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Compania Cervecerias Unidas SA (CCU) Risk Analysis

Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning. Compania Cervecerias Unidas SA disclosed 31 risk factors in its most recent earnings report. Compania Cervecerias Unidas SA reported the most risks in the “Macro & Political” category.

Risk Overview Q4, 2020

Source: the company's latest filing for the period ended Dec 31, 2020, filed Apr 23, 2021

Risk Distribution
31Risks
Sector Avg.Finance & CorporateTech & InnovationLegal & RegulatoryProductionAbility to SellMacro & Political
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Risk Change Over Time

No filing history is available.

Risks removedRisks addedRisks changedCompania Cervecerias Unidas SA Risk Factors
New Risk (1)
  • Share Price & Shareholder Rights - Risk 1
    Holders of our ADSs may be subject to certain risks since holders of our ADSs do not hold shares of our common stock directly.

    ADS holders may exercise voting rights associated with common stock only in accordance with the deposit agreement governing our ADSs. Accordingly, ADS holders will face practical limitations when exercising their voting rights because ADS holders must first receive a notice of a shareholders' meeting from the depositary and may then exercise their voting rights by instructing the depositary, on a timely basis, on how they wish to vote. This voting process necessarily will take longer for ADS holders than for direct common stockholders, who are able to exercise their vote by attending our shareholders' meetings. Therefore, if the depositary fails to receive timely voting instructions from some or all ADS holders, the depositary will assume that ADS holders agree to give a discretionary proxy to a person designated by us to vote their ADSs on their behalf. Furthermore, ADS holders may not receive voting materials in time to instruct the depositary to vote. Accordingly, ADS holders may not be able to properly exercise their voting rights.

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Production (2)

Risk Highlights Q4, 2020

Main Risk Category
Macro & Political
With 8 Risks
Number of Disclosed Risks
31
-1
From last report
S&P 500 Average: 32
Recent Changes
1Risks added
2Risks removed
3Risks changed
Since Dec 2020
Number of Risk Changed
3
-1
From last report
S&P 500 Average: 1

Risk Word Cloud

water supply is essential to the development of our businesses.development of our businessesthe relative liquidity and volatility of chilean securities markets may increase the price volatility of our american depositary shares ("adss") and adversely impact a holder's ability to sell any shares of our common stock withdrawn from our american depositary receipt ("adr") facility.our american depositary receipthealth crises, pandemics or the outbreak of contagious diseases at a global or regional level could have a negative impact on our operations and financial position.outbreak of contagious diseasesthe shortage of critical raw and packaging materials could negatively impact our supply chain, affecting our operations and results.negatively impact our supply chainwe are substantially dependent on economic, political and social conditions in argentina, which may adversely impact our operating results and financial position.adversely impact our operating resultsthe relative liquidity and volatility of chilean securities markets may increase the price volatility of our american depositary shares ("adss") and adversely impact a holder's ability to sell any shares of our common stock withdrawn from our american depositary receipt ("adr") facility.volatility of chilean securities marketsfluctuations in the cost of our raw materials may adversely impact our profitability.cost of our raw materialsargentina's legal regime and economy are susceptible to changes that could adversely affect our argentine operations.adversely affect our argentine operationspossible regulations for labeling materials and advertising of alcoholic beverages and other food products in the countries in which we operate could adversely affect us.advertising of alcoholic beveragesthe shortage of critical raw and packaging materials could negatively impact our supply chain, affecting our operations and results.shortage of critical raw

Risk Factors Full Breakdown - Total Risks 31

Economy & Political Environment3 | 9.7%
  • Economy & Political Environment - Risk 1
    We are substantially dependent on economic, political and social conditions in Chile, which may adversely impact the results of our operations and financial condition.

