Ambev Q2 2025 Earnings Report

Ambev EPS Results

• Actual EPS: $0.03
• Consensus EPS: $0.03
• Beat/Miss: Met Expectations
• One Year Ago EPS: N/A

Ambev Revenue Results

• Actual Revenue: $3.59 billion
• Expected Revenue: $21.84 billion
• Beat/Miss: Missed by -$18.26 billion
• YoY Revenue Growth: N/A

Ambev Announcement Details

• Quarter: Q2 2025
• Date: 7/31/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 11:30AM ET

Ambev (NYSE:ABEV), through its subsidiaries, engages in the production, distribution, and sale of beer, draft beer, carbonated soft drinks, malt and food, other alcoholic beverages, and non-alcoholic and non-carbonated products in Brazil, Central America and Caribbean, Latin America South, and Canada. It offers beer primarily under the Skol, Brahma, Antarctica, Brahva, Budweiser, Bud Light, Beck, Leffe, Hoegaarden, Balboa ICE, Balboa, Atlas Golden Light, Atlas, Bucanero, Cristal, Mayabe, Presidente, Presidente Light, Brahma Light, Bohemia, The One, Corona, Modelo Especial, Stella Artois, Quilmes Clásica, Paceña, Taquiña, Huari, Becker, Cusqueña, Michelob Ultra, Busch, Pilsen, Ouro Fino, Bud 66, Banks, Deputy, Patricia, Labatt Blue, Alexander Keith's, and Kokanee brands. The company also provides carbonated soft drinks, bottled water, isotonic beverages, energy drinks, coconut water, powdered and natural juices, and ready-to-drink teas under the Guaraná Antarctica, Gatorade, H2OH!, Pepsi Black, Lipton Iced Tea, Fusion, Pepsi-Cola, Canada Dry, Squirt, Red Rock, Red Bull, Seven Up, Nutrl, Bud Light Seltzer, Palm Bay, and Mike's brands. It offers its products through a network of third-party distributors and a direct distribution system. The company was founded in 1885 and is headquartered in São Paulo, Brazil. Ambev S.A. is a subsidiary of Interbrew International B.V.

Ambev Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: This quarter organic EBITDA rose high-single digits with 110 bps margin expansion despite soft volumes.
• Positive Sentiment: Year-to-date, top-line grew mid-single digits, EBITDA grew double digits with 160 bps margin expansion, EPS +6.5%, operating cash flow +4%, and BRL 6 billion in interim dividends declared.
• Neutral Sentiment: Premium and super-premium segments delivered low-teens growth and share gains, balanced choice grew low-20s, while core volumes declined due to adverse weather and revenue management.
• Positive Sentiment: The digital ecosystem saw marketplace GMV +90% with 3P exceeding 1P, Z Delivery GMV +7% (AOV +11%), and e-commerce driven by Gen Z and millennials (~80% of buyers).
• Positive Sentiment: Cost efficiency initiatives saved over $100 million in the quarter, offsetting non-commodity cost inflation in SG&A and COGS, and delivering 2.2 times operational leverage.

Presentation

[Operator]

We would like to inform you that this event is being recorded and all participants will be in a listen only mode during the company's presentation. After Ambev's remarks are completed, there will be a Q and A session, during which we kindly ask that each participating sell side analyst asks only one question. Before proceeding, let me mention that forward looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward looking statements are based on the beliefs and assumptions of Ambev's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future.

[Operator]

Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Ambev and could cause results to differ materially from those expressed in such forward looking statements. I would also like to remind everyone that, as usual, the percentage changes that will be discussed during today's call are both organic and normalized in nature. And unless otherwise stated, percentage changes refer to comparisons with second quarter twenty twenty four results. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of Ambev's normal activities. As normalized figures are non GAAP measures, the company discloses the consolidated profit, EPS, operating profit and EBITDA on a fully reported basis in the earnings release.

[Operator]

Now I will turn the conference over to Mr. Carlos Lisboa. Mr. Lisboa, you may begin your conference.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Good afternoon, everyone. Thank you for joining our second quarter twenty twenty five earnings call. It is a pleasure to be here with you today. On our last call, I highlighted that Q2 would be a decisive moment, almost like a transition quarter as we prepare our business to continue to deliver another year of growth with value creation. And I'm glad that our brands demonstrated their strength and supported the results we achieved this quarter, positioning us well for the remainder of the year, given the anticipated acceleration in costs.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

As leaders in our category, I am confident that we made the right decisions for our business, executing with discipline our growth strategy with special focus on revenue and cost management. This drove a high single digit organic EBITDA increase with 110 basis points of margin expansion, despite soft interest volumes in several markets, mostly due to adverse weather conditions. But rather than focus on only one single quarter, like in soccer, halftime is a good moment to step back and assess our year to date performance. Therefore, important to highlight that our brands continue to improve equity. Top line grew mid single digits.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

EBITDA grew double digits with 160 basis points of margin expansion. EPS grew 6.5% and cash flow from operating activities remained resilient, growing 4% despite our working capital dynamics. Also given our year to date performance, the Board of Directors has approved another intermediary dividend payout of BRL2 billion, totaling BRL6 billion declared this year. The foundation for our performance is based on the execution of our growth strategy. Starting on pillar one, lead and grow the category.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

