Compania Cervecerias Unidas' (CCU) CEO Patricio Jottar on Q4 2015 Results - Earnings Call Transcript

| About: Compania Cervecerias (CCU)

Compania Cervecerias Unidas S.A. (NYSE:CCU)

Q4 2015 Earnings Conference Call

February 4, 2016 9:00 AM ET

Executives

Linda Walstra - Investor Relations Contact

Patricio Jottar - Chief Executive Officer

Felipe Dubernet - Chief Financial Officer and Chief Administrative Officer

Analysts

Luca Cipiccia - Goldman Sachs

José Luís Rizzardo Pereira - Banco BTG Pactual SA

Mauricio Serna - JP Morgan

Antonio Gonzalez - Credit Suisse

Mauricio Martinez - ‎GBM Grupo Bursatil Mexicano

Luis Eugenio Miranda Valenzuela - Banco Santander Mexico

Gabriel Vaz de Lima - Bradesco

Operator

Good day and welcome to the CCU Q4 2015 Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Ms. Linda Walstra. Please go ahead.

Linda Walstra

Good morning and thank you for attending CCU’s fourth quarter 2015 conference call. Today with me are Patricio Jottar, Chief Executive Officer; Felipe Dubernet, Chief Financial Officer; Matías Rojas, Financial Planning and Investor Relations Manager; and Manuel Alcalde, Investor Relations Analyst.

You have received a copy of the company’s consolidated fourth quarter 2015 results. Patricio will review our over-performance and we’ll then move on to the Q&A.

Before we begin, please take note of our cautionary statement. Statements made in this call as it relates to CCU’s future performance or financial results are forward looking statements, which involve known and unknown risks and uncertainties that could can actual performance or results to materially differ. These statements should be taken in conjunction with the additional information about risk and uncertainties set forth in CCU’s annual report in Form 20-F filed with the U.S. Securities and Exchange Commission and in annual report submitted to the SVS and available on our webpage.

It is now my pleasure to introduce Patricio Jottar.

Patricio Jottar

Thank you, Linda, and good morning, everyone. CCU’s fourth quarter 2015 results showed an EBITDA growth of 14.4%. Despite a slower volume growth of 1.5%, reflecting the deceleration of economies, we’re able to achieve this EBITDA improvement from CLP 80,304 million to CLP 91,884 million in an adverse macroeconomic environment, where currencies continue to devaluate.

The estimated effect of the currency devaluation during the quarter was CLP 7,789 million, compensated mainly by higher prices and efficiencies obtained through our ExCCelencia CCU Program. As a consequence, we protected our EBITDA margin of 20.3%.

The Chile Operating segment EBITDA increased 7.2%, driven by efficiencies and a top-line growth of 6.4%, mostly due to 4.8% higher average prices, compensating the 16.6% devaluation of the Chilean peso, affecting our U.S. dollar denominated costs.

Volume growth was moderate as a consequence of a decelerating economy, where we were able to maintain market share in a very competitive scenario. During this quarter we entered the business of powder juices in an association with Empresas Carozzi, complementing our non-alcoholic beverages portfolio. Distribution will start in April 2016.

The International Business Operating segment, which consists of the operations in Argentina, Uruguay and Paraguay, reported an EBITDA growth of 50.6%, representing an EBITDA margin expansion of 254 basis points. We’re able to achieve an improvement in market share; however, due to an adverse macroeconomic scenario and unfavorable weather conditions, especially in Argentina during October and November, we had moderate volume growth.

Top-line grew 27.6% driven by 25.8% higher average prices, offsetting the high level of devaluation in the region, including 18% devaluation of the Argentine peso during the quarter.

The Wine Operating segment keeps showing positive results where EBITDA grew from CLP 6,866 million to CLP 10,132 million, which is an increase of 47.6% compared to the same quarter last year, translating into an EBITDA margin expansion of 534 basis points. This improvement is explained by a combination of efficiencies, the excellent 2015 harvest that has fully impacted the results during this quarter, and top-line growth of 10.9%.

