Embotelladora Andina

Moat pillars and durability. Intangible assets: very strong brand equity via The Coca‑Cola system plus perpetual distribution rights recorded as indefinite‑life intangibles; these rights are renewed under long‑standing bottler agreements and represent the core economic franchise.

Efficient scale: exclusive territories in Chile, Argentina, Paraguay and parts of Brazil limit rational competition and support dense logistics and cold‑drink equipment networks. Cost advantages: scale procurement (sugar, PET, packaging) and in‑system synergies, including local rPET supply via Re‑Ciclar in Chile, reduce unit costs over time.

Switching costs: retailers’ cooler placements, returnable bottle pools and direct‑store‑delivery relationships create friction, though not absolute lock‑in. Network effects: minimal at the consumer level. Erosion risks include regulatory sugar taxes, rising health‑conscious substitution, and potential renegotiation power of The Coca‑Cola Company.

Indefinite‑life distribution rights and detailed intangible roll‑forward are disclosed in H1 2026 notes; distribution rights by country total ~Ch$709 billion net. Re‑Ciclar and circular‑packaging initiatives help sustain cost and ESG positioning.

Andina’s pricing power is anchored by brand strength and category relevance but tempered by affordability constraints in emerging markets. 2025 net sales in Chile rose 6 percent, driven by price increases and modest volume growth; Brazil net sales rose 7.4 percent with double‑digit soft‑drink growth in local currency; Argentina net sales fell in CLP terms due to translation, though local‑currency sales rose in real terms with higher revenue per unit case.

This shows pass‑through ability with elasticity limits. Gross margins held near 39 percent in 2025; cost of sales rose on PET and concentrate in Brazil and mix effects. We expect mid‑single‑digit price/mix potential on average across cycles, with notable upside when input costs ease.

Revenue and cash flows are recurring and tied to staple beverage demand, but predictability is reduced by FX, inflation and policy volatility across four Latin American markets, particularly Argentina’s hyperinflation accounting (IAS 29) and periodic currency devaluations.

H1 2026 delivered higher consolidated ordinary revenue of Ch$1.744 trillion and net income of Ch$136 billion, up from H1 2025, indicating resilient volumes and pricing. Country volume shares remain strong: Brazil soft‑drink share ~64.7 percent in 2025; Chile ~64.6 percent; Paraguay ~75.6 percent; Argentina ~57 percent.

Still, translation effects can mask local‑currency growth and compress reported margins.

Balance sheet is solid with diversified debt and substantial liquidity.

As of June 30, 2026, cash and cash equivalents were ~Ch$322,077 million, other financial assets totaled ~Ch$200,353 million (current and non‑current), and other financial liabilities were ~Ch$1,251,591 million, implying net financial liabilities near ~Ch$729 billion by our approximation.

Fitch affirms BBB+ (Stable) with EBITDA margin ~17.8 percent, net leverage ~1.3x and EBITDA interest coverage ~10x, and shows a long‑dated maturity profile including USD 300 million unsecured notes. These support resilience through cycles.

Cash generation funds maintenance and growth capex, dividends mandated at a minimum 30 percent of IFRS net income in Chile, and selective projects for returnability and logistics.

FY 2025 cash from operations was Ch$461,127 million; 2025 capex totaled Ch$276,728 million across countries, with a 2026 capex budget of ~USD 250 million focused on returnable packaging and capacity.

A dividend was declared in July 2026 for payment on August 27, 2026. Dilution is limited; the investor base is stable under a shareholders’ agreement with The Coca‑Cola Company. We view capex as disciplined and strategically accretive, though not asset‑light.

Management is experienced and aligned with conservative leverage targets. CEO Miguel Ángel Peirano and CFO Andrés Wainer have long tenures; performance incentives emphasize EBITDA, market share, sustainability metrics and multi‑year deferral for investor‑facing executives.

Governance includes a long‑standing shareholder agreement where Coca‑Cola can designate board members while controlling families exercise joint control, which provides strategic stability but concentrates influence. Internal controls and IFRS reporting are established.