    Chile is our most significant market. The Chile Operating segment generated 67% of our sales revenues in 2020, the International Business Operating segment (which includes Argentina, Bolivia, Paraguay and Uruguay) contributed 22%, and the Wine Operating segment, including the domestic markets in Chile and Argentina, as well as exports, accounted for 13% of revenues. Thus, our operating and financial performance is dependent, to a large extent, on the overall level of economic activity in Chile. The Chilean economy experienced an average annual growth rate (measured by GDP) of 2.5% between 2010 and 2020 (3.3% when the contraction of 5.8% materialized in 2020, as a result of the negative effects of the COVID-19 pandemic, is not considered). In the past, slower economic growth in Chile resulted in a lower growth rate of consumption of our products and, consequently, adversely affected our profitability. Chile's economic growth rate has been affected in the past by the disruption in the global financial markets and global recessions, as was the case in 2009 and 2020. Therefore, economic growth rates of past periods cannot be extrapolated to future performance. Furthermore, Chile, as an emerging and open economy, is more exposed to constant social demands and unfavorable conditions in the international markets, which could have a negative impact on the demand for our products, as well as on third parties with whom we conduct business. Furthermore, the beginning of a massive social movement during the fourth quarter of 2019 triggered material political and economic changes, such as the development of a new constitution and increased pressure or demand on public spending. These measures have increased uncertainty levels in Chile, which could affect economic growth through a deterioration of business and consumer confidence. This could have a negative effect on the demand of our products. Any combination of lower consumer confidence, disrupted global capital markets and/or depressed international economic conditions could have a negative impact on the Chilean economy and, consequently, on our business. In addition, a global liquidity crisis or an increase in interest rates could limit our ability to obtain the cash necessary to meet our commitments and, therefore, increase our financial expenses.

  • Economy & Political Environment - Risk 2
    We are substantially dependent on economic, political and social conditions in Argentina, which may adversely impact our operating results and financial position.

    In addition to our Chilean operations, we have significant assets in Argentina and we generate significant income from our operations in this country. The financial position and results of our operations in Argentina are, to a considerable extent, dependent upon political, social and economic conditions in Argentina, as demand for beverage products generally depends on the prevailing economic conditions in the local market. In the past, Argentina has suffered recessions, high levels of inflation, currency devaluations and significant economic decelerations in various periods of its history. During 2016, Argentina's GDP contracted by 2.1% and inflation was close to 40%. In 2017, GDP growth was 2.7% and inflation was close to 20%, showing a slight recovery in the economy. In 2018, Argentina once again entered into a recession and its GDP decreased by 2.5% and accumulated inflation reached 47.6%. Consequently, given that between 2016 and 2018 the cumulative inflation rate exceeded 100%, Argentina was deemed to be a hyperinflationary economy as of July 1, 2018 (see Note 2 to our consolidated financial statements included herein) pursuant to IAS 29. In 2019, the Argentine GDP contracted by 2.2% and inflation reached 53.8%. In 2020, the GDP contracted 9.9%, mainly due to the restriction measures taken to control the spread of the COVID-19 pandemic, while inflation reached 36.1%. Accordingly, given that inflation between 2017 and 2020 exceeded 100%, Argentina is still considered a hyperinflationary economy. If economic conditions in Argentina were to slow down or further contract, if inflation continue to accelerate, or if the Argentine government's measures to attract or retain foreign investment and international financing in the future to incentivize domestic economy activity are unsuccessful, such developments could adversely affect Argentina's economic growth and in turn affect our financial health and results of operations.

  • Economy & Political Environment - Risk 3
    Inflationary pressures in Argentina may negatively impact demand for our goods, profitability and future investments.

    Argentina has faced and continues to face inflationary pressures. Increased inflationary risk may erode macroeconomic growth and limit the availability of financing, which may negatively impact our operations. In past periods of high inflation, the Argentine government had regulated prices of consumer goods, including beverages, which impacted our profitability. Even without government regulation, high inflation may impede our ability to pass on higher costs to customers, which would also negatively impact profitability.

Natural and Human Disruptions2 | 6.5%
Capital Markets3 | 9.7%

See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.

FAQ

What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky. The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment. They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result. It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process. Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”. Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report. According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing. You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector. Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements. A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below. 1. Financial & Corporate Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results. Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing. Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments. Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances. 2. Legal & Regulatory Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company. Regulation – risks related to compliance, GDPR, and new legislation. Environmental / Social – risks related to environmental regulation and to data privacy. Taxation & Government Incentives – risks related to taxation and changes in government incentives. 3. Production Costs – risks related to costs of production including commodity prices, future contracts, inventory. Supply Chain – risks related to the company’s suppliers. Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls. Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation. 4. Technology & Innovation Innovation / R&D – risks related to innovation and new product development. Technology – risks related to the company’s reliance on technology. Cyber Security – risks related to securing the company’s digital assets and from cyber attacks. Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying. 5. Ability to Sell Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers. Competition – risks related to the company’s competition including substitutes. Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration. Brand & Reputation – risks related to the company’s brand and reputation. 6. Macro & Political Economy & Political Environment – risks related to changes in economic and political conditions. Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19. International Operations – risks related to the global nature of the company. Capital Markets – risks related to exchange rates and trade, cryptocurrency.