ABEV Ambev SA

Ambev S.A. [B3: ABEV3; NYSE: ABEV] announces its results for the third quarter of 2018. The following operating and financial information, unless otherwise indicated, is presented in nominal Reais and prepared according to the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and to the accounting practices issued by the Brazilian Accounting Standards Committee ("CPC”) and approved by the Brazilian Securities and Exchange Commission (“CVM”). The information herein should be read together with our financial information for the nine-month period ended September 30, 2018 filed with the CVM and submitted to the U.S. Securities and Exchange Commission (“SEC”).

OPERATING AND FINANCIAL HIGHLIGHTS

Net revenue: Top line was up 5.8% in 3Q18, as the volume drop of 2.4% was more than offset by the growth in net revenue per hectoliter (NR/hl) of 8.3%. Net revenue was up across all of our operations - Brazil (+2.1%), Central America and the Caribbean (CAC) (+16.5%), Latin America South (LAS)1 (+13.9%) and Canada (+0.4%). In Brazil, volume was down 3.3% and NR/hl rose 5.6%. In CAC, volume and NR/hl grew by 10.3% and 5.7%, respectively. In LAS, volume was down 5.0% and NR/hl rose 19.4%. In Canada, while volume was slightly negative (-0.6%), NR/hl increased by 1.0%. Year to date, on a consolidated basis, net revenue was up 7.6%, with volume declining by 2.1% and NR/hl growing by 9.8%.

Cost of goods sold (COGS): In 3Q18, COGS and cash COGS (excluding depreciation and amortization) were up 2.2% and 2.1%, respectively. On a per hectoliter basis, COGS (COGS/hl) grew by 4.7% while cash COGS was up 4.6%, mainly due to inflationary pressures in Argentina and higher commodities prices, partially offset by favorable FX in LAS and Brazil. In 9M18, COGS and cash COGS rose 2.9% and 2.6%, respectively and, on a per hectoliter basis, COGS grew by 5.1% while cash COGS was up 4.7%.

Selling, general & administrative (SG&A) expenses: In 3Q18, SG&A and cash SG&A (excluding depreciation and amortization) rose 4.5% and 4.1%, respectively, below our weighted average inflation (approximately 7.6%). This is mostly due to the phasing of marketing expenses, which showed a higher concentration in 2Q18 due to the 2018 FIFA World Cup RussiaTM. Year to date, SG&A and cash SG&A grew by 7.0% and 6.9%, respectively.

EBITDA, gross margin and EBITDA margin: In 3Q18, EBITDA reached R$ 4,450.8 million, with an organic growth of 9.0%, gross margin of 60.5% (+130bps) and EBITDA margin of 40.2% (+120bps). In 9M18, EBITDA was R$ 13,623.5 million (+11.7%, organically), with gross margin and EBITDA margin amounting 61.4% (+180bps) and 39.8% (+150bps), respectively. Both in 3Q18 and 9M18 reported EBITDA includes the negative impact of R$ 573.8 million resulting from Hyperinflation Accounting in Argentina, as detailed on page 21.

Normalized profit and EPS: Normalized profit was R$ 2,907.4 million in 3Q18, 10.2% lower than in 3Q17, as EBITDA organic growth was impacted by the adverse effects of Hyperinflation Accounting in Argentina, as detailed on page 21. Normalized EPS in the quarter was R$ 0.18 (-8.2%). In 9M18, normalized profit increased by 2.2%, reaching R$ 7,866.8 million, with normalized EPS of R$ 0.49 (+3.7%). Without Hyperinflation Accounting impacts, 3Q18 and 9M18 EPS would correspond to R$ 0.20 (+0.6%) and R$ 0.50 (+7.4%), respectively.

Cash generation and CAPEX: Cash flow from operating activities in 3Q18 was R$ 5,257.3 million (+15.2%) and CAPEX reached R$ 940.4 million (+29.2%). In 9M18, cash flow from operating activities totaled R$ 9,125.0 million (+1.7%) and CAPEX rose 8.8% to R$ 2,218.2 million.

Payout and financial discipline: Year to date, we have paid/announced R$ 3.6 billion in dividends. As of September 30, 2018, our net cash position was R$ 7,234.3 million.

Financial highlights - Ambev consolidated					% As		%						% As		%
R$ million	3Q17		3Q18		Reported		Organic		YTD17		YTD18		Reported		Organic
Volume ('000 hl)	38,433.5		37,494.5		-2.4	%	-2.4	%	115,398.9		112,961.1		-2.1	%	-2.1	%
Net revenue	11,362.3		11,063.7		-2.6	%	5.8	%	32,872.1		34,213.5		4.1	%	7.6	%
Gross profit	6,880.2		6,693.0		-2.7	%	8.1	%	19,818.6		20,994.8		5.9	%	10.7	%
% Gross margin	60.6	%	60.5	%	-10 bps		130 bps		60.3	%	61.4	%	110 bps		180 bps
Normalized EBITDA	4,552.0		4,450.8		-2.2	%	9.0	%	12,851.5		13,623.5		6.0	%	11.7	%
% Normalized EBITDA margin	40.1	%	40.2	%	10 bps		120 bps		39.1	%	39.8	%	70 bps		150 bps
Profit	136.5		2,892.1		nm				4,551.2		7,913.9		73.9	%
Normalized profit	3,236.6		2,907.4		-10.2	%			7,694.1		7,866.8		2.2	%
EPS (R$/shares)	0.00		0.18		nm				0.27		0.49		81.8	%
Normalized EPS (R$/shares)	0.20		0.18		-8.2	%			0.47		0.49		3.7	%

Note: Earnings per share calculation is based on outstanding shares (total existing shares excluding shares held in treasury).

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1 Starting in 3Q18, reported numbers are presented applying Hyperinflation Accounting for our Argentinean subsidiaries, in accordance to IAS 29, as detailed on Section “Financial Reporting in Hyperinflationary Economies - Argentina” (page 21). Organic growth continues to be presented applying constant year-over-year exchange rates to exclude the impact of the movement of foreign exchange rates, without any impact resulting from Hyperinflation Accounting. 

Contact: 

Investor Relations - Ambev S.A. 
ir@ambev.com.br / elisa.lima@ambev.com.br 
+55 11 2122 1414