Ambev Reports 2014 Third Quarter Results Under IFRS

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Oct 31, 2014, 02:30 ET

SAO PAULO, Oct. 31, 2014 /PRNewswire/ -- Ambev S.A. [BOVESPA: ABEV3; NYSE: ABEV] announces today its results for the 2014 third quarter. The following operating and financial information, unless otherwise indicated, is presented in nominal Reais and prepared according to International Financial Reporting Standards (IFRS), and should be read together with our quarterly financial information for the nine-month period ended September 30, 2014 filed with the CVM and submitted to the SEC.

Operating and Financial Highlights

Top line performance: During 3Q14 we delivered 6.0% net revenue (NR) growth. Volume expanded 0.3% while net revenue per hectoliter (NR/hl) grew 5.7%. This performance was mainly driven by a weak macroeconomic environment in Brazil, leading to a soft top line growth (+2.3%), and poor weather in Canada (-0.3% NR growth) partially offset by a solid performance in Latin America South (+22.0% NR growth) and Hila-Ex (+10.6%).

Cost of Goods Sold (COGS): Our COGS increased 7.6% in 3Q14. On a per hectoliter basis, costs increased 7.3%, mainly explained by higher depreciation in Brazil and currency hedges in Brazil, LAS and Canada, partially offset by favorable commodities hedges.

Selling, General & Administrative (SG&A) expenses: SG&A expenses (excluding depreciation and amortization) were up 11.0% in the quarter mainly driven by (i) sales and marketing expenses, as we continued to increase investments behind our brands while phasing out the initiatives related to the 2014 FIFA World Cup and (ii) higher distribution costs as a result of the increased weight of direct distribution in Brazil and inflationary pressures in Argentina.

EBITDA, Gross margin and EBITDA margin: Our Normalized EBITDA grew 2.5% in 3Q14, reaching R$ 4,096 million. Normalized EBITDA margin contracted 160 basis points to 47.5% mainly due to a one-time gain related to the positive outcome of certain legal proceedings recorded in 3Q13, as well as a result of a gross margin contraction of 50 basis points to 65.7% and a double-digit cash SG&A growth.

Normalized Net Profit and EPS: Normalized Net Profit to Ambev shareholders was R$ 2,826 million in the quarter, 22.8% above last year, positively impacted by our financial results and a lower effective tax rate. Normalized Earnings Per Share (EPS) increased 22.6% to R$ 0.18 in the quarter.

Operating Cash generation and CAPEX: We generated R$ 4,142 million of cash from our operations in the quarter, which brought the YTD figure to R$ 9,764.8 or a 7.8% increase versus the same period last year, as a result of both a stronger operational performance as well as better working capital management. During the third quarter of 2014 capital expenditure reached R$ 1,220.2 million.

Pay-out and Financial discipline: On October 15th, we announced a dividend distribution totaling R$ 3.4 billion that will be paid as from November 13^th, 2014. Year to date, we have announced close to R$ 11.9 billion in cash payout, a 67% increase over the same period of last year, already our biggest cash payout in a given year. As of September 30^th, 2014, our net cash position was R$ 3,415.0 million, not yet accounting for the distribution announced on October 15^th, 2014.

Financial Highlights – Ambev	3Q13		% As	%	YTD13		% As	%
Consolidated	Reference		% As	%	Reference		% As	%
*R$ million*	Base	3Q14	Reported	Organic	Base	YTD14	Reported	Organic
Total volumes	39,620.5	39,898.4	0.7%	0.3%	117,141.6	122,193.6	4.3%	4.0%
Beer	28,556.9	28,896.9	1.2%	0.6%	84,504.5	88,682.6	4.9%	4.5%
CSD and NANC	11,063.6	11,001.5	-0.6%	-0.6%	32,637.1	33,511.0	2.7%	2.7%

Net sales	8,544.3	8,624.4	0.9%	6.0%	23,946.5	25,846.9	7.9%	10.6%
Gross profit	5,660.1	5,668.6	0.2%	5.2%	15,697.5	16,842.2	7.3%	10.0%
Gross margin	66.2%	65.7%	-50 bps	-50 bps	65.6%	65.2%	-40 bps	-30 bps
EBITDA	4,222.5	4,089.2	-3.2%	2.0%	11,077.3	11,448.9	3.4%	7.1%
EBITDA margin	49.4%	47.4%	-200 bps	-180 bps	46.3%	44.3%	-200 bps	-140 bps
Normalized EBITDA	4,227.8	4,096.3	-3.1%	2.5%	11,090.5	11,474.7	3.5%	7.3%
Normalized EBITDA margin	49.5%	47.5%	-200 bps	-160 bps	46.3%	44.4%	-190 bps	-130 bps
Profit	2,350.0	2,890.5	23.0%		6,634.5	7,703.0	16.1%
Normalized Profit	2,356.9	2,902.7	23.2%		6,647.7	7,728.8	16.3%
EPS (R$/shares)	0.15	0.18	22.4%		0.42	0.48	14.9%
Normalized EPS	0.15	0.18	22.6%		0.42	0.48	14.6%

Note: Earnings per share calculation is based on outstanding shares (total existing shares excluding shares held in treasury).

This press release segregates the impact of organic changes from those arising from changes in scope or currency translation. Scope changes represent the impact of acquisitions and divestitures, the start up or termination of activities or the transfer of activities between segments, curtailment gains and losses and year over year changes in accounting estimates and other assumptions that management does not consider as part of the underlying performance of the business. Unless stated, percentage changes in this press release are both organic and normalized in nature. Whenever used in this document, the term "normalized" refers to performance measures (EBITDA, EBIT, Profit, EPS) before special items adjustments. Special items are either income or expenses which do not occur regularly as part of the normal activities of the Company. They are presented separately because they are important for the understanding of the underlying sustainable performance of the Company due to their size or nature. Normalized measures are additional measures used by management and should not replace the measures determined in accordance with IFRS as indicators of the Company's performance. Comparisons, unless otherwise stated, refer to the third quarter of 2013 (Q3 2013). Values in this release may not add up due to rounding.

SOURCE Ambev S.A.