Ambev Reports 2017 Second Quarter Results Under IFRS

SÃO PAULO, July 27, 2017

Operating and Financial Highlights

Top line performance: Top line was up 4.8% in 2Q17, driven by growth in all our international operations: Latin America South (LAS) (+36.2%), Central America and the Caribbean (CAC) (+6.9%) and Canada (+1.4%), partially impacted by Brazil (-4.1%). In Brazil, volumes declined by 4.7%, while NR/hl was up 0.7%. In CAC, organic volumes were up 1.6%, with a NR/hl growth of 4.2%, while reported volumes increased by 26.2% as a result of the swap of assets carried out with ABI and our operations in Panama. In LAS, volumes grew by a solid 12.2% and NR/hl was up 21.4%. In Canada, volumes were slightly down (-0.4%), while NR/hl grew by 1.8%.

Cost of Goods Sold (COGS): Our COGS increased by 10.6% in the quarter and, on a per hectoliter basis, by 11.6%. Cash COGS (excluding depreciation and amortization) grew by 11.2% while, on a per hectoliter basis, by 12.2%, mainly due to inflationary pressures and unfavorable FX in Brazil and LAS.

Selling, General & Administrative (SG&A) expenses: SG&A was up 1.3% in 2Q17 while cash SG&A (excluding depreciation and amortization) up 1.7%, below our weighted average inflation (around 5.1%), due to efficiency gains in sales & marketing and cost savings in administrative expenses.

EBITDA, Gross margin and EBITDA margin: Normalized EBITDA reached R$ 3,943.3 million (-0.7%) in 2Q17, with gross margin of 60.6% (-200bps) and EBITDA margin of 38.4% (-210bps).

Normalized Net Profit and EPS: Normalized Net Profit was R$ 2,141.5 million in 2Q17, 2.4% lower than in 2Q16, as the EBITDA organic decline and the negative impact of currency translation due to the appreciation of the Brazilian Real were partially offset by the reduction of net financial expenses. Normalized EPS in the quarter was R$ 0.13.