Ambev’s Earnings Call: Growth Amidst Challenges

Ambev SA ((ABEV)) has held its Q4 earnings call. Read on for the main highlights of the call.

Ambev’s recent earnings call painted a picture of robust digital transformation and EBITDA growth, underscored by significant free cash flow and strategic returns to shareholders. Despite these positive strides, the company faces challenges in Argentina and tax headwinds in Brazil, alongside pressures from brand underperformance and rising costs.

Digital Transformation Success

Ambev’s B2B platform, BEES, has been a cornerstone of its digital transformation, with over 88% of gross revenues transacted through the platform. The company reported 1.3 million monthly active buyers, marking a 14% increase from the previous year, highlighting the platform’s growing influence and success.

EBITDA Growth and Margin Expansion

The company achieved an impressive 11.4% organic growth in consolidated EBITDA, with margin expansion across all business units. This marks the second consecutive year of double-digit growth in both gross and EBITDA margins, showcasing Ambev’s operational efficiency and strategic focus.

Free Cash Flow and Shareholder Returns

Ambev reported a 37% increase in free cash flow to equity, generating nearly R$18 billion. The company has executed about 45% of its share buyback program and approved intermediary dividends of around R$2 billion, reflecting a strong commitment to returning value to shareholders.

Brazil Market Performance

In Brazil, beer volumes saw a modest increase of 0.6%, driven by market share gains. Non-alcoholic beer and NAB volumes also rose by 4.1%, with Guarana Antarctica leading the charge, indicating a healthy market performance.

Strong Performance in Dominican Republic and Canada

The Dominican Republic achieved mid-single-digit volume growth, reaching all-time high volumes for the Presidente family. In Canada, mega brands experienced low-single-digit volume growth, contributing positively to the company’s overall performance.

Argentina’s Challenging Environment

The beer industry in Argentina faced a decline of low 20s due to a challenging consumer environment. Despite this, Ambev managed to maintain stable market share, demonstrating resilience in a tough market.

Impact of Tax Headwinds in Brazil

Ambev faced significant tax headwinds in Brazil, resulting in a nearly R$3.5 billion negative impact due to reduced tax deductibility. This contributed to a 2.3% decline in normalized profit, highlighting the financial challenges in the region.

Skol Brand Underperformance

The Skol brand experienced a decline in volumes, posing a priority for improvement in 2025. This underperformance impacted the overall portfolio, despite Skol being one of Ambev’s core brands.

Cost Pressures and FX Challenges

Ambev anticipates cash COGS per hectoliter in Brazil beer to increase between 5.5% and 8.5% in 2025, driven by the depreciation of the Brazilian real and rising aluminum prices, indicating ongoing cost pressures.

Forward-Looking Guidance

Looking ahead, Ambev’s CEO Carlos Lisboa shared optimistic forward-looking guidance. The company reported a 37% growth in consolidated EBITDA over the past five years and nearly R$65 billion in free cash flow to equity. For 2024, volumes excluding Argentina increased by 1.4%, with mega brands seeing a 7.6% growth. Digital initiatives continue to progress, with BEES achieving a 14% increase in monthly active buyers and Zé Delivery in Brazil fulfilling over 66 million orders, marking a 10% growth compared to 2023. The company remains focused on margin expansion despite expected cost headwinds in 2025.

In conclusion, Ambev’s earnings call highlighted a strong performance in digital transformation and EBITDA growth, with significant shareholder returns. However, challenges in Argentina, tax headwinds in Brazil, and cost pressures remain areas of concern. The company’s forward-looking guidance reflects a strategic focus on growth and resilience in the face of these challenges.