex CCU Ltda. and Transportes CCU.Inversiones Invex CCU Tres Ltda., and chairman of Fábrica de Envases Plásticos S.A. He has also worked with Heineken since 2000 in various Financefinancial positions in Spain, the Netherlands and Singapore, and previously with Diageo and with PWCPricewaterhouseCoopers in Spain. Prior to joining CCU he served as Senior Regional Tax Managersenior 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.Sevilla, Spain.

Gabriela Ugalde (54), 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, CMR 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 (44), has been our general counsel since March 2015. He is currently a member of the board of Millahue S.A., Aguas CCU-Nestle Chile S.A. and Fábrica de Envases Plásticos S.A. in Chile; Andrimar S.A., Coralina S.A., Marzurel S.A. and Milotur S.A. in Uruguay; Bebidas del Paraguay S.A. and Distribuidora del Paraguay S.A. in Paraguay; and  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.

Marisol Bravo (60), is our corporate affairs officer and has been with the Company since 1991. She is currently member of the board of directors of CRECCU S.A. Prior to her current position, she was head of special 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.

Martín Rodríguez (59), joined CCU as head of the Project Management Office in March 2015 and in September 2017 he was also appointed head of innovation. He is currently member of the board of directors of CRECCU S.A. Previously, he was M&A manager and strategic development manager at Quiñenco S.A., where he held various positions since 1999. He also was a board member of Cervecera CCU Chile Limitada, Embotelladoras Chilenas Unidas S.A. and Foods Compañía de Alimentos CCU S.A. until March 2015. He holds a degree in Business Administration from the Pontificia Universidad Católica de Chile and he has an MBA from UCLA as well as a Master’s degree in Economics from the Pontificia Universidad Católica de Chile.

Antonio Cruz (38) joined CCU as corporate development manager in June 2017. He is currently general manager of Foods Compañía de Alimentos CCU S.A. and member of the board of Bebidas del Paraguay S.A., Distribuidora del Paraguay S.A. in Paraguay;  Bebidas Bolivianas BBO S.A. in Bolivia; 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, he worked at Quiñenco S.A. within its Business Development division. He holds a degree in Business Administration from the Pontificia Universidad Católica de Chile and an MBA from Columbia University in New York.

Francisco Diharasarri (59),is the general manager of CCU Chile and has been with the Company since 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 is also currently chairman of the board of Aguas CCU-Nestlé Chile S.A., Comercial CCU S.A., CRECCU S.A., Bebidas Ecusa SpA., Foods Compañía de Alimentos CCU S.A., Manantial S.A. and Bebidas CCU-Pepsico SpA, and is also a member of the board of Bebidas Carozzi CCU SpA, Cervecería Austral S.A. and Promarca S.A., among others. He received a degree in Civil Engineering from the Universidad de Chile.

Fernando Sanchis (59), is the general manager of Companía Cervecerías Unidas Argentina S.A. and he has been with the Company since 1995. 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 currently a board member of Companía Cervecerías Unidas Argentina S.A. and Compañía Industrial Cervecera S.A. He received an accounting degree from the University of Buenos Aires in Argentina.

Sebastián Landi (45), is our international business manager since November 2019. He is the 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 a member of the board of Distribuidora del Paraguay S.A. and Bebidas Bolivianas BBO S.A, among others. Previously, he worked at Clorox since 2004, where he has held various positions in marketing first and then as general manager of Peru and finally general manager for Argentina, Paraguay & Uruguay. He is Chemistry Engineer and holds a Master’s degree in Strategic Marketing.

Domingo Jiménez (39), is the general manager of Compañía Pisquera de Chile S.A. Previously, he was the finance director at CCU Chile. He has been with the Company since 2004, working in different subsidiaries, as well as Heineken Americas and Heineken USA. He received a degree in Business Administration from the Pontificia Universidad Católica de Chile.


Pedro Herane (50), has been the general manager of Viña San Pedro Tarapacá S.A. since April 2013. Prior to his current position, he was the commercial manager in charge 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 Marketing and Communications from the Paris School of Management (ESCP – EAP) in France.

Juan Martin Vannicola (40), is the Corporate Industrial Processes Manager from  April 2020. Previously, he held various Supply Chain positions at Heineken since 2009. He worked in the Netherlands as Global Logistics consultant, in the USA as Regional Logistics Manager of the Americas, and in Greece as Supply Chain Director, in charge of breweries, malteries, water plants and the distribution operations. He holds an Industrial Engineering degree from Instituto Tecnológico de Buenos Aires, Argentina. He also graduated from the Logistics Management Program in the Eindhoven University of Technology, the Netherlands.

 

Our senior managers are full time employees; therefore, they do not perform principal business activities outside us.the Company.

 

B.Compensation

 

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 13, 2016,17, 2019, the directors’ monthly remuneration, for their attendance to meetings, independent of the number of meetings held in each period, was fixed at UF 100 per Director,director, and UF 200 for the Chairman,chairman, plus an amount equivalent to 3% of the distributed dividends, for the board as a whole, at a rate of one-ninth for each director and in proportion to the time each one served as such during the year 2016.2019. 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 3450 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 Nº18,046 and Regulation N° 1,956 of the SVS.CMF. Directors that are members and observers of the audit committee receive a monthly gross remuneration of UF 25. 50.UF stands for “Unidad de Fomento” which is an inflation linked accounting unit used in Chile. As of March 31, 2020 its value corresponded to CLP28,597.46.

The described gross compensation packagefor board members was also approved for 20172020 at the shareholders’ meeting held on April 12, 2017. 15, 2020. Additionally, the shareholders at said meeting approved, with respect to directors that are members of the directors committee (see “Item 6.C. Board Practices – Directors Committee”), a monthly gross compensation for attendance to directors committee meetings, independent of the number of meetings held in each period,  of UF 50, 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. For directors that are members and observers of the audit committee, a monthly gross remuneration of UF 50 for attendance to audit committee meetings, independent of the number of meetings held in each period, was determined.


 

In 2016,2019, 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

68,564

201,347

269,911

Marc Busain

27,769

-

27,769

John Nicolson

40,593

201,347

241,940

Jorge Luis Ramos

59,011

260,930

319,941

Manuel José Noguera Eyzaguirre

-

100,673

100,673

Philippe Pasquet

-

147,244

147,244

Francisco Pérez Mackenna

203,582

283,644

487,226

Carlos Molina Solís

192,894

214,359

407,253

Vittorio Corbo

48,718

268,463

317,181

Pablo Granifo Lavin

139,457

253,397

392,854

Jose Miguel Barros van Hövell tot Westerflier

107,063

-

107,063

Rodrigo Hinzpeter Kirberg

139,483

100,673

240,156

Didier Debrosse

55,874

100,673

156,547

Total

1,083,008

2,132,750

3,215,758

(1) Includes the remuneration for members of the Audit and Directors Committees.

 

Attendance

Dividend Participation(2)

 

Director

Meetings fee(2)

2018(3)

2019(4)

Total

 

 

(in thousands of CLP)

Andrónico Luksic Craig

43,872

511,485

92,376

647,733

Carlos Molina Solís

213,517

700,520

92,376

1,006,413

Francisco Pérez Mackenna

224,216

700,520

92,376

1,017,112

Vittorio Corbo Lioi

58,089

681,980

92,376

832,445

Pablo Granifo Lavín

160,296

548,568

92,376

801,240

Rodrigo Hinzpeter Kirberg

161,549

511,485

92,376

765,410

José Miguel Barros van Hövell tot Westerflier

175,078

530,025

92,376

797,479

Didier Debrosse(1)

 -    

170,495

 -    

170,495

Marc Busain(1)

 -    

170,495

 -    

170,495

Rory Cullinan

201,748

340,990

92,376

635,114

Hemmo Parson

123,067

340,990

92,376

556,432

Total

1,361,432

5,207,550

831,384

7,400,366

(1)Resigned as director of CCU S.A., effective May 1, 2018.

(2) Includes the remuneration for members of the audit and directors committees.

(3)Charged to 2018’s distributable Net Income. Considering the final dividend paid in 2019.

(4)Charged to 2019’s distributable Net Income. Considering the iterim dividend paid in 2019.

 

For the year ended December 31, 2016,2019, the aggregate amount of compensation paid by us to all our Directorsdirectors was CLP3,2167,400 million.

 

For the year ended December 31, 2016,2019 the aggregate amount of compensation paid to our senior managers registered at the SVSCMF during 2016,2019, was CLP7,5667,994 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.

 

C.Board Practices

 

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.

 

Due to the resignation of Messrs. Manuel José Noguera Eyzaguirre and Philippe Pasquet of their positions as directors of the Company, both effective as of June 30, 2015, at the board of directors´The shareholders’ meeting held on July 7, 2015,April 13, 2016, elected as directors, for a term of three years, Messrs. Andrónico Luksic, Francisco Pérez, Pablo Granifo, Rodrigo Hinzpeter, Marc Busain, Carlos Molina, Didier Debrosse, José Miguel Barros and Rodrigo Hinzpeter Kirberg were appointed as directors, untilVittorio Corbo, the next annual shareholders´ meeting, as permitted by Article 32latter independent according to article 50 bis of the Chilean Corporations Act.

 

AtOn May 9, 2018, due to the shareholder’sresignation 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 the Chilean Corporations Act, Messrs. Hemmo Parson and Rory Cullinan in these vacancies until the next shareholders' meeting.


Pursuant to the above, the shareholders´ meeting held on April 13, 2016, a new board was17, 2019 elected as directors, for a term of three years. The current members of the board of directors areyears, Messrs. Andrónico Luksic, Marc Busain, Francisco Pérez, Carlos Molina, Vittorio Corbo, Pablo Granifo, Rodrigo Hinzpeter, Didier Debrosse and José Miguel Barros.Barros, Hemmo Parson and 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.

 


Our Chief Executive Officer and other 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.

 

1)Directors 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, 20172020 approximately CLP 39,70842,896 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:

 

  • to examine the independent accountants’ reports, the balance sheets, and other financial statements submitted by the corporation’s managers or liquidators to the shareholders, and issue an opinion about them prior to their submission for shareholder approval;
  • to propose to the board of directors the independent accountants and the risk rating agencies, which the board must then propose to the shareholders. Should the board of directors disagree with the directors committee’s proposal, the board shall be entitled to make its own proposal, submitting both to the shareholders for their consideration;
  • to examine the documentation concerning related-party transactions of the companyCompany and its subsidiaries, and to produce a written report on such transactions. A copy of the report shall be delivered to the board, and shall be read at the board meeting in which the transaction is presented for approval or rejection;
  • to examine the managers’, principal executive officers’ and employees´ remuneration policies and compensation plans;
  • to prepare an annual report of the performance of its duties, including the principal recommendations to shareholders;
  • to advise the board of directors as to the suitability of retaining the independent accounting firm to provide non-audit services, which are not prohibited by the Chilean Securities Market Law, if the nature of such services could impair the accountants independence from the Company;company; and
  • all other matters contemplated in our bylaws or entrusted to the directors committee by a shareholders’ meeting or the board of directors.

 

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 44, 89 and89and 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”.


 

Pursuant to the Chilean Corporations Act, no person shall be considered independent who, at any time during the previous eighteen months:

 


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.

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

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.

 

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 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.

Therefore, as of July 7, 2015 and until April 13, 2016, our directors committee was composed of Messrs. Vittorio Corbo, Francisco Pérez and Jorge Luis Ramos.

At the board meeting held on April 13, 2016, followingFollowing the election of a new board of directors at the shareholders´ meeting held the same day,on April 17, 2019, Mr. Vittorio Corbo,elected as independent director in accordance with Article 50 bis of the Chilean Corporations Act, at the board meeting held the same date, appointed as members of our directors committee Messrs. Carlos Molina and Francisco Pérez asrez. Therefore, the current members of ourthe directors committee in accordance with the above-referenced law. are 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 remunerationcompensation of our directors committee members, as approved at the shareholders’ meeting of the Company held on April 12, 2017, is 34 Unidades de Fomento15, 2020, consists (with effect as of May 2020) of a monthly gross remuneration for attendance to directors committee meetings, independent of the number of meetings held in each period, of UF 50 (as of March 31, 2017,2020, approximately CLP 900.11,430 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 20152018 and 2016,2019, at the shareholders’ meetings of the Company held on April 15, 201511, 2018 and April 13, 2016, respectively.17, 2019, respectively, consisted of a monthly gross remuneration for attendance to directors committee meetings, independent of the number of meetings held in each period, of UF 34 and of UF 50, respectively,  plus the amount required to complete the remaining third of the remuneration of a director.

 


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 request 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 12, 2017,15, 2020, shall be equal to the aggregate amount of the annual remuneration of the committee members.

 

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.

 

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 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. Therefore, as of July 7, 2015 and until April 13, 2016, the audit committee was comprised of Messrs. Vittorio Corbo and Jorge Luis Ramos, and Messrs. Francisco Pérez and Carlos Molina participated in the audit committee´s meetings on an observer status. 

At the board of directors meeting held on April 13, 2016, followingFollowing the election of a new board at the shareholders´ meeting held the same day,on April 17, 2019, the board of directors, at the meeting held the same date, appointed directors Messrs.Messrs. Vittorio Corbo and Carlos Molina to our audit committee. Messrs. Corbo and Molinacommittee, both of whom meet the independence criteria under the Exchange Act and under the NYSE Rules. TheAs in 2016, 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.

 

The duties of the audit committee are:

 

  • To be responsible for the hiring, remuneration and supervision of the work of public accounting firms hired to prepare or issue audit reports or review or certify such reports. The external auditors shall report directly to the audit committee regarding such matters.
  • Resolve disputes that arise between our administration and the external auditors with regard to financial reports.
  • Grant approval prior to the contracting of non-audit services provided by the external auditors.
  • Establish a procedure for receiving and responding to complaints received with regard to accounting, accounting controls or other auditing matters whereby employees may anonymously and confidentially report their concerns related to these matters.
  • Establish an annual budget for expenses and hiring of external consultants.

 

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’ meetingsmeeting of the Company held on April 13, 2016 and April 12, 2017,17, 2019, members and observers of the audit committee receive a monthly gross remuneration of UF 50.  As approved at the shareholders’ meetings of the Company held on April 11, 2018, members and observers of the audit committee received a monthly gross remuneration of UF 25.

Finally, as approved at the shareholders’ meeting of the Company held on April 15, 2020, members and observers of the audit committee are entitled to receive (with effect as of May 2020) a compensation consisting of a monthly gross remuneration for their attendance to audit committee meetings, independent of the number of meetings held in each period, of UF 50 (as of March 31, 2020, approximately CLP 1,430 thousand).

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.


 

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:

 

 

2014

2015

2016

 

2017

2018

2019

Chile

4,439

4,547

4,567 

4,635

4,650

4,701

International Business

1,857

1,938

1,990 

International Business(1)

2,030

2,578

2,582

Wine

1,206

1.250

1,264 

1,242

1,197

1,273

Others(1)

340

365

365 

Others(2)

363

372

405

Total

7,842

8,100

8,186 

8,270

8,797

8,961

(1) Includes corporate head office functions only.

   

(1)Includes Bolivia as of 2018.

(2)Includes corporate head office functions only.

 

All employees whose 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 9,2587,958 million, CLP 6,0788,188 million and CLP 10,3425,734 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 2016,2019, we laid off 735395 employees.

 

Chile Operating segment, Wine Operating segment and Other

 

In the Chile and Wine Operating segments and Other, as of December 31 of the last three years, we had a total of   5,985, 6,1626,240, 6,219 and 6,1966,379 permanent employees, respectively. As of December 2016, 3,4662019, 4,030 were represented by 4543 labor unions. The average tenure of our permanent employees was approximately eight years.

 

Unionized employees represent approximately 56%60% of our total permanent workforce. Our management believes it generally has a good relationship with the labor unions representing our employees.

 

During 2016, 2,1662019, 1,596 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 by Administradoras 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, 2016,2019, we had 424535 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 reasons 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 oryearor fraction 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.


 

In Argentina, unionized employees represent approximately 68%71% of our total permanent workforce, moreover in Uruguay this number represent 59% of our total permanent workforce.

 

In addition to our permanent work force, as of December 31, 2016,2019, we had 239248 temporary employees, who were hired for specific time periods to satisfy short-term needs.

 

E.Share Ownership

 

Except as disclosed in “Item 7: Major Shareholders and Related Party Transactions – A. Major Shareholders”, as of March 31, 2017,2020, 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

 

A.Major Shareholders

 

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, 2017, presenting the twelve largest shareholders and all of our directors and senior management as a group:

2020:

 

 

 

 

Shareholder

Number of shares owned

% Ownership

 

 

 

INVERSIONES Y RENTAS S.A.(1)

196,421,725

53.16%

J P MORGAN CHASE BANK SEGUN CIRCULAR

56,360,299

15.25%

BANCO ITAU POR CUENTA DE INVERSIONISTAS EXTRANJEROS

30,477,217

8.25%

BANCO DE CHILE POR CUENTA DE TERCEROS NO RESIDENTES

25,836,720

6.99%

INVERSIONES IRSA LTDA.(1)

25,279,991

6.84%

BANCO SANTANDER POR CUENTA DE INV. EXTRANJEROS

8,527,278

2.31%

BANCO SANTANDER-HSBC BANK PLC LONDON CLIENT ACCOUNT

3,118,000

0.84%

BANCHILE C. DE B. S.A

2,576,522

0.70%

BOLSA ELECTRONICA DE CHILE BOLSA DE VALORES

1,862,931

0.50%

BOLSA DE COMERCIO DE SANTIAGO BOLSA DE VALORES

1,344,589

0.36%

BTG PACTUAL CHILE S.A.C.B.

951,529

0.26%

VALORES SECURITY S.A.C.B.

855,859

0.23%

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

53.1584%

INVERSIONES IRSA LIMITADA(1)

25,279,991

6.8416%

Controlling Shareholders

221,701,716

60.000%

JPMorgan Chase Bank N.A. (ADRs)

74,605,267

20.1907%

BANCO DE CHILE POR CUENTA DE TERCEROS NO RESIDENTES        

22,331,157

6.0436%

BANCO ITAU CORPBANCA POR CTA. DE INVERSIONISTAS EXTRANJEROS

15,075,151

4.0798%

BANCO SANTANDER POR CUENTA DE INV. EXTRANJEROS

13,418,453

3.6315%

BANCO DE CHILE POR CUENTA DE CITI NA NEW YORK CLIENT         

1,741,694

0.4714%

BANCO DE CHILE POR CUENTA DE CITI NA LONDON CLIENT         

1,412,497

0.3823%

BANCO DE CHILE POR CUENTA DE CEP LUXEMBOURG CLIENT         

1,409,503

0.3815%

BANCO SANTANDER-HSBC BANK PLC LONDON CLIENT ACCOUNT

1,383,491

0.3744%

BANCO SANTANDER HSBC GLOBAL CUSTODY CLIENTS SC             

911,855

0.2468%

BANCO DE CHILE POR CUENTA DE CITI NA HONG KONG CLIENT         

353,454

0.0957%

Custodian banks

58,037,255

15.7068%

AFPs as a group (Chilean pension funds)

784,390

0.2123%

Our directors and senior management as a group(2)(3)

35,440

0.0096%

Other

14,338,804

3.8806%

TOTAL

355,164,068

96.1194%

(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.

(3) As of March 31, 2020, our director Francisco Pérez Mackenna has a 0.004% direct ownership interest in Compañía Cervecerías Unidas S.A. with 14,897 shares. 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 areis IRSA with 60.00% and Commonwealth Bank of Australia with 7.62% (according to the Schedule 13G filed on February 14, 2017, stating a holding of 28,150,464 shares, as of December 31, 2016).

 

AsCCU is controlled by IRSA, which owns, directly and indirectly, 60.0% of March 31, 2017, JPMorgan Chase Bank N.A. (“JPMorgan”), the Depositary for our ADR facility, was the record owner of 56,360,299 shares of our common stock (15.25% of the outstanding common stock) deposited in our ADR facility.

As of March 31, 2017, we had4,274shareholders of record. To the best of our knowledge 13 shareholders are not Chilean, excluding ADR holders, and of those 13 non-Chilean shareholders, to the best of our knowledge 2 are U.S. corporations with a total of 151,543 (0.04%) 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 13 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.Americas B.V. 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.

The shareholders of IRSA, Quiñenco S.A. and Heineken Chile Ltda., 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, 2020, JPMorgan Chase Bank N.A. (“JPMorgan”), the depositary for our ADR facility, was the record owner of 74,605,267 shares of our common stock 20.19% of the outstanding common stock) deposited in our ADR facility.

As of March 31, 2020, 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. See “Item 7: Major Shareholders and Related Party Transactions”.

 


B.Related Party Transactions

 

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;


  • 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.

·

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:

 

  • any entities within the financial conglomerate to which the company belongs;

 

  • 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.

·

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-stock

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 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 such transaction. 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 board 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 SVS 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”.


 

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 such transaction. 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 board 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 CMF 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”.

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”. For this purpose, any transaction that is both greater than 2,000 Unidades de Fomento (as of March, 31, 2017, approximately CLP 52.9 million) and in excess 1% of the corporation’s equity, or involving an amount in excess of 20,000 Unidades de Fomento (as of March 31, 2017, approximately CLP 529.4

1

Transactions that do not involve a “material amount”. For this purpose, any transaction that is both greater than UF 2,000 (as of March, 31, 2020, approximately CLP 57 million) and in excess of 1% of the corporation’s equity, or involving an amount in excess of UF 20,000 (as of March 31, 2020, approximately CLP 572 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 resolution establishing 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”, 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, and July 5, 2016, and December 5, 2018 remains available to shareholders at the Company’s offices in 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.

 

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 1511 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”.

 

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, effective as of August 1, 2012. This agreement has an initial term of 10ten years, and will be automatically renewedrenew on January 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 September 28, 2012, CICSA and Amstel Brouwerij B.V. signed the Trademark License Agreement which provides with the exclusive rights to produce, sell and distribute Amstel beer in Argentina. This agreement has an initial term of 10 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 June 4, 2013, CICSA, Milotur and Heineken Brouwerijen B.V. signed theentered into a 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 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. This agreement was amended on March 29, 2019 to include Zona Franca Central Cervecera S.A.S. as brewer for the production of Heineken in Colombia.  

 

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 a 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.

 

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.Argentina, effective as of March 1, 2015. This agreement has an initial term of 10ten years, and will be automatically renewed, on January 1 of each year, for a ten yearsten-year 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. This agreement was amended on March 29, 2019 to include Zona Franca Central Cervecera S.A.S. as brewer for the production of Tecate in Colombia.

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-year 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 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.

 

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 that fall within the exemptions contemplated in letters a), b) and c) of Article 147 of the Chilean Corporations Act, 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, and July 5, 2016 in respect of transactions mentioned in letters a), b) and c) of Article 147 of the Chilean Corporations Act.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, 2016,2019, are detailed below:

Company

Relationship

Transaction

Amount (in

(in millions of CLP)

HeinekenAmstel Brouwerijen B.V.

Related to the controllingcontroller's shareholder

Products sale/ license/ technical assistance/ billed services

9,689

Amstel Brouwerijen BV

Related to the controller

License and technical assistance

166    266

Inversiones y RentasAntofagasta Minerals S.A.

ShareholderRelated to the controller's shareholder

Dividends paid/Office rentalSales of products

32,121   38

Inversiones Irsa Ltda.BanChile Corredores de Bolsa S.A.

ShareholderRelated to the controller's shareholder

Billing servicesInvestment Rescue/Investments

4,133 1,083,795

Inversiones PFI Chile Ltda.Banco BASA S.A.

Shareholders of subsidiaryRelated to the subsidiary's shareholder

PurchaseSales of products/Billed servicesproducts

13,318          1

Nestlé Waters S.A.Banco de Chile

Shareholder of subsidiaryRelated to the controller's shareholder

RoyaltyDerivatives/Interests/Investment Rescue/Investments/Sales of products/Services received

433    287,590

Nestlé Chile S.A.Canal 13 SpA.

Shareholder of subsidiaryRelated to the controller's shareholder

Dividends paidServices received

3,531   2,055

Cervecería Kunstmann Ltda.

Shareholder of subsidiary

Product sales/billed services

523

CerveceríaCervecera Valdivia S.A.

Shareholder of subsidiary

Dividends paid

634

Comercial Patagona Ltda.

Subsidiary joint venture

Marketing services/products sale

4,260

Cooperativa Agrícola Control Pisquero Ltda.

Shareholder of subsidiary

Loan/supply contract/ purchase grape/Dividends paid

4,960

Compañía Chilena de Fósforos S.A.

Shareholder of subsidiary

Dividends paid

1,274  3,886

Cervecería Austral S.A.

Joint venture

Sales of Products/Dividends received/Purchase of products/Billed servicesRoyalty/Sales of products/Services provided

5,735   15,330

Banco de ChileCervecería Kunstmann Ltda.

Related to non-controlling subsidiary

Sales of products/Services received

      933

Chajha S.A.

Related to the controllingsubsidiary's shareholder

Sales of products/Derivatives/Investmentsproducts

158,293          4

Cigar Trading S.R.L.

Related to the subsidiary's shareholder

Sales of products

          1

Club Libertad

Related to the subsidiary's shareholder

Sales of products

          3

Comercial Patagona Ltda.

Subsidiary of joint venture

Sales of products/Services received

   7,520

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Shareholder of subsidiary

Dividends paid/Loan/Purchase of products/Sales of products

   5,475

Ecor Ltda.

Related to the subsidiary's shareholder

Services received

     158

Emprendimientos Hoteleros S.A.E.C.A.

Related to the subsidiary's shareholder

Sales of products

     16

Empresa Nacional de Energía Enex S.A.

Related to the controller's shareholder

Purchase of products/Services received

    644

Empresas Carozzi S.A.

Shareholder of joint operation

Purchase of products/Sales of products

  5,288

Foods Compañía de Alimentos CCU S.A.

Joint venture

Services/ productCapital decrease/Consignation sales/ consignment sales/ interests/ remittance paid and recievedPurchase of products/Services provided

7,425 12,489

AlusaFundación Ramón T. Cartes

Related to the subsidiary's shareholder

Sales of products

     4

Gráfica Editorial Inter-Sudamericana S.A.

Subsidiary relatedRelated to the subsidiary's shareholder

Sales of products

    1

Hapag-Lloyd Chile SpA.

Related to the controller's shareholder

Services received

  161

Heineken Brouwerijen B.V.

Related to the controller's shareholder

License and technical assistance/Purchase of products/Services received

  24,429

Inversiones Enex S.A.

Related to the controller's shareholder

Sales of products

  1,395

Inversiones Irsa Ltda.

Related to the controller

Dividends paid

 14,494

Inversiones PFI Chile Ltda.

Shareholder of joint operation

Purchase of productsproducts/Services provided/Services received

3,223 12,797

Canal 13 S.P.A.

Parent company related

Advertising

3,428

Banchile Corredores de BolsaInversiones Punta Brava S.A.

Parent company related

Financial investments

231,900

Bebidas Bolivianas BBO S.A.

AssociatedRelated to the controller's shareholder

Sales of product and Contribution of capitalproducts

2,570    1

Central Cervecera de Colombia S.A.S.Inversiones y Rentas S.A.

Joint operationController

Contribution of capitalDividends paid/Services provided

22,944112,624

Viña TabalíLa Misión S.A.

Related to the subsidiary's shareholder

Sales of products

     1

Minera Antucoya

Related to the controller's shareholder

Sales of products

     3

Minera Centinela

Related to the controller's shareholder

Sales of products

    9

Nestlé Chile S.A.

Related to the controller

Billed servicesDividends paid

52  4,932

Operaciones y Servicios Enex Ltda.Palermo S.A.

Related to the controllersubsidiary's shareholder

Sales of products

224   3

QSR S.A.

Related to the subsidiary's shareholder

Sales of products

  94

Quiñenco S.A.

Shareholder to ControllerController's shareholder

Sales of products

14   20

Antofagasta MineralsRadiodifusión SpA.

Related to the controller's shareholder

Services received

   306

SAAM Extraportuario S.A.

Related to the controllercontroller's shareholder

Services received

 41

Societé des Produits Nestlé S.A.

Related to the subsidiary's shareholder

Royalty

  984

Tabacalera del Este S.A.

Related to the subsidiary's shareholder

Sales of products

36  3

Inversiones Enex S.ATransbank S.A.

Sales of productsRelated to the controller's shareholder

Sales of productsServices received

1,162 187

Empresas CarozziViña Tabali S.A.

Shareholder of joint operationRelated to the controller's shareholder

Sales of productsServices provided

312 70

Zona Franca Central Cervecera S.A.S.

Joint venture

Capital contribution

    13,564


 

See Note 1511 to our Consolidated Financial Statementsconsolidated financial statements included herein for detailed information.


 

C.Interests of Experts and Counsel

 

Not applicable.

ITEM 8: Financial Information

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 2016.2019. VSPT is the second-largest wine exporter in Chile. See “Item 4: Information on the Company B.Business OverviewOperating Segments InformationCompetitionOur 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:

 

 

 

2014

2015

2016

 

2017

2018

2019

 

 

 

 

 

 

Exports (thousands of liters)(1)

70,519

75,788

77,927

 

75,462

71,169

73,895

% of total consolidated sales volume

3.08%

3.17%

3.14%

 

3.14%

3.04%

2.87%

  

 

 

 

 

Exports (CLP million)(1)

108,064

123,544

131,168

 

123,023

118,206

119,197

% of total consolidated sales

8.33%

8.25%

8.41%

 

8.41%

8.21%

7.18%

(1) Includes Argentinean operations and bulk wine.

(1) Includes Argentinean operations and bulk wine.

 

 

 

 

       

(1)Includes Argentinean operations and bulk wine.

 

 

Legal Proceedings

 

Nothing to report.

 

Dividend Policy and Dividends

 

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 13, 2016,11, 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 13, 2016,17, 2019, a dividend of CLP 97.47388358.33030 per share of common stock (CLP 194.94776716.66059 per ADS using the new ratio as of December 20, 2012 of 1 ADS to 2 common shares) was approved, in addition to the interim dividend of CLP 66140 per share of common stock (CLP 132280 per ADS) distributed in January 8, 2016.4, 2019. Together, these dividend payments amounted to CLP 60,404million,184,134 million, representing 50.0%60.0% of the “Net income of the Year Attributableyear attributable to Equity Holdersequity holders of the Parent Company”parent company” for 2015.2018.


 

Dividends are paid to shareholders of record onat 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 6, 2016,4, 2019, approved the distribution, with a charge to 2016’s2019’s Net income attributable to equity holders of the parent company, of an interim dividend of CLP 6675 per share of common stock (CLP 132150 per ADS), totaling CLP 24,387,189,552,27,712,715,400, which was paid on January 6, 2017.as of December 26, 2019. Additionally, the board of directors, in its meeting held on March 8, 2017,4, 2020, resolved to propose to the next regularordinary shareholders meeting, the distribution, with a charge to 2016’s2019’s Net income attributable to equity holders of the parent company, of a final dividend of CLP 110.32236179.95079 per share of common stock (CLP 220.64472359.90158 per ADS). The proposal, representing a total payment of CLP 40,764,428,866,66,492,333,723, was approved at our last annual ordinary shareholders’ meeting held on April 12, 201715, 2020 and the final dividend was paid beginningas of April 26, 201724, 2020 to the shareholders of record at midnight on April 20, 2017.  18, 2020.Collectively, these dividend payments amounted to CLP 94,205 million, representing 72.4% of the “Net income of the year attributable to equity holders of the parent company” for 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 ADS in respect of each of the years indicated:

 

        

Year ended
December 31,

CLP Per share(1)

 

US$ Per ADS(2)

Interim

Final(3)

Total

 

Interim

Final(3)

Total

 

 

 

 

 

 

 

 

2012

63

116.64

179.64

 

0.27

0.49

0.76

2013

63

103.49

166.49

 

0.24

0.37

0.61

2014

63

98.78

161.78

 

0.21

0.32

0.52

2015

66

97.47

163.47

 

0.18

0.29

0.47

2016

66

110.32

176.32

 

0.20

0.33

0.53

 

(1) Interim and final dividend amounts are expressed in historical pesos.

(2) U.S. dollars per ADS dividend information serves reference purposes only as we pay all dividends in Chilean pesos. On December 20, 2012, there was an ADS ratio change from 1 ADS to 2 common shares. The ammounts shown above have been adjusted to reflect this change. The Chilean peso amounts 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.

(3) The final dividend with respect to each year is declared and paid within the first five months of the subsequent year.

 

Year ended

CLP Per share(1)

USD Per ADS(2)

December 31

Interim

Final(3)

Total

Interim

Final(3)

Total

2015

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

1.49

2019

75

179.95

254.95

0.20

0.42

0.62

(1) Interim and final dividend amounts are expressed in historical pesos

(2) USD per ADS dividend information provided solely 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 date or, in respect of the dividend payable for the year ended December 31, 2019, at the observed exchange rate in effect as of April 24, 2020. 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.

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 stock by holders, including holders of ADRs who are not Chilean residents, are subject to Chilean withholding taxes. See “Item 10: Additional Information – E. Taxation”.

B.Significant Changes

 

Nothing to report.


 

B.Significant Changes

 

Nothing to report.

ITEM 9: The Offer and Listing

 

A.Offer and Listing Details

 

For the periods indicated, the table below sets forth the reported high and low closing sales prices for the common stock on the Stock Exchanges in Chile as well as the high and low sales prices of the ADSs as reported by the NYSE:NYSE.  For more information on offer and listing details also see “Item 10: The Offer and Listing – C. Markets.”

 

 

 

Santiago Stock Exchange

NYSE(1)

 

(per share of common stock)

(per ADS)

Santiago Stock Exchange

 

NYSE

 

 

(per share of common stock)

 

(per ADS)

 

High

Low

High

Low

 

High

Low

 

High

Low

 

(CLP)

(CLP)

(US$)

 

(CLP)

(CLP)

 

(CLP)

Years

Years

 

 

 

     

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

2018

9,587

7,848

 

30.35

24.30

2019

 

9,990

6,850

 

29.48

17.80

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

8,120

6,500

24.17

18.78

2017 (through Mar. 31)

8,449

6,820

25.46

20.31

 

 

 

 

2014

 

 

 

 

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

 

 

 

 

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

2016

 

 

 

1st quarter

7,875

6,502

22.87

18.78

2nd quarter

8,120

7,128

24.12

19.85

3rd quarter

7,810

6,530

24.17

19.31

4th quarter

7,250

6,500

21.85

19.49

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

2019

 

 

 

 

 

1st quarter

 

9,974

8,600

 

29.47

24.92

2nd quarter

 

9,940

8,812

 

29.48

25.55

3rd quarter

 

9,990

7,789

 

29.40

21.71

4th quarter

 

8,199

6,850

 

22.52

17.80

 

 

 

 

 

 

 

 

 

 

Last six months

Last six months

 

 

 

 

 

 

 

 

 

October 2016

7,250

6,577

21.85

19.58

November 2016

7,140

6,500

21.58

19.49

December 2016

7,119

6,585

21.39

19.79

January 2017

7,367

6,820

22.66

20.31

February 2017

7,740

7,285

23.94

22.40

March 2017

8,449

7,529

25.46

22.93

(1) On 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. Prices shown above take into account this change.

October 2019

 

8,199

7,201

 

22.52

19.78

November 2019

 

7,600

6,850

 

20.06

17.80

December 2019

 

7,700

7,052

 

19.84

17.81

January 2020

 

9,399

8,600

 

28.00

24.92

February 2020

 

7,490

6,144

 

19.14

15.62

March 2020

 

6,710

4,989

 

16.72

11.25

 

 

Significant trading suspensions of the Company's stock have not occurred in the last three years.

 


 

B.Plan of distribution

 

Not applicable.

C.Markets

 

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 “CCU”. The Santiago Stock Exchange accounted for approximately 87.7%86.4%, 88.3%94.6% and 87.4%93.1% of the trading volume of our common stock in Chile in the last three years, respectively. The remaining 12.3%13.6%, 11.7%5.4% and 12.6%6.9% 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.

 

The trading volume of our ADSs in the NYSE in the last three years is as follows:

 

 

 

Year

Quarter

Traded Volume(1)
(thousands of ADS)

Quarter

Traded Volume (thousands of ADS)

 

 

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

2nd quarter

8,133

3rd quarter

8,730

4th quarter

9,338

Total

34,666

  
   

2016

1st quarter

10,853

1st quarter

10,853

2nd quarter

10,121

2nd quarter

10,121

3rd quarter

16,093

3rd quarter

16,093

4th quarter

15,288

4th quarter

15,288

Total

52,355

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

 

 

2019

1st quarter

12,259

2nd quarter

13,753

3rd quarter

17,288

4th quarter

24,402

Total

67,702

 

D.Selling Shareholders

Not applicable.


E.Dilution

 

Not applicable.

 

E.Dilution

Not applicable.

F.Expenses of the Issue

 

Not applicable.


ITEM 10: Additional Information

A.Share Capital

 

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”.

 

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 our 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.

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 simplean absolute majority of those presentat the meeting, provided legal quorums (consisting of an absolute majority of our issued voting stock, in case the quorum is satisfied at its first call, or any number of shareholders present at the meeting if the meeting takes place at its second call) 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.

 

The Chilean Corporations Act provides shareholders with preemptive rights. The Actrights and 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 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 time of the first call of the meeting, a second call of the meeting can be reconvened and upon the meeting being reconvened, shareholders present at the time of the second call of the reconvened meeting are deemed to constitute a valid 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:

 

·

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”.

 

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 corporaterestructuringcorporate restructuring involving us (or any of our subsidiaries). See “Item 10.B.10: Additional Information – B. Memorandum and Articles of Association – rights,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.B.10: Additional Information – B. Memorandum and Articles of Association – rights,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.

C.Material Contracts

 

Not applicable.

 

D.Exchange Controls

 

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”. 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 investment 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 19th Regulations, thereby expressly waiving the applicability of the regulations in force at the time of the execution of the respective transaction.

 

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, simplifiedproceduressimplified 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:

 

According 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 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.

 

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 intoADSs,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, 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, 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, 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, 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, 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.clwww.bcentral.cl.

E.Taxation

 

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 anofan 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 regulations 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).


 

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 subject to the Chilean Withholding Tax, but such distribution does not have a related credit. UnderThe modifications incorporated to the Chilean income tax law by Act N°20,780 enacted on September 29, 2014, and Act. N°20,899 enacted on February 1st, 2016, 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.Those modifications also provide for the "Partially Integrated 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 the amount 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, according to Rulings N°1,705 of May 15, 2006 and N°2,144 of October 3, 2013.

Until December 31, 2016, 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 of the shares of common stock in the ordinary course 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.

From January 1, 2017, the taxation with the alternative regime of first category as a sole tax on gains recognized on a sale or exchange of shares of common stock by a foreign holder will no longer be available. Consequently, gains obtained from this operations would be subject to both the first category tax and the Chilean Withholding Tax (the former being creditable against the latter), according to new articleArticle 17 N° 8 of the Chilean Income Tax Law, effective as of January 1,2017. The taxation with the alternative regime of first category as a sole tax 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 ofADSsof 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 which 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.

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:

  1. a fund that makes public offers of its shares in a country which public debt has been rated investment grade by an international risk classification agency qualified by the SVS;CMF;
  2. a fund that is registered with a regulatory entity of a country which public debt has been rated investment grade by an international risk classification agency qualified by the SVS,CMF, provided that the investments in Chile, including securities issued abroad that represent Chilean securities, held by the fund represent less than 30.0% of its share value;
  3. a fund that holds investments in Chile that represent less than 30.0% of its share value, provided that it proves that no more that 10.0% of its share value is directly or indirectly owned by Chilean residents;
  4. a pension fund that is exclusively formed by individuals that receive their pension on account of capital accumulated in the fund;
  5. a fund regulated by Law Nº 18,657, or the Foreign Capital Investment Funds Law, in which case all holders of its shares must reside abroad or be qualified as local institutional investors; or
  6. any other institutional foreign investor that complies with the characteristics defined by a regulation with the prior report of the SVSCMF and the Chilean Internal Revenue Service.

In order to be entitled to the exemption, foreign institutional investors, during the time in which they operate in Chile must:

  1. be organized abroad and not be domiciled in Chile;
  2. not participate, directly or indirectly, in the control of the issuers of the securities in which they invest and not hold, directly or indirectly, 10.0% or more of such companies’ capital or profits;
  3. execute an agreement in writing with a Chilean bank or securities broker in which the intermediary is responsible for the execution of purchase and sale orders and for the verification, at the time of the respective remittance, that such remittances relate to capital gains that are exempt from income tax in Chile or, if they are subject to income tax, that the applicable withholdings have been made; and
  4. register in a special registry with the Chilean Internal Revenue Service.

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 articleArticle 5 of Act N° 20,712 indicate that the funds regulated by Law N° 18,657 will maintain the applicable tax regime of articleArticle 106, allowing the distribution of profits established in articleArticle 106, as long as they do not transform into one of the funds created by Act. No 20,712.

In addition, Transitory articleArticle 9 of Act N° 20,712 allows institutional foreign investors who have acquired securities as referred to in articleArticle 107 of the Income Tax Law prior to January 1, 2017, to enjoy, in the subsequent disposal of these securities, the exemption established in articleArticle 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 articleArticle 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:

  1. on a local stock exchange or any other stock exchange authorized by the SVSCMF or in a tender offer process according to Title XXV of the Chilean Securities Market Law, so long as the shares (a) were purchased on a public stock exchange or in a tender offer process pursuant to Title XXV of the Chilean Securities Market Law, (b) are newly issued shares issued in a capital increase of the corporation, or (c) were the result of the exchange of convertible bonds (in which case the option price is considered to be the price of the shares). In this case, gains exempted from Chilean taxes shall be calculated using the criteria set forth in the Chilean Income Tax Law; or
  2. within 90 days after the shares would have ceased to be significantly traded on stock exchange. In such case, the gains exempted from Chilean taxes on capital gains will be up to the average price per share of the last 90 days. Any gains above the average price will be subject to the first category tax.

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.

 

In order to comply with our withholding obligations, we may require certificates of residence, affidavits or any other type of documentation aimed to demonstrate the tax residence and effective beneficiary status of the foreign holders.

 


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.

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 Stockcommon 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 alldistributions are made 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.


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 reduced rate if the dividends represent “qualified dividend 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 passive 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 20162019 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 20172020 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 shares of Common Stockcommon stock (to the extent not represented by ADSs) will be treated as qualified dividend income, because the Common Stockshares of common 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 Stockcommonstock 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 withheld on such dividends, reduced 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.


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 Stockthecommon 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 istreatedis treated as receiving an excess distribution in connection with the ownership or disposition of such interest, or reports 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.


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 be 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.

 

F.Dividends and Paying Agents

 

Not applicable.

 

G.Statement by Experts

 

Not applicable.

 

H.Documents on Display

 

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(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.


 

 

I.Subsidiary Information

Not applicable.

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, 2016,2019, we had a total of CLP 10,14312,015 million in debt indexed to variable interest rates (CLP 20,2078,576 million as of December 31, 2015)2018). Consequently, as of December 31, 2016,2019, our financing structure consisted (without taking into account the cross currency interest rate swaps and cross interest rate swaps effects) of 6% (12%4% (3% as of December 31, 2015)2018) of debt with variable interest rates, and 94% (88%96% (97% as of December 31, 2015)2018) 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, 2016,2019, after considering the effect of cross currency interest rate swaps and cross interest rate swaps, 97% (97% in 2015)98.6% (99.8% as of December 31, 2018) of our debt had fixed interest rates.

 

The terms and conditions of the Company’s obligations as of December 31, 2016,2019, including exchange rates, interest rates, maturities and effective interest rates are detailed in Note 2621 to our audited consolidated financial statements included elsewhere in this 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 theforthe 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, maltMalt and cans. In Chile, we obtain our supply of barley and malt from local producers and in the international market. Long-termmarket (mainly from Argentina). With local and argentine producers the Company enters into long-term supply agreements are entered into with local producers, where the barleyin which malt price is set annually, according tousing for this purpose 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 2016, we purchased 61,753 tons of malt (53,890 tons in 2015) and 13,914 tons of barley (46,620 tonsand manufacturing cost established in 2015). CCU Argentina acquires malt only from local producers. Such raw materials represent approximately 7% (9% in 2015 and 12% in 2014) of the direct cost for the Chile Operating segment.these agreements.

 

Of the cost of Chile Operating segment, the cost of cans represents approximately 15%17% of the direct cost (12% in 20152018 and 12% in 2014). Meanwhile2017), whereas in the International Business Operating segment, the cost of cans cost represent approximately 34%38% of the direct cost of raw materials in 2016 (30%2019 (38% in 20152018 and 20%33% in 2014)2017). See “Item 4:Information on the Company – B. Business Overview – 5. Raw Materials and other Supplies”. We do not hedge these transactions. Rather, we negotiate yearly contracts with malt suppliers.


 

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 30% (29%31% (27% in 20152018 and 29% in 2014)2017) 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 40%43% of the grapes used for export wines from its own vineyards, thereby reducing grape price volatility and ensuring quality consistency. Approximately 10% of the grape supply for the production of the wine sold in the domestic market is purchased from own vineyards. During 2016,2019, VSPT purchased 11%19% 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”.

 

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, UruguayBolivia, Paraguay and Paraguay,Uruguay, of associated in BoliviaPeru 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, 2016,2019, we maintained in Chile foreign currency liabilities amounting to CLP 49,694104,822 million (CLP 49,78688,219 million as of December 31, 2015)2018), mostly denominated in U.S. dollars. Obligations with financial institutions and bonds in foreignUSD. Foreign currency obligations (CLP 6,35243,638 million as of December 31, 20162019 and CLP 16,62625,404 million as of December 31, 2015)2018) represent 4% (10%14% (9% as of December 31, 2015)2018) of the total of suchother financial liabilities. The remaining 96% (90%86% (91% as of December 31, 2015)2018) is mainly denominated mainly in inflation-indexed Chilean pesos.CLP. In addition, the Company maintains foreign currency assets for CLP 66,435206,820 million (CLP 72,888212,009 million as of December 31, 2015)2018) that mainly correspond to exports in accounts receivable.

 

Regarding the foreign subsidiaries operations, the net exposure assets in U.S. dollarsUSD and other currencies amounted to CLP 3,80628,168 million as of December 31, 20162019 (CLP 1,3687,872 million as of December 31, 2015)2018).

 

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, 2016,2019, net exposure in foreign currencies of our Chilean operations, after the use of derivative instruments, amountedamounts to an asset of CLP 3,8098,440 million (liability of CLP 757(CLP 1,364 million as of December 31, 2015)2018).


 

In 2016,2019, of our total sales, 8% (8%7% (7% in 20152018 and 2014)7% in 2017) corresponded to export sales made in foreign currencies, mainly U.S. dollars,USD, euros and pounds sterling, and of the totaldirect costs, 63% (54%64% (61% in 20152018 and 55%62% in 2014)2017) 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.

 


As of December 31, 2016,2019, the net investment in foreign subsidiaries, associatedaffiliates and joint ventures amounted to CLP 135,002272,585 million, CLP 8,2491,149 million and CLP 35,449124,518 million, respectively (CLP 133,555247,680 million, CLP 6,628958 million and CLP 18,719121,448 million as of December 31, 2015)2018).


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, 2016,2019, our interest-bearing debt amounted to CLP 160,490315,819 million (see note 26Note 21 to theour consolidated financial statements)statements included herein), 94%96% of which was fixed debt and 6%4% of which was variable-rate 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, 2016

 

(millions of Ch$, except percentages)

 

 

 

Contractual Flows Maturities

 

 

Interest - Bearing Debts as of December 31, 2019

Interest - Bearing Debts as of December 31, 2019

(millions of CLP, except percentages)

(millions of CLP, except percentages)

Contractual Flows Maturities

Contractual Flows Maturities

 

 

 

2017

2018

2019

2020

2021

Thereafter

Total

Fair Value

 

2020

2021

2022

2023

2024

Thereafter

Total

Fair Value

Interest bearing liabilities

Interest bearing liabilities

 

 

 

 

Interest bearing liabilities

 

 

Fixed rate

 

Fixed rate

 

 

Ch$ (UF)(1)

Bonds and Banks

 

7,435

7,176

19,435

11,139

10,833

85,517

141,536

122,528

CLP(UF)(1)

Bonds and Banks

13,493

11,801

11,584

10,773

10,557

188,012

246,219

220,472

Average interest rate

 

4.6%

3.6%

4.5%

5.2%

 

 

Average interest rate

3.5%

3.7%

3.8%

3.2%

 

 

  

 

 

 

Ch$

 

28,794

2,660

313

-

34,740

34,318

CLP

 

18,883

10,122

59,929

1,904

1,846

1,754

94,440

89,696

Average interest rate

 

5.9%

5.2%

5.1%

 

 

Average interest rate

2.8%

4.0%

4.6%

3.8%

 

 

  

 

 

 

US$

 

1,086

-

1,086

1,083

USD

 

13,449

9,715

11,269

315

1,840

36,903

36,900

Average interest rate

 

2.9%

   

 

Average interest rate

3.3%

3.1%

6.0%

 

 

    

 

 

 

Argentine pesos

 

9,686

4,378

2,683

-

16,747

13,163

EUR

 

 107

101

30

     -  

369

 369

Average interest rate

 

27.4%

30.5%

  

 

Average interest rate

1.5%

 

 

    

 

 

 

Uruguayan pesos

 

1,045

348

-

1,742

ARS

 

  2,579

   116

           -  

            -  

        -  

             -  

2,695

 2,695

Average interest rate

 

6.0%

 

 

Average interest rate

53.3%

62.0%

 

 

  

 

 

 

BOB

 

42

1,696

3,392

922

 11,141

  11,141

Average interest rate

5.0%

 

 

 

 

UIU

 

719

 240

           -  

            -  

        -  

             -  

958

 958

  

 

Average interest rate

4.9%

 

 

Variable rate

  

 

Variable rate

 

 

US$

 

108

5,332

-

-

5,440

5,336

Average interest rate

Libor +

 

1.8%

   

 

USD

 

 7,720

            -  

           -  

            -  

        -  

             -  

7,720

 7,664

    

 

Average interest rate

3.1%

 

 

Argentine pesos

 

2,154

1,586

1,005

-

4,744

3,423

Argentine pesos

4,385

            -  

           -  

            -  

        -  

             -  

4,385

 4,385

Average interest rate

Badlar +

18.0%

15.67%

15.7%

 

 

Average interest rate

55.0%

 

 

 

 

 

 

Non interest bearing liabilities

Non interest bearing liabilities

 

 

Non interest bearing liabilities

 

 

Derivate Contract

Derivate Contract

 

 

Derivate Contract

 

 

Cross Interest Rate Swap:

Cross Interest Rate Swap:

 

 

Cross Interest Rate Swap:

 

 

Receive

 

-

Receive

 

              -  

            -  

           -  

            -  

        -  

             -  

          -  

               -  

Pay

 

-

 

              -  

            -  

           -  

            -  

        -  

             -  

          -  

               -  

Forwards

 

11,119

-

11,119

Forwards

 

     240

            -  

           -  

            -  

        -  

             -  

 240

240

 

 

(1) UF as of Dec 31, 2016

 

(1) UF as of Dec 31, 2019.

(1) UF as of Dec 31, 2019.

 


 

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, 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, 2016.2019. 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, 2019

 

 

 

         

 

 

   

Carrying Amount

    

Fair Value

On Balance Sheet Position

       

 

 

Malt inventory (millions of CLP)

 

    7,981

     

       7,981

 

Bulk wine inventory - raw material (millions of CLP)

39,759

     

   

43,933

 

         

 

 

    

Expected Maturity

   

Fair Value

 

   

2020

2021

2022

2023

2024

Thereafter

Purchase Contracts

       

 

Malt:

        

 

 

Fixed Purchase Volume (tons)

 

  157,368

  150,250

  152,000

  156,000

  158,250

   26,500

 

 

Weighted Average Price (USD per ton)(*)

 

        510

        510

        510

        510

        510

        510

 

 

Contract Amount (thousands of USD)

 

   80,275

   76,644

   77,537

   79,577

   80,725

   13,518

  408,276

Sugar:

        

 

 

Fixed Purchase Volume (tons)

 

   55,647

   52,839

          -  

          -  

          -  

          -  

 

 

Weighted Average Price (USD per ton)(*)

 

        467

        467

          -  

          -  

          -  

          -  

 

 

Contract Amount (thousands of USD)

 

   25,987

   24,676

          -  

          -  

          -  

          -  

   50,663

Grapes:

        

 

 

Fixed Purchase Volume (tons)

 

   58,231

   29,867

   20,678

   12,795

        400

          -  

 

 

Weighted Average Price (CLP per kg.)(*)

 

        205

        186

        185

        165

        633

          -  

 

 

Contract Amount (millions of CLP)

 

   11,910

     5,542

     3,822

     2,111

        253

          -  

   23,638

Wine:

        

 

 

Fixed Purchase Volume (Mlts)

 

   14,443

          -  

          -  

          -  

          -  

          -  

 

 

Weighted Average Price (CLP per liter)(*)

 

        231

          -  

          -  

          -  

          -  

          -  

 

 

Contract Amount (millions of CLP)

 

     3,332

          -  

          -  

          -  

          -  

          -  

     3,332

 

         

 

 

         

 

(*) Weighted average price estimation is calculated based on expected market prices. Prices to be paid by us are adjusted based on current market conditions.

 

 

           

 

 

Commodity Price Sensitivity as of December 31, 2016

 

 

 

         

 

 

   

Carrying Amount

    

Fair Value

On Balance Sheet Position

       

 

 

Malt inventory (millions of CLP)

 

8,817

     

8,817

 

Bulk wine inventory - raw material (millions of CLP)

30,337

     

30,337

 

         

 

 

    

Expected Maturity

   

Fair Value

 

   

2017

2018

2019

2020

2021

Thereafter

Purchase Contracts

       

 

Malt:

        

 

 

Fixed Purchase Volume (tons)

 

126,033

128,867

133,183

87,983

-

-

-

 

Weighted Average Price (US$ per ton)(*)

 

523

523

523

523

-

-

-

 

Contract Amount (thousands of US$)

 

65,967

67,450

69,709

46,051

-

-

239,797

Sugar:

  

-

-

-

-

-

-

-

 

Fixed Purchase Volume (tons)

 

65,219

-

-

-

-

-

-

 

Weighted Average Price (US$ per ton)(*)

 

610

-

-

-

-

-

-

 

Contract Amount (thousands of US$)

 

39,784

-

-

-

-

-

39,322

Grapes:

        

 

 

Fixed Purchase Volume (tons)

 

34,752

24,789

13,247

4,026

1,110

84

-

 

Weighted Average Price (CLP per kg.)(*)

 

201

189

203

259

182

934

-

 

Contract Amount (millions of CLP)

 

6,971

4,676

2,690

1,043

202

78

14,752

Wine:

        

 

 

Fixed Purchase Volume (Mlts)

 

4,639

2,700

2,700

-

-

-

-

 

Weighted Average Price (CLP per liter)(*)

 

373

166

166

-

-

-

-

 

Contract Amount (millions of CLP)

 

1,730

448

448

-

-

-

2,507

 

         

 

 

         

 

(*) 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, 20162019 we had malt purchase contracts for US$37.8USD 39.0 million in Chile, compared with US$54.8USD 35.0 million as of December 31, 2015.2018

 


 

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, 20162019 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, 2016

 

Exchange Rate Sensitivity as of December 31, 2019

Exchange Rate Sensitivity as of December 31, 2019

 

(millions of CLP, except percentages and exchange rate)

(millions of CLP, except percentages and exchange rate)

 

(millions of CLP, except percentages and exchange rate)

 

 

          

 

 

Contractual Maturity Date

 

 

   

2019

 

2020

 

2021

 

2022

 

2023

 

Thereafter

 

Total

Fair Value

 

2017

2018

2019

2020

2021

Thereafter

Total

Fair Value

Debt Obligations

Debt Obligations

 

 

 

Debt Obligations

             

 

Variable rate (US$)

 

Variable rate (USD)

Variable rate (USD)

             

 

Short and medium term

Short and medium term

 

108

5,332

-

5,440

5,336

Short and medium term

 7,720

 

       -

 

    -

 

      -  

 

        -  

 

            -  

 

7,720

7,664

Average int.rate Libor +

1.8%

1.8%

-

Fixed rate (US$)

     

 

Average int.rate Libor +

Average int.rate Libor +

3.1%

            

 

Fixed rate (USD)

Fixed rate (USD)

             

 

Short term

 

1,086

-

1,086

1,083

Short term

13,449

 

9,715

 

11,269

 

315

 

315

 

1,840

 

36,903

36,900

Interest rate

2.9%

-

Interest rate

3.3%

 

3.1%

 

3.1%

 

6.0%

 

6.0%

 

6.0%

  

 

Fixed rate (USD)

Fixed rate (USD)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short term

Short term

   107

 

101

 

101

 

 30

 

     30

 

 -  

 

369

369

   

 

Interest rate

1.5%

 

1.5%

 

1.5%

 

1.5%

 

1.5%

    

 

Cash and Cash

Cash and Cash

   

 

Cash and Cash

               

 

Equivalents(1)

Equivalents(1)

   

 

Equivalents(1)

               

 

US$

 

8,238

-

8,238

USD

   

25,498

           

25,498

25,498

Others

 

1,290

-

1,290

   

3,724

           

3,724

3,724

TOTAL

 

9,528

-

9,528

   

29,222

           

29,222

29,222

   

 

                

 

Accounts Receivable(1)

Accounts Receivable(1)

   

 

Accounts Receivable(1)

             

 

US$

 

24,449

-

24,449

USD

   

35,796

           

35,796

35,796

EUR

 

7,025

-

7,025

   

9,710

           

9,710

9,710

Others

 

1,257

-

1,257

   

1,762

           

1,762

1,762

TOTAL

 

32,732

-

32,732

   

47,268

           

47,268

47,268

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)Figures as of December 31, 2016.

 

(1) Figures as of December 31, 2019.

(1) Figures as of December 31, 2019.

 

 

 

 

 

 

 

 

 

 

 

 

 

                  

 

Contractual Maturity Date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notional

2017

2018

2019

2020

2021

Thereafter

Total

Fair Value

  

Notional

2020

 

2021

 

2022

 

2023

 

2024

 

Thereafter

 

Total

Fair Value

 

amount

 

 

  

amount

             

 

Derivate Contracts (in

 

 

millions of Ch$)

 

Receive US$

 

467

5,332

-

5,799

5,695

Pay US$

 

18,031

-

18,031

17,991

Derivate Contracts

Derivate Contracts

             

 

(in millions of CLP)

(in millions of CLP)

             

 

Receive USD

Receive USD

 

3,230

 

8,798

 

-

 

 -  

 

       -  

 

 -  

 

12,029

11,810

Pay USD

Pay USD

 

161

 

            -  

 

            -  

 

            -  

 

            -  

 

            -  

 

161

161

Receive EUR

 

109

-

109

109

Receive EUR

 

412

 

            -  

 

            -  

 

            -  

 

            -  

 

            -  

 

412

412

Pay EUR

 

578

4,967

-

5,545

5,603

Pay EUR

 

161

 

8,436

 

   -

 

            -  

 

            -  

 

            -  

 

8,597

8,644

Receive Others

 

11

-

11

11

Receive Others

         11

 

            -  

 

            -  

 

            -  

 

            -  

 

            -  

 

11

11

Pay Others

 

9

-

9

9

Pay Others

-

 

            -  

 

            -  

 

            -  

 

            -  

 

            -  

 

-

-

                  

 


 

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.

 

Service

Fee

Issuance of ADSs

US$USD 5 perfor each 100 ADSs issued

 

Cancellation or withdrawal of ADSs

US$USD 5 per each 100 ADSs canceled or surrendered

 

Cash distributions

US$USD 0.05 or less per ADS

Transfer of ADRs

USD 1.50 per ADR or ADRs

Distribution or sale of securities pursuant to the Deposit Agreement

Fee shall be in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities.

The Depositary may sell (by public or private sale) sufficient securities and property received in respect of share distributions, rights and other distributions contemplated by Article IV of the Deposit Agreement prior to such deposit to pay such charge.

 

During each year, the depositary will collect fees of US$USD 0.05 or less per ADS per calendar year for administering the ADSs.ADSs, which fee shall be payable at the sole discretion of the Depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions.

 

ADS holders will also be responsible to pay certain fees and expenses incurred by the depositary bank and/or any of its agents (including, without limitation, the custodian, and expenses incurred on behalf of holders in connection with compliance with foreign exchange control regulations or any law or regulation relating to foreign investment),in connection with the servicing of the shares or other deposited securities, the sale of securities, the delivery of deposited securities or otherwise in connection with the Depositary's or its custodian's compliance with applicable law, rule or regulation (which shall be payable at the sole discretion of the Depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions),and certain taxes and governmental charges such as: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 2016, the following2019 CCU S.A. received from JPMorgan USD 878,126.55 as depositary payments and reimbursements were made by JPMorgan, pursuant to the corresponding tax retention, in connection with our ADR program:

program.

Expenses

amount in thousands US$ (*)

Documents Edgar and filing

7.2

FASB fee

0.7

PCAOB fee

6.7

Teleconferencing

8.8

Legal advise related to 20-F preparation & filing

62.5

Software and licenses subscription Fee

61.7

Representative Fees

0.7

Investor communications

15.7

Total

164.1

(*) includes 30% tax retention


 

 

PART II

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.

 

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, 2016.2019. 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, 2016.2019.

 

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, 20162019 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, 20162019 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, 20162019 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 our audited consolidated financial statements.statements included herein.

 

(d) Changes in Internal Control over Financial Reporting. There has been no change in our internal control over financial reporting during 20162019 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.

ITEM 16A: Audit Committee Financial Expert

 

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. 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.

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.

ITEM 16B: Code of Ethics

 

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 of 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.


 

ITEM 16C: Principal Accountant Fees and Services

 

The following table sets forth the fees billed to us by our independent auditors,PricewaterhouseCoopers (“PwC”)Consultores, Auditores SpA, during the fiscal years ended December 31, 20152017, 2018 and 2016:

2019:

 

 

2014

2015

2016

 

2017

 

2018

2019

(millions of CLP)

(millions of CLP)

Audit Fees

462

487

743

 

          737

 

689

864

Audit-Related Fees

-

30

 

           1

 

             0

            0

Tax Fees

-

8

7

 

8

 

             7

             6

All Other Fees

2

11

18

 

           12

 

            16

Total Fees

464

506

798

 

         758

 

         712

886

 

 

“Audit fees” in the above table are the aggregate fees billed by PwCour 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 filings. “Audit-Related“Audit Related Fees” are fees billed by PwCour independent auditors for the issuance of special full IFRS reports related to foreign entities. “Tax fees” are fees billed by PwCour independent auditors associated with the issuance of certificates for tax and legal compliance purposes. “All Other Fees” are fees billed by PwCour independent auditors associated with expenses related to Due Diligence, upgrade of the carbon footprint measurement system, and 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

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 became effective upon completion by PwC Chile of its procedures on the filing of Form 20-F for the year endedDecember 31, 2015, which was filed on April 29, 2016. PwC Chile served as the company´s independent registered public accounting firm for the fiscal years 2015 and 2014.Not applicable.


 

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.

During the fiscal years ended December 31, 2015 and 2014 and the subsequent interim period through April 29, 2016 (the date PwC Chile´s dismissal became effective), there were 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.

During the fiscal years ended December 31, 2015 and 2014 and the subsequent interim period through April 29, 2016, there have been no reportable events (as defined in Item 16F(a)(1)(v) of Form 20-F).

On June 21, 2016, prior to KPMG’s acceptance of appointment as principal accountant according to U.S. regulations, KPMG informed the Company that in the process of its standard client evaluation procedures it became aware of a matter than would not allow it to be independent with respect to CCU, and concluded that it would not be able to accept the appointment of principal accountant for the fiscal year 2016. The above-mentioned shareholders’ meeting had delegated to the board of directors the power to appoint PwC Chile to the extent KPMG was not able to provide services to the Company. Accordingly, the board of directors, at a meeting held on July 5, 2016, resolved to appoint PwC Chile as the Company’s independent registered public accounting firm for the fiscal year 2016, which engagement became effective on July 5, 2016.

During the period from April 13, 2016, the date of the shareholders’ election to appoint KPMG as principal accountant, until KPMG’s communication on June 21, 2016, KPMG was not engaged to, and did not provide, any services.

During the fiscal years ended December 31, 2015 and 2014 and the subsequent interim period through April 29, 2016, the date PwC Chile’s dismissal became effective, the registrant had not consulted with PwC Chile regarding any matters described in Item 16F(a)(2)(i) and Item 16F(a)(2)(ii) of Form 20-F, other than those consultations conducted in the ordinary course of the audit being performed by PwC Chile. During the period between April 29, 2016, the date PwC Chile´s dismissal became effective, through July 5, 2016, the date PwC Chile was appointed again as the Company’s independent registered public accounting firm, the registrant had not consulted with PwC Chile regarding any matters described in Item 16F(a)(2)(i) and Item 16F(a)(2)(ii) of Form 20-F.


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, 20172020 approximately CLP 39,70842,896 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”.

 

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 or, if applicable, included in the usual practice policy approved by the board of directors. See “Item 7: Major Shareholders and Related Party 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. 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) propose to the board of directors the independent accountants and the risk rating agencies, which the board must then propose to the 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”.

 


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 held on April 13, 2016, followingthe17, 2019, following the election of a new board at the shareholders´ meeting held the 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.


 

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 other

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 “Comisión para el Mercado Financiero”, or “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 and March 4, 2020, 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 powers 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.

 

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.

PART III

ITEM 17: Financial Statements

 

The Company has responded to Item 18 in lieu of responding to this item.

ITEM 18: Financial Statements

 

See Annex for the Financial Statements.


 

ITEM 19: Exhibits

 

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).

2(d)Description Of Securities Other Than Equity Securities.

 

8.1           Compañía Cervecerías Unidas S.A. significant subsidiariessubsidiaries.

 

12.1        Certification of Chief Executive Officer of Compañía Cervecerías Unidas S.A. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

12.2        Certification of Chief Financial Officer of Compañía Cervecerías Unidas S.A. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

13.1        Certification of Chief Executive Officer of Compañía Cervecerías Unidas S.A. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

13.2        Certification of Chief Financial Officer of Compañía Cervecerías Unidas S.A. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101.INS            XBRL Instance Document.

 

101.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.

