CCU Compania Cervecerias Unidas SA

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 6-K

     Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934

COMPANIA CERVECERIAS 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, 23 ^rd floor, Santiago, Chile
(Address of principal executive offices)
 _________________________________________

Securities registered or to be registered pursuant to section 12(b) of the Act.

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F X Form 40-F ___

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ___ No X

                                                                                                                 

PRESS RELEASE

Our second quarter 2017 results showed an increase in EBITDA of 28.7%, from CLP 34,461 million to CLP 44,367 million, continuing our positive trend. Despite adverse economic conditions in our different geographies, we have been able to grow our consolidated volumes 7.1%. The volume growth was driven by the International Business Operating segment, which experienced a volume growth of 26.5%, followed by the Chile Operating segment with 2.7% growth and partially offset by a 3.2% volume decrease in the Wine Operating segment. Our EBITDA improvement was driven by both the Chile and the International Business Operating segments, as a result of the before mentioned volume growth, revenue management and the efficiencies obtained through the ExCCelencia CCU program. At the same time, the Wine Operating segment experienced a decrease in EBITDA not only due to lower volumes, but foremostly significant higher cost of wine, which by itself represents 7.7% of CCU´s consolidated EBITDA. Our consolidated EBITDA margin improved 167 bps from 11.2% to 12.9%. When excluding the restructuring ³  costs we incurred in the second quarter of 2016, our EBITDA increased 19.0%, a margin improvement of 75 bps. All-in, our Net income increased 34.6% from CLP 6,281 million to CLP 8,455 million.

In the Chile Operating segment our top-line grew 6.9% as a result of 2.7% higher volumes combined with 4.1% higher average prices. We managed this volume and price growth, despite a weak economic environment, as represented by a weak IMACEC ^[4] of 1.0% and pessimistic consumer confidence. Despite an intense competitive environment, we managed to maintain our overall market share. Gross profit increased 7.7%, an improvement of 39 bps as a percentage of Net sales. The initiatives of the ExCCelencia CCU program, including the combination of the route to market of the beer and non-alcoholic categories, enabled us to achieve additional efficiencies, especially in logistics, decreasing our MSD&A as a percentage of Net sales by 229 bps. All-in we had an EBITDA growth of 23.9% from CLP 30,518 million to CLP 37,815 million, translated into an EBITDA margin of 18.0%, an improvement of 247 bps. When excluding the restructuring ³ costs we incurred in the second quarter of 2016, our EBITDA increased 17.8%, a margin improvement of 167 bps.

The International Business Operating segment, which consists of the operations in Argentina, Uruguay and Paraguay, reported top-line growth of 42.8%, driven by 26.5% higher volumes, combined with 12.9% higher average prices in CLP terms. Volume growth was driven by favorable weather conditions, growth of the beer industry and market share gains in Argentina, and also by volume growth in Paraguay and Uruguay. The higher average prices resulting from our revenue management efforts in order to keep up with inflation levels, together with efficiencies and scale effects of the strong volume growth on fixed manufacturing costs, have enabled us to achieve a 541 bps improvement in Gross margin, from 51.2% to 56.6%. Further efficiency gains have enabled us to achieve a 617 bps decrease in our MSD&A as a percentage of Net sales. All-in our EBITDA improved from negative CLP 5,682 million to positive CLP 1,114 million. Excluding the restructuring ³ costs we incurred in the second quarter of 2016, our EBITDA increased from negative CLP 4,443 million to positive CLP 1,114 million.

The Wine Operating segment reported a top-line contraction of 0.7%, as a result of a 3.2% volume decrease combined with 2.6% higher average prices in CLP terms. The volume decrease is a result our export volumes. Despite the higher average prices, our Gross margin contracted 520 bps as a result of the CLP 3,437 million higher cost of wine following two consecutive weak harvests. With relatively stable MSD&A, the Gross margin contraction has resulted in a decrease of our EBITDA margin by 584 bps, from 23.4% to 17.6%, which has translated in a decrease of 25.4% from CLP 12,430 million to CLP 9,269 million. 

We have been able to continue the positive trend, and we maintain an optimistic view regarding the medium and long-term perspective of our economies. However, we remain cautious regarding short-term macroeconomic challenges, including consumer confidence. Having said that, in the short term we reinforce our commitment to revenue management and efficiency initiatives related to the ExCCelencia CCU program, building on our strong brands and effective execution.

