Ambev S.A. American Depositary Shares (Each representing 1 Common Share)

Good afternoon and thank you for waiting. We would like to welcome everyone to Ambev's second quarter 2025 results conference call. Today with us we have Mr. Carlos Lisboa, Ambev's CEO, and Mr. Guilherme Fleury, CFO and Investor Relations Officer. As a reminder, this conference presentation is available for download on our website, ri.ambev.com.br, as well as through the webcast link. We would like to inform you that this event is being recorded and all participants will be in the listen-only mode during the company's presentation. After Mbev's remarks are completed, there will be a Q&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. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Unbev'd 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 2024 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, operating profit and EBITDA on a fully reported basis in the earnings release. Now, I will turn the conference over to Mr. Carlos Lisboa. Mr. Lisboa, you may begin your conference.

Good afternoon, everyone. Thank you for joining our second quarter 2025 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 to achieve this quarter, positioning us well for the remainder of the year. given the anticipated acceleration in costs. 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 base points of margin expansion, despite soft industry 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. Topline grew mid-single digits. EBITDA grew double digits, with 160 base 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 R$ 2 billion, totaling R$ 6 billion declared this year. The foundation for our performance is based on the execution of our growth strategy. Starting on Pillar 1, Lead and Grow the Category. 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 in investments over the last years. And even in the face of software industries, the underlying performance of our strategic priorities continue to deliver solid results. Our premium and super-premium brands delivered low teens growth, expanding 7 out of top 10 markets of Unvev. The Balanced Choice portfolio maintains strong growth momentum, expanding in the low 20s, addressing evolving consumer preferences and needs. Activations on platforms like FIFA, Club, World Cup and Roland Garros yielded 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 decline, giving its highest sensitivity to industry environment and to our revenue management decisions. As for pillar two, digitize and monetize the ecosystem. B's marketplace continued its momentum, with GMV growing in the 90s and reaching an annualized amount of R$ 7.4 billion, led by partnerships such as Nestlé and L'Oreal. On the direct-to-consumer front, Z Delivery achieved a 7% increase in GMV, despite a soft industry environment, supported by a 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 40 minutes per week through bees and also in-person visits, five-fold of what we had pre-bees. 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. And as a consequence, we continue to evolve on number of brands and SKUs per POC, growing 3.4% this year only, and to better manage price and promotions, driving efficiencies to our net revenue per activator. As a result of a higher customization and 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 ZE's buyers. well above their share in the population. Moreover, ZE has become a powerful engagement platform for the category lovers. According to our internal data, ZE 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 add at least one product from our balanced choice portfolio in their baskets. which grew almost twice as fast on Z compared to the total business and reached 3.6% of total platform sales. And on Pillar 3, optimize our business. Some of you have probably heard me saying this before. Muscles have memory. Our discipline focus on cost efficiency more than offset non-commodity cost inflation. representing a saving of over 500 million reais in the quarter. In SG&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. Moving to the performance of our business units, Consistent with the first quarter, all BU's delivered a bit of 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 2 to 4 degrees Celsius lower temperature versus last year. 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. Above-core brands sustain almost 30% of our volumes and maintain our leadership in the segment. As for the core segment, it declined by low teens, giving 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. Michelob Ultra grew over 60%, and non-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 net, volumes were slightly positive in the quarter, despite mid-teens decline in June. Top-line performance was driven by healthy net revenue per hectare 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 7 pours. despite underperforming the industry as a result of our revenue management choices. 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 remained healthy, with the 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. Our performance was mainly driven by 1. 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. Florie, over to you.

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. So, let's get started. As Lisboa mentioned, quarter two was a transition quarter. We were expecting cross 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&A initiatives. The execution of our strategy is already making a difference. Let me walk you through one example in cost of goods sold in Brazil. Effects and commodities account for approximately 45% of 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. 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 Argentinian 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. The increase in financial expenses continue to have the same drivers of the first quarter. One, effects carry costs in Brazil coming from the interest rate differential between Brazil and the U.S. Two, effects 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. And for income tax, our effective tax rate for the quarter was 18.4% compared to 28.6% in second quarter of 2024. The year-over-year decrease is mostly driven by, first, a non-recurrent event in the second quarter of 24 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. In the quarter, the resilient operational performance and disciplined financial management led to a net income of R$2.8 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 debita growth. In the quarter, our cash flow from operating activities reached R$3 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. Cash flow from investing activities was 1 billion reais negative, driven mainly by CapEx investments during the quarter, similar to the investment of last year. And cash flow from financing activities reached R$4 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 diligent execution of our capital allocation priorities. Thank you for your time today. And back to you, Lisboa.