By: /s/ Patricio Jottar
                                                                                  ___________________

                                                                                  Name: Patricio Jottar

Title: Chief Executive Officer

 

By: /s/ Patricio Jottar

___________________

Name: Patricio Jottar

Title: Chief Executive Officer

                             

Date: April27th, 20172020


CCU - Management’s Report on Internal Controls over Financial Reporting

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, 2016 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, 2016, 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, 2016 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 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

By:      /s/ Patricio Jottar

            Chief Executive Officer

/s/ Felipe Dubernet 
            Chief Financial Officer

Dated:  February 27, 2017


COMPAÑÍA CERVECERÍAS UNIDAS S.A. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

(Figures expressed in thousands of Chilean pesos)

As of and for the year ended December 31, 2016

 


 



 








 

 

INDEX

 


CONSOLIDATED STATEMENT OF FINANCIAL POSITION  (ASSETS)

INDEX6

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (ASSETS)

5

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (LIABILITIES AND EQUITY)

67

CONSOLIDATED STATEMENT OF INCOME

78

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

89

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

910

CONSOLIDATED STATEMENT OF CASH FLOW

1011

NOTENote 1 GENERAL INFORMATIONGeneral Information

1112

NOTENote 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Summary of significant accounting policies

1925

2.1Basis of preparation1925
2.2Basis of consolidation2025
2.3Financial information as per operating segments2026
2.4Foreign currency and unidad de fomento (Adjustment unit)sdjustment units2721
2.5Cash and cash equivalents2228
2.6Other financial assets2229
2.7Financial instruments2229
2.8Financial asset impairment2431
2.9Inventories2431
2.10Biological currentCurrent biological assets2532
2.11Other non-financial assets2532
2.12Property, plant and equipment2532
2.13Leases2633
2.14Investment propertyproperties assets2633
2.15Intangible assets other than goodwill2633
2.16Goodwill2734
2.17Impairment of non-financial assets other than goodwill2734
22.18.18AssetsNon-current assets of a disposal groupgroups classified as held for salesale

2835

2.19Income taxes2835
2.20Employees benefits2835
2.21Provisions2936
2.22Revenue recognition2936
2.23Commercial agreements with distributors and supermarket chains2936
2.24Cost of sales of products3037
2.25Other incomes by function37
2.26Other expenses by function3037
2.262.27Distribution expenses3037
2.27Administration expenses30
2.28Administrative expenses

37

2.29

Environment liabilities

3037

NOTENote 3 ESTIMATES AND APPLICATION OF PROFESSIONAL JUDGMENTEstimates and application of professional judgment

3037

NOTENote 4 ACCOUNTING CHANGES Accounting changes

3138

NOTENote 5 RISK ADMINISTRATION Risk Administration

3139

NOTENote 6 FINANCIAL INSTRUMENTS Financial Information as per operating segments

3746

NOTENote 7 FINANCIAL INFORMATION AS PER OPERATING SEGMENTSFinancial Instruments

4354


NOTENote 8 BUSINESS COMBINATIONSCash and cash equivalents

5360

NOTE 9 NATURE OF COST AND EXPENSE

54

NOTE 10 FINANCIAL RESULTS

54

NOTE 11 OTHER INCOME BY FUNCTIONNote 9 Other non-financial assets

5467

NOTE 12 OTHER GAINS (LOSSES)Note 10 Trade and other receivables

68
Note 11 Accounts and transactions with related parties

71


55Note 12 Inventories

78

NOTENote 13 CASH AND CASH EQUIVALENTS Biological assets

5579

NOTENote 14 ACCOUNTS RECEIVABLES - TRADE AND OTHER RECEIVABLESNon-current assets of disposal groups classified as held for sale

6280

NOTENote 15 ACCOUNTS AND TRANSACTIONS WITH RELATED COMPANIESBusiness Combinations

6581

NOTENote 16 INVENTORIESInvestments accounted for using equity method

7082

NOTE 17 BIOLOGICAL CURRENT ASSETS

71

NOTE 18 OTHER NON-FINANCIAL ASSETSNote 17 Intangible assets other than goodwill

7285

NOTE 19 INVESTMENT ACCOUNTED FOR BY THE EQUITY METHODNote 18 Goodwill

7287

NOTE 20 INTANGIBLE ASSETS OTHER THAN GOODWILL

76

NOTE 21 GOODWILL

78

NOTE 22 PROPERTY, PLANT AND EQUIPMENTNote 19 Property, plant and equipment

8090

NOTE 23 INVESTMENT PROPERTYNote 20 Investment Property

8293

NOTE 24 ASSETS OF DISPOSAL GROUP HELD FOR SALE

83

NOTE 25 INCOME TAXES

84

NOTE 26 OTHER FINANCIAL LIABILITIESNote 21 Other financial liabilities

8794

NOTE 27 ACCOUNTS PAYABLE - TRADE AND OTHER PAYABLESNote 22 Trade and other current payables

103113

NOTE 28 PROVISIONSNote 23 Other provisions

103113

NOTE 29 OTHER NON-FINANCIAL LIABILITIESNote 24 Income taxes

114

104Note 25 Employee Benefits

119

NOTE 30 EMPLOYEE BENEFITSNote 26 Other non-financial liabilities

104122

NOTE 31 NON-CONTROLLING INTERESTSNote 27 Common Shareholders’ Equity

108122

NOTE 32 COMMON SHAREHOLDERS' EQUITYNote 28 Non-controlling Interests

126

109Note 29 Nature of cost and expense

128

Note 30 Other incomes by function

128

Note 31 Other Gains (Losses)

129

Note 32 Financial results

129

NOTENote 33 EFFECTS OF CHANGES IN CURRENCY EXCHANGE RATEEffects of changes in currency exchange rate

113130

NOTENote 34 CONTINGENCIES AND COMMITMENTSContingencies and Commitments

117134

Note 35 Subsequent Events136

Compañía Cervecerías Unidas S.A. and subsidiaries

Consolidated Statement of Financial Position

(Figures expressed in thousands of Chilean pesos)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

ASSETS

Notes

As of December 31, 2019

As of December 31, 2018

ThCh$

ThCh$

Current assets

 

 

 

Cash and cash equivalents

8

196,369,224

319,014,050

Other financial assets

7

9,815,358

22,745,469

Other non-financial assets

9

22,395,591

18,861,414

Trade and other current receivables

10

300,013,940

320,702,339

Accounts receivable from related parties

11

3,278,685

3,048,841

Inventories

12

232,434,461

228,062,237

Biological assets

13

9,459,071

8,489,873

Current tax assets

24

15,132,290

17,302,429

Total current assets other than non-current assets of disposal groups classified as held for sale

 

788,898,620

938,226,652

Non-current assets of disposal groups classified as held for sale

14

383,138

2,780,607

Total Non-current assets of disposal groups classified as held for sale

 

383,138

2,780,607

Total current assets

 

789,281,758

941,007,259

 

  

 

Non-current assets

 

 

 

Other financial assets

7

4,670,538

3,325,079

Other non-financial assets

9

7,042,297

5,007,150

Trade and other non-current receivables

10

3,224,627

3,363,123

Accounts receivable from related parties

11

118,122

190,865

Investments accounted for using equity method

16

136,098,062

142,017,781

Intangible assets other than goodwill

17

125,618,666

118,964,142

Goodwill

18

124,955,438

123,044,901

Property, plant and equipment (net)

19

1,097,534,155

1,021,266,631

Investment property

20

8,313,274

8,715,956

Deferred tax assets

24

54,528,648

37,691,088

Current tax assets non-current

24

2,305,129

1,270,941

Total non-current assets

 

1,564,408,956

1,464,857,657

Total Assets

 

2,353,690,714

2,405,864,916

The accompanying notes 1 to 35 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)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

LIABILITIES AND EQUITY

Notes

As of December 31, 2019

As of December 31, 2018

LIABILITIES 

ThCh$

ThCh$

Current liabilities

 

 

 

Other financial liabilities

21

68,385,728

62,766,946

Trade and other current payables

22

306,655,558

303,380,168

Accounts payable to related parties

11

8,979,434

6,936,910

Other current provisions

23

3,040,930

405,069

Current tax liabilities

24

20,504,374

75,885,449

Provisions for employee benefits

25

27,356,205

31,794,163

Other non-financial liabilities

26

48,359,767

164,555,540

Total current liabilities

 

483,281,996

645,724,245

Non-current liabilities

 

 

 

Other financial liabilities

21

261,769,288

228,185,297

Trade and other non-current payables

22

26,550

12,413

Other non-current provisions

23

531,961

7,425,759

Deferred tax liabilities

24

131,582,558

108,500,171

Provisions for employee benefits

25

33,571,138

26,901,088

Total non-current liabilities

 

427,481,495

371,024,728

Total liabilities

 

910,763,491

1,016,748,973

 

  

 

EQUITY

 

 

 

Equity attributable to equity holders of the parent

27

 

 

Paid-in capital

 

562,693,346

562,693,346

Other reserves

 

(137,502,529)

(151,048,226)

Retained earnings

 

902,863,353

868,481,588

Total equity attributable to equity holders of the parent

 

1,328,054,170

1,280,126,708

Non-controlling interests

28

114,873,053

108,989,235

Total Shareholders' Equity

 

1,442,927,223

1,389,115,943

Total Liabilities and Shareholders' Equity

 

2,353,690,714

2,405,864,916

The accompanying notes 1 to 35 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)

CONSOLIDATED STATEMENT OF INCOME

CONSOLIDATED STATEMENT OF INCOME

Notes

For the years ended December 31,

2019

2018

2017

ThCh$

ThCh$

ThCh$

Net sales

6

1,822,540,697

1,783,282,337

1,698,360,794

Cost of sales

29

(908,318,190)

(860,011,392)

(798,738,655)

Gross margin

 

914,222,507

923,270,945

899,622,139

Other income by function

30

22,584,710

228,455,054

6,717,902

Distribution costs

29

(327,543,973)

(314,391,183)

(290,227,129)

Administrative expenses

29

(136,975,243)

(152,376,458)

(142,514,649)

Other expenses by function

29

(241,479,749)

(216,236,609)

(238,704,061)

Other gains (losses)

31

3,156,799

4,029,627

(7,716,791)

Income from operational activities

 

233,965,051

472,751,376

227,177,411

Finance income

32

13,117,641

15,794,456

5,050,952

Finance costs

32

(27,720,203)

(23,560,662)

(24,166,313)

Share of net loss of joint ventures and associates accounted for using the equity method

16

(16,431,759)

(10,815,520)

(8,914,097)

Foreign currency exchange differences

32

(9,054,155)

3,299,657

(2,563,019)

Result as per adjustment units

32

(8,255,001)

742,041

(110,539)

Income before taxes

 

185,621,574

458,211,348

196,474,395

Income tax expense

24

(39,975,914)

(136,126,817)

(48,365,976)

Net income of year

 

145,645,660

322,084,531

148,108,419

 

 

 

 

 

Net income attributable to:

 

 

 

 

Equity holders of the parent

 

130,141,692

306,890,792

129,607,353

Non-controlling interests

28

15,503,968

15,193,739

18,501,066

Net income of year

 

145,645,660

322,084,531

148,108,419

Basic earnings per share (Chilean pesos) from:

 

 

 

 

Continuing operations

 

352.21

830.55

350.76

Diluted earnings per share (Chilean pesos) from:

 

 

 

 

Continuing operations

 

352.21

830.55

350.76

 

 

 

 

 

The accompanying notes 1 to 35 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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Notes

For the years ended December 31,

2019

2018

2017

ThCh$

ThCh$

ThCh$

Net income of year

 

145,645,660

322,084,531

148,108,419

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

(4,127,305)

(1,263,781)

19,669

Other comprehensive income that will not be reclassified to income for the year, before taxes

 

(4,127,305)

(1,263,781)

19,669

Components of other comprehensive income that will be reclassified to income for the year, before taxes

 

 

 

 

Gains (losses) on exchange differences  on translation

27

17,077,670

37,990,079

(34,786,480)

Gains (losses) on cash flow hedges

27

345,986

63,008

(5,661)

Other comprehensive income that will be reclassified to income for the year, before taxes

 

17,423,656

38,053,087

(34,792,141)

Other comprehensive income, before tax

 

13,296,351

36,789,306

(34,772,472)

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

1,107,699

339,533

(47,228)

Income taxes related to components of other comprehensive income that will not be reclassified to income for the year

 

1,107,699

339,533

(47,228)

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

(93,416)

(16,196)

728

Income taxes related to components of other comprehensive income that will be reclassified to income for the year

 

(93,416)

(16,196)

728

Total other comprehensive income and expense

 

14,310,634

37,112,643

(34,818,972)

Comprehensive income (expense)

 

       159,956,294

       359,197,174

       113,289,447

Comprehensive income (expense) attributable to:

 

 

 

 

Equity holders of the parent

 

       143,626,508

       341,548,106

         96,580,893

Non-controlling interests

 

16,329,786

17,649,068

16,708,554

Total Comprehensive income (expense)

 

       159,956,294

       359,197,174

       113,289,447

.

The accompanying notes 1 to 35 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)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

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

Reserves 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, 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

Initial balance restated

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  (1)

-

-

-

-

-

-

(5,922,874)

(5,922,874)

-

(5,922,874)

Interim dividends (2)

-

-

-

-

-

-

(25,865,201)

(25,865,201)

-

(25,865,201)

Interim dividends according to policy (3)

-

-

-

-

-

-

(38,938,475)

(38,938,475)

-

(38,938,475)

Other increase (decrease) in Equity (4)

-

-

-

-

-

-

-

-

(8,805,260)

(8,805,260)

Total comprehensive income (expense) (5)

-

(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 subsidiaries  (6)

-

-

-

-

(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 (7)

-

-

-

-

-

-

(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  (1)

-

-

-

-

-

-

(1,296,076)

(1,296,076)

-

(1,296,076)

Interim dividends (2)

-

-

-

-

-

-

(51,730,402)

(51,730,402)

-

(51,730,402)

Interim dividends according to policy (3)

-

-

-

-

-

-

(101,714,994)

(101,714,994)

-

(101,714,994)

Other increase (decrease) in Equity (4)

-

-

-

-

-

-

-

-

(7,374,653)

(7,374,653)

Effects business combination (8)

-

-

-

-

-

-

-

-

6,755,102

6,755,102

Total comprehensive income (expense) (5)

-

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 subsidiaries  (9)

-

-

-

-

(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

Balanced as of January 1, 2019

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

Changes

 

 

 

 

 

 

 

 

 

 

Final dividends  (1)

-

-

-

-

-

-

(30,689,081)

(30,689,081)

-

(30,689,081)

Interim dividends (10)

-

-

-

-

-

-

(27,712,715)

(27,712,715)

-

(27,712,715)

Interim dividends according to policy (3)

-

-

-

-

-

-

(37,358,131)

(37,358,131)

-

(37,358,131)

Other increase (decrease) in Equity (4)

-

-

-

-

-

-

-

-

(11,918,592)

(11,918,592)

Effects business combination (8)

-

-

-

-

60,881

60,881

-

60,881

639,893

700,774

Total comprehensive income (expense) (5)

-

16,122,893

249,503

(2,887,580)

-

13,484,816

130,141,692

143,626,508

16,329,786

159,956,294

Increase (decrease) through changes in ownership interests in subsidiaries  (11)

-

-

-

-

-

-

-

-

832,731

832,731

Total changes in equity

-

16,122,893

249,503

(2,887,580)

60,881

13,545,697

34,381,765

47,927,462

5,883,818

53,811,280

AS OF DECEMBER 31, 2019

562,693,346

(101,931,435)

329,691

(7,728,154)

(28,172,631)

(137,502,529)

902,863,353

1,328,054,170

114,873,053

1,442,927,223

(1)

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).

(2)

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.

(3)

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 or payed as of December 31 of each year.

(4)

Mainly related to dividends to Non-controlling interest.

(5)

SeeNote 27 - Common Shareholders’ Equity.

NOTE 35 ENVIRONMENT(6)

120During 2017, the Company through its subsidiary CCU Inversiones S.A. acquired shares in VSPT by an amount of ThCh$ 7,800,000 with a carrying amount of ThCh$ 5,724,003, which generated, at CCU’s consolidated level, a decrease in Other reserves by an amount of ThCh$ 2,075,441.

(7)

Corresponds to the effect by the adoption of IFRS 9 and IFRS15.

(8)

SeeNote 15 – Business combinations.

(9)

Mainly related to the acquisition of an additional interest of VSPT, through the subsidiary CCU Inversiones S.A. for an amount of ThCh$ 49,222,781 with a carrying amount of ThCh$ 36,165,735, which generated, at CCU's consolidated level, a decrease in Other reserves of ThCh$ 13,054,114 on January 29, 2018. Additionally, on December 17, 2018 the 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).

(10)

Corresponds to Interim dividends that were paid on December 26, 2019, as agreed by the Ordinary Board of Directors.

(11)

SeeNote 1 – General information, letter D, number (4).

The accompanying notes 1 to 35 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

CONSOLIDATED STATEMENT OF CASH FLOW

Notes

For the years ended as of December 31,

2019

2018

2017

ThCh$

ThCh$

ThCh$

Cash flows from operating activities

 

 

 

 

Classes of cash receipts from operating activities:

    

Proceeds from goods sold and services rendered

 

2,398,342,913

2,063,846,199

2,027,615,713

Other proceeds from operating activities

30

34,857,922

211,980,184

27,287,853

Classes of cash payments from operating activities:

    

Payments of operating activities

 

(1,548,279,410)

(1,308,662,407)

(1,263,418,419)

Payments of salaries

 

(240,710,775)

(202,182,968)

(202,321,289)

Other payments for operating activities

 

(302,964,849)

(282,794,912)

(262,820,379)

Cash flow from (used in) operations

 

341,245,801

482,186,096

326,343,479

Dividends received

 

428,681

374,208

264,079

Interest paid

 

(24,943,412)

(17,691,156)

(18,564,514)

Interest received

 

13,053,176

13,627,809

4,870,651

Income tax paid

 

(93,733,867)

(35,068,401)

(40,656,061)

Other cash movements

31

6,269,666

(14,115,425)

(10,096,203)

Net cash inflow from operating activities

 

242,320,045

429,313,131

262,161,431

     

Cash flows from investing activities

 

 

 

 

Cash flows used to obtain control of subsidiaries or other businesses

8

(8,652,268)

(5,819,495)

-

Cash flows used to purchase non-controlling interests

8

-

-

(1,149,689)

Proceeds from the sale of interests in joint ventures

10

1,240,461

-

1,058,984

Other payments to acquire interests in joint ventures

8

(13,549,638)

(59,505,559)

(49,312,890)

Proceeds from sales of property, plan and equipment

 

6,049,705

1,064,516

1,554,696

Purchase of property, plant and equipment

 

(134,668,653)

(128,366,525)

(123,526,778)

Purchases of intangibles assets

 

(5,819,196)

(3,073,897)

(2,238,702)

Proceeds from other long term assets classified as investing activities

16

11,200,000

-

-

Other cash movements

 

13,863

(3,301,141)

-

Net cash (outflow) from investing activities

 

(144,185,726)

(199,002,101)

(173,614,379)

     

Cash flows from financing activities

 

 

 

 

Proceeds from changes in ownership interests in subsidiaries that do not result in loss of control

8

-

(49,222,782)

(7,800,000)

Proceeds from long-term loans and bonds

 

25,641,701

91,326,177

41,300,000

Proceeds from short-term loans and bonds

 

25,347,785

92,681,410

16,477,169

Total proceeds from loans

 

50,989,486

184,007,587

57,777,169

Loan and bonds payments

 

(27,049,506)

(112,665,293)

(25,754,218)

Payments of lease liabilities

 

(6,416,902)

(1,077,462)

(1,414,228)

Payments of loan from related parties

 

-

-

(717,900)

Dividends paid

 

(218,035,429)

(74,825,181)

(75,128,211)

Other cash movements

 

1,092,190

819,269

36,190

Net cash (outflow) from financing activities

 

(199,420,161)

(52,963,862)

(53,001,198)

     

Net (decrease) increase in cash and cash equivalents

 

(101,285,842)

177,347,168

35,545,854

Effects of exchange rate changes on cash and cash equivalents

 

(21,358,984)

(28,377,720)

465,565

Increase (decrease) in cash and cash equivalents

 

(122,644,826)

148,969,448

36,011,419

     

Cash and cash equivalents at beginning of the year

 

319,014,050

170,044,602

134,033,183

Cash and cash equivalents at end of the year

8

196,369,224

319,014,050

170,044,602

The accompanying notes 1 to 35 are an integral part of these consolidated financial statements.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

NOTE 36 SUBSEQUENT EVENTS

123


Compañía Cervecerías Unidas S.A. and subsidiaries

Consolidated Statement of Financial Position (Assets)

(Figures expressed in thousands of Chilean pesos)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

ASSETS

Notes

As of December 31, 2016

As of December 31, 2015

ThCh$

ThCh$

Current assets

 

 

 

Cash and cash equivalent

13

133,789,950

192,554,239

Other financial assets

6

8,406,491

13,644,105

Other non-financial assets

18

15,859,137

17,654,373

Accounts receivable-trade and other receivables

14

280,766,784

252,225,937

Accounts receivable from related companies

15

3,523,825

4,788,930

Inventories

16

199,290,678

174,227,415

Biological assets

17

7,948,379

7,633,340

Taxes receivables

25

29,423,479

15,264,220

Total current assets different from assets of disposal group held for sale

 

679,008,723

677,992,559

Assets of disposal group held for sale

24

2,377,887

6,319,316

Total assets of disposal group held for sale

 

2,377,887

6,319,316

Total current assets

 

681,386,610

684,311,875

 

  

 

Non-current assets

 

 

 

Other financial assets

6

203,784

80,217

Other non-financial assets

18

5,369,211

5,220,954

Accounts receivable non-current

14

3,563,797

-

Accounts receivable from related companies

15

356,665

445,938

Investment accounted by equity method

19

64,404,946

49,995,263

Intangible assets other than goodwill

20

77,678,850

71,868,007

Goodwill

21

96,663,023

99,490,372

Property, plant and equipment (net)

22

903,831,702

872,667,210

Investment property

23

6,253,827

6,838,002

Deferred tax assets

25

31,864,635

34,529,593

Total non-current assets

 

1,190,190,440

1,141,135,556

Total Assets

1,871,577,050

1,825,447,431

F-5


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 Financial Position (Liabilities and Equity)

(Figures expressed in thousands of Chilean pesos)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

LIABILITIES AND EQUITY

Notes

As of December 31, 2016

As of December 31, 2015

LIABILITIES

ThCh$

ThCh$

Current liabilities

 

 

 

Other financial liabilities

26

66,679,933

43,973,991

Accounts payable-trade and other payables

27

259,677,852

227,736,803

Accounts payable- to related companies

15

9,530,071

11,624,218

Other short-term provisions

28

409,164

503,440

Tax liabilities

25

11,806,434

12,198,024

Employee benefits provisions

30

22,838,228

21,712,059

Other non-financial liabilities

29

71,369,972

70,942,144

Total current liabilities

 

442,311,654

388,690,679

Non-current liabilities

 

 

 

Other financial liabilities

26

117,944,033

136,926,545

Others accounts payable

27

1,082,898

1,645,098

Other long-term provisions

28

1,323,520

1,476,518

Deferred tax liabilities

25

86,789,951

90,237,843

Employee benefits provisions

30

21,832,415

18,948,603

Total non-current liabilities

 

228,972,817

249,234,607

Total liabilities

 

671,284,471

637,925,286

 

  

 

EQUITY

Equity attributable to equity holders of the parent

32

 

 

Paid-in capital

 

562,693,346

562,693,346

Other reserves

 

(142,973,378)

(103,226,416)

Retained earnings

 

657,578,187

598,349,442

Total equity attributable to equity holders of the parent

 

1,077,298,155

1,057,816,372

Non-controlling interests

31

122,994,424

129,705,773

Total Shareholders' Equity

1,200,292,579

1,187,522,145

Total Liabilities and Shareholders' Equity

1,871,577,050

1,825,447,431

F-6


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)

CONSOLIDATED STATEMENT OF INCOME

CONSOLIDATED STATEMENT OF INCOME

Notes

For the years ended December 31.

2016

2015

2014

ThCh$

ThCh$

ThCh$

Net sales

7

1,558,897,708

1,498,371,715

1,297,966,299

Cost of sales

9

(741,819,916)

(685,075,251)

(604,536,815)

Gross margin

 

817,077,792

813,296,464

693,429,484

Other income by function

11

5,144,154

6,577,244

25,463,716

Distribution costs

9

(270,835,822)

(277,599,722)

(240,848,630)

Administrative expenses

9

(155,322,295)

(128,135,799)

(110,014,716)

Other expenses by function

9

(195,412,109)

(209,201,189)

(188,109,562)

Other gains (losses)

12

(8,345,907)

8,512,000

4,036,939

Income from operational activities

 

192,305,813

213,448,998

183,957,231

Financial Income

10

5,680,068

7,845,743

12,136,591

Financial costs

10

(20,307,238)

(23,101,329)

(22,957,482)

Share of net loss of joint ventures and associates accounted for using the equity method

19

(5,560,522)

(5,228,135)

(898,607)

Foreign currency exchange differences

10

456,995

957,565

(613,181)

Result as per adjustment units

10

(2,246,846)

(3,282,736)

(4,159,131)

Income before taxes

 

170,328,270

190,640,106

167,465,421

Income taxes

25

(30,246,383)

(50,114,516)

(46,673,500)

Net income of year

 

140,081,887

140,525,590

120,791,921

 

 

 

 

 

Net income attibutable to:

 

 

 

 

Equity holders of the parent

 

118,457,488

120,808,135

106,238,450

Non-controlling interests

31

21,624,399

19,717,455

14,553,471

Net income of year

 

140,081,887

140,525,590

120,791,921

Net income per share (Chilean pesos) from:

 

 

 

 

Continuing operations

 

320.59

326.95

287.52

Diluted earnings per share (Chilean pesos) from:

 

 

 

 

Continuing operations

 

320.59

326.95

287.52

 

 

 

 

 

F-7


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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Notes

For the years ended December 31.

2016

2015

2014

ThCh$

ThCh$

ThCh$

Net income of year

 

140,081,887

140,525,590

120,791,921

Other income and expenses charged or credited againts equity

 

 

 

 

Cash flow hedges (1)

32

84,962

80,693

(155,258)

Exchange differences of foreign subsidiaries (1)

32

(27,280,176)

(29,678,944)

(4,629,683)

Gains (losses) from defined plans

32

(2,355,384)

(939,433)

(1,884,054)

Income tax related with cash flow hedge (1)

32

(20,648)

(17,563)

39,470

Income tax relating to defined benefit plans

32

659,198

314,541

501,689

Total other comprehensive income and expense

 

(28,912,048)

(30,240,706)

(6,127,836)

Comprehensive income and expense

 

111,169,839

110,284,884

114,664,085

Comprehensive income originated by:

 

 

 

 

Equity holders of the parent (2)

 

91,752,250

92,606,720

97,067,296

Non-controlling interests

 

19,417,589

17,678,164

17,596,789

Comprehensive income and expense

 

111,169,839

110,284,884

114,664,085

(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-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 Changes in Equity

(Figures expressed in thousands of Chilean pesos)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

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

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$

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 (3)

-

-

-

-

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

Balanced as of January 1, 2016

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

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)

Comprehensive income and expense

-

(25,123,546)

41,607

(1,623,299)

-

118,457,488

91,752,250

19,417,589

111,169,839

Increase (decrease) through changes in ownership interests in subsidaries (4)

-

-

-

-

(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)

59,228,745

19,481,783

(6,711,349)

12,770,434

AS OF DECEMBER 31, 2016

562,693,346

(120,558,932)

39,081

(3,925,717)

(18,527,810)

657,578,187

1,077,298,155

122,994,424

1,200,292,579

(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 32) based on the local statutory reported to SVS and the interim dividends declared at December 31 of each year.

(3)Mainly related to dividends to Non-controlling interest.

(4)In 2016, the Company, through its subsidiaries Aguas CCU-Nestlé Chile S.A. and Embotelladoras Chilenas Unidas S.A., acquired additional interests in Manantial S.A. for an amount of ThCh$ 19,111,686, with a carrying value to ThCh$ 3,816,220, resulting in a decrease to Other reserves of ThCh$ 7,801,153 (seeNote 1 (1)). Additionally, during 2016 the Company, through its subsidiary Compañía Industrial Cervecera S.A. acquired additional interests in Los Huemules SRL. for an amount of ThCh$ 118,092, with a carrying value to ThCh$ 312,103, resulting in an increase to Other reserves of ThCh$ 194,000 (seeNote 1 (4)). Finally during 2016, joint venture Foods acquired additional interest in Alimentos Nutrabien S.A. for an amount of ThCH$ 14,352,706, with a carrying value to ThCh$ 3,497,385, resulting in a decrease of ThCh$ 5,426,209.

F-9


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

CONSOLIDATED STATEMENT OF CASH FLOW

Notes

For the years ended as of December 31,

2016

2015

2014

ThCh$

ThCh$

ThCh$

Cash flows from (used in) operational activities

 

 

 

 

Collection classes:

    

Proceeds from goods sold and services rendered

 

1,862,763,071

1,770,338,769

1,584,494,230

Other proceeds from operating activities

 

23,086,788

20,467,143

30,247,374

Types of payments:

    

Payments of operating activities

 

(1,216,451,995)

(1,120,571,275)

(1,051,616,618)

Payments of salaries

 

(201,389,122)

(178,915,580)

(171,898,347)

Other payments for operating activities

 

(228,011,323)

(220,365,087)

(162,644,788)

Dividends received

 

34,380

45,492

75,169

Interest paid

 

(16,958,068)

(19,813,502)

(20,757,207)

Interest received

 

5,635,697

6,476,628

10,763,936

Income tax reimbursed (paid)

 

(47,055,951)

(44,584,176)

(44,208,661)

Other cash movements

12

8,360,871

6,432,460

(833,425)

Net cash flows from operational activities

 

190,014,348

219,510,872

173,621,663

     

Cash flows from (used in) investing activities

 

 

 

 

Cash flows used for control of subsidaries or other businesses

13

(641,489)

-

(8,369)

Cash flows used in the purchase of non-controlling interests

13

(2,174,370)

(1,921,245)

(13,776,885)

Collections from related entities

 

-

6,709,845

-

Other collections on the sale of interests in joint ventures

24

512,596

-

-

Other payments to acquire interests in joint ventures

13

(27,043,481)

(42,163,032)

(1,445,478)

Proceeds from sale of property, plan and equipment

 

2,753,539

2,776,474

2,587,448

Acquisition of property, plant and equipment

 

(125,691,740)

(129,668,910)

(227,863,039)

Purchases of intangibles assets

 

(3,191,685)

(2,062,012)

(2,217,113)

Other cash movements

 

469,240

518,711

3,753,297

Net cash flows used in investing activities

 

(155,007,390)

(165,810,169)

(238,970,139)

     

Cash flows from (used in) financing activities

 

 

 

 

Payments for changes in ownership interests in subsidaries

13

(19,111,686)

-

-

Proceeds from long-term loans

 

3,804,384

19,570,689

15,482,763

Porceeds from short-term loans

 

19,345,325

23,358,700

21,882,842

Total amount from loans

 

23,149,709

42,929,389

37,365,605

Loan payments

 

(25,295,124)

(54,797,023)

(20,766,024)

Payments of finance lease liabilities

 

(1,530,851)

(1,697,649)

(1,745,210)

Payments of loan from related entities

 

(750,000)

(601,494)

(223,225)

Dividends paid

 

(69,819,729)

(66,147,145)

(65,315,914)

Other cash movements

 

(1,945,457)

(2,525,569)

(81,470,807)

Net cash flows used in financing activities

 

(95,303,138)

(82,839,491)

(132,155,575)

     

Net decrease in cash equivalents, before the effect of changes in exchange rate

(60,296,180)

(29,138,788)

(197,504,051)

Effects of changes in exchange rates on cash and cash equivalents

 

1,531,891

6,918,151

3,425,660

     

Cash and cash equivalents, beginning of the year

 

192,554,239

214,774,876

408,853,267

Cash and cash equivalents, final of the year

13

133,789,950

192,554,239

214,774,876

F-10


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, 2016

Note 1General Information

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 amendment 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°, Cristal Cero Radler, Escudo, Kunstmann, Austral, D´olbek, Royal Guard, Morenita, Dorada, Szot, Guayacán and Stones of Lemon, Maracuyá and Apple varieties. 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 in60% of the cities of Salta, Santa Fé and Luján. Its main brands are Schneider, Imperial, Palermo, Bieckert, 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 Kunstmann beer. Additionally, exports beer to different countries in the region mainly under the SchneiderCompany’s shares. IRSA is currently a joint venture between Quiñenco S.A. and Heineken brands. In Argentina, CCU is the exclusive distributor of the energy drink Red Bull. Besides, participates in the cider business, controlling of Saenz Briones, marketing Sidra Real, La Victoria and “1888”Chile Limitada, a company controlled by Heineken Americas B.V., brands leaders in the market. Also participates in the spirits business, which its marketed under El Abuelo brand, 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, flavoured waters with the Native brand, soft drinks with the Nix and nectars with Watt´s brand. 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 and alcoholic business. Its portfolio of non-alcoholic brands consists of Pulp, Watt's, Puro Sol, La Fuente and Zuma. These brands include own, licensed and imported. The Company in the beer business is owner of Sajonia brand and imports Heineken, Coors Light, Coors 1873, Schneider, Paulaner and Kunstmann, brands.

In Colombia, through its joint venture with Central Cervecera de Colombia S.A.S. (“CCC”), CCU participates in the business of beers and malts since November 2014. Its portfolio of beers includes licensed and imported Heineken, Amstel, Murphys and Buckler brands. Its has of exclusive license for the importation, distribution and production of Heineken. Since October 2015, it holds exclusive license to produce and market Coors and Coors Light. Subsequently, from April and July of 2016, were incorporated Tecate and Sol brands, respectively,each with a license contract to produce and market these brands.

In Bolivia, through its associate Bebidas Bolivianas BBO S.A., 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, Real and Natur-all. These brands include own and licensed. The alcoholic brands consist of Real, Capital and Cordillera. 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, 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, 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 and Frugo. In Chile,CCU is the exclusive distributor of the energy drink Red Bull and Perrier water. Besides, through a joint operation also owns the Sprim and Fructus and the licencse Vivo and Caricia brands.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

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 the brands 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.

In the Wine 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 of Viña San Pedro are Altaïr, Cabo de Hornos, Sideral, 1865, Castillo de Molina, Épica, 35 Sur, GatoNegro, Gato, Manquehuito and San Pedro Exportación.  The brands´s portfolio of Viña Tarapacá includes: Gran Reserva Etiqueta Azul, Gran Reserva Etiqueta Negra, Gran Reserva Etiqueta Blanca, Gran Tarapacá, León de Tarapacá and Tarapacá Varietal. The brands´s portfolio of Viña Santa Helena includes: Parras Viejas, 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.

At the end of year 2015, the joint venture in Foods Compañía 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. In addition Foods holds the brand Nutra Bien.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

The detail of the described licenses appears below:

Main brands under license

Licenses

Validity Date

Amstel in Argentina (1)

July 2022

Amstel in Colombia (2)

March 2028

Austral in Chile (3)

July 2018

Blue Moon in Chile (4)

December 2021

Buckler in Colombia (2)

March 2028

Budweiser in Argentina

December 2025

Coors in Paraguay

Negotiating the terms of a new contract

Coors in Chile (5)

December 2025

Coors in Argentina (6)

December 2019

Coors in Colombia (6)

December 2020

Crush, Canada Dry (Ginger Ale, Agua Tónica and Limón Soda) in Chile (7)

December 2018

Gatorade in Chile (8)

December 2018

Heineken in Bolivia (9)

December 2024

Heineken in Paraguay (9)

November 2022

Heineken in Uruguay (9)

10 years renewables

Heineken in Chile and Argentina (10)

10 years renewables

Heineken in Colombia (11)

March 2028

Murphys in Colombia (2)

March 2028

Nestlé Pure Life in Chile (7)

December 2017

Paulaner in Paraguay

April 2019

Pepsi, Seven Up and Mirinda in Chile

December 2043

Red Bull in Argentina

December 2017

Red Bull in Chile (12)

Indefinitely

Schneider in Paraguay

November 2017

Sol in Argentina (10)

10 years renewables

Sol in Chile (10)

10 years renewables

Sol in Colombia (2)

March 2028

Té Lipton in Chile

March 2020

Tecate in Colombia

March 2028

Watt's (nectars, fruit-based drinks and other) rigid packaging, except carton in Chile

Indefinitely

Watt's in Paraguay (6)

May 2019

(1)   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.                                

(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.

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

As of December 31, 20162019 the Company had a total  8,961  employees detailed as follows:

 

Number of employes

 

Parent company

Consolidated

Senior Executives

10

14

Managers and Deputy Managers

89

439

Other workers

306

8,508

Total

405

8,961

These Consolidated Financial Statements include: Statement of 8,186 employees accordingFinancial 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 following detail:previous year (2018) 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 2018 and 2017.

 

Number of employes

 

Parent company

Consolidated

Senior Executives

10

16

Managers and Deputy Managers

79

400

Other employees

276

7,770

Total

365

8,186

 

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. is under the control of Inversiones y Rentas S.A. (IRSA), which is the 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.

The consolidated financial statements include the following direct and indirect significant subsidiaries where the percentage of participation represents the economic interests at the consolidated level:its subsidiaries. All amounts have been rounded to thousand Chilean pesos, except when otherwise indicated.

 

Subsidiary

Tax ID

Country of origin

Functional currency

Share percentage direct and indirect

As of December 31, 2016

As of December 31, 2015

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. (3)

99,501,760-1

Chile

Chilean Pesos

99.0670

0.9164

99.9834

99.9338

Cía. Cervecerías Unidas Argentina S.A. (4)

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

Cayman Islands

Chilean Pesos

99.9999

0.0001

100.0000

100.0000

Inversiones INVEX CCU DOS Limitada

76,126,311-0

Chile

Chilean Pesos

99.8516

0.1484

100.0000

99.9999

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 Limited (5)

0-E

Cayman Islands

Chilean Pesos

61.2146

38.7804

99.9950

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.

76,593,550-4

Chile

Chilean Pesos

98.8398

1.1339

99.9737

99.9732

Millahue S.A.

91,022,000-4

Chile

Chilean Pesos

99.9621

-

99.9621

99.9621

Aguas CCU-Nestlé Chile S.A. (1)

76,007,212-5

Chile

Chilean Pesos

-

50.0669

50.0669

50.0669

CCU Inversiones II Limitada (2)

76,349,531-0

Chile

Chilean Pesos

98.6709

1.3290

99.9999

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. (2)

0-E

Paraguay

Paraguayan guarani

50.0050

-

50.0050

50.0050

Distribuidora del Paraguay S.A. (2)

0-E

Paraguay

Paraguayan guarani

49.9590

-

49.9590

49.9590

Los Huemules S.R.L.

0-E

Argentina

Argentine pesos

-

75.4931

75.4931

26.9680

Bebidas Ecusa SpA. (3)

76,517,798-7

Chile

Chilean Pesos

-

99.9338

99.9338

99.9338

 

 

 

 

 

 

 

 

(*)PublicCompany.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

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. For consolidation purposes, the assets and liabilities of subsidiaries whose functional currency is different from the Chilean peso, are translated into Chilean pesos using the exchange rates prevailing at the date of the Consolidated Financial Statements while the exchange differences caused by the conversion of assets and liabilities are recorded in the Conversion Reserves account under Other equity reserves. Income, costs and expenses are translated at the average monthly exchange rate for the respective periods. These exchange rates have not undergone significant fluctuations during the year, with the exception of subsidiaries in hyperinflationary economies.

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, Escudo, Royal Guard, Morenita, Dorada, Andes, Bavaria and Stones in its Lemon, Maracuyá and Guaraná and Red Citris varieties. The international licensing brands, of which some are produced and other are imported, marketed and distributed by Cervecería CCU, include, among others, 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, Imperial, Kunstmann, Szot, Guayacán, D´olbek and Blue Moon.

In the Chile operating segment, in the non-alcoholic beverage’s category, CCU has the Bilz, Pap, 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, 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.

Additionally, 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, Sabor Andino 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 brands and is the exclusive distributor in Chile of Pernod Ricard in the traditional channel. Finally, in the cider category, the Company owns the Cygan brand.

On August 8th 2019 CCU announced that its subsidiary Compañía Pisquera de Chile S.A. (CPCh), acting through its subsidiary Inversiones Internacionales SpA. and International Spirits Investment USA LLC ended its asociation in Americas Distilling Investment LLC (ADI), owner of the Peruvian Company Bodega San Isidro S.R.L. (BSI).

CCU announced that its subsidiary CPCh, acting through out Inversiones Internacionales SpA. and International Spirits Investments USA LLC, have communicated to LDLM Investment LLC their decision to initiate the sell of its whole participation in Americas Distilling Investment LLC (“ADI”) which amount to 40%. ADI is the owner of the Peruvian Company Bodega San Isidro S.R.L. (“B.S.I”) and the Barsol brand.

CPCh, subject to the terms and conditions - which must still be agreed - would continue to distribute the Barsol brand in Chile. Finally, CPCh has voluntarily made the decision to cease the use of the "Cusqueño Sour" brand and replace it with other brands in its portfolio.

F-13


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

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, Isenbeck, Diosa, Norte, Iguana and Báltica. At the same time it is the holder of exclusive license for the production and marketing of Miller, Heineken, Amstel, Sol, Warsteiner and Grolsch. 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). Additionally, 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 addition of importing other liquors from Chile, as well as also sells and distributes of Eugenio Bustos and La Celia. Since June 2019 has incorporated to its wine portfolio Colon and Graffina brands belonging to the bodega Finca La Celia (subsidiary in Argentina of the Chilean subsidiary Viña San Pedro de Tarapacá S.A. (VSPT)). (SeeNote 1 – General information letter D) number (9)).

In Uruguay, the Company participates in the mineral water and soft drinks business with the Nativa Mas 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. Recently the wine category, with Misiones de Rengo, Eugenio Bustos and La Celia brands were launched.

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 and the FullSport 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.

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 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. Furthermore VSPT has presence in different markets such as: Misiones de Rengo, Viña Mar, Casa Rivas, Leyda, Finca la Celia y Tamarí.

As of May 2019 the purchase of Bodega San Juan, located in province of San Juan to Pernod Ricard Argentina S.R.L. was completed, togheter with the vineyards of Pocito and Cañada Onda as well as Graffina, Colon and Santa Silvia brands.

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. Also it 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 them, this licence was extended only until December 2019.  As of December 2015 Artesanos de Cerveza’s company was acquired togheter with its Brand “Tres Cordilleras”. 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. As of February 2019, the local Andina brand was launched. As of July 2019, the local production of the Tecate brand began and the launch of Natu Malta (alcohol-free product based on malt) was made. Finally, since October 2019 Colombia started to import and market the Kunstmann brand.

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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

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 2027

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

Crush, Canada Dry (Ginger Ale, Agua Tónica and Limón Soda) in Chile (7)

December 2023

Frugo in Chile

Indefinitely

Gatorade in Chile (8)

December 2043

Grolsch in Argentina

May 2028

Heineken in Bolivia (9)

December 2024

Heineken in Chile, Argentina and Uruguay (10)

10 years renewables

Heineken in Colombia (11)

March 2028

Heineken in Paraguay (1)

May 2023

Mas in Uruguay (16)

December 2028

Miller in Argentina (11)

December 2026

Miller and Miller Genuine Draft in Colombia (14)

December 2026

Nestlé Pure Life in Chile (7)

December 2022

Paulaner in Paraguay

April 2022

Pepsi, Seven Up and Mirinda in Chile

December 2043

Red Bull in Chile (12)

Indefinitely

Schneider in Paraguay

May 2023

Sol in Chile and Argentina (10)

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 (15)

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 (13)

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 agreement 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 been 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 was renewed for a period equal to the duration of the Shareholders Agreement of Bebidas CCU-PepsiCo SpA.

(9)

License for 10 years, automatically renewable for periods of 5 years, unless notice of non-renewal.         

(10)

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.      

(11)

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.

(12)

Indefinite contract, notice of termination 6 months in advance.

(13)

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.

(14)

License renewable for one period of 5 years, subject to the compliance of the contract conditions. 

(15)

Prior to the expiry of its term, Parties shall negotiate its continuity for five (5) more years.

(16)

License automatically renewable for periods of 10 years.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

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.

      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).


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

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, 2018, the net effect of the aforementioned compensations generated in the consolidated results of Compañía Cervecerías Unidas S.A. and 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, 2019 have been recognized in Other income by function US$ 3,447,728 (6,451,629 as of December 31, 2018), equivalents to ThCh$ 2,581,452 (ThCh$ 4,840,167 as of December 31, 2018); 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 volume and the timing of 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, 2019 have been recognized in results an amount of US$ 21,372,012 (US$ 19,802,868 as of December 31, 2018) equivalents to ThCh$ 16,002,081 (ThCh$ 14,251,811 as of December 31, 2018).

This transaction did not result in impairment of the productive assets of the Company.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

D)Direct and indirect significant subsidiaries

The consolidated financial statements include the following direct and indirect subsidiaries where the percentage of participation represents the economic interest at a consolidated level:

Subsidiary

Tax ID

Country of origin

Functional currency

Share percentage direct and indirect

As of December 31, 2019

As of December 31, 2018

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. (***) (5)

76,035,409-0

Chile

Chilean Pesos

-

25.0006

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.

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

49.9888

CCU Inversiones II Ltda. (8)

76,349,531-0

Chile

US Dollar

99.7435

0.2565

100.0000

100.0000

Cervecería Szot SpA. (***) (13)

76,481,675-7

Chile

Chilean Pesos

-

25.0009

25.0009

-

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

Inversiones Invex CCU Ltda.

76,572,360-4

Chile

US Dollar

6.7979

93.1941

99.9920

99.9920

Promarca Internacional SpA. (***)

76,574,762-7

Chile

US Dollar

-

49.9917

49.9917

49.9917

CCU Inversiones S.A. (3)

76,593,550-4

Chile

Chilean Pesos

99.0242

0.7533

99.7775

99.7775

Inversiones Internacionales SpA.

76,688,727-9

Chile

US Dollar

-

80.0000

80.0000

80.0000

New Ecusa S.A. (10)

76,718,230-9

Chile

Chilean Pesos

-

-

-

99.9834

Promarca S.A. (***)

76,736,010-K

Chile

Chilean Pesos

-

49.9917

49.9917

49.9917

CCU Inversiones III SpA. (6)

76,933,685-0

Chile

US Dollar

-

99.9950

99.9950

99.9950

Vending y Servicios CCU Ltda. (10)

77,736,670-K

Chile

Chilean Pesos

-

-

-

99.9779

Transportes CCU Ltda.

79,862,750-3

Chile

Chilean Pesos

98.0000

2.0000

100.0000

100.0000

Fábrica de Envases Plásticos S.A. (12)

86,150,200-7

Chile

Chilean Pesos

95.8904

4.1080

99.9984

99.9966

Millahue S.A.

91,022,000-4

Chile

Chilean Pesos

99.9621

-

99.9621

99.9621

Viña San Pedro Tarapacá S.A. (*) (3)

91,041,000-8

Chile

Chilean Pesos

-

82.9870

82.9870

82.9870

Manantial S.A.

96,711,590-8

Chile

Chilean Pesos

-

50.5507

50.5507

50.5507

Viña Altaïr SpA.

96,969,180-9

Chile

Chilean Pesos

-

82.9870

82.9870

82.9870

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. (10)

99,501,760-1

Chile

Chilean Pesos

98.8000

1.1834

99.9834

99.9834

Viña Valles de Chile S.A. (3)

99,531,920-9

Chile

Chilean Pesos

-

-

-

82.9870

Comercial CCU S.A.

99,554,560-8

Chile

Chilean Pesos

50.0000

49.9888

99.9888

99.9888

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

59.1971

Bodega San Juan S.A.U. (9)

0-E

Argentina

Argentine Pesos

-

82.9870

82.9870

-

Cía. Cervecerías Unidas Argentina S.A. (2)

0-E

Argentina

Argentine Pesos

-

99.9936

99.9936

99.9936

Compañía Industrial Cervecera S.A.

0-E

Argentina

Argentine Pesos

-

99.9950

99.9950

99.9950

Finca La Celia S.A. (9)

0-E

Argentina

Argentine Pesos

-

82.9870

82.9870

82.9870

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. (4)

0-E

Bolivia

Bolivians

-

51.0000

51.0000

51.0000

International Spirits Investments USA LLC

0-E

United States

US Dollar

-

80.0000

80.0000

80.0000

Inversiones CCU Lux S.à r.l. (7)

0-E

Luxemburg

US Dollar

-

99.9999

99.9999

99.9999

Southern Breweries S.C.S. (1)

0-E

Luxemburg

US Dollar

38.7810

61.2141

99.9951

99.9951

Bebidas del Paraguay S.A. (**)

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

Promarca Internacional Paraguay S.R.L. (***)

0-E

Paraguay

Paraguayan Guaranies

-

49.9917

49.9917

49.9917

Sajonia Brewing Company S.R.L. (***)

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. (11)

0-E

Uruguay

Uruguayan Pesos

-

99.9999

99.9999

99.9999

 

 

 

 

 

 

 

 

 (*)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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

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, 2016 and December 31, 2015, 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, 2019

As of December 31, 2018

%

%

Aguas CCU-Nestlé Chile S.A.

76,007,212-5

Chile

Chilean Pesos

50.0917

50.0917

Cervecera Guayacán SpA. (***) (5)

76,035,409-0

Chile

Chilean Pesos

25.0006

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.

76,248,389-0

Chile

Chilean Pesos

100.0000

100.0000

Bebidas CCU-PepsiCo SpA. (***)

76,337,371-1

Chile

Chilean Pesos

49.9888

49.9888

CCU Inversiones II Ltda. (8)

76,349,531-0

Chile

US Dollar

100.0000

100.0000

Cervecería Szot SpA. (***) (13)

76,481,675-7

Chile

Chilean Pesos

25.0009

-

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

Inversiones Invex CCU Ltda.

76,572,360-4

Chile

US Dollar

99.9920

99.9920

Promarca Internacional SpA. (***)

76,574,762-7

Chile

US Dollar

49.9917

49.9917

CCU Inversiones S.A. (3)

76,593,550-4

Chile

Chilean Pesos

99.7775

99.7775

Inversiones Internacionales SpA.

76,688,727-9

Chile

US Dollar

80.0000

80.0000

New Ecusa S.A. (10)

76,718,230-9

Chile

Chilean Pesos

-

99.9834

Promarca S.A. (***)

76,736,010-K

Chile

Chilean Pesos

49.9917

49.9917

CCU Inversiones III SpA. (6)

76,933,685-0

Chile

US Dollar

100.0000

100.0000

Vending y Servicios CCU Ltda. (10)

77,736,670-K

Chile

Chilean Pesos

-

99.9779

Transportes CCU Ltda.

79,862,750-3

Chile

Chilean Pesos

100.0000

100.0000

Fábrica de Envases Plásticos S.A. (12)

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. (*) (3)

91,041,000-8

Chile

Chilean Pesos

82.9870

82.9870

Manantial S.A.

96,711,590-8

Chile

Chilean Pesos

50.5507

50.5507

Viña Altaïr SpA.

96,969,180-9

Chile

Chilean Pesos

82.9870

82.9870

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. (10)

99,501,760-1

Chile

Chilean Pesos

99.9834

99.9834

Viña Valles de Chile S.A. (3)

99,531,920-9

Chile

Chilean Pesos

-

82.9870

Comercial CCU S.A.

99,554,560-8

Chile

Chilean Pesos

100.0000

100.0000

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

Bodega San Juan S.A.U. (9)

0-E

Argentina

Argentine Pesos

82.9870

-

Cía. Cervecerías Unidas Argentina S.A. (2)

0-E

Argentina

Argentine Pesos

100.0000

100.0000

Compañía Industrial Cervecera S.A.

0-E

Argentina

Argentine Pesos

100.0000

100.0000

Finca La Celia S.A. (9)

0-E

Argentina

Argentine Pesos

82.9870

82.9870

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. (4)

0-E

Bolivia

Bolivian

51.0000

51.0000

International Spirits Investments USA LLC

0-E

United States

US Dollar

80.0000

80.0000

Inversiones CCU Lux S.à r.l. (7)

0-E

Luxemburg

US Dollar

99.9999

99.9999

Southern Breweries S.C.S. (1)

0-E

Luxemburg

US Dollar

100.0000

100.0000

Bebidas del Paraguay S.A. (**)

0-E

Paraguay

Paraguayan Guaranies

50.0049

50.0049

Distribuidora del Paraguay S.A. (**)

0-E

Paraguay

Paraguayan Guaranies

49.9589

49.9589

Promarca Internacional Paraguay S.R.L. (***)

0-E

Paraguay

Paraguayan Guaranies

49.9917

49.9917

Sajonia Brewing Company S.R.L. (***)

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. (11)

0-E

Uruguay

Uruguayan Pesos

99.9999

99.9999

 

 

 

 

 

 

 (*)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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Subsidiary

Tax ID

Country of origin

Functional currency

Share percentage with voting rights

As of December 31, 2016

As of December 31, 2015

%

%

Cervecera CCU Chile Limitada

96,989,120-4

Chile

Chilean Pesos

100.0000

100.0000

Embotelladora Chilenas Unidas S.A. (3)

99,501,760-1

Chile

Chilean Pesos

99.9834

99.9338

Cía. Cervecerías Unidas Argentina S.A. (4)

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

Cayman Islands

Chilean Pesos

100.0000

100.0000

Inversiones INVEX CCU DOS 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 Limited (5)

0-E

Cayman Islands

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.

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. (1)

76,007,212-5

Chile

Chilean Pesos

50.1000

50.1000

CCU Inversiones II Limitada (2)

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. (2)

0-E

Paraguay

Paraguayan guarani

50.0050

50.0050

Distribuidora del Paraguay S.A. (2)

0-E

Paraguay

Paraguayan guarani

49.9590

49.9590

Los Huemules S.R.L.

0-E

Argentina

Argentine pesos

100.0000

24.9680

Bebidas Ecusa SpA. (3)

76,517,798-7

Chile

Chilean Pesos

99.9338

99.9338

 

 

 

 

 

 

 

The main movements in the ownership of the subsidiaries included in these consolidated financial statements are the following:

(1) Southern Breweries S.C.S. (SB SCS) (Ex Southern Breweries Limited)

On December 7, 2018, Southern Breweries Limited (Subsidiary of CCU) was re-domiciled 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.

(1) Aguas CCU-Nestlé(2) 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.

(3) CCU Inversiones S.A., Viña San Pedro Tarapacá S.A. (VSPT) and Viña Valles de Chile S.A. (VVCH)

 

On January 29, 20162018, the subsidiaries Aguas CCU-Nestléoutcome notice of the tender offer was published, as result CCU Inversiones S.A. acquired an additional 15.79% of VSPT 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 a 99.02% stake in this subsidiary.

On July 31, 2018, subsidiary Viña Orgánica SPT S.A. merged with Viña San Pedro Tarapacá S.A., 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.

Viñas Valles de Chile S.A. (“Aguas”)(VVCH) dissolved and Embotelladoras Chilenas Unidas S.A. (“ECUSA”) have acquired 48.07%merged into VSPT, being the latter the surviving entity, as the result of VSPT becoming, pursuant to a share purchase agreement executed on May 21, 2019 between Viña Altaïr SpA. and 0.92%VSPT, the sole owner, in a period that exceeded 10 days, of all of the shares of Manantial S.A. (“Manantial”) respectively, exercisingVVCH. This merger had legal and accounting effects as of June 1, 2019. VVCH Board of Directors´ Resolution evidencing the call option granteddissolution of VVCH was executed as public deed on June 4, 2019, and further registered in the Shareholders’ AgreementRegister of Manantial. AsCommerce and published in the Official Gazette.

(4) 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 consequence, CompañíBolivian and a Cervecerías Unidas S.A. is currentlyclosed 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, on August 9, 2018, the indirect owner of 100%Company acquired an additional the 17% 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. The totalBBOfor an amount of US$ 8,500,000, equivalents to ThCh$ 5,457,935, thus resulting in a 51% stake in BBO (seeNote 15 – Business combinations).  The Company has determined the fair values of assets and liabilities for this transaction was ThCh$ 19,111,686.business combination as follows:


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

(2) CCU Inversiones II Limitada

On December23,2013, the Company acquired 50.005% and 49.959% of the stock of Bebidas del Paraguay S.A. and Distribuidora del Paraguay S.A., respectively. This transaction allows the Company, participates 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. Subsequently, on June 9, 2015, the Company paid a committed capital of ThCh$ 7,414,290and this transaction does not change the percentage of participation.

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, and accordingly is presented in the consolidated financial statements of CCU.

As explained inNote 8, on March 31, 2016, through its subsidiary Bebidas del Paraguay S.A., acquired 51% of the stock rights of paraguayan company Artisan SRL. The amount of this transaction was ThCh$ 641,489 (equivalents to US$ 1,000,000). At the date of issuance of these consolidated financial statements the fair value is still preliminary and that the Company is not expecting that the final fair value to be significantly different.

Addittionaly, as explained inNote 19, the Company participates of 50% of shares of Central Cervecera de Colombia S.A.S.

 

(3) Embotelladoras Chilenas Unidas S.A.

On November 16, 2015,formed a new company called Bebidas ECUSA SpA.,where the subsidiary Embotelladoras Chilenas Unidas S.A. has the 100% of shares. The purpose of this companyis the distribution, transport, import, export and marketing in general, on all types of soft drinks.

As explained inNote 1 (1) before mentioned, on January 29, 2016, Embotelladoras Chilenas Unidas S.A. acquired 0.92% of the stock rights of Manantial S.A.

(4) Compañía Cervecerías Unidas Argentina S.A.

On January 7, 2016, throgh the argentinian subsidiary Compañía Industrial Cervecera S.A. (CICSA), the Company acquired 50.99% of the stock rights of Los Huemules SRL, after Mr. Juan Javier Negri declared its commitment character of CICSA and notified such situation to Los Huemules SRL. As a consequence of the above mentioned the shareholders of Los Huemules SRL. are Compañía Cervecera Kunstmann S.A. and CICSA with 49.01% and 50.99%, respectively. The final amount of this transaction was ThCh$ 118,092.

(5) Southern Breweries Limited

On August 26, 2016, the subsidiaries Saint Joseph Investments Limited and South Investments Limited was merged in CCU Cayman Limited, latter being the continuing legal entity.

Besides, on October 2016, Southern Breweries Establishment, subsidiary of CCU in Liechtenstein, changed its named to "Southern Breweries Aktiengesellschaft" and on October 18, 2016 re-domiciling it to Cayman Islands. Subsequently, on November 2016, was modified the statutes of such subsidiary and changed its name by the "Southern Breweries Limited". Finally, starting December 1, 2016, the subsidiary CCU Cayman Limited before mentioned was merged in Southern Breweries Limited, latter being the continuing legal entity. Transactions mentioned above had no significant effects on the results of the Company.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Below we briefly describe the companies that qualify as joint operations:

(a) Promarca S.A.

Promarca S.A. is a closed stock company with its main activity being the acquisition, development and administration of trademarks and their corresponding licenses to their operators.

OnDecember 31, 2016, Promarca S.A. recorded a profit of ThCh$ 4,812,696 (ThCh$ 4,708,318 in 2015 and ThCh$ 4,646,620 in 2014), which in accordance with the Company´s policies is 100% distributable.

At the Extraordinary Shareholders´ Meetings of Promarca S.A. held on June 2016, agreed to increase the Paid-in capital (jointly the "Capital Increase"). The Capital Increase was subscribed by the subsidiary New Ecusa S.A. and Watt´s Dos S.A.in equal parts, and who maintained its current 50% of the stock rights, through the Paid-in capital of ThCh$ 8,199,240 and 100% of stock rights of the company the Promarca Internacional SpA. (which its main activity are the exploitation and development of Watt´s brands in Argentina, Paraguay, Uruguay and Bolivia). From June 2016, Promarca Internacional SpA., it became a subsidiary in a 100% of Promarca S.A. During June 30, 2016, for this joint operation has determined the following fair values of assets and liabilities:

 

Assets and Liabilities

Fair Value

ThCh$

IntangibleTotal current assets other than goodwill

11,229,1493,942,346

Total non-current assets

11,229,14923,915,061

Total Assets

11,229,14927,857,407

Deferred tax liabilities

3,029,909

Total current liabilities

3,029,9095,393,779

Total non-current liabilities

9,181,670

Total liabilities

14,575,449

 

 

Net identifiable assets acquired

8,199,24013,281,958

Non-controlling interests

(6,508,159)

Goodwill

10,480,792

Amount paidInvestment value

8,199,24017,254,591

 

As a result of the previously mentioned fair values determined previouslyintangibles and in according to rights on the joint operation,goodwill have been generated, intangibleswhich 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.

On June 28 and July 11, 2019 the subsidiary CCU Inversiones II Ltda. made capital contributions to Bebidas Bolivianas BBO S.A. for an amount of US$ 1,249,713 y US$ 178,305 (equivalent to ThCh$ 849,630 and ThCh$ 122,210), respectively, since both partners concurred with the same contributions, the participation percentages were maintained.

(5) 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$ 5,614,575 described inNote 20.

(b) Compañía Pisquera Bauzá S.A.

On December 2, 2011,361,560, equivalent to 39,232 shares and the subsidiary Compañía Pisquera de Chile S.A. (CPCh) signed a license agreement for the commercializationsubscription and distribution of the pisco 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 brand Bauzá in Chile. The family Bauzá owns 51% of that company and all of its productive assets, thereby continuing the link to the production of pisco Bauzá maintaining its quality, origin and premium character.

On December 31,2015, CPB recorded a profitpayment of ThCh$ 82,663 (ThCh$ 109,207470,711, equivalent to 49,038 shares. As a consequence above mentioned CKhas the 50.0004% stake in 2014), which in accordance with the Company´s policies is 100% distributable.

On January 7, 2016, CPCh sold its interest of 49% to Agroproductos Bauzá S.A. (agroproductos Bauzá). At the end of December 31, 2015 this joint operation was classified to Assets of disposal group held for saleCervecera Guayacán SpA. (seeNote 2415 – Business combinations).

(c) Bebidas CCU-Pepsico SpA.

On October 23, 2013, Bebidas CCU-PepsiCo SpA (BCP) was incorporated, which is qualifies 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 commenced on January 1, 2014.

On December 31, 2016, BCP recorded a profit of ThCh$ 1,066,005 (ThCh$ 802,418 in 2015 and ThCh$ 789,648 in 2014), which in accordance with the Company´s policies is 100% distributable.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

(d) Bebidas Carozzi CCU SpA.

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) where 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 in the national territory. The total disbursement by ECCUSA in this transaction was an amount of ThCh$ 21,846,500. Its operations commenced on December 1, 2015. During year 2016for this joint operation has determined the following fair values of assets and liabilities:liabilities for this business combination as follows:

 

Assets and Liabilities

Fair Value

ThCh$

Cash and cash equivalent

1

Total current assets

1507,149

Intangible assets other than goodwill

15,495,163

Total non-current assets

15,495,1631,355,220

Total Assets

15,495,1641,862,369

Deferred tax liabilities

4,181,760

Total current liabilities

4,181,760238,265

Total non-current liabilities

306,828

Total liabilities

545,093

 

 

Net identifiable assets

11,313,4041,317,276

Non-controlling interests

(5,656,702)(658,633)

Goodwill

16,189,798456,007

Amount paidInvestment value

21,846,5001,114,650

              

As a result of the previously mentioned fair values determined previouslyintangibles and in according to rights on the joint operation,goodwill have been generated, intangibles and goodwill for an amount of ThCh$ 7,747,581 and ThCh$ 16,189,798, respectively (seewhich are exposed inNote 20 and 2117 – Intangible assets other than goodwill)and Note 18 – Goodwill.

 

As of December 31, 2015, the Company was in the process of assessing of the fair values of acquisitions above mentioned, so it was recorded under Other non-financial non-current assets for an amount of ThCh$ 21,846,500,however for comparison purposes of this Consolidated Financial Statements, the Company have been reclassified from Other non-financial non-current assets to Intangibles, Goodwill and Deferred taxes as is shown below:

Non-current assets

Balances presented at 12.31.2015

Reclassification

Balances 31.12.2015

ThCh$

ThCh$

ThCh$

Other non-financial assets

 

27,067,454

(21,846,500)

5,220,954

Intangible assets other than goodwill

 

64,120,426

7,747,581

71,868,007

Goodwill

 

83,300,573

16,189,799

99,490,372

 

 

 

 

 

     

Non-current liabilities

Balances presented at 12.31.2015

Reclassification

Balances 31.12.2015

ThCh$

ThCh$

ThCh$

Deferred tax liabilities

 

88,146,963

2,090,880

90,237,843

 

 

 

 

 

On December 31, 2016, BCCCU recorded a profit of ThCh$ 797,268 (ThCh$ 402,228 in 2015), which in accordance with the Company´s policies is 100% distributable.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

(6) 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.

(7) 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.

(8) 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.

On May 27 and June 12, 2019, the Company made capital contributions to the subsidiary CCU Inversiones II Ltda. For an amount of US$ 3,200,000 (equivalent toThCh$ 2,223,488) and US$ 1,428,017 (equivalent toThCh$ 990,473).

On September 6, 2019, the Company made a capital contribution to the subsidiary CCU Inversiones II Ltda. For an amount of US$ 10,000,000 (equivalent toThCh$ 7,233,000).

(9) Finca La Celia S.A. and Bodega San Juan S.A.U.

On January 28, 2019, Bodega San Juan S.A.U. was established in Argentina, where the subsidiary Finca la Celia S.A. made a capital contribution of ARS 100,000 (100,000 ordinary, non-endorsable nominal shares).

On March 1, 2019, the subsidiary VSPT made a capital increase at the subsidiary Finca La Celia S.A. for US$ 7,000,000 through the issuance of 265,300.00 ordinary, non-endorsable shares.

On May 31, 2019, the subsidiary VSPT made a capital increase at the subsidiary Finca La Celia S.A. for US$ 14,000,000 through the issuance of 607,600,000 non-endorsable nominal shares.

The aforementioned had no significant effects on the Company's results.

Graffina Business

In December 2018, the subsidiary VSPT signed an agreement to acquire a part of the Pernod Ricard wine business in Argentina. The purchase agreement, subject to local regulatory approval, included the Argentine wine brands Graffigna, Colón and Santa Silvia, which represent approximately 1.5 million boxes 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.

On January 28, 2019, the Argentine subsidiary Finca La Celia S.A. constituted the Bodega San Juan S.A.U. through a capital contribution of ARS 100,000, in order to use it as a vehicle for the acquisition of the Graffigna, Colón and Santa Silvia wine business of Pernod Ricard Argentina S.R.L., in addition to the purchase of Bodega Graffigna and Pocito vineyards, Cañada Honda and La Consulta.

On May 31, 2019, the subsidiary VSPT made a capital contribution to the subsidiary Finca La Celia S.A. by US$ 14,000,000, equivalent toThCh$9,910,040 and on the same date, Finca La Celia S.A. made a capital contribution to Bodega San Juan S.A.U. for US$ 2,806,820, equivalent toThCh$ 1,986,836.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

The Company has determined the provisional fair values of assets and liabilities for this business combination as follows:

Assets and Liabilities

Fair Value

ThCh$

Total current assets

4,470,464

Total non-current assets

8,783,049

Total Assets

13,253,513

Total current liabilities

370,326

Total non-current liabilities

1,200,124

Total liabilities

1,570,450

Identificable Net Assets Acquired / Investment value

11,683,063

Bargain purchase gain (1)

3,043,107

Investment value

8,639,956

 

 (1) SeeNote 31 – Other gain (losses)

(10)Embotelladoras Chilenas Unidas S.A., New Ecusa S.A. and Vending y Servicios CCU Ltda.

On April 1, 2019, the subsidiary New Ecusa S.A. was merged into Embotelladoras Chilenas United S.A., the latter becoming its legal continuator. The transaction mentioned above had no significant effect on the Company's results.

On June 1, 2019, the subsidiary Vending y Servicios CCU Ltda. merged into Embotelladoras Chilenas Unidas S.A., the latter becoming its legal continuator. The aforementioned had no significant effects on the Company's results.

(11)Milotur S.A.

On May 27, 2019, the subsidiary CCU Inversiones II Ltda. made a capital contribution to Milotur S.A. for an amount of US$ 3,200,000 (equivalent toThCh$ 2,223,488), maintaining its participation percentage.

(12)Fábrica de Envases Plásticos S.A. (Plasco)

According to Plasco's Extraordinary Shareholder meeting dated May 31, a capital increase ofThCh$ 10,000,000 was agreed upon with the issuance of 16,000,000 shares at a price of $ 625 per share. Likewise, it is stipulated in said meeting, that the shareholder Millahue S.A. will not concur in this increase. For this reason, 100% of the increase will be made by CCU S.A. This increase was materialized on June 25, 2019.

(13)Cervecería Szot SpA.

On August 30, 2019, the subsidiary Cervecería Kunstmann S.A. (CK) acquired an additional 5,001% of Cervecería Szot SpA. from the purchase of 5,001 shares, equivalent toThCh$ 6,156. As a result of the aforementioned, CK reached a total participation of 50,0010% on this subsidiary.(SeeNote 15 – Business combinations).


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

For this business combination, the provisional fair values ​​of assets and liabilities were determined, which are the following:

Assets and Liabilities

Fair Value

ThCh$

Total current assets

131,599

Total non-current assets

451,672

Total Assets

583,271

Total current liabilities

158,551

Total non-current liabilities

90,067

Total liabilities

248,618

Identificable Net Assets Acquired / Investment value

334,653

Non-controlling interests

(167,323)

Investment value

167,330

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, respectively.

E)Subsidiaries with direct or indirect participation of less than 50%

These Consolidated Financial Statements incorporate as a subsidiary to Distribuidora del Paraguay S.A., a company in which we have a total participation of 49.9589%.

Bebidas del Paraguay S.A. (BdP) and Distribuidora del Paraguay S.A. (DdP) are considered to be one economic group that shares their operational and financial strategy, leaded by the same management team that seeks compliance with the strategic 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 and marketing of BdP’s products. The administrative and commercial integration added to its operational and financial dependence of DdP explain the reason why BdP proceeds to present this entity as a subsidiary of CCU.

F) Joint operations:

(a) Promarca S.A.

Promarca S.A. is a closed stock company whose main activity is the acquisition, development and administration of trademarks and their corresponding licensing to their operators.

On December 31, 2019, Promarca S.A. recorded a profit ofThCh$ 4,511,337 (ThCh$ 4,581,922  in 2018 and ThCh$  4,524,117  in 2017), which in accordance with the Company’s policies is 100% distributable.

(b) 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, 2019, BCP recorded a profit of ThCh$  1,243,574  (ThCh$  1,137,233 in 2018 and ThCh$  1,078,916 in 2017), which in accordance with the Company’s policies is 100% distributable.

(c) Bebidas Carozzi CCU SpA.(BCCCU)

The purpose of this company is the production, marketing and distribution of instant powder drinks in the national territory.

On December 31, 2019, BCCCU recorded a profit of ThCh$ 1,157,424 (ThCh$ 1,263,169 in 2018 and ThCh$ 2,278,345  in 2017), 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 partiestheparties 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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

 

Note 2 Summary of significant accounting policies

 

 Significant accounting policies adopted for the preparation of these consolidated financial statements are described below:

2.1           Basis of preparation

 

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, 2016, 2015 and 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, 2016, 2015 y 2014.

The amounts shownstandards included 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, 2016, have been adopted by the Company, without significant impacts in the financial statements as of December 31, 2016.

At the date of issuance of these consolidated financial statementsConsolidated Financial Statements the following Standars,Standards, Amendments, Improvements and Interpretations to existing IFRS standards have been published. not taken effect and the Company has not adopted in advance.

These standards are required to be applied as following:by the following dates:

 

New Standards,Next Standard Improvements and Amendments, ImprovementsandInterpretations

Mandatory for years beginning in:

Amendments to IAS 71 and IAS 8

Disclosure Initiative.Presentation of Financial Statements and Accounting Policies, Changes in Accounting Estimates and Errors.

January, 1, 20172020

Amendments to IFRS 3

Definition of a Business.

January, 1, 2020

IFRS 17

Insurance Contracts.

January, 1, 2021

Amendments to  IAS 1239, IFRS 7 and IFRS 9

Recognition of Deferred Tax Assets for Unrealised Losses.Interest Rate Benchmark Reform.

January, 1, 2017

Improvement to IFRS 12

Disclosure of Interest in Other Entities.

January, 1, 2017

Amendments to IFRS 2

Classification and Measurement of Share-based Payment Transactions.

January, 1, 2018

IFRIC Interpretation 22

Foreign Currency Transactions and Advance Consideration.

January, 1, 2018

Amendments to IAS 40

Transfers of Investment Property.

January, 1, 2018

Improvement to IAS 28

Investment in Associates and Joint Ventures: Measuring an associate or joint venture at fair value.

January, 1, 2018

IFRS 9

Financial Instruments.

January, 1, 2018

IFRS 15

Revenue fro Contracts with Customers.

January, 1, 2018

IFRS 15

Clarifications to IFRS 15 Revenue fro Contracts with Customers.

January, 1, 2018

IFRS 16

Leases.

January, 1, 20192021

 

 

 

 

AsThe Company estimates the adoption of December 31, 2016, the company is in the process of evaluating the impact of adopting the IFRS 9, IFRS 15these new Standards, Improvements, Amendments and IFRS 16. These standards will not be early adopted. For the rest of the standardsInterpretations mentioned in the table above the Company doeswill not expecthave a material impact on the consolidated financial statements upon initial application.Consolidated Financial Statements.

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

2.2           Basis of consolidation

 

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. When assessing whether the Company controls another entity, the existence and effect of potential voting rights that are currently liable to be exercised at the date of the Consolidated Financial Statements is considered. 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.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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

 

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.

 

Non-controlling Interest

 

The non-controllingNon-controlling interest is presented in the Equity section of the Consolidated Statement 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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

 

2.3           Financial information as per operating segments

 

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 chief operating decision maker in order to make decisions about the resources to be allocated to the segment and assess its performance(SeeNote 76 - Financial information as per operating segment).

 

The segments performance is measured according to several indicators, of which OR (Adjust Operating Result), OR before Exceptional Items (EI), ORBDA (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 Net 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 ORBDA, for the Company purposes, is defined as Adjusted Operating Result before Depreciation and Amortization.

 

MSD&A, included Marketing, Selling, Distribution and Administrative expenses.

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

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.

OR before exceptional items (EI) and ORBDA before EI are defined as OR plus exceptional items and ORBDA plus exceptional items, respectively.

Corporate revenues and expenses are presented separately within the other.

2.4           Foreign currency and unidad de fomento (Adjustment unit)adjustment units

 

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, Paraguayan and ParaguayanBolivian 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 areassociate in Perú is the Colombian pesoPeso and Boliviano,Sol, respectively.

 

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 correspondingrespective fiscal years. These exchange rates have not suffered significant fluctuations during 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 below), 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.

Financial information in hyperinflationary economies

Inflation in Argentina has shown significant increases since the beginning of 2018. The three-year cumulative inflation rate, calculated using different combinations of consumer price indices, has exceeded 100% for several months, and it is still increasing. The three-year cumulative 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.

In accordance with the foregoing, IAS 29 must be applied by all those 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 as differences since thereof the purchasing power in force at the end of the reporting period. This implies that the restatement of non-monetary items must be made from their date of origin, last restatement, appraisal or other particular date in some very specific cases.

The adjustment factor used in each case is that obtained based on the combined index of the National Consumer Price Index (CPI), with the Wholesale Price Index (IPIM), published by the National Institute of Statistics and Census of the Argentinian 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 the functional currency of ahyperinflationary economy be restated in accordance with IAS 29, before being converted for these to be included in the consolidated financial statements. The comparative amounts presented above (until the semester ended June 30, 2018 for purposes of the Consolidated Statement of Income by Function, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows in Chilean pesos) They have not been significant fluctuations in the exchange rates during each month.restated.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

The re-expression of non-monetary items is made from the date of initial recognition in the statements of financial position and considering that the financial statements are prepared under the criteria of historical cost.

Hyperinflation re-expression will be recorded until the period in which the entity's economy ceases to be considered a hyperinflationary economy; at that time, adjustments made by hyperinflation will be part of the cost of non-monetary assets and liabilities.

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, 2016, 2015 y 2014areare detailed as follows:

 

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, 2016

As of December 31, 2015

As of December 31, 2014

Chilean Pesos as per unit of foreign currency or adjustable unit

As of December 31, 2019

As of December 31, 2018

As of December 31, 2017

Ch$

Ch$

Ch$

Foreign currencies

 

 

 

 

 

 

 

US Dollar

USD

669.47

710.16

606.75

USD

 

748.74

694.77

614.75

Euro

EUR

705.60

774.61

738.05

EUR

 

839.58

794.75

739.15

Argentine Peso

ARG

42.13

54.46

70.96

ARS

 

12.50

18.43

32.96

Uruguayan Peso

UYU

22.82

23.71

24.90

UYU

 

20.07

21.44

21.34

Canadian Dollar

CAD

 

573.26

509.62

491.05

Sterling Pound

GBP

826.10

1,053.02

944.21

GBP

 

983.24

882.36

832.09

Paraguayan guarani

PYG

0.12

0.12

0.13

Bolivians

BS

97.59

103.67

88.45

Paraguayan Guarani

PYG

 

0.12

0.12

0.11

Swiss Franc

CHF

 

773.81

706.00

631.16

Bolivian

BOB

 

107.58

101.28

89.61

Australian Dollar

AUD

 

524.25

489.17

480.31

Danish Krone

DKK

 

112.41

106.44

99.31

Brazilian Real

BRL

 

186.51

179.59

185.64

Colombian Peso

COP

0.22

0.22

0.25

COP

 

0.23

0.21

Adjustment Units

 

 

 

Unidad de fomento*

UF

26,347.98

25,629.09

24,627.10

Adjustment units

 

 

 

 

Unidad de fomento (*)

UF

 

28,309.94

27,565.79

26,798.14

Unidad de indexada (**)

UI

 

87.98

86.19

79.62

 

 

 

 

 

 

 

 

*(*) 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, 2019

As of December 31, 2018

As of December 31, 2017

Argentina Consumer Price Index

 

 

284.14

               184.13

               124.80

Index percentage variation of Argentina Consumer Price Index

 

 

54.2%

47.5%

24.8%

 

 

 

 

 

 

2.5           Cash and cash equivalents

 

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, with a high liquidity, all at a fixed interest rate, normally with an original maturity of up to three months.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

 

2.6           Other financial assets

 

Other financial assets include money market securities, derivativesderivative contracts and time deposits at financial entities with a maturity overmaturing in more than 90 days.