Top-line growth was driven by the favorable effect of the strong U.S. dollar exchange rate in the export business as well as strong growth in the domestic business, where we improved our market share.

During the fourth quarter we sold the food brands Calaf and Natur, reducing the share of non-core operations in our portfolio. In the liquor category, we have divested our investment in pisco Bauzá. The total effect of these divestments was CLP 1,694 million negative at net income level. All-in, our net income for the quarter decreased 5.7%; however, excluding these divestments net income for the quarter decreased 1.5%.

This ends 2015 with an EBITDA growth of 15.3%, an EBITDA margin of 19.1% and net income of CLP 120,808 million, representing an increase of 1%. In spite of decelerating economies, we’re able to generate top-line growth of 15.4%.

When excluding the one-time compensation received by our Argentine subsidiary CICSA during Q2 2014, for the termination of the contract which allowed us to import and distribute Corona and Negra Modelo beers in Argentina and to produce and distribute Budweiser beer in Uruguay, and the abovementioned divestments, EBITDA increased 24.8%, EBITDA margin improved 143 basis points and net income increased 14.2%.

Now, I will be glad to answer any questions you may have.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] We’ll pause for just a moment to allow everyone an opportunity to signal for question.

And we’ll now take our first question.

Luca Cipiccia

Hi, good morning. This is Luca Cipiccia from Goldman Sachs. Good morning. Two questions, one on the brand disposals. If you can maybe elaborate on how does this sit with the broader sort of strategic overall that you’ve been undergoing since last year? And should we expect more portfolio pruning? Is there other assets that you may consider exiting or reducing your exposure, especially in this category, just maybe a clarification on this point?

And secondly, if you could also update us on your CapEx plans for this year and for next year, again to understand whether anything has changed as compared to what you’re planning before, if any of the projects have been moved forward than in time? You could give us an update both qualitatively, and ideally, quantitatively on what should we expect for CapEx in 2016 and 2017?

Patricio Jottar

Thank you, Luca, for your questions. Regarding asset divestment, we expect no additional or relevant divestment of our current business. We feel very comfortable with our portfolio; probably minor issues here and there but nothing significant. Regarding CapEx 2016 and 2017, I will ask Felipe to discuss on it.

Felipe Dubernet

Yes. Hello, Luca. Good morning. CapEx in 2015 was CLP 131 billion, significantly lower to the figure that we published in the annual 20-F report, that it was CLP 219 billion. This figure was lower, because we postponed a number of projects. As we - through our ExCCelencia CCU program, we are gaining efficiencies in our industrial operations. We are postponing a number of new capacity expansions, as it is also the case of the new non-alcoholic plan that we postponed a few years, the start of the contraction.

Regarding forward looking on the CapEx, we will update this through the annual report in March, but we issue to the SVS in Chile and through the 20-F end of April. Then we will publish new estimated CapEx figure for the future.

Luca Cipiccia

I understand. But in the meantime, so on the - for instance, the non-alcoholic beverage plans, we should assume that what you - the fact that this year you track below what you were targeting initially, doesn’t necessarily mean that you’re going to compensate or recoup for that immediately in 2016 or 2017, even though if you cannot give the value, but we shouldn’t just roll-forward where you came below this year into - last year into 2016, correct?

Felipe Dubernet

Yes. It would be - that’s correct, what you are saying, because at the end, we reduce significantly the amount of CapEx due to some postponement. But, as I said, we are still working on our future needs. And this will be published as usually in the annual report and in the 20-F.

Luca Cipiccia

Perfect. Thank you. That’s it for me. Thank you.

Patricio Jottar

Thank you.

Operator

And we’ll now take our next question.

José Luís Rizzardo Pereira

Hi guys, good morning. It’s José Rizzardo from BTG Pactual. I have one question. In your earnings release, you mentioned that a negative effect devaluation was compensated mainly by higher prices and efficiencies that you’ve obtained through your ExCCelencia CCU program. So my first question is can you quantify how much came from pricing, how much came from ExCCelencia CCU?

