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.
) 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
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
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