 

PRESS RELEASE

 

          .

PRESS RELEASE

 

In the Chile Operating segment our top-line grew 6.9% as a result of 2.7% higher volumes combined with 4.1% higher average prices. We managed this volume and price growth, despite a weak economic environment, as represented by a weak IMACEC of 1.0% and pessimistic consumer confidence. Despite an intense competitive environment, we managed to maintain our overall market share. Gross profit increased 7.7%, an improvement of 39 bps as a percentage of Net sales. The initiatives of the ExCCelencia CCU program, including the combination of the route to market of the beer and non-alcoholic categories, enabled us to achieve additional efficiencies, especially in logistics, decreasing our MSD&A as a percentage of Net sales by 229 bps. All-in we had an EBITDA growth of 23.9% from CLP 30,518 million to CLP 37,815 million, translated into an EBITDA margin of 18.0%, an improvement of 247 bps. When excluding the restructuring costs we incurred in the second quarter of 2016, our EBITDA increased 17.8%, a margin improvement of 167 bps.

This quarter, CCU has been identified amongst the companies with the best corporate reputation in Chile, according to studies performed by RepTrak Chile including more than one hundred companies from Chile´s main business sectors. Also this quarter, CCU has signed the “Acuerdo por la Empleabilidad Juvenil” (Youth Employability Agreement), with the objective to reduce youth unemployment with the support of industry players.

The International Business Operating segment, which consists of the operations in Argentina, Uruguay and Paraguay, reported top-line growth of 42.8%, driven by 26.5% higher volumes, combined with 12.9% higher average prices in CLP terms. Volume growth was driven by favorable weather conditions, growth of the beer industry and market share gains in Argentina, and also by volume growth in Paraguay and Uruguay. The higher average prices resulting from our revenue management efforts in order to keep up with inflation levels, together with efficiencies and scale effects of the strong volume growth on fixed manufacturing costs, have enabled us to achieve a 541 bps improvement in Gross margin, from 51.2% to 56.6%. Further efficiency gains have enabled us to achieve a 617 bps decrease in our MSD&A as a percentage of Net sales. All-in our EBITDA improved from negative CLP 5,682 million to positive CLP 1,114 million. Excluding the restructuring costs we incurred in the second quarter of 2016, our EBITDA increased from negative CLP 4,443 million to positive CLP 1,114 million.

This quarter our license agreement to produce and distribute the beer brand Miller Genuine Draft in Argentina became effective, complementing our beer portfolio in this country.

The Wine Operating segment reported a top-line contraction of 0.7%, as a result of a 3.2% volume decrease combined with 2.6% higher average prices in CLP terms. The volume decrease is a result our export volumes. Despite the higher average prices, our Gross margin contracted 520 bps as a result of the CLP 3,437 million higher cost of wine following two consecutive weak harvests. With relatively stable MSD&A, the Gross margin contraction has resulted in a decrease of our EBITDA margin by 584 bps, from 23.4% to 17.6%, which has translated in a decrease of 25.4% from CLP 12,430 million to CLP 9,269 million

During the quarter, we completed the expansion plan in our facilities in Molina. As we mentioned in the past, our facilities in Lontué will continue to serve only as a storage location.

 

PRESS RELEASE

 

ABOUT CCU

CCU is a diversified beverage company operating in Chile, Argentina, Bolivia, Colombia, Paraguay and Uruguay. CCU is the largest Chilean brewer, the second-largest Chilean carbonated soft drinks producer, the largest Chilean water and nectar producer, and the largest pisco producer. It is the second-largest Argentine brewer, and participates in the beer, water and soft drinks industries in Uruguay, Paraguay and Bolivia, and in the beer industry in Colombia. It is one of the largest Chilean wine producers, and the second-largest Chilean wine exporter. The Company´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´s S.A., and Coors Brewing Company.

CAUTIONARY STATEMENT

Statements made in this press release that relate to CCU’s future performance or financial results are forward-looking statements, which involve known and unknown risks and uncertainties that could cause actual performance or results to materially differ. We undertake no obligation to update any of these statements. Persons reading this press release are cautioned not to place undue reliance on these forward-looking statements. These statements should be taken in conjunction with the additional information about risk and uncertainties set forth in CCU’s annual report on Form 20-F filed with the US Securities and Exchange Commission and in the annual report submitted to the SVS (Chilean Market Regulator) and available on our web page.