And as a follow-up, I mean, if you have to put in a scale of 0 through 100 your ExCCelencia CCU program, where do you are in this scale from 0 through 100? I mean, how far improvement you can achieve in the program? That’s it. Thanks.

Patricio Jottar

Thank you, Jose, for your two questions. But you asked me for to quantify that effect of exchange rate and efficiencies, and the price and business growth. Looking few figures, the quantification is the following.

In Q4 2014 our EBITDA was CLP 80.3 billion, and in Q4 2015 our EBITDA was CLP 91.9 billion. So we increased from CLP 80.3 billion to CLP 91.8 billion. Okay, the build-up is the following.

The effect of exchange rate and what we call external exchange rate, if we’ll combine exchange rate in the commodity side, was negative CLP 6.4 billion. The efficiency effect was positive CLP 10 billion and what you call the business growth. It is a combination of volumes and prices, as profit is CLP 7.9 billion. In few words, CLP 80.3 billion, minus CLP 6.4 billion, plus CLP 10 billion, plus CLP 7.9 billion, it’s CLP 91.9 billion. There you have the figures. On what we call business growth, it’s 7.9% [ph] mainly prices. Volumes do just 1.5% in the quarter.

Regarding your second question, ExCCelencia CCU plan, in the whole year we got efficiencies on more than CLP 36 billion Chilean pesos, which is larger than this. And our mission has two pillars.

Number one, we need to make this CLP 36 billion, CLP 37 billion sustainable in the future, because if you capture an efficiency, but if you don’t create the structures to make it sustainable, it’s one-time set which is good, but it’s not as good if you’re going to transform it to something permanent. And we’re working on that and we think that it’s going to be permanent. This is number one.

Number two, this is not enough. We are expecting to capture much more efficiencies. We cannot share with you which proportion of the total efficiency we are going to capture this CLP 37 billion, because as you know, we don’t make quantitative projections regarding the future of our businesses. But I could say that we are just beginning and we have ambitious plans regarding this.

José Luís Rizzardo Pereira

Thank you.

Operator

And we’ll now take our next question.

Mauricio Serna

Hi, good morning. This is Mauricio Serna from JP Morgan. I have a couple of questions. First, maybe you could please elaborate on the ExCCelencia CCU Program; I know you have like your three-year target for the program. So how far long would you say you are with this program?

And then on the volumes, maybe - do you have like any visibility on growth for 2016 or target for volume growth especially in Chile and International operations since the deceleration we saw on 4Q?

And finally, if you could provide some updates on the Colombia greenfield operations, how is it been working? And on the raw materials also, if you could also tell us like you expect to see some benefits from the falling oil prices, is it something to reflect on the raw material costs? Thanks.

Patricio Jottar

Okay. Thank you, Mauricio, for your question. Look, regarding volume and efficiency for the future, we had just finished our 2016-2018 business plan, which was approved by the Board of CCU on December. And there are two key elements in this Strategic Plan: element number one, to significantly grow in all our categories from business in our six countries; and objective number two, to be much more efficient in all our operations.

And we have an ambitious plan regarding growth and regarding efficiency. The quantification of this class of goals has been made by our team and are part of our Strategic Plan. But as you know, we don’t share future quantitative information with the market, just qualitative information. But we are focused on these two elements: to grow and to be efficient in the same time.

Regarding Colombia, as we have mentioned, we have already purchased the land in the Cundinamarca region. We have obtained the water rights and we are currently tendering the purchase of the equipments and defining the blueprint in detail of the plant. The construction of the civil-works of the plant should start in this quarter in Q1 2016 or beginning of Q2 2016, and expect to - construction should take approximately two years.

But as you also know, in the meantime we are distributing Heineken and Coors Light mainly, plus other minor brands, but mainly Heineken and Coors Light with very good results. We are growing our - and volumes are still small. But we are growing them fastly. In less than a year, we have more than doubled, almost tied to the volumes distributed by the former Heineken distributor in Colombia. So we are very happy on that. But again this is a minor distribution operation, preparing some volumes for the moment we have the plant. Regarding raw material, so we’ll ask Felipe to discuss it.

