Ambev S.A.

Good morning, and thank you for waiting. We would like to welcome everyone to Ambev's first quarter 2021 results conference call. Today with us, we have Mr. Jean-Jerissa, CEO for Ambev, and Mr. Lucas Lira, CFO and Investor Relations Officer. As a reminder, a slide presentation is available for downloading on our website, ri.ambev.com.br. as well as through the webcast link of this call. We would like to inform you that this event has been recorded and all participants will be in listen-only mode during the company's presentation. After Ambev's remarks are completed, there will be a question and answer session. At that time, further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator. Before proceeding, Let me mention that four looking statements are being made under the Safe Harbor of Securities Litigation Reform Act of 1996. Four 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. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Unbev 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 presented 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 Q4 2021 results. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of Unbev's normal activities. As normalized figures are non GAAP measures, the company discloses the consolidated profit, EPS, EBIT, and EBITDA on a fully reported basis in the earnings release. Now, I'll turn the conference over to Mr. Jean Gereissati, CEO for Ambev. Mr. Gereissati, you may begin your conference.

very much for joining our call. In February, I mentioned that 2021 would be a challenging year, and COVID-19 pandemic was still very real. After that, we saw a steep deterioration of the sanitary conditions in Brazil, coupled with increased mobility restrictions, which impacted our people, customers, suppliers, and consumers. At the same time, we were better prepared this time around. As a result, we delivered a great start of the year. We grew EBITDA by 23.8%, driven by double-digit volume and double-digit net revenue per hectolitre growth in Brazil, CAC, and LAS. Consolidated volumes were 5.4% above Q1 2019. and we were able to get back to Flatty Shibita versus Q1 2019. This was another quarter we saw clear signs that our commercial strategy is working and that momentum continues. I was very happy to see the strong performance of our international operations, and Brazil continues to show that we are in the right path. We delivered volume growth in eight of our ten markets and market share gains in seven of these markets. We saw a solid net revenue per hectolitre growth in the quarter, driven by a more flexible and efficient revenue management initiative, including occasion-based promotional activities. We continued to strengthen our portfolio as we launched innovations across our markets. To name a few, Golden Extra in Panama, Bud Light Seltzer in Canada, and MyClub Ultra in the premium segment in Brazil. Last delivered strong volume growth in the core plus and premium segments, with a great performance of Corona. In Argentina, we had an outstanding volume performance and improved net revenue per hectolitre, delivering top-line growth of 67%. Tax restrictions were partially lifted during the quarter. That combined with the good performance of our above-court portfolio and effective revenue management initiatives delivered a top-line growth of 28%. led by Dominican Republic and Guatemala. Canada gained market share and grew volumes despite a tough comp in Q1 2020. Growth was led by hard seltzers and the above core beer portfolio with My Club Ultra and Corona. Brazil beer volumes grew 16%. Despite Carnival cancellation in February, and tougher mobility restrictions imposed in March. According to our estimates, we gained market share while growing volumes in all segments, with a special highlight to our global brands that had a solid high-teens growth, and Brahma Duplo Multi that continued its growth momentum. Brand health of the portfolio improved once again in all segments this quarter, And our digital initiatives continued to expand. The delivery fulfilled 14 million orders in this quarter, reaching an all-time high in March. Net revenue for Hectoritzer growth was strong again. This growth was mainly driven by effective revenue management initiatives. Bees also had positive impact as it helped to standardize and increase efficiency across our portfolio. Today, I would like to further focus on Bees, our super app for our customers. We believe that Bees has been important to deliver a strong commercial performance as it digitizes our route to market, enables our customers to place an order in three clicks at any time of the day, and offers assortment selections to POCs using algorithms. On top of that, Bees offer other services, such as financial services, scheduled delivery, rewards programs, and other products via Marketplace, providing a full e-commerce experience to our customers. Since our decision last year to launch Bees in Brazil, we managed to roll it out to all our DDCs and wholesalers. As a result, we now reach more than 65% of our active customers in Brazil via BIS, accounting for over 550,000 customers, and we generated more than 6.5 billion in GMV. Given this promising early results and to further boost the platform, In March, we announced that Menu.com, a startup marketplace for bars and restaurants that had been accelerated by ZTECH for the past few years, will