GLOSSARY

Operating segments

The Operating segments are defined with respect to its revenues in the geographic areas of commercial activity:

·          Chile : This segment commercializes Beer, Non Alcoholic Beverages and Spirits in the Chilean market, and also includes the results of Transportes CCU Limitada, Comercial CCU S.A., CRECCU S.A. and Fábrica de Envases Plásticos S.A.

·          International Business : This segment commercializes Beer, Cider, Non Alcoholic Beverages and Spirits in the Argentinean, Uruguayan and Paraguayan market.

·          Wine : This segment commercializes Wine, mainly in the export market reaching over 80 countries.

·          Other/Eliminations: It considers the non-allocated corporate overhead expenses and eliminations of transactions between segments.

 

PRESS RELEASE

 

ARS

Argentine Peso

CLP

Chilean Peso

Cost of sales

Formerly referred to as Cost of Goods Sold (COGS), Cost of Sales includes direct costs and manufacturing costs.

Earnings Per Share (EPS)

Net profit divided by the weighted average number of shares during the year.

EBIT

Stands for Earnings Before Interest and Taxes, and for management purposes it is defined, 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. EBIT is equivalent to Adjusted Operating Result used in the 20-F Form.

EBITDA

EBITDA represents EBIT plus depreciation and amortization. EBITDA is not an accounting measure under IFRS. When analyzing the operating performance, investors should use EBITDA in addition to, not as an alternative for Net income, as this item is defined by IFRS. Investors should also note that CCU’s presentation of EBITDA may not be comparable to similarly titled indicators used by other companies. EBITDA is equivalent to ORBDA (Adjusted Operating Result Before Depreciation and Amortization), used in the 20-F Form.

Exceptional Items (EI)

Formerly referred to as Non recurring items (NRI), Exceptional items are either income or expenses which do not occur regularly as part of the normal activities of the Company. They are presented separately because they are important for the understanding of the underlying sustainable performance of the Company due to their size or nature.

Gross margin

Gross profit as a percentage of Net sales.

Gross profit

Gross profit represents the difference between Net sales and Cost of sales.

Marketing, Sales, Distribution and Administrative expenses (MSD&A)

MSD&A include marketing, sales, distribution and administrative expenses.

Net Debt

Total financial debt minus cash & cash equivalents.

Net Debt / EBITDA

The ratio is based on a twelve month rolling calculation for EBITDA.

Net Income

Net income attributable to the equity holders of the parent.

UF

The UF is a monetary unit indexed to the Consumer Price Index variation in Chile.

USD

United States Dollar

 

PRESS RELEASE

 

 

Exhibit 3: Segment Information (Second Quarter 2017)
	1. Chile Operating segment (1)				2. International Business Operating segment				3. Wine Operating segment
Second Quarter
(In ThHL or CLP million unless stated otherwise)	2017	2016	Total %		2017	2016	Total %		2017	2016	Total %
Volumes	3,511	3,419	2.7		1,241	981	26.5		364	376	(3.2)
Net sales	210,652	197,106	6.9		84,935	59,497	42.8		52,707	53,072	(0.7)
Net sales (CLP/HL)	60,001	57,644	4.1		68,418	60,625	12.9		144,945	141,302	2.6
Cost of sales	(102,076)	(96,286)	6.0		(36,822)	(29,013)	26.9		(31,721)	(29,179)	8.7
% of net sales	48.5	48.9			43.4	48.8			60.2	55.0
Gross profit	108,576	100,820	7.7		48,113	30,484	57.8		20,986	23,893	(12.2)
% of net sales	51.5	51.1			56.6	51.2			39.8	45.0
MSD&A	(86,111)	(85,083)	1.2		(50,893)	(39,318)	29.4		(13,728)	(13,494)	1.7
% of net sales	40.9	43.2			59.9	66.1			26.0	25.4
Other operating income/(expenses)	266	579			(29)	53			96	227
EBIT	22,731	16,316	39.3		(2,809)	(8,782)	(68.0)		7,354	10,626	(30.8)
EBIT Margin	10.8	8.3			(3.3)	(14.8)			14.0	20.0
EBITDA	37,815	30,518	23.9		1,114	(5,682)	(119.6)		9,269	12,430	(25.4)
EBITDA Margin	18.0	15.5			1.3	(9.6)			17.6	23.4
	4. Other/eliminations (1)				Total
Second Quarter
(In ThHL or CLP million unless stated otherwise)	2017	2016	Total %		2017	2016	Total %
Volumes					5,116	4,776	7.1
Net sales	(3,251)	(1,769)	83.8		345,043	307,905	12.1
Net sales (CLP/HL)					67,445	64,465	4.6
Cost of sales	1,089	(1,772)	(161.4)		(169,530)	(156,250)	8.5
% of net sales					49.1	50.7
Gross profit	(2,162)	(3,542)	(38.9)		175,513	151,655	15.7
% of net sales					50.9	49.3
MSD&A	(2,445)	224	(1,190.0)		(153,177)	(137,671)	11.3
% of net sales					44.4	44.7
Other operating income/(expenses)	126	62			459	921
EBIT	(4,481)	(3,256)	37.6		22,795	14,904	52.9
EBIT Margin					6.6	4.8
EBITDA	(3,830)	(2,805)	36.5		44,367	34,461	28.7
EBITDA Margin					12.9	11.2