2.7           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 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.

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

The Company acquires loan insurancespurchases credit insurance covering approximately 90% and 99% of the individually significant accounts receivable balances for the domestic market and the international market, respectively, of the total of accountstrade 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 different 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 uncollectibility, also 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.

 

The Company considers that these financial assets are past-due when: i) The debtor is unlikely to pay its obligations and the Company it hasn’t still taken actions such as to claim the credit insurance, or ii) The financial asset has exceeded the contractually agreed expiration date.

a) Measurement of expected loss

The Expected Credit Loss corresponds to the probability of credit losses according to recent history considering the uncollectability of the last three mobile years. These historical indices are adjusted according to the monthly payment and amount of the different historical trade receivables. Additionally, the portfolio is analyzed according to its solvency probability for the future, its recent financial history and market conditions, to determine the category of the client, for the constitution of impairment in relation to its defined risk.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

b) Credit impairment

On each issuing date of the Financial Statements, the Company evaluates if these financial assets measured at amortized cost have credit impairment. A financial asset has a "credit impairment" when one or more events occur that have a detrimental impact on the estimation of future cash flows. Additionally, the Company includes information on the effects of modifications to the contractual effective flows (repactations), which are minor and correspond to specific cases with strategic clients of the Company.

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 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.

 

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 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.

 

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. The fair value of derivative financial instruments that do not qualify for hedge accounting areis immediately recognized in the consolidated statement of income under Other gains (losses).  The fair value of these derivatives areis recorded under Other financial assets yand Other financial liabilities.

Derivative instruments are classified as held for trading unless they are classified as hedge instruments.

 

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 ininceptionin 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%.

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

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 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 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 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.

 

2.8            Financial asset impairment

 

At

As 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.

 

2.9           Inventories

 

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 forassetsfor 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.

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

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.

2.10       Biological currentCurrent biological assets

 

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.

2.11       Other non-financial assets

 

Other non-financial assets mainly includes advance paymentsprepayments associated with advertising related to contracts regarding the making of commercials which are work in progress 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 equipment. Additionally it includes disbursements related to tax payments to be recovered from subsidiaries in Argentina,paid guarantees paid related with leases and materials to be consumed related to industrial security tools.safety implements.

2.12       Property, plant and equipment

 

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 future economic 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.

 

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

Fumiture and accesories

5 to 10

Other equipment (coolers and mayolicas)

5 to 8

Glass containers, and plastic containers

3 to 12

Vines in production

30

 

 

 

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.

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

 

Costs incurred in acquiring and planting new vines are capitalized.

 

Additionally, the “Right of use assets” are included under PPE, according to IFRS 16.

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 2.17)- Summary of significant accounting policies 2.17).

 

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.

2.13       Leases

 

Lease agreementscontracts are classified as financial leases whenrecorded by recognizing an asset for the agreement transfersright to use the assets subject to operational lease contracts and a liability, which is equivalent to the present value of the payments associated to the contract. It should be noted that the assets and liabilities arising from a lease contract are initially measured at its present value.

Regarding the effects on the Consolidated Statement of Income, the depreciation of the right of use is recognized on a monthly basis using the straight-line method over the lease term and registered under PPE, together with the financial cost associated to the lease; both are recognized in our P&L during the lease period in order to produce a constant periodic interest rate over the remaining balance of the liability. In case of modifications to the lease agreement, such as lease value, maturity, readjustment index, associated interest rate, etc., the lessee recognizes the amount of the new measurement of the lease liability as an adjustment to the asset for the right of use. (See Note 4 – Accounting changes, letter a).

Prior to the adoption of IFRS 16, the Company substantiallyclassified leases as finance leases when all the risks and rewards inherent toassociated with the asset ownership according to International Accounting Standard No. 17 “Leases”. For those agreements that qualify as financial leases, at the initial date an asset and a liability are recognized at a value equivalent to the lower of the fair value of the asset andassets were substantially transferred. All other leases were considered as operational. The assets acquired through financial leasing were recorded as non-current assets, initially being valued at the present value of future lease payments. Subsequently, leaseminimum payments are allocated betweenor at their fair value if lower, reflecting in the liability the debt with the lessee. In this scenario the payments were accounted as the payments of the debt plus the corresponding financial cost, which is accounted as the financial expense andcost of the obligation reduction, so that a constant interest rate on the obligation balance is obtained.

Lease agreements that do not qualify as financial leases are classified as operating leases. Lease paymentsperiod. In case of operating leases, are charged to incomethe expense was accounted based on a straight line basis over the lifeduration of the lease.lease agreement for the value of the accrued service.

 

2.14       Investment propertyproperties assets

 

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.

2.15       Intangible assets other than goodwill

 

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,annually, or when factors exist indicating a likely loss of value (more frequently if events or circumstances indicate  potential impairment (SeeNote 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 Rightsrights

 

Water Rightsrights acquired by the Company correspond to the right to use existing exploitation rights of water from natural sources, and they are recorded at their attributed cost as of the date of transition date to IFRS. Given thatSince such rights are perpetual they are not amortizable, neverthelesshowever they are tested for impairment annually, subject toor more frequently if events or circumstances indicate potential impairment assessment, or when factors exist that indicate a likely loss of value ((SeeSee Note 2 - Summary of significant accounting policies 2.17).

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

Distribution Rightsrights

 

Corresponds to rights acquired to distribute different products. These rights are amortisedamortized over their estimated useful lives.

 

Research and development

 

Research and development expenses are recognized in the period incurred.

2.16       Goodwill

 

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, the amount of any non-controlling interesinterest in the acquireeacquire and the acquisition date fair valevalue of any previous equity interest in the acquireeacquire over the fair value of the identifiable net idetificable assets acquiree,acquired, If the total of consideration transferred, non-controlling interest recognized and previously held interest measured at fair value is less than the fair value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is recognized directly in the statement of income. Godwill 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 purposespurpose of impairment tests,testing, goodwill is assignedallocated to each of the Cash Generating Units (CGU)(CGUs), or groups of CGUs, that areis expected to benefit from the synergies of a business combination. Each unit or group of units   (CGU(See Note 18 -See Note 21) Goodwill) to which the goodwill is allocated represents the lowest level insidewithin the Companyentity at which goodwill is monitored for internal administrationmanagement purposes, which is not larger than a business segment. The cash generating unitsCGUs 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 impairmentmore frequently if events or some of the significant market conditions have changed.

Goodwillchanges in the acquisition of joint ventures is assessed for impairment as part of the investment, provided that there are signs indicating that the investment may be impaired.circumstances indicate potential impairment.

 

An impairment loss is recognized for the amount thatby which the book valuecarrying amount of the cash generating unitCGU exceeds its recoverable value,amount. The recoverable amount of the recoverable value beingCGU is the higher of value in use and the fair value of the cash generating unit, less costs to sell and its value in use.sell.

 

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. ACGU. Once recognized, impairment losslosses are not subsequently reversed.

Goodwill that forms part of the carrying amount of an investment in a joint venture is not reversedseparately recognized. The entire carrying amount of the investment in joint venture is assessed for impairment as a single asset provided that there are indications that the following years.

investment may be impaired.

2.17   Impairment of non financialnon-financial assets other than goodwill

 

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. TheTheincrease in the asset amount increaseresulting from thedue to reversal of the impairment loss is limited to the amount that would have been recorded had the impairment not occurred.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

2.18       AssetsNon-current assets of a disposal groupgroups classified as held for sale

 

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.

2.19       Income taxes

 

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.

 

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.

 

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.

2.20       Employees benefits

 

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 valueby 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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

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.

2.21       Provisions

 

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 ((SeeSee Note 2823 - Other provisions).

2.22       Revenue recognition

 

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 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.

 

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 merchandise to the transporter hired by 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 maritime or air company in accordance with the relevant terms. The sales occur and revenue is recognized upon the delivery of the merchandise at the port of destination.

 

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.

2.23       Commercial agreements with distributors and supermarket chains

 

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) services payment  forservices 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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

 

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.

2.24       Cost of sales of products

 

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.

 

2.25       Other incomes by function

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.

2.26Other expenses by function

 

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.

2.262.27        Distribution expenses

 

Distribution costs include all the necessary costs to deliver products to clients.customers.

2.272.28       AdministrationAdministrative expenses

 

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.

 

2.282.29       Environment liabilities

 

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.

 

 

Note 3Estimates and application of professional judgment

 

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.

 

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

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, 2.16 and Note 21).

•              The valuation of commercial trademarks to determine the existence of potential losses due to potential impairment (Note 2, 2.17 and Note 20).

•              The assumptions used in the current calculation of liabilities and obligations to employees(Note 2, 2.20 and Note 30).

•              Useful life of property, plant and equipment (Note 2, 2.12 and Note 22) and intangibles (Note 2, 2.15 and Note 20).

•              The assumptions used for the calculation of fair value financial instruments(Note 2, 2.7 and Note 6).

•              The occurrence likelihood and the estimates amount in an uncertain or contingent manner(Note 2, 2.21 and Note 28).

•              The valuation of Biological current assets(Note 2, 2.10 and Note 17)

•    

The valuation of goodwill acquired to determine the existence of losses due to potential impairment(Note 2 - Summary of significant accounting policies (2.16)andNote 18 - Goodwill).

•    

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)andNote 25 – Employee benefits).

•    

Useful lives of property, plant and equipment(Note 2 - Summary of significant accounting policies (2.12)andNote 19 – Property, plant and equipment)and intangibles(Note 2 - Summary of significant accounting policies (2.15)andNote 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)andNote 7 – Financial instruments).

•    

The likelihood of occurrence and amounts estimated in an uncertain or contingent matter(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.

 

Note 4Accounting changes

 

a)The accounting policies described in the Consolidated Financial Statements as of December 31, 2019 reflect the adoption of IFRS 16 and IFRIC 23 which went into effect as of January 1, 2019 and the initial impact of the application of these rules is described as follows:

The Company has implemented IFRS 16 using the modified retrospective approach. Under this method, the cumulative effect of initially applying the standard is recognized at January 1, 2019 and comparative amounts are not restated. Additionally, there was no impact on retained earnings as a result of the adoption of IFRS 16.

On adoption of IFRS 16, the Company recognized right of use assets and lease liabilities in relation to leases which had been previously classified as "operating leases" under the principles of IAS 17 Leases, except for the short term leases and leases of low value assets. Lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of January 1, 2019.

The lease liability is remeasured when there is a change in future lease payments, typically due to a change in index or rate (e.g., inflation), or if there is a reassessment of whether an extension or termination option will be exercised. A corresponding adjustment is made to the right of use asset.

Considerations:

Identification of the asset for right of use: As part of the contract review and analysis process, the Company identified assets by right of use associated with identifiable and non-substitutable lease contracts, which were classified under the PPE category. The Company mainly has warehouses, offices, vehicles and lands leases contract.

Interest rate used for the measurement of the financial liability: The average incremental borrowing interest rate applied to lease liabilities used is 4.28%.

Term of the contract: The Company evaluated the leases’ clauses, market conditions, costs related to the termination of the contract and early cancellation.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Other considerations:

1)

During the initial measurement of leases agreements the Company applied exemptions for leases with remaining terms less than 12 months and leases with a value lower than US$ 5,000 (ThCh$ 3,747) as of  January 1, 2019. These leases have been considered as short term and, accordingly, no right of use asset or lease liability have been recognized.

2)

The Company excluded initial direct costs from measuring the right of use asset at the date of initial application.

3)

The Company analyzed the lease term on a case-by-case basis, in those with an option to extend or terminate the lease.

The right of use asset is presented in property, plant and equipment and lease liability in borrowings. Also it has modified the nature of the lease expenses, eliminating the operating expense offset by the expense of depreciation and a financial cost, the short-term and low-value leases are still going through the Consolidated Financial Statement of Income. Finally the presentation in the Consolidated Statement of Cash Flows was modified. The main portion of lease payments are presented in cash flow from financing activities and the interest associated to leases are presented in cash flow from operating activities.

For leases previously classified as financial leases, the Company recognized the carrying amount of the lease asset and the lease liability immediately before the transition as the carrying amount of the asset for the right to use and the lease liability on the date of the lease initial recognition.

Showing up next:

Reconciliation table between the commitments for leases as of December 31, 2018, before the adoption of IFRS 16 and what was disclosed by this same concept as of January 1, 2019:

January 1, 2019

ThCh$

Operating lease and services contracts as of December 31, 2018

138,377,120

Commitments not qualified as lease liabilities (1)

(113,040,682)

Obligations for lease contracts as of December 31, 2018

25,336,438

Adjustments to present value

(6,252,251)

Leases according to IFRS 16 as of January 1, 2019

19,084,187

Financial leases liabilities recognized as of December 31, 2018

17,912,134

Lease liabilities recognized as of January 1, 2019

36,996,321

Current leases liabilities

7,633,617

Non-current leases liabilities

29,362,704

Lease liabilities recognized as of January 1, 2019

36,996,321

(1)It mainly corresponds to services contracts., short-term and low-value operational leases.

-     In relation to IFRIC 23, this interpretation clarifies how the recognition and measurement requirements of IAS 12 apply when there is uncertainty about the tax treatments adopted. The Company has determined that this standard has no impact on the Consolidated Financial Statements.    

b)During the year ended on December 31, 2016,2019, there have been no significantother 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.Consolidated Financial Statements.

 

Note 5Risk Administration

 

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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

 

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.

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

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 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.

 

As ofDecemberof December 31, 2016,2019, the Company maintained foreign currency obligations amounting to ThCh$ 49,694,209104,821,573 (ThCh$ 49,785,548 in 2015)88,218,862 as of December 31, 2018), mostly denominated in US Dollars. ForeignObligations with banks in foreign currency obligations (ThCh$ 6,352,391 in 201643,638,446 as of December 2019 and ThCh$ 16,626,496 in 2015)25,403,961 as of December 31, 2018) represent 4% (10% in 2015)a 14% (9% as of theDecember 31, 2018) of total of Otherother financial liabilities. The remaining 96% (90%86% (91% in 2015)2018) 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$ 66,435,330207,727,159 (ThCh$ 72,887,721 in 2015)212,008,612 as of December 31, 2018) 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 assets in US Dollars and other currencies amounts to ThCh$ 3,806,184 (ThCh$ 1,368,068 in 2015)28,167,683 (net liability ThCh$ 7,871,677 as of December 31, 2018).

 

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 ofDecemberof December 31, 2016,2019, 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 asset amounting toassets in the amount of ThCh$ 3,808,526 (liability amounting to ThCh$ 757,256 in 2015)8,440,013 (ThCh$ 1,364,230 as of December 31, 2018).

 

As of December 31, 2016,2019, of the Company’s total sales, both in Chile and abroad, 8% (8%7% (7% in 20152018 and 8%7% in 2014)2017) corresponds to export sales made in foreign currencies, mainly US Dollars and EuroEuros and approximately 64% (61% in 2018 and 62% in 2017) of the total direct costs 63% (54% in 2015 and 55% in 2014) 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, associatedBolivia the associate in BoliviaPerú and a joint venturesventure in Colombia. The Company does not coverhedge the risks associated withto the conversion of its subsidiaries,which whose effects are recorded in Equity.equity.

As of December 31, 2016, the net investment in foreign subsidiaries, associated and joint ventures amounted to ThCh$ 135,001,540, ThCh$ 8,249,048 and ThCh$ 35,449,038 respectively (ThCh$ 133,554,918, ThCh$ 6,628,484 and ThCh$ 18,718,832 in 2015).

Exchange rate sensitivity analysis

The exchange rate differences effect recognized in the Consolidated Statement of Income for the year ended as ofDecember 31, 2016, related to the foreign currency denominated assets and liabilities, was an income of ThCh$ 456,996 (income of ThCh$ 957,565 in 2015 and a loss of ThCh$ 613,181 in 2014). Considering the exposure as ofDecember 31, 2016, and assuming a 10% increase (or decrease) in the exchange rate, and maintaining constant all other variables, such as interest rates, it is estimated that the effect over the Company’s income would be an income after taxes of ThCh$ 289,448 (a loss of ThCh$ 58,687 in 2015 and a loss of ThCh$ 204,456 in 2014).

Considering that approximately 8% of the Company’ sales relates to export sales carried out in Chile (8% in 2015 and 8% in 2014), in currencies different from the Chilean Peso, and in approximately 63% (54% in 2015 and 55% in 2014) of the Company’s direct costs are indexed to the US Dollar and assuming that the functional currencies will be appreciated or (depreciated) by 10% as compared to the set of foreign currencies, when maintaining constant the rest of the variables the hypothetical effect on the Company’s income would be loss after taxes of ThCh$ 13,908,457 (loss of ThCh$ 10,380,193 in 2015 and ThCh$ 10,004,379 in 2014).

The Company can also be affected by the variation of the exchange rate of where the foreign subsidiaries operate, since the result is converted to Chilean Pesos at the average rate of each month. The result of the operations in the foreign subsidiaries during the year 2016 were an income of ThCh$ 32,507,630 (ThCh$32,141,475 in 2015 andThCh$ 29,235,462 in 2014). Therefore, a depreciation (or appreciation) of 10% in the exchange rate of the Argentine Peso, the UruguayanPeso and the Paraguayan Guarani against the Chilean Peso, would be a loss (income) before tax of ThCh$ 3,250,763 (ThCh$ 3,214,147 in 2015 and ThCh$ 2,923,546 in 2014).


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Exchange rate sensitivity analysis

The effect of foreign currency translation differences recognized in the Consolidated Statement of Income for the year ended as of December 31, 2019, related to assets and liabilities denominated in foreign currency, was a loss of ThCh$ 9,054,155 (a gain of ThCh$ 3,299,657 in 2018 and loss of ThCh$ 2,563,019 in 2017). Considering exposure as of December 31, 2019 and assuming a 10% increase in the exchange rate, and keeping constant all other variables such as interest rates constant, it is estimated that the effect on the Company’s net income would be a net income after taxes of ThCh$ 616,121 (ThCh$ 99,589 in 2018 and a loss of ThCh$ 76,478 in 2017) associated of the owners of the controller.

 

Considering that approximately 7% of the Company’s sales revenue comes from export sales carried out in Chile (7% in 2018 and 7% in 2017), in currencies other than Chilean Peso, and that approximately 64% (61% in 2018 and 62% in 2017) of the Company’s direct costs are in or indexed to the US Dollar and assuming that the functional currencies will appreciate (depreciate) by 10% in respect to the US Dollar, and keeping all other variables constant, the hypothetical effect on the Company’s income would be a loss after taxes of ThCh$ 27,683,581 (ThCh$ 22,116,350 in 2018 and ThCh$ 18,772,323 in 2017).

The Company can also be affected by changes in the Exchange rate of the countries where its foreign subsidiaries operate, since income is converted to Chilean Pesos at the average Exchange rate of each month. The operating income of foreign subsidiaries as of December 31, 2019 was a net income of ThCh$ 20,517,569 (ThCh$ 56,533,194 in 2018 and ThCh$ 46,395,490 in 2017). Therefore, a depreciation (appreciation) of 10% in the exchange rate of the Argentine Peso, the Uruguayan Peso, the Paraguayan Guarani and the Bolivian peso against the Chilean Peso, would result in a loss (income) before taxes of ThCh$ 2,051,757 (ThCh$ 5,653,319 in 2018 and ThCh$ 4,639,549 in 2017).See Note 1 – General information letter C.

The net investment in foreign subsidiaries, associatedassociates and joint ventures as of December 31, 2019, amounted to ThCh$ 135,001,540,272,584,756, ThCh$ 8,249,0481,149,291 and ThCh$ 35,449,038,125,518,313, respectively (ThCh$ 133,554,918,247,679,930, ThCh$ 6,628,484958,474 and ThCh$ 18,718,832121,448,016 in 2015)2018). Assuming a 10% increase or decrease in theArgentinethe 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$ 17,869,96339,925,236 (ThCh$ 16,655,06937,008,642 in 2015)2018 and ThCh$ 21,161,126 in 2017) recorded as a credit (charge) against Equity.to equity.

 

TheCompany Company 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 variable interest rate obligations indexed to the London Inter Bank Offer Rate (“LIBOR”) and the Buenos Aires Deposits of Large AmountAmounts Rate (“BADLAR”) variable interest rate indexed obligations.

 

As of December 31, 2016,2019, the Company had a total ThCh$ 10,142,84112,015,001 in debt indexed to variable interest ratesdebt (ThCh$ 20,206,6088,576,258 in 2015)2018). Consequently, as of December 31, 2016,2019, the company’s financing structure is made up (without considering the effects of cross currency swaps effect) of approximately 6% (12%4% (3% in 2015) in2018) of debt with variable interest rates,rate, and 94% (88%96% (97% in 2015)2018) in debt with fixed interest rates.

 

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, 2016,2019, after considering the effect of interest rates and currency swaps, approximately 97% (97%a 98,6% (99,8% in 2015)2018) 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, 2016,2019, including exchangeExchange rates, interest rates, maturities and effective interest rates, are detailed inNote 2621 – Other financial liabilities..

Interest rates sensitivity analysis

 

The total financial expense recognized in the Consolidated Statement of Income for the twelve month ended as of December 31, 2016, related to short-term and long-term debts amounted to ThCh$ 20,307,238 (ThCh$ 23,101,329 in 2015 and ThCh$ 22,957,482 in 2014). Assuming a reasonably possible increase of 100 bps in variable interest rates and maintaining constant all the rest of the variables, the increase would hypothetically result in a loss before tax of ThCh$ 48,700 (ThCh$ 42,664 in 2015).

Inflation risk

The Company maintains a series of Unidad de Fomento* (UF) indexed agreements with third parties, as well as UF indexed financial debt, which means that the Company is exposed to the UF fluctuations, generating increases in the value of the agreements and inflation adjustable liabilities, in the event it experiences growth. This risk is mitigated by the Company’s policy of keeping the unitary net sales in UF constant, as long as the market conditions allow it.

* 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 unit recognized in the Consolidated Statement of Comprehensive Income for the twelve month ended as of December 31, 2016, related to UF indexed short-term and long-term debt, and resulted in a loss ofThCh$ 2,246,846 (ThCh$ 3,282,736 in 2015 and ThCh$ 4,159,131 in 2014). Assuming a reasonably possible increase (decrease) of the Unidad de Fomento by approximately 3% and maintaining constant all the rest of the variables, such as interest rates, the aforementioned increase (decrease) would hypothetically result in a loss (income) of ThCh$ 3,065,645 (ThCh$ 3,065,747 in 2015 and ThCh$ 3,035,371 in 2014) in the Consolidated Statement of Income.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Interest rate sensitivity analysis

The total financial cost recognized in the Consolidated Statement of Income for the twelve months ended as of December 31, 2019, related to short and long-term debt amounted to ThCh$ 27,720,203 (ThCh$ 23,560,662 in 2018 and ThCh$ 24,166,313 in 2017). Assuming a reasonably possible increase of 100 bps in variable interest rates and maintaining all other variables constant, the increase would hypothetically result in a loss before taxes of ThCh$ 43,854 (ThCh$ 5,059 in 2018 and ThCh$ 17,176 in 2017).

 

Inflation risk

The Company maintains a series of agreements indexed to Unidades de Fomento (UF) with third parties, as well as UF indexed financial debt which means the Company is exposed to fluctuations in the UF, generating an increase in the value of those agreements and liabilities if the UF increases due to inflation. This risk is partially mitigated by the Company’s policy of keeping net sales per unit in UF constant as long as the market conditions allow it, and taking cross currency swaps if the if the market conditions are favorable to the Company.

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.(SeeNote 2 - Summary of significant accounting polices (2.4)).

Inflation sensitivity analysis

Income from indexation units recognized in the Consolidated Statement of Income for the nine-months ended as of December 31, 2019, related to UF indexed short and long-term debt and the application of Hyperinflation Accounting in Argentina, is a loss of ThCh$ 8,255,001 (a gain of ThCh$ 742,041 in 2018 and a loss of ThCh$ 110,539 in 2017). Assuming a reasonably possible 3% increase (decrease) in the Unidad de Fomento and a 10% in the inflation rate in Argentina and keeping all other variables such as interest rates constant, the aforementioned increase (decrease) would hypothetically result in a loss (income) of ThCh$ 4,781,394 (ThCh$ 3,380,752 in 2018 and ThCh$ 1,419,965 in 2017).

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, maltMalt and cans

 

In Chile, the Company obtains its barley and malt supply from both from local producers and from the international market. Long-termmarkets (mainly from Argentina). With local and argentine producers the Company enters into long-term supply agreements are entered into with local producers where the barleyin which malt price is set annually, according tousing for this purpose the market prices, which are used to determine the malt price according to theof barley and manufacturing cost established in these agreements.

The purchases and commitments madeentered for the acquisition of raw materials expose the Company to a raw material price fluctuationfluctuations risk. During 2016,2019, the Company purchased 13,914acquired 79,459 tons (46,620of malt (73,498 tons in 2015) of barley and 61,753 tons (53,890 tons in 2015) of malt. CCU Argentina acquires mainly malt from local producers. Such raw materials represent2018). Malt represents approximately 7% (9% in 2015 and 12% in 2014)6% of the direct cost of the Chile Operating segment.segment (5% in 2018 and 6% in 2017). CCU Argentina acquires all of its malt from local producers.

 

OfAs of December 31, 2019, in the Chile Operation segment, the cost of Chilecans represented approximately 17% of direct costs (12% in 2018 and 12% in 2017). In the International Business Operating segment, the cost of cans representsrepresented approximately 15%38% of the direct cost (12% in 2015 and 12% in 2014). Meanwhile in the International Business Operating segment the cans cost represent approximately 34% of the direct cost of raw materials costs as of December 31, 2019 (38% in 2016 (30%2018 and 33% in 2015 and 20% in 2014)2017).

 

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 30% (29%31% (27% in 20152018 and 29% in 2014)2017) of the direct cost of the Chile Operating segment. The company does not engage in hedging the purchases of raw materials.

Grapes and wine

The main raw material used by the subsidiary VSPT for wine production are harvested grapes from own production and grapes and wines acquired from third parties through long term and spot contracts. For the last 12 months, approximately 26% (31% in 2015) of the total wine of VSPT supply comes from its own vineyards. In the export business the own supply for 2016 was 40% (48% for 2015).

The remaining 74% (69% in 2015) supply is purchased from third parties through long term and spot contracts. During 2016, the subsidiary VSPT acquired 64% (55% in 2015) of the necessary grapes and wine from third parties through spot contracts. It also acquired 11% of its grape needs in 2016 from long term agreements (14% in 2015).

We must consider that as of December 31, 2016, the wine represents 56% (57% in 2015) of the total direct cost of the Wine Operating Segment, meaning that the supply purchased to third parties represents 36% of the direct cost (31% in 2015).

Raw material price sensitivity Analysis

The total direct cost in the Consolidated Statement of Income for 2016 amounts to ThCh$ 540,692,963 (ThCh$ 485,391,583 in 2015 and ThCh$ 433,749,832 in 2014). Assuming a reasonably possible increase (decrease) in the direct cost of each Operating segment of 8% and maintaining constant all the rest of the variables, such as exchange rates, the aforesaid increase (decrease) would hypothetically result into a loss (income) before taxes of ThCh$ 28,076,333 (ThCh$ 24,078,370 in 2015 and ThCh$ 21,875,405 in 2014) for Chile Operating segment, ThCh$ 8,089,082 (ThCh$ 8,444,331 in 2015 and ThCh$ 5,925,786 in 2014) for International Business Operating segment, ThCh$ 7,222,786 (ThCh$ 6,736,734 in 2015 and ThCh$ 6,414,035 2014) for Wine Operating segment.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

The Company does not engage in hedging raw materials purchases.

Grapes and wine

The main raw materials used by subsidiary Viña San Pedro Tarapacá S.A. for wine production are grapes harvested from its own vineyards and grapes and wine acquires from third parties through long-term and spot contracts. In the last 12 months, approximately 27% (26% in 2018) of VSPT’s total wine supply came from its own vineyards. Regarding our export market, and considering our focus on this market, approximately 43% (41% in 2018) of our wine supply for export came from our own vineyards.

 

The remaining 73% (74% in 2018) supply was purchased from third parties through long-term and spot contracts. In the last 12 months, the subsidiary VSPT acquired 54% (63% in 2018) of the necessary grapes and wine from third parties through spot contracts. Additionally, the long-term transactions were 19% (11% in 2018) of the total supply.

We should consider that as of December 31, 2019, wine represents 60% (64% in 2018) of the total direct cost of the Wine Operating segment, and supplies purchased from third parties represented 33% (38% in 2018).

Raw material Price sensitivity analysis

Total direct costs in the Consolidated Statement of Income for the twelve months ended as of December 31, 2019, amounted to ThCh$ 694,307,741 (ThCh$ 650,386,343 in 2018 and ThCh$ 586,223,676 in 2017). Assuming a reasonably possible 8% increase (decrease) in the direct cost of each Operating segment and keeping all other variables such as exchange rates constant, the aforesaid increase (decrease) would hypothetically result into a loss (income) before taxes of ThCh$ 33,084,911 (ThCh$ 30,150,723 in 2018 and ThCh$ 28,604,884 in 2017) for the Chile Operating segment, ThCh$ 14,807,640 (ThCh$ 13,545,233 in 2018 and ThCh$ 10,404,929 in 2017) for the International Business Operating segment and ThCh$ 8,310,433 (ThCh$ 8,734,204 in 2018 and ThCh$ 8,215,317 in 2017) for the Wine operating 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 (63% in 2018 and 66% in 2017). 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, 2016, amounts2019, is equivalent to 88% (88%86% (84% in 2015)2018) of the total accounts receivable.

 

Overdue, but not impaired, commercialtrade accounts receivable corresponds to clientsreceivables represent customers that show delays ofare less than 3330 days (21 daysoverdue (22 in 2015)2018).

 

As of December 31, 2016,2019, the Company hadhas approximately 1,078 clients (998 clients1,381 customers (1,294 in 2015) indebted in over2018) with more than Ch$ 10 million in debt each, that togetherwhich altogether represent approximately 84% (85%85% (86% in 2015)2018) of the total commercialtrade accounts receivable. There were 224 clients (217 clientsare 265 customers (261 customers in 2015)2018) with balances overin excess of Ch$ 50 million each, representing approximately 74% (74%73% (75% in 2015)2018) of the total accounts receivable. The 91% (93%receivable.The 92% (90% in 2015)2018) of suchthose accounts receivable are covered by the loancredit insurance.

The Company sells its products through retail customers, wholesale distributors and supermarket chains, with a credit worthiness of 100% (99% in 2018).

As of December 31, 2019, the Company has no significant guarantees from its customers.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

 

The Company believes that no additional credit risk provisions are needed toother than the individual and collective provisions determined atas of December 31, 2016, as2019, that amount to ThCh$ 5,792,821 (ThCh$ 6,059,201 in 2018) are needed since a large percentage of these are covered by insurance.

 

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 14% of total trade accounts receivable (12% in 2018). 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 90% (89%to cover 99.1% (99.5% in 2015)2018) of theindividually significant accounts receivable. This coverage accounts for more than 89% (90% in 2018) 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, 2016,2019, there were 76 clients (69 clients68 customers (58 in 2015) indebted for over2018) with more than ThCh$ 65,000 of debt each, which represent 91% (88%93% (92% in 2015)2018) of theVSPT´s total export market accounts receivable of the export market.receivable.

 

Overdue,Regarding VSPT’s export customers, overdue, but notno impaired, commercialtrade accounts receivable corresponds to clientsreceivables are customers that show delays ofare less than 3228 days (25overdue (28 days average in 2015)2018).

 

The Company estimatesbelieves that no loancredit risk provisions are necessary in addition toother than the individual and collective provisions determined as of December 31, 2016.2019. See analysis of accounts receivables maturitiesreceivable aging and losses due to impairment of accounts receivables (receivables.(SeeNote 1410 – Trade and other receivables))).

 

The Company has policies limiting the counterparty loan risk exposure with respect to financial institutions, and such exposures are frequently monitored. Consequently, the Company does not have significant risk concentration with any specific financial institutions as of December 31, 2016.

Financial investments and derivative instrumentsderivatives

The financial

Financial investments correspond to time deposits, investments in mutual funds andwhich are financial instruments acquired under re-salewith repurchase agreements as well as short-term investments with high liquidity, all at a fixed interest rate, normally with an original maturity of up tomaturing in less than three months which theyplaced in financial institutions in Chile, so there are not exposed to significant risks of market. With respect to financial derivative instruments, thesemarket risk. Derivatives are valuedmeasured at fair value and contractedtraded only in the Chilean market. Since 2018, the amendment to IFRS 9, which requires changes to the valuation of derivative financial instruments considering the counterparty risk (CVA and DVA), is applied. The CVA and DVA effect is calculated using the probability of default of the counterparty or CCU, when applicable, assuming a 40% recovery rate for each derivative instrument. For CCU, the default probability is obtained from the spread of corporate bonds with the same credit risk rating than CCU, while for the counterparty, considers the sum between the Credit Default Swap (CDS) of Chile and the CDS of Citibank in the United States. As of December 31, 2019 the effect is not material.

Tax risk

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Our businesses are taxed with different duties, particularly with excise taxes on the consumption of alcoholic and non-alcoholic beverages. An increase in the rate of these or any other tax could negatively affect our sales and profitability.

Notes to the Consolidated Financial Statements

December 31, 2016

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.

 

A summary of the Company’s financial liabilities with their maturities as of December 31, 2016 and 2015, based on the non-discounted contractual cash flows appears below:

 

As of December 31, 2016

Book value (*)

Contractual cash 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$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Other financial liabilities no derivative

 

 

 

 

 

 

 

Bank borrowings

68,685,959

8,567,124

34,661,755

31,604,772

626,411

-

75,460,062

Bond payable

74,086,739

1,108,143

4,551,720

13,401,920

19,666,590

56,878,538

95,606,911

Financial leases obligations

17,716,869

368,052

1,050,810

2,603,315

2,305,704

28,638,952

34,966,833

Deposits for return of bottles and containers

13,015,723

-

13,015,723

-

-

-

13,015,723

Sub-Total

173,505,290

10,043,319

53,280,008

47,610,007

22,598,705

85,517,490

219,049,529

Derivative

 

 

 

 

 

 

 

Derivative financial instruments

11,118,676

11,118,676

-

-

-

-

11,118,676

Sub-Total

11,118,676

11,118,676

-

-

-

-

11,118,676

Total

184,623,966

21,161,995

53,280,008

47,610,007

22,598,705

85,517,490

230,168,205

 

 

As of December 31, 2015

Book value (*)

Contractual cash 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$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Other financial liabilities no derivative

 

 

 

 

 

 

 

Bank borrowings

76,050,091

18,531,305

30,981,974

32,627,707

3,135,314

-

85,276,300

Bond payable

74,508,233

1,077,908

4,529,040

10,909,363

17,346,078

64,742,891

98,605,280

Financial leases obligations

17,559,874

418,380

1,087,320

2,709,603

2,439,335

28,871,228

35,525,866

Deposits for return of bottles and containers

12,503,170

-

12,503,170

-

-

-

12,503,170

Sub-Total

180,621,368

20,027,593

49,101,504

46,246,673

22,920,727

93,614,119

231,910,616

Derivative

 

 

 

 

 

 

 

Hedging derivatives

107,698

61,543

46,333

-

-

-

107,876

Derivative financial instruments

171,470

167,701

3,770

-

-

-

171,471

Sub-Total

279,168

229,244

50,103

-

-

-

279,347

Total

180,900,536

20,256,837

49,151,607

46,246,673

22,920,727

93,614,119

232,189,963

(*) View current and non-current book value inNote 6.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Note 6Financial Instruments

Financial instruments categories

 

The followingCompany’s financial liabilities expiring as of December 31, 2019 and December 31, 2018 based on non-discounted contractual cash flows are the book values of each financial instrument category at the closing of each year:summarized as follows:

 

 

As of December 31, 2016

As of December 31, 2015

 

Current

Non current

Current

Non current

 

ThCh$

ThCh$

ThCh$

ThCh$

Cash and cash equivalents

133,789,950

-

192,554,239

-

Other financial assets

8,406,491

203,784

13,644,105

80,217

Accounts receivable - trade and other receivable (net)

280,766,784

3,563,797

252,225,937

-

Acoounts receivable from related companies

3,523,825

356,665

4,788,930

445,938

Total financial assets

426,487,050

4,124,246

463,213,211

526,155

Bank borrowings

39,079,561

29,606,398

27,714,998

48,335,093

Bonds payable

3,250,023

70,836,716

3,155,239

71,352,994

Financial leases obligations

215,950

17,500,919

321,416

17,238,458

Derivative financial instruments

11,118,676

-

171,470

-

Hedging derivatives

-

-

107,698

-

Deposits for return of bottles and containers

13,015,723

-

12,503,170

-

Total other non-financial liabililities (*)

66,679,933

117,944,033

43,973,991

136,926,545

Account payable- trade and other payable

259,677,852

1,082,898

227,736,803

1,645,098

Accounts payable to related entities

9,530,071

-

11,624,218

-

Total financial liabilities

335,887,856

119,026,931

283,335,012

138,571,643

 

 

 

 

 

As of December 31, 2019

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$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Other financial liabilities no derivative

 

 

 

 

 

 

 

Bank borrowings

142,196,520

20,991,920

33,633,237

84,363,883

10,396,997

966,733

150,352,770

Bond payable

140,551,686

4,932,819

4,878,698

18,973,584

18,107,650

163,272,427

210,165,178

Lease liabilities

33,070,356

1,393,064

4,581,643

6,652,459

4,049,398

26,579,745

43,256,309

Deposits for return of bottles and containers

13,290,754

-

13,290,754

-

-

-

13,290,754

Sub-Total

329,109,316

27,317,803

56,384,332

109,989,926

32,554,045

190,818,905

417,065,011

Hedgin derivative

 

 

 

 

 

 

 

Derivative financial instruments

240,394

229,726

10,668

-

-

-

240,394

Derivative hedge liabilities

805,306

460,503

439,381

-

-

-

899,884

Sub-Total

1,045,700

690,229

450,049

-

-

-

1,140,278

Total

330,155,016

28,008,032

56,834,381

109,989,926

32,554,045

190,818,905

418,205,289

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$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Other financial liabilities no derivative

 

 

 

 

 

 

 

Bank borrowings

113,360,982

4,171,430

38,017,422

20,574,967

59,839,650

3,381,796

125,985,265

Bond payable

139,362,478

2,349,873

4,855,854

18,896,434

18,053,262

167,691,118

211,846,541

Financial leases obligations

17,912,134

241,724

725,183

1,911,683

1,909,956

23,078,634

27,867,180

Deposits for return of bottles and containers

13,967,995

-

13,967,995

-

-

-

13,967,995

Sub-Total

284,603,589

6,763,027

57,566,454

41,383,084

79,802,868

194,151,548

379,666,981

Hedgin derivative

 

 

 

 

 

 

 

Derivative financial instruments

4,997,124

4,997,124

-

-

-

-

4,997,124

Derivative hedge liabilities

1,351,530

639,032

620,516

424,299

-

-

1,683,847

Sub-Total

6,348,654

5,636,156

620,516

424,299

-

-

6,680,971

Total

290,952,243

12,399,183

58,186,970

41,807,383

79,802,868

194,151,548

386,347,952

 

(*) SeeView current and non-current book value inNote 26 - Other financial liabilities7 – Financial Instruments.

 

Financial instruments fair value

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, 2016

As of December 31, 2015

 

Book Value

Fair Value

Book Value

Fair Value

 

ThCh$

ThCh$

ThCh$

ThCh$

Cash and cash equivalents

133,789,950

133,789,950

192,554,239

192,554,239

Other financial assets

8,610,275

8,610,275

13,724,322

13,724,322

Accounts receivable - trade and other receivable (net)

284,330,581

284,330,581

252,225,937

252,225,937

Acoounts receivable from related companies

3,880,490

3,880,490

5,234,868

5,234,868

Total financial assets

430,611,296

430,611,296

463,739,366

463,739,366

Bank borrowings

68,685,959

69,668,649

76,050,091

77,380,452

Bonds payable

74,086,739

81,769,096

74,508,233

80,087,449

Financial leases obligations

17,716,869

30,154,204

17,559,874

29,104,078

Derivative financial instruments

11,118,676

11,118,676

171,470

171,470

Hedging derivatives

-

-

107,698

107,698

Deposits for return of bottles and containers

13,015,723

13,015,723

12,503,170

12,503,170

Total other non-financial liabililities (*)

184,623,966

205,726,348

180,900,536

199,354,317

Account payable- trade and other payable

260,760,750

260,760,750

229,381,901

229,381,901

Accounts payable to related entities

9,530,071

9,530,071

11,624,218

11,624,218

Total financial liabilities

454,914,787

476,017,169

421,906,655

440,360,436

 

 

 

 

 

(*) SeeNote 26 - Other financial liabilities.

 

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Note 6Financial Information as per operating segments

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.

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 the chief operating decision maker in order to make decisions about the resources to be allocated to the segment and assess its performance.

Operating segment


Products and services

Chile

Beers, non-alcoholic beverages, spirits and SSU.

International Business

Beers, cider, non-alcoholic beverages and spirits in Argentina, Uruguay, Paraguay and Bolivia.

Wines

Wines, mainly in export markets to more 80 countries.

 

The book value of current accounts receivables, cashCorporate revenues and cash equivalents and other financial assets and liabilities approximate fair value due toexpenses are presented separately within the short-term nature of such facilities, andOther, in addition in the caseother presents the elimination of accounts receivable, due totransactions between segments.

The Company does not have any customers representing more than 10% of consolidated revenues.

The detail of the fact that any collection losssegments is already reflectedpresented 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:

following tables:

As of December 31, 2016

Fair value with changes in income

Cash and cash equivaletns and loans and accounts receivables

Hedge derivatives

Total

ThCh$

ThCh$

ThCh$

ThCh$

Financial assets

 

 

 

 

Derivative financial instruments

479,492

-

309,237

788,729

Marketable securities and investments in other companies

7,821,546

-

-

7,821,546

Total other financial assets

8,301,038

-

309,237

8,610,275

Cash and cash equivalents

-

133,789,950

-

133,789,950

Accounts receivable-trade and other receivables (net)

-

284,330,581

-

284,330,581

Account receivable from to related companies

-

3,880,490

-

3,880,490

Total

8,301,038

422,001,021

309,237

430,611,296

As of December 31, 2016

Fair value with changes in income

Hedge derivatives

Financial libilities measured at amortized cost

Total

ThCh$

ThCh$

ThCh$

ThCh$

Financial liabilities

 

 

 

 

Bank borrowings

-

-

68,685,959

68,685,959

Bonds payable

-

-

74,086,739

74,086,739

Financial leases obligations

-

-

17,716,869

17,716,869

Deposits for return of bottles and containers

-

-

13,015,723

13,015,723

Derivative financial instruments

11,118,676

-

-

11,118,676

Total others financial liabililities

11,118,676

-

173,505,290

184,623,966

Account payable- trade and other payable

-

-

260,760,750

260,760,750

Accounts payable to related entities

-

-

9,530,071

9,530,071

Total

11,118,676

-

443,796,111

454,914,787


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

a)Information as per operating segments for the years ended December 31, 2019 and 2018:

 

Chile

International Business

Wines

Others

Total

 

2019

2018

2019

2018 (4)

2019

2018

2019

2018 (4)

2019

2018 (5)

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Sales revenue external customers

1,134,048,629

1,080,974,052

452,267,652

473,972,819

203,230,777

201,305,759

-

-

1,789,547,058

1,756,252,630

Other income

16,438,937

15,754,493

11,724,538

9,404,839

3,806,545

4,190,594

1,023,619

(2,320,219)

32,993,639

27,029,707

Sales revenue between segments

13,816,469

12,845,646

495,259

548,184

5,284,436

1,022,378

(19,596,164)

(14,416,208)

-

-

Net sales

1,164,304,035

1,109,574,191

464,487,449

483,925,842

212,321,758

206,518,731

(18,572,545)

(16,736,427)

1,822,540,697

1,783,282,337

  Change %

4.9

-

(4.0)

-

2.8

-

-

-

2.2

-

Cost of sales

(540,048,331)

(501,255,744)

(248,880,925)

(230,068,601)

(128,763,785)

(133,271,578)

9,374,851

4,584,531

(908,318,190)

(860,011,392)

  % of Net sales

46.4

45.2

53.6

47.5

60.6

64.5

-

-

49.8

48.2

Gross margin

624,255,704

608,318,447

215,606,524

253,857,241

83,557,973

73,247,153

(9,197,694)

(12,151,896)

914,222,507

923,270,945

  % of Net sales

53.6

54.8

46.4

52.5

39.4

35.5

-

-

50.2

51.8

MSD&A (1)

(429,093,171)

(407,242,869)

(210,155,693)

(210,591,361)

(55,595,811)

(52,408,689)

(9,726,563)

(11,332,903)

(704,571,238)

(681,575,822)

  % of Net sales

36.9

36.7

45.2

43.5

26.2

25.4

-

-

38.7

38.2

Other operating income (expenses)

5,266,475

1,586,173

14,201,709

223,078,626

515,019

1,828,938

1,173,780

532,889

21,156,983

227,026,626

Adjusted operating result  (2)

200,429,008

202,661,751

19,652,540

266,344,506

28,477,181

22,667,402

(17,750,477)

(22,951,910)

230,808,252

468,721,749

  Change %

(1.1)

-

(92.6)

-

25.6

-

-

-

(50.8)

-

  % of Net sales

17.2

18.3

4.2

55.0

13.4

11.0

-

-

12.7

26.3

Net financial expense

-

-

-

-

-

-

-

-

(14,602,562)

(7,766,206)

Equity and income of associates and joint ventures

-

-

-

-

-

-

-

-

(16,431,759)

(10,815,520)

Foreign currency exchange differences

-

-

-

-

-

-

-

-

(9,054,155)

3,299,657

Results as per adjustment units

-

-

-

-

-

-

-

-

(8,255,001)

742,041

Other gains (losses)

-

-

-

-

-

-

-

-

3,156,799

4,029,627

Income before taxes

 

 

 

 

 

 

 

 

185,621,574

458,211,348

Tax income (expense)

        

(39,975,914)

(136,126,817)

Net income for year

 

 

 

 

 

 

 

 

145,645,660

322,084,531

Non-controlling interests

        

15,503,968

15,193,739

Net income attributable to equity holders of the parent

 

 

 

 

 

 

 

 

130,141,692

306,890,792

Depreciation and amortization

66,301,914

63,148,804

27,077,745

19,798,708

9,826,148

7,935,006

1,815,127

2,406,676

105,020,934

93,289,194

ORBDA (3)

266,730,922

265,810,555

46,730,285

286,143,214

38,303,329

30,602,408

(15,935,350)

(20,545,234)

335,829,186

562,010,943

  Change %

0.3

-

(83.7)

-

25.2

-

-

-

(40.2)

-

  % of Net sales

22.9

24.0

10.1

59.1

18.0

14.8

-

-

18.4

31.5

 

 

 

 

 

 

 

 

 

 

 

(1)

MSD&A included Marketing, Selling, Distribution and Administrative expenses.

(2)

Adjusted operating result (for management purposes we have defined as Net 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).

(3)

ORBDA (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. 

 

As of December 31, 2015

Fair value with changes in income

Cash and cash equivaletns 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 (net)

-

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

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

 

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Derivative Instruments

The detail of maturities, number of derivative agreements, contracted nominal amounts, fair values and the classification of such derivative instrumentsb)Information as per type of agreement atoperating segments for the closing of each year is as follows:

 

As of December 31, 2016

As of December 31, 2015

Number of agreements

Nominal amounts thousand

Asset

Liability

Numberofagreements

Nominal amounts thousand

Asset

Liability

ThCh$

ThCh$

ThCh$

ThCh$

Cross currency interest rate swaps CLP/USD

1

11,237

53,743

-

-

-

-

-

Less than a year

1

11,237

53,743

-

-

-

-

-

Cross interest rate swaps USD/USD

-

-

-

-

1

10,094

-

107,698

Less than a year

-

-

-

-

-

10,094

-

107,698

Cross currency interest rate swaps USD/EURO

1

7,889

255,494

-

2

12,353

816,622

-

Less than a year

-

-

51,710

-

-

4,477

736,405

-

Between 1 and 5 years

-

7,889

203,784

-

-

7,876

80,217

-

Forwards USD

29

224,332

359,254

10,586,653

27

148,404

9,276,156

117,151

Less than a year

-

224,332

359,254

10,586,653

-

148,404

9,276,156

117,151

Forwards Euro

10

49,421

109,164

523,079

7

11,981

57,834

52,368

Less than a year

-

49,421

109,164

523,079

-

11,981

57,834

52,368

Forwards CAD

2

1,480

11,074

7,720

4

1,500

18,192

1,951

Less than a year

-

1,480

11,074

7,720

-

1,500

18,192

1,951

Forwards GBP

2

700

-

1,224

3

865

13,390

-

Less than a year

-

700

-

1,224

-

865

13,390

-

Total derivative instruments

45

 

788,729

11,118,676

44

 

10,182,194

279,168

 

 

 

 

 

 

 

 

 

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).

In the case of Cross Currency Interest Rate Swapsyears endedDecember 31, 2018 and the Cross Interest Rate Swaps, these qualify as cash flow hedges of the cash flows related to loans from Banco de Chile and Banco Scotiabank. See additional disclosures inNote 26.2017:

 

As of December 31, 2016

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 on bank bonds

USD

5,335,826

EUR

5,080,332

255,494

06-18-2018

Banco de Chile

Interest rate on bank bonds

CLP

7,458,187

USD

7,404,444

53,743

07-03-2017

 

 

 

 

 

 

 

 

 

Chile

International Business

Wines

Others

Total

 

2018

2017

2018 (4)

2017

2018

2017

2018 (4)

2017

2018 (5)

2017

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Sales revenue external customers

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

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

12,845,646

11,688,658

548,184

398,100

1,022,378

893,005

(14,416,208)

(12,979,763)

-

-

Net sales

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 %

6.0

-

5.1

-

1.0

-

-

-

5.0

-

Cost of sales

(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

45.2

46.2

47.5

41.4

64.5

61.7

-

-

48.2

47.0

Gross margin

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

54.8

53.8

52.5

58.6

35.5

38.3

-

-

51.8

53.0

MSD&A (1)

(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

36.7

36.6

43.5

49.0

25.4

26.4

-

-

38.2

39.4

Other operating income (expenses)

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

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 %

10.9

-

488.4

-

(7.6)

-

-

-

99.5

-

  % of Net sales

18.3

17.5

55.0

9.8

11.0

12.0

-

-

26.3

13.8

Net financial expense

-

-

-

-

-

-

-

-

(7,766,206)

(19,115,361)

Equity and income of associates and joint ventures

-

-

-

-

-

-

-

-

(10,815,520)

(8,914,097)

Foreign currency exchange differences

-

-

-

-

-

-

-

-

3,299,657

(2,563,019)

Results as per adjustment units

-

-

-

-

-

-

-

-

742,041

(110,539)

Other gains (losses)

-

-

-

-

-

-

-

-

4,029,627

(7,716,791)

Income before taxes

 

 

 

 

 

 

 

 

458,211,348

196,474,395

Tax income (expense)

        

(136,126,817)

(48,365,976)

Net income for year

 

 

 

 

 

 

 

 

322,084,531

148,108,419

Non-controlling interests

        

15,193,739

18,501,066

Net income attributable to equity holders of the parent

 

 

 

 

 

 

 

 

306,890,792

129,607,353

Depreciation and amortization

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 (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 %

7.4

-

370.4

-

(4.4)

-

-

-

71.8

-

  % of Net sales

24.0

23.6

59.1

13.2

14.8

15.7

-

-

31.5

19.3

 

 

 

 

 

 

 

 

 

 

 

 

(1)

MSD&A included Marketing, Selling, Distribution and Administrative expenses.

(2)

Adjusted operating result (for management purposes we have defined as Net 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).

(3)

ORBDA (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$ 208,842,4443 inORBDA and ThCh$ 157,358,973 in Net income attributable to equity holder of the parent. 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Sales information by geographic location

Net sales per geographical location

For the years ended as of December 31,

2019

2018

2017

ThCh$

ThCh$

ThCh$

Chile (1)

     1,342,369,499

     1,289,513,013

     1,226,668,091

Argentina (2)

       390,443,569

       421,607,095

       413,466,737

Uruguay

         17,805,957

         17,708,773

         16,402,136

Paraguay

         47,148,643

         43,565,171

         41,823,830

Bolivia (3)

         24,773,029

         10,888,285

                     -  

Foreign countries

       480,171,198

       493,769,324

       471,692,703

Total

1,822,540,697

1,783,282,337

1,698,360,794

(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.

(2)

Includes net sales made by the subsidiaries 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).

 

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

06-18-2018

Banco de Chile

Interest rate and exchange rate on bank bonds

USD

3,205,865

EUR

2,500,370

705,495

07-11-2016

Banco de Chile

Interest rate on bank bonds

USD

7,227,245

USD

7,334,943

(107,698)

07-07-2016

 

 

 

 

 

 

 

 

The Consolidated Statement of Other Comprehensive Income includes under the caption cash flow hedge, for the years ended December 31, 2016, a credit before income taxes of ThCh$ 84,962 (ThCh$ 80,693 and ThCh$ 155,258, in 2015 and 2014, respectively), relating to the fair value of the Cross Currency Interest Swap and Cross Interest Rate Swap derivatives instruments.

Fair value hierarchiesSales information by customer

 

 

For the years ended as of December 31,

Net Sales

2019

2018

2017

 

ThCh$

ThCh$

ThCh$

Domestic sales

1,702,109,548

1,664,613,889

1,572,617,473

Exports sales

120,431,149

118,668,448

125,743,321

Total

1,822,540,697

1,783,282,337

1,698,360,794

The financial instruments recorded at fair value in the Statement

Sales information by product category

Sales information by product category

For the years ended as of December 31,

2019

2018

2017

ThCh$

ThCh$

ThCh$

Alcoholic business

     1,206,288,857

     1,206,506,503

     1,158,451,078

Non-alcoholic business

       583,258,201

       549,746,127

       519,946,103

Others (1)

         32,993,639

         27,029,707

         19,963,613

Total

1,822,540,697

1,783,282,337

1,698,360,794

(1)Others consist mainly 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 usesales of valuation models accepted in the marketby-products 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.

The fair value of financial instruments recorded at fair value in the Consolidated Financial Statements, are as follows:packaging including bottles, pallets, and glasses.

 

As of December 31, 2016

Recorded fair value

Fair value hierarchy

Level 1

Level 2

Level 3

ThCh$

ThCh$

ThCh$

ThCh$

Derivative financial instruments

479,492

-

479,492

-

Market securities and investments in other companies

7,821,546

7,821,546

-

-

Hedging derivatives

309,237

-

309,237

-

Fair value financial assets

8,610,275

7,821,546

788,729

-

Derivative financial instruments

11,118,676

-

11,118,676

-

Fair value financial liabilities

11,118,676

-

11,118,676

-

 

 

 

 

 

     


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Depreciation and amortization as per operating segments

 

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

-

-

Hedging derivatives

816,622

-

816,622

-

Fair value financial assets

13,724,322

3,542,128

10,182,194

-

Hedging derivatives

107,698

-

107,698

-

Derivative financial instruments

171,470

-

171,470

-

Fair value financial liabilities

279,168

-

279,168

-

 

 

 

 

 

Depreciation and amortization

For the years ended as of December 31,

2019

2018

2017

ThCh$

ThCh$

ThCh$

Chile operating segment

         66,301,914

         63,148,804

         64,807,818

International Business operating segment

         27,077,745

         19,798,708

         15,568,301

Wines operating segment

           9,826,148

           7,935,006

           7,505,440

Others (1)

           1,815,127

           2,406,676

           4,317,945

Total

105,020,934

93,289,194

92,199,504

 

During year ended as ofDecember 31, 2016,(1)Includes depreciation and amortization corresponding to the Company has not made any significant instrument transfer between levels 1 and 2.Corporate Support Units.

 

Credit Quality of financial assetsCash flows Operating Segments

 

Cash flows Operating Segments

 

For the years ended as of December 31,

 

2019

2018

2017

 

ThCh$

ThCh$

ThCh$

Cash flows from operating activities

 

       242,320,045

       429,313,131

       262,161,431

Chile operating segment

 

       139,560,085

       155,728,711

       161,413,504

International business operating segment

 

          3,885,657

       228,740,495

        58,773,027

Wines operating segment

 

        37,196,293

        14,340,011

        16,167,068

Others

 

        61,678,010

        30,503,914

        25,807,832

 

 

 

 

 

Cash flows from investing activities

 

      (144,185,726)

      (199,002,101)

      (173,614,379)

Chile operating segment

 

      (125,009,624)

      (115,670,330)

       (78,746,298)

International business operating segment

 

       (38,558,437)

       (35,475,310)

       (32,312,751)

Wines operating segment

 

       (28,895,781)

       (16,749,301)

       (10,870,574)

Others (1) (*)

 

        48,278,116

       (31,107,160)

       (51,684,756)

 

 

 

 

 

Cash flows from financing activities

 

      (199,420,161)

       (52,963,862)

       (53,001,198)

Chile operating segment

 

       (14,458,606)

       (60,093,788)

       (65,996,567)

International business operating segment

 

        25,039,794

      (100,573,425)

         (8,217,846)

Wines operating segment

 

             439,231

          3,741,241

       (15,171,642)

Others (1) (*)

 

      (210,440,580)

       103,962,110

        36,384,857

 

 

 

 

 

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.

(1)

Others include Corporate Support Units, due to cash flows are managed by CCU.

(*)

Itincludes contribution to joint ventures. SeeNote 8 - Cash and cash equivalents.

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Capital expenditures as per operating segments

Capital expenditures (property, plant and equipment and software additions)

For the years ended as of December 31,

2019

2018

2017

ThCh$

ThCh$

ThCh$

Chile operating segment

 

        69,394,303

        78,887,075

        80,866,369

International Business operating segment

 

        38,524,717

        32,756,828

        32,312,751

Wines operating segment

 

        22,020,111

        16,961,638

        10,948,212

Others (1)

 

        10,548,718

          2,834,881

          1,638,148

Total

 

140,487,849

131,440,422

125,765,480

(1)Others include the capital investments corresponding to the Corporate Support Units.

Assets as per operating segments

Assets as per Operating segment

As of December 31, 2019

As of December 31, 2018

ThCh$

ThCh$

Chile operating segment

1,255,267,920

1,183,145,732

International Business operating segment

460,237,744

463,913,523

Wines operating segment

380,892,311

341,959,321

Others (1)

257,292,739

416,846,340

Total

2,353,690,714

2,405,864,916

(1)Includes assets corresponding to the Corporate Support Units.

Assets per geographic location

Assets per geographical location

As of December 31, 2019

As of December 31, 2018

ThCh$

ThCh$

Chile (1)

1,862,882,784

1,924,196,897

Argentina (2)

370,434,173

373,091,516

Uruguay

26,403,153

26,925,415

Paraguay

55,536,326

53,126,091

Bolivia (3)

38,434,278

28,524,997

Total

2,353,690,714

2,405,864,916

(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 subsidiaries Finca La Celia S.A. and Los Huemules S.R.L., registered under the Wines Operating segment and Chile Operating segment, respectively.

(3)

SeeNote 15 – Business combinations, letter a).

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Liabilities as per operating segments

Liabilities as per Operating segment

As of December 31, 2019

As of December 31, 2018

ThCh$

ThCh$

Chile operating segment

479,278,341

457,517,605

International Business operating segment

170,050,938

172,893,966

Wines operating segment

139,805,629

112,427,830

Others (1)

121,628,583

273,909,572

Total

910,763,491

1,016,748,973

(1)Others include liabilities corresponding to the Corporate Support 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,

2019

2018 (*)

2017

ThCh$

ThCh$

ThCh$

Sales revenue external customers

 

1,789,547,058

1,756,252,630

1,678,397,181

Other income

 

32,993,639

27,029,707

19,963,613

Net sales

 

1,822,540,697

1,783,282,337

1,698,360,794

  Change %

 

2.2

5.0

-

Cost of sales

 

(908,318,190)

(860,011,392)

(798,738,655)

  % of Net sales

 

49.8

48.2

47.0

Gross margin

 

914,222,507

923,270,945

899,622,139

  % of Net sales

 

50.2

51.8

53.0

MSD&A (1)

 

(704,571,238)

(681,575,822)

(668,783,480)

  % of Net sales

 

38.7

38.2

39.4

Other operating income (expenses)

 

21,156,983

227,026,626

4,055,543

Adjusted operating result  (2)

 

230,808,252

468,721,749

234,894,202

  Change %

 

(50.8)

99.5

-

  % of Net sales

 

12.7

26.3

13.8

Net financial expense

32

(14,602,562)

(7,766,206)

(19,115,361)

Equity and income of associates and joint ventures

16

(16,431,759)

(10,815,520)

(8,914,097)

Foreign currency exchange differences

32

(9,054,155)

3,299,657

(2,563,019)

Results as per adjustment units

32

(8,255,001)

742,041

(110,539)

Other gains (losses)

31

3,156,799

4,029,627

(7,716,791)

Income before taxes

 

185,621,574

458,211,348

196,474,395

Tax income (expense)

24

(39,975,914)

(136,126,817)

(48,365,976)

Net income for year

 

145,645,660

322,084,531

148,108,419

Non-controlling interests

28

15,503,968

15,193,739

18,501,066

Net income attributable to equity holders of the parent

 

130,141,692

306,890,792

129,607,353

Depreciation and amortization

29

105,020,934

93,289,194

92,199,504

ORBDA (3)

 

335,829,186

562,010,943

327,093,706

  Change %

 

(40.2)

71.8

-

  % of Net sales

 

18.4

31.5

19.3

 

 

 

 

 

(*) 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 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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

The following is a reconciliation of our Net income, the main comparable IFRS measure to Adjusted Operating Result for the years ended December 31, 2019, 2018 and 2017:

 

For the years ended December 31,

2019

2018 (*)

2017

ThCh$

ThCh$

ThCh$

Net income of year

145,645,660

322,084,531

148,108,419

Add (Subtract):

 

 

 

Other gains (losses)

(3,156,799)

(4,029,627)

7,716,791

Finance income

(13,117,641)

(15,794,456)

(5,050,952)

Finance costs

27,720,203

23,560,662

24,166,313

Share of net loss of joint ventures and associates accounted for using the equity method

16,431,759

10,815,520

8,914,097

Foreign currency exchange differences

9,054,155

(3,299,657)

2,563,019

Result as per adjustment units

8,255,001

(742,041)

110,539

Income tax expense

39,975,914

136,126,817

48,365,976

Adjusted operating result

230,808,252

468,721,749

234,894,202

Depreciation and amortization

105,020,934

93,289,194

92,199,504

ORBDA

335,829,186

562,010,943

327,093,706

(*)
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 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.

2019

2018

2017

ThCh$

ThCh$

ThCh$

Consolidated statement of income

 

 

 

Distribution costs

(327,543,973)

(314,391,183)

(290,227,129)

Administrative expenses

(136,975,243)

(152,376,458)

(142,514,649)

Other expenses by function

(241,479,749)

(216,236,609)

(238,704,061)

Other expenses included in ´Other expenses by function´

1,427,727

1,428,428

2,662,359

Total MSD&A

(704,571,238)

(681,575,822)

(668,783,480)

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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Note 7Financial Information as per operating segmentsInstruments

Financial instruments categories

 

The Company has defined three Operating segments, essentially defined with respect to its revenues in the geographic areascarrying amounts of commercial activity: 1. Chile, 2. International business and 3. Wine.each financial instrument category as of each year-end are detailed as follows:

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.

Starting from the third quarter of 2016, the Company has incorporated in the Chile operating segment the business activities performed by the Strategic Service Units (SSU), which include Transportes CCU Limitada, Comercial CCU S.A., CRECCU S.A. and Fábrica de Envases Plásticos S.A.  For the year ended December 31, 2015 and 2014, revenue and expenses of the Strategic Service Units were previously reported under Others. However, for comparability purposes, these revenues and expenses have been restated and are now allocated to Chile Operating segment. 

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 the chief operating decision maker in order to make decisions about the resources to be allocated to the segment and assess its performance.

Operating segment

Products and services

Chile

Beers, non-alcoholic beverages, spirits and SSU.

International Business

Beers, cider, non-alcoholic beverages and spirits in Argentina, Uruguay and Paraguay.

Wines

Wines, mainly in export markets to more 80 countries.

As of December 31, 2019

As of December 31, 2018

 

Current

Non-current

Current

Non-current

 

ThCh$

ThCh$

ThCh$

ThCh$

Derivative financial instruments

3,412,197

-

11,522,482

-

Market securities and investments in other companies

6,245,817

-

11,010,433

-

Derivative hedge assets

157,344

4,670,538

212,554

3,325,079

Total other financial assets

9,815,358

4,670,538

22,745,469

3,325,079

Accounts receivable - trade and other receivable (net)

300,013,940

3,224,627

320,702,339

3,363,123

Accounts receivable from related parties

3,278,685

118,122

3,048,841

190,865

Total accounts receivables

303,292,625

3,342,749

323,751,180

3,553,988

Sub-Total financial assets

313,107,983

8,013,287

346,496,649

6,879,067

Cash and cash equivalents

196,369,224

-

319,014,050

-

Total financial assets

509,477,207

8,013,287

665,510,699

6,879,067

Bank borrowings

42,447,438

99,749,082

38,160,178

75,200,804

Bonds payable

6,744,739

133,806,947

4,081,175

135,281,303

Lease Liabilities / Financial leases obligations

4,857,097

28,213,259

365,972

17,546,162

Deposits for return of bottles and containers

13,290,754

-

13,967,995

-

Total financial liabilities measured at amortized cost

67,340,028

261,769,288

56,575,320

228,028,269

Derivative financial instruments

240,394

-

4,997,124

-

Derivative hedge liabilities

805,306

-

1,194,502

157,028

Total financial derivative liabilities

1,045,700

-

6,191,626

157,028

Total other financial liabilities (*)

68,385,728

261,769,288

62,766,946

228,185,297

Account payable- trade and other payable

306,655,558

26,550

303,380,168

12,413

Accounts payable to related parties

8,979,434

-

6,936,910

-

Total commercial obligations and other accounts payable

315,634,992

26,550

310,317,078

12,413

Total financial liabilities

384,020,720

261,795,838

373,084,024

228,197,710

 

 

 

 

 

 

Corporate revenues and expenses are presented separately within the(*) SeeNote 21 - Other in addition in 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.financial liabilities.

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

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)   InformationFinancial assets and liabilities are detailed as per operating segments for the years ended December 31, 2016 and 2015:follows:

 

 

Chile(4)

International Business

Wines

Others(4)

Total

 

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Sales revenue external customers

973,220,715

885,769,609

366,778,056

400,051,022

195,322,270

184,169,165

-

-

1,535,321,041

1,469,989,796

Other income

15,630,481

16,757,566

2,783,615

4,708,728

5,851,015

5,214,674

(688,444)

1,700,951

23,576,667

28,381,919

Sales revenue between segments

8,524,493

6,932,905

546,972

953,967

228,767

131,209

(9,300,232)

(8,018,081)

-

-

Net sales

997,375,689

909,460,080

370,108,643

405,713,717

201,402,052

189,515,048

(9,988,676)

(6,317,130)

1,558,897,708

1,498,371,715

  Change %

9.7

-

(8.8)

-

6.3

-

-

-

4.0

-

Cost of sales

(471,151,686)

(411,375,380)

(157,485,547)

(162,665,341)

(112,938,261)

(105,956,281)

(244,422)

(5,078,249)

(741,819,916)

(685,075,251)

  % of Net sales

47.2

45.2

42.6

40.1

56.1

55.9

-

-

47.6

45.7

Gross margin

526,224,003

498,084,700

212,623,096

243,048,376

88,463,791

83,558,767

(10,233,098)

(11,395,379)

817,077,792

813,296,464

  % of Net sales

52.8

54.8

57.4

59.9

43.9

44.1

-

-

52.4

54.3

MSD&A (1)

(373,407,847)

(343,380,553)

(191,413,501)

(216,098,525)

(52,007,092)

(51,070,291)

(2,714,311)

(2,015,407)

(619,542,751)

(612,564,776)

  % of Net sales

37.4

37.8

51.7

53.3

25.8

26.9

-

-

39.7

40.9

Other operating income (expenses)

1,734,871

626,889

(394,820)

3,315,892

732,689

44,823

1,043,939

217,706

3,116,679

4,205,310

Adjusted operating result (2)

154,551,027

155,331,036

20,814,775

30,265,743

37,189,388

32,533,299

(11,903,470)

(13,193,080)

200,651,720

204,936,998

  Change %

(0.5)

-

(31.2)

-

14.3

-

-

-

(2.1)

-

  % of Net sales

15.5

17.1

5.6

7.5

18.5

17.2

-

-

12.9

13.7

Net financial expense

-

-

-

-

-

-

-

-

(14,627,170)

(15,255,586)

Share of net loss of joint ventures and associates accounted for using

-

-

-

-

-

-

-

-

(5,560,522)

(5,228,135)

Foreign currency exchange differences

-

-

-

-

-

-

-

-

456,995

957,565

Results as per adjustment units

-

-

-

-

-

-

-

-

(2,246,846)

(3,282,736)

Other gains (losses)

-

-

-

-

-

-

-

-

(8,345,907)

8,512,000

Income before taxes

-

-

-

-

-

-

-

-

170,328,270

190,640,106

Income taxes

 - - - - - - - -

(30,246,383)

(50,114,516)

Net income for year

-

-

-

-

-

-

-

-

140,081,887

140,525,590

Non-controlling interests

 - - - - - - - -

21,624,399

19,717,455

Net income attributable to equity holders of the parent

-

-

-

-

-

-

-

-

118,457,488

120,808,135

Depreciation and amortization

61,736,849

56,698,871

11,928,705

14,334,415

7,078,872

7,568,991

2,783,619

2,964,525

83,528,045

81,566,802

ORBDA  (3)

216,287,876

212,029,907

32,743,480

44,600,158

44,268,260

40,102,290

(9,119,851)

(10,228,555)

284,179,765

286,503,800

  Change %

2.0

-

(26.6)

-

10.4

-

-

-

(0.8)

-

  % of Net sales

21.7

23.3

8.8

11.0

22.0

21.2

-

-

18.2

19.1

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2019

As of December 31, 2018

 

Book Value

Fair Value

Book Value

Fair Value

 

ThCh$

ThCh$

ThCh$

ThCh$

Derivative financial instruments

3,412,197

3,412,197

11,522,482

11,522,482

Market securities and investments in other companies

6,245,817

6,245,817

11,010,433

11,010,433

Derivative hedge assets

4,827,882

4,827,882

3,537,633

3,537,633

Total other financial assets

14,485,896

14,485,896

26,070,548

26,070,548

Accounts receivable - trade and other receivable (net)

303,238,567

303,238,567

324,065,462

324,065,462

Accounts receivable from related parties

3,396,807

3,396,807

3,239,706

3,239,706

Total accounts receivables

306,635,374

306,635,374

327,305,168

327,305,168

Sub-Total financial assets

321,121,270

321,121,270

353,375,716

353,375,716

Cash and cash equivalents

196,369,224

196,369,224

319,014,050

319,014,050

Total financial assets

517,490,494

517,490,494

672,389,766

672,389,766

Bank borrowings

142,196,520

146,544,455

113,360,982

117,211,707

Bonds payable

140,551,686

189,670,078

139,362,478

187,276,391

Lease Liabilities / Financial leases obligations

33,070,356

41,851,389

17,912,134

24,278,897

Deposits for return of bottles and containers

13,290,754

13,290,754

13,967,995

13,967,995

Total financial liabilities measured at amortized cost

329,109,316

391,356,676

284,603,589

342,734,990

Derivative financial instruments

240,394

240,394

4,997,124

4,997,124

Derivative hedge liabilities

805,306

805,306

1,351,530

1,351,530

Total financial derivative liabilities

1,045,700

1,045,700

6,348,654

6,348,654

Total other financial liabilities (*)

330,155,016

392,402,376

290,952,243

349,083,644

Account payable- trade and other payable

306,682,108

306,682,108

303,392,581

303,392,581

Accounts payable to related parties

8,979,434

8,979,434

6,936,910

6,936,910

Total commercial obligations and other accounts payable

315,661,542

315,661,542

310,329,491

310,329,491

Total financial liabilities

645,816,558

708,063,918

601,281,734

659,413,135

 

 

 

 

 

(1)(*) SeeMSD&A, included Marketing, Selling, Distribution and Administrative expenses.