Felipe Dubernet

Hello, Mauricio. Yes, commodity prices are down, when looking at the last 12 months. Looking at the shorter period, three months, the decrease in commodity prices is slowing down, especially sugar for example; and for some commodities increasing in the last two weeks, such as oil or aluminum. So we - in 2016, we benefit of course of lower raw material costs that has offset partially the impact of the devaluation of the currency as Patricio highlighted before.

But this is a very volatile scenario in terms of raw materials for the future. And we will never make projections on that. Of course, we have our own internal projections. However, the scenario is very volatile.

Mauricio Serna

Okay. Thanks.

Patricio Jottar

Thank you.

Operator

And we’ll now take our next question.

Antonio Gonzalez

Hi, good morning. This is Antonio Gonzalez from Credit Suisse. Just two questions, the first one is in light of the Chilean peso and the Argentine peso depreciation, can you help us balance qualitatively? Of course, how do you see margins in 2016? Do you think that the ExCCelencia CCU program continues to kick-in and that is more than enough to compensate from a margin standpoint the weakness of the currencies or you see a scenario where just given the Argentine peso depreciation et cetera your margin can effectively decline EBITDA margin, I am talking about in 2016?

And then the second question is regarding free cash flow. Just going back to the first question on CapEx, if your CapEx remains at levels below, let’s say, CLP 200 billion or so, and your EBITDA is already at CLP 290 billion, do you foresee a scenario where you are deep cash flow positive in 2016? And if so, are you thinking about distributing more aggressively dividends, or how you think about cash accumulation going forward? Thank you.

Patricio Jottar

Thanks, Antonio, for your questions. So we launch the 2016-2018 business plan and before 2016 we put our focus on recuperating margins. And I mentioned in my introduction, my first words, we increased importantly our margins in 2015. And we have the purpose of continue keeping an increasing margin for the future. Of course, devaluations - particular devaluation in Argentina is a big challenge, because it was the deepest devaluation in a very short period of time.

Efficiencies are not going to be enough in Argentina. We need price and we need to heavily increase prices in order to build it. The Argentine economy is starting a recession and we are very positive on the future on the Argentine economy. But in the short-term, the transformation and all the adjustments made by the new government are going to have an impact. So it’s going to be difficult to capture volumes, particularly if we heavily increase prices.

So it’s a complete balance to achieve, but we are very focused on achieving it. And I would say that I feel comfortable on our ability to achieve the recuperation of margins sooner than later.

In the case of Chile, combination of prices and efficiencies plus the growth of the business should be enough for that purpose. Again altogether, we have the purpose of keeping an increasing margin in our business and our Strategic Plan 2016-2018 is about this. Regarding cash flow, I will ask Felipe, to discuss it.

Felipe Dubernet

Yes, in 2015, our cash flow generation was exceptional. We generated more than CLP 220 billion from our operation, a combination of the excellent EBITDA growth, but also the efficiency in working capital through the ExCCelencia CCU program. And also, as I already answered to Luca Cipiccia, also we have postponed a number of CapEx even at the better efficiencies in our line.

Answer your question on dividend, the proposal of dividend is due in March for the Shareholder’s Meeting that will be in April. But you need to take into account that although we are reducing our level of CapEx for the following years, we have the commitment with the Colombia project, where we started - start - we will invest, both parties, CLP 200 million each for the greenfield in Colombia.

So, so far we have invested CLP 30 million of the CLP 200 million for the Colombia project. So it’s a shareholder decision, but I think we would continue with the dividend policy of 50%.

Antonio Gonzalez

That’s very true. Thank you.

Patricio Jottar

Thank you.

Operator

And we’ll now take our next question.

Mauricio Martinez

Hello, everyone. This is Mauricio Martinez from GBM. Thank you for taking my question. I was wondering if you can share with us development of the competitive environment in Chile for the brewery segment, and specifically, the reaction from the consumers to the new launches that you made recently.