This quarter reinforced our confidence in the choices we made across our portfolio. Market share pressure linked to revenue management initiatives was softened by the strength of our brands built through a consistent execution and investments over the last years. And even in the face of softer industries, the underlying performance of our strategic priorities continue to deliver solid results. Our premium and super premium brands delivered low teens growth, expanding seven out of top 10 markets of Ambev. The balanced choice portfolio maintained strong growth momentum, expanding the low 20s, addressing evolving consumer preferences and needs.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Activations on platforms like FIFA Club, World Cup and Holungaho yield positive results. Our brands stood out as the most recognized in these events, generating engagement and strengthening brand equity. As for core segment, while brand equity remains stable, volumes declined given its highest sensitivity to industry environment and to our revenue management decisions. As for Pillar two, digitize and monetize the ecosystem. This marketplace continued its momentum with GMV growing in the 90s and reaching an annualized amount of billion dollars led by partnerships such as Nestle and L'Oreal.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

On the direct to consumer front, Z Delivery achieved a 7% increase in GMV despite a soft industry environment supported by 11% rise in average order value. Additionally, our digital platforms are further strengthening our core business through better services to customers and also consumers, benefits that may not always be visible externally. Over the years, our customers have been spending more time with us. In Brazil, for instance, we now engage for nearly forty minutes per week through and also in person visits, fivefold of what we had pre BIS. This deeper and more frequent engagement has allowed us to set missions to our business developers to focus on sell out rather than sell in.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

And as a consequence, we continue to evolve on number of brands and SKUs per pork growing 3.4% this year only and to better manage price and promotions driving efficiencies to our net revenue per hectoliter. As a result of a higher customization in a more data driven approach, NPS of customers continue to improve achieving all time high levels close to 70 points this quarter. As for DTC, today e commerce is the fastest growing channel for Ambev and ZE is leading that growth. However, it is not just about growth, but about who is driving it. Gen Z LDA and millennials represent nearly 80% of ZEZ buyers, well above their share in the population.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Moreover, ZEZ has become a powerful engagement platform for the category lovers. According to our internal data, ZEZ consumers have a 47% higher frequency of beer consumption compared to the category average. Therefore, being close to them means being close to the trends and that drives our portfolio forward. It is not a coincidence, but a consequence that both premium and balanced choice brands have a higher mix on the platform. For example, in H1, 14% of ZE users added at least one product from our balanced choice portfolio in their baskets, which grew almost twice as fast on ZE compared to the total business and reached 3.6% of total platform sales.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

And on pillar three, optimize our business. Some of you have probably heard me saying this before, muscles have memory. Our disciplined focus on cost efficiency more than offset non commodity cost inflation, representing a saving of over million dollars in the quarter. In SG and A, we offset the impact of lower scale from volumes in distribution expenses. Overall, these efforts were essential to achieve an operational leverage of 2.2 times in the quarter.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Moving to the performance of our business units, consistent with the first quarter, all BUs delivered EBITDA growth and four of them expanded margins as we continue implementing our growth strategy with discipline across our footprint. In this quarter, our diversified geographic footprint contributed in a meaningful way. Now let's look at the commercial highlights of our main markets. In Brazil Beer, our volumes declined 9%, mostly driven by unfavorable weather with 65 colder days compared to last year. June represented over 60% of the quarter's volume impact with critical regions for the category facing two four degrees Celsius lower temperature versus last year.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Even so, brand equity improved again in this quarter, softening the market share impact from our revenue management decisions to a low single digit decline. Our premium and super premium brands grew mid teens gaining market share in the segment. Our both core brands sustained almost 30% of our volumes and maintain our leadership in the segment. As for the core segment, it declined by low teens given its higher sensitivity to industry performance and to our revenue management decisions. And lastly, in our balanced choice portfolio, Stella Pure Gold more than doubled its volumes.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Michelob Ultra grew over 60 and no alcoholic beers grew mid teens. As a matter of fact, these brands represent around 2.5% of our volumes in H1, up from 1.4% last year. In Brazil, volumes were slightly posted in the quarter despite mid teens decline in June. Top line performance was driven by healthy net revenue per hectoliter as our brands showed resilience gaining market share according to our estimates and the non sugar portfolio growing above 30%. Moving to Argentina, volume performance presented another sequential improvement with beer volumes returning to growth after seven quarters despite underperforming the industry as a result of our revenue management choices.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

The premium segment grew double digits while the health of our mega brands improved once again. Overall, we continue posted on the recovery of the category in the country. In The Dominican Republic, the consumption environment presented a sequential improvement. In this environment, beer gained share of throat as our main brands remain healthy with President family gaining brand equity in the quarter. Lastly, in Canada, volumes grew 0.8% more than offsetting a soft industry affected by colder temperatures.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Our performance was mainly driven by one, the Ontario industry that continues to grow given the route to market change that took place last year. Two, the non alcoholic beer industry that expanded mid teens with our brands outperforming by growing mid-20s and now representing almost 5% of our volumes. And lastly, the execution for our strategy and investments behind our brands, resulting in the fastest growing beer brands in the country with share of throat and market share gains according to our estimates. All in all, we delivered the best EBITDA growth for the second quarter in years. Now, let's move on to our financial performance. Florey, over to you.

[Guilherme Fleury de Figueiredo Ferraz Parolari, Chief Financial, Investor Relations & Shared Services Officer at Ambev]

Thank you, Lisboa, and hello, everyone. Today, I'll cover three topics. First, cost and expenses management. Second, net income performance. And third, cash flow generation.

