Investor Presentation 2Q19 Results September, 2019 2 Forward - - PowerPoint PPT Presentation

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Investor Presentation 2Q19 Results September, 2019 2 Forward - - PowerPoint PPT Presentation

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Investor Presentation 2Q19 Results September, 2019 2 Forward Looking Statements This presentation contains forward-looking statements, that should be considered as good faith estimates. Such statements are subject to risks and uncertainties

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SLIDE 1

Investor Presentation 2Q19 Results

September, 2019

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SLIDE 2

Forward Looking Statements

This presentation contains forward-looking statements, that should be considered as good faith

  • estimates. Such statements are subject to risks and uncertainties outside of Viña Concha y Toro’s

control that could cause Viña Concha y Toro’s actual results to differ materially from those set forth in the forward-looking statements. Forward-looking statements speak only as of the date they are delivered, and Viña Concha y Toro undertakes no obligation to publicly update or revise them considering developments which differ from those anticipated.

2

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SLIDE 3

I. 2Q2019 Results II. 1H2019 Results

  • III. Outlook

Agenda

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SLIDE 4

2Q2019 Results

  • Wine sales: +13.7%, on higher volume, better mix, US distribution integration and

positive f/x.

4

  • 1. Top line consistent with the new commercial strategy

(Ch$ million) 2Q19 2Q18 Var % Sales 165,577 151,184 9.5% Wine 158,520 139,474 13.7% Others 7,056 11,710 (39.7%)

  • Wine volume: +3.8%, with increases in key brands and markets.
  • Principal and Invest categories posted strong performance, +18% in volume.
  • Other sales declined 40% on the end of diageo distribution.
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SLIDE 5

(1) Considera CdD Reserva Especial y Casillero Devil’s; (2) Considera Casillero Reserva Privada, Casillero Expert, CDD Vintage, CDD Leyenda y Casillero Legendary

Brand Matrix: Higher focus in Principal and Invest brands

Relevance

Brand matrix: 25 brands, represent 79% of group sales Principal & Invest brands : +26% value growth , 40% of sales

High

INVEST WATCH PRINCIPAL PROTECT

  • Fetzer
  • Frontera
  • Reservado
  • Clos de Pirque
  • Exportación
  • Isla Negra
  • MPO Entry Level (Mi Pueblo y Classic)
  • 1,000 Stories
  • Bonterra
  • Don Melchor
  • MCC
  • Trivento Golden
  • Trivento Reserve
  • Diablo
  • CdD Reserva

Especial1

  • CS Orgánico
  • CS Bicicleta
  • Casillero del Diablo
  • Trio
  • Sunrise
  • CdD Super Premium2
  • Tocornal
  • Anthony's Hill
  • Tocornal Trivento
  • Tocornal CS

Low Potential High Low

21% 32% 19% 7% % of Sales

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SLIDE 6
  • Brand Matrix Growth by category:
  • The protect segment declines due to lower volume of Frontera. However its sales

value increases 5.1%.

2Q2019 Results

  • 2. Focus of New Commercial strategy reflected in brands performance

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(Ch$ million) Value Var. Volume Var. Principal 16% 10% Invest 39% 32% Protect 6%

  • 3%

Watch 28% 14%

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SLIDE 7

2Q2019 Results

Key Brands posted strong volume growth :

  • Principal Casillero del Diablo: +10%
  • Invest CyT: +38%
  • Invest Cono Sur: +23%
  • Invest Trivento : +70%
  • Invest Fetzer: +11%

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SLIDE 8

Casillero del Diablo

Successful performance of Diablo and Casillero del Diablo line extensions.

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Diablo: 2Q19: 33,500 cases 3X volume growth Devils and Reserva Especial: 2Q19: 50,700 cases 40% volume growth

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SLIDE 9

Brand Matrix – Trivento Reserve

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Trivento Reserve: 2Q19: 259,000 cases 70% volume growth

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SLIDE 10

Market Matrix: Specialized commercial areas

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Commercial offices: 14 - Distributors: 352 - Markets + 130

9 MARKETS 115 MARKETS

9 MARKETS

Presence & Priority Priority

Continuous Growth Accelerated Growth Next wave Others

A MARKETS B MARKETS C MARKETS

COMMERCIAL AND DISTRIBUTION OFFICES

Market Manager

>

Markets

>

% of Sales in 2018

> 77% 11% 12%

+107 COUNTRIES

Wine sales led by A markets increasing 18%.

