AmBev SA - Ambev Reports 2022 Fourth Quarter Results

May 4, 2023 (press release) –

"A good start to the year, delivering another quarter of consistent top line and bottom line growth, with margin expansion." - Jean Jereissati, CEO

Total Volume (organic)

-0.4% vs LY

Total volume slightly declined as growth in Brazil (NAB +7.3% and Beer +0.8%), and in Canada (+5.0%) were more than offset by Latin America South ("LAS") (-7.8%), impacted by a challenging macroeconomic environment, and Central America and the Caribbean ("CAC") (-5.0%) despite sequential recovery in the Dominican Republic.

Net Revenue (organic)

+26.5% vs LY

Top line performance driven by net revenue per hectoliter ("NR/hl") growth of 26.9%. Net revenue grew in all our business units: LAS2 +66.3%, Brazil NAB +18.6%, Canada +15.1%, Brazil Beer +14.4%, and CAC +3.9%.

Cash flow from operating activities

R$ (576.3) million

Cash flow from operating activities declined compared to R$ 519.8 million in 1Q22, explained mostly by phasing of raw material purchase and lower inventory build-up impacting payables, as well as higher income tax withholding on interest on shareholders' equity (IOC).

Sustainability

We announced a partnership to install in our plants charging stations for our fleet of electric trucks.

Following the election of our Board of Directors in our Annual Shareholders' Meeting, we now have three women on our Board, being recognized by Women on Board.

1. The following operating and financial information, unless otherwise indicated, is presented in nominal Reais and prepared according to the International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and to the accounting practices issued by the Brazilian Accounting Standards Committee ("CPC") and approved by the Brazilian Securities and Exchange Commission ("CVM"). The information herein should be read together with our financial information for the twelve-month period ended March 31, 2023, filed with the CVM and submitted to the U.S. Securities and Exchange Commission ("SEC").
2. The impacts resulting from applying Hyperinflation Accounting for our Argentinean subsidiaries, in accordance with IAS 29, are detailed in the section Financial Reporting in Hyperinflationary Economies - Argentina (page 16).

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MANAGEMENT COMMENTS

Starting the year with sustained top line performance driving double-digit growth in the bottom line and margin expansion

Since the COVID pandemic, we focused on a top line-led recovery, working to build momentum through a step change in volumes as well as improving NR/hl performance consistently over time. Although EBITDA growth and margins were negatively impacted by significant cost and expense inflation, we believed that once cost inflation began to be less of a headwind, bottom line growth and margins expansion would follow. Our first quarter results illustrate this dynamic well: net revenue increased by 26.5%, EBITDA grew by 39.9%, gross margin expanded 290 bps and EBITDA margin expanded 310 bps.

Our business momentum continued, led once again by Brazil. Performance was fueled by our commercial execution during the first full Carnival post-pandemic and healthier brands, as we lapped a strong 1Q22 when mask mandates were lifted in the country. Volumes grew by 2.5% (+0.8% in Beer and +7.3% in NAB) and market share was stable in both businesses according to our estimates. As for international operations, our performance improved despite the challenging macro environments we faced in several Latin American markets impacting volumes (-7.8% in LAS and -5.0% in CAC), while in Canada volumes grew (+5.0%) due to a better industry and market share gains, according to our estimates.

Top line performance accelerated sequentially despite persistent macro volatility in many markets. Disciplined commercial execution led NR/hl to increase by 26.9% versus 1Q22, above the rolling 12-month (R12M) inflation in each reporting business unit, which more than offset consolidated volume declining 0.4%. In Brazil, NR/hl increased by 12.3% (+13.5% in Beer and +10.6% in NAB), ahead of volume performance, due to a combination of price increases carry over, a consistent and disciplined revenue management strategy and a positive premium mix, driving top line growth of 15.1% (+14.4% in Beer and +18.6% in NAB). In our international operations, revenue management initiatives continued to drive NR/hl growth (+80.3% in LAS, +9.3% in CAC and + 9.6% in Canada) as inflation remained higher than normal levels, while in Canada positive brand and channel mix also helped.