[Guilherme Fleury de Figueiredo Ferraz Parolari, Chief Financial, Investor Relations & Shared Services Officer at Ambev]

So let's get started. As Lisboa mentioned, quarter two was a transition quarter. We were expecting cost pressures, especially in Brazil, and we chose to act, protecting margins by controlling what we can. That meant disciplined resource allocation, proactive cost management and targeted SG and A initiatives. The execution of our strategy is already making a difference.

[Guilherme Fleury de Figueiredo Ferraz Parolari, Chief Financial, Investor Relations & Shared Services Officer at Ambev]

Let me walk you through one example in cost of goods sold in Brazil. FX and commodities account for approximately 45% our cash COGS. Most of that is hedged, which means the impact was largely locked in before the start of the year. But the remaining 55% is where we can act. And that's exactly what we've done.

[Guilherme Fleury de Figueiredo Ferraz Parolari, Chief Financial, Investor Relations & Shared Services Officer at Ambev]

We've been focused on curbing cost escalation where we have control, rationalizing our operations. In 2025 alone, we've reduced the number of SKUs by around 10%, eliminating low churn items, therefore, increasing the productivity of our breweries and distribution centers. To put it simply, this SKU rationalization means fewer line changeovers at our breweries and better productivity, helping our cost performance in Brazil Beer to be within our guidance for the full year. Before we move on to net income, I would like to remind everyone that in Argentina, our results under IFRS, including EBITDA, were significantly affected by the Argentinean peso devaluation of 12% in the quarter, with the currency impacts of the year to date being carried out in the second quarter. Now, moving on to net income and starting with net financial results.

[Guilherme Fleury de Figueiredo Ferraz Parolari, Chief Financial, Investor Relations & Shared Services Officer at Ambev]

The increase in financial expenses continued to have the same drivers of the first quarter. One, FX carry cost in Brazil coming from the interest rate differential between Brazil and The U. S. Two, FX losses related to the dollar purchase in Bolivia. And three, a non cash impact linked to depreciation of the BRL during the quarter from hard currency cash balances translation.

[Guilherme Fleury de Figueiredo Ferraz Parolari, Chief Financial, Investor Relations & Shared Services Officer at Ambev]

And for income tax, our effective tax rate for the quarter was 18.4% compared to 28.6% in 2024. The year over year decrease is mostly driven by first, a non recurrent event in the second quarter of twenty twenty four related to accrued withholding taxes over undistributed profits from LABA coming from the depreciation of the BRL against the Canadian dollar during that period in accordance with IAS 12 accounting standards. Second, the effect of income tax exemption over part of our state VAT government grants, following favorable court ruling obtained in the second half of last year. And lastly, a favorable country mix of earnings this quarter. On a year to date basis, our effective tax rate remains at the same level as prior year.

[Guilherme Fleury de Figueiredo Ferraz Parolari, Chief Financial, Investor Relations & Shared Services Officer at Ambev]

In the quarter, the resilient operational performance and disciplined financial management led to a net income of BRL2.8 billion, a 15% improvement versus last year. Last topic, cash flow generation. In our half time review, cash flow from operating activities grew 4% led by the EBITDA growth. In the quarter, our cash flow from operating activities reached BRL3 billion. The 9.2% decline versus last year reflects the volume dynamic in the quarter with lower sales tax payables, partially offset by better receivables and inventories.

[Guilherme Fleury de Figueiredo Ferraz Parolari, Chief Financial, Investor Relations & Shared Services Officer at Ambev]

Cash flow from investing activities was BRL1 billion negative, driven mainly by CapEx investments during the quarter, similar to the investment of last year. And cash flow from financing activities reached billion negative, primarily due to the payment of intermediary dividends in April, the repurchase of shares according to our buyback program and Bolivia fees to purchase dollars that, as I mentioned, impacted the financial results. Before I hand it back to Lisboa, I would like to reinforce the message that we remain focused on delivering sustainable value creation to our shareholders through a diligence execution of our capital allocation priorities. Thank you for your time today. And back to you, Lisboa.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Thank you, Florey. Before we conclude, I would like to offer a few closing thoughts. As I noted earlier, reaching the half time give us an opportunity to assess how we are performing against the mission I set forth when I first came on board. Firstly, avoid disruption, on track. And in fact, the most recent results of our employee engagement survey shows improvement across all functions, reinforcing the belief in our future.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Secondly, keep momentum on track. So far in the year, we have achieved better brand equity, top and bottom line growth and also EBITDA margin expansion. Lastly, build a stronger version of our company on track. I believe that momentum invites more momentum. Our performance in first half position us well to second half.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Our roadmap to success shall be paved based on a consistent performance of our business. And before finishing, I want to take a moment to recognize our team who made again a huge difference in our quarter performance, over delivering on everything we have under our control. Thank you very much. And now let's go to the second half when our brands will continue to be part of cultural moments assuring presence not only on the tables, but also in the hearts of our consumers. Thank you for your attention.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

And now I will hand it back to the operator for the

[Operator]

We will now begin the Q and A session. Q please click lower hand button. We kindly reinforce our request that each participant asks only a single question. Our first question comes from Isabella Simonato with Bank of America. You can open your microphone.

[Isabella Simonato Alonso, Managing Director at Bank of America Merrill Lynch]

Thank you. Good afternoon, everyone. Hi, Carlos, Guilherme. I have two questions, sort of related. First of all, regarding the top line and the volume performance, right, in Brazil.

[Isabella Simonato Alonso, Managing Director at Bank of America Merrill Lynch]

I understand, the reasons you mentioned to drive this weakness, but it seems, a much steeper, right, change year on year versus events that we've seen in the past. Right? If I'm not mistaken, this is the largest year on year volume contraction we've seen with the exception of what happened during the pandemic. So I even with a bad weather, right, or in or you guys leading price increases that were not necessarily followed by competition, What is your read, right, on the size of the decline? And in that sense, what makes you confident than the second half?

