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AmBev Reports Weak Q3 Earnings

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Brazilian beer giant Companhia de Bebidas das America (ABV), also known as AmBev, posted weak third-quarter 2013 earnings driven by a rise in input costs and operating expenses. Normalized earnings per share of R$0.73 was down 7.6% from the prior-year quarter figure of R$0.79.

In terms of U.S. dollars, earnings came in at 33 cents per share, lagging the Zacks Consensus Estimate of 39 cents.

Reported net sales grew 5.3% to R$8,462.6 million from R$8,036.0 million in the prior-year quarter. The increase was primarily attributable to a 7.3% rise in net revenue per hectoliter, which more than offset the 3.1% decline in volumes. On an organic basis, total revenue grew 4.0% from prior-year quarter due to a rise in net revenue per hectoliter.

Highlights of the Quarter

Cost of goods sold (:COGS) increased 5.8% year over year due to unfavorable foreign currency exchange rates and increased industrial depreciation. Though reported gross profit in absolute terms increased 4.3% year over year to R$5,646.4 million, gross profit margin contracted 70 basis points (bps) to 66.7%.

Reported, selling, marketing and administrative (SG&A) expenses, excluding depreciation and amortization, inched up merely 0.7% year over year to R$2,357.1 million as the benefit from strong cost management initiatives were more than offset by higher distribution expenses.   

In the said quarter, AmBev's normalized EBITDA increased 10.9% year over year to R$4,199.3 million while as a percentage of sales, normalized EBITDA margin expanded 250 bps to 49.6%. Improvement in normalized EBITDA margin was primarily due to expansion across the company’s business units.


AmBev, which competes with Constellation Brands Inc. (STZ), Brown-Forman Corporation (BF.B) and Beam Inc. (BEAM) ended the quarter with cash and cash equivalents of R$4,787.9 million and shareholders’ equity of R$31,105.7 million. During the first nine months of 2013, the company generated R$7,869.7 million of cash from its operating activities, up 8.4% from the comparable period in 2012.

During the first three quarters of 2013, the company spent R$2,612.1 million toward capital expenditure. Moreover, AmBev paid a dividend of R$8,067.1 million to its shareholders in the reported quarter.


Despite a challenging macroeconomic environment, AmBev expects further improvement in earnings before interest, taxes, depreciation and amortization (:EBITDA) performance. Moreover, the company expects the Brazilian beer industry to decline in the range of flat to low single digits. The company’s net revenue per hectoliter will likely grow in the high single-digit range in Brazil while cost of goods sold per hectoliter is anticipated to increase in high single digits or low double digits.

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