AMBEV S.A. — 2022 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing; the filing gives seasonal volume data but does not provide a clear standalone Q4 income statement or cash flow.
Ambev produces and distributes beer and other beverages across the Americas. Its four reporting segments are Brazil, Central America and the Caribbean (CAC), Latin America South (LAS), and Canada. Financial statements are prepared under IFRS and presented in Brazilian reais (R$).
Financial and operating performance
Unless stated otherwise, amounts below are R$ billions. Comparisons are with 2021.
| Metric | 2022 | Change |
|---|---|---|
| Net sales | 79.71 | +9.4% |
| Sales volume | 185.75 million hectoliters | +3.0% |
| Net revenue per hectoliter | R$429.1 | +6.2% |
| Gross profit / margin | 39.29 / 49.3% | +5.6%; margin down 180 bps |
| Income from operations / margin | 17.69 / 22.2% | +3.6%; margin down 120 bps |
| Net income | 14.89 | +13.5% |
| Net income attributable to Ambev shareholders | 14.46 | Up from 12.67 |
| Basic earnings per share | R$0.9184 | Up from R$0.8052 |
| Cash flow from operating activities | 20.64 | Down 9.9% |
| Cash flow from investing activities | (5.00) | Outflow down 35.3% |
| Cash flow from financing activities | (16.34) | Outflow up 1.8% |
| Capital expenditure on property, plant, equipment and intangibles | 6.53 | Down from 7.68 |
| Total debt | 3.77 | Up from 3.10 |
| Net cash position | 11.54 | Down from 15.41 |
Cash and cash equivalents were R$14.93 billion; current investment securities were R$0.45 billion. Cash and cash equivalents plus current investment securities, less bank overdrafts, were R$15.38 billion. Operating cash flow declined mainly due to bonus and capital-expenditure payments in the first quarter and lower cash generation in CAC and Canada. The company reported that operating cash, investments, derivatives and borrowing access should fund capital spending, debt service and dividends.
Short-term debt was R$0.98 billion and long-term debt R$2.79 billion. Current contractual obligations included R$29.54 billion of trade and other payables, R$0.96 billion of lease liabilities and R$0.13 billion of sales-tax deferrals. The filing reports cash of R$3.08 billion held in Cuba and Argentina that was not freely transferable to the parent.
Material changes and segment trends
- Brazil: Net sales rose 19.8% to R$42.64 billion. Beer volume grew 3.5% and revenue per hectoliter 13.4%; NAB sales rose 34.2%, with volume up 12.0% and revenue per hectoliter up 19.8%.
- CAC: Net sales fell 5.1% to R$9.44 billion as volume declined 12.1%. Management cited first-half supply constraints, weaker second-half consumption and adverse currency translation.
- LAS: Net sales increased 4.8% to R$17.37 billion, supported by 1.7% volume growth and 3.1% higher revenue per hectoliter. Inflation in Argentina and currency translation affected performance.
- Canada: Net sales declined 4.5% to R$10.26 billion; volume fell 2.8%, and revenue per hectoliter decreased 1.8%, with currency translation and a weak industry contributing.
- Cost of sales increased 13.4%, faster than sales, and rose from 48.9% to 50.7% of sales. Management attributed pressure to commodity prices, inflation, packaging inputs, freight and diesel. This compressed gross and operating margins despite higher revenue and profit.
Outlook, management commentary and risks
- 2023 cost outlook: Management expects Brazil Beer cost of goods sold per hectoliter, excluding depreciation and amortization and non-Ambev marketplace products, to increase 6.0%–9.9% for the full year, assuming current commodity prices. It cited general inflation and higher costs for certain commodities. The expected average BRL/USD hedge rate was 5.10; management described aluminum hedging as a tailwind.
- Management said its 2023 strategy would continue to focus on brands, innovation, technology and ecosystem collaboration. It was implementing a new SAP S/4HANA ERP system in Brazil and warned that implementation could cause disruption, higher costs or operating inefficiencies.
- Unusual tax benefit: A R$1.2 billion additional PIS/COFINS tax credit, recognized after analysis of the ICMS exclusion rules, benefited 2022 results: R$0.9 billion was recorded in other operating income and R$0.3 billion in financial income. The filing also identifies R$329 million relating to recovery of IRPJ/CSLL paid on SELIC interest. These items and tax incentives contributed to an unusual effective tax benefit: the reported income-tax line was a R$655.6 million benefit, and the effective tax rate was negative 4.6%.
- Litigation and tax exposure: The filing reports R$990.8 million of provisions for legal contingencies and R$91.6 billion of estimated possible losses not recorded as liabilities, substantially tax-related. Management states that possible-loss estimates depend on uncertain proceedings and outcomes. Surety bonds, letters of guarantee or other collateral may be required as disputes progress.
- Other principal risks: Commodity and foreign-exchange volatility; inflation and political or economic instability in Brazil and Argentina; supply-chain and logistics disruptions; competition and changing consumer demand; water scarcity and climate impacts; cyber and data-protection incidents; regulation and beverage taxes; and the COVID-19 pandemic or other disruptions. Ambev uses derivatives to manage certain currency, interest-rate and commodity exposures, but does not assure that hedges will fully offset risks.
- The company paid R$12.24 billion in dividends and interest on shareholders’ equity in 2022. Its bylaws generally provide for a minimum dividend of 40% of adjusted annual net income, but the board may withhold distributions if payment is incompatible with the company’s financial condition.
- PwC issued an unqualified opinion on the IFRS financial statements and reported effective internal control over financial reporting as of December 31, 2022. The audit identified tax contingencies and the R$1.2 billion ICMS-related tax credit as critical audit matters, involving significant judgment.
Most important facts for investors to verify
- How much of 2022 earnings and cash generation is sustainable absent the R$1.2 billion tax credit, SELIC-related recovery and state tax incentives.
- Whether cost inflation, pricing and product mix will preserve margins as Brazil Beer costs per hectoliter are forecast to rise 6.0%–9.9% in 2023.
- Developments in the R$91.6 billion of possible unrecorded losses, including tax disputes, and any resulting collateral or cash requirements.
- Cash availability and repatriation restrictions in Argentina and Cuba, and the impact of currency movements across foreign operations.
- Execution risks and costs associated with the Brazil ERP implementation, planned investment and working-capital needs.