Ambev SA Q3 FY2024 earnings call

• Performance Perspective: Delivered solid quarter of growth and profitability against tough comps, building on H1 performance. Brazil and CAC strong, others improving. - Operational Performance: Resilient consolidated top-line, gross profit grew high-single digits, EBITDA grew with margin expansion. Detailed breakdown by regions: LAS had Argentina challenges but ex-Argentina growth; Canada premium brands growing; CAC Dominican Republic strong but Panama and Guatemala faced issues; Brazil NAB and beer segments performed well. - Innovation and Sustainability: Push into beyond beer and balanced lifestyle brands; tech initiatives like digitizing route to market and Ze Delivery in Brazil; sustainability efforts with 15 carbon-neutral plants and reduced water usage. - Financial Awards: Finance, shared services, and legal teams received 2023 Transparency Award by ANEFAC.

In LAS, Argentina volumes declined mid-teens, but ex-Argentina volumes grew mid-single digits led by Bolivia and Chile. Canada saw sequential volume improvement with premium brands growing, market share stable. In CAC, Dominican Republic had mid-single digit volume growth, but Panama and Guatemala faced challenges. Brazil's NAB had record Q3 volumes, with Health and Wellness portfolio strong; beer industry grew low-single digits, focus brands like Brahma, Budweiser, Spaten, Corona performed well with high rolling 12-month volumes. Revenue contribution % wasn't explicitly stated in absolute terms but detailed regional and brand performances were highlighted.

• Cash Flow: Q4 critical for cash generation due to business seasonality and tough comps; Board approved BRL2 billion share buyback program to return excess cash to shareholders. - Tax and Litigation: Tax headwinds in Brazil with income tax expense high; favorable administrative court decisions totaling ~BRL2 billion in Q3, with ongoing tax reform discussions in Brazil.

• Economic and Industry Risks: General economic conditions, industry conditions, and other operating factors could materially affect results. - Brazil Tax Headwinds: Impact on net profit; injunctions obtained but still facing challenges with deductibility related to state VAT, government grants, and IOC. - Argentina Macro Challenges: Tough consumption environment, volume declines, and macroeconomic factors weighing on performance.

Q: Regarding pricing in Brazil and Skol's performance.

A: Jean Jereissati noted pricing was taken earlier in September, Skol suffered more than expected but believed short-term; mix positive with brand mix and channel factors.

Q: On revenue per hectoliter in Brazil Beer.

A: Jean Jereissati said net revenue per hectoliter grew 2.6% sequentially, brand mix positive, mix overall positive with brand mix very positive.

Q: Strategy at lower end of market and 2025 innovations.

A: Jean Jereissati stated focus on trade-up, maintaining core relevance with affordability, and innovation in functionality, Zeros, gluten-free, low-calorie propositions.

Q: Buyback and capital structure.

A: Lucas Lira explained buyback related to excess cash and attractive investment opportunity, legal limits on share repurchase.

Q: Contribution margins in premium beer and RGB rollout.

A: Jean Jereissati discussed premiumizing trend, RGBs for premium brands like Corona, and consumer connection and volume expansion.

Q: Taxation monetization and Argentina outlook.

A: Lucas Lira talked about tax recoveries and injunctions, Jean Jereissati mentioned Argentina macro environment improving with sequential volume improvements.

Q: Ze Delivery and RGB.

A: Jean Jereissati elaborated on Ze Delivery's growth, GMV, and RGB role in Ze Delivery, and RGB expansion for premium brands.

Q: Skol strategy and discounting.

A: Jean Jereissati stated Skol's role in maintaining core consumers, and discounting was in line with usual revenue management with price in line with inflation.