(1)    See exhibit 6: Results 2016 as previously reported and current adjustments.

 

PRESS RELEASE

 

 

Exhibit 4: Segment Information (Six months ended on June 30, 2017)
	1. Chile Operating segment (1)				2. International Business Operating segment				3. Wine Operating segment
YTD as of June
(In ThHL or CLP million unless stated otherwise)	2017	2016	Total %		2017	2016	Total %		2017	2016	Total %
Volumes	8,788	8,531	3.0		2,982	2,570	16.1		682	676	0.9
Net sales	502,286	476,618	5.4		198,039	151,344	30.9		98,101	97,668	0.4
Net sales (CLP/HL)	57,156	55,867	2.3		66,405	58,893	12.8		143,898	144,493	(0.4)
Cost of sales	(232,102)	(218,945)	6.0		(81,311)	(64,883)	25.3		(59,869)	(54,085)	10.7
% of net sales	46.2	45.9			41.1	42.9			61.0	55.4
Gross profit	270,184	257,672	4.9		116,729	86,461	35.0		38,232	43,583	(12.3)
% of net sales	53.8	54.1			58.9	57.1			39.0	44.6
MSD&A	(183,481)	(184,657)	(0.6)		(108,239)	(85,913)	26.0		(25,235)	(25,260)	(0.1)
% of net sales	36.5	38.7			54.7	56.8			25.7	25.9
Other operating income/(expenses)	630	984			810	69			211	271
EBIT	87,333	73,999	18.0		9,300	617	1,407.2		13,208	18,595	(29.0)
EBIT margin	17.4	15.5			4.7	0.4			13.5	19.0
EBITDA	117,661	102,298	15.0		16,910	6,575	157.2		17,000	22,142	(23.2)
EBITDA margin	23.4	21.5			8.5	4.3			17.3	22.7
	4. Other/eliminations (1)				Total
YTD as of June
(In ThHL or CLP million unless stated otherwise)	2017	2016	Total %		2017	2016	Total %
Volumes					12,452	11,777	5.7
Net sales	(4,698)	(3,532)	33.0		793,728	722,098	9.9
Net sales (CLP/HL)					63,743	61,314	4.0
Cost of sales	1,324	(1,633)	(181.1)		(371,957)	(339,546)	9.5
% of net sales					46.9	47.0
Gross profit	(3,373)	(5,165)	(34.7)		421,771	382,551	10.3
% of net sales					53.1	53.0
MSD&A	(5,112)	(125)	4,000.7		(322,066)	(295,954)	8.8
% of net sales					40.6	41.0
Other operating income/(expenses)	309	910			1,959	2,234
EBIT	(8,176)	(4,380)	86.7		101,664	88,831	14.4
EBIT margin					12.8	12.3
EBITDA	(6,972)	(3,450)	102.1		144,599	127,564	13.4
EBITDA margin					18.2	17.7

(1)    See exhibit 6: Results 2016 as previously reported and current adjustments.

                          

PRESS RELEASE

 

Exhibit 6: Results 2016 as previously reported and current adjustments

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 June 2016 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 allocated to Chile Operating segment explained in the following tables: