Business Context and Reporting Period
Company: AMBEV S.A.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Fourth Quarter (4Q) and Full Year (FY) ended December 31, 2018.
Release Date: February 28, 2019.
Accounting Standards: International Financial Reporting Standards (IFRS).
Key Context: Starting in 3Q18, Ambev applied Hyperinflation Accounting (IAS 29) to its Argentinean subsidiaries due to cumulative inflation exceeding 100% over three years. This significantly impacts reported revenue and EBITDA figures for the Latin America South (LAS) region.
Key Financial Metrics
| Metric (R$ Million) |
4Q18 |
4Q17 |
Change (As Reported) |
Change (Organic) |
| Net Revenue |
16,017.8 |
15,027.2 |
+6.6% |
+5.3% |
| Normalized EBITDA |
7,475.4 |
7,296.1 |
+2.5% |
+5.3% |
| Normalized EBITDA Margin |
46.7% |
48.6% |
-190 bps |
0 bps |
| Normalized Profit |
3,724.5 |
4,505.5 |
-17.3% |
N/A |
| Normalized EPS (R$) |
0.23 |
0.28 |
-16.4% |
N/A |
| Cash Flow from Operating Activities |
8,786.2 |
8,901.0 |
-1.3% |
N/A |
| CAPEX |
1,352.8 |
1,165.5 |
+16.1% |
N/A |
| Metric (R$ Million) |
FY2018 |
FY2017 |
Change (As Reported) |
Change (Organic) |
| Net Revenue |
50,231.3 |
47,899.3 |
+4.9% |
+6.9% |
| Normalized EBITDA |
21,098.9 |
20,147.6 |
+4.7% |
+9.4% |
| Normalized EBITDA Margin |
42.0% |
42.1% |
-10 bps |
+100 bps |
| Normalized Profit |
11,591.3 |
12,199.7 |
-5.0% |
N/A |
| Normalized EPS (R$) |
0.72 |
0.74 |
-3.7% |
N/A |
| Cash Flow from Operating Activities |
17,911.2 |
17,874.1 |
+0.2% |
N/A |
| CAPEX |
3,571.0 |
3,203.7 |
+11.5% |
N/A |
Liquidity and Debt
- Net Cash Position (Dec 31, 2018): R$ 9,054.1 million (up from R$ 7,811.6 million in 2017).
- Consolidated Debt: R$ 2,422.8 million (down from R$ 2,553.1 million in 2017).
- Cash and Cash Equivalents: R$ 11,463.5 million.
- Dividends Paid (2018): R$ 8.6 billion total (R$ 7.5 billion related to 2018 profit).
Material Changes vs. Prior Period
- Revenue Mix: Consolidated volume declined 3.8% in 4Q18 and 2.6% in FY18. Revenue growth was driven entirely by Net Revenue per Hectoliter (NR/hl) increases of 9.4% (4Q18) and 9.7% (FY18).
- Regional Performance:
- Brazil: Revenue down 0.6% (4Q18) due to volume decline (-4.0%), partially offset by price/mix (+3.5%). EBITDA margin contracted 350 bps to 47.9% due to commodity costs (aluminum, barley).
- Latin America South (LAS): Revenue up 21.8% (4Q18) driven by a 30.3% increase in NR/hl to offset a 7.3% volume drop in Argentina. EBITDA margin expanded 700 bps to 51.4%.
- Central America & Caribbean (CAC): Strong performance with revenue up 9.6% and volume up 7.9%. EBITDA margin expanded 110 bps.
- Canada: Revenue down 2.2% with volume down 3.6%. EBITDA margin contracted 40 bps.
- Cost Structure: COGS per hectoliter increased 18.9% in 4Q18, driven by inflation in Argentina, higher commodity prices, and hard comparables. SG&A expenses decreased 10.1% in 4Q18 due to bonus accrual phasing and non-working money expense projects.
- Profitability: Normalized profit declined 17.3% in 4Q18 and 5.0% in FY18, primarily due to higher financial expenses offsetting EBITDA growth.
Guidance, Outlook, and Risks
- 2019 Outlook: Management expects positive macroeconomic fundamentals. They are confident in accelerating EBITDA growth despite significant cost escalation.
- Cost Guidance: Full-year cash total COGS per hectoliter in Brazil is expected to increase by "mid-teens" in 2019 due to currency depreciation and commodity prices. The average hedging rate for 2019 is 3.61 BRL/USD versus 3.16 BRL/USD in 2018.
- Strategic Focus: Continued investment in portfolio innovation (e.g., Skol Puro Malte, premium brands like Corona and Stella Artois) and premiumization in Non-Alcoholic Beverages (NAB).
- Risks and Contingencies:
- Argentina Hyperinflation: Ongoing macroeconomic volatility and low consumer confidence in Argentina continue to impact volumes. The adoption of IAS 29 creates accounting volatility in reported results.
- Commodity Prices: Exposure to aluminum and barley prices remains a key cost driver.
- FX Exposure: Currency fluctuations impact translation of results and hedging costs.
Investor Verification Checklist
- Argentina Accounting Impact: Verify the specific impact of Hyperinflation Accounting (IAS 29) on FY18 and 4Q18 EBITDA (R$ 353.5 million negative impact in FY18; R$ 220.3 million positive impact in 4Q18).
- Volume vs. Price Dynamics: Confirm the sustainability of revenue growth given the consistent decline in consolidated volumes (-2.6% FY18) and reliance on price/mix increases.
- Brazil NAB Performance: Review the significant EBITDA decline (-44.9%) in the Non-Alcoholic Beverages segment in Brazil during 4Q18 and its impact on full-year guidance.
- Financial Expenses: Analyze the 29.8% increase in net finance results (R$ 1,619.0 million in 4Q18), driven by derivative losses and FX variations.
- Dividend Sustainability: Assess the payout ratio given the R$ 8.6 billion paid in 2018 against the normalized profit of R$ 11.6 billion.