Thank you, Fleury. Before we conclude, I would like to offer a few closing thoughts. As I noted earlier, Reaching the half-time gives 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. Secondly, keep momentum. On track. So far in the year, we have achieved better brand equity, top and bottom line growth, and also a beta margin expansion. Lastly, build a stronger version of our company. On track. I believe that momentum invites more momentum. Our performance in first half positioned us well to second half. 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, and now I will hand it back to the operator for the Q&A.

We will now begin the Q&A session. To ask a question, we kindly ask cell site analysts to click on Raise Hand button at the bottom of the screen. To remove a question from the queue or after your question has been addressed, 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.

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, 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 even with the bad weather, right, 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? 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. 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.

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 you to float it for the second one, okay? 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 sell-out 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. 70% of the industry decline 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, Isabela, with a double digit decline, mid-twins decline, right, just in this month, impacting important regions for the industry, which represent 60% of the industry volume. These regions saw 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. As a matter of comparison, it's good to have the two businesses 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 the same level of impact due to the adverse weather that I mentioned before. Additionally, the remainder, 30% of the industry impact comes mostly from inflation, especially impacting essential goods, which inflation came above CPI and continues to put some sort of pressure in disposable income for Brazilian consumers. 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. Now moving to our selling performance. First and foremost, as I mentioned before, three-fourths 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 our first call announcement, our revenue management decisions. And this resulted in a low single-digit market share loss, according to our estimates, and also pre-inline with nuisance-allowed data. 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 group meetings and gain share, again, in the segment. The core decline came Pretty much in line with low teens due to segment high sensitivity to the adverse weather conditions. 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. And these brands are also more sensitive to revenue management decisions and greater price elasticity. And it's important to reinforce as well that our market share over index in the core performance vis-à-vis the overall performance of our business. 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 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 per capita in the future and also super important to emphasize that we feel today our company stronger right as a whole, better prepared for the year to come than we were in the beginning of the year. Since our growth algorithm is prepared, right, set for the acceleration of costs that we already observed impacting the second quarter.

And this boy, if I may. Hi Isabella, good to be 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 Boa mentioned, to drive top-line and brand equity. Over the years, we know that cost of food sold was the main source of margin pressure, mainly coming from effects and commodities. 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, which impacted positively the quarter. We're always looking to optimize our footprint. And just to remember, you know, we are very known for our zero-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.

Thank you very much. You're welcome.

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

Hi. Hi, everyone. Thank you so much for taking my question. 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 effects. But we have some horizon for what can happen for 2026. My question is if you can give us some color on what you see and what you've been done in terms of hedging, specifically for raw material costs.

Thank you, Renata, for being here. So two things with you. We are maintaining our hedging strategy the same as the prior year. So it's a hedging strategy that you look 12 months forward, and it's non-speculative. 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 hectolitre guidance that we have given to the market, which is Brazil beer excluding Brazil. non-UNBEV marketplace to be within the range of five and a half and eight and a half. And even though we look that it's still being at the lower part of that guidance for now, this is something that will work toward the year, but I cannot give you any guidance on that topic now.

All right. So thank you so much for your comments.

Our next question comes from Leonardo Alencar with XP. You can open your microphone.

Hi, Lisboa. Hi, Florie. Thanks for taking my questions. I want to dive a little deeper on discussion on pricing. 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? And if you could even give a little more detail, you know, 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 hectolitre. So, but then maybe less than expected. So just to understand where we should expect the biggest price increase within categories. That's the two main points I want to understand further. Thank you.