[Isabella Simonato Alonso, Managing Director at Bank of America Merrill Lynch]

And ABI also mentioned that the second half of the year will show a significant recovery or will show an improvement. I think that's what we wanted to better understand. And the second point, you guys showed, I think a much better than expected margin performance despite this more limited dilution, right? And, you guys mentioned some of the initiatives, but I wonder if you could elaborate a little bit more on those things you can control, right? If the bulk of what you plan to do is done in this quarter or if you guys see more room to continue to cut costs and have a more efficient portfolio.

[Isabella Simonato Alonso, Managing Director at Bank of America Merrill Lynch]

I mean, I think we wanted to get a better sense of what we can expect going forward in terms of initiatives and where we are right in this pipeline? Thank you.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Hello, everyone. Thanks again for joining the call. And hi, Isabella, nice to talk to you. Super clear your question and I fully understand the point. So I'm going to answer the first and hand over to to Florif for the second one, okay?

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

So I think it's important to step back a little bit and first and foremost, understand what happened with the industry in second quarter, okay? We estimate a mid single digit sellout industry decline, which is pretty much in line with news estimations, right? And this was pretty much driven, as I mentioned during the intro, as very adverse weather during this period. Okay? So I think the first message from my side is there is no structural change in consumer demand in Brazil.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

70% of the industry declined based on our industry models is explained by the weather. And the reason why is the following. We faced 65 colder days versus last year with a high concentration in one month. June was a big outlier, Isabella, with a double digit decline, mid teens decline, right, just in this month, impacting, important regions for the industry, which represent 60% of the industry volume. These regions saw a temperature variation, right, of two to four lower, right, degrees Celsius, which has a very important impact when you assume the correlation of temperature into, volumes, right, in this month.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

As a matter of comparison, it's good to have the two business in our hands, right, the alcoholic and non alcoholic business. In our CSD business, despite slightly growing volumes in the quarter, and by the way, we were growing a very healthy way in April and May. In June, we also suffered, right, the same level of impact, right, due to the adverse weather that I mentioned before, right. Additionally, the remainder, 30% of the industry impact comes mostly from inflation, right? Especially impacting essential goods, which came, right, inflation came above CPI, right, and continues to put some sort of pressure in disposable income for Brazilian consumers.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

It's also important to consider another aspect from an industry selling standpoint performance. The performance was also impacted by two less business days in the period, right? Now moving to our selling performance, right? First and foremost, as I mentioned before, three fourth of the volume impact was driven by industry, pretty much, right, explained by the weather, right? Additionally, the one fourth of the volume performance explained mainly by a wider consumer price relativity caused by something that we anticipated to you during the, you know, our first call announcement, right, our revenue management decisions.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

And this resulted in a low single digit market share loss according to our estimates and also pretty in line with new satellite data. Right? Regarding the share performance, brand equity continued to improve, softening the market share impact when we compare to our historical market share models. Second point, premium grew mid teens and gained share again in the segment. The core decline came pretty much in line with low teens due to segment higher sensitivity to the adverse weather conditions.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

And also, it's important to mention, the core side of the segment relies more in out of home consumption occasions, which were more impacted by adverse weather. Right? And these brands are also more sensitive to revenue management decisions and greater price elasticity. Okay? And it's important to reinforce as well that our market share over index in the core performance vis a vis the overall performance of our business.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

All in all, looking ahead, without going into details about our quarter three performance, what I can say is the following. July doesn't look at all to June in terms of weather conditions, which means that we do see a significant improvement throughout the month, right, despite the fact that the beginning of the month was also impacted by residual adverse, weather. And the second comment that I have is the following. We are also observing initial readings on consumer price relativity starting to ease improving along the month. Okay?

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Beyond July, we remain confident. No fundamental of the fundamentals of the beer industry impacted in the quarter, and we continue to see clear opportunities for us in terms of pickup in the future. And also, super important to emphasize that we feel today, our company, stronger, right, as a whole, better prepare for the year to come than we were in the beginning of the year since our growth algorithm is prepare, right, set for the acceleration of cost that we already observed impacting the second quarter.

[Guilherme Fleury de Figueiredo Ferraz Parolari, Chief Financial, Investor Relations & Shared Services Officer at Ambev]

And, miss Boy, if I may, Isabella, Fleury here. Let me just start by saying that our approach remains very focused when you think about cost. We want to optimize where we control. And important to remember that while preserving the commercial leverage, as miss Boa mentioned, to drive top line and brand equity. Over the years, we know that cost of food sold was a main source of margin pressure, mainly coming from FX and commodities.

[Guilherme Fleury de Figueiredo Ferraz Parolari, Chief Financial, Investor Relations & Shared Services Officer at Ambev]

And today, I gave you an example of SKU optimization, but there are others. We are very focused also on looking into how to improve distribution expenses, did which impacted positive in the quarter while always looking to optimizing our footprint. And just to remember, you know, we were very known for our zero budget based budget, and that's something that we'll continue to exercise throughout the year. And I would like to say to finalize that the team is very engaged with that.

[Isabella Simonato Alonso, Managing Director at Bank of America Merrill Lynch]

Thank you very much.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

You're welcome.

[Operator]

Our next question comes from Renata Cabral with Citi. You can open your microphone.

