Ambev Reports 2016 First Quarter Results Under IFRS

SAO PAULO, May 4, 2016

Operating and Financial Highlights

Top line performance: Top line was up 2.6% in the quarter, as solid growth in CAC (+19.4%), LAS (+15.1%) and Canada (+2.3%) was partly offset by a decline in Brazil (-4.0%), due to an anticipated weak start of the year. Consolidated volumes were down 7.7% while net revenue per hectoliter (NR/hl) was up by a solid 11.1%. In Brazil, on top of an already challenging macroeconomic scenario, our volumes were heavily impacted by a tough comparable base of early Carnival and price increases to mitigate taxes. NR/hl was up 4.9% with returnable glass bottles (RGB) mix partly offsetting the growth driven by our revenue management initiatives. In CAC, volumes were up by double digits (+10.4%) with solid NR/hl performance (+8.1%). In LAS, while volumes declined by 10.4% mainly due to Peru CSD exit in 3Q15 and Argentina weakness in the quarter, NR/hl was up by a strong 28.6%, reflecting the high inflation in the region. In Canada, beer volumes increased for another quarter, while we also benefited from our recent acquisitions of craft and near beer brands, driving a reported volume increase of 5.8% (organic +0.9%) with a solid 1.3% NR/hl organic growth. 

Cost of Goods Sold (COGS): Our COGS increased by 2.9% while, on a per hectoliter basis, the increase was 11.5% mainly driven by (i) inflationary pressures in LAS and Brazil, and (ii) unfavorable currency movements, partly offset by the benefit of procurement savings, a higher weight of RGB mix in Brazil and FX hedges.

Selling, General & Administrative (SG&A) expenses: SG&A (excluding depreciation and amortization) was up 3.9%, with efficiency gains in working money and cost savings in non working money, specially in Brazil, driving a (i) below inflation growth of sales and marketing and distribution expenses and a (ii) decline in administrative expenses.

EBITDA, Gross margin and EBITDA margin: Normalized EBITDA reached R$ 5,264 million (+1.1%) in 1Q16 with gross margin of and EBITDA margin compression of -10bps and -70bps respectively.

Normalized Net Profit and EPS: Normalized Net Profit was R$ 2,900 million (-2.4%) in the quarter, as (i) higher net interest expense, mainly due to higher carry cost of our hedges, higher non cash accretion expense related to our investment in Dominican Republic and non cash foreign exchange translation losses on intercompany payables were partly offset by (ii) a lower effective tax rate, mainly due to a higher benefit from interest on capital and an easy comparable base in other tax adjustments due to a one time expense reported in 1Q15. Normalized EPS was R$ 0.18 in 1Q16.