(2)Adjusted operating result (for management purposes we have defined as Net income before other gains (losses), netNote 21 - Other financial expense, equity and income of joint venture, foreign currency exchange differences, result as per adjustment units and income taxes).liabilities

(3)ORBDA (for management purpose we have defined as Adjusted Operating Result before Depreciation and Amortization).

(4)Starting from the third quarter of 2016, the Company has incorporated in the Chile operating segment the business activities performed by the Strategic Service Units (SSU), which include Transportes CCU Limitada, Comercial CCU S.A., CRECCU S.A. and Fábrica de Envases Plásticos S.A.  As of December 2015, the revenue and expenses of the Strategic Service Units were previously  reported under Others. However for comparability purposes these revenues and expenses have been restated and are now reported under to Chile operating segment (see reconciliation in letter c) under this Note).

 

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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

b)   Information as per operating segments for the years endedDecember 31, 2015 and 2014:Financial instruments by category:

 

 

Chile (5)

International Business

Wines

Others (5)

Total

 

2015

2014

2015

2014

2015

2014

2015

2014

2015

2014

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

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

Other income

16,757,566

15,562,980

4,708,728

3,992,902

5,214,674

3,918,028

1,700,951

559,921

28,381,919

24,033,831

Sales revenue between segments

6,932,905

6,227,110

953,967

3,522,074

131,209

290,716

(8,018,081)

(10,039,900)

-

-

Net sales

909,460,080

835,430,042

405,713,717

299,667,683

189,515,048

172,348,553

(6,317,130)

(9,479,979)

1,498,371,715

1,297,966,299

  Change %

8.9

-

35.4

-

10.0

-

-

-

15.4

-

Cost of sales

(411,375,380)

(374,336,312)

(162,665,341)

(136,174,602)

(105,956,281)

(97,523,600)

(5,078,249)

3,497,698

(685,075,251)

(604,536,816)

  % of Net sales

45.2

44.8

40.1

45.4

55.9

56.6

-

-

45.7

46.6

Gross margin

498,084,700

461,093,730

243,048,376

163,493,081

83,558,767

74,824,953

(11,395,379)

(5,982,281)

813,296,464

693,429,484

  % of Net sales

54.8

55.2

59.9

54.6

44.1

43.4

-

-

54.3

53.4

MSD&A (1)

(343,380,553)

(328,766,178)

(216,098,525)

(154,299,739)

(51,070,291)

(50,284,131)

(2,015,407)

(2,252,954)

(612,564,776)

(535,603,002)

  % of Net sales

37.8

39.4

53.3

51.5

26.9

29.2

-

-

40.9

41.3

Other operating income (expenses)

626,889

850,122

3,315,892

20,173,967

44,823

238,952

217,706

2,458,269

4,205,310

23,721,310

Adjusted operating result before Exceptional Items (EI)

155,331,036

133,177,674

30,265,743

29,367,309

32,533,299

24,779,774

(13,193,080)

(5,776,966)

204,936,998

181,547,792

  Change %

16.6

-

3.1

-

31.3

-

-

-

12.9

-

  % of Net sales

17.1

15.9

7.5

9.8

17.2

14.4

-

-

13.7

14.0

Exceptional Items (EI) (2)

-

(301,550)

-

(1,214,505)

-

-

-

(111,445)

-

(1,627,500)

Adjusted operating result (3)

155,331,036

132,876,124

30,265,743

28,152,804

32,533,299

24,779,774

(13,193,080)

(5,888,411)

204,936,998

179,920,292

  Change %

16.9

-

7.5

-

31.3

-

-

-

13.9

-

  % of Net sales

17.1

15.9

7.5

9.4

17.2

14.4

-

-

13.7

14

Net financial expense

-

-

-

-

-

-

-

-

(15,255,586)

(10,820,891)

Share of net loss of joint ventures and associates accounted for using

-

-

-

-

-

-

-

-

(5,228,135)

(898,607)

Foreign currency exchange differences

-

-

-

-

-

-

-

-

957,565

(613,181)

Results as per adjustment units

-

-

-

-

-

-

-

-

(3,282,736)

(4,159,131)

Other gains (losses)

-

-

-

-

-

-

-

-

8,512,000

4,036,939

Income before taxes

-

-

-

-

-

-

-

-

190,640,106

167,465,421

Income taxes

 - - - - - - - -

(50,114,516)

(46,673,500)

Net income for year

-

-

-

-

-

-

-

-

140,525,590

120,791,921

Non-controlling interests

 - - - - - - - -

19,717,455

14,553,471

Net income attributable to equity holders of the parent

-

-

-

-

-

-

-

-

120,808,135

106,238,450

Depreciation and amortization

56,698,871

48,459,588

14,334,415

11,194,117

7,568,991

7,115,790

2,964,525

1,838,071

81,566,802

68,607,566

ORBDA before EI

212,029,907

181,637,262

44,600,158

40,561,426

40,102,290

31,895,564

(10,228,555)

(3,938,895)

286,503,800

250,155,358

ORBDA (4)

212,029,907

181,335,712

44,600,158

39,346,921

40,102,290

31,895,564

(10,228,555)

(4,050,340)

286,503,800

248,527,858

  Change %

16.9

-

13.4

-

25.7

-

-

-

15.3

-

  % of Net sales

23.3

21.7

11.0

13.1

21.2

18.5

-

-

19.1

19.1

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2019

Fair value with changes in income

Financial assets measured at amortized cost

Hedge derivatives

Total

ThCh$

ThCh$

ThCh$

ThCh$

Financial assets

 

 

 

 

Derivative financial instruments

3,412,197

-

-

3,412,197

Marketable securities and investments in other companies

6,245,817

-

-

6,245,817

Derivative hedge assets

-

-

4,827,882

4,827,882

Total other financial assets

9,658,014

-

4,827,882

14,485,896

Cash and cash equivalents

-

196,369,224

-

196,369,224

Trade and other receivable (net)

-

303,238,567

-

303,238,567

Accounts receivable from related parties

-

3,396,807

-

3,396,807

Total financial assets

9,658,014

503,004,598

4,827,882

517,490,494

 

As of December 31, 2019

Fair value with changes in income

Hedge derivatives

Financial liabilities measured at amortized cost

Total

ThCh$

ThCh$

ThCh$

ThCh$

Financial liabilities

 

 

 

 

Bank borrowings

-

-

142,196,520

142,196,520

Bonds payable

-

-

140,551,686

140,551,686

Leases liabilities

-

-

33,070,356

33,070,356

Deposits for return of bottles and containers

-

-

13,290,754

13,290,754

Derivative financial instruments

240,394

-

-

240,394

Derivative hedge liabilities

-

805,306

-

805,306

Total Other financial liabilities

240,394

805,306

329,109,316

330,155,016

Account payable- trade and other payable

-

-

306,682,108

306,682,108

Accounts payable to related parties

-

-

8,979,434

8,979,434

Total financial liabilities

240,394

805,306

644,770,858

645,816,558

(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 this result as an Exceptional Items related to different restructuring process of operating segments.

(3)Adjusted operating result (for management purposes we have defined as Net 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)ORBDA (for management purpose we have defined as Adjusted Operating Result before Depreciation and Amortization).

(5)Starting from the third quarter of 2016, the Company has incorporated in the Chile operating segment the business activities performed by the Strategic Service Units (SSU), which include Transportes CCU Limitada, Comercial CCU S.A., CRECCU S.A. and Fábrica de Envases Plásticos S.A.  As of December 2015, the revenue and expenses of the Strategic Service Units were previously  reported under Others. However for comparability purposes these revenues and expenses have been restated and are now reported under to Chile operating segment (see reconciliation in letter c) under this Note).

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

 

 

 

 

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

 

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

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

 

 

 

 

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

 

c)Derivative InstrumentsFor the year ended December 31, 2015 and 2014, revenue and expenses of the Strategic Service Units were previously reported under Others. However, for comparability purposes, these revenues and expenses have been restated and are now allocated to Chile Operating segment explained in the following tables:

 

ForThe 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 endedare detailed as of December 31, 2015:follows:

 

 

Chile

Others

 

2015

2015

 

Previously reported

Adjusted

Tight

Previously reported

Adjusted

Tight

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Sales revenue external customers

885,769,609

-

885,769,609

-

-

-

Other income

10,238,408

6,519,158

16,757,566

8,220,109

(6,519,158)

1,700,951

Sales revenue between segments

6,013,177

919,728

6,932,905

(7,098,353)

(919,728)

(8,018,081)

Net sales

902,021,194

7,438,886

909,460,080

1,121,756

(7,438,886)

(6,317,130)

Cost of sales

(420,297,983)

8,922,603

(411,375,380)

3,844,354

(8,922,603)

(5,078,249)

  % of Net sales

46.6

-

45.2

-

-

-

Gross margin

481,723,211

16,361,489

498,084,700

4,966,110

(16,361,489)

(11,395,379)

  % of Net sales

53.4

-

54.8

-

-

-

MSD&A (1)

(328,488,527)

(14,892,026)

(343,380,553)

(16,907,433)

14,892,026

(2,015,407)

  % of Net sales

36.4

-

37.8

-

-

-

Other operating income (expenses)

688,920

(62,031)

626,889

155,675

62,031

217,706

Adjusted operating result (2)

153,923,604

1,407,432

155,331,036

(11,785,648)

(1,407,432)

(13,193,080)

  % of Net sales

17.1

-

17.1

-

-

-

Net financial expense

-

-

-

-

-

-

Share of net loss of joint ventures and associates accounted for using

-

-

-

-

-

-

Foreign currency exchange differences

-

-

-

-

-

-

Results as per adjustment units

-

-

-

-

-

-

Other gains (losses)

-

-

-

-

-

-

Income before taxes

-

-

-

-

-

-

Net income for year

-

-

-

-

-

-

Net income attributable to equity holders of the parent

-

-

-

-

-

-

Depreciation and amortization

45,766,393

10,932,478

56,698,871

13,897,003

(10,932,478)

2,964,525

ORBDA (3)

199,689,997

12,339,910

212,029,907

2,111,355

(12,339,910)

(10,228,555)

  % of Net sales

22.1

-

23.3

-

-

-

 

 

 

 

 

 

 

 

As of December 31, 2019

As of December 31, 2018

Number of agreements

Nominal amounts thousand

Asset

Liability

Number of agreements

Nominal amounts thousand

Asset

Liability

ThCh$

ThCh$

ThCh$

ThCh$

Cross currency interest rate swaps CLP/USD

1

2,000

4,571,984

805,306

1

2,000

3,325,079

1,194,502

Less than a year

-

-

-

805,306

1

-

-

1,194,502

Between 1 and 5 years

1

2,000

4,571,984

-

-

2,000

3,325,079

-

Cross currency interest rate swaps USD/EURO

1

11,600

255,898

-

1

11,600

212,554

157,028

Less than a year

-

-

157,344

-

1

-

212,554

-

Between 1 and 5 years

1

11,600

98,554

-

-

11,600

-

157,028

Total

2

 

4,827,882

805,306

2

 

3,537,633

1,351,530

Forwards USD

14

72,593

2,989,286

160,803

32

269,371

11,264,711

3,832,634

Less than a year

14

72,593

2,989,286

160,803

32

269,371

11,264,711

3,832,634

Forwards Euro

5

26,393

412,065

79,591

10

79,326

225,815

1,153,302

Less than a year

5

26,393

412,065

79,591

10

79,326

225,815

1,153,302

Forwards CAD

1

800

10,846

-

3

2,650

28,381

3,986

Less than a year

1

800

10,846

-

3

2,650

28,381

3,986

Forwards GBP

-

-

-

-

4

1,030

3,575

7,202

Less than a year

-

-

-

-

4

1,030

3,575

7,202

Total

20

 

3,412,197

240,394

49

 

11,522,482

4,997,124

Total instruments

22

 

8,240,079

1,045,700

51

 

15,060,115

6,348,654

See definition of (1), (2) and (3) in information as per Operating segment letter a).

 

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).


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

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, 2019

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

8,820,379

EUR

8,564,481

255,898

06-18-2021

Banco de Chile

Flow interest rate on bank bonds

UF

59,233,320

CLP

55,466,642

3,766,678

09-15-2021

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

The Consolidated Statement of Other Comprehensive Income includes under the caption cash flow hedge, for the years ended December 31, 2019, a credit before income taxes of ThCh$  345,986 (ThCh$  63,008 and ThCh$  5,661, in 2018 and  2017, respectively), related to the fair value of Cross Currency Interest Swap and Cross Interest Rate Swap derivatives instruments.

Fair value hierarchies

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 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.

 

For the year ended as of December 31, 2014:

 

Chile

Others

 

2014

2014

 

Previously reported

Adjusted

Tight

Previously reported

Adjusted

Tight

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Sales revenue external customers

813,639,952

-

813,639,952

-

-

-

Other income

9,100,957

6,462,023

15,562,980

7,021,944

(6,462,023)

559,921

Sales revenue between segments

7,600,483

(1,373,373)

6,227,110

(11,413,273)

1,373,373

(10,039,900)

Net sales

830,341,392

5,088,650

835,430,042

(4,391,329)

(5,088,650)

(9,479,979)

Cost of sales

(383,558,625)

9,222,313

(374,336,312)

12,720,013

(9,222,315)

3,497,698

  % of Net sales

46.2

-

44.8

-

-

-

Gross margin

446,782,767

14,310,963

461,093,730

8,328,684

(14,310,965)

(5,982,281)

  % of Net sales

53.8

-

55.2

-

-

-

MSD&A (1)

(317,765,236)

(11,000,942)

(328,766,178)

(13,253,897)

11,000,943

(2,252,954)

  % of Net sales

38.3

1

39.4

-

-

-

Other operating income (expenses)

722,478

127,644

850,122

2,585,913

(127,644)

2,458,269

Adjusted operating result before Exceptional Items (EI)

25,561,470

(2,954,119)

22,607,351

(3,624,700)

2,954,118

(670,582)

  Change %

-

-

-

-

-

-

  % of Net sales

0.04

- 0.56

0.04

- 334.38

- 0.56

-

Exceptional Items (EI) (2)

-

(301,550)

(301,550)

(412,995)

301,550

(111,445)

Adjusted operating result (3)

129,740,009

3,437,665

133,177,674

(2,339,300)

(3,437,666)

(5,776,966)

  % of Net sales

15.6

-

15.9

-

-

-

Net financial expense

-

-

-

-

-

-

Share of net loss of joint ventures and associates accounted for using

-

-

-

-

-

-

Foreign currency exchange differences

-

-

-

-

-

-

Results as per adjustment units

-

-

-

-

-

-

Other gains (losses)

-

-

-

-

-

-

Income before taxes

-

-

-

-

-

-

Income taxes

 - - - - - -

Net income for year

-

-

-

-

-

-

Non-controlling interests

 - - - - - -

Net income attributable to equity holders of the parent

-

-

-

-

-

-

Depreciation and amortization

38,832,969

9,626,619

48,459,588

11,464,690

(9,626,619)

1,838,071

ORBDA before EI

37,317,380

(533,386)

36,783,994

(713,134)

533,385

(179,749)

  Change %

-

-

-

-

-

-

  % of Net sales

0.06

- 0.10

0.06

- 65.79

- 0.10

-

ORBDA (4)

168,572,978

12,762,734

181,335,712

8,712,395

(12,762,735)

(4,050,340)

  % of Net sales

20.3

-

21.7

-

-

-

 

 

 

 

 

 

 

See definition of (1), (2), (3) and (4) in information as per Operating segment letter b).


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

The fair value of financial instruments recorded at fair value in the Consolidated Financial Statements, is detailed as follows:

As of December 31, 2019

Recorded fair value

Fair value hierarchy

level 1

level 2

level 3

ThCh$

ThCh$

ThCh$

ThCh$

Derivative financial instruments

3,412,197

-

3,412,197

-

Market securities and investments in other companies

6,245,817

6,245,817

-

-

Derivative hedge assets

4,827,882

-

4,827,882

-

Total other financial assets

14,485,896

6,245,817

8,240,079

-

Derivative financial instruments

240,394

-

240,394

-

Derivative hedge liabilities

805,306

-

805,306

-

Total financial derivative liabilities

1,045,700

-

1,045,700

-

 

 

 

 

 

 

As of December 31, 2018

Recorded fair value

Fair value hierarchy

level 1

level 2

level 3

ThCh$

ThCh$

ThCh$

ThCh$

Derivative financial instruments

11,522,482

-

11,522,482

-

Market 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

26,070,548

11,010,433

15,060,115

-

Derivative financial instruments

4,997,124

-

4,997,124

-

Derivative hedge liabilities

1,351,530

-

1,351,530

-

Total financial derivative liabilities

6,348,654

-

6,348,654

-

 

 

 

 

 

During the year ended as ofDecember 31, 2019, the Company has not made any significant instrument transfers between levels 1 and 2.

Sales information by geographic locationCredit quality of financial assets

 

Net sales per geographical location

For the years ended as of December 31,

2016

2015

2014

ThCh$

ThCh$

ThCh$

Chile (1)

1,176,972,109

1,081,835,420

991,938,043

Argentina (2)

329,585,488

366,886,701

264,631,403

Uruguay

15,204,331

14,432,950

11,204,806

Paraguay

37,135,780

35,216,644

30,192,047

Total

1,558,897,708

1,498,371,715

1,297,966,299

(1)Includes net sales correspondThe Company uses two credit assessment systems for its clients: a) Clients with loan insurance are assessed according to Corporate Support Unitthe external risk criteria (trade reports, non-compliance and eliminations between geographical locations. Additionally, includes net sales madeprotested documents that are available in Chile of the Wines Operating segment.

(2)Includes net sales madelocal market), payment capability and equity situation required by the subisiaries Finca La Celia S.A.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 Los Huemules SRL.protested documents), registered underexternal risk (trade reports, non-compliance and protested documents that  are available in the Wines Operating segmentlocal market) and Chile Operating segment, respectively.

Sales information by customer

 

For the years ended as of December 31,

Net Sales

2016

2015

2014

 

ThCh$

ThCh$

ThCh$

Domestic sales

1,429,152,068

1,374,282,584

1,188,231,333

Exports sales

129,745,640

124,089,131

109,734,966

Total

1,558,897,708

1,498,371,715

1,297,966,299

Sales information by product category

 

For the years ended as of December 31,

Sales information by product category

2016

2015

2014

 

ThCh$

ThCh$

ThCh$

Alcoholic business

1,041,923,724

1,040,145,164

880,580,817

Non-alcoholic business

493,397,317

429,844,632

393,351,650

Others (1)

23,576,667

28,381,919

24,033,832

Total

1,558,897,708

1,498,371,715

1,297,966,299

(1)Others consist mainly of sales of by-productspayment capacity and packaging including bottles, pallets, and glasses.

Depreciation and amortization as per operating segments

Property, plant and equipment depreciation and amortization of software

For the years ended as of December 31,

2016

2015

2014

ThCh$

ThCh$

ThCh$

Chile Operating segment

61,736,849

56,698,871

38,832,969

International business Operating segment

11,928,705

14,334,415

11,194,117

Wines Operating segment

7,078,873

7,568,991

7,115,790

Others (1)

2,783,619

2,964,525

11,464,690

Total

83,528,046

81,566,802

68,607,566

(1)Includes depreciation and amortization corresponding toequity situation. The uncollectible rate during the Corporate Support Units.last two years has not been significant.

 

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Cash flows Operating Segments

Cash flows Operating Segments

 

For the years ended as of December 31,

 

2016

2015

2014

 

ThCh$

ThCh$

ThCh$

Cash flows from (used in ) Operating activities

 

190,014,348

219,510,872

173,621,663

Chile Operating segment

 

152,862,350

49,531,088

27,943,224

International BusinessOperating segment

 

13,065,093

31,975,494

10,070,867

Wines Operating segment

 

32,949,789

30,926,463

31,523,287

Others (1)

 

(8,862,884)

107,077,827

104,084,285

 

 

 

 

 

Cash flows from (used in ) Investing Activities

 

(155,007,390)

(165,810,169)

(238,970,139)

Chile Operating segment

 

(57,119,431)

(59,046,239)

(55,303,491)

International Business Operating segment

 

(40,032,866)

(26,457,885)

(31,118,042)

Wines Operating segment

 

(13,499,538)

(9,807,177)

(10,279,735)

Others (1)

 

(44,355,555)

(70,498,868)

(142,268,871)

 

 

 

 

 

Cash flows from (used in ) Financing Activities

 

(95,303,138)

(82,839,491)

(132,155,575)

Chile Operating segment

 

(90,636,820)

21,923,989

17,907,244

International Business Operating segment

 

18,577,556

3,431,139

23,525,276

Wines Operating segment

 

(18,841,106)

(19,061,949)

(10,447,305)

Others (1)

 

(4,402,768)

(89,132,670)

(163,140,790)

 

 

 

 

 

(1)Others includes Corporate Support Units, due to cahs flows are managed by CCU.

Capital expenditures as per operating segments

 

Capital expenditures (property, plant and equipment and software additions)

 

For the years ended as of December 31,

 

2016

2015

2014

 

ThCh$

ThCh$

ThCh$

Chile Operating segment

 

53,809,780

43,771,262

53,895,523

International business Operating segment

 

39,592,739

27,871,662

33,481,407

Wines Operating segment

 

14,767,858

10,052,863

12,686,080

Others (1)

 

20,713,048

50,035,135

130,017,142

Total

 

128,883,425

131,730,922

230,080,152

Note 8 Cash and cash equivalents

                                                                     

(1)Others includes the capital investments corresponding to the Corporate Support Units.

AssetsCash and cash equivalent balances are detailed as per operating segmentsfollows:

 

Assets as per Operating segments

As of December 31, 2016

As of December 31, 2015

ThCh$

ThCh$

Chile Operating segment

1,125,266,274

1,056,161,363

International business Operating segment

259,002,220

256,319,478

Wines Operating segment

316,965,318

308,288,465

Others (1)

170,343,238

204,678,125

Total

1,871,577,050

1,825,447,431

 

As of December 31, 2019

As of December 31, 2018

As of December 31, 2017

 

ThCh$

ThCh$

ThCh$

Cash on hand

242,308

221,071

97,228

Bank balances

71,393,732

64,085,358

45,389,589

Cash

71,636,040

64,306,429

45,486,817

Time deposits

4,356,420

46,723,278

4,804,224

Securities purchased under resale agreements

101,077,015

196,319,058

102,695,758

Investments in mutual funds

5,888,424

10,194,222

16,586,749

Short term investments classified as cash equivalents

106,965,439

206,513,280

119,282,507

Cash equivalents

111,321,859

253,236,558

124,086,731

Overnight deposits

13,411,325

1,471,063

471,054

Total other cash and cash equivalents

13,411,325

1,471,063

471,054

Total

196,369,224

319,014,050

170,044,602

(1)Includes assets corresponding to the Corporate Support Units.

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Assets per geographic location

The composition of cash and cash equivalents by currency as ofDecember 31, 2019, is detailed as follows:

 

Assets per geographical location

As of December 31, 2016

As of December 31, 2015

ThCh$

ThCh$

Chile (1)

1,600,077,453

1,557,641,691

Argentina (2)

197,986,123

188,897,724

Uruguay

27,327,545

25,703,157

Paraguay

46,185,929

53,204,859

Total

1,871,577,050

1,825,447,431

(1)Includes the assets corresponding to the Corporate Support Units and eliminations between geographic location. 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.

Liabilites as per operating segments

Liabilities as per Operating segments

As of December 31, 2016

As of December 31, 2015

ThCh$

ThCh$

Chile Operating segment

242,132,457

218,651,536

International business Operating segment

100,994,174

97,680,139

Wines Operating segment

104,147,109

102,780,420

Others (1)

224,010,731

218,813,191

Total

671,284,471

637,925,286

 

Chilean Peso

US Dollar

Euro

Argentine Peso

Uruguayan Peso

Paraguayan Guarani

Bolivian

Others

Total

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Cash on hand

92,440

3,964

-

6,727

-

-

139,177

-

242,308

Bank balances

48,583,607

10,176,489

2,592,865

1,577,902

1,384,395

2,763,191

3,184,376

1,130,907

71,393,732

Cash

48,676,047

10,180,453

2,592,865

1,584,629

1,384,395

2,763,191

3,323,553

1,130,907

71,636,040

Time deposits

2,450,392

1,906,028

-

-

-

-

-

-

4,356,420

Securities purchased under resale agreements

101,077,015

-

-

-

-

-

-

-

101,077,015

Investments in mutual funds

-

-

-

5,888,424

-

-

-

-

5,888,424

Short term investments classified as cash equivalents

101,077,015

-

-

5,888,424

-

-

-

-

106,965,439

Cash equivalents

103,527,407

1,906,028

-

5,888,424

-

-

-

-

111,321,859

Overnight deposits

-

13,411,325

-

-

-

-

-

-

13,411,325

Total other cash and cash equivalents

-

13,411,325

-

-

-

-

-

-

13,411,325

Total

152,203,454

25,497,806

2,592,865

7,473,053

1,384,395

2,763,191

3,323,553

1,130,907

196,369,224

 

 

(1)Others includes liabilites corresponding to the Corporate Support Units.The composition of cash and cash equivalents by currency as ofDecember 31, 2018, is detailed as follows:

 

 

Chilean Peso

US Dollar

Euro

Argentine Peso

Uruguayan Peso

Paraguayan Guarani

Bolivian

Others

Total

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Cash on hand

77,940

5,290

-

5,477

-

-

132,364

-

221,071

Bank balances

39,692,222

17,550,277

954,640

1,039,825

548,975

2,495,748

1,127,401

676,270

64,085,358

Cash

39,770,162

17,555,567

954,640

1,045,302

548,975

2,495,748

1,259,765

676,270

64,306,429

Time deposits

24,755,756

-

-

21,967,522

-

-

-

-

46,723,278

Securities purchased under resale agreements

196,319,058

-

-

-

-

-

-

-

196,319,058

Investments in mutual funds

-

-

-

10,194,222

-

-

-

-

10,194,222

Short term investments classified as cash equivalents

196,319,058

-

-

10,194,222

-

-

-

-

206,513,280

Cash equivalents

221,074,814

-

-

32,161,744

-

-

-

-

253,236,558

Overnight deposits

-

1,471,063

-

-

-

-

-

-

1,471,063

Total other cash and cash equivalents

-

1,471,063

-

-

-

-

-

-

1,471,063

Total

260,844,976

19,026,630

954,640

33,207,046

548,975

2,495,748

1,259,765

676,270

319,014,050


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Operating Segment’s additional information

 

The Consolidated Statementcomposition of Income classified according to the Company’s operations managementcash and cash equivalents by currency as ofDecember 31, 2017, is detailed as follows:

 

CONSOLIDATED STATEMENT OF INCOME

Notes

For the years ended December 31,

2016

2015

2014

ThCh$

ThCh$

ThCh$

Sales revenue external customers

 

1,535,321,041

1,469,989,796

1,273,932,468

Other income

 

23,576,667

28,381,919

24,033,831

Net sales

 

1,558,897,708

1,498,371,715

1,297,966,299

  Change %

 

4.0

15.4

-

Cost of sales

 

(741,819,916)

(685,075,251)

(604,536,815)

  % of Net sales

 

47.6

45.7

46.6

Gross margin

 

817,077,792

813,296,464

693,429,484

  % of Net sales

 

52.4

54.3

53.4

MSD&A (1)

 

(619,542,751)

(612,564,776)

(535,603,002)

  % of Net sales

 

39.7

40.9

41.3

Other operating income (expenses)

 

3,116,679

4,205,310

23,721,310

  Change %

 

(2.1)

12.9

-

Exceptional Items (EI) (2)

 

-

-

(1,627,500)

Adjusted operating result (3)

 

200,651,720

204,936,998

179,920,292

  Change %

 

(2.1)

13.9

-

  % of Net sales

 

12.9

13.7

13.9

Net financial expense

10

(14,627,170)

(15,255,586)

(10,820,890)

Share of net loss of joint ventures and associates accounted for using

19

(5,560,522)

(5,228,135)

(898,607)

Foreign currency exchange differences

10

456,995

957,565

(613,180)

Results as per adjustment units

10

(2,246,846)

(3,282,736)

(4,159,131)

Other gains (losses)

12

(8,345,907)

8,512,000

4,036,939

Income before taxes

 

170,328,270

190,640,106

167,465,421

Income taxes

25

(30,246,383)

(50,114,516)

(46,673,500)

Net income for year

 

140,081,887

140,525,590

120,791,921

Non-controlling interests

31

21,624,399

19,717,455

14,553,471

Net income attributable to equity holders of the parent

 

118,457,488

120,808,135

106,238,450

Depreciation and amortization

 

83,528,045

81,566,802

68,607,566

  Change %

 

(0.8)

14.5

-

ORBDA (4)

 

284,179,765

286,503,800

248,527,858

  Change %

 

(0.8)

15.3

-

  % of Net sales

 

18.2

19.1

19.1

 

 

 

 

 

 

Chilean Peso

US Dollar

Euro

Argentine Peso

Uruguayan Peso

Paraguayan Guarani

Bolivian

Others

Total

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Cash on hand

75,623

16,154

-

5,451

-

-

-

-

97,228

Bank balances

30,110,816

4,691,411

182,966

1,391,103

718,348

7,758,211

-

536,734

45,389,589

Cash

30,186,439

4,707,565

182,966

1,396,554

718,348

7,758,211

-

536,734

45,486,817

Time deposits

4,804,224

-

-

-

-

-

-

-

4,804,224

Securities purchased under resale agreements

102,695,758

-

-

-

-

-

-

-

102,695,758

Investments in mutual funds

-

-

-

16,586,749

-

-

-

-

16,586,749

Short term investments classified as cash equivalents

102,695,758

-

-

16,586,749

-

-

-

-

119,282,507

Cash equivalents

107,499,982

-

-

16,586,749

-

-

-

-

124,086,731

Overnight deposits

-

471,054

-

-

-

-

-

-

471,054

Total other cash and cash equivalents

-

471,054

-

-

-

-

-

-

471,054

Total

137,686,421

5,178,619

182,966

17,983,303

718,348

7,758,211

-

536,734

170,044,602

See definition of (1), (2), (3) and (4) in information as per Operating segment letter b).

 

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

The composition of time deposits is detailed as follows:

 

The following is a reconciliationAs of our Net income, the main comparable IFRS measure to Adjusted Operating Result for the years ended December 31, 2016, 2015 and 2014:2019:

 

 

For the years ended December 31,

2016

2015

2014

ThCh$

ThCh$

ThCh$

Net income of year

140,081,887

140,525,590

120,791,921

Add (Subtract):

 

 

 

Other gains (losses)

8,345,907

(8,512,000)

(4,036,939)

Financial Income

(5,680,068)

(7,845,743)

(12,136,591)

Financial costs

20,307,238

23,101,329

22,957,482

Share of net loss of joint ventures and associates accounted for using the equity method

5,560,522

5,228,135

898,607

Foreign currency exchange differences

(456,995)

(957,565)

613,181

Result as per adjustment units

2,246,846

3,282,736

4,159,131

Income taxes

30,246,383

50,114,516

46,673,500

Adjusted Operating result

200,651,720

204,936,998

179,920,292

Financial entity

Date of placement

Due date

Currency

Amount

Monthly interest rate (%)

ThCh$

Banco de Chile

12-27-2019

01-03-2020

CLP

2,450,392

0.12

Banco de Chile

12-27-2019

01-09-2020

USD

1,108,307

0.12

Banco de Chile

12-20-2019

01-10-2020

USD

486,897

0.12

Banco de Chile

12-23-2019

01-06-2020

USD

310,824

0.12

Total

 

 

 

4,356,420

 

Exceptional Item (EI)

-

-

1,627,500

AdjustedOperating result before(EI)

200,651,720

204,936,998

181,547,792

Depreciation and amortization

83,528,045

81,566,802

68,607,566

ORBDA before (EI)

284,179,765

286,503,800

250,155,358

Exceptional Item (EI)

-

-

(1,627,500)

ORBDA

284,179,765

286,503,800

248,527,858

As of December 31, 2018:

 

 

Financial entity

Date of placement

Due date

Currency

Amount

Monthly interest rate (%)

ThCh$

Banco de Chile

12-21-2018

01-30-2019

USD

486,812

0.29

Banco de Chile

12-24-2018

01-09-2019

CLP

1,250,613

0.21

Banco de Chile

12-26-2018

01-25-2019

USD

139,017

0.27

Banco de Chile

12-27-2018

01-25-2019

USD

62,548

0.23

Banco Francés - Argentina

12-07-2018

03-07-2019

ARS

5,921,330

0.53

Banco Francés - Argentina

12-12-2018

03-12-2019

ARS

5,110,766

0.50

Banco HSBC - Argentina

12-12-2018

03-12-2019

ARS

4,921,479

0.50

Banco Itaú - Argentina

11-07-2018

01-07-2019

ARS

6,013,947

0.58

Banco Santander - Chile

12-18-2018

01-10-2019

CLP

2,803,033

0.25

Banco Santander - Chile

12-19-2018

01-10-2019

CLP

10,010,400

0.26

Banco Santander - Chile

12-27-2018

01-24-2019

CLP

10,003,333

0.25

Total

 

 

 

46,723,278

 

As of December 31, 2017:

Financial entity

Date of placement

Due date

Currency

Amount

Monthly interest rate (%)

ThCh$

Banco Consorcio - Chile

12-20-2017

01-03-2018

CLP

4,804,224

0.24

Total

 

 

 

4,804,224

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

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,

2016

2015

2014

ThCh$

ThCh$

ThCh$

Consolidated statement of income

 

 

 

Distribution costs

(270.835.822)

(277.599.722)

(240.848.630)

Administrative expenses

(155.322.295)

(128.135.799)

(110.014.716)

Other expenses by function

(195.412.109)

(209.201.189)

(188.109.562)

Other expenses included in ´Other expenses by function´

2.027.475

2.371.934

3.369.906

Total MSD&A

(619.542.751)

(612.564.776)

(535.603.002)

Segment information by joint ventures and associates

The Administration of the Company review the financial situation and operations result of the all of their joint ventures and associated that is described inNote 19.

Note 8Business Combinations

a) Bebidas del Paraguay S.A.

Year 2016 Acquisitions

 

On March 31, 2016, the susbsidiary Bebidas del Paraguay S.A. acquired 51%The composition of the stock rights of Artisan SRL (Paraguayan company). The purpose of this companySecurities purchased under resale agreements is the production and marketing of Sajonia brand beer. The amount of this transaction was ThCh$ 641,489 (equivalents to US$ 1,000,000). At the date of issuance of these consolidated financial statements the Company is in the process of assessing the fair values of acquisitions above mentioned, estimating preliminarily that the effects will not be significant, so it was recorded under Other non-financial assets (seeNote 18).

It is expected that the acquisition of this company allows to transform the brand into a reference in the segment of craft beer, increases their productive capacities and distribution network, forming part of the portfolio brands of BdP. Acoording with the above mentioned, BdP begins to participate in the elaboration of beer, with its own brand and with great growth prospects.

b) Other acquisitions

On December 2015 and June 2016, The Company participates, thorough subsidiary Embotelladoras Chilenas Unidas S.A., in joint operations Bebidas Carozzi CCU SpA. and Promarca Internacional SpA., determining fair valuesdetailed as explained inNote 1, letter a)and d), respectively.follows:

 

As of December 31, 2016, the Company has not made other business combinations.2019:

 

Financial entity

Underlying Asset (Time Deposit) (*)

Date of placement

Due date

Currency

Amount

Monthly interest rate (%)

ThCh$

BanChile Corredores de Bolsa S.A.

Banco de Crédito e Inversiones - Chile

12-30-2019

01-02-2020

CLP

1,124,056

0.22

BanChile Corredores de Bolsa S.A.

Banco Central de Chile

12-30-2019

01-02-2020

CLP

6,176,480

0.22

BanChile Corredores de Bolsa S.A.

Banco de Crédito e Inversiones - Chile

12-27-2019

01-02-2020

CLP

2,776,880

0.18

BanChile Corredores de Bolsa S.A.

Banco Itaú Corpbanca - Chile

12-27-2019

01-02-2020

CLP

489,632

0.18

BanChile Corredores de Bolsa S.A.

Banco de Crédito e Inversiones - Chile

12-30-2019

01-09-2020

CLP

100,005

0.16

BanChile Corredores de Bolsa S.A.

Banco Bice - Chile

12-27-2019

01-02-2020

CLP

734,448

0.18

BancoEstado S.A. Corredores de Bolsa

Banco de Crédito e Inversiones - Chile

12-26-2019

01-03-2020

CLP

4,001,333

0.20

BancoEstado S.A. Corredores de Bolsa

Banco Santander - Chile

12-26-2019

01-03-2020

CLP

9,403,133

0.20

BancoEstado S.A. Corredores de Bolsa

Banco de Chile

12-27-2019

01-03-2020

CLP

12,003,360

0.21

BancoEstado S.A. Corredores de Bolsa

Banco del Estado de Chile

12-27-2019

01-03-2020

CLP

5,001,400

0.21

BancoEstado S.A. Corredores de Bolsa

Banco Itaú Corpbanca - Chile

12-27-2019

01-03-2020

CLP

4,001,120

0.21

BancoEstado S.A. Corredores de Bolsa

Scotiabank Sudamericano - Chile

12-27-2019

01-02-2020

CLP

1,192,040

0.21

BancoEstado S.A. Corredores de Bolsa

Banco Security - Chile

12-27-2019

01-02-2020

CLP

658,478

0.21

BancoEstado S.A. Corredores de Bolsa

Banco del Estado de Chile

12-30-2019

01-09-2020

CLP

200,012

0.18

BancoEstado S.A. Corredores de Bolsa

Scotiabank Sudamericano - Chile

12-27-2019

01-09-2020

CLP

1,200,336

0.21

BancoEstado S.A. Corredores de Bolsa

Banco del Estado de Chile

12-30-2019

01-24-2020

CLP

331,012

0.18

BancoEstado S.A. Corredores de Bolsa

Banco Consorcio - Chile

12-30-2019

01-24-2020

CLP

369,030

0.18

BancoEstado S.A. Corredores de Bolsa

Banco de Crédito e Inversiones - Chile

12-26-2019

01-03-2020

CLP

6,002,000

0.20

BancoEstado S.A. Corredores de Bolsa

Banco del Estado de Chile

12-30-2019

01-09-2020

CLP

300,018

0.18

BancoEstado S.A. Corredores de Bolsa

Banco Security - Chile

12-23-2019

01-06-2020

CLP

300,168

0.21

BancoEstado S.A. Corredores de Bolsa

Banco Consorcio - Chile

12-23-2019

01-06-2020

CLP

300,168

0.21

BancoEstado S.A. Corredores de Bolsa

Banco de Crédito e Inversiones - Chile

12-23-2019

01-06-2020

CLP

1,200,672

0.21

BancoEstado S.A. Corredores de Bolsa

Scotiabank Sudamericano - Chile

12-30-2019

01-16-2020

CLP

3,864,985

0.18

BancoEstado S.A. Corredores de Bolsa

Banco Santander - Chile

12-30-2019

01-16-2020

CLP

5,959,517

0.18

BancoEstado S.A. Corredores de Bolsa

Banco Security - Chile

12-30-2019

01-16-2020

CLP

1,000,060

0.18

BancoEstado S.A. Corredores de Bolsa

Banco Consorcio - Chile

12-30-2019

01-16-2020

CLP

376,110

0.18

BancoEstado S.A. Corredores de Bolsa

Banco de Crédito e Inversiones - Chile

12-26-2019

01-03-2020

CLP

500,167

0.20

Scotia Corredora de Bolsa Chile S.A.

Scotiabank Sudamericano - Chile

12-27-2019

01-06-2020

CLP

8,363,007

0.21

Scotia Corredora de Bolsa Chile S.A.

Banco Itaú Corpbanca - Chile

12-27-2019

01-06-2020

CLP

639,513

0.21

Scotia Corredora de Bolsa Chile S.A.

Banco de Chile

12-26-2019

01-03-2020

CLP

1,500,525

0.21

Scotia Corredora de Bolsa Chile S.A.

Banco de Chile

12-26-2019

01-03-2020

CLP

1,211,714

0.21

Scotia Corredora de Bolsa Chile S.A.

Banco Bice - Chile

12-26-2019

01-03-2020

CLP

2,289,511

0.21

Scotia Corredora de Bolsa Chile S.A.

Banco de Chile

12-26-2019

01-03-2020

CLP

814,100

0.21

Scotia Corredora de Bolsa Chile S.A.

Scotiabank Sudamericano - Chile

12-26-2019

01-03-2020

CLP

2,926,683

0.21

Scotia Corredora de Bolsa Chile S.A.

Banco Santander - Chile

12-26-2019

01-03-2020

CLP

5,705,073

0.21

Scotia Corredora de Bolsa Chile S.A.

Banco Itaú Corpbanca - Chile

12-26-2019

01-03-2020

CLP

5,109,314

0.21

Scotia Corredora de Bolsa Chile S.A.

Banco Security - Chile

12-26-2019

01-03-2020

CLP

2,950,955

0.21

Total

 

 

 

 

101,077,015

 

(*) All financial instruments acquired under resale agreements, correspond to time deposits and are subject to a fixed interest rate.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

As of December 31, 2018:

Financial entity

Underlying Asset (Time Deposit) (*)

Date of placement

Due date

Currency

Amount

Monthly interest rate (%)

ThCh$

BanChile Corredores de Bolsa S.A.

Banco del Estado de Chile

12-17-2018

01-04-2019

CLP

6,807,616

0.24

BanChile Corredores de Bolsa S.A.

Scotiabank Chile

12-20-2018

01-10-2019

CLP

3,552,994

0.23

BanChile Corredores de Bolsa S.A.

Scotiabank Chile

12-21-2018

01-10-2019

CLP

1,196,505

0.23

BanChile Corredores de Bolsa S.A.

Banco BICE - Chile

12-21-2018

01-10-2019

CLP

1,997,067

0.23

BanChile Corredores de Bolsa S.A.

Banco Security - Chile

12-21-2018

01-10-2019

CLP

709,418

0.23

BanChile Corredores de Bolsa S.A.

Banco de Chile

12-21-2018

01-10-2019

CLP

296,155

0.23

BanChile Corredores de Bolsa S.A.

Banco Security - Chile

12-21-2018

01-10-2019

CLP

184,213

0.23

BanChile Corredores de Bolsa S.A.

Scotiabank Chile

12-21-2018

01-16-2019

CLP

283,475

0.23

BanChile Corredores de Bolsa S.A.

Banco Security - Chile

12-21-2018

01-16-2019

CLP

91,813

0.23

BanChile Corredores de Bolsa S.A.

Banco de Chile

12-26-2018

01-15-2019

CLP

10,004,000

0.24

BanChile Corredores de Bolsa S.A.

Banco de Crédito e Inversiones - Chile

12-26-2018

01-10-2019

CLP

300,885

0.24

BanChile Corredores de Bolsa S.A.

Banco del Estado de Chile

12-26-2018

01-10-2019

CLP

1,100,440

0.24

BanChile Corredores de Bolsa S.A.

Banco del Estado de Chile

12-26-2018

01-10-2019

CLP

490,196

0.24

BanChile Corredores de Bolsa S.A.

Banco de Chile

12-26-2018

01-10-2019

CLP

5,001,235

0.24

BanChile Corredores de Bolsa S.A.

Scotiabank Chile

12-28-2018

01-15-2019

CLP

3,500,840

0.24

BanChile Corredores de Bolsa S.A.

Scotiabank Chile

12-28-2018

01-15-2019

CLP

1,500,360

0.24

BancoEstado S.A. Corredores de Bolsa

Banco de Chile

12-13-2018

01-14-2019

CLP

4,105,904

0.24

BancoEstado S.A. Corredores de Bolsa

Banco de Chile

12-14-2018

01-02-2019

CLP

1,094,729

0.24

BancoEstado S.A. Corredores de Bolsa

Banco del Estado de Chile

12-14-2018

01-02-2019

CLP

7,009,520

0.24

BancoEstado S.A. Corredores de Bolsa

Banco de Crédito e Inversiones - Chile

12-14-2018

01-02-2019

CLP

1,911,598

0.24

BancoEstado S.A. Corredores de Bolsa

Banco Santander - Chile

12-14-2018

01-02-2019

CLP

415,536

0.24

BancoEstado S.A. Corredores de Bolsa

Banco Security - Chile

12-14-2018

01-02-2019

CLP

5,690,513

0.24

BancoEstado S.A. Corredores de Bolsa

Banco Santander - Chile

12-14-2018

01-30-2019

CLP

250,340

0.24

BancoEstado S.A. Corredores de Bolsa

Banco Security - Chile

12-20-2018

01-30-2019

CLP

500,440

0.24

BancoEstado S.A. Corredores de Bolsa

Scotiabank Chile

12-24-2018

01-10-2019

CLP

199,653

0.24

BancoEstado S.A. Corredores de Bolsa

Banco de Crédito e Inversiones - Chile

12-24-2018

01-10-2019

CLP

950,991

0.24

BancoEstado S.A. Corredores de Bolsa

Banco de Chile

12-26-2018

01-30-2019

CLP

2,634,725

0.24

BancoEstado S.A. Corredores de Bolsa

Banco del Estado de Chile

12-26-2018

01-30-2019

CLP

6,702,680

0.24

BancoEstado S.A. Corredores de Bolsa

Scotiabank Chile

12-26-2018

01-30-2019

CLP

4,829,042

0.24

BancoEstado S.A. Corredores de Bolsa

Banco de Crédito e Inversiones - Chile

12-26-2018

01-30-2019

CLP

8,848,606

0.24

BancoEstado S.A. Corredores de Bolsa

Banco Santander - Chile

12-26-2018

01-30-2019

CLP

6,560,550

0.24

BancoEstado S.A. Corredores de Bolsa

Banco Itaú Corpbanca - Chile

12-26-2018

01-30-2019

CLP

1,650,525

0.24

BancoEstado S.A. Corredores de Bolsa

Banco Security - Chile

12-26-2018

01-30-2019

CLP

4,881,954

0.24

BancoEstado S.A. Corredores de Bolsa

Banco Consorcio

12-26-2018

01-30-2019

CLP

3,427,727

0.24

BancoEstado S.A. Corredores de Bolsa

Banco de Chile

12-27-2018

01-15-2019

CLP

3,279,009

0.25

BancoEstado S.A. Corredores de Bolsa

Banco del Estado de Chile

12-27-2018

01-15-2019

CLP

472,241

0.25

BancoEstado S.A. Corredores de Bolsa

Banco de Chile

12-27-2018

01-10-2019

CLP

600,200

0.25

BancoEstado S.A. Corredores de Bolsa

Banco de Crédito e Inversiones - Chile

12-27-2018

01-15-2019

CLP

3,001,000

0.25

BBVA Corredores de Bolsa Ltda.

Banco del Estado de Chile

11-30-2018

01-04-2019

CLP

3,899,730

0.26

BBVA Corredores de Bolsa Ltda.

Banco Itaú Corpbanca - Chile

11-30-2018

01-04-2019

CLP

2,216,658

0.26

BBVA Corredores de Bolsa Ltda.

Banco del Estado de Chile

12-13-2018

01-02-2019

CLP

2,859,342

0.25

BBVA Corredores de Bolsa Ltda.

Banco del Estado de Chile

12-13-2018

01-30-2019

CLP

270,405

0.25

BBVA Corredores de Bolsa Ltda.

Banco de Crédito e Inversiones - Chile

12-13-2018

01-16-2019

CLP

233,620

0.25

BBVA Corredores de Bolsa Ltda.

Banco Security - Chile

12-13-2018

01-16-2019

CLP

1,969,680

0.25

BBVA Corredores de Bolsa Ltda.

Banco de Chile

12-13-2018

01-02-2019

CLP

3,550,258

0.25

BBVA Corredores de Bolsa Ltda.

Banco Santander - Chile

12-17-2018

01-02-2019

CLP

2,876,187

0.25

BBVA Corredores de Bolsa Ltda.

Banco Itaú Corpbanca - Chile

12-17-2018

01-02-2019

CLP

7,880,787

0.25

BBVA Corredores de Bolsa Ltda.

Scotiabank Chile

12-17-2018

01-16-2019

CLP

1,474,627

0.25

BBVA Corredores de Bolsa Ltda.

Banco de Crédito e Inversiones - Chile

12-17-2018

01-16-2019

CLP

1,550,072

0.25

BBVA Corredores de Bolsa Ltda.

Banco Itaú Corpbanca - Chile

12-17-2018

01-16-2019

CLP

1,230,260

0.25

BBVA Corredores de Bolsa Ltda.

Banco de Crédito e Inversiones - Chile

12-17-2018

01-02-2019

CLP

4,911,284

0.25

BBVA Corredores de Bolsa Ltda.

Banco de Chile

12-19-2018

01-10-2019

CLP

6,881,358

0.26

BBVA Corredores de Bolsa Ltda.

Banco del Estado de Chile

12-19-2018

01-10-2019

CLP

7,941,664

0.26

BBVA Corredores de Bolsa Ltda.

Scotiabank Chile

12-19-2018

01-10-2019

CLP

3,822,988

0.26

BBVA Corredores de Bolsa Ltda.

Banco Santander - Chile

12-19-2018

01-10-2019

CLP

4,451,265

0.26

BBVA Corredores de Bolsa Ltda.

Banco Itaú Corpbanca - Chile

12-19-2018

01-10-2019

CLP

1,963,352

0.26

BBVA Corredores de Bolsa Ltda.

Banco Itaú Corpbanca - Chile

12-19-2018

01-10-2019

CLP

185,620

0.26

BBVA Corredores de Bolsa Ltda.

Banco Security - Chile

12-19-2018

01-10-2019

CLP

1,967,453

0.26

BBVA Corredores de Bolsa Ltda.

Banco Security - Chile

12-19-2018

01-10-2019

CLP

895,503

0.26

BBVA Corredores de Bolsa Ltda.

Banco de Crédito e Inversiones - Chile

12-24-2018

01-10-2019

CLP

4,802,350

0.26

BBVA Corredores de Bolsa Ltda.

Banco Santander - Chile

12-24-2018

01-10-2019

CLP

2,602,140

0.26

BBVA Corredores de Bolsa Ltda.

Banco de Crédito e Inversiones - Chile

12-24-2018

01-10-2019

CLP

2,501,517

0.26

BBVA Corredores de Bolsa Ltda.

Banco de Chile

12-24-2018

01-09-2019

CLP

900,546

0.26

BBVA Corredores de Bolsa Ltda.

Banco de Crédito e Inversiones - Chile

12-27-2018

01-30-2019

CLP

1,190,413

0.26

BBVA Corredores de Bolsa Ltda.

Banco de Crédito e Inversiones - Chile

12-27-2018

01-10-2019

CLP

3,801,316

0.26

BBVA Corredores de Bolsa Ltda.

Scotiabank Chile

12-27-2018

01-15-2019

CLP

9,453,276

0.26

BBVA Corredores de Bolsa Ltda.

Banco Itaú Corpbanca - Chile

12-27-2018

01-09-2019

CLP

2,000,692

0.26

Total

 

 

 

 

196,319,058

 

(*) All financial instruments acquired under resale agreements, correspond to time deposits and are subject to a fixed interest rate.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

As of December 31, 2017:

Financial entity

Underlying Asset (Time Deposit) (*)

Date of placement

Due date

Currency

Amount

Monthly interest rate (%)

ThCh$

BanChile Corredores de Bolsa S.A.

Scotiabank Chile

12-12-2017

01-05-2018

CLP

369,413

0.24

BanChile Corredores de Bolsa S.A.

Banco del Estado de Chile

12-14-2017

01-05-2018

CLP

144,116

0.24

BanChile Corredores de Bolsa S.A.

Scotiabank Chile

12-14-2017

01-05-2018

CLP

6,006,912

0.24

BanChile Corredores de Bolsa S.A.

Banco de Crédito e Inversiones - Chile

12-14-2017

01-05-2018

CLP

196,591

0.24

BanChile Corredores de Bolsa S.A.

Banco Itaú Corpbanca - Chile

12-14-2017

01-05-2018

CLP

970,704

0.24

BanChile Corredores de Bolsa S.A.

Banco Security - Chile

12-14-2017

01-05-2018

CLP

3,796,772

0.24

BanChile Corredores de Bolsa S.A.

Banco de Chile

12-22-2017

01-05-2018

CLP

3,672,751

0.25

BanChile Corredores de Bolsa S.A.

Banco de Crédito e Inversiones - Chile

12-26-2017

01-05-2018

CLP

2,910,394

0.24

BanChile Corredores de Bolsa S.A.

Banco Itaú Corpbanca - Chile

12-26-2017

01-05-2018

CLP

1,591,406

0.24

BanChile Corredores de Bolsa S.A.

Banco Security - Chile

12-12-2017

01-05-2018

CLP

2,935,603

0.24

BanChile Corredores de Bolsa S.A.

Banco del Estado de Chile

12-22-2017

01-05-2018

CLP

2,631,974

0.25

BancoEstado S.A. Corredores de Bolsa

Banco del Estado de Chile

12-28-2017

01-04-2018

CLP

80,020

0.25

BancoEstado S.A. Corredores de Bolsa

Banco de Crédito e Inversiones - Chile

12-22-2017

01-03-2018

CLP

5,003,750

0.25

BancoEstado S.A. Corredores de Bolsa

Banco de Chile

12-28-2017

01-05-2018

CLP

2,750,688

0.25

BancoEstado S.A. Corredores de Bolsa

Banco del Estado de Chile

12-28-2017

01-05-2018

CLP

3,000,750

0.25

BancoEstado S.A. Corredores de Bolsa

Scotiabank Chile

12-28-2017

01-05-2018

CLP

5,001,250

0.25

BancoEstado S.A. Corredores de Bolsa

Banco de Crédito e Inversiones - Chile

12-28-2017

01-05-2018

CLP

4,001,000

0.25

BancoEstado S.A. Corredores de Bolsa

Banco Security - Chile

12-28-2017

01-05-2018

CLP

1,000,250

0.25

BancoEstado S.A. Corredores de Bolsa

Scotiabank Azul - Chile

12-28-2017

01-05-2018

CLP

1,000,250

0.25

BancoEstado S.A. Corredores de Bolsa

Banco de Chile

12-28-2017

01-10-2018

CLP

4,251,063

0.25

BancoEstado S.A. Corredores de Bolsa

Scotiabank Chile

12-29-2017

01-10-2018

CLP

3,238,217

0.25

BancoEstado S.A. Corredores de Bolsa

Banco Itaú Corpbanca - Chile

12-29-2017

01-10-2018

CLP

2,000,333

0.25

BancoEstado S.A. Corredores de Bolsa

Banco Security - Chile

12-29-2017

01-10-2018

CLP

1,938,656

0.25

BancoEstado S.A. Corredores de Bolsa

Banco de Chile

12-28-2017

01-30-2018

CLP

1,250,313

0.25

BancoEstado S.A. Corredores de Bolsa

Scotiabank Chile

12-29-2017

01-10-2018

CLP

340,057

0.25

BancoEstado S.A. Corredores de Bolsa

Scotiabank Chile

12-22-2017

01-10-2018

CLP

2,628,752

0.25

BancoEstado S.A. Corredores de Bolsa

Banco Santander - Chile

12-22-2017

01-10-2018

CLP

1,974,698

0.25

BancoEstado S.A. Corredores de Bolsa

Banco de Chile

12-28-2017

01-15-2018

CLP

3,800,950

0.25

BancoEstado S.A. Corredores de Bolsa

Banco del Estado de Chile

12-28-2017

01-04-2018

CLP

950,238

0.25

BancoEstado S.A. Corredores de Bolsa

Banco Santander - Chile

12-22-2017

01-10-2018

CLP

1,000,750

0.25

BancoEstado S.A. Corredores de Bolsa

Banco Internacional - Chile

12-28-2017

01-10-2018

CLP

944,884

0.25

BancoEstado S.A. Corredores de Bolsa

Banco BICE - Chile

12-28-2017

01-10-2018

CLP

2,000,500

0.25

BancoEstado S.A. Corredores de Bolsa

Banco Santander - Chile

12-28-2017

01-10-2018

CLP

8,475,346

0.25

BancoEstado S.A. Corredores de Bolsa

Banco del Estado de Chile

12-28-2017

01-04-2018

CLP

225,056

0.25

BancoEstado S.A. Corredores de Bolsa

Banco del Estado de Chile

12-28-2017

01-30-2018

CLP

8,102,025

0.25

BancoEstado S.A. Corredores de Bolsa

Banco de Crédito e Inversiones - Chile

12-29-2017

01-10-2018

CLP

2,524,410

0.25

BancoEstado S.A. Corredores de Bolsa

Banco Itaú Corpbanca - Chile

12-28-2017

01-10-2018

CLP

3,833,082

0.25

BBVA Corredores de Bolsa Ltda.

Scotiabank Azul - Chile

12-27-2017

01-08-2018

CLP

1,700,567

0.25

BBVA Corredores de Bolsa Ltda.

Scotiabank Azul - Chile

12-18-2017

01-18-2018

CLP

290,289

0.23

BBVA Corredores de Bolsa Ltda.

Scotiabank Chile

12-28-2017

01-30-2018

CLP

1,455,543

0.23

BBVA Corredores de Bolsa Ltda.

Scotiabank Azul - Chile

12-28-2017

01-30-2018

CLP

2,425,349

0.23

Valores Security S.A. Corredores de Bolsa

Banco Security - Chile

12-27-2017

01-10-2018

CLP

280,086

0.23

Total

 

 

 

 

102,695,758

 

(*) All financial instruments acquired under resale agreements, correspond to time deposits and are subject to a fixed interest rate.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Payments for business acquisitions are detailed as follows:

 

 

For the years ended as of December 31,

 

2019

2018

2017

 

ThCh$

ThCh$

ThCh$

Total disbursement per business acquisition

 

 

 

 

Other cash payment to acquire interests in joint ventures (1)

 

13,549,638

59,505,559

49,312,890

Cash flow used for control of subsidiaries or other business (2)

 

-

49,222,782

7,800,000

Cash flow used in the purchase of non-controlling interests (3)

 

-

-

1,149,689

Payment for changes in ownership interests in subsidiaries (4)

 

8,652,268

5,819,495

-

Total

 

22,201,906

114,547,836

58,262,579

(1)

Corresponds to capital contributions made to Zona Franca Central Cervecera S.A.S.(seeNote 16 – Investments accounted using equity method).

(2)

In 2018, the Company, through its subsidiary, CCU Inversiones S.A. correspond to the acquisition of 15.79% of VSPT (seeNote 1 – General information, letter D)). In 2017, corresponds to the acquisition of 2.5% of interest in VSPT, through its subsidiary CCU Inversiones S.A. (seeNote 1 – General information, letter D)).

(3)

Corresponds to the payment for the acquisition of the 40% of Americas Distilling Investment LLC.

(4)

SeeNote 15 – Business combinations.For year 2019 letters c) and d)and for year 2018 letters a) and b).

 

Note 9 Other non-financial assets

The Company maintained the following other non-financial assets:

 

As of December 31, 2019

As of December 31, 2018

 

Current

Non-current

Current

Non-current

 

ThCh$

ThCh$

ThCh$

ThCh$

Insurances paid

3,709,267

1,701

3,565,768

-

Advertising

8,940,821

5,372,024

7,976,638

3,173,523

Advances to suppliers

7,548,987

-

4,695,341

-

Prepaid expenses

1,068,339

1,510,785

1,685,096

1,705,693

Total advances

21,267,414

6,884,510

17,922,843

4,879,216

Guarantees paid

30,592

139,742

62,316

106,571

Consumables

481,494

-

393,234

-

Dividends receivable

614,591

-

423,994

-

Other

1,500

18,045

59,027

21,363

Total other assets

1,128,177

157,787

938,571

127,934

Total

22,395,591

7,042,297

18,861,414

5,007,150

Nature of costeach non-financial asset:

a)Insurances paid: Annual payments for insurances policies are included, which are capitalized and expensethen amortized according the term of the contract.

b)Advertising: Corresponds to advertising and promotion contracts related to customers and advertising service providers, that promote our brands which are capitalized and then amortized according the term of the contract.

c)Advances to suppliers: Payments made to suppliers mainly for assets constructions and purchases of property, plants and equipments.

d)Prepaid expenses: Services paid in advance that give entitlement to benefits usually for a period of 12 months, they are reflected against result as they are accrued.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

e)Guarantees paid: It is the initial payment for the lease of goods required by the lessor to ensure compliance with the conditions stipulated in the contract.

f)Materials to be consumed: Under this item are mainly included security supplies, clothing or supplies to be used in administrative offices, such as: eyeglasses, gloves, masks, aprons, etc.

g)Dividends receivable: Dividends receivable from associates and joint ventures.

Note 10Trade and other receivables

 

Operational costThe trade and expense grouped by natural classificationother receivables are detailed as follows:

 

 

For the years ended as of December 31,

Costs and expenses by nature

2016

2015

2014

 

ThCh$

ThCh$

ThCh$

Raw material cost

540,692,964

485,391,583

433,749,832

Materials and maintenance expense

47,102,582

43,093,939

38,678,842

Personnel expense (1)

210,885,553

197,915,151

169,331,464

Transportation and distribution

230,047,942

234,431,464

201,371,151

Advertising and promotion expense

105,938,586

117,921,841

105,649,991

Lease expense

16,294,896

13,641,122

13,347,091

Energy expense

24,444,163

25,178,032

29,566,627

Depreciation and amortization

83,528,045

81,566,802

68,607,566

Other expenses

104,455,411

100,872,027

83,207,159

Total

1,363,390,142

1,300,011,961

1,143,509,723

 

As of December 31, 2019

As of December 31, 2018

 

Current

Non-current

Current

Non-current

 

ThCh$

ThCh$

ThCh$

ThCh$

Chile operating segment

154,120,306

-

162,477,091

-

International business operating segment

66,023,849

-

76,166,145

-

Wines operating segment

51,727,913

-

51,478,501

-

Total commercial debtors

271,872,068

-

290,121,737

-

Impairment loss estimate

(5,792,821)

-

(6,059,201)

-

Total commercial debtors - net

266,079,247

-

284,062,536

-

Others accounts receivables (1)

33,934,693

3,224,627

36,639,803

3,363,123

Total other accounts receivable

33,934,693

3,224,627

36,639,803

3,363,123

Total

300,013,940

3,224,627

320,702,339

3,363,123

 

(1)As of December 31, 2019, an account receivable is included that relates to the sale of 49% of the participation that CPCh held over Compañía Pisquera Bauzá S.A. where in the current asset it maintains an amount of ThCh$ 1,325,613 (ThCh$ 1,392,650 as of December 31, 2018) and in non-current assets with no balance as of December 31, 2019 (ThCh$ 1,240,461 as of December 31, 2018). The charges received for this transaction as of December 31, 2019 are presented in the Consolidated Statement of Cash Flows, in investment activities, under the heading "Proceeds from the sale of interests in joint ventures"

The Company’s accounts receivable are denominated in the following currencies:

 

As of December 31, 2019

As of December 31, 2018

 

ThCh$

ThCh$

Chilean Peso

181,846,678

191,979,443

Argentine Peso

57,199,230

67,553,470

US Dollar

35,796,040

34,113,849

Euro

9,709,996

10,152,559

Unidad de Fomento

3,242,714

2,678,592

Uruguayan Pesos

4,350,677

5,128,068

Paraguayan Guarani

7,411,985

8,774,244

Bolivian

1,919,063

1,340,388

Others currencies

1,762,184

2,344,849

Total

303,238,567

324,065,462




Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

The detail of the accounts receivable maturities as ofDecember 31, 2019, is detailed as follows:

 

Total

Current balance

Overdue balances

0 a 3 months

3 a 6 months

6 a 12 months

More than 12 months

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Chile operating segment

154,120,306

145,910,170

4,488,495

758,196

1,264,373

1,699,072

International business operating segment

66,023,849

60,199,888

4,015,211

20,872

167,968

1,619,910

Wines operating segment

51,727,913

44,080,110

7,317,810

155,026

50,090

124,877

Total commercial debtors

271,872,068

250,190,168

15,821,516

934,094

1,482,431

3,443,859

Impairment loss estimate

(5,792,821)

(745,303)

(664,608)

(344,670)

(877,811)

(3,160,429)

Total commercial debtors - net

266,079,247

249,444,865

15,156,908

589,424

604,620

283,430

Others accounts receivables

33,934,693

33,638,366

105,976

138,377

-

51,974

Total other accounts receivable

33,934,693

33,638,366

105,976

138,377

-

51,974

Total current

300,013,940

283,083,231

15,262,884

727,801

604,620

335,404

Others accounts receivables

3,224,627

3,224,627

-

-

-

-

Total non-current

3,224,627

3,224,627

-

-

-

-

The detail of the accounts receivable maturities as of December 31, 2018, is detailed as follows:

 

Total

Current balance

Overdue balances

 

0 a 3 months

3 a 6 months

6 a 12 months

More than 12 months

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Chile operating segment

162,477,091

152,644,412

5,928,791

1,085,806

844,101

1,973,981

International business operating segment

76,166,145

63,419,349

9,546,370

1,092,229

701,571

1,406,626

Wines operating segment

51,478,501

44,304,213

6,248,007

272,721

305,811

347,749

Total commercial debtors

290,121,737

260,367,974

21,723,168

2,450,756

1,851,483

3,728,356

Impairment loss estimate

(6,059,201)

(148,214)

(542,195)

(600,433)

(1,407,848)

(3,360,511)

Total commercial debtors - net

284,062,536

260,219,760

21,180,973

1,850,323

443,635

367,845

Others accounts receivables

36,639,803

36,056,454

321,767

162,295

99,233

54

Total other accounts receivable

36,639,803

36,056,454

321,767

162,295

99,233

54

Total current

320,702,339

296,276,214

21,502,740

2,012,618

542,868

367,899

Others accounts receivables

3,363,123

3,363,123

-

-

-

-

Total non-current

3,363,123

3,363,123

-

-

-

-

The Company markets its products through wholesale customers, retail and supermarket chains. As ofDecember 31, 2019, the accounts receivable from the three most important supermarket chains in Chile and Argentina represent 29.1% (27.9% in 2018) of the total accounts receivable.

As indicated in the Risk management note (SeeNote 5 – Risk administration), for Credit Risk purposes, the Company acquires credit insurance policies to cover approximately 90% and 99% of the significant accounts receivable balances domestic and export, respectively, of the total of the account receivables.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

The general criteria for the determination of the provision for impairment has been established in the framework of IFRS 9, which requires analyzing the behavior of the client portfolio in the long term in order to generate an expected credit loss index by tranches based on the age of the portfolio. This analysis delivered the following results for the Company:

 

As of December 31, 2019

As of December 31, 2018

 

Credit loss rate

Total carrying amount

Impairment provision

Credit loss rate

Total carrying amount

Impairment provision

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Up to date

0.13%

283,828,534

(745,303)

0.10%

296,424,428

(148,214)

0 a 3 months

4.76%

15,927,492

(664,608)

4.30%

22,044,935

(542,195)

3 a 6 months

36.48%

1,072,471

(344,670)

32.60%

2,613,051

(600,433)

6 a 12 months

100.00%

1,482,431

(877,811)

100.00%

1,950,716

(1,407,848)

More than 12 months

100.00%

3,495,833

(3,160,429)

100.00%

3,728,410

(3,360,511)

Total

 

305,806,761

(5,792,821)

 

326,761,540

(6,059,201)

The percentage of impairment determined for the portfolio in each court may differ from the direct application of the previously presented parameters because these percentages are applied to the uncovered portfolio of credit insurance that the Company takes. Past due balances over 6 months and for which no estimates have been made for impairment losses, correspond mainly to items protected by credit insurance. Additionally, there are expired amounts in this stretch, which according to the policy, partial losses due to impairment are estimated based on an individual case-by-case analysis.

For the above mentioned, management estimates that it does not require establishing allowances for further impairment, in addition to those already constituted based on an aging analysis of these balances.

The write-offs of our doubtful clients are once all pre-trial and judicial, efforts have been made and exhausted all means of payment, with the proper demonstration of the insolvency of customers. This process of write off normally takes more than 1 year.

The movement of the impairment losses provision for accounts receivable is as follows:

 

As of December 31, 2019

As of December 31, 2018

 

ThCh$

ThCh$

Balance at the beginning of year

(6,059,201)

(4,154,752)

First application effect IFRS 9

-

(192,377)

Initial balance restated

(6,059,201)

(4,347,129)

Estimate of expected credit losses up 12 months

(903,754)

(474,984)

Estimate of expected credit losses longer than 12 months

(964,554)

(1,222,877)

Sub total of impairment estimate for accounts receivable

(1,868,308)

(1,697,861)

Provision of repaired portfolio

(129,841)

(149,303)

Uncollectible accounts

1,389,330

527,545

Add back of unused provisions

441,106

597,359

Estimates resulting from business combinations (1)

-

(1,354,559)

Effect of translation into presentation currency

434,093

364,747

Total

(5,792,821)

(6,059,201)

(1)  SeeNote 30 Employee benefits.15 – Business Combinations, letter a).


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Note 11Accounts and transactions with related parties

Transactions between the Company and its subsidiaries occur in the normal course of operations and have been eliminated during the consolidation process.

The amounts indicated as transactions in the following table relate to trade operations with related parties, which are under similar terms than what a third party would get respect to price and payment conditions. There are no uncollectible estimates decreasing accounts receivable or guarantees provided to related parties.

Conditions of the balances and transactions with related parties:

(1) 

Business operations agreed upon Chilean peso with a payment condition usually up to 30 days.

(2

Business operations agreed upon in foreign currencies and with a payment condition up to 30 days. Balances are presented at the closing exchange rate.

(3) 

An agreement of the subsidiary Compañía Pisquera de Chile S.A. with Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda. due to differences resulting from the capital contributions made by the latter. It establishes a 3% annual interest over capital, with annual payments to be made in eight instalments of UF 1,124 each. Beginning February 28, 2007 and UF 9,995 bullet payment at the last contribution date. In accordance with the contract,Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.renewed the contract for a period of nine years with maturing in the year 2023. Consequently, the UF 9,995 will be paid in nine equal and successive instalments of UF 1,200 each and a final payment of UF 2,050, beginning on February 28, 2015.

(4) 

An agreement of grape supply between the subsidiary Compañía Pisquera de Chile S.A. and Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda. These contracts stipulate a 3% annual interest on the capital, with a term of eight years, and annual payments with a last payment maturing on May 31, 2020.

(5) 

Business operations agreed upon Chilean pesos between the subsidiary Cervecería Kunstmann S.A. with Cervecería Szot SpA., which will accrue interest corresponding to the nominal TAB rate of 30 days plus spread of 0.78% per year. This operation has a duration of twelve months from September 5, 2018, automatically renewable for equal and successive periods, and any of the parties may terminate in advance, by means of a notice to the other, given thirty days in advance of the date on which it is desired to expire.

(6) 

Business operations agreed upon Chilean pesos of the subsidiary Cervecería Guayacán SpA. with Inversiones Diaguitas # 33 SpA., which will accrue interest corresponding to the nominal TAB rate of 30 days plus spread of 0.78% per year. This operation has a duration of eighteen months from May 30, 2019.

The transaction table includes the main transactions made with related parties.





Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

The detail of the accounts receivable and payable from related parties as of December 31, 2019 and 2018, are detailed as follows:

Accounts receivable from related parties

Current:

Tax ID

Company

Country of origin

Ref.

Relationship

Transaction

Currency

As of December 31, 2019

As of December 31, 2018

ThCh$

ThCh$

6,062,786-K

Andrónico Luksic Craig

Chile

(1)

Chairman of CCU

Sales of products

CLP

1,334

-

52,000,721-0

Representaciones Chile Beer Kevin Michael Szot E.I.R.L.

Chile

(1)

Shareholder of subsidiary

Sales of products

CLP

19,475

-

76,029,109-9

Inversiones Chile Chico Ltda.

Chile

(1)

Related to the controller's shareholder

Services provided

CLP

1,928

2,959

76,079,669-7

Minera Antucoya

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

350

161

76,111,872-2

Inversiones Tv Medios Ltda.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

22

33

76,115,132-0

Canal 13 SpA.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

-

51

76,178,803-5

Viña Tabalí S.A.

Chile

(1)

Related to the controller's shareholder

Services provided

CLP

30,888

51,667

76,178,803-5

Viña Tabalí S.A.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

1,437

153

76,363,269-5

Inversiones Alabama Ltda.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

2,046

738

76,380,217-5

Hapag-Lloyd Chile SpA.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

2,948

141

76,481,675-7

Cervecería Szot SpA.