[Renata Cabral, VP - Equity Research at Citigroup]

And my question is a follow-up in terms of costs that you just mentioned. Of course, we have the guidance for 2025 in terms of cash COGS. And first half of the year had a lot of volatility in terms of FX, but we have some horizon for what can happen for 2026. My question is if you can give us give us some color on what you see and what you've been done in terms of hedging, specifically for raw material costs.

[Guilherme Fleury de Figueiredo Ferraz Parolari, Chief Financial, Investor Relations & Shared Services Officer at Ambev]

Oh, thank you, Renata. Flori here. So two things with you. We are maintaining our hedging strategy the same as the prior year. So it's a it's a hedging strategy that you look twelve months forward, and it's non speculative.

[Guilherme Fleury de Figueiredo Ferraz Parolari, Chief Financial, Investor Relations & Shared Services Officer at Ambev]

The idea of the hedging for us is to protect the business, number one. Number two is that we are very confident about the cash COGS per hectoliter guidance that we have given to the market, which is Brazil beer excluding non unbaked marketplace to be within the range of five and a half and eight and a half. And even though we look that it's it's still being, like, the lower part of that guidance for now, this is something that we work towards the year, but I cannot give you any guidance on that topic now.

[Operator]

Our next question comes from Leonardo Alincar with XP.

[Leonardo Alencar, Head of Agro, Food & Beverage at XP Investimentos]

I want to dive a little deeper I know it's a sensitive issue. But if you could discuss the dynamics between off trade and on trade talking about this economic situation, which is not really favorable. But then with this weather, adverse weather by the end of the quarter and maybe not so bad, but still a challenge in the beginning of the third quarter. So what can you expect between these channels between on and off trades?

[Leonardo Alencar, Head of Agro, Food & Beverage at XP Investimentos]

And if you could even give a little more detail, more color on pricing between categories. I understand that you've been pushing premium and super premium and you've been gaining market share on that sector. And despite losing volume this quarter, you managed to increase net revenue per per hectoliter. So but then maybe less than expected. So just to understand where we should expect the biggest price increase between categories.

[Leonardo Alencar, Head of Agro, Food & Beverage at XP Investimentos]

That's the two main points I want to understand further. You.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Lomajul. Thank you for the question. It's a very sensitive topic, as you said. So let me elaborate here in order to answer your point. Our revenue management agenda has started in March, right, just after the Carnival, as I mentioned earlier, was built throughout the quarter, right?

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

So we increased prices pretty much in all segments, right, which helped us to achieve the quarter two net revenue per hectoliter performance that you saw, right, in Brazil. And it's always good to emphasize that within the net revenue per hectoliter, the rate is pretty much in line with inflation, right? And we are capturing, right, the premiumization benefits on top of that, right? As for the for the core volumes, right, as I mentioned before, volume volumes declined due to the industry. Right?

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

So pretty much, we saw the the vast majority of the impact in impacting these brands because they are more sensitive to pricing performance. Right? Pricing differences and also to something that you mentioned in terms of channels. Right? The only main difference that we observed within the quarter was related to the on premise side of the industry, because this channel was more impacted by the adverse weather conditions.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Despite that, we brought, as I mentioned before, a positive, a net positive effect from the mix on top of the rate initiatives that took place, right? Looking ahead, net revenue per hectoliter will remain a key lever to support our ambition to continue expanding margins in Brazil, right? And we will always balance the long term pricing aligned with CPI, while managing the short term cost inflation, protecting profitability. And for sure, we'll always have an eye on our portfolio performance of our brands because in the end, everything must work together, right? We must find a perfect balance to make our business reach the ambitions we have for the year.

[Leonardo Alencar, Head of Agro, Food & Beverage at XP Investimentos]

Okay. Thank you, Usbeau.

[Operator]

Our next question comes from Felipe Ucros with Scotiabank. You can open your microphone.

[Felipe Ucros, Director at Scotiabank]

Thanks, operator. Good afternoon. Please welcome, Yuri. Thanks all for the space. Couple of questions on digital and last.

[Felipe Ucros, Director at Scotiabank]

So the first one on digital, the marketplace's GMV accelerated quite a bit this quarter. So so congrats on that. Just wondering if you can give us some some some details on what drove this. You mentioned the new brands that you've been signing on the platform, but perhaps a little more from the strategy perspective. You know, you're you're coming off of a few quarters of consolidating the cost and expense structure of the digital platform.

[Felipe Ucros, Director at Scotiabank]

So just wondering if you started pushing harder on the expansion again, or maybe it's just other factors like the timing of signing new agreements. And then on last, I was a bit surprised about the net revenue per hectoliter in the region. I I imagine this was mostly driven by Argentina based on the comments in the release. But wondering if you can talk to us a little bit about the drivers here, particularly given the environment where the inflation's pretty high. We've already seen a few beverage companies report in Argentina, and they have they have very good performances.

[Felipe Ucros, Director at Scotiabank]

But it seems like everyone in the industry is taking the the foot off the accelerator on on on price mix. So just wondering if you can give us some comments on on what's happening there. Thank you.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Hi, Felipe. Thank you for for your question. So and you are right. One of the aspects that we, make us feel, you know, very positive about our year performance is the the the good balance between the three pillars of our growth strategy being the pillar number two, a very important highlight for the period. Right?

