Ambev Reports 2015 Second Quarter Results Under IFRS

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Jul 30, 2015, 01:15 ET

SAO PAULO, July 30, 2015 /PRNewswire/ -- Ambev S.A. [BOVESPA: ABEV3; NYSE: ABEV] announces today its results for the 2015 second 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 six-month period ended June 30, 2015 filed with the CVM and submitted to the SEC.

Operating and Financial Highlights

Top line performance: During the quarter we delivered 10.3% of net revenue growth, driven by top line increases in all of our markets (Brazil +3.8%, CAC +14.0%, LAS +45.7% and Canada +3.5%). Consolidated volumes declined 3.4%, mainly due to a very difficult 2014 FIFA World Cup comparable base in Brazil (volumes down 7.9%), which was partially offset by growth in CAC (+13.5%), LAS (+7.1%) and Canada (+1.6%). On the other hand, net revenue per hectoliter (NR/HL) was up by a solid 14.2% driven by our revenue management initiatives, a strong benefit of premium mix across all of our operations and the higher weight of direct distribution in Brazil. Year to date, our consolidated top line is up 12.5%.

Cost of Goods Sold (COGS): Our COGS increased 12.4% and cash COGS was up 9.7%. On a per hectoliter basis, cash COGS increased 13.6%, impacted by inflationary pressures in Argentina, unfavorable currency hedges, product mix and lower dilution of fixed costs in Brazil, partially offset by the benefit of procurement savings initiatives and better commodities hedges.

Selling, General & Administrative (SG&A) expenses: SG&A expenses (excluding depreciation and amortization) were up 5.0% in the quarter, as (i) the inflationary pressure mainly in Argentina and Brazil and (ii) the impact from increased weight of our direct distribution in Brazil were partially offset by (iii) savings in our non working money expenses and (iv) an easier comparable base related to sales & marketing expenses associated with the 2014 FIFA World Cup event.

EBITDA, Gross margin and EBITDA margin: Normalized EBITDA reached R$ 4,123 million (+13.8%) as our Normalized EBITDA margin expanded 130 basis points to 41.6%. Gross margin was 70 basis points down in the quarter to 61.9%, with the margin compression fully explained by higher depreciation. Year to date, normalized EBITDA is up 17.8% with an EBITDA margin of 44.5% (+200bps).

Normalized Net Profit and EPS: Normalized Net Profit was R$ 2,830 million in the quarter, 27.3% above last year, positively impacted by EBITDA growth and a lower effective tax rate, partially offset by higher net interest expenses. Normalized Earnings Per Share (EPS) increased 25.9% to R$ 0.17 in 2Q15. In the first half of the year, our normalized EPS is up 17.3%.

Operating Cash generation and CAPEX: We generated R$ 4,343 million of cash from our operations in the quarter, a 45.6% increase versus last year, mainly as a result of stronger operational performance and better working capital management. During the second quarter of 2015 capital expenditure reached R$ 1.2 billion, of which R$ 900 million in Brazil. Year to date, total capex reached R$ 1.9 billion, of which R$ 1.4 billion in Brazil. In the first half, we generated a total of R$ 8,162 million of cash from our operation, a 45.2% increase versus the same period last year.

Pay-out and Financial discipline: During the second quarter, we paid approximately R$ 1.6 billion in interest on capital to shareholders and repurchased circa R$ 400 million of Ambev shares, which brought the YTD total payout figure close to R$ 7 billion or a 17% increase versus the same period of last year (including dividends, IOC and buybacks). As of June 30^th, 2015, our net cash position was R$ 4,818 million.

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 second quarter of 2014 (2Q14). Values in this release may not add up due to rounding.

Financial Highlights – Ambev			% As	%			% As	%
Consolidated			% As	%			% As	%
*R$ million*	2Q14	2Q15	Reported	Organic	YTD14	YTD15	Reported	Organic
Total volumes	39,310.6	37,960.0	-3.4%	-3.4%	82,295.2	81,141.0	-1.4%	-1.4%
Beer	28,580.6	27,517.5	-3.7%	-3.7%	59,785.8	59,267.9	-0.9%	-0.9%
CSD and NANC	10,730.0	10,442.5	-2.7%	-2.7%	22,509.5	21,873.1	-2.8%	-2.8%

Net sales	8,177.4	9,910.0	21.2%	10.3%	17,222.5	20,678.8	20.1%	12.5%
Gross profit	5,136.8	6,135.4	19.4%	9.0%	11,173.5	13,290.3	18.9%	11.8%
Gross margin	62.8%	61.9%	-90 bps	-70 bps	64.9%	64.3%	-60 bps	-40 bps

Normalized EBITDA	3,327.4	4,123.3	23.9%	13.8%	7,378.4	9,196.3	24.6%	17.8%
Normalized EBITDA margin	40.7%	41.6%	90 bps	130 bps	42.8%	44.5%	170 bps	200 bps
Normalized Profit	2,222.7	2,829.7	27.3%		4,826.1	5,800.4	20.2%
Normalized EPS	0.14	0.17	25.9%		0.30	0.35	17.3%