Ambev Reports 2013 Fourth Quarter And Full Year Results Under IFRS

SAO PAULO, Feb. 26, 2014

Operating and Financial Highlights

Top line performance: Net revenues accelerated when compared to the first three quarters of the year and grew 10.0% in 4Q 2013, leading to a 6.4% growth in the FY 2013. Volumes declined 1.4% (-3.2% in the full year) being more than offset by a 11.6% growth in net revenue per hectoliter (NR/hl) during the quarter (+9.9% for FY 2013), mainly driven by our revenue management initiatives across our operations, greater weight of direct distribution and higher share of premium in Brazil. Albeit consolidated volumes remained in negative territory, we saw an improvement versus last quarter trends in all divisions and, thanks to a solid NR/hl performance, (Brazil Beer +11.7%, Brazil CSD & NANC +13.1%, HILA-ex +5.5%, LAS +16.2% and Canada +2.5%), this was a quarter of top line growth in all our divisions (Brazil Beer +7.9%, Brazil CSD & NANC +11.8%, HILA-ex +20.9%, LAS +16.5%, while Canada +2.1%).

Cost of Goods Sold (COGS): COGS was up 6.8% in 4Q 2013 and 7.0% for the full year, whereas on a per hectoliter basis, costs increased 8.4% and 10.5%, respectively. Although currency hedges continued to be a headwind, our aluminum, barley, sugar and corn hedges once again helped to soften this pressure. The fourth quarter confirmed the improvement already seen in 3Q, with COGS/hl growing 8.5% in H2 versus 13.9% in H1.

Selling, General & Administrative (SG&A) expenses: SG&A expenses (excluding depreciation and amortization) were up 10.8% in the quarter and 7.9% in FY 2013. Given our front loaded commercial investments in the year, mainly during the FIFA Confederations Cup, our 4Q 2013 performance was positively impacted by lower year over year sales and marketing expenses, while administrative expenses were impacted by timing of variable compensation accruals, partially offset by our cost savings initiatives. Distribution costs were impacted by a higher weight of direct distribution in Brazil, which reached c.70% in 4Q this year and c.67% for FY 2013.

EBITDA, Gross margin and EBITDA margin: Our Normalized EBITDA grew 18.0% in 4Q 2013, reaching R$ 6,453.7 million, which represents another improvement on the pace of year over year growth seen along the first three quarters of 2013 (1Q +2.6%, 2Q +6.8%, 3Q +9.5%), leading to a 10.5% growth in FY 2013, reaching R$ 17,485.1 million. Gross margin performance significantly improved in 4Q 2013 (ie, +90 basis points versus contraction in the first three quarters of the year), driven by expansion in Brazil Beer and all of our international divisions. Our strong finish to the year allowed us to achieve a Normalized EBITDA margin of 58.4% in the quarter (+400 bps expansion) and 50.3% for FY 2013 (+180 bps), also helped by a one-time gain of R$ 300 million in other operating income related to recovery of restricted funds in Brazil.

Operating Cash generation and Profit: Cash generated from our operations in 4Q 2013 improved 13.1% when compared to the same period last year, totalling R$ 8,386.3 million (R$ 17,377.3 million for the full year, was an increase of 10.1% when compared to 2012). Our Normalized Profit was R$ 4,766.6 million in the quarter, positively impacted by our operational performance and lower effective tax rate, reaching R$ 11,383.3 million in the full year. Normalized Earnings Per Share (EPS) corresponded to R$ 0.30 in the quarter and R$ 0.75 for FY 2013.