Ambev Reports 2012 Third Quarter Results Under IFRS

SAO PAULO, Oct. 31, 2012

Operating and Financial Highlights

Top line performance: This quarter we delivered the strongest net revenue growth (+15.1%) of the year despite a 0.5% decline in overall volumes (+0.3% in beer; -2.3% in CSD&NANC), giving us +2.1% volume and +9.3% net revenue per hectoliter (NR/Hl) growth for the year.  The performance of our Brazilian operations stood out once more, with a 17.5% NR/Hl growth while volume growth was limited to 0.2%.  As for our international operations, Canadian performance was flat, Latin America South (LAS) NR/Hl growth of 21.5% more than offset a 2.3% decline in volumes against a tough macroeconomic backdrop in Argentina, and HILA-ex reported volumes that grew roughly 55% in the first full quarter of consolidation of Cervecería Nacional Dominicana's (CND) results.     

Cost of Goods Sold (COGS): COGS rose 11% in the third quarter, withCOGS per hectoliter growing 11.3%.  This was primarily caused by input cost pressures in Brazil for barley, aluminum and sugar, coupled with negative packaging mix and greater industrial depreciation related to capacity investments in the country, but also due to higher barley and labor costs in LAS.  For the first nine months of 2012, COGS/Hl increased 6.6%.

Selling, General & Administrative (SG&A) expenses: SG&A (excluding depreciation and amortization) expenses in Q3 2012 grew 16.2%.  Commercial spend and distribution expenses increased at a lower pace as compared to H1 2012 (with the exception of LAS, where labor cost pressures persist), whereas growth in administrative expenses in Brazil (mainly bonus accruals) mostly resulted from a tough comparison with Q3 2011.  Year-to-date, SG&A (excluding depreciation and amortization) growth stands at 15.1%.

EBITDA, Gross margin and EBITDA margin: We delivered a normalized EBITDA of R$ 3,801.5 million in the third quarter, which is 19.2% above the same period last year, giving us 12.5% growth thru September 30, 2012.  Both Gross and EBITDA margins expanded (120 bps and 160 bps, respectively) led by Brazil and LAS, while Canadian EBITDA margin remained flat for the quarter, and HILA-ex improved its EBITDA margin considerably to 16.7%, with an EBITDA of R$ 66.8 million.  These results sent us back to margin expansion territory for the year (+30 bps), with an EBITDA margin of 46.0%.

Operating Cash generation and Profit: Stronger revenue performance was the main driver behind the R$ 4,365.6 million (+27.6% vs. Q3 2011) of cash generated from our operations during Q3 2012.  Normalized Profit was R$ 2,518.5 million and Normalized Earnings per share (EPS) was R$ 0.81 in the quarter thanks to a higher EBITDA, a lower effective tax rate and an easy comparison with Q3 2011.