Earnings

Stock’s Earnings in Focus: Ambev SA (ADR) (NYSE:ABEV)

Ambev SA (ADR) (NYSE:ABEV) on July 29, 2016 announced its results for the 2016 second quarter. The following operating and financial information, unless otherwise indicated, is presented in nominal Reais and prepared according to International Financial Reporting Standards (IFRS), and should be read together with our quarterly financial information for the six-month period ended June 30, 2016 filed with the CVM and submitted to the SEC.

Top line performance: Net revenue (NR) was up 3.2% in the quarter, explained by growth in all of our operations (Brazil +1.7%, CAC +19.9%, LAS +2.6% and Canada +1.6%). Volumes were down 6.7% mainly driven by a decline in Brazil and Argentina as economic and political volatility in these countries continued to put pressure on beverage consumption. This decline was more than offset by a solid net revenue per hectoliter (NR/hl) increase of 10.6%, due to our revenue management initiatives and premium mix in most of the countries we operate.

Cost of Goods Sold (COGS): Our COGS increased by 0.6% while, on a per hectoliter basis, the increase was 7.8% mainly driven by inflationary pressures and unfavorable currency movements, partly offset, among other factors, by FX and commodity hedges, the growth of 300ml returnable glass bottles and the benefit of procurement savings.

Selling, General & Administrative (SG&A) expenses: SG&A (excluding depreciation and amortization) was up 7.8%, below our weighted average inflation (around 9.3%), mainly due to efficiency gains in sales & marketing and cost savings in administrative expenses, while distribution expenses grew in line with inflation.

EBITDA, Gross margin and EBITDA margin: Normalized EBITDA reached R$ 4,204.6 million (+1.8%) in 2Q16 with gross margin expansion of 100bps and EBITDA margin compression of 60bps.

Normalized Net Profit and EPS: Normalized Net Profit was R$ 2,194.7 million (-22.4%) in the quarter due to a higher net finance expense mainly driven by (i) higher carry cost of our COGS hedges, (ii) mark to market losses of CAPEX hedges, (iii) a non cash impact driven by accretion expense related to our investment in Dominican Republic (around R$ 150 million in the quarter) and (iv) a non cash impact due to foreign exchange translation losses on intercompany loans (around R$ 90 million in the quarter). Effective tax rate was 9.4% versus 6.1% last year. Normalized EPS was R$ 0.13 in 2Q16.

Operating Cash Generation and CAPEX: In the quarter, cash generated from operations was R$ 2.5 billion while CAPEX reached R$ 1.1 billion. Year to date, we generated R$ 4.7 billion in cash from operations while CAPEX reached R$ 1.8 billion. In Brazil, CAPEX year to date is R$ 930 million.

Pay-out and Financial discipline: In 2Q16, we announced a R$ 2 billion dividend to be paid as from July 29th, 2016. Year to date, we have paid/announced R$ 4.2 billion in interest on capital and dividends. As of June 30th, 2016, our net cash position was R$ 2,182.9 million.

Shares of Ambev SA (ADR) (NYSE:ABEV) fell -1.53% to reach at $5.78 during the course of session. The company has experienced volume of 33.97M shares while on average the company has a capacity of trading 10.30M shares. The stock holds the market capitalization of $92.26B along with 15.69M outstanding shares. The stock traded in the price range of $5.73 – $5.84 for the last trading session. For the stock price target value has been calculated at $6.06 based on calls of 4 experts. Stock’s minimum price target estimates has been figured out at $4.67 while the maximum price target forecast is established at $8.00.

As of current trade, Ambev SA (ADR) (NYSE:ABEV) has shown weekly downbeat performance of -2.20%. Its six months performance indicated a bullish movement while its yearly performance reflected a positive trend of 3.40%. Year-to-date (YTD) performance of the stock illustrate upbeat trend of 29.60%. Shares of Ambev SA (ADR) (NYSE:ABEV) currently have an ABR of 2.25, derived from a total of 2 opinions. The company’s price sits 3.63% above from its 50-day moving average of $5.69 and 14.80% above from the stock’s 200-day moving average of $5.15. The company has Relative Strength Index (RSI 14) of 51.28 along with Average True Range (ATR 14) of 0.12. Its weekly and monthly volatility is 1.48%, 1.64% respectively.

Ambev SA (ADR) (NYSE:ABEV)’s price to book ratio for most recent quarter is 6.28.

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