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

And within the pillar number two, marketplace continues to create a pretty interesting revenue stream for Ambev, right, with minimal investments, but with very interesting, right, performance year to date and show even more potential in the future. Right? And and we do see a pretty interesting correlation as well with the level that that our service level to our customers, they continue to rise the NPS, right, in a quarter by quarter view. In terms of marketplace, we grew 90% in the quarter with Brazil growing 100%, right? With Q2 and year to date, it's very interesting at this point, the 3P part of the marketplace surpassing, right, the 1P in terms of GMV.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

The growth was led primarily, as I mentioned before, by partnerships we have within the 3P, like Nestle, L'Oreal and PepsiCo Foods, right? Very interesting to highlight that 80% of our Brazil customers base bought in the marketplace in Q2, up double digits from last year. Also very interesting to highlight that we are increasing the number of SKUs per POC. And on a first half standpoint, this achieved, right, a level of 30% year over year. Right?

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

First half, unbev marketplace is improving in terms of margin as well, right, to something that you also mentioned, right, improving 400 basis points to 15%. And in Brazil, this improvement improvement was even higher to 600 basis points, reaching 17%, Right? So and the the point that I made in my intro, right, this is also allowing us to better understand our customers now with even more touch points, right, having even more, you know, a broader assortment, giving us a lot of data insights, right, enabling us to better attend their needs.

[Guilherme Fleury de Figueiredo Ferraz Parolari, Chief Financial, Investor Relations & Shared Services Officer at Ambev]

And and thank you, Felipe. Talking a little bit about, like this, Bo just mentioned about the marketplace gross margin. So let me tackle, like, Argentina and how we're seeing it. We continue to see a sequential improvement in the market overall. Even though it's dynamic, we see, like, the consumer confidence is gradually improving, and that is what is reflected in our results.

[Guilherme Fleury de Figueiredo Ferraz Parolari, Chief Financial, Investor Relations & Shared Services Officer at Ambev]

In Argentina, since the past the beginning of hyperinflation, we've been very careful on protecting our margins by also looking into cost and looking to the capacity of the consumers to absorb price increase. And that's what we continue to do in that market.

[Operator]

Our next question comes from Nadine Sarwat with Bernstein. You can open your microphone. I believe she dropped the queue, so I'm gonna move on to the next person in line, which is Lucas Ferreira with JPMorgan. You can open your microphone, sir.

[Lucas Ferreira, Executive Director at J.P. Morgan]

Hi, guys. Thanks for the space. My question is on below EBITDA lines, specifically those lines. Lodi, you mentioned about the non derivatives. How to think about those lines?

[Lucas Ferreira, Executive Director at J.P. Morgan]

Because they have been relatively meaningful, right, in the last few quarters, like you mentioned, you explained the reason for that. My question is how think about those lines in the let's say twelve months. Are you guys will you guys continue to push money out of some of these countries you mentioned and have impacts in these operations or this line should go, I don't know nearly zero at some point. Just general terms how to think about your financial expenses line and these volatility we're seeing volatility in the next few quarters? Thank you.

[Guilherme Fleury de Figueiredo Ferraz Parolari, Chief Financial, Investor Relations & Shared Services Officer at Ambev]

Thank you, Lucas. Fleury here. So you know that's difficult for us to give any projection how we think about the future. The way I'll think about that is probably thinking about what how Bolivia could probably on the macro side perform on the coming months, and we don't have any reason to believe that it will be different from the past. So we always have on our side, we need to be careful on repatriate if I may call cash from other markets that will not be changed.

[Guilherme Fleury de Figueiredo Ferraz Parolari, Chief Financial, Investor Relations & Shared Services Officer at Ambev]

So in overall, I think there's there'll be no material change on this line as from what I foresee from now. But that is as much as I can tell you, and I've been careful here not to give you any forecast on things that I should.

[Lucas Ferreira, Executive Director at J.P. Morgan]

Of course. Thank you very much.

[Operator]

Our next question comes from Enrique Brustolin with Bradesco. You can open your microphone.

[Henrique Brustolin, Senior Equity Research Analyst at Bradesco BBI]

Lisboa, Flori. Thanks for taking my question. I would like to connect the point on this being a transition period and the first half of the year having been very volatile with the goal of sustaining flat year on year margins that you have been mentioning throughout the first half. So if you could make a balance on where you are right now relative to the beginning of the year, if it gives greater comfort on achieving that target. And I know sort of the goal is for Ambev on a consolidated level, but any comment relating to Brazil Beer as well specifically on the potential to sustain margins and pricing where you're positioned right now, if how confident you are in being able to sustain that?

[Henrique Brustolin, Senior Equity Research Analyst at Bradesco BBI]

And a quick follow-up on the pricing in Brazil Beer. Was there anything relevant when it comes to price relativity when you look at the premium segment to the mainstream segment that could explain part of the underperformance in the mainstream? Those are the two questions. Thank you.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Enrique. Thank you for your question. Let me see how I can address your point, okay? But I think the most important aspect to highlight about where we stand today is the following, Okay? And I'm gonna use the three pillars of our growth strategy to explain.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Right? First and foremost, brands. I mentioned as as part of my intro, we see our brands stronger today. Right? I think we have very different from my moment in Brazil many years ago, a way more complete portfolio and not only composed by strong local domestic brands in the core, but also very powerful brands above core.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Right? And this give us way more optionality, right, to work with. Right? So pay attention to the following. When we migrated from '24 into '25, we had zero pricing carryover.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

And as you know, we already implemented a good part of our plan for this year, especially in the '25. So now this put us in a very different type of type of position looking forward. Right? Second point, digitalization of the business. Right?