be integrated into this ecosystem. Today in Brazil, we offer more than 100 SKUs from approximately 31 partners in 380 cities already. reaching more than 5% of our net revenue in some of these locations. Our platforms scale will open many new opportunities for us to grow together with our customers and our partners. Our platforms scale will open many new opportunities for us to grow together with our customers and our partners. Our digital platforms will be fully connected throughout our operation, integrating with and leveraging on our existing supply chain, logistics, and sales capabilities. As our digital transformation evolves, we will enhance each step in our supply chain and become more flexible, efficient, and integrated with our partners, customers, and consumers, improving our NPS throughout the ecosystem. As for the rest of 2021, our outlook remains unchanged, and we continue to expect a challenging year. COVID-19 is real and around us, and cost pressures will continue mainly in Brazil, not only thanks to effects, but also to commodities prices. With that said, I remain very confident in our people, our capabilities, and plans for 2021. Overall volumes at AMBEV continued its performance in April, and net revenue for hectolitre performance will remain as obvious, especially in Brazil, given the inflationary scenario we are living. We expect Our top-line performance should continue to drive our recovery, growing ahead of bottom line, as we work to get back in the full year to the normalized, consolidated beta of pre-pandemic levels. Thank you very much. Thank you for your time and attention, and I will hand over this over to Lucas. Thank you, Jean. Hello, everyone. This time last year, our financial performance was marked by declining net revenue, declining EBITDA, declining normalized profit, and declining operational cash flow generation. What's worse, we were still in the early days of the COVID-19 pandemic. What a difference a year makes. In Q1 2021, net revenue grew nearly 28%. EBITDA grew almost 24%, normalized profit grew close to 125%, and operational cash flow grew close to 84%. Brazil beer performance was strong, and the growth of our international operations was even stronger. Just to put things into perspective, all these indicators are either at or above 2019 levels in nominal terms. And in terms of outlook, even though COVID-19 is still around, I believe it's fair to say that things are not as gloomy as before. Quite the contrary, we expect recovery to continue as vaccinations pick up. So I'm proud to see that not only have we navigated the crisis well so far, but more importantly, that the commercial momentum we started to build in Q3 2020 has continued to translate into consistent improvement in our financial results quarter after quarter. We have two big priorities on the finance side. Number one, continue to protect liquidity given the still volatile environment. And number two, improve our return on invested capital. The team has done a great job since last year in terms of protecting our liquidity positions. which remained solid in each of our markets, while still investing about 1.3 billion reais in CapEx in the quarter. Most of this investment was directed towards increasing our brewing and packaging capacity, particularly in Brazil, to support our innovation pipeline. And the second biggest bucket of investment was in technology, such as our ERP integration designed to, among other things, support our B2B and B2C platforms. And in terms of ROIC, there's a lot of work going into improving resource allocation, as well as improvements in working capital. But there's no doubt that one of our biggest challenges remains the recovery of our profitability. FX headwinds will remain as our biggest hurdle throughout the year, particularly in Q2. whereas one-way package mix and commodity pressures should also be a factor. In addition, cash SG&A was higher in Q1 mainly due to provisions for variable compensation given the stronger-than-expected start to the year. Since 2020 was a zero-bonus year, should our performance remain on track, provisions for variable compensation should continue to impact our year-over-year SG&A performance going forward. On the other hand, this stronger-than-expected top-line performance should help offset higher SG&A for the remainder of the year. And we will keep focusing on our productivity initiatives and typical financial discipline regarding costs and expenses management. Yes, we will continue to work hard on improving our profitability and but we will not lose sight of the long term. The sense of urgency is there, but we have to be disciplined and stick to our commercial plan, which, after all, has been working. For us, the name of the game still is continuous and consistent improvement of our results. We have been on this improvement journey since the second half of 2020, and Q1 was another important step, so there's definitely more to come. Finally, a quick word on ESG. In June, we plan to host a webinar to focus specifically on how we have been working to embed ESG into our company model. I hope to see you all there. Thank you, and now let's move to Q&A.

Thank you. Now we'll begin the Q&A session. If you have a question, please press star 1. And to remove the question from the list, please press star 2. Our first question comes from Marcel Moraes with Santander.