Brazilian beer giant,
Companhia de Bebidas das America
), also known as
, reported second-quarter 2012 normalized earnings of R$0.63 per
share, improving 6.8% from the prior-year quarter's earnings of
R$0.59 a share. The results were primarily driven by solid top-line
However, in the U.S. dollar terms, earnings fell 21.6% to 29
cents per share from 37 cents earned in the year-ago quarter and
missed the Zacks Consensus Estimate of 35 cents.
Quarter in Detail
Net sales for the quarter increased 10.4% to R$6,825.4 million
compared with R$5,811.6 million in the prior-year quarter. The
increase in revenues was primarily attributable to a 2.4% growth in
organic volumes across all regions.
Gross profit escalated 12.7% to R$4,525.0 million compared with
R$3,793.0 million in the year-ago quarter. Gross profit margin
expanded 140 basis points (bps) organically to 66.3%, primarily
driven by margin expansion at all other business units.
Selling, marketing and administrative expenses (SG&A)
increased 18.7% year over year to R$2,003.5 million as a result of
general inflation along with higher administrative and distribution
expenses in Brazil and LAS. During the quarter, AmBev's normalized
EBITDA hiked 9.3% year over year to R$2,975.7 million, while
normalized EBITDA margin contracted 40 basis points to 43.6%.
AmBev ended the quarter with cash and cash equivalents of
R$4,891.1 million and shareholders' equity of R$26,728.0 million.
During the quarter, the company paid a dividend and IOC of R$2.5
billion to its shareholders. Further, AmBev invested $628.2 million
during the reported quarter to improvise its supply and warehousing
facility in Brazil.
We believe that AmBev has reasons to worry following the
decision of the Brazilian Federal government to raise taxes on beer
and soft drinks. This tax hike threatens to limit the company's
future growth trajectory and might also adversely affect its top
and bottom lines. To shield against the higher taxes, the company
might inflate its prices in an effort to somewhat offset the
negative impact, which however might result in lower volumes. As a
result, the net income is likely to witness a fall.
Moreover, intense competition from global and regional players,
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
Sell rating. The company retains a long-term 'Underperform'
AMBEV-PR ADR (ABV): Free Stock Analysis Report
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