Patricio Jottar

Thank you, Mauricio, for your question. I would say that both in Chile and Argentina we have taken the beer business strong level of competition from ABI; in Chile, with the incorporation of Corona to the portfolio and recently with the incorporation of Budweiser to the portfolio beginning on January.

And first, they have a very strong portfolio and they’re competing hardly. In the case of Argentina, same thing, it’s the fact that we changed the generic returnable bottle for a proprietary returnable bottle for the year to go. The rollout is just finishing 2015, 2016 is a demonstration of the strength on how they are competing. I would say that during this quarter we haven’t seen changes with the level of competition which is very hard and that’s it. That’s it.

Mauricio Martinez

[indiscernible] innovation?

Patricio Jottar

Yes. Regarding innovation, we are very happy with - especially, between some segment with the development of Sol, but also Royal Guard. Royal Guard is a very good brand and has demonstrated its strength. And we recently launched the Belgian-style wheat ale beer Blue Moon and also Tecate to complement our portfolio.

I think with our portfolio, and also through the mainstream through Sol and Escudo, continue to strength during the year demonstrating the turnaround in terms of the preference of the consumer and sustaining our market share through solid basis.

Mauricio Martinez

Perfect. Thank you very much.

Patricio Jottar

Thank you.

Operator

And we’ll now take our next question.

Luis Eugenio Miranda Valenzuela

Hi, good morning. Luis Miranda, Santander. Patricio, just a follow-up on the Chilean market; I don’t know when we see the price and volume at a consolidated level. Can you give us some color if there is any material difference of the performance between the beer and the non-alcoholic beverage market?

And the second question is with regarding a follow-up on cost side. When you see - you saw the benefit of the harvest on the wine, fully benefiting fourth quarter results. Could we see these continue during the first-half of 2016? Thank you.

Patricio Jottar

Thank you, Luis, for your question. Competition is hard in both categories, in both segments. In beer, in the non-alcoholic segment business, don’t forget them that in the non-alcoholic side of the business we are competing with the ABI of the soft drinks, which is Coca Cola. And they’re very strong…

Luis Eugenio Miranda Valenzuela

Right.

Patricio Jottar

…when they compete marginally. Marginally, we are getting better results in non-alcoholic than in beer. But also deliver - getting good results in terms of market share in the total - in the combination of both categories, in what we call the segment Chile. But again, marginally, we are getting best results in non-alcoholic than in beer.

Regarding, harvest and wine, I will ask Felipe to discuss it.

Felipe Dubernet

Yes. There are two positions, the one that is very difficult to forecast, the economy and the weather. So harvest is highly dependent on weather. So far so good, we can say. We haven’t had a - we have had a normal spring, let’s say, in terms of weather. You would remember that in 2013 was odder the weather in terms of the harvest. So for the time being, we can say so far so good. And we hope to have a harvest as smooth as we have had the one last year.

Luis Eugenio Miranda Valenzuela

Fair enough. Thank you very much.

Patricio Jottar

Thank you, Luis.

Operator

We will now go ahead with our next question.

Unidentified Analyst

Hi, this is Andrew Manch [ph] from HSBC. Thanks for taking the question. Just wanted to know - I know we just spoke about weather to a little degree, but to what affect it had on the quarters of volumes. And then, I guess, as we look into 2016, did you expect the benefit from weather as well? Thank you.

Patricio Jottar

Thank you, Andrew. The weather was bad in October - bad in November and very good in December. It was not - let’s say that it was not a happy combination, because we are not prepared to face the fantastic volume trends of December, as the temperatures were very high, so we got weak volumes in October and November, good volumes in December, but not as good as they should have been if we have been enough prepared to this.

I mean, economically it is not efficient to have excess capacity, but it’s very extensive to face an unexpected - the level of temperatures, the one we have in December. I think that you have shared the numbers, Felipe.

Felipe Dubernet

Yes. In Argentina, the last quarter…

Patricio Jottar

No, but I guess that was…

Felipe Dubernet

Yes, in Chile [Multiple Speakers].

