Message from the chairman of the board

On behalf of the Board of Directors I preside, I am pleased to present Coca-Cola Andina’s first Integrated Report, where you can find our results account with a triple view: economic, social and environmental.  

 At Coca-Cola Andina we made the decision to move towards an integrated report that reflects our way of doing business. We are convinced that it is our responsibility to generate shared value for all of the Company's stakeholders. To do so in a sustainable way, we manage the business with a broad future vision, making decisions that allow not only to generate the greatest profitability for our shareholders, but also to provide well-being in the communities of which we are a part, positively influencing the care of the environment, developing fair trade with our customers and suppliers, and strengthening a healthy working environment for our collaborators. 

 In this path of adding value to our shareholders, the main challenge of the year was brought by the prevailing political and economic conditions in the countries where Coca-Cola Andina operates, that were marked by the currency depreciation in Argentina and Brazil, low economic growth levels and disparate consumption rates, among others.  

 We addressed the different scenarios with a solid strategy that was reflected in our commercial management, achieving an improvement in the market share for soft drinks in three of our four operations, highly efficient processes and an acceleration in product innovation and business models for our customers and consumers. 

 The results reflect an excellent work of our team, that in recent years, has devoted efforts to share and transfer good practices, and to learn from mistakes creating effective spaces for debate, integrating the value chain with the vision of building a common future that every day urges us to go further.  

The fruit of these efforts have made us become a proactive company regarding the new expectations of our stakeholders, which was reflected in our financial results in local currency, in the work done in each one of the countries and in our market share. All this leaves us in an excellent competitive position ready to face new challenges. 

 In 2018 EBITDA reached CLP 324,964 million, a drop of 3.8% compared to 2017, mainly impacted by the effect of translation of figures upon consolidating the results of Argentina and to a lesser extent Brazil, resulting from the devaluation of the Argentine peso and the Brazilian real with respect to the Chilean peso. Our EBITDA margin reached 19.4%, an increase of 115 basis points compared to the previous year.  In local currency, the four operations showed EBITDA growths: Argentina 3.4% (with IAS 29, in real terms), Brazil 8.9%, Chile 7.7% and Paraguay 10.7%. 

 In addition, in order to continue adding value to our shareholders and investors, we reduced financing costs and improved the Company's debt profile. This was achieved through the partial repurchase of the bonds we had issued in the United States, an operation that was refinanced with the issuance of bonds in Chile. 

Finally, the Company’s net income (income attributable to the owners if the controller)  reached CLP 96,603 million, 18.0% lower than in the previous period. Dividends distributed during 2018 totaled CLP 85,475 million, increasing 13.2% over the previous year. 

 At Coca-Cola Andina we take care of actively responding to the concerns of our stakeholders and we approach them, we validate materiality and renew the commitments assumed. One of the strategic focuses is to evolve into a total beverage company, diversifying the product portfolio to offer options appropriate for every consumer style. Specifically, in 2018 we continued promoting the AdeS seed-based products and we incorporated the complete line of Guallarauco alternatives. In Argentina's operation, we invested in a canning line with which we will produce a greater variety of formats and new flavors. In Chile, we continued innovating in the reformulation of our products pursuant to the requirements of the Labelling Law, which allows us to continue leading the market with low-calorie, sugar-free, and sugar-reduced products. To reinforce this strategic pillar of developing new products with a focus on consumers and their new consumer preferences, representatives of Coca-Cola Andina are part of the Innovation Team of Coca-Cola Brasil.  

 Another strategic focus is that we evolve every year to become water stewards that, added to the value of process efficiency, urge us to keep and expand coverage of our water access programs in each region where we operate. Also, the Company's active commitment to environmental care led us to subscribe the new certified clean energy supply contract for 100% of the demand for three of our plants in Chile, an exemplary precedent for the rest of our operations. Along these lines, we are proud of the operation of our new Duque de Caxias plant, that brought material recognitions to our digital development in the industrial universe, where we implemented industry technologies 4.0, laying the foundations for future growth and industrial management.  

 Diversification of the product portfolio and water care are commitments that inspire us to be protagonists in packaging management, which has directed us to lead important investments in 2018. The New Aseptic production line in Chile, thanks to its technology, allows to reduce the PET used in the bottles by 40%. In post-consumption aspects, we continue positioning in the recovery circuit, through alliances with strategic partners that improve the working conditions of cooperatives and base recyclers. We constantly maintain and grow our programs in this area, thus achieving an annual recovery of more than four tons of plastic. 

It is clear to us, and this Integrated Report is evidence that the Sustainable development of our business is strategic and runs in a transversal way in all the Company's projects. Convinced that we can improve the quality of life of the communities around us, we maintain initiatives such as "Coletivo Joven” in Brazil, that improves the future perspective of the young people involved, and it also helps them to find a job. In the case of Paraguay, women's empowerment has been one of the most relevant focuses of the year and in 2018 we launched the program "Emprendemos Juntasthrough which we provide management tools to clients allowing them to grow in their businesses and strengthen the development of our value chain. We know that we still need to grow in inclusion issues, so this year we took great steps, and, in this report, you will find more details of how our Company faces these commitments and prepares for new challenges. 

 We maintain our commitment to adhere to the United Nations Global Compact, one of the world’s largest voluntary initiatives of corporate responsibility, which represents our firm goal of reaching increasingly challenging goals -financial, market, social, environmental and Corporate Governance- in a framework of ethics and transparency. In this sense, we are proud to announce that we were recognized by the magazine, Institutional Investor, as a leader in the category of "Investor Relations Professionals" in the mid cap food and beverage sector for the second consecutive year. We also received the highest award in the category Leader in Investor Relations from ALAS20. Following the distinctions, the sustainability maturity in Coca-Cola Andina continues to bear fruit, as today the Company is positioned in indexes such as Dow Jones MILA, DJSI Chile, the FTSE 4Good Emerging Index and the Vigeo Eiris Emerging 70 Ranking. 

Finally, I want to acknowledge and thank all the team that makes up this great family, Coca-Cola Andina, for their efforts, contributions and shared visions that have helped us to move in the right direction. We have a group of committed collaborators who are encouraged to innovate and give the best of each one to grow and develop in a sustainable way, which together with the strength of the great Coca-Cola brand, motivates us every day to go further, much further. 

Juan Claro 

Chairman of the Board of Directors