Ambev Reports Third Quarter 2013 Results Under IFRS

SAO PAULO, Oct. 31, 2013

Operating and Financial Highlights

Top line performance: Our net revenues increased 4.0%, with a volume decline of 3.1% being more than offset by 7.3% growth in net revenue per hectoliter (NR/Hl).  Accordingly, though industry softness in Brazil, Canada, and, to a lesser extent, Argentina, continued to impact volume performance, this was another quarter of top line growth in nearly all our divisions (Brazil Beer +0.8%, Brazil CSD & NANC +5.4%, HILA-ex +10.7%, LAS +14.8%, while Canada -0.1%) thanks to solid NR/Hl performance (Brazil Beer +6.0%, Brazil CSD & NANC +7.6%, HILA-ex +10.9%, LAS +15.1% and Canada +2.2%).

Cost of Goods Sold (COGS): COGS grew at 5.8%, with COGS/Hl increasing 9.3%.  Such performance represents an improvement over our H1 2013 results (COGS +9.0%; COGS/Hl +13.9%), and came mostly from our Brazilian business, where commodity hedges (primarily barley and aluminum) helped to soften pressure coming from currency hedges, higher industrial depreciation linked to capital expenditures, as well as packaging mix in Brazil Beer. 

Selling, General & Administrative (SG&A) expenses: SG&A expenses (excluding depreciation and amortization) improved significantly and were down 0.5%.  Such improvement is explained by commercial spend growing at a lower pace than H1 2013 (without compromising investments behind our brands and innovation) and by the savings generated from our cost management initiatives around "non-working money", also helped by lower provisions related to variable compensation.  Distribution expenses were higher due mainly to the greater weight of direct distribution in Brazil and inflationary pressures in Argentina.   

EBITDA, Gross margin and EBITDA margin: Our Normalized EBITDA grew 9.4% and corresponded to R$ 4,199.3 million, which also represents an important improvement if compared to the YoY growth we delivered in the first half of the year (+4.4%).  Gross margin performance improved in Q3 2013 (ie, -60 basis points vs. -120 bps in H1 2013) driven by less contraction in Brazil and expansion in our international divisions, while we delivered strong EBITDA margin expansion of 250 bps on the back of expansion across our business units.