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SLIDE 11

2Q2019 Results – Sales breakdown

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Export Markets 63.6% Chile Domestic 12.2% Argentina Domestic 0.6% Argentina Direct Exports 1.4% USA Domestic 17.0% USA Direct Exports 0.9% Other 4.3%

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SLIDE 12

2Q2019 Results

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  • 3. Performance across markets

3.1 Export markets: positive performance in UK, Mexico, Brazil, Korea and China among others. Value +10.7%

  • +3.3% volume
  • Better mix:

Premium sales 33.3% of sales volume (30.2% in 2Q2018) Premium sales 46.3% of sales value (43.6% in 2Q2018)

  • Favorable F/X (~7%)
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Recovery of Chilean wine exports 2Q2019

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Bottled export volume starting to recover in 2Q2019, in a challenging global scenario for wine trade.

2Q2019 9L cases US$ value Volume YoY% Value YoY% CHINA 2,175,036 71,940,516 0.1% 8.3% ESTADOS UNIDOS 1,302,656 37,208,400 (1.3%) 4.0% BRASIL 1,548,317 38,436,027 (1.8%) (7.7%) REINO UNIDO 1,360,973 35,021,710 (2.3%) (4.2%) JAPON 1,041,864 26,868,745 (11.8%) (6.2%) HOLANDA 769,221 19,930,968 (11.5%) (19.4%) CANADA 692,081 21,850,118 16.8% 13.9% COREA DEL SUR 431,227 15,484,512 31.8% 28.6% MEXICO 417,968 10,042,018 10.2% (4.3%) OTHERS 4,023,346 120,011,754 8.4% 8.6% TOTAL 2Q19 13,762,689 396,794,768 1.8% 2.8%

In 1Q19:

  • Volume: -4.5%
  • Value: -6.1%

In 2Q19:

  • Volume: +1.8%
  • Value: +2.8%
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SLIDE 14

2Q2019 Results

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  • 3. Performance Across Markets

3.2 Chile domestic market led by Casillero del Diablo and upper Brand extensions.

  • Value

+3.6%

  • Volume: +3.0%
  • Premium growth : +12.5 volume +13.1% value
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SLIDE 15

2Q2019 Results

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3.3 Operation in USA: Growth led by domestic market volume across all portfolios: Fetzer and the Chilean and Argentine wines

  • Total : Value +30.9%

Volume +3.7%

  • Domestic: Value +40.4%

Volume +12.1%

  • Exports: Value -28.6%

Volume -48.2%

  • Invest Brands +10.8% volume +25.5% value
  • Bonterra (+8% vol. +19% value)
  • 1000 stories (+25% vol. +54% value)
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SLIDE 16

2Q2019 Results

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3.4 Operation in Argentina: focus on exports and key markets.

  • Sales led by shipments to distribution offices.
  • Total Value: +24%
  • Total Volume: +13.5%
  • Invest Brands +70% volume +81% value
  • Trivento Reserve (74% vol. 87% value) and trivento

golden (20% vol y 46% value)

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SLIDE 17

2Q2019 Results

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4. Operating profit increased 35% mainly reflecting

  • Higher volume & mix, and favorable f/x effect.
  • Lower wine cost in Chile, Argentina and the US,
  • Partially offset by higher SG&A, and productive cost in Chile.

(Ch$ million) 2Q19 2Q18 Var.% Sales 165,577 151,184 9.5% EBIT 19,787 14,677 34.8% EBIT margin 12.0% 9.7% 220 bp EBITDA 27,522 20,365 35.1% EBITDA margin 16.6% 13.5% 320 bp

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SLIDE 18

Non operating profit

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5. Non- Operating profit declined on lower exchange differences

  • In 2Q18, gains from hedging strategy amounted CH$ 5,832 million, mostly related

to the Argentine peso depreciation.

(Ch$ million) 2Q19 2Q18 Var % Var $ Financial income 144,063 295,655 (51.3%) (151,592) Financial costs (2,917,919) (2,803,234) 4.1% (114,685) Share of profit (loss) of associates and joint ventures using equity method (22,314) (46,728) (52.2%) 24,414 Exchange differences 1,422,725 5,832,369 (75.6%) (4,409,644) Adjustment units (386,636) (137,610) 181.0% (249,026) Non-operating profit (loss) (1,760,081) 3,140,452 (4,900,533)

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2Q2019 Results

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(Ch$ million) 2Q19 2Q18 Var % Sales 165,577 151,184 9.5% Gross profit 60,521 49,451 22.4% Gross margin 36.6% 32.7% 380 bp EBIT 19,787 14,677 34.8% EBIT margin 12.0% 9.7% 220 bp Non-operating profit (1,760) 3,140 Net profit 13,985 13,536 3.3% Net margin 8.4% 9.0% (50 bp)

