Ambev (NYSE:ABEV), the Brazilian beverages company, announced its Q3 2023 results, showing robust growth in net revenues and EBITDA by approximately 19% and 44% respectively. Despite a decline in value brands, the company experienced an upswing in premium and super premium brands. The earnings call highlighted the company's strong performance in Brazil and international markets, with the exception of Argentina, which faced volume declines due to inflationary pressures.
Key takeaways from the call:
- Net revenue per hectoliter increased by 6.4%, driven by revenue management initiatives and a positive brand mix.
- The company's digital platforms, BEES and Zé Delivery, continued to grow, contributing to increased GMV and user awareness.
- Ambev reported a 25% increase in normalized profit and a significant improvement in net finance results, with cash flow from operating activities increasing by nearly 30%.
- The company is closely monitoring tax reforms in Brazil and has provided updates on income taxes and the put option in the Dominican Republic.
- Ambev remains confident in its ability to deliver a strong finish for 2023 and position itself well for 2024.
In the call, the company reported a normalized profit of R$4 billion for the quarter, a 25% increase year-over-year. This improvement was attributed to net finance results, including a reduction in losses on derivative instruments due to hedging decisions in Argentina and lower carry costs in Brazil. Cash flow from operating activities reached nearly R$8 billion, with improved performance in all regions, primarily in Brazil and CAC.
Ambev CEO, Jean Jereissati, discussed the company's brand portfolio and growth strategy, emphasizing the importance of renovating and reaccessing their portfolio. He highlighted the company's success in the high-end segment with brands like Corona and Budweiser performing well. CFO Lucas Lira discussed the company's approach to SG&A and CAC expenses, stating that the company remains disciplined in managing expenses, particularly in distribution and administrative costs.
The company also discussed its strategy regarding the value segment, shifting focus from tactical plays to a more strategic approach on core brands like Antarctica and Brahma. Despite industry challenges in Canada, the company's premiumization strategy focusing on core plus premium and super premium brands has performed well.
Regarding capital deployment, the company intends to invest in organic opportunities and pursue growth through inorganic strategies. They mentioned a forthcoming cash disbursement of approximately R$1.8 billion in connection with an M&A deal in the Dominican Republic. They also plan to return excess cash to shareholders through dividends, IOC, and buybacks, prioritizing IOC while it remains tax deductible. The company expressed confidence in their performance during the pandemic and highlighted their solid business in Brazil and recovery in CAC, aiming for growth and profitability in the second half of the year and improved organic EBITDA growth in 2023.
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