27/05/2025 Results Presentation Transcription 1Q25 Download

Speakers

→ Osvaldo Solar - CFO

→ Daniela Lama - Head of Investor Relations

Moderator

María José Undurraga

To close the presentation today, we will open a space

→ Hello, my name is María José Undurraga, moderator to answer the questions you send through the platform in representation of Viña Concha y Toro. I would like to chat. thank you for joining us in this results presentation for the first quarter of 2025. Now, I will leave you with Osvaldo Solar, CFO of Viña

Concha y Toro.

Before we begin, note that on the right-hand side of your screen you can select the language in which you (The presentation begins) would like to listen. The presentation we will be viewing today is already available on our website in both

English and Spanish. Speaker

Osvaldo Solar

Let me begin by reading a brief disclaimer. This → Good morning and good afternoon to some of you. presentation contains forward-looking statements As always, it is a pleasure to have the opportunity to based on current available information and should share with you the results, on this occasion for the first be regarded as made in good faith. Such statements quarter, which, for various reasons, we had to delay are subject to risks and uncertainties beyond the up to this week, to deliver our commentaries on the company’s control, which could cause Viña Concha results that were published yesterday. y Toro’s actual results to differ materially from those expressed in these statements. This has been a challenging quarter, in which we believe that Concha y Toro’s performance has been

We will begin today’s presentation with an overview of the outstanding, particularly in comparison to what has industry context by Osvaldo Solar, CFO of the company. been seen across the industry.

Then, we will move on to an analysis of accumulated sales with Daniela Lama, Head of Investor Relations. We We wanted to highlight some central elements of will conclude once again with Osvaldo Solar, who will go the results before diving into specific comments and over the results obtained by the company. detailed analysis.

For a more detailed quarterly analysis, please refer to One of these aspects is sales. Sales grew by 1.4%, as the press release published on Monday, May 26. If shown on screen, despite the drop in the exchange you have any questions or additional questions, please rate. We may keep in mind, as we will elaborate contact Daniela directly. more on it shortly, the currency basket we have as a

52Q1 noitatneserp rotsevni company. Because, while the dollar improved a bit - in Another emerging factor has been tax increases in the sense that the Chilean peso depreciated against some markets. We have seen this in the U.S. and the dollar and against the British pound - there was their tariffs but, more tangibly, regarding the taxes a strong appreciation against the Mexican peso and of alcoholic beverages in the UK and the recovery of the Brazilian real as well, which ultimately impacted packaging waste, for example, which are tax-related nearly 2% of our sales. So, this 1.4% increase reflects contingencies that we may also see in other countries, significant underlying growth. that are not just specific to the alcohol industry but are more general in scope. However, these are elements

On the other hand, growth continued in what we have that we must consider as we evaluate 2025. defined as the 'premium category'. Let us remember that this premium is a fairly entry level and competitive In this context, we want to highlight opportunities segment, and we have explained in other presentations that arise. But in order for these opportunities to the reason behind this strategy, which is very powerful materialize, they must create economic value for and has allowed Concha y Toro to profit on one hand the company. We have been very insistent over and grow on the other. That mix, in this first quarter, time about this, and we will also take a look at it yielded 51.9%, that is, an increase in 230 basis points. here when analyzing the returns on invested capital.

This profitability is critical in the medium and long

In addition, gross profit also improved by 2.5%. The term. Any opportunity we pursue must generate real gross margin rose by 50 basis points, to 38.6%, which economic value for the winery and, therefore, for its is a good reflection of what we are commenting on, shareholders. that we are growing in sales while also aiming towards results that may generate profit out of these incomes. But when such volatile and uncertain situations arise, thanks to the sound basis that the company has, both

Elsewhere, EBITDA also grew 5.8%, which we see as a as it is structured backwards, in terms of wineries and very important figure, considering everything we have wine quality, as toward the future, in its integration in already mentioned. The EBITDA margin is 14.6%, moving the distribution area, we are able to see a very sound toward the goals we have outlined for the company. We position for the company that allows us to evaluate are still a long way from our long-term target margin, but what is going on in the market and make decisions in we are steadily heading in that direction. that context, provided that they generate economic value.

