Brazilian beer giant,
Companhia de Bebidas das America
), also known as
, reported robust third-quarter 2012 normalized earnings of
R$0.81 per share, substantially beating the prior-year quarter's
earnings of R$0.53 a share by 52.6%. The results were primarily
driven by solid top-line performance, improved margins and lower
Moreover, in the U.S. dollar terms, earnings came at 39 cents
per share which beat the Zacks Consensus Estimate of 35
Quarter in Detail
Reported net sales increased 26.1% to R$8.036 billion compared
with R$6.375 billion in the prior-year quarter. The increase in
revenues was primarily attributable to a marginal hike of 1.5% in
volumes across all regions. On an organic basis, total revenue
jumped 15.1% from prior-year quarter despite a 0.5% decline in
overall organic volume.
In spite of the input cost pressure, organic gross profit
escalated 17.1% to R$5.414 billion compared with R$4.244 billion
in the year-ago quarter. Gross profit margin expanded 120 basis
points (bps) organically to 67.4%, primarily driven by margin
expansion at every business units.
Selling, marketing and administrative expenses (SG&A)
increased 16.2% year over year as a result of higher
administrative and distribution expenses in Brazil. During the
quarter, AmBev's normalized EBITDA climbed 19.2% year over year
to R$3.802 billion, while normalized EBITDA margin expanded 160
basis points to 47.3%.
AmBev ended the quarter with cash and cash equivalents of
R$4.531 billion and shareholders' equity of R$27.496 billion. The
company generated R$4.366 billion of cash from its operating
activities. Moreover, the company paid a dividend and IOC of
R$1.2 billion to its shareholders during the quarter. Further, it
invested $0.966 billion during the reported quarter to improvise
its supply and warehousing facility in Brazil.
We have maintained our long-term 'Underperform' recommendation
on AmBev, anticipating negative impact on its future financial
performance due to Brazilian government's decision to raise taxes
on beer. To shield against the higher taxes, AmBev might inflate
its prices in order to somewhat offset the negative impact, which
may result in lower volumes. Consequently, the net income may be
Moreover, intense competition from global and regional
players, such as
Fomento Economico Mexicano S.A.
Molson Coors Brewing Company
), coupled with the seasonal nature of its business, may
undermine AmBev's operating performance in the future.
Currently, AmBev holds a Zacks #4 Rank, implying a short-term
AMBEV-PR ADR (ABV): Free Stock Analysis
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