Hi, Leonardo. 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, it was built throughout the quarter, right? So, we increased prices pretty much in all segments, right? Which helped us to achieve the quarter two net revenue practically the performance that you saw, right, in Brazil. And it's always good to emphasize that, you know, within the net revenue calculator, 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 core volumes, right, as I mentioned before, volumes declined due to the industry, right? So pretty much we saw... The vast majority of the impact is impacting these brands because they are more sensitive to pricing performance, pricing differences, and also to something that you mentioned in terms of channels. 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. Despite that, we brought, as I mentioned before, a net positive effect from the mix on top of the rate initiatives that took place. Looking ahead, Net Revenue Project Leader 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.

Okay. Thank you, Isabel.

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

Good afternoon. Thanks a lot for the space. A couple of questions on digital and last. So the first one on digital, the marketplace's GMV accelerated quite a bit this quarter. So congrats on that. Just wondering if you can give us 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 coming off a few quarters of consolidating the cost and expense structure of the digital platform. So just wondering if you've 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 hectolitre in the region. 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 is pretty high. We've already seen a few beverage companies report in Argentina. They have very good performances. but it seems like everyone in the industry is taking the foot off the accelerator on price mix. So just wondering if you can give us some comments on what's happening there. Thank you.

Hi, Felipe. Thank you for your question. So, and you are right, one of the aspects that make us feel, you know, very positive about our year performance is the good balance between the three pillars of our growth strategy, being the pillar number two, a very important highlight for the period right and within the pillar number two uh marketplace continues to create a pretty interesting revenue stream for mbav right with minimal investments but with very interesting right performance year to date and show even more potential in the future, right? And we do see a pretty interesting correlation as well with the level, our service level to our customers. They continue to rise the NPS, right? You know, 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 this point, the 3P part of the marketplace surpassing the 1P in terms of GMV. The growth was led primarily, as I mentioned before, by partnerships we have within the 3P, like Nestlé, L'Oreal, and PepsiCo Foods. 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, you know, on a first-half standpoint, this achieved, right, a level of 30% year-over-year, right? First-half, a bad marketplace. is improving in terms of margin as well, right, to something that you also mentioned, right, improving 400 base points to 15%. And in Brazil, this improvement was even higher, to 600 base points, reaching 17%, right. So, and 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.

And thank you, Felipe. Talking a little bit about this, we'll just mention about the marketplace cross-margin. So let me tackle 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 the consumer confidence is gradually improving, and that is what is reflected in our results. In Argentina, since the beginning of hyperinflation, we've been very careful on protecting our margins by also looking into cost and looking into the capacity of the consumers to absorb price increase. And that's what we continue to do in that market.

Understood. Thank you.

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

Hi, guys. Thanks for the space. My question is on the low EBITDA lines, specifically those lines you mentioned about the non-derivatives. how to think about those lines, because they have been relatively meaningful in the last few quarters. Like you mentioned, you explained the reason for that. My question is how to think about those lines in, let's say, 12 months. 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 in general terms, how to think about it. your financial expenses line in these volatility. We've seen volatility in the next few quarters. Thank you.

Thank you, Lucas. So, you know, that's difficult for us to give any projection how we think about the future. The way I think about that is probably thinking about what... how Bolivia could probably, on the macro side, perform in 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 and repatriate, if I may call, cash from other markets. That will not be changed. So overall, I think there will be no material change on these lines 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.

Of course. Thank you very much.

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

Hello, Lisboa, Flori, thanks for taking my question. I'd 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, you know, on achieving that target. And I know the 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, you know, how confident you are in being able to sustain that. 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.

Hi, Henrique. 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 going to use the three pillars of our growth strategy to explain, right? First and foremost, brands. I mentioned 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 court right and these give us way more optionality right to work with right so Pay attention to the falling. When we migrated from 24 into 25, we had zero pricing carryover. And as you know, we already implemented a good part of our, you know, plan for this year, especially in the second quarter of 25. So now this put us in a very different type of position looking forward, right? Second point. digitalization of the business, right? The digital ecosystem. 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 pretty important bridge between the first and the third because providers are way better, you know, pools about customers and consumers, right? 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 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 the ambition to put all the muscles of the organization to work at the same pace in order to evolve with our business, to create growth with value. simultaneously right so and and you heard me saying that during the first uh quarter announcement that we put for ourselves a big ambition right to be way more productive right then we used to be before in order to make this year another year right of margin uh expansion despite the fact that we're gonna have not a tailwind but a headwind in the cost side right so that's the reason why in my point of view we'll 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? It's pretty much the fact that core relies way more on the side of the industry that was more affected by the weather, right, the adverse weather. And we know that these brands above core, they have more resilience, right? to support the differences, right? And we know that, you know, moving forward, we already see those differences easing, right? Which is a good indication that we're going to have in the second half a pretty different, right, reality than we face in the second quarter.