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

The digital ecosystem. It's it's always I always emphasize this point. You know, the beauty is when you connect the three pillars. Right? And the second pillar is a pre import important bridge between the first and the third because provide us a way better, you know, push about customers and consumers.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

And it's also creating on top of that, on top of the benefits brings to the, you know, the core side of the business, also new revenue streams. So it's a a very powerful, right, part of our growth strategy, and it is evolving in a very consistent fashion as I just mentioned and explained. And the pillar number three, right, how you make the one, two together with, you know, the ambition to put the other muscles of the organization, right, to work at the same pace in order to, you know, evolve with our business to create growth with value simultaneously. Right? So and you heard me saying that during the first quarter announcement that we put for ourselves a big ambition, right, to be way more productive, right, than we used to be before in order to make this year another year, right, of margin expansion despite the fact that we're going to have not a tailwind, but a headwind in the cost side, right?

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

So that's the reason why, in my point of view, we will feel more confident about the year to come. Right? And regarding your second question, pricing. Right? What is the major difference between core and premium?

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

It's pretty much the fact that core relies way more on the on the on the side of the industry that was more affected by the by the weather. Right? The adverse weather. And we know that these brands above core, they have also they they have more resilience to support the differences. Right?

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

And we know that, you know, moving forward, we already see those differences easing, right, which is a good indication that we're gonna have in the second half a pretty different, right, reality than we face in the second quarter.

[Henrique Brustolin, Senior Equity Research Analyst at Bradesco BBI]

That's very clear, Lisboa. Thanks very much.

[Operator]

Our next question comes from Thiago Duarte with BTG. You can open your microphone.

[Thiago Duarte, Head - Equity Research Brazil at BTG Pactual]

Yes. Thank you, Lisboa. It's really nice to touch base. Yes, I think I have to circle back and follow-up on this Brazil beer pricing discussion. A couple of things here.

[Thiago Duarte, Head - Equity Research Brazil at BTG Pactual]

Number one, how much of the revenue per hectoliter gain was through mix considering the outperformance of premium relative to the core segment? This would be the first point. And the second on pricing is the revenue management initiatives in Q2, they differ in terms of timing in the year, a lot from what we have been seeing historically. And they have typically adjust prices in the second half of the year ahead of the summer. So given how much pricing you had already implemented, how should we think about revenue management in the second half of this year, particularly ahead of the summer?

[Thiago Duarte, Head - Equity Research Brazil at BTG Pactual]

So that would be the second part of this question. And if I may, on a more fundamental question, we started the year talking about revamping the core, investing behind the brands that have somehow been underinvested. And that's all against the backdrop of a portfolio that has expanded significantly through innovation and new offerings in the last few years. Luis Boro just talked about this, right? And when we look at the quarter and even the year to date picture, we have brands like Corona, Stella Artois, Pure Gold, all doing relatively well.

[Thiago Duarte, Head - Equity Research Brazil at BTG Pactual]

And they are all relatively new to the portfolio. And on the other side, we have brands core brands losing share. Fleury shared this 10% SKU reduction in the portfolio. So, it seems different from both in terms of the implementation and in terms of the results from what we were discussing in the beginning of the year. So, if you could elaborate how we should think about these variables going forward and the priorities for the business? You so much.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Thiago. Thanks for the question. And again, this is a very sensitive topic. So let me elaborate here in a way that makes sense. Agenda.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Okay? It's not necessarily fair to say, correct to say that we always increase prices, right, in a specific moment in the year, right? That will this will always depend on market dynamics. This is the first point. The second point is the following.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

We started, right, as I mentioned during the first quarter announcement, just after the carnival, and this was built on during the quarter. Right? The rate impact was pretty much in line with inflation, which means that the difference is coming from a positive mix effect. Right? And it's interesting as well that within mix, we had a negative impact from channel mix and some regional mix and a very positive impact from brands mix.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Right? And this brought the posted net impact. Right? Moving forward, we will always maintain our long long term goal, right? As a north for us, they keep prices in line with inflation, which is pretty much what we have done and we did within the quarter two.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Prices are not above inflation because everything that we mentioned before about consumers under pressure on disposable income. And we know that a part of the population is very sensitive to price increases. But on the other hand, we will always take in consideration the inflation impacting us on the cost end, and this will drive our decisions. Right? This is the, you know, the further I can go with this topic.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Right? On the other side, nothing changed about the core. We are here to build the category. We are here to make our category even stronger, more appealing to our cost consumers in the future. Right?

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

And we do know that having a core segment healthy is a very important driver to have to have a healthy category as well. And we also know that a healthy core help us to drive more per capita increase, right, in the future. So in other words, core will remain being a cornerstone of the category, a priority for us. However, we cannot move on with our plans without making decisions. Right?

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

So when you analyze just one quarter, maybe it's a little bit unfair, right, vis a vis what we have in terms of expectations and plans for the future and for the year, entire year. So we know that this part of the portfolio was more impacted within the quarter. But, again, the majority of the impact came from a nonstructural side, which was related to weather. The pricing side was the one of the smallest impact that we had. Right?

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

So and again, as part of our strategy moving forward, always to take decisions again, having in mind what happened in quarter two. And as a consequence, you can imagine that we'll we'll move forward the way that is necessary to protect the balance between the core segment and the above core segment. Right? And this part of the the the the category is showing way more resilience, which means, again, in the end, optionality for us.

