Ambev Reports 2015 Fourth Quarter And Full Year Results Under IFRS

SÃO PAULO, Feb. 25, 2016

Operating and Financial Highlights

Top line performance: Top line was up 10.4% in the quarter, driven by growth in Brazil (+7.0%), CAC (+10.0%), LAS (+24.7%) and Canada (+4.0%). Volumes declined 3.3% while net revenue per hectoliter (NR/hl) was up by a solid 14.1%. In the full year, top line was up 12.0%, also explained by growth in all of our markets: (i) Brazil was up 8.0%, despite a volume decline of 2.7%, mainly driven by the tough comparable base of the 2014 FIFA World Cup and a challenging macroeconomic environment, more than offset by a solid 10.9% NR/hl increase; (ii) CAC top line was up 17.7%, as we continued to grow our business in Dominican Republic while expanding our presence in the region; (iii) LAS was up 29.7%, due to a strong NR/hl performance offsetting a low single digit volume decline in Argentina, along with a solid performance in Paraguay, Chile and Uruguay; and (iv) Canada was up 4.0%, as we accelerated our net revenue growth with a great balance between volume (+1.7%) and NR/hl (+2.2%). On a consolidated basis, volumes declined by 1.6% while NR/hl was up 13.8% in the year.

Cost of Goods Sold (COGS): Our COGS increased by 11.7% while, on a per hectoliter basis, the increase was 15.5%. In the full year, COGS increased by 13.2% while COGS/hl increased by 15.0% mainly driven by (i) inflationary pressures in Argentina, (ii) unfavorable currency movements and (iii) product mix, partially offset by the benefit of procurement savings initiatives, productivity gains and FX hedges.

Selling, General & Administrative (SG&A) expenses: SG&A (excluding depreciation and amortization) was up 15.7% in the quarter and 11.8% in the full year, as (i) higher overall inflation, (ii) higher distribution costs due to increased mix of direct distribution in Brazil and (iii) increased sales & marketing investments were partly offset by efficiency gains in Brazil and CAC.

EBITDA, Gross margin and EBITDA margin: Normalized EBITDA reached R$ 8,021 million (+7.0%) in 4Q15 with gross margin and EBITDA margin compression of 40bps and 170bps respectively. In the full year, EBITDA reached R$ 22,210 million (+12.4%) with gross margin down 30bps and EBITDA margin expansion of 20bps, driven by Brazil (+140bps) and CAC (+220bps), partly offset by LAS (-170bps) and Canada (-230bps).

Normalized Net Profit and EPS: Normalized Net Profit was R$ 4,349 million (-7.9%) in the quarter, as EBITDA growth was offset by (i) net interest expense, mainly due to a higher non cash accretion expense related to our investment in Dominican Republic and a higher carry cost of our hedges; and (ii) a higher effective tax rate, mainly due to higher tax provisions related to our international subsidiaries and a lower accrual from interest on shareholders' equity in the quarter, with no impact in our cash benefit. In the full year, Normalized Net Profit was up +6.3% to R$ 13,236 million. Normalized EPS was R$ 0.27 in 4Q15 and R$ 0.81 in the full year.