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

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

Yeah, thank you. Lisboa Theory, nice touch base. Yeah, I think I have to circle back and follow up on this Brazil beer pricing discussion. A couple of things here. 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. EMBEV typically adjusts 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? 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. Lisboa just talked about this, right? And when we look at the quarter and even the year-to-date picture, we have brands like Corona, Stellar 2 Up, your gold, all doing relatively well. And they're all relatively new to the portfolio. And on the other side, we have core brands losing share. Fleury shared this 10% SKU reduction in the portfolio. So, you know, 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. Thank you so much.

Hi, Tiago. Thanks for the question. And again, this is a very sensitive topic, so let me elaborate here in a way that, you know, makes sense. Agenda, 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? This will always depend on market dynamics. This is the first point. The second point is the following. We started, right, as I mentioned during the first quarter announcement, just after the carnival, and this was built 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 BrandsMix, right? And this brought the post-it net impact, right? Moving forward, we will always maintain our long-term impact go, 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. 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. This is the further I can go with this topic. 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. And we do know that having a core segment healthy is a very important driver to have a healthy category as well. And we also know that a healthy core helps us to drive more per capita increase 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? So when you analyze just one quarter, maybe it's a little bit unfair, right? vis-à-vis what we have in terms of expectations and plans for the future, for the year, entire year. So, we know that this part of the portfolio was more impacted within the core, but again, the majority of the impact came from a non-structural side, which was related to weather. The pricing side was one of the smallest impacts that we had. Right. So, and again, it's 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 will move forward the way that is necessary to protect the balance between the core segment and the above core segment. And this part of the category is showing way more resilience, which means, again, in the end, optionality for us.

And Thiago Fleury here. Just two things on my side 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 costs 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 brand and portfolio.

That's all clear. Thank you so much. Thank you as well.

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

Hi. Good afternoon, and thanks for taking my question. It would be 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, I want to understand, what are the topic points, the facts that make you say that brand equity across brands have improved or improved? Get your point, that is not for just, you know, judging just one quarter, so maybe you were talking about, you know, first half result so essentially i wanted to understand what the the points that make you upset of you know having a brand equity uh cross brands improving and the other one very quickly would be just to to to get an update on on the revamp strategy on on on skull i know that uh we don't necessarily share or know the specific details about this plan but just just wanted to know like kind of like the progress on on this and how you see the brand ahead of the second half of this year. Thank you very much.

Perfect. Rodrigo, let me answer your question, the two questions, okay? The first one about equity improvement. Why? 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. 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 brings to life what we call power. And we do see power improvement everywhere. in a pretty important part of our portfolio, which gives us even more confidence about the future, because power is a very good proxy for share. Okay? The second point is the following. When we compare what happened with consumer price dynamics in quarter two, in other words, the price relativity gap we had, we faced, 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 question about Skoll, 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, you know, huge uh uh revolution in terms of performance for the brand but but we have been as i mentioned uh in a few times with you all we have been working right in order to you know I just correct a few aspects about our plans for the portfolio, especially for Skoll, and we have been observing interesting improvements, right? One of them is about placement, right? Distribution suffered. during the, you know, 24. And now we are bringing back since the beginning of second quarter distributions to a 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 for SCO within the POCs. 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 middle of this period, we had carnival, right? And school was not a priority for us, right, in terms of bad brand activation for this period. So the brand still suffered a decline. And since then... We see a recovery, you know, a very consistent recovery, right, in share, right, month after month. Again, too early. I'm not claiming here we solve it, right, but this is the type of indication that we need to give us confidence that we are touching the right, you know, buttons to put the brand back on a growth trajectory. Thank you very much. Thank you. That was useful.

Thank you.

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

Thank you for joining our call today. We feel encouraged by our first half of the year. 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. 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 gives us reasons to believe we are on the right track to continue pursuing another year of growth with value creation for R&D. Thank you very much again. Hope to see you soon.

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