[Guilherme Fleury de Figueiredo Ferraz Parolari, Chief Financial, Investor Relations & Shared Services Officer at Ambev]

And Thiago, Florid here. Just, two things on my side to to contribute here. One is everything that Lisboa mentioned was something that we have planned since the beginning of the year, looking into how we knew cost would probably perform, number one. Number two, I think when I mentioned about the 10% rationalization SKUs, you need to take into consideration the size of our portfolio, this number of brands, so on and so forth. So we're working into formats and SKUs that were low moving and or would have a lower contribution to our portfolio, which does not create or should not create any confusion to what was explained before about our strategy with brands and portfolio.

[Thiago Duarte, Head - Equity Research Brazil at BTG Pactual]

That's all clear. Thank you so much.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Thank you as well.

[Operator]

Our next question comes from Rodrigo Alcantara. You can open your microphone.

[Rodrigo Alcantara, Director - Equity Research at UBS Group]

Hi. Good afternoon, and thanks for taking my question. But before for Lisboa, if I may, I would say that for the sake of clarification here and to understand your mindset, Lisboa, Well, we saw the price action, right? We saw the price elasticity effect and the share outcome, right? So just curious to want to understand what are the topic points, the facts that make you sense, that brand equity across brands, have improved or or improved.

[Rodrigo Alcantara, Director - Equity Research at UBS Group]

Get your point that is not a fair to to just, judge on just one quarter. So maybe you were talking about on a first half result. So essentially, I wanted to understand what the points that make you set of having a brand equity across brands improving. And the other one very quickly would be just to get an update on the revamped strategy on Skol. I know that we don't necessarily share know the specific details about this plan, but just wanted to know like kind of what the progress on this and how you see the brand ahead of the second half of this year. Thank you very much.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Perfect. Rodrigo, let me answer your question, the two questions. Okay? The first one about equity improvement. Why?

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

What is the big reason to believe our brands are improving? First and foremost, we track. Right? Every single month, we track what we call brand power. And this brand power is based on three different components.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

How different a brand is, how salient a brand is, and how meaningful a brand is to our consumers. The combination of the three components, right, brings to life what we call power. And we do see power improvement in a pretty important part of our portfolio, which give us even more confidence about the future because power is a very good proxy for share. Okay? The second the second point is the following.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

When we compare what happened with, you know, consumer price, dynamics, right, in quarter two, in other words, right, the price relativity gap we had, we faced, right, the level of impact we had in share was lower than we historically used to see in our portfolio, which also reinforces the point that the power is bringing more strength to our portfolio. Right? And regarding your your your question about Skol, I think this is a very interesting aspect that we didn't discuss. So thanks for bringing the point. I don't want to highlight here any huge revolution in terms of performance for the brand.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

But we have been, as I mentioned, in a few times with you all, we have been working, right, in order to, you know, adjust, correct a few aspects about our plans for the portfolio, especially for Skol, and we have been observing interesting, improvements. Right? One of them is about placement. Right? Distribution suffered during the '24.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

And now we are bringing back since the beginning of second quarter distributions to way healthier level for the brand. And we know that availability is critical if we want to put the brand back in a growth trajectory. The second aspect is not only being present, but being well executed. We also improved the level of support we have for the brand at a POC level. And we do see that, you know, level of, you know, support bring a better turn for the brand, right, which means share of handlers first call within the POCs.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

And last but not least, right, when we compare from the beginning of the year today, we see a sort of a v curve. And why a v curve? Because in the mid in the mid of this period, we had Carnival. Right? And Skol was not a priority for us, right, in terms of bad brand activation for this period.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

So the the brand still suffered a decline. And since then, we see a recovery as, you know, a very consistent recover, right, in share, right, month after month. Again, too early. I'm not claiming here we solve it. Right?

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

But this is the type of indication that we need to give us confidence that we are touching the right buttons to put the brand back on a growth trajectory. Thank you very much.

[Rodrigo Alcantara, Director - Equity Research at UBS Group]

Thank you. That was useful. Thank you.

[Operator]

Thank you. This concludes the Q and A session. I would like to invite Mr. Carlos Lisboa to proceed with his closing remarks. Please go ahead, sir.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

Thank you for joining our call today. We feel encouraged by our first half of the year. We, as I mentioned before, we progressed in all three pillars of our growth strategy. We have a stronger portfolio of brands. Our digital platforms are gaining traction and we deliver margin expansion through revenue and cost management.

[Carlos Eduardo Klutzenschell Lisboa, CEO at Ambev]

I feel that we are a stronger company today than we were six months ago, positioning us well, better for the second half of the game. Looking forward, while our operating environment remains dynamic, the quarter we just went through give us reasons to believe we are on the right track to continue pursuing another year of growth with value creation for Renault Bev. Thank you very much again. See you hope to see you soon.

[Operator]

This concludes today's presentation. You may disconnect, and have a nice day.

Participants

Executives

• Carlos Eduardo Klutzenschell Lisboa, CEO
• Guilherme Fleury de Figueiredo Ferraz Parolari, Chief Financial, Investor Relations & Shared Services Officer

Analysts

• Isabella Simonato Alonso, Managing Director at Bank of America Merrill Lynch
• Renata Cabral, VP - Equity Research at Citigroup
• Leonardo Alencar, Head of Agro, Food & Beverage at XP Investimentos
• Felipe Ucros, Director at Scotiabank
• Lucas Ferreira, Executive Director at J.P. Morgan
• Henrique Brustolin, Senior Equity Research Analyst at Bradesco BBI
• Thiago Duarte, Head - Equity Research Brazil at BTG Pactual
• Rodrigo Alcantara, Director - Equity Research at UBS Group