Patricio Jottar

I discussed, Andy,…

Felipe Dubernet

Well, Chile, in October it was all about - the average temperature was - the average high maximum temperature in October was 20.8 compared to 2014’s 25. So we have practically four degrees.

Patricio Jottar

I mean, this is - four degrees is a lot. Temperatures in October were the comparable with temperature in June, which is in middle of winter time, which is extremely bad.

Felipe Dubernet

Yes. In December, we experienced a recovery; last year was 28.2, this year 29.6, with some higher peaks in sense of sales and the logistics system as Patricio mentioned suffer on a daily basis, not in total capacity of the month. So - but we are in the pace of recovery in the service level to our clients.

Patricio Jottar

So it’s very - this, Andrew, is very complicated, because we lost sales to customers. It’s not too much to consumer, because consumers bought the inventories of our customers, which we pieced a lot; but just a complicated math, a very complicated math in terms of logistics, because of the temperature, of the weather conditions.

Unidentified Analyst

Got you. Okay, thank you.

Patricio Jottar

Thank you.

Operator

We’ll now go ahead with our next question.

Gabriel Vaz de Lima

Hi, good morning, everybody. It’s Gabriel Lima here with Bradesco. So just two questions. The first one is also about ExCCelencia CCU. I know you guys are not making any quantitative comments. But on the qualitative side, where do you expect the savings to come from? I mean, if you were to monitor the savings going forward, is it coming from sales savings, would it be from G&A? I know, you mentioned industry savings, so that will be on COGS? So that’s the first one.

And the second one is about Argentina. Did you change anything in your strategy with the outcome of the elections? I mean, do you plan to increase production. So in a nutshell, you made some comments on the 2016 outlook for Chile. So would appreciate to hear your comments on Argentina as well. Thank you.

Patricio Jottar

Thank you, Gabriel, for your question. The ExCCelencia CCU plan has six fronts of implementation, six areas where we are capturing efficiencies and where we continue capturing efficiencies. First of all, it’s marketing expenses. We are optimizing the marketing return on investment not by reducing our marketing rates, but optimizing the margin.

Secondly, in revenue management, particularly discounts, there is a lot of money to be captured there, and we are moving on the right direction. In terms of sales a little bit. And number four, in terms of the effectiveness and the cost of our distribution. On logistics there is a lot of money to be saved. We have saved lot of money. We’ll continue saving on that. Procurement also; we are doing a lot of things in procurement. We needed to discuss more on this; and finally, in industrial area.

In administrative expenses, we have a very efficient operation, comparably with the best in the world regarding this. So we are not looking for opportunities there. It is regarding ExCCelencia.

Regarding Argentina, we mentioned before that we’re very optimistic on the future of Argentina. Your question is, what is changing, what are you going to do that you didn’t do before. And my answer is the following.

For many years, the situation in Argentina was very complicated; devaluation, the inflation, the economy not growing, a lot. But as I have mentioned many times we always invested thinking the long-run, thinking in the long-run regarding our portfolio, our brand, the brand equity portfolio and thinking the long-run regarding our industrial investments.

So we’re well prepared to face the future and strategically we are not going to make changes on our strategy, because we always look for the long-run, for the long-term in the countries where we invest.

Gabriel Vaz de Lima

Okay. Clear. Thank you.

Patricio Jottar

Thank you, Gabriel.

Operator

We will now take our next question.

Antonio Gonzalez

Yes. Hi, good morning. I would like to ask you a follow-up question on the dividend, please. So if I look at your balance sheet, you have a net cash position, and looking at the level of CapEx you are currently investing and even taking into account the CLP 170 million you need to invest in Colombia, it’s very likely that you will continue to be in a net cash position.

So with regards to the dividend and optimizing the capital structure, I mean, when you look at the companies in your sector, some of them are more levered. So why are you so conservative on the dividend front considering that even assuming the numbers on Colombia it’s likely that you will continue to remain in net cash? Thank you very much.