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Successful bond placement

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This issuance is part of a debt restructuring plan to take advantage of lower interest rates. Issued in the local market, UF denominated: UF 2,000,000 (equivalent to US$ 78 million) Maturity: 25- year with a 20-year grace period and 18.8-year duration. Rating: AA- (Feller and Humphreys) Placed at a rate of UF+1.35% Spread: 82 basis points over benchmark Demand: 3.2 x the offering size

  • Avg. rate last 10 years: UF+3.70%
  • Avg. rate last 3 years (2016-2018): UF+2.94%
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SLIDE 21

I. 2Q2019 Results

  • II. 1H2019 Results
  • III. Outlook

Agenda

21

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SLIDE 22

1H2019 Results

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(Ch$ million) 1H19 1H18 Var % Sales 296,263 275,626 7.5% Gross profit 103,682 88,852 16.7% Gross margin 35.0% 32.2% 280 bp EBIT 29,193 24,348 19.9% EBIT margin 9.9% 8.8% 100 bp Non-operating profit (3,622) 2,451 Net profit 19,314 19,998 (3.4%) Net margin 6.5% 7.3% (70 bp)

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I. 2Q2019 Results II. 1H2019 Results

  • III. Outlook

Agenda

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2019 harvest - Chile

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  • The 2019 harvest in Chile decreased 7.4%, to 1,194 million liters.
  • Excluding wine from table grapes, production declined 2.1% YoY.

915 1,046 1,255 1,282 990 1,287 1,014 949 1,290

1,194

200 400 600 800 1000 1200 1400 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Chile wine harvest - (MM liters)

Source: SAG

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SLIDE 25

2018 harvest - Argentina

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  • The 2019 harvest totaled 2.4 million tons, 3.6% lower when compared to 2018.
  • The Malbec variety increased 4%, and represents 36% of red grapes.

Source: INV 2,539 2,807 2,174 2,786 2,587 2,338 1,704 1,922 2,516

2,425

500 1000 1500 2000 2500 3000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Argentina wine harvest - th. tons

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2019 harvest - USA

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  • The 2018 California crush reveals a bountiful 2018 winegrape harvest up 6.6% in volume to 4.3

million tons.

Source: USDA

3,589 3,347 4,018 4,246 3,894 3,705 4,031 4,016

4,282

500 1000 1500 2000 2500 3000 3500 4000 4500 2010 2011 2012 2013 2014 2015 2016 2017 2018

USA harvest - thousand tons.

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Global wine production

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  • World wine production in 2018 reached 279 Mhl, an increase of 13% YoY.
  • Inventory stocks have recovered after an abundant harvest in 2018, bringing global

industry market to a balanced situation.

Source: OIV 266 262 281 280 267 258 267 300 282 284 268 269 272 264 268 258 292 270 275 269 251

279

200 220 240 260 280 300 320 Millions of HL

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Outlook

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  • The 2019 harvest in the southern hemisphere in general is lower than the previous

year on strong comparables.

  • In Chile and Argentina wine prices for 2019 harvest have declined, reflecting the

recovery of inventory stocks.

  • 2019 - 2020 season in the central valleys of Chile, from Curicó to the north, is

being affected by drought conditions.

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SLIDE 29

Investor Presentation 2Q19 Results

September, 2019

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Currency mix

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3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 CLP 21.5% 19.3% 23.5% 20.6% 21.1% 15.6% 18.3% 16.3% USD 35.0% 40.2% 30.3% 33.6% 36.0% 40.1% 31.3% 37.2% GBP 18.4% 15.5% 19.4% 21.0% 20.5% 19.9% 24.5% 20.0% EUR 9.6% 8.7% 11.7% 8.2% 8.1% 7.9% 11.2% 9.8% CAD 3.2% 3.1% 4.1% 3.1% 3.4% 3.2% 3.5% 3.1% BRL 5.0% 4.4% 2.7% 6.3% 3.9% 4.0% 3.2% 6.9% PEM 2.1% 4.2% 3.1% 2.8% 2.7% 5.3% 3.6% 3.1% SEK 2.7% 2.4% 2.8% 2.5% 2.4% 2.2% 2.6% 2.2% ARS 1.6% 1.2% 1.2% 0.8% 1.0% 0.6% 0.8% 0.6% NOK 1.0% 1.0% 1.1% 1.0% 1.0% 1.1% 1.1% 1.0%