Chile

(5)

Associate of subsidiary (until august 2019)

Loan

CLP

-

50,825

76,481,675-7

Cervecería Szot SpA.

Chile

(1)

Associate of subsidiary (until august 2019)

Services provided

CLP

-

2,869

76,481,675-7

Cervecería Szot SpA.

Chile

(1)

Associate of subsidiary (until august 2019)

Sales of products

CLP

-

23,090

76,486,051-9

Inversiones Río Elqui SpA.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

11,845

24,029

76,727,040-2

Minera Centinela

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

1,081

608

76,806,870-4

Transacciones e Inv. Arizona S.A.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

-

11

77,051,330-8

Cervecería Kunstmann Ltda.

Chile

(1)

Related to non-controlling subsidiary

Services provided

CLP

22,755

23,229

77,051,330-8

Cervecería Kunstmann Ltda.

Chile

(1)

Related to non-controlling subsidiary

Sales of products

CLP

192,227

78,435

77,755,610-K

Comercial Patagona Ltda.

Chile

(1)

Subsidiary of joint venture

Sales of products

CLP

1,277,205

1,222,832

78,259,420-6

Inversiones PFI Chile Ltda.

Chile

(1)

Shareholder of joint operation

Services provided

CLP

380,253

751,805

81,148,200-5

Ferrocarril de Antofagasta a Bolivia S.A.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

5,453

5,070

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

(1)

Shareholder of subsidiary

Advance purchase

CLP

800,000

14,393

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

(4)

Shareholder of subsidiary

Sales of products

UF

48,353

47,082

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

(3)

Shareholder of subsidiary

Loan

UF

33,827

32,149

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

(1)

Shareholder of subsidiary

Sales of products

CLP

2,898

1,478

90,160,000-7

Compañía Sud Americana de Vapores S.A.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

2,173

1,264

91,021,000-9

Invexans S.A.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

32

33

91,705,000-7

Quiñenco S.A.

Chile

(1)

Controller's shareholder

Sales of products

CLP

2,141

3,929

92,011,000-2

Empresa Nacional de Energía Enex S.A.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

6,841

4,384

92,048,000-4

SAAM S.A.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

85

149

93,920,000-2

Antofagasta Minerals S.A.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

3,218

3,167

94,625,000-7

Inversiones Enex S.A.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

177,270

195,720

96,427,000-7

Inversiones y Rentas S.A.

Chile

(1)

Controller

Services provided

CLP

2,708

3,465

96,536,010-7

Inversiones Consolidadas Ltda.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

2,325

853

96,571,220-8

Banchile Corredores de Bolsa S.A.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

889

3,545

96,591,040-9

Empresas Carozzi S.A.

Chile

(1)

Shareholder of joint operation

Sales of products

CLP

936

-

96,645,790-2

Socofin S.A.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

1,028

-

96,767,630-6

Banchile Administradora General de Fondos S.A.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

-

315

96,790,240-3

Minera Los Pelambres

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

588

300

96,819,020-2

Agrícola El Cerrito S.A.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

22

11

96,847,140-6

Inmobiliaria Norte Verde S.A.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

32

33

96,892,490-7

Protección y Seguridad S.A.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

248

-

96,908,970-K

San Antonio Terminal Internacional S.A.

Chile

(1)

Related to the controller's shareholder

Services provided

CLP

9,516

-

96,919,980-7

Cervecería Austral S.A.

Chile

(1)

Joint venture

Services provided

CLP

126,755

139,647

96,919,980-7

Cervecería Austral S.A.

Chile

(1)

Joint venture

Remittance send

CLP

-

2,923

96,922,250-7

Agrícola Valle Nuevo S.A.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

32

33

96,951,040-5

Inversiones Rosario S.A.

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

65

22

97,004,000-5

Banco de Chile

Chile

(1)

Related to the controller's shareholder

Sales of products

CLP

9,767

44,604

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

(1)

Joint venture

Remittance send

CLP

-

20,035

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

(1)

Joint venture

Services provided

CLP

17,626

269,616

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

(1)

Joint venture

Sales of products

CLP

-

11,071

0-E

Central Cervecera de Colombia S.A.S.

Colombia

(2)

Joint venture

Sales of products

USD

77,375

9,480

0-E

QSR S.A.

Paraguay

(2)

Related to the subsidiary's shareholder

Sales of products

PYG

688

434

Total

 

 

 

 

 

 

3,278,685

3,048,841


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Non Current:

Tax ID

Company

Country of origin

Ref.

Relationship

Transaction

Currency

As of December 31, 2019

As of December 31, 2018

ThCh$

ThCh$

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

(3)

Shareholder of subsidiary

Loan

UF

118,122

143,783

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

(4)

Shareholder of subsidiary

Sales of products

UF

-

47,082

Total

 

 

 

 

 

 

118,122

190,865


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Accounts payable to related parties

 

Current:

Tax ID

Company

Country of origin

Ref.

Relationship

Transaction

Currency

As of December 31, 2019

As of December 31, 2018

ThCh$

ThCh$

76,115,132-0

Canal 13 SpA.

Chile

(1)

Related to the controller's shareholder

Services received

CLP

148,288

277,515

76,380,217-5

Hapag-Lloyd Chile SpA.

Chile

(1)

Related to the controller's shareholder

Services received

CLP

24,910

32,646

76,460,328-1

Inversiones Diaguitas #33 SpA.

Chile

(6)

Shareholder of subsidiary

Loan

CLP

188,669

-

76,455,830-8

DiWatts S.A.

Chile

(1)

Related joint venture shareholder

Purchase of products

CLP

161,612

-

76,481,675-7

Cervecería Szot SpA.

Chile

(1)

Associate of subsidiary

Purchase of products

CLP

-

2,199

77,003,342-K

Origen Patagónico SpA.

Chile

(1)

Related to non-controlling subsidiary

Services received

CLP

9

-

77,051,330-8

Cervecería Kunstmann Ltda.

Chile

(1)

Related to non-controlling subsidiary

Services received

CLP

480

8,704

77,755,610-K

Comercial Patagona Ltda.

Chile

(1)

Subsidiary of joint venture

Services received

CLP

72,148

92,129

78,053,790-6

Servipag Ltda.

Chile

(1)

Related to the controller's shareholder

Services received

CLP

1,972

4,218

78,259,420-6

Inversiones PFI Chile Ltda.

Chile

(1)

Shareholder of joint operation

Purchase of products

CLP

258,133

1,160,168

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

(1)

Shareholder of subsidiary

Purchase of products

CLP

-

417

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

(1)

Shareholder of subsidiary

Services received

CLP

919

-

92,011,000-2

Empresa Nacional de Energía Enex S.A.

Chile

(1)

Related to the controller's shareholder

Purchase of products

CLP

1,898

44,239

94,058,000-5

Servicios Aeroportuarios Aerosan S.A.

Chile

(1)

Related to the controller's shareholder

Services received

CLP

911

1,711

94,625,000-7

Inversiones Enex S.A.

Chile

(1)

Related to the controller's shareholder

Services received

CLP

-

76

96,591,040-9

Empresas Carozzi S.A.

Chile

(1)

Shareholder of joint operation

Purchase of products

CLP

654,756

736,974

96,689,310-9

Transbank S.A.

Chile

(1)

Related to the controller's shareholder

Services received

CLP

273

5,868

96,798,520-1

Saam Extraportuarios S.A.

Chile

(1)

Related to the controller's shareholder

Services received

CLP

807

17,201

96,810,030-0

Radiodifusión SpA.

Chile

(1)

Related to the controller's shareholder

Services received

CLP

14,230

41,170

96,908,970-K

San Antonio Terminal Internacional S.A.

Chile

(1)

Related to the controller's shareholder

Services received

CLP

1,792

15,724

96,919,980-7

Cervecería Austral S.A.

Chile

(1)

Joint venture

Remittance received

CLP

-

7,869

96,919,980-7

Cervecería Austral S.A.

Chile

(1)

Joint venture

Purchase of products

CLP

1,806,688

1,204,662

96,919,980-7

Cervecería Austral S.A.

Chile

(1)

Joint venture

Royalty

CLP

76,420

109,091

97,004,000-5

Banco de Chile

Chile

(1)

Related to the controller's shareholder

Services received

CLP

22,230

1,244

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

(1)

Joint venture

Purchase of products

CLP

-

19,920

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

(1)

Joint venture

Remittance received

CLP

-

46,708

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

(1)

Joint venture

Consignation sales

CLP

-

211,985

0-E

Ecor Ltda.

Bolivia

(2)

Related to the subsidiary's shareholder

Services received

BOB

30,565

11,879

0-E

Central Cervecera de Colombia S.A.S.

Colombia

(2)

Joint venture

Services received

USD

145,454

24,449

0-E

Nestlé Waters Marketing & Distribution S.A.S.

France

(2)

Related to the subsidiary's shareholder

Purchase of products

Euros

11,893

12,256

0-E

Amstel Brouwerijen B.V.

Netherlands

(2)

Related to the controller's shareholder

License and technical assistance

Euros

59,740

120,726

0-E

Heineken Brouwerijen B.V.

Netherlands

(2)

Related to the controller's shareholder

Purchase of products

USD

1,355,062

1,044,963

0-E

Heineken Brouwerijen B.V.

Netherlands

(2)

Related to the controller's shareholder

License and technical assistance

Euros

2,100,423

1,486,100

0-E

Heineken Brouwerijen B.V.

Netherlands

(2)

Related to the controller's shareholder

Royalty

USD

1,554,066

12,879

0-E

Heineken Brouwerijen B.V.

Netherlands

(2)

Related to the controller's shareholder

Services received

USD

-

1,025

0-E

Gráfica Editorial Inter-Sudamericana S.A.

Paraguay

(2)

Related to the subsidiary's shareholder

Services received

PYG

122

-

0-E

Banco BASA S.A.

Paraguay

(2)

Related to the subsidiary's shareholder

Services received

PYG

-

18

0-E

Emprendimientos Hoteleros S.A.E.C.A

Paraguay

(2)

Related to the subsidiary's shareholder

Services received

PYG

11,334

11,249

0-E

Watt's Alimentos S.A.

Paraguay

(2)

Related joint venture shareholder

Purchase of products

USD

112,891

106,531

0-E

Hoteles Contemporáneos S.A.

Paraguay

(2)

Related to the subsidiary's shareholder

Services received

PYG

494

-

0-E

Société des Produits Nestlé S.A.

Switzerland

(2)

Related to the subsidiary's shareholder

Royalty

CHF

160,245

62,397

Total

 

 

 

 

 

 

8,979,434

6,936,910


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Most significant transactions and effects on results:

As of December 31, 2019 and 2018 the most significant transactions with related parties that are not subsidiaries of the Company and their effect on the Consolidated Statement of Income are detailed as follows:

Tax ID

Company

Country of origin

Relationship

Transaction

2019

2018

Amounts

(Charges)/Credits (Effect on Income)

Amounts

(Charges)/Credits (Effect on Income)

ThCh$

ThCh$

ThCh$

ThCh$

76,079,669-7

Minera Antucoya

Chile

Related to the controller's shareholder

Sales of products

2,813

1,988

2,045

1,454

76,115,132-0

Canal 13 SpA.

Chile

Related to the controller's shareholder

Services received

2,054,644

(2,054,644)

2,641,844

(2,641,844)

76,178,803-5

Viña Tabali S.A.

Chile

Related to the controller's shareholder

Services provided

69,567

25,771

90,214

90,214

76,313,970-0

Inversiones Irsa Ltda.

Chile

Related to the controller

Dividends paid

14,493,784

-

4,522,295

-

76,380,217-5

Hapag-Lloyd Chile SpA.

Chile

Related to the controller's shareholder

Services received

160,967

(160,967)

159,652

(159,652)

76,727,040-2

Minera Centinela

Chile

Related to the controller's shareholder

Sales of products

9,016

6,372

7,246

5,152

77,051,330-8

Cervecería Kunstmann Ltda.

Chile

Related to non-controlling subsidiary

Services received

135,589

(135,589)

113,507

(113,507)

77,051,330-8

Cervecería Kunstmann Ltda.

Chile

Related to non-controlling subsidiary

Sales of products

796,617

614,988

773,056

589,466

77,755,610-K

Comercial Patagona Ltda.

Chile

Subsidiary of joint venture

Services received

544,738

(544,738)

405,845

(405,845)

77,755,610-K

Comercial Patagona Ltda.

Chile

Subsidiary of joint venture

Sales of products

6,975,121

4,492,551

5,691,405

3,761,223

78,259,420-6

Inversiones PFI Chile Ltda.

Chile

Shareholder of joint operation

Purchase of products

10,237,934

-

10,555,440

-

78,259,420-6

Inversiones PFI Chile Ltda.

Chile

Shareholder of joint operation

Services provided

2,289,097

2,289,097

2,756,584

2,756,584

78,259,420-6

Inversiones PFI Chile Ltda.

Chile

Shareholder of joint operation

Services received

269,996

(269,996)

302,332

(302,332)

79,985,340-K

Cervecera Valdivia S.A.

Chile

Shareholder of subsidiary

Dividends paid

3,886,021

-

990,073

-

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

Shareholder of subsidiary

Purchase of products

4,496,965

-

5,432,008

-

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

Shareholder of subsidiary

Dividends paid

928,507

-

768,325

-

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

Shareholder of subsidiary

Loan

36,828

4,285

35,016

3,863

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limari Ltda.

Chile

Shareholder of subsidiary

Sales of products

12,367

8,164

3,731

2,464

90,703,000-8

Nestlé Chile S.A.

Chile

Related to the controller

Dividends paid

4,931,641

-

3,922,143

-

91,705,000-7

Quiñenco S.A.

Chile

Controller's shareholder

Sales of products

19,952

13,932

20,362

14,330

92,011,000-2

Empresa Nacional de Energía Enex S.A.

Chile

Related to the controller's shareholder

Purchase of products

200,481

(200,481)

227,106

(227,106)

92,011,000-2

Empresa Nacional de Energía Enex S.A.

Chile

Related to the controller's shareholder

Services received

444,367

(444,367)

277,482

(277,482)

92,048,000-4

SAAM S.A.

Chile

Related to the controller's shareholder

Services received

-

-

11,453

(5,366)

93,920,000-2

Antofagasta Minerals S.A.

Chile

Related to the controller's shareholder

Sales of products

38,007

28,630

34,966

27,973

94,625,000-7

Inversiones Enex S.A.

Chile

Related to the controller's shareholder

Sales of products

1,394,919

988,572

1,434,303

1,020,286

96,427,000-7

Inversiones y Rentas S.A.

Chile

Controller

Dividends paid

112,614,526

-

35,137,554

-

96,427,000-7

Inversiones y Rentas S.A.

Chile

Controller

Services provided

9,176

9,176

9,106

9,106

96,571,220-8

BanChile Corredores de Bolsa S.A.

Chile

Related to the controller's shareholder

Investments

531,200,000

-

1,231,060,000

-

96,571,220-8

BanChile Corredores de Bolsa S.A.

Chile

Related to the controller's shareholder

Investment Rescue

552,594,958

274,958

1,220,115,263

1,225,263

96,591,040-9

Empresas Carozzi S.A.

Chile

Shareholder of joint operation

Purchase of products

5,201,040

-

3,823,086

-

96,591,040-9

Empresas Carozzi S.A.

Chile

Shareholder of joint operation

Sales of products

86,790

81,906

35,852

28,656

96,657,690-1

Inversiones Punta Brava S.A.

Chile

Related to the controller's shareholder

Services received

-

-

87,894

(87,894)

96,657,690-1

Inversiones Punta Brava S.A.

Chile

Related to the controller's shareholder

Sales of products

1,188

840

1,095

779

96,689,310-9

Transbank S.A.

Chile

Related to the controller's shareholder

Services received

187,378

(187,378)

167,149

(167,149)

96,798,520-1

SAAM Extraportuario S.A.

Chile

Related to the controller's shareholder

Services received

41,188

-

83,711

-

96,810,030-0

Radiodifusión SpA.

Chile

Related to the controller's shareholder

Services received

306,153

(306,153)

470,325

(470,325)

96,919,980-7

Cervecería Austral S.A.

Chile

Joint venture

Purchase of products

14,235,437

-

10,055,050

-

96,919,980-7

Cervecería Austral S.A.

Chile

Joint venture

Dividends received

438,258

-

372,088

-

96,919,980-7

Cervecería Austral S.A.

Chile

Joint venture

Royalty

331,083

(331,083)

329,276

(329,276)

96,919,980-7

Cervecería Austral S.A.

Chile

Joint venture

Services provided

253,789

253,789

258,099

258,099

96,919,980-7

Cervecería Austral S.A.

Chile

Joint venture

Sales of products

71,885

51,102

38,444

28,125

97,004,000-5

Banco de Chile

Chile

Related to the controller's shareholder

Interests

149,209

(149,209)

165,325

(165,325)

97,004,000-5

Banco de Chile

Chile

Related to the controller's shareholder

Investments

106,006,335

-

374,540,529

-

97,004,000-5

Banco de Chile

Chile

Related to the controller's shareholder

Derivatives

75,540,396

2,859

42,723,097

(753,383)

97,004,000-5

Banco de Chile

Chile

Related to the controller's shareholder

Investment Rescue

105,256,049

175,733

371,884,715

343,839

97,004,000-5

Banco de Chile

Chile

Related to the controller's shareholder

Services received

393,096

(393,096)

368,839

(368,839)

97,004,000-5

Banco de Chile

Chile

Related to the controller's shareholder

Sales of products

246,431

223,733

247,781

218,469

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

Joint venture

Purchase of products

5,515

(5,515)

24,944

(24,944)

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

Joint venture

Capital decrease

11,200,000

-

-

-

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

Joint venture

Services provided

325,857

325,857

444,677

444,677

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

Joint venture

Consignation sales

956,516

-

3,029,169

-

0-E

Bebidas Bolivianas BBO S.A.

Bolivia

Associate (until july 2019)

Sales of products

-

-

194,516

73,916

0-E

Ecor Ltda.

Bolivia

Related to the subsidiary's shareholder

Services received

157,818

(157,818)

67,426

(67,426)

0-E

Zona Franca Central Cervecera S.A.S.

Colombia

Joint venture

Capital contribution

13,563,816

-

59,505,559

-

0-E

Amstel Brouwerijen B.V.

Netherlands

Related to the controller's shareholder

License and technical assistance

265,594

(265,594)

247,395

(247,395)

0-E

Heineken Brouwerijen B.V.

Netherlands

Related to the controller's shareholder

Purchase of products

13,916,593

-

11,604,832

-

0-E

Heineken Brouwerijen B.V.

Netherlands

Related to the controller's shareholder

License and technical assistance

10,395,266

(10,395,266)

9,678,688

(9,678,688)

0-E

Heineken Brouwerijen B.V.

Netherlands

Related to the controller's shareholder

Services received

116,703

(116,703)

73,733

(73,733)

0-E

Banco BASA S.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

1,458

797

-

-

0-E

Chajha S.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

4,284

893

2,003

1,318

0-E

Cigar Trading S.R.L.

Paraguay

Related to the subsidiary's shareholder

Sales of products

704

368

671

392

0-E

Club Libertad

Paraguay

Related to the subsidiary's shareholder

Sales of products

3,304

1,412

7,697

4,737

0-E

Consignataria de Ganado S.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

239

60

-

-

0-E

Emprendimientos Hoteleros S.A.E.C.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

15,626

9,009

12,401

8,101

0-E

Fundación Ñande Paraguay

Paraguay

Related to the subsidiary's shareholder

Sales of products

-

-

1,602

947

0-E

Fundación Ramón T. Cartes

Paraguay

Related to the subsidiary's shareholder

Sales of products

3,860

1,005

217

107

0-E

Ganadera Las Pampas S.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

457

135

836

242

0-E

Gráfica Editorial Inter-Sudamericana S.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

967

665

5,973

4,154

0-E

La Misión S.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

774

543

871

610

0-E

Palermo S.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

3,161

1,040

4,069

2,825

0-E

QSR S.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

93,590

60,787

32,858

19,080

0-E

Tabacalera del Este S.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

3,489

2,152

25,861

16,339

0-E

Societé des Produits Nestlé S.A.

Switzerland

Related to the subsidiary's shareholder

Royalty

984,337

(984,337)

706,629

(706,629)

 

 

 

 

 

 

 

 

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

As of December 31, 2018 and 2017 the most significant transactions with related parties that are not subsidiaries of the Company and their effect on the Consolidated Statement of Income are detailed as follows:

Tax ID

Company

Country of origin

Relationship

Transaction

2018

2017

Amounts

(Charges)/Credits (Effect on Income)

Amounts

(Charges)/Credits (Effect on Income)

ThCh$

ThCh$

ThCh$

ThCh$

76,079,669-7

Minera Antucoya

Chile

Related to the controller's shareholder

Sales of products

2,045

1,454

1,501

1,200

76,115,132-0

Canal 13 SpA.

Chile

Related to the controller's shareholder

Services received

2,641,844

(2,641,844)

2,064,067

(2,064,067)

76,178,803-5

Viña Tabali S.A.

Chile

Related to the controller's shareholder

Services provided

90,214

90,214

85,931

85,931

76,313,970-0

Inversiones Irsa Ltda.

Chile

Related to the controller

Dividends paid

4,522,295

-

4,457,428

-

76,380,217-5

Hapag-Lloyd Chile SpA.

Chile

Related to the controller's shareholder

Services received

159,652

(159,652)

183,292

(183,292)

76,481,675-7

Cervecería Szot SpA.

Chile

Associate of subsidiary

Capital contribution

-

-

52,771

-

76,727,040-2

Minera Centinela

Chile

Related to the controller's shareholder

Sales of products

7,246

5,152

5,085

4,068

76,553,712-6

Heliservicios S.A.

Chile

Related to the controller

Services received

-

-

17,760

(17,760)

77,051,330-8

Cervecería Kunstmann Ltda.

Chile

Related to non-controlling subsidiary

Services received

113,507

(113,507)

152,578

(152,578)

77,051,330-8

Cervecería Kunstmann Ltda.

Chile

Related to non-controlling subsidiary

Sales of products

773,056

589,466

640,590

484,283

77,755,610-K

Comercial Patagona Ltda.

Chile

Subsidiary of joint venture

Services received

405,845

(405,845)

355,279

(355,279)

77,755,610-K

Comercial Patagona Ltda.

Chile

Subsidiary of joint venture

Sales of products

5,691,405

3,761,223

4,807,422

2,884,453

78,259,420-6

Inversiones PFI Chile Ltda.

Chile

Shareholder of joint operation

Purchase of products

10,555,440

-

11,062,488

-

78,259,420-6

Inversiones PFI Chile Ltda.

Chile

Shareholder of joint operation

Services provided

2,756,584

2,756,584

3,154,653

3,154,653

78,259,420-6

Inversiones PFI Chile Ltda.

Chile

Shareholder of joint operation

Services received

302,332

(302,332)

162,589

(162,589)

79,985,340-K

Cervecera Valdivia S.A.

Chile

Shareholder of subsidiary

Dividends paid

990,073

-

818,433

-

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

Shareholder of subsidiary

Purchase of products

5,432,008

-

4,956,446

-

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

Shareholder of subsidiary

Dividends paid

768,325

-

637,313

-

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

Shareholder of subsidiary

Loan

35,016

3,863

25,204

6,467

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

Shareholder of subsidiary

Sales of products

3,731

2,464

4,727

3,116

90,703,000-8

Nestlé Chile S.A.

Chile

Shareholder of subsidiary

Dividends paid

3,922,143

-

4,158,228

-

91,705,000-7

Quiñenco S.A.

Chile

Controller's shareholder

Sales of products

20,362

14,330

15,941

12,753

92,011,000-2

Empresa Nacional de Energía Enex S.A.

Chile

Related to the controller's shareholder

Purchase of products

227,106

(227,106)

260,177

(260,177)

92,011,000-2

Empresa Nacional de Energía Enex S.A.

Chile

Related to the controller's shareholder

Services received

277,482

(277,482)

298,865

(298,865)

92,048,000-4

SAAM S.A.

Chile

Related to the controller's shareholder

Services received

11,453

(5,366)

103

(9)

93,920,000-2

Antofagasta Minerals S.A.

Chile

Related to the controller's shareholder

Sales of products

34,966

27,973

33,441

26,753

94,625,000-7

Inversiones Enex S.A.

Chile

Related to the controller's shareholder

Sales of products

1,434,303

1,020,286

1,445,395

1,156,316

96,427,000-7

Inversiones y Rentas S.A.

Chile

Controller

Dividends paid

35,137,554

-

34,633,542

-

96,427,000-7

Inversiones y Rentas S.A.

Chile

Controller

Services provided

9,106

9,106

9,622

9,622

96,571,220-8

BanChile Corredores de Bolsa S.A.

Chile

Related to the controller's shareholder

Investments

1,231,060,000

-

645,420,000

-

96,571,220-8

BanChile Corredores de Bolsa S.A.

Chile

Related to the controller's shareholder

Investment Rescue

1,220,115,263

1,225,263

653,920,000

720,312

96,591,040-9

Empresas Carozzi S.A.

Chile

Shareholder of joint operation

Purchase of products

3,823,086

-

19,251,592

-

96,591,040-9

Empresas Carozzi S.A.

Chile

Shareholder of joint operation

Sales of products

35,852

28,656

91,198

72,958

96,657,690-1

Inversiones Punta Brava S.A.

Chile

Related to the controller's shareholder

Services received

87,894

(87,894)

83,946

(83,946)

96,657,690-1

Inversiones Punta Brava S.A.

Chile

Related to the controller's shareholder

Sales of products

1,095

779

1,150

920

96,689,310-9

Transbank S.A.

Chile

Related to the controller's shareholder

Services received

167,149

(167,149)

131,269

(131,269)

96,798,520-1

SAAM Extraportuario S.A.

Chile

Related to the controller's shareholder

Services received

83,711

-

55,148

-

96,810,030-0

Radiodifusión SpA.

Chile

Related to the controller's shareholder

Services received

470,325

(470,325)

391,598

(391,598)

96,919,980-7

Cervecería Austral S.A.

Chile

Joint venture

Purchase of products

10,055,050

-

8,481,780

-

96,919,980-7

Cervecería Austral S.A.

Chille

Joint venture

Dividends received

372,088

-

245,068

-

96,919,980-7

Cervecería Austral S.A.

Chile

Joint venture

Royalty

329,276

(329,276)

333,356

(333,356)

96,919,980-7

Cervecería Austral S.A.

Chile

Joint venture

Services provided

258,099

258,099

253,473

253,473

96,919,980-7

Cervecería Austral S.A.

Chile

Joint venture

Sales of products

38,444

28,125

413,117

183,835

97,004,000-5

Banco de Chile

Chile

Related to the controller's shareholder

Interests

165,325

(165,325)

369,097

(369,097)

97,004,000-5

Banco de Chile

Chile

Related to the controller's shareholder

Investments

374,540,529

-

2,146,826

-

97,004,000-5

Banco de Chile

Chile

Related to the controller's shareholder

Derivatives

42,723,097

(753,383)

63,548,208

5,500,174

97,004,000-5

Banco de Chile

Chile

Related to the controller's shareholder

Investment Rescue

371,884,715

343,839

21,152,221

3,596

97,004,000-5

Banco de Chile

Chile

Related to the controller's shareholder

Services received

368,839

(368,839)

359,579

(359,579)

97,004,000-5

Banco de Chile

Chile

Related to the controller's shareholder

Sales of products

247,781

218,469

219,821

175,857

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

Joint venture

Purchase of products

24,944

(24,944)

393,705

(393,705)

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

Joint venture

Remittance send

-

-

717,900

-

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

Joint venture

Services provided

444,677

444,677

731,310

731,310

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

Joint venture

Consignation sales

3,029,169

-

2,804,870

-

0-E

Bebidas Bolivianas BBO S.A.

Bolivia

Associate (until july 2018)

Sales of products

194,516

73,916

425,664

161,752

0-E

Ecor Ltda.

Bolivia

Related to the subsidiary's shareholder

Services received

67,426

(67,426)

-

-

0-E

Central Cervecera de Colombia S.A.S.

Colombia

Joint venture

Capital contribution

-

-

28,232,532

-

0-E

Zona Franca Central Cervecera S.A.S.

Colombia

Joint venture

Capital contribution

59,505,559

-

21,080,358

-

0-E

Americas Distilling Investments

United States

Associate of subsidiary

Capital contribution

-

-

1,043,720

-

0-E

Amstel Brouwerijen B.V.

Netherlands

Related to the controller's shareholder

License and technical assistance

247,395

(247,395)

211,740

(211,740)

0-E

Heineken Brouwerijen B.V.

Netherlands

Related to the controller's shareholder

Purchase of products

11,604,832

-

13,493,244

-

0-E

Heineken Brouwerijen B.V

Netherlands

Related to the controller's shareholder

Sales of products

-

-

846,179

634,634

0-E

Heineken Brouwerijen B.V.

Netherlands

Related to the controller's shareholder

License and technical assistance

9,678,688

(9,678,688)

11,051,487

(11,051,487)

0-E

Heineken Brouwerijen B.V.

Netherlands

Related to the controller's shareholder

Services received

73,733

(73,733)

166,677

(166,677)

0-E

Chajha S.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

2,003

1,318

2,139

1,497

0-E

Cigar Trading S.R.L.

Paraguay

Related to the subsidiary's shareholder

Sales of products

671

392

630

441

0-E

Club Libertad

Paraguay

Related to the subsidiary's shareholder

Sales of products

7,697

4,737

6,358

4,450

0-E

Consignataria de Ganado S.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

-

-

327

229

0-E

Emprendimientos Hoteleros S.A.E.C.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

12,401

8,101

3,162

2,214

0-E

Fundación Ñande Paraguay

Paraguay

Related to the subsidiary's shareholder

Sales of products

1,602

947

2,998

2,099

0-E

Fundación Ramón T. Cartes

Paraguay

Related to the subsidiary's shareholder

Sales of products

217

107

283

198

0-E

Ganadera las Pampas S.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

836

242

1,575

1,103

0-E

Gráfica Editorial Inter-Sudamericana S.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

5,973

4,154

2,714

1,900

0-E

La Misión S.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

871

610

-

-

0-E

Palermo S.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

4,069

2,825

7,354

5,148

0-E

QSR S.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

32,858

19,080

31,154

21,808

0-E

Tabacalera del Este S.A.

Paraguay

Related to the subsidiary's shareholder

Sales of products

25,861

16,339

58,202

40,741

0-E

Societé des Produits Nestlé S.A.

Switzerland

Related to the subsidiary's shareholder

Royalty

706,629

(706,629)

410,421

(410,421)

 

 

 

 

 

 

 

 

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Remuneration of the Management key employees

The Company is managed by a Board of Directors comprised of 9 members, each of whom is in office for a 3-year term and may be re-elected.

The Board was appointed at the Ordinary Shareholders´ Meeting held on April 17, 2019, being elected Messrs.Andrónico Luksic Craig, Francisco Pérez Mackenna, Pablo Granifo Lavín, Rodrigo Hinzpeter Kirberg, Carlos Molina Solís, José Miguel Barros van Hövell tot Westerflier, Hemmo Parson, Rory Cullinan and Vittorio Corbo Lioi, the latter independent according to article 50 bis of Law Nº18,046. The Chairman and the Vice Chairman, as well as the members of the Audit Committee were appointed at the Board of Directors´ meeting held on April 17, 2019. At the same meeting, and according to article 50 bis of Law N° 18,046, the independent Director Mr. Vittorio Corbo Lioi appointed the other members of the Directors Committee, which is composed of Directors Messrs. Corbo, Pérez and Molina. Additionally, Messrs. Corbo and Molina were appointed as members of the Audit Committee, both meeting the independence criteria under the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002 and the New York Stock Exchange Rules. The Board of Directors also resolved that Directors Messrs. Pérez and Barros shall participate in the Audit Committee´s meetings as observers.

The Ordinary Shareholders´ Meeting referred to above resolved to maintain the remuneration of the Directors agreed at the previous Ordinary Shareholders´ Meeting, which consists of a gross monthly fee for attendance to Board Meetings of UF 100 per Director, and UF 200 for the Chairman, regardless of the number of meetings held within such period, plus an amount equivalent to 3% of the distributed dividends, for the Board as a whole, at a rate of one-ninth for each Director and in proportion to the time each one served as such during the year 2019. 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.

Additionally, the Ordinary Shareholders´ Meeting resolved that those Directors that are members of the Directors Committee receive a gross remuneration 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° 1956 of the CMF. Directors that are members and observers of the Audit Committee receive a gross monthly remuneration of UF 50.

The remunerations of Directors and Chief Executives of the Company are composed as follows:

Directors’ remunerations:

 

For the years ended as of December 31,

2019 (*)

2018

2017

ThCh$

ThCh$

ThCh$

Audit's Committee

47,386

29,185

23,222

Directors' Committee

47,154

35,179

23,470

Attendance meetings fee

1,266,892

952,490

962,074

Dividend Participation

6,038,934

2,270,840

2,137,753

 

(*) Includes payments of attendance meetings fee and dividend participation accrued in 2018.

Chief Executives’ remunerations:

 

For the years ended as of December 31,

2019

2018

2017

ThCh$

ThCh$

ThCh$

Directors' Committee

13,650

16,457

14,195

Attendance meetings fee

190,080

178,913

177,927

Dividend Participation

18,541

22,144

32,692

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

The Chief Executives’ Remuneration as of December 31, 2019 amounted to ThCh$ 7,993,975 (ThCh$ 7,308,365 in 2018 and ThCh$ 6,449,061 in 2017). The Company grants to the Chief Executives annual bonuses, which have an optional, discretional and variable nature, not contractual and assigned according to compliance of individual and corporate goals and based on the incomes of the year.

Note 12Inventories

The inventories balances are detailed as follows:

 

As of December 31, 2019

As of December 31, 2018

 

ThCh$

ThCh$

Finished products

83,163,323

83,843,751

In process products

3,539,351

3,109,463

Raw material

129,926,627

127,732,091

In transit raw material

10,556,865

8,488,881

Materials and products

6,494,675

6,206,087

Realizable net value  estimate and obsolescence

(1,246,380)

(1,318,036)

Total

232,434,461

228,062,237

The Company wrote off a total of ThCh$ 1,962,689, ThCh$ 3,296,095 and ThCh$ 2,981,075 against net realizable value and obsolescence for the years ended as of December 31, 2019, 2018 and 2017, respectively.

Additionally, the Company presents an estimate for inventory impairment which includes amounts related to low turnover, technical obsolescence and/or products recalled from the market.

The movement of net realizable value and obsolescence estimate is detailed as follows:

 

As of December 31, 2019

As of December 31, 2018

 

ThCh$

ThCh$

Initial balance

(1,318,036)

(1,538,133)

Inventories write-down estimation

(1,642,147)

(3,081,986)

Estimates resulting from business combinations (1)

(210,816)

(101,244)

Inventories recognised as an expense

1,962,689

3,296,095

Business combinations effect

(38,070)

107,232

Total

(1,246,380)

(1,318,036)


(1)
SeeNote 15 – Business Combinations, letter c).

As of December 31, 2019 and 2018, the Company does not have any inventory pledged as guarantee for financial obligations.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Note 13Biological assets

The Company recorded under Current biological assets the agricultural activities (grapes) derived from production of plantations that will be destined to be an input to the following process of the wine production.

The costs associated to the agricultural activities (grapes) are accumulated to the harvest date.

The valuation of current biological assets is described inNote 2 - Summary of significant accounting policies, 2.10.

The movement ofcurrent biological assetsis detailed as follows:

ThCh$

As of January 1 2018

Historic cost

8,157,688

Book Value

8,157,688

As of December 31, 2018

Acquisitions

20,871,261

Decreases due to harvesting

(20,634,418)

Other increases (decreases) (1)

95,342

Changes

332,185

Book Value

8,489,873

As of December 31, 2018

Historic cost

8,489,873

Book Value

8,489,873

As of December 31, 2019

Acquisitions

14,028,209

Decreases due to harvesting

(13,153,317)

Other increases (decreases) (1)

94,306

Changes

969,198

Book Value

9,459,071

As of December 31, 2019

Historic cost

9,459,071

Book Value

9,459,071

(1) Mainly corresponds to the financial effect of the application IAS 29 “Financial reporting in hyperinflationary economies”.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Note 14Non-current assets of disposal groups classified as held for sale

a)International Business Operating segment

-

During September 2015, the Board of subsidiary Saenz Briones & Cía. S.A.I.C. authorized the sale of property located in Luján de Cuyo city, Province of Mendoza, Argentina. At the date of issuance of these Consolidated Financial Statements the administration is still committed with a sale plan for this property. In order to to seek out a buyer and keep high probabilities to sale it the subsidiary has changed the Real Estate Broker.

b)Wine Operating segment

-

In 2015, the Board of subsidiary Viña Valles de Chile S.A. (legal and continuing successor of Viña Misiones de Rengo S.A. after the merge performed on June 1, 2013) authorized the sale of certain fixed assets located in Rengo city, Provincia de Cachapoal, Sexta Región. Due to the aforementioned these assets were classified as Non-current assets classified as held for sale.

At the date of issuance of these Consolidated Financial Statements these assets, by an amount of ThCh$ 1.884.958, were reclassified as PPE considering all the requirements stablished by IFRS 5 Non-current assets classifies as held for sale.

-

During the last quarter of 2009, the Board of Tamarí S.A. (merged with Finca la Celia S.A. legal and continuing successor 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 for an amount of ThCh$ 529.415.

During 2010, the Company hired a specialist broker for such assets. Later, on December 13, 2011 a contract was signed for the sale of these assets, receiving payments for US$ 150.000 and a guarantee for US$ 700.000.

At the date of issuance of these Consolidated Financial Statementsthis transaction is presented net of impairment provision in Trade and other current receivables.

As described inNote 2 - Summary of significant accounting policies, 2.18, non-current assets of disposal groups classified as held for sale have been recorded at the lower of carrying amount and fair value less cost to sale on December 31, 2019:

Assets held for sale are detailed as follows:

Non-current assets of disposal groups classified as held for sale

As of December 31, 2019

As of December 31, 2018

ThCh$

ThCh$

Land

228,181

1,894,078

Constructions

144,985

718,203

Machinery

9,972

168,326

Total

383,138

2,780,607


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Note 1015Financial resultsBusiness Combinations

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 10, 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 in proportion to their current participation.

      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, on this date the Company proceeded to consolidate this business.

      The Company has determined 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. This transaction did not change the percentage of participation because both partners concurred in proportion to their current participation.

On June 28, 2019 and on July 11, 2019 the subsidiary CCU Inversiones II Ltda. made capital contributions to Bebidas Bolivianas BBO S.A. for an amount of US$ 1,249,713 (equivalent toThCh$ 849,630) and an amount of US$ 178,305 (equivalents to ThCh$ 122,210) respectively.This transaction did not change the percentage of participation because both partners concurred in proportion to their current participation.

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 CK has the 50.0004% stake in Cervecera Guayacán SpA.

      The Company has determined the fair values of assets and liabilities for this business combination (seeNote 1 - General information, letter D).

c)  Bodega San Juan S.A.U.

      In December 2018, the subsidiary Viña San Pedro Tarapacá S.A. (VSPT) signed an agreement to acquire a part of thePernod Ricard wine business in Argentina. The purchase agreement, subject to local regulatory approval, included the Argentine wine brands Graffigna, Colón and Santa Silvia, which represent approximately 1.5 million boxes of 9-liter wine bottles per year. Bodegas Graffigna has a winery warehouse in the province of San Juan, two fields in the same province, and a field in Mendoza.

On January 28, 2019, the Argentine subsidiary Finca La Celia S.A. established the company Bodega San Juan S.A.U. making a capital contribution of ARS 100,000, in order to use it as a vehicle for the acquisition of the Graffigna, Colón and Santa Silvia wine business of Pernod Ricard Argentina S.R.L., in addition to the purchase of Graffigna winery and the Pocito vineyards, Cañada Honda and La Consulta.

On May 31, 2019, the subsidiary VSPT made a capital contribution to the subsidiary Finca La Celia S.A. by US$ 14,000,000, equivalent toThCh$ 9,910,040 and on the same date the subsidiary Finca La Celia S.A. made a capital contribution to Bodega San Juan S.A.U. for US$ 2,806,820, equivalent toThCh$ 1,986,836.

 

The financial income composition for the year ended as of December 31, 2016, 2015 y 2014, is as follows:contributions indicated above were used to purchase assets from Pernod Ricard Argentina S.R.L.

 

Financial Results

For the years ended as of December 31,

2016

2015

2014

ThCh$

ThCh$

ThCh$

Financial income

5,680,068

7,845,743

12,136,591

Financial cost

(20,307,238)

(23,101,329)

(22,957,482)

Foreign currency exchange differences

456,995

957,565

(613,181)

Result as per adjustment units

(2,246,846)

(3,282,736)

(4,159,131)

Total

(16,417,021)

(17,580,757)

(15,593,203)

Note 11Other income by function

The detail of other income by function is as follows:

Other income by function

For the years ended as of December 31,

 

2016

2015

2014

 

ThCh$

ThCh$

ThCh$

Sales of fixed assets

1,882,883

 

2,541,619

1,978,208

Lease

382,934

 

245,285

364,388

Sales of glass

549,787

 

672,203

836,098

Others

2,328,550

 

3,118,137

(1) 22,285,022

Total

5,144,154

6,577,244

25,463,716

 (1)   Under this amount includes,For the positive one-time effect compensations received by our Argentine subsidiary CICSA for an amount 227,245 thousands of Argentine pesos (equivalent to MUS$ 34,200), foracquisition described above, the termination provisional fair values ​​of the contract which allowed us to importassets 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.liabilities have been determined(seeNote 1 – General information, letter D).


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

d)  Cervecería Szot SpA.

 

On August 30, 2019, the subsidiary Cervecería Kunstmann S.A. (CK) acquired an additional 5,001% of Cervecería Szot SpA. coming from the purchase of 5,001 shares, equivalent toThCh$ 6,156. As a result of the aforementioned, CK reached a total interest of 50.001% on said subsidiary.

For the acquisition described above, the provisional fair values ​​of the assets and liabilities have been determined (seeNote 1 – General information, letter D).

As of December 31, 2019, the Company has no other business combinations.

Note 1216Investments accounted for using equity methodOther Gains (Losses)

 

Joint ventures and Associates

As ofDecember 31, 2019 and 2018, the Company recorded investments qualifying as joint venture and associates.

The detailshare value of other gains (losses) items isinvestments in joint ventures and associates are detailed as follows:

 

Other gains (losses)

For the years ended as of December 31,

2016

2015

2014

ThCh$

ThCh$

ThCh$

Results derivative contracts (1)

(10,134,414)

9,839,675

4,152,548

Marketable securities to fair value

84,133

36,280

(103,306)

Other

1,704,374

(1,363,955)

(12,303)

Total

(8,345,907)

8,512,000

4,036,939

 

Percentage of participation

As of December 31, 2019

As of December 31, 2018

%

ThCh$

ThCh$

Cervecería Austral S.A.

50,00

8,607,390

7,327,949

Foods Compañía de Alimentos CCU S.A. (1)

50,00

1,709,803

12,012,276

Central Cervecera de Colombia S.A.S.

50,00

25,334,386

40,681,482

Zona Franca Central Cervecera S.A.S.

50,00

99,278,045

80,766,534

Total joint ventures

 

134,929,624

140,788,241

Other companies

 

1,168,438

1,229,540

Total associated

 

1,168,438

1,229,540

Total

 

136,098,062

142,017,781


(1)
SeeNote 16 – Investments accounted for using equity method, number (2).

(1)   Under this concept the Company received cash flows amounting ThCh$ 9,698,871, ThCh$ 5,419,700 and ThCh$ 927,149 corresponding to 2016, 2015 and 2014, respectevily and these were recorded

The above mentioned values include goodwill generated in the Consolidated Cash Flow Statement, under Operational activities, in line item Other cash movements.

Note 13 Cashacquisition of the following joint venture and cash equivalents

Cash and cash equivalent balances were as follows,associate, which are presented net of any impairment loss:

 

 

As of December 31, 2016

As of December 31, 2015

As of December 31, 2014

 

ThCh$

ThCh$

ThCh$

Cash

106,203

12,712

12,708

Overnight deposits

1,978,738

462,873

1,319,399

Bank balances

41,276,555

42,370,367

30,853,126

Time deposits

14,955,778

32,639,373

99,373,117

Investments in mutual funds

24,772

-

-

Securities purchased under resale agreements

75,447,904

117,068,914

83,216,526

Total

133,789,950

192,554,239

214,774,876

 

 

As of December 31, 2019

As of December 31, 2018

 

ThCh$

ThCh$

Cervecería Austral S.A.

 

1,894,770

1,894,770

Total

 

1,894,770

1,894,770

 

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

The currency composition of cashresult accrued in joint ventures and cash equivalents atDecember 31, 2016, isassociates are detailed as follows:

 

 

Chilean Peso

US Dollar

Euro

Argentine Peso

Uruguayan Peso

Paraguayan Guaraní

Others

Total

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Cash

100,921

788

-

4,494

-

-

-

106,203

Overnight deposits

-

1,978,738

-

-

-

-

-

1,978,738

Bank balances

27,164,331

6,258,367

786,887

2,158,115

1,136,782

3,269,045

503,028

41,276,555

Time deposits

14,955,778

-

-

-

-

-

-

14,955,778

Investments in mutual funds

-

-

-

24,772

-

-

-

24,772

Securities purchased under resale agreements

75,447,904

-

-

-

-

-

-

75,447,904

Total

117,668,934

8,237,893

786,887

2,187,381

1,136,782

3,269,045

503,028

133,789,950

 

For the years ended as of December 31,

2019

2018

2017

ThCh$

ThCh$

ThCh$

Cervecería Austral S.A.

1,930,395

1,638,811

952,235

Foods Compañía de Alimentos CCU S.A.

897,526

792,376

165,905

Central Cervecera de Colombia S.A.S.

(18,755,448)

(11,804,950)

(8,646,651)

Zona Franca Central Cervecera S.A.S.

(562,416)

(391,465)

87,583

Total joint ventures

(16,489,943)

(9,765,228)

(7,440,928)

Bebidas Bolivianas BBO S.A. (1)

-

(921,812)

(1,459,916)

Other companies (2)

58,184

(128,480)

(13,253)

Total associated

58,184

(1,050,292)

(1,473,169)

Total

(16,431,759)

(10,815,520)

(8,914,097)


(1)
SeeNote 15 – Business combinations, letter a).

(2)SeeNote 15 – Business combinations, letter b).

 

The currency composition of cashChanges in investments in joint ventures and cash equivalents at December 31, 2015, isassociates are detailed as follows:

 

 

Chilean Peso

US Dollar

Euro

Argentine Peso

Uruguayan Peso

Paraguayan Guaraní

Others

Total

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Cash

10,675

39

-

1,998

-

-

-

12,712

Overnight deposits

-

462,873

-

-

-

-

-

462,873

Bank balances

21,964,295

4,922,732

955,840

5,699,756

948,816

7,519,619

359,309

42,370,367

Time deposits

32,639,373

-

-

-

-

-

-

32,639,373

Securities purchased under resale agreements

117,068,914

-

-

-

-

-

-

117,068,914

Total

171,683,257

5,385,644

955,840

5,701,754

948,816

7,519,619

359,309

192,554,239

 

As of December 31, 2019

As of December 31, 2018

 

ThCh$

ThCh$

Balance at the beginning of year

142,017,781

99,270,280

Other payments to acquire interests in joint ventures

13,549,638

59,505,559

Participation in the joint ventures and associates (loss)

(16,431,759)

(10,815,520)

Capital decrease (1)

(11,200,000)

-

Dividends received

(614,591)

(423,994)

Business combinations (2)

(241,885)

(14,144,241)

Others

9,018,878

8,625,697

Total

136,098,062

142,017,781

 

(1)SeeNote 16 – Investments accounted for using equity method, number (2).

The currency composition of cash and cash equivalents at December 31, 2014, is(2)SeeNote 15 – Business combinations.

Significant matters regarding investments accounted for using the equity method are detailed as follows:

 

 

Chilean Peso

Unidad de Fomento

US Dollar

Euro

Argentine Peso

Uruguayan Peso

Paraguayan Guaraní

Others

Totales

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Cash

9,939

-

420

-

2,349

-

-

-

12,708

Overnight deposits

-

-

1,319,399

-

-

-

-

-

1,319,399

Bank balances

8,790,934

-

4,738,935

974,179

11,726,073

536,097

3,753,420

333,488

30,853,126

Time deposits

90,962,579

8,410,538

-

-

-

-

-

-

99,373,117

Investments in mutual funds

-

-

-

-

-

-

-

-

-

Securities purchased under resale agreements

83,216,526

-

-

-

-

-

-

-

83,216,526

Totales

182,979,978

8,410,538

6,058,754

974,179

11,728,422

536,097

3,753,420

333,488

214,774,876

(1) Cervecería Austral S.A.

 

A closed stock company that operates as a beer manufacturing facility in the southern end of Chile, which is the southernmost brewery in the world.

(2)Foods Compañía de Alimentos CCU S.A. (Foods)

Foods, is a closed stock company that participated in the business of snacks and foods in Chile. At the end of 2015, Foods sold the Calaf and Natur brands to Empresas Carozzi S.A. In addition Foods was the main shareholder of Alimentos Nutrabien S.A. and owned the Nutra Bien brand. On December 17, 2018, Foods and subsidiary CCU Inversiones S.A. sold 100% of the shares of Alimentos Nutrabien S.A. to Ideal S.A.

On November 18, 2019 at the Ordinary Shareholders Meeting, it was agreed to decrease the capital of the company by an amount of ThCh$ 22,400,000, leaving a final capital of ThCh$ 12,144,358. This decrease was paid in proportion to the number of shares held by each shareholder as of the date of said Meeting.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

(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 (Products).

Subsequently, on August 16, 2017, CCU, through its subsidiary CCU Inversiones ll Limitada, acquired 50% of the shares of a company incorporated in Colombia called Zona Franca Central Cervecera S.A.S. (ZF CC), which relates to a joint agreements and that qualifies as a joint operations, in which CCU and Grupo Postobón participate as equal shareholders. The amount of this transaction was US$ 10,204, equivalents to ThCh$ 6,432. The purpose of ZF CC is acting exclusively as industrial user of one or more free trade zones; manufacturing and selling products of its own brands and through licenses to CCC. CCC markets these products.

For the purposes above, previous associations involves the construction of a beer production plant, with an annual total capacity of 3,000,000 hectoliters.

The compositionParties will also invest in CCC and ZF CC an approximate amount of time deposits is as follows:US$ 200,000,000 in equal parts, following a gradual investment plan agreed by the parties.

 

As of December 31, 2016:2019 and 2018, the total amount contributed to CCC and ZF CC was US$ 255,734,458 (equivalents to ThCh$ 166,698,958) and US$ 236,857,949 (equivalents to ThCh$ 153,149,320), respectively.

 

Financial Institution

Issue date

Maturity date

Currency

Amount

Monthly interest rate (%)

ThCh$

Banco Santander

12-27-2016

01-05-2017

CLP

1,250,550

0.33

Banco Santander

12-28-2016

01-10-2017

CLP

2,400,792

0.33

Banco Santander

12-29-2016

01-25-2017

CLP

5,701,292

0.34

Banco Consorcio

12-28-2016

01-26-2017

CLP

5,401,782

0.33

Banco Francés

12-12-2016

01-11-2017

$ ARG

201,362

1.60

Total

 

 

 

14,955,778

 

The Company does not have any contingent liabilities related to joint ventures and associates as December 31, 2019.

 

As of December 31, 2015:2019 and 2018, the significant items of the financial statements of 100% of joint ventures and associates are summarized as follows:

 

Financial Institution

Issue date

Maturity date

Currency

Amount

Monthly interest rate (%)

ThCh$

Banco Consorcio

11-30-2015

01-06-2016

CLP

3,512,658

0.35

Banco Consorcio

12-29-2015

01-20-2016

CLP

800,181

0.34

Banco Consorcio

12-29-2015

01-25-2016

CLP

2,850,665

0.35

Banco Consorcio

12-14-2015

01-12-2016

CLP

37,568

0.32

Banco Consorcio

12-29-2015

01-29-2016

CLP

2,500,600

0.36

Banco Consorcio

12-21-2015

01-20-2016

CLP

460,521

0.34

Banco de Crédito e Inversiones

12-15-2015

01-08-2016

CLP

7,762,889

0.33

Banco Santander

12-21-2015

01-20-2016

CLP

6,407,467

0.35

Banco Santander

12-23-2015

01-20-2016

CLP

1,251,133

0.34

Banco Santander

12-24-2015

01-11-2016

CLP

1,651,271

0.33

Banco Santander

12-28-2015

01-25-2016

CLP

3,301,122

0.34

HSBC Bank Chile

12-17-2015

01-14-2016

CLP

2,103,298

0.33

Total

 

 

 

32,639,373

 

 

Joint ventures

Joint ventures

 

As of December 31, 2019

As of December 31, 2018

 

ThCh$

ThCh$

Assets and Liabilities

 

 

Current assets

135,905,220

206,761,242

Non-current assets

319,779,443

246,997,507

Current liabilities

122,826,437

172,143,127

Non-current liabilities

65,850,124

2,893,856

 

 

 

 

 

 

Joint ventures

Associates

 

For the years ended as of December 31,

 

2019

2018

2017

2017

 

ThCh$

ThCh$

ThCh$

ThCh$

Income Statement (Summarized)

 

 

  

Net sales

124,808,755

70,296,729

57,417,288

19,760,918

Operating result

(42,670,725)

(21,173,985)

(18,606,383)

(4,086,973)

Net income for year

(31,752,130)

(19,886,274)

(14,352,788)

(4,462,733)

Other comprehensive income

(49,363,608)

(24,720,721)

(27,052,015)

(5,761,515)

Depreciation and amortization

(752,201)

(2,656,715)

(2,618,567)

(2,818,923)


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

Note 17 Intangible assetsother than goodwill

As of December 31, 2014

The intangible assets movement are detailed as follows:

 

Financial Institution

Issue date

Maturity date

Currency

Amount

Monthly interest rate (%)

ThCh$

Banco Consorcio

11-25-2014

01-09-2015

CLP

5,018,600

0.31

Banco Consorcio

12-24-2014

01-19-2015

CLP

4,002,707

0.29

Banco Consorcio

12-22-2014

01-20-2015

CLP

230,186

0.27

Banco Consorcio

12-22-2014

01-20-2015

CLP

700,588

0.28

Banco de Chile

11-06-2014

02-05-2015

CLP

3,016,500

0.30

Banco de Chile

11-25-2014

01-09-2015

CLP

8,430,240

0.30

Banco de Chile

12-11-2014

01-12-2015

CLP

2,054,168

0.31

Banco de Chile

12-26-2014

02-10-2015

CLP

2,001,000

0.30

Banco de Chile

12-30-2014

02-10-2015

CLP

3,000,300

0.30

Banco de Chile

11-06-2014

02-05-2015

UF

3,039,750

1.60

Banco de Crédito e Inversiones

10-28-2014

01-08-2015

CLP

3,472,080

0.30

Banco de Crédito e Inversiones

12-16-2014

01-23-2015

CLP

8,011,600

0.29

Banco de Crédito e Inversiones

10-15-2014

01-08-2015

CLP

10,079,567

0.31

Banco de Crédito e Inversiones

12-26-2014

02-10-2015

CLP

2,301,073

0.28

Banco Internacional

12-16-2014

01-23-2015

CLP

3,005,700

0.38

Banco Itaú

10-29-2014

01-27-2015

CLP

5,331,387

0.28

Banco Santander

11-20-2014

01-08-2015

CLP

4,518,450

0.30

Banco Santander

11-28-2014

01-15-2015

CLP

5,618,480

0.30

Banco Santander

12-03-2014

01-08-2015

CLP

2,306,440

0.30

Banco Santander

12-24-2014

01-19-2015

CLP

4,703,180

0.29

Banco Santander

12-26-2014

02-10-2015

CLP

4,002,000

0.30

Banco Santander

12-30-2014

02-10-2015

CLP

2,100,203

0.29

Banco Santander

12-03-2014

01-08-2015

CLP

150,420

0.30

Banco Santander

12-11-2014

01-07-2015

CLP

1,803,360

0.28

Banco Security

12-22-2014

01-23-2015

CLP

2,702,430

0.30

Banco Security

12-23-2014

01-30-2015

CLP

2,401,920

0.30

BancoEstado

10-29-2014

01-27-2015

UF

5,370,788

0.28

Total

 

 

 

99,373,117

 

 

Trademarks

Software programs

Water rights

Distribution rights

Total

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

As of January 1, 2018

 

 

 

 

 

Historic cost

63,804,999

31,499,321

2,250,027

659,730

98,214,077

Accumulated amortization

-

(20,674,588)

-

(507,009)

(21,181,597)

Book Value

63,804,999

10,824,733

2,250,027

152,721

77,032,480

 

 

 

 

 

 

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)

-

-

(92,415)

-

(92,415)

Amortization of year

-

(2,999,205)

-

(39,751)

(3,038,956)

Conversion effect

(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

104,487,137

11,271,441

2,942,512

263,052

118,964,142

 

 

 

 

 

 

As of December 31, 2018

 

 

 

 

 

Historic cost

104,487,137

35,157,353

2,942,512

833,653

143,420,655

Accumulated amortization

-

(23,885,912)

-

(570,601)

(24,456,513)

Book Value

104,487,137

11,271,441

2,942,512

263,052

118,964,142

 

 

 

 

 

 

As of December 31, 2019

 

 

 

 

 

Additions

-

7,624,915

268,321

-

7,893,236

Additions for business combinations (cost)  (2)

393,946

-

-

-

393,946

Amortization of year

-

(3,363,211)

-

(99,933)

(3,463,144)

Conversion effect

(12,069,829)

(478,931)

-

(121,562)

(12,670,322)

Effect of conversion (amortization)

-

188,764

-

37,420

226,184

Others increase (decreased) (3)

13,535,980

605,356

-

133,288

14,274,624

Changes

1,860,097

4,576,893

268,321

(50,787)

6,654,524

Book Value

106,347,234

15,848,334

3,210,833

212,265

125,618,666

 

 

 

 

 

 

As of December 31, 2019

 

 

 

 

 

Historic cost

106,347,234

42,908,693

3,210,833

845,379

153,312,139

Accumulated amortization

-

(27,060,359)

-

(633,114)

(27,693,473)

Book Value

106,347,234

15,848,334

3,210,833

212,265

125,618,666

 

(1) Corresponds mainly to the brands mentioned inNote 1 – General information, letter C).

(2) SeeNote 15 – Business combinations.

(3) Corresponds to the financial effect of the application IAS 29 "Financial reporting in hyperinflationary economies”.

There are no restrictions or pledges on intangible assets.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

The composition of Securities purchased under resale agreements iscash generating units associated to thetrademarks are detailed as follows:

 

As of December 31, 2016:

Financial Institution

Securities purchased (*)

Issue date

Maturity date

Currency

Amount

Monthly interest rate (%)

ThCh$

BanChile Corredores de Bolsa S.A.

Banco de Chile

12-28-2016

01-04-2017

CLP

3,531,124

0.32

BanChile Corredores de Bolsa S.A.

BancoEstado

12-28-2016

01-04-2017

CLP

3,602,675

0.32

BanChile Corredores de Bolsa S.A.

Scotiabank Sudamericano

12-28-2016

01-04-2017

CLP

2,044,419

0.32

BanChile Corredores de Bolsa S.A.

Banco Santander

12-28-2016

01-04-2017

CLP

674,935

0.32

BanChile Corredores de Bolsa S.A.

Banco de Chile

12-28-2016

01-06-2017

CLP

1,679,525

0.32

BanChile Corredores de Bolsa S.A.

BancoEstado

12-28-2016

01-06-2017

CLP

1,205,429

0.32

BanChile Corredores de Bolsa S.A.

Scotiabank Sudamericano

12-28-2016

01-06-2017

CLP

1,116,326

0.32

BanChile Corredores de Bolsa S.A.

Banco de Chile

12-29-2016

01-06-2017

CLP

1,427,025

0.31

BanChile Corredores de Bolsa S.A.

BancoEstado

12-29-2016

01-06-2017

CLP

1,725,807

0.31

BanChile Corredores de Bolsa S.A.

Scotiabank Sudamericano

12-29-2016

01-06-2017

CLP

5,799,890

0.31

BanChile Corredores de Bolsa S.A.

Banco de Crédito e Inversiones

12-29-2016

01-06-2017

CLP

1,549,449

0.31

BancoEstado S.A. Corredores de Bolsa

Scotiabank Sudamericano

12-29-2016

01-06-2017

CLP

3,916,539

0.33

BancoEstado S.A. Corredores de Bolsa

Banco Itaú

12-29-2016

01-06-2017

CLP

6,085,662

0.33

BancoEstado S.A. Corredores de Bolsa

BancoEstado

12-29-2016

01-10-2017

CLP

2,400,528

0.33

BancoEstado S.A. Corredores de Bolsa

Banco de Crédito e Inversiones

12-29-2016

01-10-2017

CLP

6,019,097

0.33

BancoEstado S.A. Corredores de Bolsa

BBVA Chile

12-29-2016

01-10-2017

CLP

3,933,092

0.33

BancoEstado S.A. Corredores de Bolsa

BancoEstado

12-30-2016

01-10-2017

CLP

1,600,149

0.28

BancoEstado S.A. Corredores de Bolsa

Banco Itaú

12-30-2016

01-10-2017

CLP

3,000,280

0.28

BancoEstado S.A. Corredores de Bolsa

BBVA Chile

12-29-2016

01-10-2017

CLP

1,350,297

0.33

BancoEstado S.A. Corredores de Bolsa

Banco BICE

12-29-2016

01-05-2017

CLP

105,017

0.33

BancoEstado S.A. Corredores de Bolsa

Banco de Chile

12-29-2016

01-10-2017

CLP

500,110

0.33

BancoEstado S.A. Corredores de Bolsa

Banco Santander

12-29-2016

01-10-2017

CLP

3,500,770

0.33

BancoEstado S.A. Corredores de Bolsa

Banco de Chile

12-29-2016

01-16-2017

CLP

4,000,880

0.33

BancoEstado S.A. Corredores de Bolsa

Banco de Chile

12-29-2016

01-20-2017

CLP

1,917,467

0.33

BancoEstado S.A. Corredores de Bolsa

BBVA Chile

12-29-2016

01-20-2017

CLP

82,974

0.33

BancoEstado S.A. Corredores de Bolsa

Banco de Chile

12-29-2016

01-03-2017

CLP

250,055

0.33

BancoEstado S.A. Corredores de Bolsa

BancoEstado

12-29-2016

01-05-2017

CLP

6,101,342

0.33

BancoEstado S.A. Corredores de Bolsa

Banco de Crédito e Inversiones

12-27-2016

01-03-2017

CLP

925,383

0.31

BancoEstado S.A. Corredores de Bolsa

BBVA Chile

12-29-2016

01-05-2017

CLP

725,160

0.33

BanChile Corredores de Bolsa S.A.

Banco de Chile

12-28-2016

01-16-2017

CLP

872,178

0.32

BanChile Corredores de Bolsa S.A.

BancoEstado

12-28-2016

01-16-2017

CLP

435,612

0.32

BanChile Corredores de Bolsa S.A.

Scotiabank Sudamericano

12-28-2016

01-16-2017

CLP

1,865,909

0.32

BanChile Corredores de Bolsa S.A.

Banco de Crédito e Inversiones

12-28-2016

01-16-2017

CLP

1,241,355

0.32

BanChile Corredores de Bolsa S.A.

Banco Santander

12-28-2016

01-16-2017

CLP

261,444

0.32

Total

 

 

 

 

75,447,904

 

Segment

Cash Generating Unit

As of December 31, 2019

As of December 31, 2018

(CGU)

ThCh$

ThCh$

Chile

Embotelladoras Chilenas Unidas S.A.

32,109,965

31,659,575

 

Manantial S.A.                                                

1,166,000

1,166,000

 

Compañía Pisquera de Chile S.A.

1,363,782

1,363,782

 

Cervecería Kunstmann S.A. (3) (5)

1,091,223

1,091,223

 

Sub-Total

35,730,970

35,280,580

International Business

CCU Argentina S.A. and subsidiaries (1)

38,839,911

36,807,884

 

Marzurel S.A., Coralina S.A. and Milotur S.A.

2,482,090

2,651,576

 

Bebidas del Paraguay S.A. and Distribuidora del Paraguay S.A.

3,542,203

3,558,832

 

Bebidas Bolivianas BBO S.A. (2)

5,864,121

6,363,540

 

Sub-Total

50,728,325

49,381,832

Wines

Viña San Pedro Tarapacá S.A. (4)

19,887,939

19,824,725

 

Sub-Total

19,887,939

19,824,725

Total

 

106,347,234

104,487,137

 

(*) All financial instruments acquired under resale agreements, correspond to time deposits and are subject to a fixed interest rate.(1)SeeNote 1 – General Information, letter C).

(2)SeeNote 15 – Business combinations, letter a).

(3)SeeNote 15 – Business combinations, letter b).

(4)SeeNote 15 – Business combinations, letter c).

(5)SeeNote 15 – Business combinations, letter d).

 

Management has not found any evidence of impairment of intangible assets. The same methodology described inNote 18 - Goodwill, has been used fortrademarks with indefinite useful lives.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Note 18Goodwill

The goodwill movement is detailed as follows:

Goodwill

ThCh$

As of January 1, 2018

Historic cost

94,617,474

Book Value

94,617,474

As of December 31, 2018

Additions for business combinations (1)

10,832,577

Other increases (decreases) (2)

21,881,066

Conversion effect

(4,286,216)

Changes

28,427,427

Book Value

123,044,901

As of December 31, 2018

Historic cost

123,044,901

Book Value

123,044,901

As of December 31, 2019

Additions for business combinations (1)

306,691

Other increases (decreases) (2)

9,153,712

Conversion effect

(7,549,866)

Changes

1,910,537

Book Value

124,955,438

As of December 31, 2019

Historic cost

124,955,438

Book Value

124,955,438

(1) SeeNote 15 – Business combinations, letter a) and d).

As(2) Corresponds to the financial effect of December 31, 2015:the application IAS 29 "Financial reporting in hyperinflationary economies”.

 

Financial Institution

Securities purchased (*)

Issue date

Maturity date

Currency

Amount

Monthly interest rate (%)

ThCh$

BanChile Corredores de Bolsa S.A.

Banco de Chile

12-24-2015

01-08-2016

CLP

3,731,991

0.32

BanChile Corredores de Bolsa S.A.

Banco de Chile

12-28-2015

01-08-2016

CLP

4,253,623

0.31

BanChile Corredores de Bolsa S.A.

Banco de Chile

12-28-2015

01-20-2016

CLP

19,557

0.30

BanChile Corredores de Bolsa S.A.

Banco de Crédito e Inversiones

12-28-2015

01-08-2016

CLP

8,828,519

0.31

BanChile Corredores de Bolsa S.A.

BancoEstado

12-24-2015

01-08-2016

CLP

4,674,281

0.32

BanChile Corredores de Bolsa S.A.

BancoEstado

12-28-2015

01-08-2016

CLP

3,923,128

0.31

BanChile Corredores de Bolsa S.A.

BancoEstado

12-28-2015

01-20-2016

CLP

449

0.30

BancoEstado S.A. Corredores de Bolsa

Banco BICE

12-29-2015

01-14-2016

CLP

980,345

0.32

BancoEstado S.A. Corredores de Bolsa

Banco de Chile

12-28-2015

01-04-2016

CLP

4,693,648

0.31

BancoEstado S.A. Corredores de Bolsa

Banco de Chile

12-29-2015

01-08-2016

CLP

7,565,908

0.32

BancoEstado S.A. Corredores de Bolsa

Banco de Chile

12-29-2015

01-14-2016

CLP

4,219,808

0.32

BancoEstado S.A. Corredores de Bolsa

Banco de Crédito e Inversiones

12-28-2015

01-04-2016

CLP

3,999,302

0.31

BancoEstado S.A. Corredores de Bolsa

Banco Itaú

12-30-2015

01-07-2016

CLP

200,021

0.31

BancoEstado S.A. Corredores de Bolsa

Banco Itaú

12-30-2015

01-14-2016

CLP

2,749,535

0.31

BancoEstado S.A. Corredores de Bolsa

Banco Itaú

12-30-2015

01-14-2016

CLP

750,078

0.31

BancoEstado S.A. Corredores de Bolsa

Banco Itaú

12-28-2015

01-07-2016

CLP

2,600,806

0.31

BancoEstado S.A. Corredores de Bolsa

Banco Itaú

12-29-2015

01-01-2016

CLP

1,300,277

0.32

BancoEstado S.A. Corredores de Bolsa

Banco Santander

12-29-2015

01-14-2016

CLP

3,079,945

0.32

BancoEstado S.A. Corredores de Bolsa

Banco Security

12-28-2015

01-04-2016

CLP

5,779,339

0.31

BancoEstado S.A. Corredores de Bolsa

Banco Security

12-29-2015

01-08-2016

CLP

241,899

0.32

BancoEstado S.A. Corredores de Bolsa

Banco Security

12-29-2015

01-14-2016

CLP

1,919,498

0.32

BancoEstado S.A. Corredores de Bolsa

BancoEstado

12-28-2015

01-04-2016

CLP

4,837,882

0.31

BancoEstado S.A. Corredores de Bolsa

BancoEstado

12-29-2015

01-08-2016

CLP

140,839

0.32

BancoEstado S.A. Corredores de Bolsa

BancoEstado

12-29-2015

01-14-2016

CLP

10,702,283

0.32

BancoEstado S.A. Corredores de Bolsa

BancoEstado

12-23-2015

01-12-2016

CLP

195,156

0.30

BancoEstado S.A. Corredores de Bolsa

BBVA Chile

12-28-2015

01-04-2016

CLP

1,003,626

0.31

BancoEstado S.A. Corredores de Bolsa

BBVA Chile

12-29-2015

01-08-2016

CLP

353,294

0.32

BancoEstado S.A. Corredores de Bolsa

BBVA Chile

12-30-2015

01-14-2016

CLP

9,801,762

0.31

BancoEstado S.A. Corredores de Bolsa

Scotiabank Sudamericano

12-29-2015

01-14-2016

CLP

652,718

0.32

BancoEstado S.A. Corredores de Bolsa

Scotiabank Sudamericano

12-28-2015

01-04-2016

CLP

2,443,254

0.31

BancoEstado S.A. Corredores de Bolsa

BancoEstado

12-29-2015

01-08-2016

CLP

800,000

0.32

BBVA Corredores de Bolsa S.A.

BBVA Chile

12-22-2015

01-11-2016

CLP

350,326

0.31

Valores Security S.A. C. de B.

Banco BICE

12-22-2015

01-07-2016

CLP

110,651

0.34

Valores Security S.A. C. de B.

Banco Central de Chile

12-28-2015

01-04-2016

CLP

4,856,917

0.32

Valores Security S.A. C. de B.

Banco Central de Chile

11-30-2015

01-06-2016

CLP

4,053,610

0.34

Valores Security S.A. C. de B.

Banco Consorcio

12-28-2015

01-04-2016

CLP

24,999

0.32

Valores Security S.A. C. de B.

Banco de Crédito e Inversiones

12-28-2015

01-04-2016

CLP

119,401

0.32

Valores Security S.A. C. de B.

Banco Itaú

12-28-2015

01-04-2016

CLP

4,234,301

0.32

Valores Security S.A. C. de B.

Banco Security

11-30-2015

01-06-2016

CLP

1,725,673

0.34

Valores Security S.A. C. de B.

Banco Security

12-28-2015

01-04-2016

CLP

2,707,819

0.32

Valores Security S.A. C. de B.

Banco Security

12-22-2015

01-07-2016

CLP

14,478

0.34

Valores Security S.A. C. de B.

BancoEstado

11-30-2015

01-06-2016

CLP

241,798

0.34

Valores Security S.A. C. de B.

BancoEstado

12-28-2015

01-04-2016

CLP

401,100

0.32

Valores Security S.A. C. de B.

BancoEstado

12-22-2015

01-07-2016

CLP

125,126

0.34

Valores Security S.A. C. de B.

BBVA Chile

12-28-2015

01-04-2016

CLP

1,659,944

0.32

Total

 

 

 

 

117,068,914

 

(*) All financial instruments acquired under resale agreements, correspond to time deposits and are subject to a fixed interest rate.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

AsFor the purpose of December 31, 2014:impairment testing, goodwill acquired in a business combination is allocated as of the acquisition date to each of the CGUs, or groups of CGUs that is expected to benefit from the business combination synergies. The carrying amount of goodwill assigned to the CGUs within the Company’s segments is detailed as follows:

 

Financial Institution

Securities purchased (*)

Issue date

Maturity date

Currency

Amount

Monthly interest rate (%)

ThCh$

BanChile Corredores de Bolsa S.A.