In terms of costs, we expected a tougher start to the year. Even though Cash COGS per hectoliter growth started to decelerate in many of our markets, given the timing of commodity hedges (mainly aluminum and barley), our costs remained under pressure this quarter, resulting in an increase of 19.3% in Cash COGS on a consolidated basis. Brazil Beer Cash COGS per hectoliter (excluding non-Ambev marketplace) increased by 15.3%, while in Brazil NAB it grew by 3.0%, in LAS +50.0%, in CAC +8.7%, and in Canada +14.6%. Consolidated Cash SG&A, however, grew by 26.8%, driven by continued inflationary pressure and higher sales and marketing investments behind our brands, while savings initiatives helped to minimize the escalation of administrative expenses. In Brazil, Cash SG&A grew by 11.5% (+9.3% in Beer and +25.2% in NAB), in LAS +73.3%, in CAC +31.8%, and in Canada +16.6%.

As a result, in Brazil Normalized EBITDA increased by 27.2% (+24.4% in Beer and +47.1% in NAB), while margins improved: gross margin expanded 70 bps (+10 bps in Beer and +420 bps in NAB) and Normalized EBITDA margin expanded 290 bps (+250 bps in Beer and +530 bps in NAB). As for our international operations, Normalized EBITDA grew in LAS (+ 97.0%), where both gross margin and Normalized EBITDA margin expanded (+730 bps and +600 bps, respectively), and Canada (+3.5%), where both gross margin and Normalized EBITDA contracted (-140 bps and -210 bps, respectively). In CAC Normalized EBITDA declined by 2.1%, with gross margin expanding 240 bps, while Normalized EBITDA margin contracted 230 bps.

Financial highlights - Ambev consolidated

Ambev as a platform

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As our business continued to evolve, we kept focused on executing and delivering results in each of the five pillars of our framework:

1. In Brazil, our brands added over 700 thousand fans versus 1Q22, according to our estimates, and our super premium and premium focus brands increased brand health versus last year. Brahma and Zé Deliverywere the two most cited brands onsocial networks by Brazilians during Carnival celebrations.

1. During carnival celebrations we focused on reverse logistics by strengthening our collectors' ecosystem with the distribution of adequate personal protective equipment (PPE), wage support and other incentives, resulting in over 175 tons of waste correctly destined in the main capitals of Brazil.

1. In Brazil, Zé Delivery remained improving both awareness and coverage sequentially and versus 1Q22, reaching 5.0 million Monthly Active Users ("MAU").

2. In Brazil, Spaten grew volumes by double-digit. Bud Zero volumes increased over 90% sequentially and its coverage more than doubled versus last quarter.

3. BEES Net Promoter Score (NPS) achieved all-time high levels both in Brazil and CAC.

In Brazil, we continued to work with partners in the marketplace to expand products availability, reaching over 77% of BEES'

customers. Gross Merchandise Volume (GMV) grew sequentially and by 36% versus 1Q22, delivering an annualized amount of R$ 1.6 billion.

Sustainability

In the context of our climate action commitment, in April we announced a partnership with Raízen, a Brazilian energy company, to install in our plants charging stations for our fleet of electric trucks. In principle, Raízen will annually supply 480 MWh of clean and certified renewable energy, helping to reduce around 110 thousand liters of diesel consumption and 300 tons of CO2 per year. The first station was installed in our brewery located in the city of Rio de Janeiro and will be responsible for charging 20 electric trucks.

We also started to recover biogas generated in the effluent treatment stations of four breweries in Brazil (Sapucaia do Sul, in the state of Rio Grande do Sul; Itapissuma, in the state of Pernanbuco; Teresina, in the state of Piauí; and Manaus, in the state of Amazonas) and in Ypane brewery in Paraguay, increasing the percentage of renewable calorific energy to 41.1% in March 2023.

In March, the fourth edition of Aceleradora 100+, our acceleration program focused on startups whose activities relate to our 2025 sustainability goals, came to its end. This edition was carried out in partnership with Quintessa, Plataforma Parceiros pela Amazônia, Ball, Valgroup, Pepsico and Machado Meyer, and awarded "O2Eco" as the winner startup for developing a new technology to improve the quality and availability of water using the microorganisms present in any bed of water.

