AmBev Beats on Higher Prices

The Brazilian beer giant Companhia de Bebidas das America (ABV - Analyst Report), aka AmBev, reported robust second-quarter 2011 earnings of R$0.59 or 36 cents per share, up 21% from prior-year earnings of R$0.49 or 30 cents a share. The growth was primarily attributable to price increases and stronger profit margins.

Financial Details

Net sale for the quarter grew 6.2% to R$5,811.6 million (US$3,585.2 million) compared with R$5.678.4 million (US$3,502.9 million) in the prior-year quarter. The increase in revenue was primarily attributable to higher prices in all regions. However, organic volume decreased 0.9% across all regions but for HILA-ex.

During the quarter, AmBev's EBITDA rose 9.0% year over year to R$2,583.6 million (US$1,593.8 million) while EBITDA margin expanded 110 basis points to 44.5%. The growth was mainly the result of higher prices and lower logistic costs in Brazil, better market performance and market share gain in Latin America South, effective cost management in Canada and higher volumes in HILA-Ex.

Selling, marketing and administrative expenses decreased 429% year over year to R$1,720.4 million (US$1,061.3 million) on the back of lower logistics costs and effective cost management.

AmBev ended the quarter with cash and cash equivalents of R$5,251.3 million (US$3,239.5 million) and shareholders’ equity of R$7770.6 million (US$4,793.7 million).

The company plans to invest R$2.5 billion in Brazil in fiscal 2011 and will look for opportunities to enhance its working capital and ascertain capex plans.

AmBev, which competes with Fomento Econ (FMX - Analyst Report) and Molson Coors Brewing Company (TAP - Analyst Report), currently holds a Zacks #2 Rank, implying a short-term Buy rating on the stock. Besides, the company retains a long-term Neutral' recommendation on the stock.

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