Banco de Chile

12-16-2014

01-15-2015

CLP

3,004,500

0.30

BanChile Corredores de Bolsa S.A.

Banco de Chile

12-16-2014

01-20-2015

CLP

10,015,000

0.30

BanChile Corredores de Bolsa S.A.

Banco de Chile

12-17-2014

01-09-2015

CLP

2,002,613

0.28

BanChile Corredores de Bolsa S.A.

Banco Santander

12-16-2014

01-15-2015

CLP

8,012,000

0.30

BanChile Corredores de Bolsa S.A.

Banco Santander

12-17-2014

01-09-2015

CLP

2,002,613

0.28

BanChile Corredores de Bolsa S.A.

Scotiabank Sudamericano

12-17-2014

01-09-2015

CLP

1,001,307

0.28

BanChile Corredores de Bolsa S.A.

Scotiabank Sudamericano

12-22-2014

01-23-2015

CLP

1,401,176

0.28

BanChile Corredores de Bolsa S.A.

Scotiabank Sudamericano

12-16-2014

01-15-2015

CLP

4,006,000

0.30

Banco Estado S.A. Corredores de Bolsa

BancoEstado

12-17-2014

01-08-2015

CLP

600,784

0.28

Banco Estado S.A. Corredores de Bolsa

BancoEstado

12-19-2014

01-08-2015

CLP

250,280

0.28

Banco Estado S.A. Corredores de Bolsa

BancoEstado

12-26-2014

01-08-2015

CLP

2,501,167

0.28

Banco Estado S.A. Corredores de Bolsa

BancoEstado

12-30-2014

01-20-2015

CLP

2,250,203

0.27

Banco Estado S.A. Corredores de Bolsa

BancoEstado

12-24-2014

01-08-2015

CLP

2,001,307

0.28

Banco Estado S.A. Corredores de Bolsa

BancoEstado

12-23-2014

01-06-2015

CLP

450,336

0.28

Banco Estado S.A. Corredores de Bolsa

BancoEstado

12-29-2014

01-08-2015

CLP

650,122

0.28

BBVA Corredores de Bolsa Ltda.

BBVA Banco Bhif

12-29-2014

01-22-2015

CLP

2,900,561

0.29

BBVA Corredores de Bolsa Ltda.

BBVA Banco Bhif

12-30-2014

02-10-2015

CLP

5,000,483

0.29

BBVA Corredores de Bolsa Ltda.

BBVA Banco Bhif

12-15-2014

01-08-2015

CLP

2,604,021

0.29

BBVA Corredores de Bolsa Ltda.

BBVA Banco Bhif

12-16-2014

01-08-2015

CLP

1,101,595

0.29

BBVA Corredores de Bolsa Ltda.

BBVA Banco Bhif

12-17-2014

01-08-2015

CLP

250,338

0.29

BBVA Corredores de Bolsa Ltda.

BBVA Banco Bhif

12-18-2014

01-08-2015

CLP

1,301,634

0.29

BBVA Corredores de Bolsa Ltda.

BBVA Banco Bhif

12-22-2014

01-08-2015

CLP

550,479

0.29

BBVA Corredores de Bolsa Ltda.

BBVA Banco Bhif

12-23-2014

01-08-2015

CLP

1,100,851

0.29

Valores Security S.A. C. de B.

Banco BICE

11-26-2014

01-08-2015

CLP

87,863

0.31

Valores Security S.A. C. de B.

Banco BICE

12-17-2014

01-23-2015

CLP

484,241

0.28

Valores Security S.A. C. de B.

Banco BICE

12-29-2014

01-06-2015

CLP

2,920,853

0.29

Valores Security S.A. C. de B.

Banco Central de Chile

11-18-2014

01-07-2015

CLP

288,293

0.29

Valores Security S.A. C. de B.

Banco Central de Chile

12-01-2014

01-20-2015

CLP

1,246,441

0.31

Valores Security S.A. C. de B.

Banco Central de Chile

12-17-2014

01-23-2015

CLP

28,349

0.28

Valores Security S.A. C. de B.

Banco Central de Chile

11-26-2014

01-08-2015

CLP

1,166,177

0.31

Valores Security S.A. C. de B.

Banco Central de Chile

12-29-2014

01-08-2015

CLP

1,000,193

0.29

Valores Security S.A. C. de B.

Banco Consorcio

12-29-2014

01-15-2015

CLP

100,759

0.28

Valores Security S.A. C. de B.

Banco Consorcio

12-29-2014

01-06-2015

CLP

400,077

0.29

Valores Security S.A. C. de B.

Banco de Crédito e Inversiones

11-18-2014

01-07-2015

CLP

886,510

0.29

Valores Security S.A. C. de B.

Banco Itaú

11-18-2014

01-07-2015

CLP

1,037,652

0.29

Valores Security S.A. C. de B.

Banco Itaú

11-26-2014

01-08-2015

CLP

174,866

0.31

Valores Security S.A. C. de B.

Banco Itaú

12-01-2014

01-20-2015

CLP

418,344

0.31

Valores Security S.A. C. de B.

Banco Itaú

12-17-2014

01-23-2015

CLP

1,512,069

0.28

Valores Security S.A. C. de B.

Banco Itaú

12-29-2014

01-15-2015

CLP

788,389

0.28

Valores Security S.A. C. de B.

Banco Santander

12-01-2014

01-20-2015

CLP

413,433

0.31

Valores Security S.A. C. de B.

Banco Security

11-18-2014

01-07-2015

CLP

3,839,782

0.29

Valores Security S.A. C. de B.

Banco Security

11-26-2014

01-08-2015

CLP

1,180,497

0.31

Valores Security S.A. C. de B.

Banco Security

12-01-2014

01-20-2015

CLP

630,151

0.31

Valores Security S.A. C. de B.

Banco Security

12-17-2014

01-23-2015

CLP

3,998,068

0.28

Valores Security S.A. C. de B.

Banco Security

12-29-2014

01-15-2015

CLP

1,318,189

0.28

Valores Security S.A. C. de B.

Banco Security

12-29-2014

01-06-2015

CLP

577,769

0.29

Valores Security S.A. C. de B.

BancoEstado

11-18-2014

01-07-2015

CLP

976,860

0.29

Valores Security S.A. C. de B.

BancoEstado

12-17-2014

01-23-2015

CLP

47,422

0.28

Valores Security S.A. C. de B.

BBVA Banco Bhif

12-17-2014

01-23-2015

CLP

438,345

0.28

Valores Security S.A. C. de B.

BBVA Banco Bhif

12-29-2014

01-15-2015

CLP

469,734

0.28

Valores Security S.A. C. de B.

BBVA Banco Bhif

12-29-2014

01-06-2015

CLP

1,102,267

0.29

Valores Security S.A. C. de B.

Scotiabank Sudamericano

12-29-2014

01-15-2015

CLP

723,563

0.28

Total

 

 

 

 

83,216,526

 

Segment

Cash Generating Unit

As of December 31, 2019

As of December 31, 2018

(CGU)

ThCh$

ThCh$

Chile

Embotelladoras Chilenas Unidas S.A.

25,257,686

25,257,686

 

Manantial S.A.                                                

8,879,245

8,879,245

 

Compañía Pisquera de Chile S.A.                                                

9,808,550

9,808,550

 

Los Huemules S.R.L.                                            

5,892

8,679

 

Cervecería Kunstmann S.A.

456,007

456,007

 

Cervecería Szot SpA. (1)

202,469

-

 

Sub-Total

44,609,849

44,410,167

International Business

CCU Argentina S.A. and subsidiaries

26,014,868

24,863,266

 

Marzurel S.A., Coralina S.A. and Milotur S.A.

4,422,841

4,839,916

 

Bebidas del Paraguay S.A. and Distribuidora del Paraguay S.A.

5,214,846

5,236,732

 

Bebidas Bolivianas BBO S.A. (2)

12,276,890

11,278,676

 

Sub-Total

47,929,445

46,218,590

Wines

Viña San Pedro Tarapacá S.A.

32,416,144

32,416,144

 

Sub-Total

32,416,144

32,416,144

Total

 

124,955,438

123,044,901

(*) All financial instruments acquired under resale agreements, correspond

(1)SeeNote 15 – Business combinations, letter d).

(2)SeeNote 15 – Business combinations, letter a).

Goodwill assigned to time deposits and arethe CGUs is subject to impairment test on an annually basis or more frequently if there are signs of potential impairment. These signs may include a fixed interest rate.significant change in the economic environment that could affect the business scenario, new legal provisions, operational performance indicators or the disposal of an important part of a CGU. The impairment loss is recognized for the amount by which the carrying amount of the CGU exceeds its recoverable amount. The recoverable value of each CGU is determined as the highest amount between its value in use and its fair value minus the cost of selling. The management considers that the value in use approach, determined by a discounted cash flow model, is the most reliable method to determine the recoverable values of the CGU.

 

The following table shows the most relevant inputs for each CGU in where there is a relevant Goodwill and / or intangible assets with indefinite useful life assigned:

 

Chile

Argentina

Uruguay

Paraguay

Bolivia

 

Estimated CAPEX for the year 2020 ThCh$

138,497

39,347

919

827

2,324

Perpetual growth

3.00%

2.20%

3.00%

2.20%

4.50%

Discount rate

7.53%

17.25%

9.31%

10.25%

10.00%

 

 

 

 

 

 

The following describes some considerations applied when determining the corresponding values in use of the CGUs that have Goodwill and / or intangible assets with indefinite useful life assigned:

Projection period: A five-year horizon is considered for all units / brands. An exceptionally longer period of time (no longer than ten years), is considered for those units / brands that require a longer maturation period.

Cash Flow: To determine the value in use, the Company has used cash flow projections in line with the time horizon described above, based on budgets, strategic plans and projections reviewed by management for the same period of time. Given the maturity of our business, these budgets have been historicaly consistent with the results.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

The total accumulatedManagement’s cash flows paid in business combinationsflow projection included significant judgements and acquisitions of associates are as follows:assumptions relating to perpetual growth rates and discount rates.

 

 

 

For the years ended as of December 31,

 

2016

2015

2014

 

ThCh$

ThCh$

ThCh$

Total disbursement per business acquisition

 

 

 

 

Cash flow used in the purchase of non-controling interests (1)

 

2,174,370

1,921,245

13,776,885

Other cahs payment to acquire interests in joint ventures (2)

 

27,043,481

42,163,032

1,445,478

Cahs flow used for control of subsidiaries or other business (3)

 

19,111,686

-

-

Payment for changes in ownership interests in subidiaries (4)

 

641,489

-

8,369

Total

 

48,971,026

44,084,277

15,230,732 

Perpetual growth: Although the Company expects a higher volume and price growth in the medium and long term, a nominal growth of 3% has been assumed for the perpetuity in Chilean units, which is a conservative assumption considering the historical capacity and nature of the business where the company operates. In the case of Paraguay and Argentina, a perpetuity rate of 2.2% is used, consistent with the expected long-term growth for these countries. For Bolivia, a perpetuity rate of 4.5% equivalent to long-term inflation is used. In the case of Uruguay, a perpetuity rate of 3.0% is used, which is composed by the average inflation rate of the United States of America mentioned above, plus an 80% of Uruguay's potential GDP growth in the long term (1.0% - 1.1%).

 

(1)Discount rate: Corresponds to an increasedthe nominal WACC (Weighted Average Cost of capital made in 2016 and 2015 and the acquisitions made during 2014Capital) rate of Bebidas Bolivianas BBO S.A. (seeNote 19).each country.

(2)Corresponds to an increased of capital made in 2016, 2015 and 2014 of Central Cervecera de Colombia S.A.S. (seeNote 19)and

According to the sensitivities calculated, the Administration determines that there is no reasonably possible change in the assumptions tested that could cause the carrying amount paidexceeds the recoverable value. As of December 31, 2019, the Administration has not noted signs of impairment in proportion to the creation of the company Promarca Internacional SpA. (SeeNote 1, letter a)). In 2015 corrsponds to the payment of 50% of the acquisitions of Bebidas Carozzi CCU SpA. (seeNote 1).Goodwill or Intangible assets with indefinite useful lives.

(3)Corresponds to acquisition of additional interests in Manantial S.A. through its subsidiaries Aguas CCU-Nestlé Chile S.A. and Embotelladoras Chilenas Unidas S.A. (seeNote 1, point (1)).

(4)In 2016 corresponds to the payment for ownership on Artisan SRL (Paraguay) (seeNote 8, letter a)).

 

 

Note 14Accounts receivables – Trade and other receivables

The accounts receivables – trade and other receivables were as follows:

 

As of December 31, 2016

As of December 31, 2015

 

Current

Non current

Current

Non current

 

ThCh$

ThCh$

ThCh$

ThCh$

Accounts receivables:

 

 

 

 

ChileOperating segment (1)

145,670,490

-

136,203,740

-

International business Operating segment

63,600,881

-

52,591,935

-

Wines Operating segment

42,958,093

-

43,333,189

-

Others accounts receivables (2)

32,375,234

3,563,797

24,033,944

-

Impairment loss estimate

(3,837,914)

-

(3,936,871)

-

Total

280,766,784

3,563,797

252,225,937

-

(1)From the third quarter of 2016 onwards, the Chile Operating segment incorporated in their management the business activities performed by the Strategic Service Units (SSU), which include Transportes CCU Limitada, Comercial CCU S.A., CRECCU S.A. and Fábrica de Envases Plásticos S.A. As of December 2015, the account receivables of the Strategic Service Units were disclosed under item Others for an amount of ThCh$ 47,871,339, however for comparability purposes these account receivable have been reclassifficated to the Chile Operating segment.

(2)As of December 31, 2016, this item mainly includes ThCh$ 526,959 in short-term and ThCh$ 2,898,277 in long-term related to de account receivable to the sale of 49% that subsidiriary CPCh maintained in Compañía Pisquera Bauzá S.A. (seeNote 24).

The Company’s accounts receivable are denominated in the following currencies:

 

As of December 31, 2016

As of December 31, 2015

 

ThCh$

ThCh$

Chilean Peso

179,896,747

158,757,937

Argentine Peso

56,773,947

48,535,814

US Dollar

24,449,473

25,498,590

Euro

7,025,446

7,463,166

Unidad de Fomento

3,613,395

7,102

Uruguayan Pesos

5,304,719

4,074,908

Paraguayan Guaraní

6,010,193

6,111,636

Others currencies

1,256,661

1,776,784

Total

284,330,581

252,225,937


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

Note 19Property, plant and equipment

 

The detail of the accounts receivable maturities as ofDecember 31, 2016, isProperty, plant and equipment movements are detailed as follows:

 

 

Total

Current balance

Overdue balances

0 a 3 months

3 a 6 months

6 a 12 months

More than 12 months

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Accounts receivables:

 

 

 

 

 

 

ChileOperating segment

145,670,490

134,545,838

8,090,616

1,136,211

638,417

1,259,408

International business Operating segment

63,600,881

55,230,423

7,521,071

130,299

275,300

443,788

Wines reportable Operating segment

42,958,093

39,499,120

3,028,707

208,628

137,671

83,967

Others accounts receivables

32,375,234

31,897,595

186,213

291,426

-

-

Sub Total

284,604,698

261,172,976

18,826,607

1,766,564

1,051,388

1,787,163

Impairment loss estimate

(3,837,914)

-

(1,130,545)

(478,707)

(542,389)

(1,686,273)

Total current

280,766,784

261,172,976

17,696,062

1,287,857

508,999

100,890

Others accounts receivables

3,563,797

3,563,797

-

-

-

-

Total non-current

3,563,797

3,563,797

-

-

-

-

 

 Land, buildings and construction

 Machinery and equipment

 Bottles and containers

 Other Equipment

 Assets under construction

 Furniture, accessories and vehicles

 Under production vines

 Total

 ThCh$

 ThCh$

 ThCh$

 ThCh$

 ThCh$

 ThCh$

 ThCh$

 ThCh$

As of January 1, 2018

 

 

 

 

 

 

 

 

Historic cost

622,388,974

485,977,017

159,541,057

142,280,575

108,606,889

79,194,908

29,367,600

1,627,357,020

Accumulated depreciation

(179,320,875)

(280,432,996)

(86,748,741)

(94,621,343)

-

(53,842,782)

(14,476,855)

(709,443,592)

Book Value

443,068,099

205,544,021

72,792,316

47,659,232

108,606,889

25,352,126

14,890,745

917,913,428

 

 

 

 

 

 

 

 

 

As of December 31, 2018

 

 

 

 

 

 

 

 

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 accumulated 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)

(594,460)

(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

(17,172,212)

(27,289,843)

(23,911,356)

(14,882,856)

-

(6,025,870)

(1,017,002)

(90,299,139)

Conversion effect depreciation

707,133

6,290,990

12,688,447

5,358,799

-

288,185

92,393

25,425,947

Others increase (decreased) (1)

26,662,381

31,149,984

19,091,618

2,850,058

4,240,542

290,325

673,686

84,958,594

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

53,794,690

39,926,280

14,372,490

4,562,905

(11,178,682)

332,131

1,543,389

103,353,203

Book Value

496,862,789

245,470,301

87,164,806

52,222,137

97,428,207

25,684,257

16,434,134

1,021,266,631

 

 

 

 

 

 

 

 

 

As of December 31, 2018

 

 

 

 

 

 

 

 

Historic cost

693,438,996

552,095,601

180,757,354

143,550,263

97,428,207

80,890,915

30,862,740

1,779,024,076

Accumulated depreciation

(196,576,207)

(306,625,300)

(93,592,548)

(91,328,126)

-

(55,206,658)

(14,428,606)

(757,757,445)

Book Value

496,862,789

245,470,301

87,164,806

52,222,137

97,428,207

25,684,257

16,434,134

1,021,266,631

 

 

 

 

 

 

 

 

 

As of December 31, 2019

 

 

 

 

 

 

 

 

Additions

-

-

-

-

131,852,714

-

-

131,852,714

Additions of historic cost by business combination

8,271,085

2,605,523

2,672

-

-

-

-

10,879,280

Additions of accumulated depreciation by business combination

(5,168)

(14,806)

(838)

-

-

-

-

(20,812)

Transfers

39,314,971

29,945,516

19,737,192

18,915,984

(117,631,917)

7,304,360

2,413,894

-

Conversion effect historic cost

(11,615,913)

(18,521,702)

(18,784,647)

(5,216,819)

(1,119,515)

(299,589)

(244,966)

(55,803,151)

Write off (cost)

(916,048)

(1,686,432)

(5,447,699)

(19,566,224)

-

(18,177,535)

-

(45,793,938)

Write off (depreciation)

772,278

1,250,400

4,464,153

19,540,873

-

18,095,047

-

44,122,751

Capitalized interests

-

-

-

-

909,256

-

-

909,256

Depreciation (2)

(22,502,711)

(32,380,334)

(23,542,865)

(15,756,612)

-

(6,904,318)

(1,132,431)

(102,219,271)

Conversion effect depreciation

399,539

2,071,105

5,068,567

1,712,436

-

152,781

-

9,404,428

Others increase (decreased) (1)

13,715,717

24,772,155

15,358,642

3,240,126

5,731,215

269,831

273,374

63,361,060

Divestitures (cost)

(1,861)

(40,001)

(405,192)

(5,835,237)

(583,270)

(8,872)

(428,543)

(7,302,976)

Divestitures (depreciation)

1,609

2,064

336,276

5,758,846

-

6,986

-

6,105,781

Additions by IFRS 16

16,411,597

2,879,880

-

-

-

1,480,925

-

20,772,402

Changes

43,845,095

10,883,368

(3,213,739)

2,793,373

19,158,483

1,919,616

881,328

76,267,524

Book Value

540,707,884

256,353,669

83,951,067

55,015,510

116,586,690

27,603,873

17,315,462

1,097,534,155

 

 

 

 

 

 

 

 

 

As of December 31, 2019

 

 

 

 

 

 

 

 

Historic cost

760,199,222

592,555,555

190,100,694

133,582,436

116,586,690

72,083,918

31,942,579

1,897,051,094

Accumulated depreciation

(219,491,338)

(336,201,886)

(106,149,627)

(78,566,926)

-

(44,480,045)

(14,627,117)

(799,516,939)

Book Value

540,707,884

256,353,669

83,951,067

55,015,510

116,586,690

27,603,873

17,315,462

1,097,534,155

The detail
(1)
Corresponds to the financial effect of the accounts receivable maturities asapplication IAS 29 "Financial reporting in hyperinflationary economies”.

(2)Includes depreciation of December 31, 2015, is as follows:the right of use assets according to IFRS16. SeeNote 4 - Accounting changes, letter a).

 

 

Total

Current balance

Overdue balances

 

0 a 3 months

3 a 6 months

6 a 12 months

More than 12 months

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Accounts receivables:

 

 

 

 

 

 

ChileOperating segment

136,203,740

124,024,627

10,108,821

659,670

511,993

898,629

International business Operating segment

52,591,935

45,600,898

5,839,178

226,648

321,512

603,699

Wines reportable Operating segment

43,333,189

40,022,791

2,715,939

193,781

299,921

100,757

Others accounts receivables

24,033,944

22,204,897

370,715

982,963

475,369

-

Sub Total

256,162,808

231,853,213

19,034,653

2,063,062

1,608,795

1,603,085

Impairment loss estimate

(3,936,871)

-

(888,274)

(280,839)

(1,168,592)

(1,599,166)

Total

252,225,937

231,853,213

18,146,379

1,782,223

440,203

3,919

The Company markets its products through retail, wholesale clients, chains and supermarkets. As ofDecember 31, 2016, the accounts receivable from the three most important supermarket chains in Chile and Argentina represent 27.1% (29.1% in 2015) of the total accounts receivable.

As indicated in the Risk management note (Note 5), for Credit Risk purposes, the Company acquires credit insurance policies to cover approximately 90% and 99% of the significant accounts receivable balances domestic and export, respectively, of the total of the account receivables. Regarding amounts aged more than 6 months and for which no allowances have been constituted, they correspond mainly to amounts already covered by the credit insurance policies. In addition, there are amounts overdue within ranges for which, in accordance with current policies are only partially impaired for, based on a case by case analysis.

For the above mentioned, management estimates that it does not require establishing allowances for further deterioration, in addition to those already constituted based on an aging analysis of these balances.

The write-offs of our doubtful clients are once all pre-trial and judicial, efforts have been made and exhausted all means of payment, with the proper demonstration of the insolvency of customers. This process of punishment normally takes more than 1 year.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

The movementbalance of the impairment losses provision for accounts receivableland at the end of each year is as follows:

 

 

As of December 31, 2016

As of December 31, 2015

 

ThCh$

ThCh$

Balance at the beginning of year

(3,936,871)

(3,153,132)

Impairment estimate for accounts receivable

(1,352,722)

(1,883,258)

Uncollectible accounts

219,222

264,618

Back of unused provisions

1,031,841

557,106

Effect of translation into presentation currency

200,616

277,795

Total

(3,837,914)

(3,936,871)

 

As of December 31, 2019

As of December 31, 2018

 

ThCh$

ThCh$

Land

265,724,058

249,548,928

Total

265,724,058

249,548,928

 

Capitalized interest as of December 31, 2019, amounted ThCh$ 909,256  (ThCh$  609,921 in 2018 and ThCh$ 1,042,045 in 2017)), using an annually capitalization rate of 3.68% (3.71% in 2018 and 4.25% in 2017).

The Company, through its subsidiary 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 ofDecember 31, 2019, the Company maintained approximately 5,080 hectares of which 4,046 are for vines in production stage. Of the total hectares mentioned above, 3,710 correspond to own land and 336 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 2019, the production in plant vines yield was approximately 52.9 million kilos of grapes (52.4 million kilos of grapes in 2018).

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 Management has not perceived evidence of impairment with respect to these at December 31, 2019.

The depreciation for the year ended as of December 31, 2019 and 2018, recognized in net incomes and other assets is as follows:

 

As of December 31, 2019

As of December 31, 2018

 

ThCh$

ThCh$

Recognized in net incomes

99,466,718

87,569,949

Recognized in others assets

2,752,553

2,729,190

Total

102,219,271

90,299,139


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Note 15Accounts and transactions with related companies

 

Transactions between the Company and its subsidiaries occur in the normal course of operations and have been eliminated during the consolidation process.Assets under leases:

 

The amounts indicated as transactions in the following table relatecarrying amount of land and buildings,machinery, equipment and accessories and other properties, plant and equipment relates to trade operations with related companies, which are under similar terms than what a third party would get respect to price and payment conditions. There are no uncollectible estimates decreasing accounts receivable or guarantees provided to related companies.

Balances and transactions with related companies consist of the following:

(1)  Business operations agreed upon in Chilean Pesos. Companies not under a current trade account agreement not accrue interest and have payment terms of 30 days.

(2)  Business operations agreed upon in Chilean Pesos. The remaining balance accrues interest at 90-days active bank rate (TAB) plus an annual spread. Interests is paid or charged against the trade current account.

(3)  Business operations in foreign currencies, not covered by a current trade account, that do not accrue interest and have payment terms of 30 days. Balances are presented at the closing exchange rate.

(4)   An agreement between the subsidiary Compañía Pisquera de Chile S.A. with Cooperativa Agrícola Control Pisquero de Elqui and Limarí Ltda. due to differences resulting from the contributions made by the latter. It establishes a 3% annual interest over capital, with annual payments to be made in eight instalments of UF 1,124 each. Beginning February 28, 2007 and UF 9,995 bullet payment at the last contribution date. In accordance with the contract,Cooperativa Agrícola Control Pisquero de Elqui and Limarí Ltda.renew the contract for a period of nine years. Consequently, the UF 9,995 will pay in ten instalments of UF 1,200 each one and a final payment of UF 2,050, beginning February 28, 2015.

(5)   An agreement of grape supply between the subsidiary Compañía Pisquera de Chile S.A. with Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda. These contracts stipulate a 3% annual interest on the capital, with a term of eight years, and annual payments due on May 31, 2018 and May 31,2020.lease agreements.

 

The transaction schedule includes all the transactions made with related parties.

The detailmovement of the accounts receivable and payable from related companiesassets for right of use as of December 31, 2016 and 2015,2019 is as follows:

 

 

 Land and buildings

 Machinery

 Fixtures and accessories

 Other properties, plants and equipment

 Total

 ThCh$

 ThCh$

 ThCh$

 ThCh$

 ThCh$

As of January 1, 2019

 

 

 

 

 

Historic cost

13,585,966

206,968

-

49,863

13,842,797

Accumulated depreciation

(1,334,818)

(181,824)

-

(6,095)

(1,522,737)

Book Value (*)

12,251,148

25,144

-

43,768

12,320,060

      

As of December 31, 2019

 

 

 

 

 

Conversion effect historic cost

-

-

(4,542)

-

(4,542)

Depreciation

86,001

3,427

(1,947)

-

87,481

Conversion effect depreciation

-

-

1,879

68

1,947

Others increase (decreased) (1)

(1,672,077)

(8,750)

14,111

(923)

(1,667,639)

Additions of right of use assets

16,406,527

2,907,407

1,400,812

57,656

20,772,402

Depreciation of right of use assets

(3,670,669)

(1,495,128)

(504,841)

(34,950)

(5,705,588)

Changes

11,149,782

1,406,956

905,472

21,851

13,484,061

Book Value

23,400,930

1,432,100

905,472

65,619

25,804,121

As of December 31, 2019

 

 

 

 

 

Historic cost

28,320,416

3,105,625

1,410,382

106,596

32,943,019

Accumulated depreciation

(4,919,486)

(1,673,525)

(504,910)

(40,977)

(7,138,898)

Book Value

23,400,930

1,432,100

905,472

65,619

25,804,121

(1)It corresponds mainly to the financial effect of the application of IAS 29 “Financial Information in Hyperinflationary Economies.

(*)   Corresponds to the financial leases obligations under IAS 17.

InNote 21 – Other financial liabilities, letter B)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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Accounts receivable from related companies

Current:

Tax ID

Company

Country of origin

Ref.

Relationship

Transaction

Currency

As of December 31, 2016

As of December 31, 2015

ThCh$

ThCh$

0-E

Bebidas Bolivianas BBO S.A.

Bolivia

(3)

Associated

Sales of products

USD

42,006

78,810

0-E

Pepsi Cola Panamericana S.R.L.

Perú

(3)

Associated with the controller

Sales of products

USD

1,149

1,149

76,028,758-K

Norgistics Chile S.A.

Chile

(1)

Related to the controller

Sales of products

CLP

-

110

76,029,109-9

Inversiones Chile Chico Ltda.

Chile

(1)

Related to the controller

Billed services

CLP

526

5,353

76,178,803-5

Viña Tabalí S.A.

Chile

(1)

Related to the controller

Billed services

CLP

10,513

29,817

77,051,330-8

Cervecería Kunstmann Ltda.

Chile

(1)

Related to the controller

Sales of products

CLP

120,458

142,789

77,755,610-K

Comercial Patagona Ltda.

Chile

(1)

Joint venture

Sales of products

CLP

1,035,566

738,270

77,755,610-K

Comercial Patagona Ltda.

Chile

(1)

Joint venture

Rental of cranes

CLP

3,215

2,875

78,780,780-1

Operaciones y Servicios Enex Ltda.

Chile

(1)

Related to the controller

Sales of products

CLP

13,058

90,323

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

(5)

Shareholder to subsidiary

Advance purchase

CLP

14,393

1,065,214

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

(1)

Shareholder to subsidiary

Sales of products

CLP

7,450

24,027

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

(4)

Shareholder to subsidiary

Loan

U.F.

30,542

29,589

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

(5)

Shareholder to subsidiary

Sales of products

U.F.

76,620

74,529

90,081,000-8

Compañía Chilena de Fósforos S.A.

Chile

(1)

Shareholder to subsidiary

Sales of products

CLP

2,575

5,651

90,160,000-7

Compañía Sud Americana de Vapores S.A.

Chile

(1)

Related to the controller

Sales of products

CLP

458

522

90,703,000-8

Nestlé Chile S.A.

Chile

(1)

Shareholder to subsidiary

Sales of products

CLP

14,747

-

91,021,000-9

Invexans S.A.

Chile

(1)

Related to the controller

Sales of products

CLP

4,552

3,723

91,705,000-7

Quiñenco S.A.

Chile

(1)

Shareholder Controller

Sales of products

CLP

1,937

3,070

92,011,000-2

Empresa Nacional de Energía ENEX S.A.

Chile

(1)

Related to the controller

Sales of products

CLP

-

2,136

92,048,000-4

SAAM S.A.

Chile

(1)

Related to the controller

Sales of products

CLP

1,437

-

93,920,000-2

Antofagasta Minerals S.A.

Chile

(1)

Related to the controller

Sales of products

CLP

3,479

4,198

94,625,000-7

Inversiones Enex S.A.

Chile

(1)

Related to the controller

Sales of products

CLP

258,306

203,349

96,427,000-7

Inversiones y Rentas S.A.

Chile

(1)

Controller

Sales of products

CLP

-

12,664

96,536,010-7

Inversiones Consolidadas Limitada

Chile

(1)

Related to the controller

Sales of products

CLP

1,513

1,409

96,571,220-8

Banchile Corredores de Bolsa S.A.

Chile

(1)

Related to the controller

Sales of products

CLP

3,096

1,073

96,591,040-9

Empresas Carozzi S.A.

Chile

(1)

Shareholder of joint operation

Sales of products

CLP

76,704

301,882

96,645,790-2

Socofin S.A.

Chile

(1)

Related to the controller

Sales of products

CLP

-

10

96,819,020-2

Agrícola El Cerrito S.A.

Chile

(1)

Related to the controller

Sales of products

CLP

30

30

96,847,140-6

Inmobiliaria Norte Verde S.A.

Chile

(1)

Related to the controller

Sales of products

CLP

30

40

96,919,980-7

Cervecería Austral S.A.

Chile

(1)

Joint venture

Sales of products

CLP

255,330

29,502

97,004,000-5

Banco de Chile

Chile

(1)

Related to the controller

Sales of products

CLP

120,547

126,435

99,525,700-9

Las Margaritas S.A.

Chile

(1)

Related to the controller

Sales of products

CLP

-

47

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

(1)

Joint venture

Sales of products

CLP

73,511

358,428

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

(1)

Joint venture

Transport service

CLP

39,669

881,499

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

(1)

Joint venture

Interests

CLP

219,835

219,647

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

(1)

Joint venture

Sales service

CLP

96,572

118,292

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

(1)

Joint venture

Shared service

CLP

243,689

182,822

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

(1)

Joint venture

Collection service

CLP

312

49,646

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

(2)

Joint venture

Remittanse send

CLP

750,000

-

Total

 

 

 

 

 

 

3,523,825

4,788,930

Non Current:

Tax ID

Company

Country of origin

Ref.

Relationship

Transaction

Currency

As of December 31, 2016

As of December 31, 2015

ThCh$

ThCh$

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

(4)

Shareholder to subsidiary

Loan

U.F.

190,040

209,330

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limari Ltda.

Chile

(4)

Shareholder to subsidiary

Sales of products

U.F.

166,625

236,608

Total

 

 

 

 

 

 

356,665

445,938


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Accounts payable to related companies

Current:

Tax ID

Company

Country of origin

Ref.

Relationship

Transaction

Currency

As of December 31, 2016

As of December 31, 2015

ThCh$

ThCh$

0-E

Amstel Brouwerijen B.V.

Holanda

(3)

Related to the controller

License and technical assiStance

Euros

64,932

246,334

0-E

Banco Amambay S.A.

Holanda

(3)

Associated

Commissions

PYG

34

-

0-E

Grafica y Editorial Intersuda S.A.

Holanda

(3)

Related to the controller

Purchase of products

PYG

1,604

-

0-E

Heineken Brouwerijen B.V.

Holanda

(3)

Related to the controller

License and technical assistance

Euros

3,344,215

6,568,594

0-E

Heineken Brouwerijen B.V.

Holanda

(3)

Related to the controller

Purchase of products

Euros

787,873

307,118

0-E

Heineken Nederland Supply

Francia

(3)

Related to the controller

License and technical assistance

Euros

-

37,772

0-E

Heineken supply chain B.V.

Francia

(3)

Related to the controller

Purchase of products

Euros

-

11,647

0-E

Nestlé Waters Management & Tecnology S.A.S.

Uruguay

(3)

Related to the controller

Purchase of products

Euros

-

12,191

0-E

Nestlé Waters Marketing & Distribution S.A.S.

Chile

(3)

Related to the controller

Purchase of products

Euros

-

21,861

0-E

Pespsi Cola Manufacturing Co. of Uruguay S.R.L.

Chile

(3)

Related to the controller

Purchase of products

USD

-

151,578

0-E

Watt's Alimentos S.A.

Chile

(3)

Related to the controller

Purchase of products

USD

2,196

-

76,115,132-0

Canal 13 S.p.A.

Chile

(1)

Related to the controller

Marketing services

CLP

333,658

21,100

76,481,675-7

Cerveceria Szot S.p.A.

Chile

(1)

Related to the controller

Purchase of products

CLP

4,930

-

77,051,330-8

Cervecería Kunstmann Ltda.

Paraguay

(1)

Shareholder to subsidiary

Purchase of products

CLP

6,691

15,707

77,755,610-K

Comercial Patagona Ltda.

Chile

(1)

Joint venture

Marketing services

CLP

37,889

24,694

78,105,460-7

Alimentos Nutrabien S.A.

Chile

(1)

Joint venture

Purchase of products

CLP

315

212

78,259,420-6

Inversiones PFI Chile Ltda.

Chile

(1)

Shareholder to subsidiary

Purchase of products

CLP

846,035

1,195,665

81,805,700-8

Cooperativa AgrÍcola Control Pisquero de Elqui y Limarí Ltda.

Chile

(1)

Shareholder to subsidiary

Purchase of products

CLP

41,667

-

84,356,800-9

Watt´s S.A.

Chile

(1)

Shareholder of joint operation

Purchase of products

CLP

-

13,205

89,010,400-2

Alusa Chile S.A.

Chile

(1)

Related to the controller

Purchase of products

CLP

-

437,884

92,011,000-2

Empresa Nacional de Energía Enex S.A.

Chile

(1)

Related to the controller

Electric service

CLP

124,255

-

94,058,000-5

Servicios Aeroportuarios Aerosan S.A.

Chile

(1)

Related to the controller

Transport service

CLP

1,273

193

96,591,040-9

Empresas Carozzi S.A.

Chile

(1)

Shareholder of joint operation

Purchase of products

CLP

1,930,063

-

96,689,310-9

Transbank S.A.

Chile

(1)

Related to the controller

Commission

CLP

2,955

25,911

96,798,520-1

Saam Extraportuarios S.A.

Chile

(1)

Related to the controller

Transport service

CLP

-

17

96,810,030-0

Radiodifusion S.p.A

Chile

(1)

Related to the controller

Marketing services

CLP

19,018

-

96,894,740-0

Banchile Factoring S.A.

Chile

(1)

Related to the controller

Factoring service

CLP

78,591

-

96,919,980-7

Cervecería Austral S.A.

Chile

(1)

Joint venture

Purchase of products

CLP

1,462,888

414,400

97,004,000-5

Banco de Chile

Chile

(1)

Related to the controller

Billed services

CLP

41,001

2,431

99,540,870-8

Aguas de Antofagasta S.A.

Chile

(1)

Related to the controller

Water service

CLP

-

36,879

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

(1)

Joint venture

Purchase of products

CLP

36,834

63,212

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

(1)

Joint venture

Consignation sales

CLP

217,689

2,015,613

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

(1)

Joint venture

Discount fleet

CLP

143,465

-

Total

 

 

 

 

 

 

9,530,071

11,624,218


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Most significant transactions and effects on results:

The following are the most significant transactions with related entities that are not subsidiaries of the Company and their effect on the Consolidated Statement of Income:

Tax ID

Company

Country of origin

Relationship

Transaction

For the years ended as of December 31,

2016

2015

2014

Amounts

(Charges)/Credits (Effect on Income)

Amounts

(Charges)/Credits (Effect on Income)

Amounts

(Charges)/Credits (Effect on Income)

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

0-E

Amstel Brouwerijen B.V

Holanda

Related to the controller

License and technical assistance

165,995

(165,995)

229,967

(229,967)

161,865

(161,865)

0-E

Bebidas Bolivianas BBO S.A.

Bolivia

Associated

Sales of products

396,076

150,509

209,292

79,531

-

-

0-E

Bebidas Bolivianas BBO S.A.

Bolivia

Associated

Contribution of capital

2,174,370

-

1,921,245

-

-

-

0-E

Central Cervecera de Colombia S.A.S.

Colombia

Joint operation

Contribution of capital

22,943,861

-

19,941,532

-

-

-

0-E

Heineken Brouwerijen B.V.

Holanda

Related to the controller

License and technical assistance

9,445,557

(9,445,557)

9,331,241

(9,331,241)

6,338,435

(6,338,435)

0-E

Heineken Brouwerijen B.V.

Holanda

Related to the controller

Billing services

82,475

(52,266)

27,904

(27,904)

95,533

(95,533)

0-E

Heineken Brouwerijen B.V.

Holanda

Related to the controller

Purchase of products

-

-

71,107

-

295,899

-

0-E

Heineken Brouwerijen B.V.

Holanda

Related to the controller

Sales of products

161,220

120,915

-

-

208,932

79,394

0-E

Nestle Waters S.A.

Italy

Shareholder to subsidiary

Royalty paid

432,535

(432,535)

308,527

(308,527)

204,010

(204,010)

76,115,132-0

Canal 13 S.p.A.

Chile

Related to the controller

Advertising

3,427,941

(2,661,759)

1,554,332

(405,349)

3,318,107

(1,196,948)

76,178,803-5

ViñaTabalí S.A.

Chile

Related to the controller

Billed services

52,470

52,470

50,787

50,787

64,321

64,321

76,313,970-0

Inversiones Irsa Ltda.

Chile

Controller

Dividends paid

4,132,618

-

4,089,832

-

-

-

77,051,330-8

Cervecería Kunstmann Ltda.

Chile

Shareholder to subsidiary

Sales of products

522,566

418,052

405,652

324,522

317,990

254,392

77,755,610-K

Comercial Patagona Ltda.

Chile

Joint venture

Sales of products

4,259,983

1,746,594

2,679,985

1,098,794

1,410,939

578,485

78,259,420-6

Inversiones PFI Chile Ltda.

Chile

Shareholder to subsidiary

Purchase of products

10,083,606

-

8,692,744

-

-

-

78,259,420-6

Inversiones PFI Chile Ltda.

Chile

Shareholder to subsidiary

Billed services

3,234,158

3,234,158

2,649,644

2,649,644

-

-

78,780,780-1

Operaciones y Servicios Enex Ltda.

Chile

Related to the controller

Sales of products

224,387

183,997

328,256

262,605

-

-

79,985,340-K

Cervecera Valdivia S.A.

Chile

Shareholder to subsidiary

Dividends paid

633,668

-

489,942

-

511,172

-

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

Shareholder to subsidiary

Loan

28,256

6,815

29,589

5,827

27,681

7,975

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

Shareholder to subsidiary

Sales of products

76,619

9,285

74,529

8,487

71,616

11,411

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

Shareholder to subsidiary

Purchase of grape

4,255,971

-

6,226,156

-

5,027,758

-

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

Shareholder to subsidiary

Sales of products

-

-

8,071

6,457

-

-

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

Shareholder to subsidiary

Dividends paid

599,123

-

791,836

-

617,964

-

81,805,700-8

Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

Chile

Shareholder to subsidiary

Billed services

-

-

181,437

181,437

-

-

89,010,400-2

Alusa Chile S.A.

Chile

Related to the controller

Purchase of products

3,223,272

-

2,665,007

-

1,562,351

-

90,081,000-8

Compañía Chilena de Fósforo S.A.

Chile

Shareholder to subsidiary

Dividends paid

1,273,753

-

4,055,034

-

1,637,775

-

90,703,000-8

Nestlé Chile S.A.

Chile

Shareholder to subsidiary

Dividends paid

3,530,565

-

2,704,376

-

2,581,736

-

91,705,000-7

Quiñenco S.A.

Chile

Shareholder to Controller

Sales of products

13,984

11,186

14,509

14,509

-

-

93,920,000-2

Antofagasta Minerals S.A.

Chile

Related to the controller

Sales of products

35,532

28,069

-

-

-

-

94,625,000-7

Inversiones Enex S.A

Chile

Related to the controller

Sales of products

1,161,918

906,296

636,707

496,631

-

-

96,657,690-7

Inversiones Punta Brava S.A.

Chile

Related to the controller

Sales of products

-

-

1,587

1,270

-

-

96,427,000-7

Inversiones y Rentas S.A.

Chile

Controller

Office lease

11,463

11,463

11,006

11,006

10,539

10,539

96,427,000-7

Inversiones y Rentas S.A.

Chile

Controller

Dividends paid

32,109,822

-

31,777,378

-

32,701,972

-

96,571,220-8

Banchile Corredores de Bolsa S.A.

Chile

Related to the controller

Investments

61,400,000

-

225,840,000

-

315,790,000

797,953

96,571,220-8

Banchile Corredores de Bolsa S.A.

Chile

Related to the controller

Investment Rescue

170,500,000

402,369

231,800,000

583,333

-

-

96,591,040-9

Empresas Carozzi S.A.

Chile

Shareholder of joint operation

Sales of products

311,666

249,322

-

-

-

-

96,919,980-7

Cervecería Austral S.A.

Chile

Joint venture

Sales of products

62,444

27,788

36,560

16,269

315,650

126,260

96,919,980-7

Cervecería Austral S.A.

Chile

Joint venture

Purchase of products

5,438,419

-

4,776,140

-

3,525,715

-

96,919,980-7

Cervecería Austral S.A.

Chile

Joint venture

Billed services

234,327

234,327

425,165

425,165

231,038

231,038

97,004,000-5

Banco de Chile

Chile

Related to the controller

Sales of products

87,772

48,800

39,148

25,446

60,472

21,165

97,004,000-5

Banco de Chile

Chile

Related to the controller

Derivatives

35,318,178

2,006,627

105,973,453

1,708,487

2,595,060

(1,637)

97,004,000-5

Banco de Chile

Chile

Related to the controller

Investments

61,400,000

-

204,050,000

-

181,200,794

1,427,444

97,004,000-5

Banco de Chile

Chile

Related to the controller

Leasing paid

87,457

2,266

123,316

(23,901)

224,872

(24,155)

97,004,000-5

Banco de Chile

Chile

Related to the controller

Investment Rescue

61,400,000

247,101

219,500,000

770,364

-

-

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

Joint venture

Remittanse received

-

-

33,298,001

-

31,367,766

-

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

Joint venture

Remittanse send

750,000

-

27,189,651

-

31,144,541

-

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

Joint venture

Interests

-

-

287,243

287,243

363,945

363,945

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

Joint venture

Sales of products

5,973

2,745

13,540

6,223

15,097

9,511

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

Joint venture

Billed services

1,553,943

1,553,943

7,633,582

7,633,582

6,990,442

6,990,442

99,542,980-2

Foods Compañía de Alimentos CCU S.A.

Chile

Joint venture

Consignation sales

5,115,078

-

24,067,498

-

23,303,360

-

 

 

 

 

 

 

 

 

 

 

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Remuneration of the Management key employees

The Company is managed by a Board of Directors comprised of 9 members, each of whom is in office for a 3-year term and may be re-elected.

The Board was appointed at the Ordinary Shareholders´ Meeting held on April 13, 2016, being elected Messrs. Andrónico Luksic Craig, Francisco Pérez Mackenna, Pablo Granifo Lavín, Rodrigo Hinzpeter Kirberg, Marc Busain, Carlos Molina Solís, Didier Debrosse, José Miguel Barros van Hövell tot Westerflier y Vittorio Corbo Lioi, the latter independent according to article 50 bis of Law Nº18,046. The Chairman and the Vice Chairman, as well as the members of the Audit Committee were appointed at the Board of Directors´ meeting held on April 13, 2016. At the same meeting, and according to article 50 bis of Law N° 18,046, the independent Director Mr. Vittorio Corbo Lioi appointed the other members of the Directors Committee, which is composed of Directors Messrs. Pérez, Molina y Corbo. Additionally, Messrs. Corbo y Molina were appointed as members of the Audit Committee, both meeting the independence criteria under the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002 and the New York Stock Exchange Rules. The Board of Directors also resolved that Directors Messrs. Pérez y Barros shall participate in the Audit Committee´s meetings as observers.

As agreed to at the Ordinary Shareholders´ Meeting held on April 13, 2016, the remuneration of the Directors consists on a gross monthly fee for attendance to Board Meetings of UF 100 per Director, and UF 200 for the Chairman, independent of the number of meetings held within such period, plus an amount equivalent to 3% of the distributed dividends, for the 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 2016. 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.

Additionally, those Directors that are members of the 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 article 50 bis of Law Nº 18,046 and Regulation N° 1956 of the SVS. Directors that are members of the Audit Committee receive a gross monthly remuneration of UF 25.

According to the above, as of December 31, 2016, the Directors received ThCh$ 3,215,759 (ThCh$ 2,976,684 in 2015 and ThCh$ 2,746,921 in 2014) in meeting attendance fees and dividend participation. In addition, ThCh$ 212,665 (ThCh$ 191,416 in 2015 and ThCh$ 117,342 in 2014) were paid as meeting attendance fees and dividend participation to the Senior Management of the Parent Company.

As of December 31, 2016, the remuneration corresponding to the key personal was ThCh$ 7,565,658 (ThCh$ 5,497,192 in 2015 and ThCh$ 5,191,018 in 2014).The Company grants annual discretionary and variable bonuses to the top key employees, which are not subject to an agreement and are decided on the basis of the compliance with individual and corporate goals and depending on the year results.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Note 16Inventories

The inventory balances were as follows:

 

As of December 31, 2016

As of December 31, 2015

 

ThCh$

ThCh$

Finished products

76,323,417

50,873,881

In process products

1,935,157

1,828,386

Raw material

113,232,691

113,716,967

In transit raw material

4,460,822

3,707,440

Materials and products

5,675,945

5,926,122

Realizable net value estimate and obsolescence

(2,337,354)

(1,825,381)

Total

199,290,678

174,227,415

The Company wrote off a total of ThCh$ 2,012,748, ThCh$ 2,057,704 and ThCh$ 1,369,096 relating to inventory shrinkage and obsolescence for the year endedDecember 31, 2016, 2015 y 2014, respectively.

Additionally, an estimate for obsolescence inventories include amounts related to low turnover, technical obsolescence and product recalls from the market.

Movement of Realizable net value and obsolescence estimate is as follows:

 

As of December 31, 2016

As of December 31, 2015

As of December 31, 2014

 

 

ThCh$

ThCh$

ThCh$

Initial balance

(1,825,381)

(2,589,518)

(1,286,695)

Inventories write-down estimation

(2,551,828)

(1,469,233)

(2,682,310)

Inventories recognised as an expense

2,012,748

2,057,704

1,369,096

Business combination effect

27,107

175,666

10,391

Total

(2,337,354)

(1,825,381)

(2,589,518)

As ofDecember 31, 2016, 2015 and 2014, the Company does not have any inventory pledged as guarantee against financial obligations.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Note 17Biological current assets

The Company recorded under Biological current assets the agricultural activities (grapes) derived from production of plantations that will be destined to be an input to the following process of the wine production.

The costs associated to the agricultural activities (grapes) are accumulated to the harvest date.

The valuation of Biological current assets is described inNote 2, 2.10.

The movement of Biological current assets were as follows:

 

ThCh$

As of January 1, 2015

Historic cost

7,633,591

Book Value

7,633,591

As of December 31, 2015

Acquisitions

18,192,939

Decreases due to harvesting

(18,193,190)

Book Value

7,633,340

As of December 31, 2015

Historic cost

7,633,340

Book Value

7,633,340

As of December 31, 2016

Acquisitions

19,611,307

Decreases due to harvesting

(19,296,268)

Book Value

7,948,379

As of December 31, 2016

Historic cost

7,948,379

Book Value

7,948,379


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Note 18 20Other non-financial assetsInvestment Property

 

The Company maintained the following other non-financial assets:Investment property movements are detailed as follows:

 

 

As of December 31, 2016

As of December 31, 2015

 

Current

Non current

Current

Non current

 

ThCh$

ThCh$

ThCh$

ThCh$

Insurance paid

3,038,856

-

3,512,317

-

Advertising

5,819,736

2,567,939

4,822,197

2,652,382

Advances to suppliers

5,269,826

-

7,438,102

-

Guarantees paid

50,590

227,738

99,493

228,749

Consumables

433,570

-

526,645

-

Dividends receivable

245,073

-

150,343

-

Recoverable taxes (1)

-

1,231,414

-

1,303,925

Cost of subsidiaries acquired (2)

-

641,489

-

-

Other

1,001,486

700,631

1,105,276

1,035,898

Total

15,859,137

5,369,211

17,654,373

5,220,954

 

Lands

Buildings

Total

ThCh$

ThCh$

ThCh$

As of January 1, 2018

 

 

 

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

 

 

 

 

As of December 31, 2018

 

 

 

Additions

-

3,613

3,613

Depreciation

-

(49,728)

(49,728)

Conversion 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

 

 

 

 

As of December 31, 2018

 

 

 

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

 

 

 

 

As of December 31, 2019

 

 

 

Additions

-

132,462

132,462

Divestitures

(695,289)

-

(695,289)

Depreciation

-

(64,088)

(64,088)

Conversion effect (depreciation)

(1,042,090)

(391,483)

(1,433,573)

Conversion effect

-

23,854

23,854

Other increases (decreases) (1)

1,191,644

442,308

1,633,952

Changes

(545,735)

143,053

(402,682)

Book Value

6,179,518

2,133,756

8,313,274

 

 

 

 

As of December 31, 2019

 

 

 

Historic cost

6,179,518

2,920,605

9,100,123

Depreciation

-

(786,849)

(786,849)

Book Value

6,179,518

2,133,756

8,313,274

 

(1) Corresponds to the tax profit minimum and VAT credit exporter, both registeredfinancial effect of the application IAS 29 Financial reporting in the argentine subsidiaries, whose term of recovery is estimated over a year.

(2)See Note 1, (2).hyperinflationary economies.

 

 

Note 19

Investment accountedproperty includes seventeen land properties, two offices and one apartment, situated in Chile, which are maintained for byappreciation purposes, with one apartment for being leased and generating ThCh$ 3,825 revenue during year 2019 (ThCh$ 158,235 in 2018 and ThCh$ 193,839 in 2017). Additionally, there are four properties in Argentina, which are leased and generated an income for ThCh$ 104,334 for year 2019 (ThCh$ 97,312 in 2018 and ThCh$ 135,064 in 2017). In addition, the equity method

Joint venturesexpenses associated with such investment properties amounted to ThCh$ 67,096 for the year ended as of December 31, 2019 (ThCh$ 50,874 in 2018 and Associates

As ofDecember 31, 2016 and 2015, the Company recorded investments qualifying as joint venture and associates.ThCh$ 60,452 in 2017).

 

The sharemarket valuation of investment properties exceeds 100% of the book value.

The fair value, of investment property that represent 96% of the investments in joint ventures and associatescarrying amount is as follows:ThCh$ 10,939,073.

 

 

Percentage of participation

As of December 31, 2016

As of December 31, 2015

%

ThCh$

ThCh$

Cervecería Austral S.A. (1)

50.00

5,548,458

5,043,071

Foods Compañía de Alimentos CCU S.A. (2)

50.00

5,624,391

11,582,085

Central Cervecera de Colombia S.A.S. (3)

50.00

35,449,038

18,718,832

Total joint ventures

 

46,621,887

35,343,988

Bebidas Bolivianas BBO S.A. (4)

34.00

17,281,665

14,276,937

Other companies

 

501,394

374,338

Total associates

 

17,783,059

14,651,275

Total

 

64,404,946

49,995,263

Management has not detected any evidence of impairment of investment property.

 

The Company does not maintain any pledge or restriction over investment property items.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

The above mentioned values include the goodwill generated through the acquisition of the following joint venture and associate, which are presented net of any impairment loss:

 

 

As of December 31, 2016

As of December 31, 2015

 

ThCh$

ThCh$

Cervecería Austral S.A.

 

1,894,770

1,894,770

Bebidas Bolivianas BBO S.A.

 

9,032,617

7,648,453

Total

 

10,927,387

9,543,223

Note 21Other financial liabilities

 

The results accruedDebts and financial liabilities classified according to the type of obligation and their classifications in joint ventures and associatesthe Consolidated Financial Statements are detailed as follows:

 

 

For the years ended as of December 31,

2016

2015

2014

ThCh$

ThCh$

ThCh$

Cervecería Austral S.A.

754,326

247,180

157,836

Foods Compañía de Alimentos CCU S.A.

(519,536)

(1,251,392)

(334,771)

Central Cervecera de Colombia S.A.S.

(3,969,699)

(2,668,179)

-

Total joint ventures

(3,734,909)

(3,672,391)

(176,935)

Bebidas Bolivianas BBO S.A.

(1,805,548)

(1,557,886)

(1,019,011)

Other companies

(20,065)

2,142

-

Total associates

(1,825,613)

(1,555,744)

(1,019,011)

Total

(5,560,522)

(5,228,135)

(1,195,946)

 

As of December 31, 2019

As of December 31, 2018

 

Current

Non-current

Current

Non-current

 

ThCh$

ThCh$

ThCh$

ThCh$

Bank borrowings (*)

42,447,438

99,749,082

38,160,178

75,200,804

Bonds payable (*)

6,744,739

133,806,947

4,081,175

135,281,303

Leases liabilities (*) / Financial leases obligations (*)

4,857,097

28,213,259

365,972

17,546,162

Derivative financial instruments  (**)

240,394

-

4,997,124

-

Derivative hedge liabilities (**)

805,306

-

1,194,502

157,028

Deposits for return of bottles and containers

13,290,754

-

13,967,995

-

Total

68,385,728

261,769,288

62,766,946

228,185,297

 

Changes in investments in joint ventures and associates during such periods are as follows:

 

As of December 31, 2016

As of December 31, 2015

 

ThCh$

ThCh$

Balance at the beginning of year

49,995,263

31,998,620

Business combination effect

25,118,232

23,387,006

Participation in the joint ventures and associates (loss)

(5,560,522)

(5,228,135)

Dividends received

(245,073)

(150,343)

Increase (decrease) through changes in ownership interests

(5,426,209)

-

Others

523,255

(11,885)

Total

64,404,946

49,995,263

Following are the significant matters regarding the investments accounted by the equity method:

(1)  See(1) Cervecería Austral S.A.Note 5 – Risk administration.

(2) SeeNote 7 – Financial instruments.

(*) Includes leases recognized by IFRS 16, SeeNote 4 - Accounting changes, letter a).

 

A closed stock company that operates a beer manufacturing facility in the southern end of Chile, being the southernmost brewery in the world.

(2) Foods Compañía de Alimentos CCU S.A.

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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

On December 16, 2016, FoodsThe maturities and the subsidiary CCU Inversiones S.A., proceeded to acquire 49,99999% and 0.0001%, respectivelyinterest rates of the shares of Alimentos Nutrabien S.A. As a consequence above mentioned the only shareholders direct of that company are: (i) Food´s with 99.99999% of the share capital, and (ii) CCU investments S.A. with a 0.0001% of the share capital, respectively. The amount of this transaction was UF 545.000, equivalent toThCh$14.352.706.these obligations are detailed as follows:

 

(3) Central Cervecera de Colombia S.A.S.Current loan and financial obligation

 

On November 10, 2014, CCU, directly and through its subsidiaries CCU Inversiones II Limitada, and Postobón have established a joint arrangements through a company named Central Cervecera de Colombia S.A.S. (the "Company"), in which CCU and Postobón participate as equal shareholders. The purposeAs of this Company is the beer and non-alcoholic drinks production, marketing and distribution based on malt. The Parties will invest in the Company an approximate amount of US$ 400,000,000, following a gradual investment plan conditioned to the fulfillment of certain milestones. Asof December 31, 20162019 CCU Inversiones II Limitada paid US$ 68,078,797 (US$ 33,901,562 in 2015). The partnership involves the construction of a beer production plant, with an annual total capacity of 3,000,000 hectoliters.

Committed capital payments have been made on the following dates: November 20, 2014, for US$ 2,411,019 (equivalents to ThCh$ 1,445,478; March 25 and 7 July,  2015 forUS$ 7,749,931 and US$ 23,740,612 (equivalents to ThCh$ 4,833,244 and ThCh$ 15,108,288, respectively and on August 30, 2016 was a new increased in capital for an amount of US$ 34,177,235 (equivalents to ThCh$ 22,943,861).

(4) Bebidas Bolivianas BBO S.A.:

 

 

 

 

 

 

 

 

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

UF

2,037

2,629

4,666

Monthly

4.87

91,041,000-8

Viña San Pedro Tarapacá S.A.

Chile

97,030,000-7

Banco del Estado de Chile

Chile

CLP

-

10,715,017

10,715,017

At maturity

2.20

91,041,000-8

Viña San Pedro Tarapacá S.A.

Chile

76,645,030-K

Banco Itaú Corpbanca

Chile

USD

-

11,370,518

11,370,518

At maturity

2.47

91,041,000-8

Viña San Pedro Tarapacá S.A.

Chile

97,018,000-1

Scotiabank Chile

Chile

USD

-

7,629,611

7,629,611

At maturity

3.08

91,041,000-8

Viña San Pedro Tarapacá S.A. (1)

Chile

97,018,000-1

Scotiabank Chile

Chile

USD

-

9,089

9,089

At maturity

2.90

91,041,000-8

Viña San Pedro Tarapacá S.A.

Chile

76,645,030-K

Banco Itaú Corpbanca

Chile

USD

-

45,102

45,102

At maturity

3.64

91,413,000-1

Compañía Cervecerías Unidas S.A.

Chile

97,030,000-7

Banco del Estado de Chile

Chile

CLP

-

319,034

319,034

At maturity

4.56

96,711,590-8

Manantial  S.A.

Chile

97,004,000-5

Banco de Chile

Chile

CLP

13,500

4,500

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

9,761

3,286

13,047

Monthly

6.12

96,711,590-8

Manantial  S.A.

Chile

97,030,000-7

Banco del Estado de Chile

Chile

CLP

22,183

30,027

52,210

Monthly

5.14

96,711,590-8

Manantial  S.A.

Chile

97,004,000-5

Banco de Chile

Chile

CLP

16,667

11,113

27,780

Monthly

4.44

96,711,590-8

Manantial  S.A.

Chile

97,004,000-5

Banco de Chile

Chile

CLP

20,834

27,776

48,610

Monthly

4.42

96,711,590-8

Manantial  S.A.

Chile

97,030,000-7

Banco del Estado de Chile

Chile

CLP

25,468

-

25,468

Monthly

4.92

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

30,880

20,791

51,671

Monthly

4.73

96,711,590-8

Manantial  S.A.

Chile

76,645,030-K

Banco Itaú Corpbanca

Chile

CLP

39,281

53,063

92,344

Monthly

4.42

96,711,590-8

Manantial  S.A.

Chile

97,004,000-5

Banco de Chile

Chile

CLP

31,200

83,600

114,800

Monthly

5.16

96,711,590-8

Manantial  S.A.

Chile

97,004,000-5

Banco de Chile

Chile

CLP

300,155

-

300,155

Monthly

0.31

96,711,590-8

Manantial  S.A.

Chile

97,004,000-5

Banco de Chile

Chile

CLP

997,853

-

997,853

Monthly

2.34

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

97,004,000-5

Banco de Chile

Chile

CLP

6,384

400,000

406,384

At maturity

4.56

96,981,310-6

Cervecería Kunstmann S.A.

Chile

97,030,000-7

Banco del Estado de Chile

Chile

CLP

296,906

299,397

596,303

Monthly

5.02

96,981,310-6

Cervecería Kunstmann S.A.

Chile

76,645,030-K

Banco Itaú Corpbanca

Chile

CLP

-

14,896

14,896

At maturity

3.83

96,981,310-6

Cervecería Kunstmann S.A.

Chile

97,018,000-1

Scotiabank Chile

Chile

CLP

-

8,444

8,444

At maturity

4.00

96,981,310-6

Cervecería Kunstmann S.A.

Chile

97,018,000-1

Scotiabank Chile

Chile

CLP

-

1,589,137

1,589,137

Semiannual

3.45

99,586,280-8

Compañía Pisquera de Chile S.A.

Chile

97,030,000-7

Banco del Estado de Chile

Chile

CLP

322,400

-

322,400

At maturity

4.68

0-E

Compañía Industrial Cervecera S.A.

Argentina

0-E

Banco Patagonia

Argentina

ARS

4,385,390

-

4,385,390

At maturity

55.00

0-E

Compañía Industrial Cervecera S.A.

Argentina

0-E

Banco Patagonia

Argentina

ARS

2,474,461

-

2,474,461

At maturity

53.00

0-E

Bebidas Bolivianas BBO S.A.

Bolivia

0-E

Banco Mercantil Santa Cruz S.A.

Bolivia

BOB

41,808

-

41,808

Quarterly

5.00

0-E

Milotur S.A.

Uruguay

0-E

Banco Itaú

Uruguay

UI

332,747

331,593

664,340

Monthly

4.80

Total

 

 

 

 

 

 

9,478,815

32,968,623

42,447,438

 

 

On May(1) This obligation is hedged by a Cross Currency Interest Rate Swap agreementNote 7 2014,– Financial instruments the Company acquired 34% of the stock rights of Bebidas Bolivianas.

BBOS.A. 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.(*)The amount of this transaction was ThCh$ 13,776,885. On December 9, 2015,based on the Company paid an increased of capital for an amount of US$ 2,720,000 (equivalents to ThCh$ 1,921,244)undiscounted contractual flows is found inNote 5 – Risk administration. 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$ 1,019,971 (equivalents to ThCh$ 663,951), respectively.

 

 

The Company does not have any contingent liabilities related to joint ventures and associates as December 31, 2016.

 

 

 

 

 

 

 

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$

 

(%)

Lease liabilities

 

 

 

 

 

 

 

 

 

 

79,862,750-3

Transportes CCU Limitada

Chile

97,030,000-7

Banco del Estado de Chile

Chile

UF

22,133

66,397

88,530

Monthly

2.14

90,413,000-1

Compañía Cervecerías Unidas S.A.

Chile

99,012,000-5

Consorcio Nacional  de Seguros S.A.

Chile

UF

93,127

284,229

377,356

Monthly

3.95

0-E

Finca La Celia S.A.

Argentina

0-E

Banco Supervielle

Argentina

ARS

541

631

1,172

Monthly

17.00

Subtotal

 

 

 

 

 

 

115,801

351,257

467,058

 

 

90,413,000-1

CCU and subsidiaries

Chile

-

Suppliers of PPE

Chile

Euros

25,324

81,810

107,134

Monthly

1.48

90,413,000-1

CCU and subsidiaries

Chile

-

Suppliers of PPE

Chile

USD

104,848

495,766

600,614

Monthly

4.73

90,413,000-1

CCU and subsidiaries

Chile

-

Suppliers of PPE

Chile

CLP

133,037

483,206

616,243

Monthly

4.56

90,413,000-1

CCU and subsidiaries

Chile

-

Suppliers of PPE

Chile

UF

492,185

1,596,949

2,089,134

Monthly

1.92

0-E

CCU and subsidiaries

Argentina

-

Suppliers of PPE

Argentina

ARS

26,841

76,616

103,457

Monthly

62.00

0-E

CCU and subsidiaries

Argentina

-

Suppliers of PPE

Argentina

USD

329,178

490,070

819,248

Monthly

10.16

0-E

CCU and subsidiaries

Uruguay

-

Suppliers of PPE

Uruguay

UI

13,553

40,656

54,209

Monthly

5.95

Subtotal leases by IFRS 16 (**)

 

 

 

 

 

1,124,966

3,265,073

4,390,039

 

 

Total

 

 

 

 

 

 

1,240,767

3,616,330

4,857,097

 

 

 

(*)The amount based on the undiscounted contractual flows is found inNote 5 – Risk administration.

(**) The interest rates for IFRS 16 correspond to average rates.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

The summarized financial information of these companies as ofDecember 31, 2016, 2015 and 2014 and the figures for each entity 100% of each in summary form are as follows:

 

 

Joint ventures

Associated

Joint ventures

Associated

Joint ventures

Associated

 

For the years ended as of December 31,

 

2016

2015

2014

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Income Statement (Summarized)

 

 

 

 

 

 

Net sales

63,926,397

19,733,853

59,187,508

18,310,272

46,399,652

8,470,716

Operating result

(11,913,526)

(4,159,093)

(6,796,020)

(4,039,249)

212,503

(2,882,721)

Net income for year

(7,287,727)

(4,712,596)

(6,803,143)

(4,573,734)

(392,427)

(2,920,431)

Other comprehensive income

(3,451,487)

(7,965,214)

(2,494,511)

-

1,312,608

3,719,889

Depreciation and amortization

(2,104,820)

(2,698,849)

(1,998,935)

(534,485)

(1,936,455)

(1,091,414)

 

 

 

 

 

 

 

 

As of December 31, 2016

As of December 31, 2015

As of December 31, 2015

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Assets and Liabilities

 

 

 

 

 

 

Current assets

64,587,798

7,602,940

57,908,034

9,326,003

15,625,609

6,987,602

Non-current assets

50,994,744

30,504,073

29,453,402

31,393,842

39,076,178

17,664,655

Current liabilities

23,043,784

5,886,879

6,233,586

6,086,146

17,550,702

4,467,768

Non-current liabilities

2,350,385

7,789,367

3,720,129

9,494,421

2,725,097

5,244,421

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 23/03/2009

Chile

UF

661,567

5,128,436

5,790,003

Semiannual

4.25

90,413,000-1

Compañía Cervecerías Unidas S.A.

Chile

Bond J

898 28/06/2018

Chile

UF

-

954,736

954,736

Semiannual

2.90

Total

 

 

 

 

 

 

661,567

6,083,172

6,744,739

 

 

(1) This obligation is hedged by a Cross Currency Interest Rate Swap agreementNote 7 – Financial instruments.

(*)The amount based on the undiscounted contractual flows is found inNote 5 – Risk administration.

As of December 31, 2018:

 

 

 

 

 

 

 

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

UF

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

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

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

97,004,000-5

Banco de Chile

Chile

CLP

31,200

93,600

124,800

Monthly

5.16

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

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

97,030,000-7

Banco del Estado de Chile

Chile

CLP

28,669

64,826

93,495

Monthly

5.02

96,711,590-8

Manantial  S.A.

Chile

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

76,645,030-K

Banco Itaú Corpbanca

Chile

CLP

9,192

28,382

37,574

Monthly

6.12

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

97,004,000-5

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

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

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

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 BBVA

Argentina

ARS

736,905

-

736,905

At maturity

64.00

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 Patagonia

Argentina

ARS

238,536

-

238,536

At maturity

66.50

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 Superville

Argentina

USD

-

210,829

210,829

At maturity

6.00

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

Total

 

 

 

 

 

 

3,878,856

34,281,322

38,160,178

 

 

(1) This obligation is hedged by a Cross Currency Interest Rate Swap agreementNote 7 – Financial instruments.

(*)The amount based on the undiscounted contractual flows is found inNote 5 – Risk administration.

 

 

 

 

 

 

 

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$

 

(%)

Financial leases obligations

 

 

 

 

 

 

 

 

 

 

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

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

0-E

Finca La Celia S.A.

Argentina

0-E

Banco Supervielle

Argentina

ARS

797

2,391

3,188

Monthly

17.00

Total

 

 

 

 

 

 

90,516

275,456

365,972

 

 

(*)The amount based on the undiscounted contractual flows is found inNote 5 – Risk administration.

 

 

 

 

 

 

 

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 06/28/2018

Chile

UF

929,641

-

929,641

Semiannual

2.90

Total

 

 

 

 

 

 

1,594,998

2,486,177

4,081,175

 

 

(1) This obligation is hedged by a Cross Currency Interest Rate Swap agreementNote 7 – Financial instruments.

(*)The amount based on the undiscounted contractual flows is found inNote 5 – Risk administration.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Note 20 Intangible assets other than goodwill

 

The intangible assets movement during the years ended as of December 31, 2015Non-current loan and 2016 was as follows:

 

Trademarks

Software programs

Water rights

Distribution rights

Total

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

As of January 1, 2015

 

 

 

 

 

Historic cost

58,720,268

21,353,252

1,914,139

1,046,487

83,034,146

Accumulated amortization

-

(14,281,717)

-

(95,534)

(14,377,251)

Book Value

58,720,268

7,071,535

1,914,139

950,953

68,656,895

 

 

 

 

 

 

As of December 31, 2015

 

 

 

 

 

Additions

-

3,160,435

-

104,739

3,265,174

Additions by business combination (1)

7,747,581

-

-

-

7,747,581

Transfers (2)

(3,266,332)

-

-

-

(3,266,332)

Divestitures (cost)

-

(3,748)

-

-

(3,748)

Divestitures (amortization)

-

3,748

-

-

3,748

Amortization of year

-

(1,814,784)

-

(126,877)

(1,941,661)

Conversion effect

(2,235,479)

(297,814)

-

(247,219)

(2,780,512)

Effect of conversion (amortization)

-

164,652

-

22,210

186,862

Book Value

60,966,038

8,284,024

1,914,139

703,806

71,868,007

 

 

 

 

 

 

As of December 31, 2015

 

 

 

 

 

Historic cost

60,966,038

24,212,125

1,914,139

904,007

87,996,309

Accumulated amortization

-

(15,928,101)

-

(200,201)

(16,128,302)

Book Value

60,966,038

8,284,024

1,914,139

703,806

71,868,007

 

 

 

 

 

 

As of December 31, 2016

 

 

 

 

 

Additions

40,000

4,533,631

219,163

-

4,792,794

Additions by business combination (1)

5,614,575

-

-

-

5,614,575

Divestitures (cost)

-

(167,825)

(42,243)

-

(210,068)

Divestitures (amortization)

-

197,910

-

-

197,910

Amortization of year

-

(2,472,425)

-

(389,166)

(2,861,591)

Conversion effect

(1,714,990)

(213,166)

-

(140,990)

(2,069,146)

Effect of conversion (amortization)

-

130,442

-

215,927

346,369

Book Value

64,905,623

10,292,591

2,091,059

389,577

77,678,850

 

 

 

 

 

 

As of December 31, 2016

 

 

 

 

 

Historic cost

64,905,623

28,364,765

2,091,059

763,017

96,124,464

Accumulated amortization

-

(18,072,174)

-

(373,440)

(18,445,614)

Book Value

64,905,623

10,292,591

2,091,059

389,577

77,678,850

(1) SeeNote 1, letter a)and d).