On the reputation front, the quarter was marked by the disclosure of significant results, with the rankings coordinated and disclosed by Merco, the leading corporate reputation monitor in Latin America, highlighting the Company's external perception. In Brazil, we maintained second place for the fifth consecutive year, while in Bolivia we sustained the first position for the sixth consecutive year and in Argentina we went from fifth to fourth place.

As part of "Bora", our productive inclusion program, we launched the Aprimore program in partnership with SEBRAE (a Brazilian entity that promotes competitiveness and sustainable development of micro and small ventures), aiming at accelerating craft breweries and fostering brewers ecosystem. At its pilot stage, the program will select five breweries from the state of Bahia, in the Northeast region of Brazil, which will receive assistance on the main management challenges they face, such as market connections, brand exposure in events, business rounds and visits to the Colorado Brewery for benchmarking, and even support to enroll in beer competitions. In addition to such initiative, in order to keep empowering a diverse landscape in the brewing universe, we offered two thousand scholarships for training women in brewing practice, making it the largest course of the segment, called CervejeiraSouEu.

Also, given our sustainability strength and leadership in the beverage sector, our Corporate Affairs Vice President Officer was elected for the General Assembly of the Brazilian Network for the United Nations Global

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Compact (UNGC) for a 3-year term, supporting the UNGC's effort on achieving the 2030 Sustainable Development Goals in Brazil.

At our Annual Shareholders' Meeting held on April 28th, 2023, Luciana Pires Dias and Carlos Lisboa were elected as new members of our Board of Directors, bringing more diversity in terms of gender and experience. With the new composition, we now have three women on our Board of Directors, being recognized by Women on Board.

Lastly, our 2022 Annual and ESG Report covering our achievements and results for the main topics that are material to our business, our way of doing business, how our people are leading transformation and our agenda with society will be published soon on our website.

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KEY MARKETS PERFORMANCES

Brazil Beer: commercial momentum continued with super premium and premium brands growing mid- thirties and with stable market share

• Operating performance: consistent execution of our commercial strategy during Carnival festivities led to a 0.8% volume increase despite a challenging comparable given the strong recovery of the out of home consumption occasions after the mask mandate was lifted in March 2022. Net revenue was up 14.4%, with NR/hl growing sequentially and by 13.5% versus 1Q22, driven by price increases carry over, disciplined revenue management initiatives, especially during Carnival, and a positive brand mix. Cash COGS/hl increased by 13.6% (15.3% excluding the sale of non-Ambev products on the marketplace), mostly due to anticipated commodities headwinds (primarily aluminum and barley). Normalized EBITDA was up 24.4%, with Normalized EBITDA margin expansion of 250 bps.
• Commercial highlights: we continued to invest behind our brands with a more consumer centric approach with our market share remaining stable according to our estimates. Brand health of our super premium and premium focus brands also increased versus last year, leading our super premium and premium portfolio to outperform once again, growing volumes in the mid-thirties, with a highlight to Original, Spaten, Stella Artois and Corona. Core brands remained resilient, delivering volume growth in line with total volumes. In the core plus segment, Budweiser grew volumes and Budweiser Zero continued expanding its distribution, reaching record POC coverage, and volume. We continued to work with our partners in the BEES Marketplace to expand assortment, reaching over 77% of BEES customers. Zé Delivery has now reached 5.0 million MAU (a sequential increase and +9% versus 1Q22) as a result of enhanced coverage and awareness, and its Average Order Value (AOV) was up 16%.

3 Net revenue per hectoliter and Cash COGS per hectoliter, excluding the sale of non-Ambev products on the marketplace, were R$ 406.3 (14.1% organic growth) and R$ (185.9) (15.3% organic growth), respectively. The scope change in Brazil Beer refers to tax credits and related effects.

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AmBev SA published this content on 04 May 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 May 2023 05:25:11 UTC.

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