Ambev S.A. — FY2021 Form 20-F
Reporting period: Year ended December 31, 2021; filed March 2022. This is an annual report, not a standalone 2021 Q4 earnings filing. Financial statements are consolidated, prepared under IFRS in Brazilian reais (R$). Ambev brews, distributes and sells beer and other beverages across the Americas through Brazil, Central America and the Caribbean (CAC), Latin America South (LAS), and Canada.
Key financial metrics
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Net sales | R$72.9bn | R$58.4bn | +24.8% |
| Sales volume | 180.4m hl | 165.8m hl | +8.8% |
| Net revenue per hl | R$403.9 | R$352.1 | +14.7% |
| Gross profit / margin | R$37.2bn / 51.1% | R$31.3bn / 53.6% | Profit +18.8%; margin down 2.5 percentage points |
| Operating income / margin | R$17.1bn / 23.4% | R$16.0bn / 27.4% | Income +6.9%; margin down 4.0 points |
| Net income / margin | R$13.1bn / 18.0% | R$11.7bn / 20.1% | Net income +11.9%; margin down 2.1 points |
| Operating cash flow | R$22.9bn | R$18.9bn | +21.5% |
| Cash used in investing / financing | R$7.7bn / R$16.0bn | R$6.8bn / R$8.6bn | Higher outflows in both |
| Interest-bearing debt | R$3.1bn | R$4.8bn | Down R$1.7bn |
| Cash, cash equivalents and current investments | R$18.5bn | R$18.8bn | Down R$0.2bn |
| Net cash position | R$15.4bn | R$14.0bn | Up R$1.4bn |
Net cash is the company’s stated measure: cash and cash equivalents net of overdrafts plus current investment securities, less interest-bearing debt. Lease liabilities are reported separately. Capital expenditure on property, plant, equipment and intangibles was R$7.7bn, versus R$4.7bn in 2020.
Material changes and operating performance
- Revenue growth reflected both higher volumes and higher revenue per hectoliter. Volume increased in Brazil, CAC and LAS; Canada volume declined 0.7%.
- All four segments increased reported net sales: Brazil +17.8%, CAC +35.9%, LAS +43.3%, and Canada +15.5%. LAS growth included Argentina’s high inflation and currency translation; reported segment results were also affected by exchange-rate movements.
- Cost of sales rose 31.8%, faster than revenue, and increased from 46.4% to 48.9% of sales. Management cited higher commodity and input costs and real depreciation; hedging partly offset the impact.
- Administrative expenses rose 65.4%, while sales, marketing and distribution expenses increased 16.1%. Operating margin contracted despite higher operating income.
- Other operating income fell 20.7%, primarily because recognition of Brazilian ICMS-related PIS/COFINS tax credits was lower than in 2020. Net finance expense increased 31.7% to R$3.2bn.
- In Southern Hemisphere markets, including Brazil, Q4 is seasonally strong: it represented 28.5% of FY2021 volume. The filing does not provide a clear standalone Q4 revenue or profit value in the supplied text.
Outlook, risks and unusual items
- 2022 outlook: Management expected COVID-related volatility to continue and said inflation was pressuring consumer purchasing power. It anticipated less significant transactional foreign-exchange headwinds than commodity-cost headwinds, with both pressuring EBITDA margin. For Brazil Beer, it forecast cost of goods sold per hl, excluding depreciation and amortization, to increase 16%–19%, based on current commodity prices and specified exclusions.
- Tax items: The company reported cumulative recognition of R$7.3bn in recoverable credits from excluding ICMS from the PIS/COFINS tax base; some credits have been offset, while outstanding balances remain assets. A separate 2021 recognition of R$1.070bn related to the STF decision on income tax and social contribution applied to SELIC interest on tax recoveries. Amounts depend on case-specific legal and estimation judgments.
- Contingencies: Provisions for legal contingencies totaled R$847.2m at year-end. Management estimated possible, unprovided legal losses at R$82.4bn, predominantly tax-related; the filing states these are possible, not probable, losses. The scale and outcomes of these disputes are uncertain.
- Exceptional expenses: FY2021 exceptional items were an expense of R$392.8m, mainly restructuring and a distribution-agreement item; COVID-related health and community expenses were R$134.3m. In 2020, exceptional expenses were R$452.0m and included pandemic-related costs and restructuring.
- Principal risks: commodity-price and foreign-exchange volatility, inflation and interest rates, Brazil and Argentina macroeconomic and political conditions, ongoing pandemic effects, changing consumer demand, competition, regulation and tax disputes, supplier and logistics concentration, and water scarcity and climate-related costs.
- The company reported effective disclosure controls and internal control over financial reporting; PwC gave unqualified opinions on the IFRS consolidated financial statements and internal controls.
Important facts for investors to verify
- Review the full audited statements and notes for the drivers of gross- and operating-margin declines, including cost inflation, administrative spending and tax-credit recognition.
- Check the timing, recoverability and cash impact of PIS/COFINS credits and the R$1.070bn SELIC-related tax item, alongside the status of major tax litigation and the R$82.4bn possible-loss estimate.
- Assess 2022 cost guidance against actual commodity prices, foreign-exchange movements, hedging coverage and pricing or mix actions.
- Reconcile debt, cash and lease liabilities, and monitor the substantial supplier commitments, including R$47.4bn of packaging-material commitments reported for year-end 2021.
- Consider currency translation and restrictions on upstreaming cash from foreign subsidiaries, particularly in Argentina and other Latin American markets.