(2) SeeNote 24, letter a).financial obligation

 

As ofDecember 31, 2019:

There are no restriction or any pledge against on intangible assets.

 

 

 

 

 

 

 

 

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

UF

16,327

16,330

28,619

61,276

Monthly

4.87

91,041,000-8

Viña San Pedro Tarapacá S.A. (1)

Chile

97,018,000-1

Scotiabank Chile

Chile

USD

8,685,384

-

-

8,685,384

At maturity

2.90

91,041,000-8

Viña San Pedro Tarapacá S.A.

Chile

76,645,030-K

Banco Itaú Corpbanca

Chile

USD

10,445,830

-

-

10,445,830

At maturity

3.64

91,413,000-1

Compañía Cervecerías Unidas S.A.

Chile

97,030,000-7

Banco del Estado de Chile

Chile

CLP

39,902,607

-

-

39,902,607

At maturity

4.56

96,981,310-6

Cervecería Kunstmann S.A.

Chile

97,018,000-1

Scotiabank Chile

Chile

CLP

1,000,000

-

-

1,000,000

At maturity

4.00

96,981,310-6

Cervecería Kunstmann S.A.

Chile

97,018,000-1

Scotiabank Chile

Chile

CLP

3,333,334

3,333,334

1,666,667

8,333,335

Semiannual

3.45

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

76,645,030-K

Banco Itaú Corpbanca

Chile

CLP

2,000,000

-

-

2,000,000

At maturity

3.83

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

Bebidas Bolivianas BBO S.A.

Bolivia

0-E

Banco Mercantil Santa Cruz S.A.

Bolivia

BOB

2,469,892

4,939,784

-

7,409,676

Quarterly

5.00

0-E

Bebidas Bolivianas BBO S.A.

Bolivia

0-E

Banco Mercantil Santa Cruz S.A.

Bolivia

BOB

922,478

1,844,956

922,478

3,689,912

Quarterly

5.00

0-E

Milotur S.A.

Uruguay

0-E

Banco Itaú

Uruguay

UI

221,062

-

-

221,062

Monthly

4.80

Total

 

 

 

 

 

 

86,996,914

10,134,404

2,617,764

99,749,082

 

 

(1) This obligation is hedged by a Cross Currency Interest Rate Swap agreementNote 7 – Financial instruments.

(*)The amount based on the undiscounted contractual flows is found inNote 5 – Risk administration.

 

 

 

 

 

 

 

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$

 

(%)

Lease liabilities

 

 

 

 

 

 

 

 

 

 

 

79,862,750-3

Transportes CCU Limitada

Chile

97,030,000-7

Banco del Estado de Chile

Chile

UF

182,302

125,892

-

308,194

Monthly

2.14

90,413,000-1

Compañía Cervecerías Unidas S.A.

Chile

99,012,000-5

Consorcio Nacional  de Seguros S.A.

Chile

UF

794,931

852,210

15,993,556

17,640,697

Monthly

3.95

Subtotal

 

 

 

 

 

 

977,233

978,102

15,993,556

17,948,891

 

 

90,413,000-1

CCU and subsidiaries

Chile

-

Suppliers of PPE

Chile

Euros

202,592

59,089

-

261,681

Monthly

1.48

90,413,000-1

CCU and subsidiaries

Chile

-

Suppliers of PPE

Chile

USD

838,782

603,084

1,839,685

3,281,551

Monthly

4.73

90,413,000-1

CCU and subsidiaries

Chile

-

Suppliers of PPE

Chile

UF

2,255,024

1,121,035

1,903,125

5,279,184

Monthly

1.92

90,413,000-1

CCU and subsidiaries

Chile

-

Suppliers of PPE

Chile

CLP

725,207

154,917

44,034

924,158

Monthly

4.56

0-E

CCU and subsidiaries

Argentina

-

Suppliers of PPE

Argentina

ARS

116,255

-

-

116,255

Monthly

62.00

0-E

CCU and subsidiaries

Argentina

-

Suppliers of PPE

Argentina

USD

355,915

26,769

-

382,684

Monthly

10.16

0-E

CCU and subsidiaries

Uruguay

-

Suppliers of PPE

Uruguay

UI

18,855

-

-

18,855

Monthly

5.95

Subtotal leases by IFRS 16 (**)

 

 

 

 

 

4,512,630

1,964,894

3,786,844

10,264,368

 

 

Total

 

 

 

 

 

 

5,489,863

2,942,996

19,780,400

28,213,259

 

 

(*)The amount based on the undiscounted contractual flows is found inNote 5 – Risk administration.

(**) The interest rates for IFRS 16 correspond to average rates.

 

 

 

 

 

 

 

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 23/03/2009

Chile

UF

10,249,998

10,259,097

28,266,218

48,775,313

Semiannual

4.25

90,413,000-1

Compañía Cervecerías Unidas S.A.

Chile

Bond J

898 28/06/2018

Chile

UF

-

-

85,031,634

85,031,634

Semiannual

2.90

Total

 

 

 

 

 

 

10,249,998

10,259,097

113,297,852

133,806,947

 

 

(1) This obligation is hedged by a Cross Currency Interest Rate Swap agreementNote 7 – Financial instruments.

(*)The amount based on the undiscounted contractual flows is found inNote 5 – Risk administration.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

The detailAs of the Trademarks appears below:December 31, 2018:

 

Operating segment

Cash Generating Unit

As of December 31, 2016

As of December 31, 2015

(CGU)

ThCh$

ThCh$

Chile

Embotelladoras Chilenas Unidas S.A.

31,476,163

25,861,588

 

Manantial S.A.

1,166,000

1,166,000

 

Compañía Pisquera de Chile S.A.

1,363,782

1,363,782

 

Compañía Cerveceria Kunstmann S.A.

286,744

286,518

 

Subtotal

34,292,689

28,677,888

International Business

CCU Argentina S.A. and subsidiaries

4,774,066

6,171,061

 

Marzurel S.A., Coralina S.A. and Milotur S.A.

2,822,016

2,932,762

 

Bebidas del Paraguay S.A. y Distribuidora del Paraguay S.A.

3,234,664

3,440,608

 

Subtotal

10,830,746

12,544,431

Wines

Viña San Pedro Tarapacá S.A.

19,782,188

19,743,719

 

Subtotal

19,782,188

19,743,719

Total

 

64,905,623

60,966,038

 

 

 

 

 

 

 

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

UF

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

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

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

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

Total

 

 

 

 

 

 

14,087,671

57,581,469

3,531,664

75,200,804

 

 

 

Management has not identified any evidence of impairment of intangible assets. Respect to trademarks with indefinite useful life, used the same methodology which(1) This obligation is designated inhedged by a Cross Currency Interest Rate Swap agreementNote 217 – Financial instruments.

(*)The amount based on the undiscounted contractual flows is found in Note 5 – Risk administration.

 

 

 

 

 

 

 

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$

 

(%)

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

Total

 

 

 

 

 

 

749,483

801,372

15,995,307

17,546,162

 

 

(*)The amount based on the undiscounted contractual flows is found inNote 5 – Risk administration.

 

 

 

 

 

 

 

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

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 agreementNote 7 - Financial instruments.

(*)The amount based on the undiscounted contractual flows is found inNote 5 - Risk administration.

 

Details of the fair value of bank borrowings, financial leases obligations and bonds payable are described inNote 7 - Financial instruments.

The effective interest rates of bond obligations are as follows:

Bonds Serie H                                   

4.27%

Bonds Serie J                                   

2.89%


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Debts and financial liabilities are stated in several currencies and they accrue fixed and variable interest rates. These obligations classified by currency and interest type (excluding the effect of cross currency interest rate swap agreements) are detailed as follows:

 

 

As of December 31, 2019

As of December 31, 2018

 

Fixed Interest Rate

Variable Interest Rate

Fixed Interest Rate

Variable Interest Rate

 

ThCh$

ThCh$

ThCh$

ThCh$

US Dollar

35,640,020

7,629,611

17,333,622

8,070,339

Chilean Pesos

86,598,796

-

65,221,552

-

Argentinean Pesos

2,695,345

4,385,390

3,357,467

505,919

Unidades de Fomento (*)

166,400,723

-

167,823,319

-

Euros

368,815

-

-

-

Unidad indexada (**)

958,466

-

1,308,837

-

Boliviano

11,141,396

-

7,014,539

-

Total

303,803,561

12,015,001

262,059,336

8,576,258

Note 21Goodwill

(*) The Unidad de Fomento (UF) is a Chilean inflation-indexed, Chilean peso-denominated monetary unit. The UF rate us set daily in advance based on changes in the previous month’s inflation rate.

(**) The unidad Indexada (UI) is an Uruguayan 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.

 

The goodwill movements duringterms and conditions of the years endedmain interest accruing obligations as of December 31, 20162019, are detailed as follows:

A)Bank Borrowings

Banco del Estado de Chile - Bank Loans

a)   On July 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, with maturity on July 27, 2017.

      This loan accrues interest at an annual fixed rate of 6.86% and 2015an effective rate of 7.17%. The subsidiary 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 as follows:renewed for 5 years, with maturity on July 27, 2022.

      This loan accrues interest at an annual fixed rate of 4.68%. The Subsidiary 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:

 

-         

GoodwillMaintain 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.

ThCh$

As of January 1, 2015

 

Historic cost

-

86,779,903Maintain a debt ratio of no more than 3, measured as Total liabilities divided by Equity.

Book Value

86,779,903

 

As of December 31, 2015-

Additions by business combination (1)

16,189,798

Transfers (2)

(2,856,245)

Conversion effect

(623,084)

Book Value

99,490,372

As of December 31, 2015

Historic cost

99,490,372

Book Value

99,490,372

As of December 31, 2016

Conversion effect

(2,827,349)

Book Value

96,663,023

As of December 31, 2016

Historic cost

96,663,023

Book Value

96,663,023Maintain an Equity higher than UF 770,000.

 

(1) SeeNote 1, letter d).

(2) SeeNote 24, letter a).      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.

 

Goodwill from investments acquired      As of December 31, 2019, the Subsidiary was in business combinations is assigned ascompliance with the financial covenants and specific requirements 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 value of the goodwill of the investments assigned to the CGUs inside the Company segments are:this loan.

 

Operating segment

Cash Generating Unit

As of December 31, 2016

As of December 31, 2015

(CGU)

ThCh$

ThCh$

Chile

Embotelladoras Chilenas Unidas S.A.

25,257,686

25,257,686

 

Manantial S.A.

8,879,245

8,879,245

 

Compañía Pisquera de Chile S.A.

9,808,550

9,808,550

 

Los Huemules S.R.L.

47,443

47,443

 

Subtotal

43,992,924

43,992,924

International Business

CCU Argentina S.A. and subsidiaries

6,851,916

8,864,698

 

Marzurel S.A., Coralina S.A. and Milotur S.A.

7,260,675

7,701,975

 

Bebidas del Paraguay S.A. y Distribuidora del Paraguay S.A.

6,141,364

6,514,631

 

Subtotal

20,253,955

23,081,304

Wines

Viña San Pedro Tarapacá S.A.

32,416,144

32,416,144

 

Subtotal

32,416,144

32,416,144

Total

 

96,663,023

99,490,372


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

b)   On 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 UF 380,000, (equivalent to ThCh$ 9,206,290) maturing on October 15, 2019.

 

Goodwill assigned to      The subsidiary amortizes interest semi-annually and capital amortization consists of a single payment at the CGUend of the established term.

      On October 15, 2019 the subsidiary Viña San Pedro Tarapacá S.A. renegotiated this loan, by an amount of ThCh$ 10,664,833, at a fixed interest rate maturing on April 10, 2020.

c)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.

d)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 impairment tests annually orcertain 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 higher frequencyFinancial 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 case there are indications that anyaccordance 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 CGU could experience impairment. The recoverable amountcosts and expenses.

c.Maintain at the end of each CGU is determinedsemester, assets free of liens for an amount equal to at least 1.2, defined as the higherratio of valueTotal 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 usethe Statement of Changes in Equity.

e.To maintain, either directly or fair value less costs to sell. To determineindirectly, ownership over more than 50% of the value in use,subscribed and paid-up shares and over the Company has used cash flow projections overvoting rights of the following companies: Cervecera CCU Chile Ltda. and Embotelladoras Chilenas Unidas S.A.

f.Maintain a 5-year span, based on the budgets and projections reviewed by Managementnominal installed capacity for the same termproduction manufacturing of beer and with an average grown-rate of 3%. The rates used to discount the projected cash flows reflect the market assessmentsoft drinks, equal or higher altogether than 15.9 million hectoliters a year.

g.To maintain, either directly or through a subsidiary, ownership of the specific risks related to the corresponding CGU. The pre-tax discount rates used range from a 9.5% to 12.8%. Given the materialitytrademark "CRISTAL", denominative for beer class 32 of the amounts involved, it wasinternational classifier, and not considered relevant to describe additional information in this Note. A reasonable change in assumptions would not result in an impairmenttransfer its use, except to goodwill.its subsidiaries.

 

As of December 31, 2016,2019, the Company has not identified any evidence of impairment of goodwill.was in compliance with the financial covenants required for this loan.

 


1ORBDA, for the Company purposes, is defined as Adjusted Operating Result before Depreciation and Amortization.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

e)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, (ThCh$ 6,277,920) at a fixed interest rate, maturing on July 3, 2018.

The subsidiary amortizes interest and capital in a single payment at the end of the established term.

On July 3, 2018,this loan was paid.

f)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, (ThCh$ 6,277,920) at a fixed interest rate, maturing on April 23, 2019.

The subsidiary amortizes interest and capital in a single payment at the end of the established term.

On April 23, 2019, this loan was paid.

g)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 in a single payment at the end of the established term.

On April 17, 2019 this loan was paid.

h)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.

The subsidiary amortizes interest and capital in a single payment at the end of the established term.

      On May 25, 2018 the loan was renewed, maturing on July 3, 2018.

On July 3, 2018,this loan was paid.

Banco de Chile – Bank Loans

a)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 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 administration and Note 7 – Financial instruments.

On July 3, 2017, this loan was paid.

b)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 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.

c)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 in a single payment at the end of the established term.

      On August 24, 2018, the loan was renewed, maturing on August 24, 2020.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Scotiabank Chile – Bank Loans

a)On June 17, 2015, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Scotiabank Chile for a total of US$ 7,871,500, (ThCh$ 6,177,081). It accrues interest at a compound floating rate Libor at 90 days plus a fixed margin, maturing on June 18, 2018.

The subsidiary pays quarterly interest and amortization of capital 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 June 18, 2018,this loan was paid.

b)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, (ThCh$ 9,102,984). It accrues interest at a compound floating rate Libor at 90 days plus a fixed margin, 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 administrationand Note 7 – Financial instruments.

c)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, maturing 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, maturing on April 22, 2019.

On April 22, 2019, this loan was paid.

d)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, (ThCh$ 11,771,100) at a fixed interest rate, maturing on July 3, 2019.

The subsidiary amortizes interest and capital in a single payment at the end of the established term.

On July 3, 2019, this loan was paid.

e)On May 23, 2019, Sociedad Viña San Pedro Tarapacá S.A. signed a bank loan with Scotiabank Chile for a total of US$ 10,000,000, (ThCh$ 7,847,400) at a fixed interest rate, maturing on May 20, 2020.

      The subsidiary amortizes interest and capital in a single payment at the end of the established term.

f)On April 17, 2019, the subsidiary Cervecería Kunstmann S.A. signed a bank loan with Scotiabank Chile for a total of ThCh$ 1,000,000 at a fixed interest rate, maturing on April 16, 2021.

The subsidiary amortizes interest semi-annually and capital amortization consists in a single payment at the end of the established term.

g)On December 9, 2019, the subsidiary Cervecería Kunstmann S.A. signed a bank loan with Scotiabank Chile for a total of ThCh$ 10,000,000 at a fixed interest rate, maturing on December 9, 2025.

The subsidiary amortizes interest and capital semi-annually with a first payment on June 9, 2020.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

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 subsidiary amortizes interest and capital 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 subsidiary amortizes interest and capital in a single payment at the end of the established term.

      On July 3, 2018,this loan was paid.

Banco Itaú Corpbanca– Bank Loans

a)On April 23, 2019, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Itaú Corpbanca for a total of US$ 14,000,000, (ThCh$ 910,986,360) at a fixed interest rate, maturing on April 22, 2022.

The subsidiary amortizes interest semi-annually and capital amortization consists in a single payment at the end of the established term.

b)On April 22, 2019, the subsidiary Cervecería Kunstmann S.A. signed a bank loan with Banco Itau Corpbanca for a total of ThCh$ 2,000,000 at a fixed interest rate, maturing on April 21, 2021.

The subsidiary amortizes interest semi-annually and capital amortization consists in a single payment at the end of the established term.

c)On July 3, 2019, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Itaú Corpbanca for a total of US$ 15,000,000, (ThCh$ 11,771,100) at a fixed interest rate, maturing on July 2, 2020.

      The subsidiary amortizes interest and capital in a single payment at the end of the established term.

d)On May 10, 2015, the subsidiary Cervecera Guayacán SpA. signed a bank loan with Banco Itaú Corpbanca for a total of UF 3,067, (ThCh$ 86,827) at a fixed interest rate, maturing on May 10, 2030.

      The subsidiary amortizes interest and capital monthly with a first payment on June 10, 2015.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

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.

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, 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 of 20%. The subsidiary amortizes monthly interest and capital amortization consists of a single payment at the end of the established term.

      On May 26, 2018,this loan was paid.

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 argentinean pesos, maturing on 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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

The proportional participation of banks lenders is as follows:

(a) Banco de Galicia y Buenos Aires S.A., with 91.66 million argentinean pesos of pro rata participation.

(b)Banco Santander Río, with 91.66 million argentinean pesos of pro rata participation.

This loan accrues interest at an annual rate fixed of 23%whose payment will make monthly. CICSA amortized capital in 24 consecutive and variable monthly installments once completed the 12-month grace period from the date of signature of the addendum.

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 ORBDA2.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.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 AdjustedORBDA (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 Republic of Argentina.

d.Maintain at the end of each quarter a minimum Equity of 600 million of argentinean pesos.

On September 16, 2019, this loan was paid.

Banco Mercantil Santa Cruz S.A. – Bank loans

a)   On June 26, 2017, the subsidiary Bebidas Bolivianas BBO S.A.signed a bank loan with Banco Mercantil Santa Cruz S.A. for a total of 68,877,500 Bolivian, at a fixed interest rate, maturing on May 1, 2027.

The subsidiary amortizes quarterly interest and and capital amortization begins on September 10, 2019 in a quarterly basis.

b)   On December 18, 2017,the subsidiary Bebidas Bolivianas BBO S.A.signed a bank loan with Banco Mercantil Santa Cruz S.A. for a total of 6,860,000 Bolivian, at a fixed interest rate, maturing on December 13, 2018.

      The subsidiary amortizes interest and capital quarterly.

      On September 14, 2018, the loan was paid.

c)   On May 14, 2018,the subsidiary Bebidas Bolivianas BBO S.A.signed a bank loan with Banco Mercantil Santa Cruz S.A. for a total of 6,860,000 Bolivian, at a fixed interest rate, maturing on May 9, 2019.

      The subsidiary amortizes interest and capital quarterly.

      On September 27, 2018, the loan was paid.

d)   On June 22, 2018,the subsidiary Bebidas Bolivianas BBO S.A.signed a bank loan with Banco Mercantil Santa Cruz S.A. for a total of 6,180,400 Bolivian, at a fixed interest rate, maturing on December 13, 2019.

      The subsidiary amortizes interest and capital quarterly.


2ORBDA, for the Company purposes, is defined as Adjusted Operating Result before Depreciation and Amortization.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

      On September 20, 2018, the loan was paid.

e)On May 31, 2019, the subsidiary Bebidas Bolivianas BBO S.A. signed a bank loan with Banco Mercantil Santa Cruz S.A. for a total of 34,300,000 bolivians at a fixed interest rate, maturing on April 8, 2029.

The subsidiaryBebidas Bolivianas BBO S.A. pays quarterly interest and capital amortization will begin on August 18, 2021 also quarterly.

Banco Itaú – Bank loans

a)On February 20, 2018, the subsidiary Milotur S.A. signed a bank loan with Banco Itaú for a total of UI 15,139,864.80 at a fixed interest rate, maturing on February 20, 2021.

The subsidiary amortizes interest monthly and capital will be payed at the end of the established term.

B)Lease liabilities

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.

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 de Seguros de Vida Consorcio Nacional de Seguros S.A., recording a balance debt of UF 608,375, with 3.95% annual interest and maturity on February 5, 2048.

These Consolidated Financial Statements have modifications according the adoption of IFRS 16 (SeeNote 4 – Accounting changes). As a consequense of the aforementioned the Company has recognized a financial liability, equivalent to the present value of the associated payments to the operational agreements with an amount over than US$ 5,000 (equivalent to ThCh$ 3,743) and a term over than 12 months.

Below is the detail of future payments and the value lease liabilities, whose analysis is within the scope of IFRS 16 (seeNote 4 - Accounting changes):

 

As of December 31, 2019

Gross Amount

Interest

Value

ThCh$

ThCh$

ThCh$

0 to 3 months

1,393,064

152,297

1,240,767

3 months to 1 year

4,581,643

965,313

3,616,330

Over 1 year to 3 years

6,652,459

1,162,596

5,489,863

Over 3 years to 5 years

4,049,398

1,106,402

2,942,996

Over 5 years

26,579,745

6,799,345

19,780,400

Total

43,256,309

10,185,953

33,070,356


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

 

As of December 31, 2018

Gross Amount

Interest

Value

ThCh$

ThCh$

ThCh$

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

27,867,180

9,955,046

17,912,134

Bonds Payable

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.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.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 ORBDA3 and 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 costs 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 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.

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.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.


3ORBDA, for the Company purposes, is defined as Adjusted Operating Result before Depreciation and Amortization.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

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.Not to make investments in facilities issued by related parties, except in the cases and under the terms established in the agreement.

h.Neither sells nor transfer assets from the issuer and its subsidiaries representing over 25% of the assets total of the consolidated financial statements.

On October 8, 2018, the Company redeemed all of the Series E Bonds, before their scheduled maturity, in accordance with the provisions 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 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 Bonds – CCU S.A.

On March 23, 2009, under number 573, the Company recorded in the Securities Record the issue of bonds Series H for UF 2 million, with 21 years terms. Emission was placed in the local market on April 2, 2009.  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, were amended Issue Contract Series H, 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.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. The Total Adjusted Liabilities are defined as Total Liabilities less Dividends provisioned, according to policy included in the Statement of Changes in Equity, plus the amount of all guarantees, debts or obligations of third parties not within the liability 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 account, according to policy included in the Statement of Changes in Equity.

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 ORBDA4 and 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.


4ORBDA, for the Company purposes, is defined as Adjusted Operating Result before Depreciation and Amortization.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

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 hectoliters 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.

The inflationary risk associated to the interest rate in which this Bond H is exposed, 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.

As ofDecember 31, 2019, 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. ORBDA5 is 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 FinancialPosition, 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.


5ORBDA, for the Company purposes, is defined as Adjusted Operating Result before Depreciation and Amortization.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

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 non-alcoholic 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.

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, 2019, the Company was in compliance with the financial covenants required for this public issue.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

D) Reconciliation of liabilities arising from financing activities

 

  As of December 31, 2018

 Flows

Accrual of interest

Change in foreign currency and unit per adjustment

Others

  As of December 31, 2019

 

 Payments

Acquisitions

 

Principal

Interest

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Other financial liabilities

 

 

 

 

 

 

 

 

Current

        

Bank borrowings

38,160,178

(24,502,019)

(12,402,773)

25,347,785

12,639,856

(446,694)

3,651,105

42,447,438

Bond payable

4,081,175

(2,547,487)

(4,734,806)

-

4,758,356

66,887

5,120,614

6,744,739

Lease liabilities (1)

365,972

(6,416,902)

(727,334)

-

1,334,118

1,420,466

8,880,777

4,857,097

Total others financial liabilities current

42,607,325

(33,466,408)

(17,864,913)

25,347,785

18,732,330

1,040,659

17,652,496

54,049,274

Non-current

        

Bank borrowings

75,200,804

-

-

25,641,701

-

2,557,682

(3,651,105)

99,749,082

Bond payable

135,281,303

-

-

-

-

3,646,258

(5,120,614)

133,806,947

Lease liabilities (1)

17,546,162

-

-

-

-

463,687

10,203,410

28,213,259

Total others financial liabilities non-current

228,028,269

-

-

25,641,701

-

6,667,627

1,431,691

261,769,288

Total Other financial liabilities

270,635,594

(33,466,408)

(17,864,913)

50,989,486

18,732,330

7,708,286

19,084,187

315,818,562

 (1) Includes leases recognized by IFRS 16,See Note 4 - Accounting changes, letter a).

 

  As of December 31, 2017

 Flows

Accrual of interest

Change in foreign currency and unit per adjustment

Others

  As of December 31, 2018

 

 Payments

Acquisitions

 

Principal

Interest

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Other financial liabilities

 

 

 

 

 

 

 

 

Current

        

Bank borrowings

24,623,746

(93,311,712)

(7,329,217)

92,681,410

7,751,402

(2,102,985)

15,847,534

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 liabilities current

28,106,467

(97,119,965)

(10,242,360)

92,681,410

12,309,286

(2,069,090)

18,941,577

42,607,325

Non-current

        

Bank borrowings

73,886,831

(207,714)

-

8,828,143

-

396,858

(7,703,314)

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 liabilities non-current

161,001,732

(16,622,790)

-

91,326,177

-

3,868,697

(11,545,547)

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


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

 

As of December 31, 2016

 Flows

Accrual of interest

Change in foreign currency and unit per adjustment

Others

  As of December 31, 2017

 

 Payments

Acquisitions

 

Principal

Interest

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Other financial liabilities

 

 

 

 

 

 

 

 

Current

        

Bank borrowings

39,079,561

(22,241,073)

(7,146,384)

16,477,169

7,492,719

(3,435,455)

(5,602,791)

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 liabilities current

42,545,534

(23,646,339)

(10,206,075)

16,477,169

11,868,152

(3,381,908)

(5,550,066)

28,106,467

Non-current

        

Bank borrowings

29,606,398

(844,687)

-

41,300,000

(306,747)

(1,470,924)

5,602,791

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 liabilities non-current

117,944,033

(3,522,107)

-

41,300,000

(306,747)

18,666

5,567,887

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


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Note 22Trade and other current payables

Trade and other payables are detailed as follows:

 

As of December 31, 2019

As of December 31, 2018

 

Current

Non-current

Current

Non-current

 

ThCh$

ThCh$

ThCh$

ThCh$

Suppliers

248,608,507

-

247,335,760

-

Notes payable

2,081,089

26,550

3,973,183

12,413

Trade an other current payables

250,689,596

26,550

251,308,943

12,413

Withholdings payable

55,965,962

-

52,071,225

-

Trade accounts payable withholdings

55,965,962

-

52,071,225

-

Total

306,655,558

26,550

303,380,168

12,413

Note 23Other provisions

Provisions recorded in the consolidated statement of financial position are detailed as follows:

 

As of December 31, 2019

As of December 31, 2018

Current

Non-current

Current

Non-current

ThCh$

ThCh$

ThCh$

ThCh$

Litigation

193,764

367,614

405,069

488,562

Others

2,847,166

164,347

-

6,937,197

Total

3,040,930

531,961

405,069

7,425,759

The changes in provisions are detailed as follows:

 

Litigation (1)

Others

Total

ThCh$

ThCh$

ThCh$

As of January 1, 2018

 

1,300,695

 

289,469

1,590,164

As of December 31, 2018

 

 

 

 

 

Incorporated

 

560,355

 

6,731,027

7,291,382

Used

 

(344,749)

 

-

(344,749)

Released

 

(102,277)

 

(11,975)

(114,252)

Conversion effect

 

(520,393)

 

(71,324)

(591,717)

Changes

 

(407,064)

 

6,647,728

6,240,664

As of December 31, 2018

 

893,631

 

6,937,197

7,830,828

As of December 31, 2019

 

 

 

 

 

Incorporated

 

493,097

 

3,172,465

3,665,562

Used

 

(461,968)

 

-

(461,968)

Released

 

(129,623)

 

(7,063,046)

(7,192,669)

Conversion effect

 

(233,759)

 

(35,103)

(268,862)

Changes

 

(332,253)

 

(3,925,684)

(4,257,937)

As of December 31, 2019

 

561,378

 

3,011,513

3,572,891

(1)SeeNote 34 – Contingencies and commitments.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

The maturities of provisions at December 31, 2019, are detailed as follows:

 

Litigation

Others

Total

ThCh$

ThCh$

ThCh$

Less than one year

 

193,764

 

2,847,166

3,040,930

Between two and five years

 

238,429

 

164,347

402,776

Over five years

 

129,185

 

-

129,185

Total

 

561,378

 

3,011,513

3,572,891

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 provisions 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 trials/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 are detailed inNote 34 - 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 possible adverse effects that could arise from these proceedings.

Note 24Income taxes

Current tax assets

Taxes receivables are detailed as follows:

 

As of December 31, 2019

As of December 31, 2018

 

ThCh$

ThCh$

Refundable tax previous year

5,484,216

11,884,421

Taxes under claim (1)

-

968,195

Argentinean tax credits

1,140,073

440,172

Monthly provisions

8,136,478

3,686,905

Payment of absorbed profit provision

4,830

-

Other credits

366,693

322,736

Total

15,132,290

17,302,429

(1)This item includes claims for refund of first category taxes (Provisional payment of absorbed profit) for an amount of ThCh$ 968,195  as of December 31, 2018, that was presented in April 2014 from the commercial year 2013, which was recovered the second quarter of 2019.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Current tax assets non-current

Taxes receivables are detailed as follows:

 

As of December 31, 2019

As of December 31, 2018

 

ThCh$

ThCh$

Taxes under claim (1)

-

1,173,281

Others (2)

2,305,129

97,660

Total

2,305,129

1,270,941

(1)This item includes claims for refund of first category taxes (Provisional payment of absorbed 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, 2019

As of December 31, 2018

 

ThCh$

ThCh$

Chilean Tax income (expense)

12,928,404

71,587,790

Monthly provisional payments

6,133,335

3,946,196

Chilean direct taxes

165,936

101,474

Other

1,276,699

249,989

Total

20,504,374

75,885,449

Tax expense

The income tax and deferred tax expense for the years ended as of December 31, 2019, 2018 and 2017, are detailed as follows:

 

For the years ended as of December 31,

 

2019

2018

2017

 

ThCh$

ThCh$

ThCh$

Income as per deferred tax related to the origin and reversal of temporary differences

(8,160,347)

9,930,675

(500,800)

Prior year adjustments

(1,390,633)

484,985

569,212

Effect of change in tax rates

-

23,903

(50,071)

Tax benefits (loss)

11,804,310

(1,795,446)

611,282

Total deferred tax expense

2,253,330

8,644,117

629,623

Current tax expense

(43,516,068)

(144,929,220)

(47,841,130)

Prior period adjustments

1,286,824

158,286

(1,154,469)

Total expenses (income) for current taxes

(42,229,244)

(144,770,934)

(48,995,599)

(Loss) Income from income tax

(39,975,914)

(136,126,817)

(48,365,976)


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

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,

 

2019

2018

2017

 

ThCh$

ThCh$

ThCh$

Net income from cash flow hedge

93,416

(16,196)

728

Actuarial gains and losses deriving from defined benefit plans

1,097,001

408,928

(73,169)

Charge to equity

1,190,417

392,732

(72,441)

Effective Rate

The Company’s income tax expense as ofDecember 31, 2019, 2018 and 2017 represents 21.54%, 29.71% and 24.62%, 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,

2019

2018

2017

ThCh$

Rate %

ThCh$

Rate %

ThCh$

Rate %

Income before taxes

185,621,574

 

458,211,348

 

196,474,395

 

Income tax using the statutory rate

(50,117,825)

     27.00

(123,717,064)

     27.00

(50,100,971)

     25.50

Adjustments to reach the effective rate

 

 

 

 

 

 

Tax effect of permanent differences, net

9,105,693

(4.91)

(14,596,485)

3.19

4,071,180

(2.07)

Effect of change in tax rate

                     -  

          -  

23,903

(0.01)

(50,071)

0.03

Effect of tax rates in Argentina and Uruguay

1,140,027

(0.61)

1,519,558

(0.33)

(1,700,857)

0.86

Prior year adjustments

(103,809)

0.06

643,271

(0.14)

(585,257)

0.30

Income tax, as reported

(39,975,914)

     21.54

(136,126,817)

     29.71

(48,365,976)

     24.62


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Deferred taxes

Deferred tax assets and liabilities included in the Consolidated Financial Statements are detailed as follows:

 

As of December 31, 2019

As of December 31, 2018

 

ThCh$

ThCh$

 Deferred taxes assets

 

 

Accounts receivable impairment provision

1,216,921

1,406,961

Other non-tax expenses

7,984,991

8,825,378

Benefits to staff

3,785,361

3,468,874

Inventory impairment provision

283,440

352,183

Severance indemnity

8,649,423

6,829,816

Inventory valuation

2,311,192

2,143,768

Intangibles

294,209

241,802

Other assets

22,334,415

14,883,181

Tax loss carryforwards

14,888,509

3,782,552

Subtotal by deferred tax assets

61,748,461

41,934,515

Deferred tax liabilities offset

(7,219,813)

(4,243,427)

Total assets from deferred taxes

54,528,648

37,691,088

 

 

 

Deferred taxes liabilities

 

 

Property, plant and equipment depreciation

74,003,316

51,471,109

Agricultural operation expenses

6,123,595

7,150,018

Manufacturing indirect activation costs

5,786,780

5,743,496

Intangibles

17,505,666

16,614,440

Land

25,775,281

25,408,185

Other liabilities

9,607,733

6,356,350

Subtotal by deferred tax liabilities

138,802,371

112,743,598

Deferred tax assets offset

(7,219,813)

(4,243,427)

Total liabilities from deferred taxes

131,582,558

108,500,171

Total 

(77,053,910)

(70,809,083)

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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Changes in deferred tax assets are detailed as follows:

Analysis of the deferred tax movement during the year

ThCh$

As of January 1, 2018

(53,998,782)

Deferred taxes related to credited items (charged) directly to equity (1)

(23,732,154)

Deferred taxes from tax loss carry forwards absorption

8,644,117

Conversion effect

(1,036,695)

Deferred taxes against equity

408,928

Deferred taxes from business combinations

(805,010)

Other deferred movements taxes

(289,487)

Changes

(16,810,301)

As of December 31, 2018

(70,809,083)

As of January 1, 2019

Deferred taxes related to credited items (charged) directly to equity

(9,909,958)

Deferred taxes from tax loss carry forwards absorption

2,253,330

Conversion effect

2,461,738

Deferred taxes against equity

1,097,001

Deferred taxes from business combinations

(2,146,938)

Changes

(6,244,827)

As of December 31, 2019

(77,053,910)

 

(1) Corresponds to the financial effect of the application IAS 29 "Financial reporting in hyperinflationary economies.

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.

Additionally, 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.

On December 21, 2019, the law N° 27,541 called the Law of Social Solidarity and Productive Reactivation in the Public Emergency" which modifies some articles of law N° 27,430 was postponed. This change mainly postpones one more year (for the year 2020) the increase of the income tax rate of 30% and the withholding tax rate on dividends of 7%, setting up the income tax rate in 25% and the withholding tax rate in 13% on dividends.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019

Note 2225Employee BenefitsProperty, plant and equipment

 

The movementCompany grants short term and employment termination benefits as part of Property, plantits compensation policies.

The Parent Company and equipmentits subsidiaries have 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:

§

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.

§

Long-term benefits are plans or agreements mainly intended to cover the post-employment benefits generated at the end of the labor 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 ofDecember 31, 2019 and 2018, the total staff benefits recorded in the Consolidated Statement of Financial Position is detailed as follows:

 

 

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$

ThCh$

ThCh$

ThCh$

ThCh$

As of January 1, 2015

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Additions

-

-

-

-

123,581,249

-

-

-

123,581,249

Transfers

24,332,658

53,855,456

21,539,178

12,777,031

(121,954,867)

8,596,245

8,750

845,549

-

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)

Write off (cost)

(747,359)

(289,708)

(3,742,613)

(1,918,945)

-

(1,156,594)

(18,734)

-

(7,873,953)

Write off (depreciation)

394,898

184,171

3,456,971

1,909,228

-

636,696

12,858

-

6,594,822

Capitalized interests

-

-

-

-

1,086,976

-

-

-

1,086,976

Depreciation

(16,319,675)

(23,241,987)

(20,568,254)

(9,738,483)

-

(6,504,278)

(290,871)

(1,009,087)

(77,672,635)

Conversion effect depreciation

828,924

4,905,696

5,480,844

2,894,015

-

353,900

256

81,519

14,545,154

Others increase (decreased)

264,777

368,742

783,920

226,420

(2,018,429)

150,953

(23,262)

-

(246,879)

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

Transfers to Assets Held for Sale (Cost)

(2,682,692)

-

-

-

-

-

-

-

(2,682,692)

Transfers to Assets Held for Sale (Depreciation)

443,892

-

-

-

-

-

-

-

443,892

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

 

 

 

 

 

 

 

 

 

 

As of December 31, 2015

 

 

 

 

 

 

 

 

 

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

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)

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

 

 

 

 

 

 

 

 

 

 

As of December 31, 2016

 

 

 

 

 

 

 

 

 

Additions

-

-

-

-

128,518,969

-

-

-

128,518,969

Transfers

22,834,409

40,559,020

26,734,419

11,477,889

(115,555,005)

12,571,079

-

1,378,189

-

Conversion effect historic cost

(5,161,938)

(9,794,457)

(10,440,956)

(3,309,017)

(716,066)

(63,653)

(1,927)

(100,704)

(29,588,718)

Write off (cost)

(421,820)

(1,114,726)

(963,296)

(602,003)

164,887

(1,425,485)

-

-

(4,362,443)

Write off (depreciation)

16,882

1,045,213

1,211,494

557,191

-

809,775

-

-

3,640,555

Capitalized interests

-

-

-

-

853,832

-

-

-

853,832

Depreciation

(16,446,343)

(22,298,558)

(20,154,538)

(9,709,915)

-

(9,495,693)

(235,007)

(1,025,552)

(79,365,606)

Conversion effect depreciation

1,743,342

4,080,872

3,082,501

4,139,993

-

252,389

578

66,872

13,366,547

Others increase (decreased)

(40,372)

1,960,728

(1,217,118)

(313,368)

(779,982)

792,760

(620,991)

-

(218,343)

Divestitures (cost)

(1,973,792)

(4,671,503)

(919,611)

(105,417)

-

(479,526)

-

(1,480,301)

(9,630,150)

Divestitures (depreciation)

1,366,357

4,474,718

699,573

23,026

-

375,766

-

1,010,409

7,949,849

Book Value

422,430,564

194,077,788

80,476,665

42,729,268

114,581,146

21,486,882

12,575,574

15,473,815

903,831,702

 

 

 

 

 

 

 

 

 

 

As of December 31, 2016

 

 

 

 

 

 

 

 

 

Historic cost

584,830,357

453,656,276

196,174,306

129,190,151

114,581,146

70,251,593

13,926,785

29,436,746

1,592,047,360

Accumulated depreciation

(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

422,430,564

194,077,788

80,476,665

42,729,268

114,581,146

21,486,882

12,575,574

15,473,815

903,831,702

Employees’ Benefits

As of December 31, 2019

As of December 31, 2018

Current

Non-current

Current

Non-current

ThCh$

ThCh$

ThCh$

ThCh$

Short term benefits

27,356,205

-

31,600,044

-

Employment termination benefits

-

33,571,138

194,119

26,901,088

Total

27,356,205

33,571,138

31,794,163

26,901,088

 

Short - term benefits

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.

The total short-term benefits recorded in the Consolidated Statement of Financial Position are detailed as follows:

Short-Term Employees’ Benefits

As of December 31, 2019

As of December 31, 2018

ThCh$

ThCh$

Vacation

11,500,170

10,518,298

Bonus and compensation

15,856,035

21,081,746

Total

27,356,205

31,600,044

The Company records staff vacation cost on an accrual basis.

Severance Indemnity

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 4,50% (5,69% in 2018) and in Argentina 49,14% (34,62% in 2018).


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

The obligation recorded for severance indemnity is detailed as follows:

Severance Indemnity

As of December 31, 2019

As of December 31, 2018

ThCh$

ThCh$

Current

-

194,119

Non-current

33,571,138

26,901,088

Total

33,571,138

27,095,207

The change in the severance indemnity is detailed as follows:

Severance Indemnity

ThCh$

Balance as of January 1, 2018

23,699,115

Current cost of service

2,154,071

Interest cost

1,742,273

Actuarial (Gain) losses

1,322,754

Paid-up benefits

(1,640,831)

Past service cost

306,746

Business combinations (1)

776,718

Conversion effect

(1,281,341)

Others

15,702

Changes

3,396,092

As of December 31, 2018

27,095,207

Current cost of service

2,457,762

Interest cost

1,750,514

Actuarial (Gain) losses

4,086,158

Paid-up benefits

(1,773,734)

Past service cost

930,906

Conversion effect

(787,975)

Others

(187,700)

Changes

6,475,931

As of December 31, 2019

33,571,138

 

(1)SeeNote 15 – Business combinations, letter a).

The balancefigures recorded in the Consolidated Statement of the land at the end of each year isIncome, are detailed as follows:

 

 

As of December 31, 2016

As of December 31, 2015

 

ThCh$

ThCh$

Land

226,136,602

227,849,584

Total

226,136,602

227,849,584

Capitalized interest as of December 31, 2016, amounted to ThCh$ 853,832 (ThCh$ 1,086,976 in 2015), using an annually capitalization rate of 4.17% for both years.

The Company, through its subsidiaries 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 ofDecember 31, 2016, the Company maintained approximately 4,208 of which 3,787 hectares are for vines in production stage. Of the total hectares mentioned above, 3,455 correspond to own land and 332 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 2016, the production plant vines yield approximately 49.8 million kilos of grapes (60.1 million kilos of grapes in 2015).

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.

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 Managment has not perceived evidence of impairment with respect to these at December 31, 2016.

Assets under finance lease:

The book value of land and buildings relates to finance lease agreements for the Company and its subsidiaries. Such assets will not be owned by the Company until the corresponding purchase options are exercised.

 

As of December 31, 2016

As of December 31, 2015

 

ThCh$

ThCh$

Land

3,130,181

3,037,571

Buildings

9,217,312

9,333,443

Machinery and equipment

228,081

1,061,907

Total

12,575,574

13,432,921

Expense recognized for severance indemnity

For the years ended as of December 31,

2019

2018

2017

ThCh$

ThCh$

ThCh$

Current cost of service

2,457,762

2,154,071

1,942,099

Past service cost

930,906

306,746

604,337

Non-provided paid benefits

3,959,881

6,547,694

6,023,869

Other

70,747

175,005

269,377

Total expense recognized in Consolidated Statement of Income

7,419,296

9,183,516

8,839,682

 

InNote 26, letter B)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., Compañía Cervecera Kunstmann S.A. and Manantial S.A.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

Note 23Actuarial AssumptionsInvestment Property

 

ChangesAs mentioned inNote 2 - Summary of significant accounting policies, 2.20, the severance payment obligation is recorded at its actuarial value. The main actuarial assumptions used for the calculation of the severance indemnity obligation are detailed as follows:

Actuarial Assumptions

Chile

Argentina

As of December 31, 2019

As of December 31, 2018

As of December 31, 2019

As of December 31, 2018

Mortality table

RV_2014

RV-2014

Gam,83

Gam,83

Annual interest rate

4,50%

5,69%

49,14%

34,62%

Voluntary employee turnover rate

1,9%

1,9%

"ESA 77 Adjusted" - 50%

"ESA 77 Adjusted" - 50%

Company’s needs rotation rate

5,3%

5,3%

"ESA 77 Adjusted" -50 %

"ESA 77 Adjusted" - 50%

Salary increase (*)

3,7%

3,7%

45,11%

28,27%

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, 2019

As of December 31, 2018

ThCh$

ThCh$

1% increase in the Discount Rate (Gain)

2,126,263

1,623,794

1% decrease in the Discount Rate (Loss)

(2,479,498)

(1,880,258)

 

 

 

Personnel expense

The amounts recorded in the movementConsolidated Statement of the investment property during the years ended as of December 31, 2015 and 2016 isIncome are detailed as follows:

 

 

Lands

Buildings

Total

ThCh$

ThCh$

ThCh$

As of January 1, 2015

 

 

 

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

 

 

 

Additions

-

4,148

4,148

Transfers from PPE (cost)

(275,000)

-

(275,000)

Depreciation

-

(60,450)

(60,450)

Conversion effect (depreciation)

(488,315)

(291,928)

(780,243)

Conversion effect

-

31,934

31,934

Book Value

5,097,142

1,740,860

6,838,002

 

 

 

 

As of December 31, 2015

 

 

 

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

 

 

 

 

As of December 31, 2016

 

 

 

Additions

-

11,036

11,036

Divestitures

(2,563)

-

(2,563)

Depreciation

-

(41,055)

(41,055)

Conversion effect (depreciation)

(364,940)

(218,986)

(583,926)

Conversion effect

-

32,333

32,333

Book Value

4,729,639

1,524,188

6,253,827

 

 

 

 

As of December 31, 2016

 

 

 

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

Personal expense

For the years ended as of December 31,

2019

2018

2017

ThCh$

ThCh$

ThCh$

Salaries

168,117,881

159,246,822

151,944,702

Employees’ short-term benefits

27,469,694

31,528,110

27,588,955

Total expenses for short-term employee benefits

195,587,575

190,774,932

179,533,657

Employments termination benefits

7,419,296

9,183,516

8,839,682

Other staff expense

34,115,503

32,183,184

32,485,170

Total (1)

237,122,374

232,141,632

220,858,509

 

Investment property includes twenty land properties, two offices(1)See Note 29 – Natures of cost 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$ 251,545 revenue during year 2016 (ThCh$ 172,243 in 2015 and ThCh$ 153,283 in 2014)expense. Additionally, there are three land properties in Argentina, which are leased and generated an income for ThCh$ 131,389 for year 2016 (ThCh$ 127,093 in 2015 and ThCh$ 117,661 in 2014). In addition, the expenses associated with such investment properties amounted to ThCh$ 71,090 for the year ended as of December 31, 2016 (ThCh$ 120,340 in 2015 and ThCh$ 190,670 in 2014).

 

The fair value, of investment property that represent 90% of the book value, is ThCh$ 18,249,882.

Management has not detected any evidence of impairment of Investment property.

The Company does not maintain any pledge or restriction over investment property items.

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

Note 2426Assets of disposal group held for saleOther non-financial liabilities

 

a)Chile Operating segment

On January 7, 2016, the shareholders of Compañía Pisquera Bauzá S.A. came to an agreement in which Compañía Pisquera de Chile S.A. (“CPCh”) (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).

In January 2016, the first installment was paid for an amount of UF 20,000 (equivalents to ThCh$ 512,596 on January 8, 2016).

As of December 31, 2016, the balances is UF 130,000 plus interest, of which UF 20,000 with short-term maturity (equivalents to ThCh$ 526,959) and UF 110,000 with long-term maturity (equivalents to ThCh$ 2,898,277 payable in annual installments maturing in 2020 (SeeNote 14).

Previously, in October 2015, the Board of Directors of CPCh agreed to instruct the Management to obtain an agreement with Agroproductos Bauzá based on the terms which were reflected in the before mentioned transaction. As a consequence of the aforementioned CPCh recorded a provision before taxes for an amount of ThCh$ 1,401,253, charged to the result of the fourth quarter of for year 2015. This amount is presented under Other gains/losses in the Consolidated Statement of Income of the quarter.

b)

International Business Operating segment

-

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. At the date of issuance of these Financial Statements this transaction is current.

-

During December 2014, the Board of 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 under item Other income by function.

-

During September 2015, the Board of subsidiary Saenz Briones S.A. authorized the sale of property located in Luján de Cuyo city, Provincia de Mendoza, Argentina. At the date of issuance of these Financial Statements that property is the same condition.

c)

Wine Operating segment

-

During November 2015, the Board of 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 December 23, 2015 signed sale reservation contract for al fiexed assets available for the sale. At the date of issuance of these Financial Statements that  transaction is current.

As described inNote 2, 2.18, non-current assets held for sale have been recorded at the lower of carrying amount less cost to sale.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

AtDecember 31, 2016 and 2015, the items of assets held for saleThe total Other non-financial liabilities are the following:detailed as follows:

 

Assets of disposal group held for sale

As of December 31, 2016

As of December 31, 2015

ThCh$

ThCh$

Land

1,816,348

1,855,980

Contructions

504,207

544,863

Machinerys

57,332

74,109

Joint agreement (Trademarks, goodwill, net of deferred taxes) (1)

-

3,844,364

Total

2,377,887

6,319,316

 

As of December 31, 2019

As of December 31, 2018

 

ThCh$

ThCh$

Parent dividend provisioned by the board (1)

-

51,730,402

Parent dividend provisioned according to policy

37,358,131

101,714,994

Outstanding parent dividends

948,439

684,158

Subsidiaries dividends according to policy

8,416,207

7,502,145

Total dividends payable

46,722,777

161,631,699

Income received in advance (2)

1,312,595

2,497,811

Others

324,395

426,030

Total

48,359,767

164,555,540

Current

48,359,767

164,555,540

Total

48,359,767

164,555,540

 

(1)  Under this ítem include ThCH$ 2,856,245 related to GoodwillSeeNote 1 – Common Shareholders’ Equity, dividends.

(2)SeeNote 1 – General information, letter C).

 

 

Note 25Income taxes

Tax accounts receivable

The detail of the taxes receivables is the following:

 

As of December 31, 2016

As of December 31, 2015

 

ThCh$

ThCh$

Refundable tax previous year

4,436,810

3,296,151

Taxes under claim (1)

2,141,476

2,138,675

Argentinean tax credits

2,532,114

3,756,333

Monthly provisions

18,860,164

4,592,593

Payment of absorbed profit provision

75,141

33,276

Other credits

1,377,774

1,447,192

Total

29,423,479

15,264,220

(1)This item include claims for refund of first category taxes (Provisional payment of absorved profit) for an amount of ThCh$ 968,168 that was presented in April 2014 from the commercial year 2013 and claim to ThCh$ 1,173,281 presented in April 2010 from the commercial year 2009.

Taxes accounts payable

The detail of taxes payable taxes is as follows:

 

As of December 31, 2016

As of December 31, 2015

 

ThCh$

ThCh$

Chilean income taxes

7,033,363

7,689,139

Monthly provisional payments

4,365,187

3,488,085

Chilean unique taxes

68,824

224,045

Estimated Argentine minimum gain subsidiaries taxes

339,060

796,755

Total

11,806,434

12,198,024


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Tax expense

The detail of the income tax and deferred tax expense for the years ended as ofDecember 31, 2016, 2015 and 2014, is as follows:

 

For the years ended as of December 31,

 

2016

2015

2014

 

ThCh$

ThCh$

ThCh$

Income as per deferred tax related to the origin and reversal of temporary differences

(878,629)

(454,933)

992,342

Prior year adjustments

3,838,136

3,204,656

4,763,242

Effect of change in tax rates

(856,612)

(1,066,964)

(14,520,287)

Tax benefits (loss)

(765,292)

248,559

527,447

Total deferred tax expense

1,337,603

1,931,318

(8,237,256)

Current tax expense

(31,285,976)

(48,168,474)

(34,522,795)

Prior period adjustments

(298,010)

(3,877,360)

(3,913,449)

(Loss) Income from income tax

(30,246,383)

(50,114,516)

(46,673,500)

(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 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,

 

2016

2015

2014

 

ThCh$

ThCh$

ThCh$

Net income from cash flow hedge

(20,648)

(17,563)

39,470

Actuarial gains and losses deriving from defined benefit plans

659,198

314,541

501,689

Charge to equity

638,550

296,978

541,159

Effective Rate

The Company’s income tax expense as ofDecember 31, 2016, 2015 y 2014 represents 17.70%, 26.30% and 27.90%, 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,

2016

2015

2014

ThCh$

Rate (%)

ThCh$

Rate (%)

ThCh$

Rate (%)

Income before taxes

170,328,270

-

190,640,106

-

167,168,082

-

Income tax using the statutory rate

(40,878,785)

24.00

(42,894,024)

22.50

(35,105,297)

21.00

Adjustments to reach the effective rate

 

 

 

 

 

 

Tax effect of permanent differences, net

10,357,858

(6.10)

(3,202,337)

1.70

(133,385)

0.10

Effect of change in tax rate

(856,612)

0.50

(1,066,964)

0.50

(14,520,287)

8.60

Effect of tax rates in Argentina and Uruguay

(1,308,482)

0.80

(2,278,489)

1.20

2,235,676

(1.30)

Prior year adjustments

2,439,638

(1.40)

(672,702)

0.40

849,793

(0.50)

Income tax, as reported

(30,246,383)

17.70

(50,114,516)

26.30

(46,673,500)

27.90


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Deferred taxes

Deferred tax assets and liabilities included in the Balance Sheet were as follows:

 

As of December 31, 2016

As of December 31, 2015

 

ThCh$

ThCh$

Movement of deferred tax assets

 

 

Accounts receivable impairment provision

861,158

714,251

Other non-tax expenses

11,303,607

12,808,597

Employee benefits

2,166,999

1,930,430

Inventory impairment provision

1,554,362

499,611

Severance indemnity

4,937,161

5,044,561

Inventory valuation

2,337,591

1,454,638

Amortization of intangibles

206,616

2,517,835

Other assets

3,536,574

3,856,366

Tax loss carryforwards

4,960,567

5,703,304

Total assets from deferred taxes

31,864,635

34,529,593

 

 

 

Deferred taxes liabilities

 

 

Fixed assets depreciation

36,617,407

40,338,573

Capitalized software expense

2,271,445

1,852,161

Agricultural operation expense

5,698,674

4,348,021

Manufacturing indirect activation costs

4,865,509

3,867,574

Intangibles

10,054,490

10,012,031

Land

23,726,645

26,511,916

Other liabilities

3,555,781

3,307,567

Total liabilities from deferred taxes

86,789,951

90,237,843

Total

(54,925,316)

(55,708,250)

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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Movement of deferred tax assets

ThCh$

As of January 1, 2015

(57,311,681)

Increase in joint operation

(1,208,970)

Deferred Tax Losses Tax absorption

(33,276)

Deferred taxes from tax loss carry forwards absorption

1,931,318

Conversion effect

503,187

Deferred taxes against equity

296,978

Other deferred movements taxes

114,194

Change

1,603,431

As of December 31, 2015

(55,708,250)

As of January 1, 2016

Increase in joint operation

(1,514,955)

Deferred Tax Losses Tax absorption

(178,473)

Deferred taxes from tax loss carry forwards absorption

1,337,603

Conversion effect

245,227

Deferred taxes against equity

638,550

Other deferred movements taxes

254,982

Change

782,934

As of December 31, 2016

(54,925,316)

Note 2627Other financial liabilitiesCommon Shareholders’ Equity

 

DebtsSubscribed and financial liabilities classified based onpaid-up Capital

As of December 31, 2019, December 31, 2018 and December 31, 2017, the typeCompany’s capital shows a balance of obligationThCh$ 562,693,346, divided into 369,502,872 shares of common stock without face value, entirely subscribed and their classifications inpaid-up. The Company has issued only one series of common shares. Such common shares are registered for trading at the consolidated balance sheet areSantiago Stock Exchange and the Chilean Electronic Stock Exchange, and at the New York Stock Exchange /NYSE), evidenced by ADS (American Depositary Shares), with an equivalence of two shares per ADS (See Note 1 - General information).

The Company has not issued any others shares or convertible instruments during the period, thus changing the number of outstanding shares as follows:of December 31, 2019 and 2018 and 2017.

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.

Earnings per share

The basic earnings per share is calculated as the ratio between the net income (loss) for the period attributable to equity holders of the parent 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 equity holders of the parent and the weighted average additional common shares that would have been outstanding if it had become all ordinary potential dilutive shares.

 

 

As of December 31, 2016

As of December 31, 2015

 

Current

Non current

Current

Non current

 

ThCh$

ThCh$

ThCh$

ThCh$

Bank borrowings (*)

39,079,561

29,606,398

27,714,998

48,335,093

Bonds payable (*)

3,250,023

70,836,716

3,155,239

71,352,994

Financial leases obligations (*)

215,950

17,500,919

321,416

17,238,458

Deposits for return of bottles and containers

13,015,723

-

12,503,170

-

Derivatives financial instruments (**)

11,118,676

-

171,470

-

Hedging derivatives (**)

-

-

107,698

-

Total

66,679,933

117,944,033

43,973,991

136,926,545

(*)  SeeNote 5.

(**) SeeNote 6.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

The maturitiesinformation used for the calculation of the earnings as per each basic and interest rates of such obligations arediluted share is as follows:

 

Earnings per share

For the years ended as of December 31,

2019

2018

2017

Equity holders of the controlling company (ThCh$)

130,141,692

306,890,792

129,607,353

Weighted average number of shares

369,502,872

369,502,872

369,502,872

Basic earnings per share (in Chilean pesos)

352.21

830.55

350.76

Equity holders of the controlling company (ThCh$)

130,141,692

306,890,792

129,607,353

Weighted average number of shares

369,502,872

369,502,872

369,502,872

Diluted earnings per share (in Chilean pesos)

352.21

830.55

350.76

As ofDecember 31, 2016:2019, 2018 and 2017, the Company has not issued any convertible or other kind of instruments creating diluting effects.

 

 

 

 

 

 

 

 

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$

 

%

Bank borrowings

 

 

 

 

 

 

 

 

 

 

 

 

 

0-E

Finca La Celia S.A.

Argentina

0-E

Banco Superville

Argentina

USD

136,115

-

-

-

-

136,115

At maturity

3.50

0-E

Finca La Celia S.A.

Argentina

0-E

Banco Superville

Argentina

USD

135,537

-

-

-

-

135,537

At maturity

3.50

0-E

Finca La Celia S.A.

Argentina

0-E

Banco Superville

Argentina

USD

217,353

-

-

-

-

217,353

At maturity

3.50

0-E

Finca La Celia S.A.

Argentina

0-E

Banco Superville

Argentina

USD

-

54,032

-

-

-

54,032

At maturity

4.25

0-E

Finca La Celia S.A.

Argentina

0-E

Banco Macro

Argentina

USD

-

200,933

-

-

-

200,933

At maturity

1.85

0-E

Finca La Celia S.A.

Argentina

0-E

Banco Patagonia

Argentina

USD

201,628

-

-

-

-

201,628

At maturity

2.70

0-E

Finca La Celia S.A.

Argentina

0-E

Banco Patagonia

Argentina

USD

-

133,909

-

-

-

133,909

At maturity

2.00

0-E

Finca La Celia S.A.

Argentina

0-E

Banco Patagonia

Argentina

$ARG

1,436

1,589

-

-

-

3,025

Quarter

15.25

0-E

Finca La Celia S.A.

Argentina

0-E

Banco Patagonia

Argentina

$ARG

433,258

-

-

-

-

433,258

At maturity

36.00

0-E

Finca La Celia S.A.

Argentina

0-E

Banco Patagonia

Argentina

$ARG

228,734

-

-

-

-

228,734

At maturity

29.00

0-E

Finca La Celia S.A.

Argentina

0-E

Banco Patagonia

Argentina

$ARG

340,659

-

-

-

-

340,659

At maturity

28.50

0-E

Finca La Celia S.A.

Argentina

0-E

Banco Patagonia

Argentina

$ARG

-

518,917

-

-

-

518,917

At maturity

26.75

0-E

Finca La Celia S.A.

Argentina

0-E

Banco San Juan

Argentina

$ARG

367,243

-

-

-

-

367,243

Quarter

30.00

0-E

Finca La Celia S.A.

Argentina

0-E

Banco San Juan

Argentina

$ARG

9,178

400,250

-

-

-

409,428

Quarter

27.00

0-E

Finca La Celia S.A.

Argentina

0-E

Banco San Juan

Argentina

$ARG

425

84,263

-

-

-

84,688

Quarter

23.00

0-E

Finca La Celia S.A.

Argentina

0-E

BBVA

Argentina

$ARG

524,538

-

-

-

-

524,538

At maturity

27.50

0-E

Finca La Celia S.A.

Argentina

0-E

BBVA

Argentina

$ARG

50,045

-

-

-

-

50,045

At maturity

27.00

0-E

Finca La Celia S.A.

Argentina

0-E

Banco Patagonia

Argentina

$ARG

290,342

-

-

-

-

290,342

At maturity

27.75

0-E

Finca La Celia S.A.

Argentina

0-E

Banco Patagonia

Argentina

$ARG

74,763

-

-

-

-

74,763

At maturity

27.50

91,041,000-8

Viña San Pedro Tarapacá S.A. (1)

Chile

97,004,000-5

Banco de Chile

Chile

CLP

57,821

7,271,000

-

-

-

7,328,821

At maturity

4.40

91,041,000-8

Viña San Pedro Tarapacá S.A.

Chile

97,030,000-7

Banco Estado

Chile

UF

157,295

-

10,012,233

-

-

10,169,528

At maturity

2.70

91,041,000-8

Viña San Pedro Tarapacá S.A. (1)

Chile

97,018,000-1

Scotiabank

Chile

USD

3,151

-

5,269,733

-

-

5,272,884

At maturity

1.79

99,586,280-8

Compañía Pisquera de Chile S.A

Chile

97,030,000-7

Banco Estado

Chile

CLP

457,454

16,000,000

-

-

-

16,457,454

At maturity

6.86

96,711,590-8

Manantial S.A.

Chile

97,004,000-5

Banco de Chile

Chile

UF

16,333

50,142

46,143

-

-

112,618

Monthly

4.80

96,711,590-8

Manantial S.A.

Chile

97,004,000-5

Banco de Chile

Chile

UF

9,264

28,576

57,305

-

-

95,145

Monthly

5.48

96,711,590-8

Manantial S.A.

Chile

97,004,000-5

Banco de Chile

Chile

UF

7,599

5,124

-

-

-

12,723

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

18,000

-

180,000

Monthly

6.00

96,711,590-8

Manantial S.A.

Chile

97,004,000-5

Banco de Chile

Chile

CLP

19,000

57,000

12,667

-

-

88,667

Monthly

7.59

96,711,590-8

Manantial S.A.

Chile

97,004,000-5

Banco de Chile

Chile

CLP

14,000

42,000

88,667

-

-

144,667

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

22,500

-

292,500

Monthly

5.76

96,711,590-8

Manantial S.A.

Chile

76,645,030-K

Banco Itaú

Chile

CLP

8,111

25,086

72,892

13,047

-

119,136

Monthly

6.12

96,711,590-8

Manantial S.A.

Chile

97,030,000-7

Banco Estado

Chile

CLP

-

205,849

-

-

-

205,849

Monthly

4.92

96,711,590-8

Manantial S.A.

Chile

97,030,000-7

Banco Estado

Chile

CLP

67,488

203,111

580,563

-

-

851,162

Monthly

4.92

96,711,590-8

Manantial S.A.

Chile

97,030,000-7

Banco Estado

Chile

CLP

19,030

58,392

167,461

52,210

-

297,093

Monthly

5.02

96,711,590-8

Manantial S.A.

Chile

97,004,000-5

Banco de Chile

Chile

CLP

37,500

112,500

37,510

-

-

187,510

Monthly

5.04

96,711,590-8

Manantial S.A.

Chile

97,004,000-5

Banco de Chile

Chile

CLP

-

255,037

-

-

-

255,037

Monthly

4.68

0-E

Milotur S.A.

Uruguay

0-E

Banco Itaú

Uruguay

UYI

406,353

638,554

696,605

-

-

1,741,512

Monthly

6.00

96,981,310-6

Compañia Cervecera Kunstmann S.A.

Chile

97,004,000-5

Banco de Chile

Chile

CLP

21,408

-

2,000,000

-

-

2,021,408

At maturity

5.35

96,981,310-6

Compañia Cervecera Kunstmann S.A.

Chile

97,018,000-1

Scotiabank

Chile

CLP

18,000

2,000,000

-

-

-

2,018,000

At maturity

4.50

96,981,310-6

Compañia Cervecera Kunstmann S.A.

Chile

97,004,000-5

Banco de Chile

Chile

CLP

-

6,656

400,000

-

-

406,656

At maturity

4.68

96,981,310-6

Compañia Cervecera Kunstmann S.A.

Chile

97,030,000-7

Banco Estado

Chile

CLP

190,490

584,272

1,672,625

520,654

-

2,968,041

Monthly

5.02

0-E

Compañía Industrial Cervecera S.A.

Argentina

0-E

Banco BNA

Argentina

$ARG

251,181

717,375

1,912,999

-

-

2,881,555

Monthly

15.00

0-E

Compañía Industrial Cervecera S.A.

Argentina

0-E

Banco Macro

Argentina

$ARG

34,300

23,406

-

-

-

57,706

Monthly

15.25

0-E

Compañía Industrial Cervecera S.A.

Argentina

0-E

Banco BBVA

Argentina

$ARG

421,179

421,652

-

-

-

842,831

Quarter

26.00

0-E

Compañía Industrial Cervecera S.A.

Argentina

0-E

Banco BNA

Argentina

$ARG

103,106

303,347

134,821

-

-

541,274

Monthly

25.19

0-E

Compañía Industrial Cervecera S.A.

Argentina

0-E

Banco Galicia

Argentina

$ARG

68,826

789,966

5,529,763

-

-

6,388,555

Quarter

30.50

0-E

Compañía Industrial Cervecera S.A.

Argentina

0-E

Banco Citibank

Argentina

$ARG

30,190

-

-

-

-

30,190

At maturity

25.66

0-E

Compañía Industrial Cervecera S.A.

Argentina

0-E

Banco HSBC

Argentina

$ARG

2,109,794

-

-

-

-

2,109,794

At maturity

25.25

0-E

Compañía Industrial Cervecera S.A.

Argentina

0-E

Banco BBVA

Argentina

$ARG

1,392

-

-

-

-

1,392

At maturity

26.12

0-E

Compañía Industrial Cervecera S.A.

Argentina

0-E

Banco Macro

Argentina

$ARG

12

-

-

-

-

12

At maturity

25.53

0-E

Compañía Industrial Cervecera S.A.

Argentina

0-E

Santander Rio

Argentina

$ARG

199,954

-

-

-

-

199,954

At maturity

25.00

0-E

Saenz Briones y Cía. S.A.

Argentina

0-E

Banco Citibank

Argentina

$ARG

1,138

-

-

-

-

1,138

At maturity

26.50

Sub-total

 

 

 

 

 

 

7,778,623

31,300,938

28,979,987

626,411

-

68,685,959

 

 

 (1) This obligation is hedged by a Cross Currency Interest Rate Swap agreement(Note 6Distributable 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, 2019.

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, 2019, 2018 and 2017, the Company has distributed the following dividends:

Dividend Nº

Payment Date

Type of Dividend

Dividends per Share ($)

Related to FY

252

01-06-2017

Interim

66,0000

2016

253

04-26-2017

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

257

04-29-2019

Final

358,33030

2018

258

12-26-2019

Interim

75,0000

2019

 

 

 

 

 

On December 6, 2017, at the 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.

On April 11, 2018, at the Shareholders’ Meeting it was agreed to pay the final Dividend No. 255, amounting to ThCh$ 40,234,551 corresponding to the 31.04% of Net income attributable 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.

In the Ordinary Shareholders’ Meeting of Compañía Cervecerías Unidas S.A., on April 17, 2019, it was agreed, with charge to the profits of the year 2018, the distribution of a final Dividend No. 257 of Ch$ 358.

(*) SeeNote 533030 per share, increasing the non-discounted contractual cash flows.amount total to distribute to ThCh$ 132,404,074. This dividend was paid as of April 29, 2019.

 

On December 4, 2019, at the Ordinary Board Director Meeting it was agreed to pay the interim Dividend No. 258, amounting to ThCh$ 27,712,715 corresponding to Ch$ 75 per share. This dividend was paid on December 26, 2019.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Consolidated Statement of Comprehensive Income

Comprehensive income and expenses are detailed as follows:

Other Income and expense charged or credited against net equity

Gross Balance

Tax

Net Balance

ThCh$

ThCh$

ThCh$

Gains (losses) on cash flow hedges (1)

345,986

(93,416)

252,570

Gains (losses) on exchange differences  on translation (1)

17,077,670

-

17,077,670

Reserve of Actuarial gains and losses on defined benefit plans

(4,127,305)

1,107,699

(3,019,606)

Total comprehensive income As of December 31, 2019

13,296,351

1,014,283

14,310,634

    

Other Income and expense charged or credited against net equity

Gross Balance

Tax

Net Balance

ThCh$

ThCh$

ThCh$

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$

ThCh$

Cash flow hedge (1)

(5,661)

728

(4,933)

Conversion differences of subsidiaries abroad  (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)

(1)These concepts will be reclassified to the Statement of Income when it’s settled.

 

Reserves affecting other comprehensive incomes

The movement of comprehensive income and expense is detailed as follows:

 

 

 

 

 

 

 

 

Maturity

 

 

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

 

 

 

 

 

 

 

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

 

%

Bonds payable

 

 

 

 

 

 

 

 

 

 

 

 

 

90,413,000-1

Compañía Cervecerías Unidas S.A.

Chile

388 18/10/2004 Bono Serie E

Chile

UF

-

2,612,294

5,125,926

5,298,895

7,904,394

20,941,509

Semiannual

4.00

90,413,000-1

Compañía Cervecerías Unidas S.A.

Chile

573 23/03/2009 Bono Serie H

Chile

UF

637,729

-

2,345,596

9,540,856

40,621,049

53,145,230

Semiannual

4.25

Sub-total

 

 

 

 

 

 

637,729

2,612,294

7,471,522

14,839,751

48,525,443

74,086,739

 

 

a)As of December 31, 2019:

 

 

 

 

 

 

 

 

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

-

Banco Supervielle

Argentina

$ARG

981

3,017

1,464

-

-

5,462

At maturity

17.50

96,711,590-8

Manantial S.A.

Chile

-

Banco de Creditos e Inversiones

Chile

UF

14,369

3,837

-

-

-

18,206

Monthly

3.13

96,711,590-8

Manantial S.A.

Chile

-

Banco de Chile

Chile

UF

6,054

8,072

-

-

-

14,126

Monthly

8.65

96,711,590-8

Manantial S.A.

Chile

-

Banco Security

Chile

UF

4,489

8,755

-

-

-

13,244

Monthly

9.25

90,413,000-1

Compañía Cervecerías Unidas S.A.

Chile

-

Consorcio Nacional de Seguros S.A

Chile

UF

13,759

42,717

125,221

130,838

17,131,641

17,444,176

Monthly

7.07

96,981,310-6

Compañía Cervecera Kunstmann S.A

Chile

97,030,000-7

BancoEstado

Chile

UF

25,436

77,942

98,688

-

-

202,066

Monthly

4.33

76,077,848-6

Cervecera Belga de la Patagonia S.A.

Chile

97,015,000-5

Banco Santander de Chile

Chile

UF

-

6,522

-

13,067

-

19,589

Monthly

6.27

Sub-total

 

 

 

 

 

 

65,088

150,862

225,373

143,905

17,131,641

17,716,869

 

 

               

Total

 

 

 

 

 

 

8,481,440

34,064,094

36,676,882

15,610,067

65,657,084

160,489,567

 

 

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

(70,932,096)

345,986

(4,127,305)

(74,713,415)

Deferred taxes

-

(93,416)

1,107,699

1,014,283

Inflation adjustment of subsidiaries in Argentina

88,009,766

-

-

88,009,766

Total changes in equity

17,077,670

252,570

(3,019,606)

14,310,634

Equity holders of the parent

16,122,893

249,503

(2,887,580)

13,484,816

Non-controlling interests

954,777

3,067

(132,026)

825,818

Total changes in equity

17,077,670

252,570

(3,019,606)

14,310,634


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

b)As of December 31, 2015:2018:

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

c)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)

Other Reserves

                                                       

 

 

 

 

 

 

 

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$

 

%

Bank borrowings

 

 

 

 

 

 

 

 

 

 

 

 

 

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

At maturity

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

Quarter

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

0-E

Viña San Pedro Tarapaca S.A. (1)

Argentina

O-E

Banco de Chile

Argentina

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

97.004.000-5

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

97.030.000-7

Scotiabank

Chile

USD

-

2,977

5,590,024

-

-

5,593,001

At maturity

1.15

91.041.000-8

Compañía Pisquera de Chile S.A

Chile

97.018.000-1

Banco Estado

Chile

CLP

449,879

-

15,978,778

-

-

16,428,657

At maturity

6.86

99.586.280-8

Manantial S.A.