Finally, the net income also increased by 8.2% compared to the same quarter last year, which is also a So, in a volatile context, we may see that Concha good indicator. That is why we have highlighted these y Toro presents results that differ from other results as key achievements for the company. performances within the industry, which are the result of the highly competitive position the company has

Now, having clarified these general highlights, we been able to build, and that we will discuss further want to provide some context within the industry. throughout the presentation.

There is a first aspect that we have defined as a high level of volatility and uncertainty. That is something Now I turn things over to Daniela for a more detailed we must be aware of on a daily basis. As you can see analysis of sales during the first quarter. in the news, there is often a development by the end of the week that forces us to wait until the opening of the markets to see how it plays out. This has been Speaker: Daniela Lama particularly evident in the U.S. market, where tariffs were set at 10%, but there is always talk of ongoing → Hello, good morning. As you can see here, while we negotiations, unresolved issues, possible changes had consolidated sales growth of 1.4%, we are talking regarding Europe, and what may happen between the specifically about the wine segment. Compared to the

U.S. and China, etc. All of this generates uncertainty same quarter last year, we are seeing a growth of 0.9% and volatility, both in terms of currencies and in the in value. outlook for the months ahead. This is a reality we have experienced in recent months, and that has not Now, it is important to remember that this company diminished even after the close of the first quarter. is seasonal, the first quarter is always lower than the

52Q1 noitatneserp rotsevni other quarters. And yet, this year we managed to decline was Trivento Reserve, but that is due to a shift surpass the results of the past three years. Therefore, to the next Trivento label: Trivento Private Reserve, in that sense, as we will see later on, the company’s which grew, while Trivento Reserve declined slightly strategy remains very stable and was the correct one. by 2.6%. On the other hand, Frontera, we have this

6.6%, which is mostly explained by the Japanese

We can see that the premium and superior segments market. However, it is important to note that Japan is were the ones that continued to grow, by 6.4% in the best evaluated annually rather than quarterly due to first quarter, while the lower-tier and varietal segments its unique behavior that we have observed in previous declined, with 5.1%. If we now look at volume, we see years. And what happened here was not due to a drop a decline in wine-only volume of 3%. We will explain in sales but rather an inventory timing issue. the reasons behind this in the next slide, but basically, it was due to the lower-tier brands, with a 7.5% decline. Isla Negra, as mentioned before, dropped by 14% in

However, the projection for year end remains positive, the UK. And Tocornal, in Chile, also declined, but was with a low single-digit positive number, just as we have offset by the growth of the other brands. Although it is stated before. not among the top seven, it is worth mentioning.

Now, let us look at performance by market. These five When we look at the mix of Principal + Invest, main markets represent almost 75% of total sales, and considering only wines, it reach 56.1%, mainly due to we see that the UK, Chile, and the US experienced the strength of brands such as Casillero del Diablo, growth in value. I would like to stop at each market Bonterra, which grew nearly 30% - especially in the individually, because each played a different role this U.S; and Don Melchor, which had a growth of 140%, quarter. mainly due to having been ranked No.1 worldwide during the fourth quarter of last year, which has had a

In the UK, as Osvaldo mentioned, a new tax on very positive impact since then. alcoholic products was implemented in the first quarter. This impacted lower-value, non-premium On the other hand, in the nonwine segment, which products the most, generating significant competition. includes beer and spirits, we saw growth in both

As a result, our Isla Negra brand declined, which we volume and value. This was primarily due to our will see in the next slide. This fall also affected our Kross brand Odissea, which performed extremely consolidated performance, since Isla Negra is one of well, growing more than 150%, but it is important the top five best-selling brands in the UK. to remember the brand was launched in the fourth quarter of 2023, so the base in the first quarter of last

In Chile, though the 3.8% growth is positive, we also year was lower. This year, it is expected to continue to saw a drop in a non-premium product. However, the grow, although the variation is expected to decrease rest of the portfolio performed quite well, especially as the brand reaches normal levels. This strong premium brands like Diablo and Don Melchor. We also performance helped the nonwine segment grew by had new launches, including Concha y Toro The Wine 5.2% in value. and Marques de Casa Concha Gold & Blue.

Now, I will hand it over to Osvaldo.

In the United States, the performance was good, both in volume and value, while in Brazil and Mexico something special happened. We need to consider Speaker: Osvaldo Solar that although we are growing in terms of volume, by 6.3% and 10.8%, respectively, but, due to the → Alright, now that we have gone over the sales exchange rates of the currencies, sales value declined figures, let us take a deeper look at the results for the by 9.1% in Brazil and 3.3% in Mexico, as we will see in period. the next slides.

The first item we have is operating result, or EBIT.

Now, looking at our top seven brands, which account At first glance, the figure appears flat compared to for almost 65% of total sales, we see what I was last year (0.1% decline), which is why we did not

commenting on before

premium brands remain highlight it. But it deserves further explanation. The resilient - strong and growing. The only one showing a CLP$21,479 million we see in orange on the left-hand

52Q1 noitatneserp rotsevni side of the chart includes about CLP$2,039 million in is key to providing stability, or in some cases write-offs. These write-offs relate to accounting effect directly reducing or neutralizing fluctuations. This due to the sale of a plot of land, wine write-off and quarter was somewhat atypical, because the most certain vineyard replanting costs. significant fluctuations did not occur in our largest currencies. The biggest impacts came from the

So, considering the write-offs of CLP$2,039 million, Brazilian real, which represents 6,0%, and the the adjusted operating result for the first quarter was Mexican peso, which represents 5.7%.

CLP$23,518 million and not the CLP$21,479 million that includes the write-offs. As we were saying, the U.S. dollar, which represents a 28.8%, went up a 1.1%, as we may see on the right

We wanted to make this distinction clear, because the side, rising from around 950 to 961 pesos. The

EBIT actually increased was 7.4% compared to the pound sterling, appearing in third place, as we see official figure published of -0.1%. This is important on the right side, rose from 1,209 to 1,215, a subtle to understand the company’s outlook in light of the variation. But the significant effect took place on the changes we have made in the past, as well as the Brazilian real and Mexican peso, which fell 14.4% and ongoing development of our sales performance. 15,4%, respectively, in terms of the appreciation of the

Chilean peso against those currencies. This had an

Looking at the margin, it is the same: the official effect on the quarter, and that is why we commented

EBIT margin was 10.3%, which would seem like a on it when analyzing the sales, with an effect of drop of about 10 basis points. But if we adjust for CLP$4,041 million, corresponding to the 2% of the those write-offs, the real EBIT margin is 11.3%, sales, decreasing the revenue, compared to last year; which is still below the target we are aiming for, but and at an operating results level, it had an effect of clearly better than last year, and is not what one CLP$3,310 million. would perceive given the official figures published by the company. Therefore, we believe that operating So, when we look at the quarterly results, with a performance is showing a fluctuation according to growth of 7.4%, with write-offs aside, this growth expectations for 2025. took place even considering this negative effect we had on the average currency rate, we believe that this

Now, turning to EBITDA, which would represent represents a resilience or strength in the company’s the company’s cash flow, it is CLP$30,447 million, results that is worth considering. reflecting this increase of 5.8% we noted in the highlights, which not only puts us above the figure Now on to non-operating results, which include two of 2024, but also establishes a distance with the main items: net financial expenses and exchange performance of 2023. We have maintained a quarterly rate effects, and results from joint ventures, the comparison with the previous three years, as we have most important section is the one in blue, where we mentioned that 2023 was an exceptionally weak year, show non-operating results excluding joint ventures. but we are presenting 2022 as a reference point both Our associates and joint ventures, while having an for the EBIT and the EBITDA. accountable impact, are only to be considered towards the third quarter, when Almaviva shows its results, as it

Regarding the EBITDA margin, we see a slight sets the standard for this scheme. So, while there is a

improvement compared to last year

14.6% versus current negative figure of CLP$420 million, we do not

14,0%. Again, we are not yet at our company target, consider it relevant at this stage, because it must be which should remain close to a 20% EBITDA margin, examined in an annual context. but we are on the right track, and the strategy and development plans continue to align with reaching As for financial expenses and currency differences, that goal. we are seeing an improvement of almost CLP$1,000 million on comparison. Where does this improvement

One central issue this quarter, which we mentioned come from? It is largely due to the financial costs, before, has been the foreign exchange rates, which is something we have been discussing for some so let us pause on this point for a moment. On time and whose positive impact is fully reflected in the left-hand side of the slide, you can see our this first quarter with an improvement of CLP$1,358 currency diversification policy, which we believe million.

52Q1 noitatneserp rotsevni

Currency effects, as you know, are the result of 4.69%, which is very competitive compared to current positions the company takes. In this case, let us market conditions and real financing alternatives remember that there is a hedge that the company available today. calculates on a daily basis, and due to future value hedging, we may see a loss of CLP$135 million, Now, if we look at the interest rates in more detail, compared to last year’s CLP$230 million. although they appear relatively stable, the debt renewals that the company carried out during the first

What’s interesting about financial costs is that 80% of quarter and into the second quarter, within the short- the reduction comes from lower debt, and the other term percentage, have shown a substantial drop of

20% comes from lower interest rates, a very relevant over one point for each renewal, so, interest costs will point when looking ahead. continue to be a very favorable factor going forward, as we understand that rates should keep trending

Here we can see it on this graph, where we must downward, particularly short-term rates. As for long- compare it to the light blue line corresponding to term rates, we already have them locked in through the

2024, which is a stricter result than the one we had in structure I mentioned earlier, and the company does

2023, year when the company was forced to get into not need to increase its long-term debt. debt, due to the low performance of that season. So, we must aim towards the results of the bottom grey What does all this mean in absolute terms? We have line, which displays different conditions, due to the rise reduced debt by CLP$50,590 million. And one thing on the interest rate and the higher debt into which the we always highlight is the company’s daily hedging company had to incur. strategy, matching assets and liabilities across different currencies.

So, when we look at this decrease of 20%, we must consider it within this context, which is interesting for What did all of this lead to? In terms of net income, we looking toward the future. saw this growth of 8.2%, going from CLP12,740 million to CLP$13,783 million. Let us remember what Daniela

And when we look toward the future, there are a mentioned earlier about seasonality—the first quarter is few important aspects to consider. One of them is typically the lowest quarter of the year for the company. what is happening with inflation, which has an effect That is what makes this growth all the more notable. In over interest rates. We wanted to highlight this in the graph, we include a five-year comparison to give a the first quarter, as we have explained before, and broader perspective on this result. it continues to be relevant - in fact, we consider it a strength of the company as long as inflation in Chile We have talked before about the importance of return does not converge to 3%. If it does, this aspect will on invested capital. 2023 was a particularly low point, lose importance, but since it has not, considering that as reflected in that 5.3%. But last year we improved it is nowadays around 4.5% annualized, this benefit significantly, reaching 8% by year-end. We recall that persists. this figure is calculated on a rolling twelve-month basis, meaning that when analyzing the first quarter of this

If we looked at inflation during the first few months year, we include the last three quarters of last year and of the year, the annualized rate would be even the first quarter of the current year. With the addition higher. So, the company still holds an advantage of this first quarter, we already see that this ROIC up to reflected in the first quarter through an implicit gain March 2025 is of 8%, compared to the 5.7% of last year. of CLP$1,100 million, as a result of the difference between the fixed inflation of 2.82% that the company This shows that we are moving in the right direction. has set for all its bonds versus the actual inflation The investments the company has made are during the period. particularly focused on generating returns. This is something I insist on, as it is a common question

On the right side of the slide, we show how our bonds one receives, and this is a key metric that both are structured, with about UF5.2 million indexed to management and the board pay close attention

2.82%, and another UF1.75 million are converted to to, as it serves as a good indicator of the quality of

US dollars so we may align assets and liabilities in investments, especially for a company like ours that is foreign currency, which gives out an annual rate of fully vertically integrated.

