(Recasts to add cost guidance, share performance, comments;
By Guillermo Parra-Bernal and Paula Arend Laier
SAO PAULO May 4 Stable Latin American
currencies and increased hedging against commodity price swings
should help Ambev SA slow cost growth to single-digits by
year-end, as the region's biggest beer maker wrestles with the
lowest annual profit in four years.
Costs per hectoliter should expand significantly less this
quarter than the first quarter's 23.1 percent increase, Chief
Executive Officer Bernardo Paiva said on Thursday on a call to
discuss quarterly results. Cost growth will decrease much more
rapidly between July and December, he said.
Stubbornly high cost growth has hurt performance at Ambev's
Beer Brazil division, a relevant market segment for parent
company Anheuser Busch Inbev NV. The Brazilian real's
20 percent surge in the 12 months through March led Ambev
to spend more protecting itself against sudden
changes in aluminum, grains and sugar prices.
As a result, Ambev missed first-quarter profit estimates
despite rising beer volumes in Brazil, Argentina and Central
America. Adjusted earnings before interest, taxes, depreciation
and amortization slumped 17.3 percent, with margins contracting
nearly 10 percentage points on an annual basis for a third
"Last year was a very volatile one, but we expect that more
stable currencies in the regions where we operate help us meet"
cost growth guidance, Chief Financial Officer Ricardo Rittes
said on a separate call.
The situation underscores the hurdles facing Paiva, who is
also battling the impact of Brazil's harshest recession ever,
mounting competition and consumer indifference. He sees 2017 as
a transition year for Ambev in which it should intensify a focus
on premium products and cost controls.
Paiva said he remains cautious about a slight recovery in
consolidated volumes, which rose 3.4 percent last quarter.
Earlier in the day, AB Inbev said Ambev's costs in Brazil
could grow by double-digits in percentage terms during the first
half of the year, but decline pronouncedly between July and
December. Half of Ambev's sales costs in Brazil are pegged to
the U.S. dollar.
Its shares gained 2.5 percent in late trading, the most in
almost two months, as several indicators pointed to a gradual
recovery in margins and volumes.
Adjusted net income totaled 2.316 billion reais ($732.1
million), below a consensus estimate of 2.795 billion reais.
Profit fell 20.1 percent between January and March from a year
earlier, the steepest decline in three quarters.
The cost of goods sold climbed 26.4 percent on an annual
basis. The high cost per hectoliter signaled Ambev failed again
to fully pass along repressed cost inflation to consumers,
especially in Brazil.
($1 = 3.1635 reais)
(Editing by Jason Neely, Jeffrey Benkoe and Dan Grebler)