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The Brazilian beer giant Companhia de Bebidas das America (ABV - Analyst Report), aka AmBev, reported third-quarter 2011 earnings of R$0.53 (33 cents) per share, which declined 9.9% from prior-year quarter’s earnings of R$0.59 (34 cents) a share. Higher financial costs and higher effective tax rate more than offset the growth in net sales and improved margins.
Net sales for the quarter increased 10.6% to R$6,374.5 million (US$3,921.6 million), compared with R$5.978.2 million (US$3,398.6 million) in the prior-year quarter. The increase in revenues was primarily attributable to higher prices and a 2.9% growth in organic volumes across all regions.
During the quarter, AmBev's EBITDA rose 13.5% year over year to R$2,952.8 million, while EBITDA margin expanded 190 basis points to 46.3%. The growth was mainly the result of increased volumes of Beer and CSD in Brazil, recovery of Beer market and maintaining a stable market share in Latin America South, effective cost management in Canada and higher volumes in HILA-Ex.
Selling, marketing and administrative expenses increased 2.3% year over year to R$1,822.4 million. AmBev ended the quarter with cash and cash equivalents of R$5,958.9 million and shareholders’ equity of R$8,299.1 million. During the quarter, the company has paid R$2.35 billion of dividend to its shareholders.
The company’s plan to invest R$2.5 billion in Brazil in fiscal 2011 is still on track and will look for opportunities to enhance its working capital and ascertain capex plans. Year-to-date, AmBev has already invested R$2.1 billion. AmBev also believes that minimum wage in Brazil will grow by 7.5% in real terms in fiscal 2012, banking which the company looks to improve its top-line.
AmBev, which competes with Fomento Economico Mexicano S.A. (FMX - Analyst Report) and Molson Coors Brewing Company (TAP - Analyst Report), currently, holds a Zacks #3 Rank, implying a short-term ‘Hold’ rating on the stock. Besides, the company retains a long-term ‘Neutral' recommendation on the stock.
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