Ambev Reports 2016 Third Quarter Results Under IFRS

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Oct 28, 2016, 01:50 ET

SAO PAULO, Oct. 28, 2016 /PRNewswire/ -- Ambev S.A. [BOVESPA: ABEV3; NYSE: ABEV] announces today its results for the 2016 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, 2016 filed with the CVM and submitted to the SEC.

Operating and Financial Highlights

Top line performance: Net revenue (NR) was up 2.3% in the quarter, as solid growth in CAC (+12.1%) and LAS (+22.1%) and flat top line in Canada (+0.1%) was partially offset by a decline in Brazil (-6.6%). Volumes were down 3.4% mainly driven by a decline in Brazil and Argentina as economic volatility in these countries continued to put pressure on beverage consumption. This decline was more than offset by a solid net revenue per hectoliter (NR/hl) increase of 5.9%, due to our revenue management initiatives.

Cost of Goods Sold (COGS): Our COGS increased by 15.5% while on a per hectoliter basis COGS was up 19.5% mainly driven by Brazil where COGS/hl increased by 27.6% due to our FX hedges which reflected in 3Q16 the severe BRL devaluation of the second half of 2015. During that time, Brazilian Real suffered close to a 60% year over year devaluation before peaking at 4.18 BRL/USD in September 2015, thus temporarily inflating our cost of sales denominated in US dollars, which represents around 40% of our COGS in Brazil.

Selling, General & Administrative (SG&A) expenses: SG&A (excluding depreciation and amortization) was up 11.3% due to (i) phasing of sales & marketing expenses, that were more concentrated in this quarter due to Rio 2016 Olympic Games and other marketing activations, and (ii) higher distribution expenses, partly offset by savings in administrative expenses.

EBITDA, Gross margin and EBITDA margin: Normalized EBITDA was R$ 3,999.4 million (-14.0%) in 3Q16 with gross margin and EBITDA margin compression of 450bps and 740bps respectively.

Normalized Net Profit and EPS: Normalized Net Profit reached R$ 3,198.3 million in 3Q16, 3.6% above that of last year, as EBITDA decline and higher net finance results were more than offset by (i) a reversion of withholding tax provisions related to unremitted earnings in Argentina, where a new legislation revoked a tax created in 2013, and (ii) the recognition of deferred tax assets on carried losses in international subsidiaries, reverting a negative impact we had in Other Tax Adjustments in 2015 and previous years. Normalized EPS was R$ 0.20 in 3Q16.

Operating Cash Generation and CAPEX: In the quarter, cash generated from operations was R$ 5.1 billion while CAPEX reached R$ 902 million. Year to date, we generated R$ 9.8 billion in cash from operations while CAPEX reached R$ 2.8 billion. In Brazil, CAPEX year to date is R$ 1.4 billion.

Pay out and Financial discipline: As of September 30^th, 2016, our net cash position was R$ 3,120.1 million. This figure does not include the dividend payment of R$ 0.16 per share (approximately R$ 2.5 billion) announced on October 19^th, 2016 to be paid starting on November 25^th, 2016. Year to date we have announced/paid out approximately R$ 6.6 billion in interest on capital and dividends.

Financial highlights - Ambev consolidated			% As	%			% As	%
*R$ million*	3Q15	3Q16	Reported	Organic	YTD15	YTD16	Reported	Organic
Total volumes	39,988.4	38,838.2	-2.9%	-3.4%	121,129.4	114,463.3	-5.5%	-5.9%
Net sales	10,745.1	10,482.8	-2.4%	2.3%	31,423.9	32,425.1	3.2%	2.7%
Gross profit	7,001.2	6,267.3	-10.5%	-4.8%	20,291.5	20,354.7	0.3%	0.7%
Gross margin	65.2%	59.8%	-540 bps	-450 bps	64.6%	62.8%	-180 bps	-120 bps
Normalized EBITDA	4,992.0	3,999.4	-19.9%	-14.0%	14,188.3	13,468.4	-5.1%	-4.0%
Normalized EBITDA margin	46.5%	38.2%	-830 bps	-740 bps	45.2%	41.5%	-370 bps	-290 bps
Normalized Profit	3,086.6	3,198.3	3.6%		8,887.0	8,293.2	-6.7%
Normalized EPS	0.19	0.20	3.7%		0.54	0.50	-7.3%
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 2015 (3Q15). Values in this release may not add up due to rounding.

SOURCE Ambev S.A.