Patricio Jottar

Thank you for your question. As you know and as we have mentioned many times, part of our long-term strategy is to have a strong balance sheet. We’re very conservative in terms of that and that is part of our strategy. You have to consider we are competing against the best place in the world in the different categories where we are competing; with Coca-Cola, with ABI; they’re very strong.

And we need to be very strong in order compete with them. And we’re strong in terms of our portfolio. We’re strong in terms of our multi-category portfolio. We are strong in terms of capturing the synergies from multi-category strategy. We are strong in terms of moving our operations to other countries. We are strong in terms of having good partnerships with Heineken and with Pepsi, in order to improve our portfolio.

And we are also very strong in terms of keeping very sound balance sheet. This is part of our strategy and we do not expect to change it for the future. So you should expect changes on that.

Antonio Gonzalez

Thank you.

Patricio Jottar

Thank you.

Operator

We’ll now take our next question.

Unidentified Analyst

Hi guys, this is [Horacio Ebasa] [ph] from BCI Inversiones. Well, thanks a lot for taking my question. It’s regarding the wine business, three questions there. First of all, you have achieved very good EBITDA margin with very favorable conditions. There was an important reduction in SG&A as a percentage of sales. Can you give us more color there? That is the first question.

The second question is regarding return of capital employed. You guys had a strong focus in previous periods on improving that indicator. If you can give us or can share with us what number or what range are you now, regarding return of capital employed?

And the third question is, if you foresee with current conditions or similar conditions that they now maintaining an EBITDA margin in the range of 20% as sustainable or not for the wine business? Thanks a lot.

Patricio Jottar

Thank you, Horacio [ph], for your question. You’re right, that for many years the return on capital employed was - the EBIT, our operating result in the numerator and capital employed in the denominator was much lower than expected in the wine business. Our cost of capital in the range of 8% to 10% was moving in that range. And our return on capital employed was less than that 6% - 5%, 6%, 7% for many years. And our first priority for many years was to have a return on capital employed much bigger than that.

In order to do that, we put emphasis on the numerator and on denominator. On the numerator, operating results, every single element on the operating results, including efficiencies, and the ExCCelencia CCU plan, of course, has been applied in the wine business and we are getting good results.

Same thing regarding capital employed. We have not put our aims, our focus on growing or to gaining market share in the export side of business. But we have put our focus on making good businesses.

It’s different in the case of Chile, where we have been gaining market share because we have a lot of advantages to do that, to do this. And we have a - for many years, we have been investing less than depreciation; some year we have invested more than - more than depreciation. But if you take a longer period of time you could see that our CapEx has been very conservative. And we’re getting good results in terms of capital employed.

So, good results in term of efficiency and operating results, particularly in the domestic side of the business, on one hand. And to have under control the capital employed on the other, is beginning to show good results and we’re very happy on this. In fact, our return on capital employed today is higher or bigger than the one of Consitola [ph] and the one of Contarita [ph]. We feel very proud on this.

For the future, we’ll keep the same emphasis in maintaining or putting a lot of focus in having a good return on capital employed.

Unidentified Analyst

Okay. Okay. Thanks. Thanks a lot.

Patricio Jottar

Thank you, Horacio.

Operator

[Operator Instructions] And there are no further questions at this time. I’d like to hand it back over to Patricio for closing remarks.

Patricio Jottar

2015 has demonstrated our strength to successfully operate under adverse macroeconomic conditions and intense competition, showing that we are well positioned to face the challenges and opportunities of the coming years.

We have elaborated a new Strategic Plan 2016-2018, based on two main pillars: one, to grow; two, to get efficiencies. We have proposed ourselves to grow profitably in all our categories and businesses, and at the same time we’ll seek efficiencies with determination, by executing our ExCCelencia CCU Program, in all six countries where we operate, with focus as always on our core categories, which are beer and non-alcoholic beverages.

Thank you very much.

Operator

Ladies and gentlemen, this concludes the conference call for today. We thank you for your participation. You may now disconnect your line and have a great day.

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