Ambev reports Q1 net earnings of 2.34B reais, compared with year-ago earnings of 2.31B reais; beer sales drop in Brazil, leading company to revise downward its outlook for rest of 2013

Nevin Barich

SAO PAULO , April 30, 2013 (press release) – Companhia de Bebidas das Americas -- Ambev [BOVESPA: AMBV4, AMBV3; NYSE: ABV, ABVc] announces today its results for the 2013 first quarter. The following operating and financial information, unless otherwise indicated, is presented in nominal Reais and prepared according to International Financial Reporting Standards (IFRS), and should be read together with our financial information for the three-month period ended March 31, 2013 filed with the CVM and submitted to the SEC.

Operating and Financial Highlights

Top line performance: Net revenues grew 2.4%. Volumes declined 6.8% (Brazil -6.3%; Latin America South -10.2%; and Canada -3.0%) mainly because of poor industry performance in our main markets. Such volume shortfall was offset, however, by our net revenue per hectoliter results, which improved 9.8% in Q1 2013 (Brazil +7.5%; Latin America South +20.2%; Canada +2.3%). HILA-ex net revenues increased 27% supported by volumes growing 19.9%.

Cost of Goods Sold (COGS): COGS rose 7.4%, with COGS per hectoliter growing 15.1%. On the hedging side, performance was impacted not only by the closing of the higher commodity hedge cycle (mainly barley, and to a lesser extent, aluminum and sugar), but also by currency hedges already becoming a headwind because of the depreciation of the Real. In addition, adverse effect in fixed cost dilution as a result of the volume decline and packaging mix, increased industrial depreciation tied to Brazil capital expenditures, inflationary pressures in Argentina and a tough comparison in Canada were also relevant factors.

Selling, General & Administrative (SG&A) expenses: SG&A (excluding depreciation and amortization) was up 8.0%. Sales and marketing investments remained a priority in order to implement our commercial strategy during Carnival in Brazil, we continued to invest behind our brands in LAS, and spent more in Canada due to a shift into the first quarter due to innovation launches and brand activation initiatives. Meanwhile, distribution costs continued to suffer from inflationary pressures in Brazil and Argentina. All in all, SG&A growth was in line with the weighted average inflation for our geographical footprint.

EBITDA, Gross margin and EBITDA margin: Normalized EBITDA totalled R$ 3,599.0 million and grew 2.3% mainly as a result of the negative volume performance and higher COGS per hectoliter. As for our main divisions, Brazil delivered an EBITDA of R$ 2,499.9 million (+1.6%) and Canada R$ 246.3 million (-11.4%), whereas LAS generated R$ 784.9 million (+10.0%) and HILA-ex R$ 67.8 million. Overall, gross margin contracted 150 basis points (bp) and EBITDA margin contracted 10 bp.

Operating Cash generation and Profit: Cash generated from our operations totalled R$ 1,729.8 million (+37.5%), while our Normalized Profit in the quarter reached R$ 2,344.5 million (+1.3%) and Normalized Earnings Per Share (EPS) R$ 0.75 (+0.8%).

This press release segregates the impact of organic changes from those arising from changes in scope or currency translation. Scope changes represent the impact of acquisitions and divestitures, the start up or termination of activities or the transfer of activities between segments, curtailment gains and losses and year over year changes in accounting estimates and other assumptions that management does not consider as part of the underlying performance of the business. Unless stated, percentage changes in this press release are both organic and normalized in nature. Whenever used in this document, the term "normalized" refers to performance measures (EBITDA, EBIT, Profit, EPS) before special items adjustments. Special items are either income or expenses which do not occur regularly as part of the normal activities of the Company. They are presented separately because they are important for the understanding of the underlying sustainable performance of the Company due to their size or nature. Normalized measures are additional measures used by management and should not replace the measures determined in accordance with IFRS as indicators of the Company's performance. Comparisons, unless otherwise stated, refer to the first quarter of 2012 (Q1 2012). Values in this release may not add up due to rounding.

SOURCE Ambev

/CONTACT: Tatiana S F Rodrigues, Ambev - Investor Relations, + 55 (11) 2122-1414, ir@ambev.com.br

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