52Q1 noitatneserp rotsevni

Here, we have included a chart on financial debt, brands, which reflect the identity of Concha y Toro. where one may clearly see the decline we have been And this is not just something we say ourselves; it is talking about. As we will see in the following, our recognized worldwide. indicators reflect what we define as financial solidity in the company’s position. We have also added two other notable achievements that are part of the strength of the company. The first

First, we have this net debt covenant, set at 1.2x, while is the research and innovation the company carries the company’s debt is 0.5x; compared to the 0.67x we out, where we were recently incorporated into the had in the same month last year. Biotechnology Advisory Commission under the

Chilean Ministry of Science. Although it is an indirect

On the other hand, we have the coverage on the aspect, we highlight it, because it reflects the powerful financial expenses, where the covenant is 2.5x, and results our research center has delivered, especially in we are currently at 6.8x index. So again, this shows an areas such as plant development and efficient water improvement from the 4.8x by march of last year, and use, and will without a doubt bring benefits to Concha these ratios align with the solid position we are aiming y Toro’s performance, and is not only recognized for. by us, but also by the scientific institutions that see this center as an important source of quality and

This next chart is not a covenant, but rather a knowledge. reference point to indicate what the company is targeting. It reflects the figure towards which the board And lastly, we have the recognition by the Dow Jones aims, which sometimes becomes higher, when there Sustainability Index 2025, where our winery was is some acquisition, or any other contingency, but in named the most sustainable winery in the world. general, the company’s net financial debt over EBITDA When we say 'most sustainable', this is a very relevant tends to be 2.5x. Right now, we are at 2.2x, which is element in terms of what our winery is doing in terms very aligned with this perspective, which gives us the of climate, water and energy use, etc. But this must flexibility to invest, should a real opportunity arise that always be aligned with the profitability that makes this generates true economic value. company viable. So, we have this achievement of a very high-standard recognition, without degrading

Finally, we want to highlight a few nonfinancial results, the financial results of the company. On the contrary, which are also important to mention. One is the case it has been an element that has helped us to become of Amelia, which we decided to spotlight here because stronger. For example, the reduction in water use in we have already talked about Don Melchor and its our vineyards, where we have achieved significant milestone 100-point rating for the 2021 vintage, progress, as we have commented on in other which was a major achievement. But beyond that, the instances, such as an 18% reduction on water use company also has other ultra-premium wines with in our fields, through technological innovation and strong recognition. In this case, Amelia was named intelligence in such a vital aspect. Therefore, being

'White Wine of the Year' by Tim Atkin. We wanted to recognized as the most sustainable winery is an highlight this because Concha y Toro is a portfolio of additional element that reflects the comprehensive brands. And in the high-end segment, we have many and ongoing effort the company is making. brands that have a lot to say due to the extraordinary quality of our wines, so we wanted to highlight this as With this, we conclude the presentation. Thank you a non-financial result that reflects one of the strengths very much for your attention. We would be very happy of the company. to answer any questions you may have.

We also want to mention our performance in brand (End of the presentation) recognition, where we see that Concha y Toro is once again listed among the Top 10 Most Admired Brands in the World, according to Drinks International. These Speaker: María José Undurraga recognitions are more difficult to quantify, but they are fundamental to the results the company achieves - → We have now reached the end of this presentation of especially when it comes to integration, wine quality; the results. Thank you for attending and we wish you a but one of the central aspects nowadays are our very good afternoon.