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AmBev Lags Q2 Earnings Estimates

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Brazilian beer giant, Companhia de Bebidas das America , also known as AmBev, reported weak second-quarter 2013 normalized earnings of R$0.60 per share, down 2.7% from the prior-year quarter figure of R$0.62. The results were adversely affected by rise in input costs and operating expenses.

In terms of U.S. dollars, earnings came in at 26 cents per share, lagging the Zacks Consensus Estimate of 33 cents.

Reported net sales grew 9.9% to R$7.503 billion, compared with R$6.825 billion in the prior-year quarter. The increase was primarily attributable to a 10.0% rise in net revenue per hectoliter, which more than offset the 1.6% decline in volumes. On an organic basis, total revenue jumped 8.3% from prior-year quarter, due to a rise in net revenue per hectoliter.

Quarter in Detail

Cost of goods sold (COGS) increased 10.8% year over year due to unfavorable foreign currency exchange rates. Though reported gross profit in absolute terms increased 8.5% year over year to R$4.911 billion, gross profit margin contracted 80 basis points (bps) to 65.5%.

Reported, selling, marketing and administrative (SG&A) expenses, excluding depreciation and amortization, increased 14.8% year over year to R$2.481 billion as the company continued with its sales and marketing investments in Brazil and higher commercial spends in the FIFA Confederation Cup held in June. In addition, inflationary pressure in Argentina increased the company’s SG&A expenses as well. This was partially offset by lower spending in Canada due to phasing.

During the quarter, AmBev's normalized EBITDA increased 8.7% year over year to R$3.218 billion. However, as a percentage of sales, normalized EBITDA margin contracted 50 bps to 42.9% due to lower gross margin and increased operating expenses.


AmBev, which competes with Constellation Brands Inc. (STZ - Free Report) , Brown-Forman Corporation (BF.B - Free Report) and Beam Inc. ended the quarter with cash and cash equivalents of R$4.436 billion and shareholders’ equity of R$30.988 billion. During the first six months of 2013, the company generated R$2.571 billion of cash from its operating activities, down 6.5% from the comparable period in 2012.

During the quarter, the company spent R$756.4 million toward capital expenditure. Of the total amount spent, about R$559.0 million was invested in Brazil. Moreover, AmBev paid a dividend and IOC of R$5.1 billion to its shareholders in the said quarter.


Despite a challenging macroeconomic environment, AmBev expects further improvement in EBITDA performance. Moreover, the company projects the Brazilian beer industry to decline in the range of flat to low single digits. The company’s net revenue per hectoliter will likely grow in the high single-digit range in Brazil while cost of goods sold per hectoliter is expected to increase in the range of high single digits or low double digits. Furthermore, AmBev intends to expend about R$3.0 billion in Brazil to avail the emerging opportunities available in the market.

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