Chile

97.030.000-7

Banco de Chile

Chile

UF

15,123

46,470

109,544

-

-

171,137

At maturity

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

97.004.000-5

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

76.645.030-K

Banco Estado

Chile

CLP

200,000

-

-

-

-

200,000

Monthly

5.26

96.711.590-8

Manantial S.A.

Chile

76.645.030-K

Banco Estado

Chile

CLP

254,313

-

-

-

-

254,313

Monthly

4.38

96.711.590-8

Manantial S.A.

Chile

97.030.000-7

Banco Estado

Chile

CLP

35,843

36,436

-

-

-

72,279

At maturity

7.56

96.711.590-8

Manantial S.A.

Chile

97.030.000-7

Banco Estado

Chile

CLP

-

150,000

-

-

-

150,000

At maturity

5.40

96.711.590-8

Manantial S.A.

Chile

97.030.000-7

Banco Estado

Chile

CLP

-

255,510

-

-

-

255,510

Monthly

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

96.711.590-8

Milotur S.A.

Chile

97.030.000-7

Nuevo Banco Comercial

Chile

USD

25,991

71,036

-

-

-

97,027

At maturity

5.50

96.711.590-8

Milotur S.A.

Chile

97.030.000-7

Banco Itaú

Chile

UYI

-

344,850

1,701,800

-

-

2,046,650

Monthly

6.00

0-E

Compañia Cervecera Kunstmann S.A.

Uruguay

O-E

Banco Estado

Uruguay

CLP

-

515,083

-

-

-

515,083

Monthly

4.34

0-E

Compañia Cervecera Kunstmann S.A.

Uruguay

O-E

Banco Estado

Uruguay

CLP

-

618,100

-

-

-

618,100

Monthly

4.34

96.981.310-6

Compañia Cervecera Kunstmann S.A.

Chile

97.030.000-7

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

97.030.000-7

Scotiabank

Chile

USD

7,229

453,561

-

-

-

460,790

At maturity

1.90

96.981.310-6

Compañia Cervecera Kunstmann S.A.

Chile

97.004.000-5

Banco Estado

Chile

CLP

180,724

555,208

1,589,858

1,378,183

-

3,703,973

At maturity

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

96.981.310-6

Compañía Industrial Cervecera S.A.

Chile

97.030.000-7

Banco BNA

Chile

$ARG

345,777

927,294

2,472,784

1,236,392

-

4,982,247

Monthly

15.00

96.981.310-6

Compañía Industrial Cervecera S.A.

Chile

97.018.000-1

Banco BNA

Chile

$ARG

173,166

392,114

697,088

-

-

1,262,368

At maturity

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

Monthly

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 y Cía. S.A.

Argentina

0-E

Banco Citibank

Argentina

$ARG

65,596

121,022

-

-

-

186,618

Quarter

15.25

Sub-total

 

 

 

 

 

 

6,259,888

21,455,110

35,558,704

12,776,389

-

76,050,091

 

 

The reserves that are a part of the Company’s equity are as follows:

 (1)Currency Translation Reserves: This obligationreserve originated from the translation of foreign subsidiaries’ and joint ventures financial statements which functional currency is hedged bydifferent from the presentation currency of the Consolidated Financial Statements and inflation adjustment of subsidiaries in Argentina. As of December 31, 2019, 2018 and 2017, it amounts to a Cross Currency Interest Rate Swap agreement(Note 6).negative reserve of ThCh$ 101,931,435 ThCh$ 118,054,328 and ThCh$ 153,541,761, respectively.

(2)Hedge reserve: This obligationreserve originated from the hedge accounting application of financial liabilities. The reserve is hedged byreversed 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, 2019, 2018 and 2017, it amounts to a Cross Currency Rate Swap agreement(Note 6).

(*) SeeNote 5 the non-discounted contractual cash flows.positive reserve of ThCh$ 329,691, ThCh$ 80,188 and ThCh$ 28,244  respectively, net of deferred taxes.

 

Actuarial gains and losses on defined benefit plans reserves: As of December 31, 2019, 2018 and 2017 the amount recorded is a negative reserve of ThCh$  7,728,154, ThCh$ 4,840,574 and ThCh$ 3,958,511, respectively, net of deferred taxes.

Other reserves: As of December 31, 2019, 2018 and 2017 the amount is a negative reserve of ThCh$ 28,172,631, ThCh$ 28,233,512 and ThCh$ 20,603,251, respectively. Such reserves relate mainly to the following concepts:

-    

Adjustment due to re-assessment of fixed assets carried out in 1979 (increased for ThCh$ 4,087,396).

-    

Price level restatement of paid-up capital registered as of December 31, 2008, according to CMF Circular Letter Nª456 (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 (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).


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

-    

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 aforementioned effect was accounted in result of the period.

-    

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).

Note 28Non-controlling Interests

Non-controlling Interests are detailed as follows:

a.Equity

Equity

As of December 31, 2019

As of December 31, 2018

ThCh$

ThCh$

Viña San Pedro Tarapacá S.A.

40,970,994

39,007,270

Bebidas del Paraguay S.A.

18,930,090

18,803,673

Aguas CCU-Nestlé Chile S.A.

26,718,238

24,118,966

Cervecería Kunstmann S.A.

7,221,111

8,118,212

Compañía Pisquera de Chile S.A.

5,368,951

5,109,395

Saenz Briones & Cía. S.A.I.C.

1,164,303

1,179,410

Distribuidora del Paraguay S.A.

4,777,051

4,445,452

Bebidas Bolivianas BBO S.A. (1)

8,579,344

7,075,032

Other

1,142,971

1,131,825

Total

114,873,053

108,989,235

 

(1)SeeNote 15 – Business combinations, letter a).

b.Result

 

For the years ended as of December 31,

Result

2019

2018

2017

 

ThCh$

ThCh$

ThCh$

Aguas CCU-Nestlé Chile S.A.

7,590,887

7,587,140

7,814,358

Viña San Pedro Tarapacá S.A.

3,775,811

2,520,768

6,223,423

Cervecería Kunstmann S.A.

3,111,069

2,772,074

1,979,976

Compañía Pisquera de Chile S.A.

1,283,694

1,154,401

954,046

Saenz Briones & Cía. S.A.I.C.

(69,465)

42,787

33,027

Distribuidora del Paraguay S.A.

324,839

1,431,158

906,728

Bebidas del Paraguay S.A.

221,498

210,568

580,406

Bebidas Bolivianas BBO S.A. (1)

(568,189)

(552,816)

-

Other

(166,176)

27,659

9,102

Total

15,503,968

15,193,739

18,501,066

 

 

 

 

Registration or ID No. Instrument

 

 

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

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

 

 

 

 

 

 

615,318

2,539,921

4,953,915

7,348,000

59,051,079

74,508,233

 

 

(1)SeeNote 15 – Business combinations, letter a).

 

 

 

 

 

 

 

 

 

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

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

BancoEstado

Chile

UF

23,716

72,672

196,552

-

-

292,940

Monthly

4.33

76.077.848-6

Cervecera Belga de la Patagonia S.A.

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

 

 

 

 

 

 

119,492

201,924

378,035

231,950

16,628,473

17,559,874

 

 

               

Total

 

 

 

 

 

 

6,994,698

24,196,955

40,890,654

20,356,339

75,679,552

168,118,198

 

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

Detailsc.The Summarized financial information of the fair value of bank borrowings, financial leases obligations and bonds payable are described inNote 6.non controlling interest is detailed as follows:

 

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%

 

As of December 31, 2019

As of December 31, 2018

 

 

 

 

ThCh$

ThCh$

Assets and Liabilities

  

Current assets

762,824,893

711,482,809

Non-current assets

922,672,059

829,511,196

Current liabilities

438,802,486

399,409,388

Non-current liabilities

207,501,667

149,602,171

 

 

 

Dividends paid

10,969,709

3,212,105

 

 

 

 

 

The debts and financial liabilities are stated in several currencies and they accrue fixed and variablemain significant Non-controlling interest rates. The details of such obligations classified as per currency and interest type (excluding the effect of cross currency interest rate swap agreements) are as follows:

 

As of December 31, 2016

As of December 31, 2015

 

Fixed Interest Rate

Variable Interest Rate

Fixed Interest Rate

Variable Interest Rate

 

ThCh$

ThCh$

ThCh$

ThCh$

US Dollar

1,079,507

5,272,884

686,276

15,940,220

Chilean Pesos

33,822,001

-

25,840,175

-

Argentine Pesos

11,515,546

4,869,957

17,146,915

4,266,388

Unidades de Fomento

102,188,160

-

102,191,574

-

UYI

1,741,512

-

2,046,650

-

Total

150,346,726

10,142,841

147,911,590

20,206,608

The terms and conditions of the main interest accruing obligations as of December 31, 2016, were as follows:

A)Bank Borrowings

Banco Estado – Bank Loans

a)   On July 27, 2012, the subsidiary Compañíis represented by Viña Pisquera ChileSan Pedro Tarapacá 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 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,which will be measured on the half-yearly financial statements of CPCh:balances:

 

 

As of December 31, 2019

As of December 31, 2018

 

Assets and Liabilities

 

 

ThCh$

ThCh$

Assets and Liabilities

  

Current assets

161,149,880

156,118,074

Non-current assets

219,742,431

185,841,247

Current liabilities

90,203,962

80,877,682

Non-current liabilities

49,601,667

31,550,148

 

 

 

   -Maintain

 

For the years ended as of December 31,

Result

2019

2018

2017

 

ThCh$

ThCh$

ThCh$

Net sales

212,321,758

206,518,731

204,453,782

Net income of year

22,218,101

14,833,018

17,715,119

 

 

 

 

Dividends paid by Viña Financial Expense Coverage not less than 3, calculated asSan Pedro Tarapacá S.A. amounted to ThCh$ 7,416,023, ThCh$ 9,070,285 and ThCh$ 13,602,317, for the relationship between Gross Margin less Marketing costs, Distributionyears ended December 31, 2019, 2018 and Administration expenses, plus Other income by function, less Other expenses by function, plus Depreciation and Amortization, divided by Financial costs.2017, respectively.

 

   -Maintain a debt ratio of no more than 2.5, measured as Total liabilities divided by Equity.

   -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, 2016, the Company was in compliance with the financial covenants and specific requirements of this loan.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

b)   On April 25, 2012, the subsidiary Compañía Cervecera Kunstmann S.A. signed a bank loan with Banco Estado for a total

Note 29Nature of ThCh$ 500,000, maturing on April 25, 2013. 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.

cost and
expense

 

      This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interestOperational cost and capital amortization consists of a single payment at the end of the established term.

      On April 27, 2016, this loan was paid.

c)   On April 25, 2013, the subsidiary Compañía Cervecera Kunstmann S.A. signed a bank loan with Banco Estado for a total of ThCh$ 600,000, 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 27, 2016, this loan was paid.

d)   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.

e)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.

f)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 the loan was renewed for a term of 3 months, maturing on July 28, 2015.

On July 17, 2015, payment of the loan was made.

g)On July 15, 2015, the subsidiary Compañía Cervecera Kunstmann S.A. signed a bank loan with Banco Estado for a total of ThCh$ 4,000,000, maturing on July 14, 2020.

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.

h)On May 26, 2016, the subsidiary Aguas CCU-Nestlé Chile S.A. signed a bank loan with Banco Estado for a total of ThCh$ 5,300,000, maturing on November 22, 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 November 22, 2016, payment of the loan was made.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

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, maturing on July 11, 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.

      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 July 11, 2016, payment of the loan was made.

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 mitigatedexpenses grouped 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 July 7, 2016, payment of the loan was made.

      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 July 7, 2016, the subsidiary Compañía Cervecera Kunstmann S.A. signed a bank loan with Banco de Chile for a total of ThCh$ 7,271,000, maturing on July 2, 2017.

      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.

      This debt was changed to Euros 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 and 6.

d) 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.

      On April 22, 2016, payment of the loan was made.

e) 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.

f)    On April 20, 2016, the subsidiary Compañía Cervecera Kunstmann S.A. signed a bank loan with Banco de Chile for a total of ThCh$ 2,000,000, maturing on April 20, 2018.

      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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

g)   On August 25, 2016, the subsidiary Compañía Cervecera Kunstmann S.A. signed a bank loan with Banco de Chile for a total of ThCh$ 400,000, maturing on August 24, 2018.

      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.

Banco Scotiabank – Bank Loans

a)  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.

b)   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.

     On August 24, 2016, payment of the loan was made.

c)  On June 17, 2015, the subsidiary Viña San Pedro Tarapacá S.A. it signed a bank loan with Scotiabank for a total of US$ 7,871,500, 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 company 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 and6.

The aforementioned loans oblige the Company to comply with the covenants indicated in letter D) Restriction in this Note.

d)  On April 24, 2015, the subsidiary Compañía Cervecera Kunstmann SA He signed a bank loan with Scotiabank for a total of US$ 1,000,000, with a term of one year expiring at April 22, 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.

On April 22, 2016, payment of the loan was made.

e)  On April 20, 2016, the subsidiary Compañía Cervecera Kunstmann SA He signed a bank loan with Scotiabank for a total of ThCh$ 2,000,000, with a term of one year expiring at April 20, 2017.

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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

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, 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 Aires – Syndicated Bank Loan with Compañía Industrial Cervecera S.A. (CICSA)

On October 5, 2012, the subsidiary CICSA signed a syndicated bank loan for a total of 187.5 million Argentine Pesos, maturing on October 5, 2015.

The proportional participation of banks lenders isnature are detailed 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)Banco de Galicia y Buenos Aires S.A., with 20 million Argentine 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 of 15.01% whose payment is made monthly. The subsidiary amortizes capital in 9 consecutive and equal quarterly quotes, once the grace period of 12 months from the 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 EBITDA1.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.


1EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization).


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

As of December 31, 2016, the Company was in compliance with the financial covenants and specific requirements of this loan.

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 Argentine 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 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 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 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.

      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 Estado de Chile in favor of Banco de la Nación Argentina (seeNote 34).

b)   On April 20, 2015, the subsidiary CICSA signed a bank loan for a total of 24 million of argentine 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.

      The subsidiary amortizes capital in 30 monthly, once the grace period of 6 months from de date of disbursement.

      This loan is guaranteed by CCU S.A., through a Stand By issued by the Banco Estado de Chile (seeNote 34).

c)   On June 26, 2015, the subsidiary CICSA signed a bank loan for a total of 30 million of argentine pesos, maturing on December 26, 2015.

      This loan accrues a fixed interest at an annual rate of 23%. The subsidiary amortizes monthly interest and the capital amortization in 6 monthly.

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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

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, 2016, the Company was in compliance with the financial covenants and specific requirements of this loan.

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 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.


2EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization).


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Compañía Cervecera Kunstmann S.A., Manantial S.A. and Finca La Celia S.A.:

Other lease agreements are as follows:

Type

Institution

Contract Date

Currency

ThCh$

Number of quotas

Annual 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 2C

Banco de Chile

26-06-07

UF

7.716

121

5.80%

85

Land Lote 2D

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

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

 

 

 

 

 

 

 

 

The following is a detail of future payments and the current value of the financial lease obligations as ofDecember 31, 2015:

Lease Minimum Future Payments

As of December 31, 2016

Gross Amount

Interest

Amount

ThCh$

ThCh$

ThCh$

0 to 3 months

368,052

302,964

65,088

3 months to 1 year

1,050,810

899,948

150,862

Over 1 year to 3 years

2,603,315

2,377,942

225,373

Over 3 years to 5 years

2,305,704

2,161,799

143,905

Over 5 years

28,638,952

11,507,311

17,131,641

Total

34,966,833

17,249,964

17,716,869


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

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 to UF 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 of ThCh$ 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)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)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 costs 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 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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

(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)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)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)Not to make investments in facilities issued by related parties, except in the cases and under the terms established in the agreement.

(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, 2016 and December 31, 2015, the Company was in compliance with the financial covenants required for this public issue.

Series H and I Bonds – CCU S.A.

On March 23, 2009, the Company recorded in the Securities Record the issue of bonds Series H and I for a combined total of UF 5 million, with 5 and 21 years terms, respectively. Emissions of both series were 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 to ThCh$ 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)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. The Total Adjusted Liabilities are defined as Total Liabilities less Dividends provisioned, according to policy included in the Statement of Changes in Equity, plus the amount of all guarantees, debts or obligations of third parties not within the liability 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 account, according to policy included in the Statement of Changes in Equity.

(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)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.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

(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.

On March 17, 2014, the Company paid the total Serie I Bonds, equivalent UF 3,000,000.

As ofDecember 31, 2016 and December 31, 2015, the Company was in compliance with the financial covenants required for this public issue.

D) Restriction of subsidiary Viña San Pedro Tarapacá S.A.

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:

(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.

As ofDecember 31, 2016 and December 31, 2015, the subsidiary was in compliance with the financial covenants required for this public issue.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Note 27Accounts payable – trade and other payables

As ofDecember 31, 2016 and 2015, the total Accounts payable-trade and other payables are as follows:

 

As of December 31, 2016

As of December 31, 2015

 

Current

Non current

Current

Non current

 

ThCh$

ThCh$

ThCh$

ThCh$

Suppliers

210,160,789

-

179,926,026

-

Notes payable

2,121,496

1,082,898

3,930,657

1,645,098

Withholdings payable

47,395,567

-

43,880,120

-

Total

259,677,852

1,082,898

227,736,803

1,645,098

Note 28Provisions

As ofDecember 31, 2016 and 2015, the total provisions recorded in the consolidated statement of financial position are as follows:

 

As of December 31, 2016

As of December 31, 2015

Current

Non current

Current

Non current

ThCh$

ThCh$

ThCh$

ThCh$

Litigation

409,164

839,079

503,440

839,934

Others

-

484,441

-

636,584

Total

409,164

1,323,520

503,440

1,476,518

The following was the change in provisions during the years ended December 31, 2015 and 2016:

 

Litigation (1)

Others

Total

ThCh$

ThCh$

ThCh$

As of January 1, 2015

 

1,023,895

 

1,596,196

2,620,091

As of December 31, 2015

 

 

 

 

 

Incorporated

 

792,724

 

888

793,612

Used

 

(222,139)

 

-

(222,139)

Released

 

(31,005)

 

(801,778)

(832,783)

Conversion effect

 

(220,101)

 

(158,722)

(378,823)

As of December 31, 2015

 

1,343,374

 

636,584

1,979,958

As of December 31, 2016

 

 

 

 

 

Incorporated

 

551,167

 

22,219

573,386

Used

 

(267,704)

 

(14,173)

(281,877)

Released

 

(124,336)

 

(67,271)

(191,607)

Conversion effect

 

(254,258)

 

(92,918)

(347,176)

As of December 31, 2016

 

1,248,243

 

484,441

1,732,684

 

For the years ended as of December 31,

Costs and expenses by nature

2019

2018

2017

 

ThCh$

ThCh$

ThCh$

Direct cost

694,307,741

650,386,343

586,223,676

Personnel expense (1)

237,122,374

232,141,632

220,858,509

Transportation and distribution

245,696,284

243,907,283

235,265,049

Advertising and promotion

117,889,341

118,003,908

129,603,036

Depreciation and amortization

105,020,934

93,289,194

92,199,504

Materials and maintenance

49,356,159

46,610,947

46,172,647

Energy

29,922,632

29,309,465

25,940,847

Leases

12,798,957

17,727,367

15,929,047

Other expenses

122,202,733

111,639,503

117,992,179

Total

1,614,317,155

1,543,015,642

1,470,184,494

 

(1)  SeeNote 34.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

The maturities of provisions at December 31, 2016, were as follows:

 

Litigation

Others

Total

ThCh$

ThCh$

ThCh$

Less than one year

 

409,164

 

-

409,164

Between two and five years

 

423,863

 

484,441

908,304

Over five years

 

415,216

 

-

415,216

Total

 

1,248,243

 

484,441

1,732,684

Litigation25 - Employee benefits.

 

The detail of significant litigation proceedings to which the Company is exposed at a consolidated level is described inNote 34.

Management believes based on the development of such proceedings to date, the provisions established on a case by basis are adequate to cover the eventual adverse effects that could arise from these proceedings.

Note 29Other non-financial liabilities

As ofDecember 31, 2016 and 2015, the total Other non-financial liabilities are as follows:

 

As of December 31, 2016

As of December 31, 2015

 

ThCh$

ThCh$

Parent dividend provisioned by the board

24,387,190

24,387,190

Parent dividend provisioned according to policy

34,841,553

36,016,878

Outstanding parent dividends

915,585

723,259

Subsidiaries dividends according to policy

11,192,210

9,725,015

Others

33,434

89,802

Total

71,369,972

70,942,144

Current

71,369,972

70,942,144

Total

71,369,972

70,942,144

Note 30Employee BenefitsOther incomes by function

 

The Company grants short term and employment termination benefitsOther income by function is detailed as part of its compensation policies.follows:

 

The Parent Company and its subsidiaries maintain 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:

Other incomes by function

For the years ended as of December 31,

2019

2018

2017

ThCh$

ThCh$

ThCh$

Sales of fixed assets

5,084,269

2,464,820

1,641,317

Rental income

315,325

266,335

535,555

Sale of glass

934,863

731,111

1,334,123

Claims recovery

82,896

831,230

761,290

Advance term license (1)

-

213,400,487

-

Other (1)

16,167,357

10,761,071

2,445,617

Total

22,584,710

228,455,054

6,717,902

 

i. Short-term benefits(1)See brands inNote 1 – General information, letter C). Additionally, it is worth mentioning that the payments they have received from ABI 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,presented in the “Personnel Expense” item.Consolidated Statement of Cash Flows, in Operating Activities, under the heading "Other charges for operating activities."


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Note 31Other Gains (Losses)

Other gains (losses) items are detailed as follows:

Other gain and (loss)

For the years ended as of December 31,

2019

2018

2017

ThCh$

ThCh$

ThCh$

Results derivative contracts (1)

4,830,982

5,108,327

(8,010,204)

Marketable securities to fair value

(275,172)

(132,420)

293,413

Bargain purchase gain (2)

3,043,107

-

-

Other

(4,442,118)

(946,280)

-

Total

3,156,799

4,029,627

(7,716,791)

(1)

Under this concept the Company (payment) or received cash flows amounting to ThCh$ 8,184,537 (payment), ThCh$ 7,508,815 (payment) and ThCh$ 11,391,103 received, corresponding to 2019, 2018 and 2017, respectively, and these were recorded in the Consolidated Cash Flow Statement, under Operational activities, in line item Other cash movements.

(2)

Corresponds to the higher value originated by the business combination explained inNote 1 - General information, letter D) number (9).

 

As ofDecember 31, 2016 and 2015, the total staff benefits recorded in the Consolidated Statement of

Note 32Financial Positionresults

The financial results composition is detailed as follows:

 

Employees’ Benefits

As of December 31, 2016

As of December 31, 2015

Current

Non current

Current

Non current

ThCh$

ThCh$

ThCh$

ThCh$

Short term benefits

22,517,220

-

21,617,103

-

Employment termination benefits

321,008

21,832,415

94,956

18,948,603

Total

22,838,228

21,832,415

21,712,059

18,948,603

Financial results

For the years ended as of December 31,

2019

2018

2017

ThCh$

ThCh$

ThCh$

Finance income

13,117,641

15,794,456

5,050,952

Finance costs

(27,720,203)

(23,560,662)

(24,166,313)

Foreign currency exchange differences

(9,054,155)

3,299,657

(2,563,019)

Result as per adjustment units

(8,255,001)

742,041

(110,539)

 

 

 

 

 

Employees’ Bonuses

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, 2016 and 2015, the total short-term benefits recorded in the Consolidated Statement of Financial Position are as follows:

Short-Term Employees’ Benefits

As of December 31, 2016

As of December 31, 2015

ThCh$

ThCh$

Vacation

9,405,040

8,442,610

Bonus and compensation

13,112,180

13,174,493

Total

22,517,220

21,617,103

The Company records the staff vacation cost on an accrual basis.

Severance Indemnity

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 5.52% (6.36% in 2015) and in Argentina 31.88% (39.26% in 2015).

As ofDecember 31, 2016, the obligation recorded for severance indemnity is as follows:

Severance Indemnity

As of December 31, 2016

As of December 31, 2015

ThCh$

ThCh$

Current

321,008

94,956

Non-current

21,832,415

18,948,603

Total

22,153,423

19,043,559


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

The change in the severance indemnity during the year ended as of December 31, 2015 and 2016 was as follows:

Severance Indemnity

Severance Indemnity

ThCh$

Balance as of January 1, 2015

17,437,221

Current cost of service

1,023,969

Interest cost

1,703,107

Actuarial loss

947,153

Paid-up benefits

(1,700,491)

Past service cost

131,204

Others

(498,604)

Movements of the year

1,606,338

As of December 31, 2015

19,043,559

Current cost of service

1,650,484

Interest cost

1,702,662

Actuarial loss

2,342,336

Paid-up benefits

(2,490,851)

Past service cost

342,039

Conversion effect

(670,709)

Others

233,903

Movements of the year

3,109,864

As of December 31, 2016

22,153,423

The figures recorded in the Consolidated Statement of Income as ofDecember 31, 2016, 2015 y 2014, are as follows:

Expense recognized for severance indemnity

For the years ended as of December 31,

2016

2015

2014

ThCh$

ThCh$

ThCh$

Current cost of service

1,650,484

1,023,969

601,053

Past service cost

342,039

131,204

1,090,429

Non-provided paid benefits

7,851,201

4,377,570

5,916,192

Other

1,114,112

646,502

335,808

Total expense recognized in Consolidated Statement of Income

10,957,836

6,179,245

7,943,482


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Actuarial Assumptions

As mentioned inNote 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, 2016 and 2015, are as follows:

Actuarial Assumptions

Chile

Argentina

As of December 31,

As of December 31,

As of December 31,

As of December 31,

2016

2015

2016

2015

Mortality table

RV-2014

RV-2004

Gam '83

Gam'83

Annual interest rate

5.52%

6.36%

31.88%

39.26%

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%

26.25%

33.32%

Estimated retirement age for (*)

Officers

 

60

60

60

60

Other

Male

65

65

65

65

Female

60

60

60

60

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, 2016

As of December 31, 2015

ThCh$

ThCh$

1% increase in the Discount Rate (Gain)

1,421,484

1,164,165

1% decrease in the Discount Rate (Loss)

(1,649,255)

(1,344,213)

 

 

 

Personnel expense

The amounts recorded in the Consolidated Statement of Income for the years ended as ofDecember 31, 2016, 2015 and 2014, are as follows:

Personnel expense

For the years ended as of December 31,

2016

2015

2014

ThCh$

ThCh$

ThCh$

Salaries

145,766,757

138,359,074

119,623,310

Employees’ short-term benefits

23,189,206

24,693,325

18,128,043

Employments termination benefits

10,957,836

6,179,245

7,943,482

Other staff expense

30,971,754

28,683,507

23,636,629

Total (1)

210,885,553

197,915,151

169,331,464

(1)See Note 9.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Note 31Non-controlling Interests

The detail of Non-controlling Interests is the following:

a.Equity

Equity

As of December 31, 2016

As of December 31, 2015

ThCh$

ThCh$

Viña San Pedro Tarapacá S.A.

75,092,267

72,512,897

Bebidas del Paraguay S.A.

17,828,260

20,403,140

Aguas CCU-Nestlé Chile S.A.

16,440,129

19,891,176

Compañía Cervecera Kunstmann S.A.

5,740,305

4,979,490

Compañía Pisquera de Chile S.A.

4,717,811

4,699,612

Manantial S.A. (1)

-

3,767,028

Saenz Briones & Cía. S.A.

799,111

962,286

Distribuidora del Paraguay S.A.

2,197,241

1,949,490

Los Huemules S.R.L. (1)

-

395,469

Other

179,300

145,185

Total

122,994,424

129,705,773

(1)SeeNote8.

b.Result

 

For the years ended as of December 31,

Result

2016

2015

2014

 

ThCh$

ThCh$

ThCh$

Aguas CCU-Nestlé Chile S.A.

8,377,672

7,052,867

5,408,750

Viña San Pedro Tarapacá S.A.

9,887,477

9,182,843

6,003,439

Compañía Cervecera Kunstmann S.A.

1,636,906

1,267,335

966,212

Manantial S.A.

-

861,072

684,427

Compañía Pisquera de Chile S.A.

790,152

592,506

889,482

Saenz Briones & Cía. S.A.

11,184

128,407

(58,433)

Distribuidora del Paraguay S.A.

255,683

1,144,911

429,527

Bebidas del Paraguay S.A.

576,986

(486,790)

253,516

Los Huemules S.R.L.

-

(45,370)

(48,171)

Sidra La Victoria S.A.

-

-

175

Other

88,339

19,674

24,547

Total

21,624,399

19,717,455

14,553,471


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

c.Summarized financial information of non controlling interest:

 

 

As of December 31, 2016

As of December 31, 2015

 

 

 

 

ThCh$

ThCh$

Assets and Liabilities

  

Current assets

601,165,755

566,432,064

Non-current assets

716,889,536

727,700,381

Current liabilities

368,293,544

336,696,932

Non-current liabilities

146,234,462

218,031,963

 

 

 

Dividends paid

9,803,978

5,956,500

 

 

 

The main significant Non-controlling interest is represented by Viña San Pedro Tarapacá S.A. with the following balances:

 

As of December 31, 2016

As of December 31, 2015

 

 

 

 

ThCh$

ThCh$

Assets and Liabilities

  

Current assets

145,866,023

142,945,036

Non-current assets

171,099,295

165,343,429

Current liabilities

70,351,438

70,099,022

Non-current liabilities

33,795,671

32,681,398

Net sales

201,402,052

189,515,048

Net income of year

28,021,996

26,024,999

 

 

 

Dividends paid by Viña San Pedro amounted to ThCh$ 17,682,375, ThCh$ 13,474,959, and ThCh$ 5,436,350, for the years ended December 31, 2016; 2015, and 2014, respectively.

Note 3233Effects of changes in currency exchange rateCommon Shareholders’ Equity

 

Subscribed and paid-up CapitalCurrent assets are denominated in the following currencies:

 

As of December 31, 2016 and December 31, 2015, 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, the Chilean Electronic Stock Exchange and the Valparaíso Stock Exchange, and at the New York Stock Exchange /NYSE), evidenced by ADS (American Deposcitary Shares), with an equivalence of two shares per ADS (See Note 1).

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, 2016 and 2015.

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.

CURRENT ASSETS

As of December 31, 2019

As of December 31, 2018

ThCh$

ThCh$

Current assets

 

 

Cash and cash equivalents

196,369,224

319,014,050

CLP

152,203,454

260,844,976

USD

25,497,806

19,026,630

Euros

2,592,865

954,640

ARS

7,473,053

33,207,046

UYU

1,384,395

548,975

PYG

2,763,191

2,495,748

BOB

3,323,553

1,259,765

Others currencies

1,130,907

676,270

Other financial assets

9,815,358

22,745,469

CLP

1,411,002

1,284,308

USD

8,221,686

20,990,836

Euros

171,824

438,369

Others currencies

10,846

31,956

Other non-financial assets

22,395,591

18,861,414

CLP

14,650,054

14,998,511

UF

435,913

282,494

USD

1,320,765

860,506

Euros

4,785

5,078

ARS

5,434,632

2,061,473

UYU

79,070

72,792

PYG

312,473

434,399

BOB

157,899

146,161

Trade and other current receivables

300,013,940

320,702,339

CLP

181,492,816

191,891,137

UF

1,280,465

1,394,916

USD

35,796,040

34,113,849

Euros

9,709,996

10,152,559

ARS

56,518,792

65,748,507

UYU

4,350,677

5,128,068

PYG

7,183,907

8,588,066

BOB

1,919,063

1,340,388

Others currencies

1,762,184

2,344,849

Accounts receivable from related parties

3,278,685

3,048,841

CLP

3,118,442

2,959,696

UF

82,180

79,231

USD

77,375

9,480

PYG

688

434

Inventories

232,434,461

228,062,237

CLP

183,592,686

181,084,437

USD

-

198,068

ARS

34,513,163

34,392,396

UYU

1,826,086

2,403,427

PYG

8,107,700

7,669,975

BOB

4,394,826

2,313,934

Biological assets

9,459,071

8,489,873

CLP

8,568,831

7,914,384

ARS

890,240

575,489

Current tax assets

15,132,290

17,302,429

CLP

8,908,539

13,262,197

ARS

6,029,315

3,922,627

UYU

194,436

117,605

Non-current assets of disposal groups classified as held for sale

383,138

2,780,607

CLP

-

1,884,958

ARS

383,138

895,649

Total current assets

789,281,758

941,007,259

 

 

 

 

 

 

CLP

553,945,824

676,124,604

UF

1,798,558

1,756,641

USD

70,913,672

75,199,369

Euros

12,479,470

11,550,646

ARS

111,242,333

140,803,187

UYU

7,834,664

8,270,867

PYG

18,367,959

19,188,622

BOB

9,795,341

5,060,248

Others currencies

2,903,937

3,053,075

Total current assets by currencies

789,281,758

941,007,259


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

Consolidated Statement of Comprehensive Income

As of December 31, 2016, 2015 and 2014,Non-Current assets are denominated in the detail of the comprehensive income and expense of the term is as follows:following currencies:

 

Other Income and expense charged or credited against net equity

Gross Balance

Tax

Net Balance

ThCh$

ThCh$

ThCh$

Cash flow hedge (1)

84,962

(20,648)

64,314

Conversion differences of subsidiaries abroad (1)

(27,280,176)

-

(27,280,176)

Actuarial gains and losses on defined benefit plans reserves

(2,355,384)

659,198

(1,696,186)

Total comprehensive income as of december 31, 2016

(29,550,598)

638,550

(28,912,048)

    

Other Income and expense charged or credited against net equity

Gross Balance

Tax

Net Balance

ThCh$

ThCh$

ThCh$

Cash flow hedge (1)

80,693

(17,563)

63,130

Conversion differences of subsidiaries abroad (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)

    

Other Income and expense charged or credited against net equity

Gross Balance

Tax

Net Balance

ThCh$

ThCh$

ThCh$

Cash flow hedge (1)

(155,258)

39,470

(115,788)

Conversion differences of subsidiaries abroad (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)

NON-CURRENT ASSETS

As of December 31, 2019

As of December 31, 2018

ThCh$

ThCh$

Non-current assets

 

 

Other financial assets

4,670,538

3,325,079

UF

4,571,984

3,325,079

Euros

98,554

-

Trade and other non-current receivables

3,224,627

3,363,123

CLP

353,862

88,306

UF

1,962,249

1,283,676

ARS

680,438

1,804,963

PYG

228,078

186,178

Other non-financial assets

7,042,297

5,007,150

CLP

2,887,597

4,278,605

USD

187,185

173,693

ARS

3,953,224

540,495

PYG

14,291

14,357

Accounts receivable from related parties

118,122

190,865

UF

118,122

190,865

Investments accounted for using the equity method

136,098,062

142,017,781

CLP

15,251,038

19,407,798

USD

120,237,275

122,031,829

ARS

609,749

578,154

Intangible assets other than goodwill

125,618,666

118,964,142

CLP

73,452,410

67,739,510

ARS

39,888,291

37,960,927

UYU

2,624,125

2,912,675

PYG

3,686,290

3,848,057

BOB

5,967,550

6,502,973

Goodwill

124,955,438

123,044,901

CLP

77,020,100

76,817,632

ARS

26,020,761

24,871,945

UYU

4,422,841

4,839,916

PYG

5,214,846

5,236,732

BOB

12,276,890

11,278,676

Property, plant and equipment (net)

1,097,534,155

1,021,266,631

CLP

873,378,864

830,151,351

ARS

167,553,390

142,669,147

UYU

15,013,733

14,890,634

PYG

21,686,062

18,030,887

BOB

19,902,106

15,524,612

Investment property

8,313,274

8,715,956

CLP

3,614,497

4,332,690

ARS

4,698,777

4,383,266

Deferred tax assets

54,528,648

37,691,088

CLP

43,093,811

32,989,545

ARS

10,018,983

2,955,530

UYU

273,198

223,831

PYG

47,859

47,456

BOB

1,094,797

1,474,726

Current tax assets non-current

2,305,129

1,270,941

CLP

2,276,104

1,172,749

ARS

29,025

98,192

Total non-current assets

1,564,408,956

1,464,857,657

 

 

 

 

 

 

CLP

1,091,328,283

1,036,978,186

UF

6,652,355

4,799,620

USD

120,424,460

122,205,522

Euros

98,554

-

ARS

253,452,638

215,862,619

UYU

22,333,897

22,867,056

PYG

30,877,426

27,363,667

BOB

39,241,343

34,780,987

Total non-current assets by currencies

1,564,408,956

1,464,857,657

(1)These concepts will be reclassified to the Statement of Income when its settled.

The movement of comprehensive income and expense is as follows:

 

a)As of December 31, 2016:

Changes

Currency translation
difference

Hedge reserves

Actuarial gains and
losses on
defined benefit
plans reserves

Total other
reserves

ThCh$

ThCh$

ThCh$

ThCh$

Increase (Decrease)

(27,280,176)

(399,558)

(2,355,384)

(30,035,118)

Deferred taxes

-

89,982

659,198

749,180

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)


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

b)As of December 31, 2015:

Changes

Currency translation difference

Hedge reserves

Actuarial gains and losses on defined benefit plans reserves

Total other reserves

ThCh$

ThCh$

ThCh$

ThCh$

Increase (Decrease)

(29,678,944)

593,993

(939,433)

(30,024,384)

Deferred taxes

-

(145,800)

314,541

168,741

Reclassification to the result by function

-

(513,298)

-

(513,298)

Reclassification of deferred taxes related to other reserves

-

128,235

-

128,235

Total changes in equity

(29,678,944)

63,130

(624,892)

(30,240,706)

Equity holders of the parent

(27,652,528)

40,844

(589,731)

(28,201,415)

Non-controlling interests

(2,026,416)

22,286

(35,161)

(2,039,291)

Total changes in equity

(29,678,944)

63,130

(624,892)

(30,240,706)

 

Income per share

The basic income per share is calculated asCurrent liabilities are denominated in 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.

As of December 31, 2016, 2015 y 2014, the information used for the calculation of the income as per each basic and diluted share is as follows:following currencies:

 

Income per share

For the years ended as of December 31,

2016

2015

2014

Equity holders of the controlling company (ThCh$)

118,457,488

120,808,135

106,238,450

Weighted average number of shares

369,502,872

369,502,872

369,502,872

Basic income per share (in Chilean pesos)

320.59

326.95

287.52

Equity holders of the controlling company (ThCh$)

118,457,488

120,808,135

106,238,450

Weighted average number of shares

369,502,872

369,502,872

369,502,872

Diluted income per share (in Chilean pesos)

320.59

326.95

287.52

CURRENT LIABILITIES

As of December 31, 2019

As of December 31, 2018

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

12,051,690

56,334,038

11,197,060

51,569,886

CLP

2,816,224

27,718,532

1,579,060

19,510,742

UF

1,271,049

8,033,376

1,695,546

13,302,035

USD

594,829

20,040,156

4,509,884

16,667,379

Euros

94,247

92,478

1,153,302

-

ARS

6,887,233

77,247

2,098,712

1,762,947

UI

346,300

372,249

110,633

326,783

BOB

41,808

-

38,735

-

Others currencies

-

-

11,188

-

Trade and other current payables

302,997,598

3,657,960

297,834,912

5,545,256

CLP

174,164,421

1,250,912

177,575,915

1,796,915

USD

44,197,074

1,940,430

43,335,127

2,746,757

Euros

7,212,069

451,610

4,921,252

974,462

ARS

67,565,461

-

63,786,646

612

UYU

2,490,915

-

2,202,163

-

PYG

2,991,595

14,942

2,367,325

26,444

BOB

4,046,335

-

3,302,514

-

Others currencies

329,728

66

343,970

66

Accounts payable to related parties

8,908,578

70,856

6,651,051

285,859

CLP

3,366,289

70,856

4,042,438

-

USD

3,167,473

-

903,988

285,859

Euros

2,172,056

-

1,619,082

-

PYG

11,950

-

11,267

-

BOB

30,565

-

11,879

-

Others currencies

160,245

-

62,397

-

Other current provisions

2,998,462

42,468

271,812

133,257

CLP

2,847,167

42,468

5,380

133,257

ARS

151,295

-

266,432

-

Current tax liabilities

6,759,999

13,744,375

56,895,995

18,989,454

CLP

5,575,556

13,661,546

3,932,875

18,989,454

ARS

882,944

82,829

52,201,867

-

UYU

188,335

-

249,988

-

PYG

113,164

-

511,265

-

Provisions for employee benefits

12,695,440

14,660,765

16,181,182

15,612,981

CLP

6,067,859

14,660,765

5,530,208

15,612,981

ARS

5,703,223

-

9,839,822

-

UYU

393,672

-

383,167

-

PYG

208,769

-

271,167

-

BOB

321,917

-

156,818

-

Other non-financial liabilities

1,311,982

47,047,785

2,479,960

162,075,580

CLP

-

47,047,785

-

162,075,580

USD

1,311,982

-

2,467,789

-

ARS

-

-

12,171

-

Total current liabilities

347,723,749

135,558,247

391,511,972

254,212,273

 

 

 

 

 

 

 

 

 

 

CLP

194,837,516

104,452,864

192,665,876

218,118,929

UF

1,271,049

8,033,376

1,695,546

13,302,035

USD

49,271,358

21,980,586

51,216,788

19,699,995

Euros

9,478,372

544,088

7,693,636

974,462

ARS

81,190,156

160,076

128,205,650

1,763,559

UYU

3,072,922

-

2,835,318

-

PYG

3,325,478

14,942

3,161,024

26,444

UI

346,300

372,249

110,633

326,783

BOB

4,440,625

-

3,509,946

-

Others currencies

489,973

66

417,555

66

Total current liabilities by currency

347,723,749

135,558,247

391,511,972

254,212,273

 

As of December 31, 2016, 2015 y 2014, 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, 2016.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

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, 2016, 2015 and 2014, the Company has distributedNon-Current liabilities are denominated in the following dividends:currencies:

 

Dividend Nº

Payment Date

Type of Dividend

Dividends per Share

Related to FY

247

17-04-2014

Final

103.48857

2013

248

09-01-2015

Interim

63.0000

2014

249

23-04-2015

Final

98.78138

2014

250

08-01-2016

Interim

66.0000

2015

251

22-04-2016

Final

97.47388

2015

252

05-01-2017

Interim

66.0000

2016

 

 

 

 

 

NON-CURRENT LIABILITIES

As of December 31, 2019

As of December 31, 2018

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$

ThCh$

ThCh$

Non-current liabilities

 

 

 

 

 

 

Other financial liabilities

102,736,775

23,336,497

135,696,016

24,970,597

68,367,746

134,846,954

CLP

64,961,148

3,488,251

1,710,701

3,412,966

55,837,517

43,764

UF

13,498,582

12,374,564

131,223,152

10,724,171

10,786,277

131,315,290

USD

20,325,911

629,853

1,839,685

8,059,332

-

-

Euros

202,592

59,089

-

157,028

-

-

ARS

116,255

-

-

1,727

-

-

UI

239,917

-

-

871,421

-

-

BOB

3,392,370

6,784,740

922,478

1,743,952

1,743,952

3,487,900

Trade and other non-current payables

3,430

-

23,120

5,142

-

7,271

CLP

-

-

23,120

-

-

7,271

BOB

3,430

-

-

5,142

-

-

Other non- current provisions

181,318

221,458

129,185

6,970,327

281,654

173,778

CLP

2,752

-

-

6,750,083

-

-

ARS

44,491

221,458

129,185

81,026

281,654

173,778

UYU

134,075

-

-

139,218

-

-

Deferred tax liabilities

34,461,423

14,884,675

82,236,460

23,241,269

14,084,656

71,174,246

CLP

30,680,639

12,364,153

60,223,544

20,302,096

12,761,025

56,936,976

ARS

3,773,135

2,515,423

18,082,144

2,839,763

1,315,431

10,490,282

UYU

-

-

883,439

46,754

-

897,718

PYG

7,649

5,099

459,957

52,656

8,200

422,346

BOB

-

-

2,587,376

-

-

2,426,924

Provisions employee benefits

1,149,024

-

32,422,114

1,258,674

-

25,642,414

CLP

-

-

29,164,931

-

-

22,959,627

ARS

-

-

3,257,183

-

-

2,682,787

PYG

382,348

-

-

391,302

-

-

BOB

766,676

-

-

867,372

-

-

Total non-current liabilities

138,531,970

38,442,630

250,506,895

56,446,009

82,734,056

231,844,663

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CLP

95,644,539

15,852,404

91,122,296

30,465,145

68,598,542

79,947,638

UF

13,498,582

12,374,564

131,223,152

10,724,171

10,786,277

131,315,290

USD

20,325,911

629,853

1,839,685

8,059,332

-

-

Euros

202,592

59,089

-

157,028

-

-

ARS

3,933,881

2,736,881

21,468,512

2,922,516

1,597,085

13,346,847

UYU

134,075

-

883,439

185,972

-

897,718

PYG

389,997

5,099

459,957

443,958

8,200

422,346

UI

239,917

-

-

871,421

-

-

BOB

4,162,476

6,784,740

3,509,854

2,616,466

1,743,952

5,914,824

Total non-current liabilities by currency

138,531,970

38,442,630

250,506,895

56,446,009

82,734,056

231,844,663

 

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.

On April 13, 2016, at the General Shareholders Meeting it was agreed to pay the final Dividend No. 250, amounting to ThCh$ 36,016,878 corresponding to $ 97.47388 per share. This dividend was paid on April 22, 2016.

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’ financial statements which functional currency is different from the presentation currency of the Consolidated Financial Statements. As of December 31, 2016, it amounts to a negative reserve of ThCh$ 120,558,932 (ThCh$ 95,435,386 in 2015 and ThCh$ 67,782,858 in 2014).

Hedge reserve: This reserve originated from the hedge accounting application of financial liabilities for. 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, 2016, it amounts to a negative reserve of ThCh$ 39,081 (ThCh$ 2,526 in 2015 and ThCh$ 43,370 in 2014), net of deferred taxes.

Actuarial gains and losses on defined benefit plans reserves: This reserve originates from January 1, 2013, due application of the amendment to IAS 19. The amount recorded is a negative reserve of ThCh$ 3,925,717 (ThCh$ 2,302,418 in 2015 and ThCh$ 1,712,687 in 2014), net of deferred taxes.

Other reserves: As of December 31, 2016, 2015 y 2014 the amount is a negative reserve of ThCh$ 18,527,810, ThCh$ 5,486,086 and ThCh$ 5,511,629, respectively. Such reserves relate mainly to the following concepts:

-              Adjustment due to re-assessment of fixed assets carried out in 1979 (increased ofr ThCh$ 4,087,396).

-              Price level restatement of paid-up capital registered as of December 31, 2008, according to SVS Circular Letter Nª456 (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 (Note 1) (decreased for ThCh$ 7,801,153).

-              Difference in purchase of shares of the Alimentos Nutrabien S.A. made during year 2016 (Note 1) (decreased for  ThCh$5,426,209).


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

Note 33Effects of changes in currency exchange rate

Current assets are denominated in the following currencies:

CURRENT ASSETS

As of December 31, 2016

As of December 31, 2015

ThCh$

ThCh$

Current assets

 

 

Cash and cash equivalents

133,789,950

192,554,239

CLP

117,668,934

171,683,257

USD

8,237,893

5,385,644

Euros

786,887

955,840

$ARG

2,187,381

5,701,754

UYU

1,136,782

948,816

PYG

3,269,045

7,519,619

Other currencies

503,028

359,309

Other financial assets

8,406,491

13,644,105

CLP

548,700

1,052,312

USD

7,604,996

12,495,117

Euros

160,875

57,833

PYG

80,846

7,261

Other currencies

11,074

31,582

Other non-financial assets

15,859,137

17,654,373

CLP

11,994,895

12,083,128

UF

139,776

29,882

USD

683,933

972,718

Euros

85,753

723,216

$ARG

2,641,862

3,780,430

UYU

86,842

7,789

PYG

226,076

57,210

Accounts receivable - trade and other receivables

280,766,784

252,225,937

CLP

179,861,356

158,757,937

UF

676,843

7,102

USD

24,449,473

25,498,590

Euros

7,025,446

7,463,166

$ARG

56,347,636

48,535,814

UYU

5,304,719

4,074,908

PYG

5,844,650

6,111,636

Other currencies

1,256,661

1,776,784

Accounts receivable from related companies

3,523,825

4,788,930

CLP

3,373,508

4,604,853

UF

107,162

104,118

USD

43,155

79,959

Inventories

199,290,678

174,227,415

CLP

168,749,946

147,189,195

USD

287,776

2,474,304

Euros

25,634

237,848

$ARG

25,104,485

18,850,888

UYU

1,590,709

1,645,888

PYG

3,532,128

3,829,292

Biological assets

7,948,379

7,633,340

CLP

7,370,852

7,130,962

$ARG

577,527

502,378

Tax receivables

29,423,479

15,264,220

CLP

26,525,628

11,080,218

$ARG

2,897,851

4,184,002

Non-current assets held for sale

2,377,887

6,319,316

CLP

2,046,179

5,890,543

$ARG

331,708

428,773

Total current assets

681,386,610

684,311,875

 

 

 

 

 

 

CLP

518,139,998

519,472,405

UF

923,781

141,102

USD

41,307,226

46,906,332

Euros

8,084,595

9,437,903

$ARG

90,088,450

81,984,039

UYU

8,119,052

6,677,401

PYG

12,952,745

17,525,018

Other currencies

1,770,763

2,167,675

Total current assets by currencies

681,386,610

684,311,875


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Non-Current assets are denominated in the following currencies:

NON-CURRENT ASSETS

As of December 31, 2016

As of December 31, 2015

ThCh$

ThCh$

Non-current assets

 

 

Other financial assets

203,784

80,217

Euros

203,784

80,217

Accounts receivable non-current

3,563,797

-

CLP

35,391

-

UF

2,936,552

-

$ARG

426,311

-

PYG

165,543

-

Other non-financial assets

5,369,211

5,220,954

CLP

3,177,139

3,034,450

USD

669,470

80,137

$ARG

1,519,236

1,839,876

PYG

3,366

266,491

Accounts receivable from related companies

356,665

445,938

UF

356,665

445,938

Investments accounted for using the equity method

64,404,946

49,995,263

CLP

64,005,129

49,884,870

$ARG

399,817

110,393

Intangible assets different than goodwill

77,678,850

71,868,007

CLP

64,981,854

57,749,615

$ARG

5,508,504

7,039,283

UYU

3,247,094

3,296,510

PYG

3,941,398

3,782,599

Goodwill

96,663,023

99,490,372

CLP

76,382,543

76,382,543

USD

13,402,038

14,216,606

$ARG

6,878,442

8,891,223

Property, plant and equipment (net)

903,831,702

872,667,210

CLP

787,734,139

763,339,926

USD

26,072

-

Euros

971,382

-

$ARG

82,920,719

76,412,324

UYU

15,436,334

13,747,872

PYG

16,743,056

19,167,088

Investment property

6,253,827

6,838,002

CLP

5,015,603

4,401,400

$ARG

1,238,224

2,436,602

Deferred tax assets

31,864,635

34,529,593

CLP

29,547,881

29,392,503

$ARG

2,108,426

5,032,803

UYU

156,714

10,801

PYG

51,614

93,486

Total non-current assets

1,190,190,440

1,141,135,556

 

 

 

 

 

 

CLP

1,030,879,679

984,185,307

UF

3,293,217

445,938

USD

14,097,580

14,296,743

Euros

1,175,166

80,217

$ARG

100,999,679

101,762,504

UYU

18,840,142

17,055,183

PYG

20,904,977

23,309,664

Total non-current assets by currencies

1,190,190,440

1,141,135,556


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Current liabilities are denominated in the following currencies:

CURRENT LIABILITIES

As of December 31, 2016

As of December 31, 2015

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

19,600,116

47,079,817

7,223,935

36,750,056

CLP

946,301

39,944,625

1,239,182

17,035,281

UF

892,328

2,843,982

764,199

2,888,550

USD

11,280,437

388,874

303,416

10,957,905

Euros

523,079

-

52,368

-

$ARG

5,542,674

3,263,782

4,862,819

5,523,470

UYI

406,353

638,554

-

344,850

Other currencies

8,944

-

1,951

-

Account payable - trade and other payables

258,298,853

1,378,999

226,844,826

891,977

CLP

166,920,713

303,060

148,162,838

303,060

UF

30,798

-

9,933

-

USD

18,281,460

937,822

17,676,381

566,572

Euros

8,160,258

-

6,402,517

-

$ARG

59,603,954

-

47,686,146

-

UYU

3,309,074

-

2,607,826

-

PYG

1,638,181

138,117

3,874,709

22,345

Other currencies

354,415

-

424,476

-

Accounts payable to related companies

9,530,071

-

11,624,218

-

CLP

5,329,217

-

4,267,123

-

USD

2,196

-

151,578

-

Euros

4,197,020

-

7,205,517

-

PYG

1,638

-

-

-

Other short-term provisons

339,072

70,092

382,152

121,288

CLP

-

70,092

-

121,288

$ARG

339,072

-

382,152

-

Tax liabilities

7,544,398

4,262,036

3,664,162

8,533,862

CLP

5,316,283

4,262,036

3,487,812

5,802,277

USD

22,183

-

-

26,747

$ARG

1,966,866

-

-

2,704,838

UYU

239,066

-

176,350

-

Employee benefits provisions

22,255,693

582,535

21,388,736

323,323

CLP

16,579,716

582,535

16,558,870

323,323

$ARG

5,367,378

-

4,437,159

-

UYU

308,599

-

392,707

-

Other non-financial liabilities

24,421,940

46,948,032

28,440,259

42,501,885

CLP

24,388,426

46,948,032

28,350,457

42,501,885

$ARG

33,514

-

89,802

-

Total current liabilities

341,990,143

100,321,511

299,568,288

89,122,391

 

 

 

 

 

 

 

 

 

 

CLP

219,480,656

92,110,380

202,066,282

66,087,114

UF

923,126

2,843,982

774,132

2,888,550

USD

29,586,276

1,326,696

18,131,375

11,551,224

Euros

12,880,357

-

13,660,402

-

$ARG

72,853,458

3,263,782

57,458,078

8,228,308

UYU

3,856,739

-

3,176,883

-

PYG

1,639,819

138,117

3,874,709

22,345

UYI

406,353

638,554

-

344,850

Other currencies

363,359

-

426,427

-

Total current liabilities by currency

341,990,143

100,321,511

299,568,288

89,122,391


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Non-Current liabilities are denominated in the following currencies:

NON-CURRENT LIABILITIES

As of December 31, 2016

As of December 31, 2015

More than 1 year until 3 years

More than 3 year until 5 years

More than 5 years

More than 1 year until 3 years

More than 3 year until 5 years

More than 5 years

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

ThCh$

Non-current liabilities

 

 

 

 

 

 

Other financial liabilities

36,676,882

15,610,067

65,657,084

40,890,654

20,356,339

75,679,552

CLP

5,320,385

626,411

-

18,284,794

1,784,088

-

UF

17,811,112

14,983,656

65,657,084

5,523,414

17,335,859

75,679,552

USD

5,269,733

-

-

5,590,024

-

-

$ARG

7,579,047

-

-

9,790,622

1,236,392

-

UYI

696,605

-

-

1,701,800

-

-

Other accounys payable

1,082,898

-

-

1,098,985

546,113

-

CLP

808,160

-

-

808,161

404,081

-

UF

6,950

-

-

6,760

-

-

USD

267,788

-

-

284,064

142,032

-

Other long term provisions

507,259

401,054

415,207

712,806

410,073

353,639

CLP

-

49,996

-

-

49,996

15,000

$ARG

258,278

351,058

415,207

396,987

360,077

338,639

UYU

248,981

-

-

314,991

-

-

PYG

-

-

-

828

-

-

Deferred tax liabilities

26,487,686

7,963,522

52,338,743

21,787,421

8,622,777

59,827,645

CLP

26,183,335

7,767,522

48,824,727

21,175,080

8,219,255

53,911,744

$ARG

287,582

191,721

2,048,919

601,313

400,875

4,288,716

UYU

-

-

1,015,197

-

-

1,154,787

PYG

16,769

4,279

449,900

11,028

2,647

472,398

Employee benefits provisons

335,925

-

21,496,490

643,905

-

18,304,698

CLP

-

-

18,481,842

-

-

15,369,150

$ARG

-

-

3,014,648

-

-

2,935,548

PYG

335,925

-

-

643,905

-

-

Total non-current liabilities

65,090,650

23,974,643

139,907,524

65,133,771

29,935,302

154,165,534

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CLP

32,311,880

8,443,929

67,306,569

40,268,035

10,457,420

69,295,894

UF

17,818,062

14,983,656

65,657,084

5,530,174

17,335,859

75,679,552

USD

5,537,521

-

-

5,874,088

142,032

-

$ARG

8,124,907

542,779

5,478,774

10,788,922

1,997,344

7,562,903

UYU

248,981

-

1,015,197

314,991

-

1,154,787

PYG

352,694

4,279

449,900

655,761

2,647

472,398

UYI

696,605

-

-

1,701,800

-

-

Total non-current liabilities by currency

65,090,650

23,974,643

139,907,524

65,133,771

29,935,302

154,165,534


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Note 34Contingencies and Commitments

 

Operating lease agreements

 

The total amount of the Company’s obligations towith third parties relating to lease operating and services agreements that may notcannot be terminated is detailed as follows:

 

Lease Agreements not to be terminated

Lease operating and services agreements not to be terminated

As of December 31, 2019

As of December 31, 2018

ThCh$

ThCh$

Within 1 year

56.054.644

56.311.446

Between 1 and 5 years

54.935.377

59.404.285

Over 5 years

11.824.929

22.661.389

Total (1)

122.814.950

138.377.120

(1)In 2019 under this disclosure there are commitments related to service contracts, short-term and low-value lease agreements.

As of December 31, 2016

ThCh$

Within 1 year

175,604,322

Between 1 and 5 years

272,442,932

Over 5 years

34,053,398

Total

482,100,652

 

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, 20162019 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

128,703,020

8,713,649

238,823,373

15,242,253

Between 1 and 5 years

292,815,491

9,521,391

1,144,214,818

11,727,826

Over 5 years

44,412,317

157,459

75,941,390

-

Total

465,930,828

18,392,499

1,458,979,581

26,970,079

 

Capital investment commitments

 

As of December 31, 2016,2019, the Company had capital investment commitments related to Property, Plant and Equipment and Intangibles (software) for approximately ThCh$ 54,115,404.44,678,091.

 

Litigation

 

The following are the most significant proceedings faced by the Company and its subsidiaries in Chile, including all thosepresent a possible risk of occurrence and causes whose committed amounts, individually, are more than ThCh$ 25,000.Those25,000 and US$ 15,000 for cases of foreign subsidiaries.Those losses contingencies for which an estimate cannot be made have been also considered.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

ProceedingsTrials and claim

 

Subsidiary

Court

Number

Description

Status

Estimated accrued loss contingency

Viña Tarapacá Ex Zavala, Viña Misiones de RengoComercial CCU S.A.

14th Civil Court of SantiagoAppeal.

28869-2007Debt payment lawsuit.

Breach of contract

Appeal of first instance verdictOpposition  to execution is pending.

ThCh$ 50,00042,126

Embotelladoras Chilenas Unidas S.A.

Court of Appeal.

Debt payment lawsuit.

Opposition  to execution is pending.

ThCh$ 101,377

Compañía Industrial Cervecera S.A. (CICSA)

Court of first instance in Argentina

-Labor Court.

Labor trial for layofftrial.

On evidentiary phaseEvidentiary stage.

US$ 31,00015.000

Compañía Industrial Cervecera S.A. (CICSA)

Supreme Court of TucumanCommercial Court.

-Distributor claim for to the termination of distribution agreement.

Intempestive breach of distribution contract

Supreme Court reviewEvidentiary stage.

US$ 35,00024.000

Compañía Industrial Cervecera S.A. (CICSA)

Court of first instance in Argentina

-Labor Court.

Labor trial for layofftrial.

On evidentiary phaseEvidentiary stage.

US$ 32,00037.000

Compañía Industrial Cervecera S.A. (CICSA)

Appeals courtLabor Court.

-Labor trial.

Intempestive breach of distribution contract

On execution phaseEvidentiary stage.

US$ 37,00033.000

Compañía Industrial Cervecera S.A. (CICSA)

Court of first instance in Argentina

-Labor Court.

Labor trial for layofftrial.

On execution phaseEvidentiary stage.

US$ 36,00015.000

Compañía Industrial Cervecera S.A. (CICSA)

Court of first instance in Argentina

-Labor Court.

Labor trial for layofftrial.

On evidentiary phaseEvidentiary stage.

US$ 50,00035.000

Compañía Industrial Cervecera S.A. (CICSA)

-Tax Court.

-Several Tax claims.

City Council´s Administrative Claim related to advertising and publicity fees

The process is in pre-trial administrative phaseEvidentiary stage.

US$ 506,000202.000

SaenzSáenz Briones y& Cía. S.A.

Court of first instance in Argentina

-S.A.I.C.

Labor trial for layoffCourt.

On evidentiary phaseLabor trial.

Evidentiary stage.

US$ 67,00040.000

 

 

 

 

 

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 20162019

 

Subsidiary

Court

Number

Description

Status

Estimated accrued loss contingency

Saenz Briones y Cía. S.A.

Court of first instance in Argentina

-

Labor trial for layoff

On evidentiary phase

US$ 168,000

Saenz Briones y Cía. S.A.

Court of first instance in Argentina

-

Labor trial for layoff

On evidentiary phase

US$ 63,000

Saenz Briones y Cía. S.A.

Court of first instance in Argentina

-

Labor trial for layoff

On evidentiary phase

US$ 167,000

Saenz Briones y Cía. S.A.

Court of first instance in Argentina

-

Labor trial for layoff

On evidentiary phase

US$ 61,000

 

The Company and its subsidiaries have established provisions to allow for such contingencies for ThCh$ 1,248,243561,378 and ThCh$ 1,343,374,893,631, as of December 31, 20162019 and 2015,2018, respectively (See Note 2823 – Other provisions).

 

Tax processes

 

At the date of issue of these consolidated financial statements, there areis notax litigation that involveinvolves significant passive or taxes in claim different to mentioned inNote 2524 – Income Tax.

 

Guarantees

 

As of December 31, 2016, the subsidiary Viña San Pedro Tarapacá S.A. (VSPT) has2019, 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 Celia S.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 subsidiary Finca La Celia S.A.joint venture Central Cervecera de Colombia S.A.S. (CCC) maintains financial debt with local banks in Argentina,Colombia, guaranteed by VSPTthe subsidiary CCU Inversiones II Ltda. through stand-by letters issued by Banco Estado deScotiabank Chile and they are within the financing policy framework approved by Board of Directors, according to the following detail:

 

Institution

Amount

Due date

Banco Santander RíoColpatria

USD 1,100,00027.200.000

August 20, 2017May 27, 2020

Banco PatagoniaColpatria

USD 1,600,0004.000.000

March 31, 2017June 21, 2020

Banco PatagoniaColpatria

USD 1,600,00013.500.000

July 7, 2017

Banco San Juan

USD 1,200,000

April 28, 2017

Banco BBVA Francés

USD 1,500,000

February 20, 2017September 1, 2020

 

 

 

 

The mentionedindirect associate Bodega San Isidro S.R.L. maintains financial debt with local bank in Peru, which is endorsed by the subsidiary Compañía Pisquera de Chile (CPCh) through a stand-by letters wereletter issued by VSPT according to the maturity of the financial debts negotiated with the Argentine banks, and they areBanco del Estado de Chile, this is within the financing policy framework approved by VSPTthe Board, of Directors.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

The loan obtained by the subsidiary CICSA in Argentina,and is detailed 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.follow:

 

Institution

Amount

Due date

Banco Crédito de la Nación Argentina S.A.Perú (BCP)

USD 9,000,0002.600.000

December 31, 201726, 2020

 

 

 

 

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.

Note 35Environment

Distribution of CCU´s main environmental costsin the Industrial Units, accumulated to September 2016:

-Industrial Waste Water Treatment (IWWT):52,8 %

These expenses are mainly related to the maintenance and control of the respective Industrial Waste Water Treatment Plants (IWWT).

-Solid Industrial Residues (SIR):33,4 %

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:1,2 %

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:12,6 %

These expenses are related to the verification and compliance of Food Safety, Environmental Management and Operational Health & Safety Management Standards (ISO 22.000, ISO 14.001 and ISO 18.001 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 S.A.


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

The main expensesof each year, detailed by project, are the following:

Company that made the disbursement

Project

Expenses

For the years ended as of December 31,

2016

2015

ThCh$

ThCh$

CCU Chile Ltda.

IWWT

Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT).

1,319,489

1,160,516

 

SIR

Solid waste (SIR) and hazardous waste (ResPel) management.

666,781

607,091

 

Gases

Management of atmospheric emissions

21,655

26,031

 

Others

Management of internal and external regulatory compliance.

233,364

173,115

CCU Argentina S.A.

IWWT

Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT).

820,999

1,089,788

 

SIR

Solid waste (SIR) and hazardous waste (ResPel) management.

560,710

602,247

 

Gases

Management of atmospheric emissions

21,847

2,857

 

Others

Management of internal and external regulatory compliance.

141,379

167,668

Cía. Cervecera Kunstmann S.A.

IWWT

Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT).

86,515

87,069

 

SIR

Solid waste (SIR) and hazardous waste (ResPel) management.

40,150

10,633

 

Others

Management of internal and external regulatory compliance.

45,876

45,781

Cía. Pisquera de Chile S.A.

IWWT

Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT).

237,994

224,045

 

SIR

Solid waste (SIR) and hazardous waste (ResPel) management.

43,059

78,746

 

Others

Management of internal and external regulatory compliance.

12,582

15,628

Transportes CCU Limitada

IWWT

Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT).

9,792

18,687

 

SIR

Solid waste (SIR) and hazardous waste (ResPel) management.

288,856

196,114

 

Gases

Management of atmospheric emissions

13,356

17,297

 

Others

Management of internal and external regulatory compliance.

141,138

130,044

VSPT S.A.

IWWT

Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT).

454,828

381,893

 

SIR

Solid waste (SIR) and hazardous waste (ResPel) management.

165,697

172,089

 

Others

Management of internal and external regulatory compliance.

10,916

5,227

Embotelladora Chilenas Unidas S.A.

IWWT

Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT).

593,414

665,990

 

SIR

Solid waste (SIR) and hazardous waste (ResPel) management.

421,771

53,539

 

Gases

Management of atmospheric emissions

156,295

96,019

 

Others

Management of internal and external regulatory compliance.

14,305

10,233

Aguas CCU-Nestlé Chile S.A.

IWWT

Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT).

35,550

29,057

 

SIR

Solid waste (SIR) and hazardous waste (ResPel) management.

3,910

3,661

 

Others

Management of internal and external regulatory compliance.

69,330

50,904

Fábrica de Envases Plásticos S.A.

SIR

Solid waste (SIR) and hazardous waste (ResPel) management.

21,410

19,326

 

Gases

Management of atmospheric emissions

129,487

137,359

 

 

 

 

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

The main disbursements (investment) of each year, detailed by by project, are the following:

Company that made the disbursement

Project

Concept

Status [Finished, In process]

As of December 31, 2016

As of December 31, 2015

Disbursements made

Amount committed future periods

Estimated Completion Date Disbursements

Disbursements made

ThCh$

ThCh$

ThCh$

CCU Chile Ltda.

IWWT

IWWT Temuco Stage II; IWWT expansion (Screw) Temuco

Processing

2,854,428

156,383

Dec - 17

181,077

 

SIR

Changing and increasing containers for glass and rubbish

Finished

37,602

-

Finished

194,875

 

Gases

Change Fuel FO6 to GNL Temuco, Upgrade Odor Control, Thermal Plant Improvements Quilicura, Videoconferencing rooms.

Processing

265,248

103,093

Dec - 17

35,728

 

Others

DS 10 and RE 43 compliance; Emergency Brigade and Anti Fire Protection System

Processing

108,188

352,424

Dec - 17

124,162

CCU Argentina S.A.

IWWT

IWWT Stage 2 and 3, Salta

Processing

217,401

134,386

Dec - 17

60,003

 

Gases

Boiler 1 Economizer, Luján

Finished

227,079

29,780

Finished

-

 

Others

Fire Network in Distribution Center SV; Compromises ISO 22 K/14K/18 K OSHAS Luján

Processing

32,360

25,076

Dec - 17

56,131

Cía. Cervecera

IWWT

New IWWT PTR – IC Technology

Processing

2,050,705

548,710

Dec - 17

2,958,767

Kunstmann S.A.

Others

DIA; Increase installed power; Equipment protection structures

Processing

33,835

278,000

Dec - 17

-

Cía. Pisquera de Chile S.A.

IWWT

IWWT, Change of Hidroeyectors, Water plant and dam, IWWT improvement in Salamanca and Sotaquí, New Sewer Plant, Water process meters.

Finished

133,879

6,864

Finished

9,712

 

SIR

Improved sludge system; Containers for glass

Finished

20,224

1,610

Finished

-

 

Others

Requirement for ISO Standards in Salamanca, Monte Patria, Sotaquí and Pisco Elqui; DS 10 compliance in Salamanca and Montepatria

Processing

268,003

379,547

Dec - 17

-

Transportes CCU Limitada

SIR

Ceiling of waste area in Distribution Center Llay Llay

Processing

-

57,224

Dec - 17

-

 

Gases

LED lightning in Distribution Center Talca

Processing

81,355

43,939

Dec - 17

-

 

Others

Access to DC Copiapó and Acoustic closure in DC Cervecería Stgo.

Processing

138,743

103,057

Dec - 17

-

VSPT S.A.

IWWT

Sewage plant; Degassing Pond Improvement

Finished

76,285

-

Finished

50,356

 

SIR

Solid Packing Separator

Finished

3,128

-

Finished

-

 

Gases

Electric Power Generator to IWWT, Power Meters

Finished

19,296

-

Finished

-

 

Others

Fire network Molina, DS 10 compliance, Standardization 5 dining rooms, Autonomous Breathing Equipment

Finished

220,005

-

Finished

85,825

Embotelladora Chilenas Unidas S.A.

Gases

Condensate recovery, Meters and Monitoring of Consumption, Mantle Insulation of Boilers, Heat recovery compressor discharge, Upgrade exhaust gas analyzer, Upgrade System Control and Installation System Lighting.

Processing

54,282

29,402

Dec - 17

33,684

 

Others

Safety Acid Injection; Standardization Kitchen ECCUSA; Autonomous Breathing Equipment to Stgo. and Antofagasta

Processing

112,904

27,843

Dec - 17

5,992

Aguas CCU-Nestlé Chile S.A.

IWWT

IWWT Coinco

Processing

559,569

410,347

Dec - 17

27,756

 

Gases

Lighting lines 1, 2 y 3, Steam networks, Solar Lighting

Finished

21,425

-

Finished

-

 

Others

Warehouse Flammable Coinco, RE 43 and DS 594 compliance.

Processing

28,694

222,221

Dec - 17

12,600

Fábrica de Envases Plásticos S.A.

Gases

Control of electrical variables, change of lighting.

Processing

187,373

22,404

Dec - 17

47,711

 

Others

Risk Mitigation, Reduction weight of PET Bottles, Bathroom Expansion, Various SIG -OCA, Ammonia Sensors

Processing

158,522

47,436

Dec - 17

61,401

 

 

 

 

 

 

 

 


Compañía Cervecerías Unidas S.A. and subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2016

Note 3635Subsequent Events

a)

The Consolidated Financial Statements of CCU S.A., have been approved by the Board of Directors on February 26, 2020.

b)

There are no others subsequent events between the closing date and the filing date of these Financial Statements (February 26, 2020) that could significantly affect their interpretation.

 

 


a)The Consolidated Financial Statements of CCU S.A. have been approved by the Board Directors on February 27, 2017.

 

b)There are no others subsequent events between the closing date and the filing date of these Financial Statements (February 27, 2017) that could significantly affect their interpretation.

 

F-123F-137