Business Context and Reporting Period
Company: AMBEV S.A.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Third Quarter ended September 30, 2022 (3Q22)
Currency: Brazilian Reais (R$) unless otherwise noted.
Overview: Ambev reported double-digit organic growth in net revenue and normalized EBITDA, driven primarily by strong performance in Brazil (Beer and Non-Alcoholic Beverages) and Latin America South. These gains offset significant headwinds in Central America and the Caribbean (CAC) and Canada, where inflation, supply chain disruptions, and volume declines impacted results.
Key Financial Metrics (3Q22 vs. 3Q21)
| Metric | 3Q22 (R$ Million) | 3Q21 (R$ Million) | Change (As Reported) | Change (Organic) |
|---|---|---|---|---|
| Net Revenue | 20,587.6 | 18,492.6 | +11.3% | +18.9% |
| Normalized EBITDA | 5,600.6 | 5,468.9 | +2.4% | +10.6% |
| Normalized EBITDA Margin | 27.2% | 29.6% | -240 bps | -210 bps |
| Normalized Profit | 3,229.8 | 3,753.3 | -13.9% | -13.9% |
| Cash Flow from Operating Activities | 6,109.4 | 6,398.2 | -4.5% | N/A |
| Net Debt / (Cash) | (15,640.6) | (15,411.3) | Net Cash Position | N/A |
Note: Organic growth excludes currency translation and scope changes. Normalized metrics exclude exceptional items and share of results of joint ventures.
Material Changes vs. Prior Period
- Revenue Growth: Organic net revenue grew 18.9%, driven by a 17.4% increase in Net Revenue per hectoliter (NR/hl). Volume growth was modest at +1.3% organic, reaching a record 46.3 million hectoliters for the quarter.
- Profitability Pressure: Despite EBITDA growth, Normalized Profit declined 13.9% year-over-year. This was caused by higher financial expenses (R$ 1,251.1 million) and a higher effective tax rate, partially offsetting EBITDA gains. The prior year (3Q21) benefited from a one-off Deferred Taxes Liabilities reversion of approximately R$ 754 million.
- Cost Inflation: Cash COGS per hectoliter increased 21.5% and SG&A rose 23.3% due to commodity prices (aluminum, barley), diesel costs, and ocean freight inflation.
- Regional Divergence:
- Brazil: Beer volumes were flat (0.0%) but NR/hl grew 17.0%. Non-Alcoholic Beverages (NAB) saw volume growth of 10.2% and NR/hl growth of 23.2%.
- CAC: Volumes declined 18.7% and Net Revenue fell 13.1% due to inflation, logistics constraints, and social unrest in the Dominican Republic and Panama.
- Latin America South (LAS): Net Revenue surged 45.8% (organic) driven by Argentina's hyperinflation accounting adjustments and price increases, though volumes grew only 4.5%.
- Canada: Net Revenue grew 9.2% but Normalized EBITDA declined 2.6% due to cost pressures.
Guidance, Outlook, and Risks
- Outlook: Management expects Brazil Beer Cash COGS/hl to grow within the 16-19% range for the full year. The company remains on track to deliver better net revenue and EBITDA growth in the second half of 2022, driven by Brazil, though international operations have not yet fully recovered.
- Strategic Focus: Preparation for the FIFA World Cup in the Southern Hemisphere is a key strategic lever. The company is leveraging its "five pillars" strategy, including brand health, innovation (representing >15% of net revenue), and digital platforms (BEES and Zé Delivery).
- Risks and Contingencies:
- Hyperinflation: Argentina is classified as a hyperinflationary economy (IAS 29), requiring restatement of results which significantly impacts reported revenue and EBITDA figures for the LAS region.
- FX Exposure: Significant losses on derivative instruments (R$ 1,073.4 million) were recorded due to hedging carry costs related to FX exposure in Argentina and Brazil.
- Operational Disruptions: Hurricanes Fiona and Ian impacted the CAC region. Supply chain disruptions and high inflation continue to pressure costs in Brazil, Canada, and the Dominican Republic.
Investor Verification Checklist
- Argentina Accounting Impact: Verify the specific impact of IAS 29 hyperinflation accounting on LAS revenue and EBITDA, as this distorts organic operational performance comparisons.
- Financial Expenses: Review the breakdown of the R$ 1,251.1 million net finance results, specifically the R$ 1,073.4 million loss on derivative instruments, to understand the non-operational drag on profit.
- CAC Recovery: Assess the timeline for volume recovery in the Dominican Republic and Panama given the cited social unrest and hurricane damage.
- Cost Pass-Through: Monitor the ability to sustain NR/hl growth in Brazil and other markets to offset the 21.5% increase in Cash COGS/hl.
- Normalized vs. GAAP Profit: Note the significant divergence between Normalized Profit (R$ 3,229.8 million) and GAAP Profit (R$ 3,215.0 million) is minimal in 3Q22, but the year-over-year decline in Normalized Profit is driven by tax and finance items rather than operational EBITDA.