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November 11, 2003

BRAZIL: AmBev profits up while beer sales suffer

Companhia de Bebidas das Americas yesterday announced a rise in Q3 profits, despite a large drop in Brazillian beer sales.

Companhia de Bebidas das Americas yesterday announced a rise in Q3 profits, despite a large drop in Brazillian beer sales. AmBev, as the company is more commonly known, announced a net profit of BRL340.4m (US$117.9m). Earnings before interest, taxes, depreciation and amortisation (EBITDA) rose by 21% year-on-year to reach BRL777.8m.

Net revenue for the quarter also rose, by 13% to BRL2.02 billion. All these rises were reported in spite of a fall in Brazilian beer sales volume for the company of 12.3% year-on-year.

AmBev started increasing local beer prices by 12% on average from June this year, and stepped up direct distribution and sales of higher-margin brands. Consequently, gross margin for the quarter grew to 55.6% compared to 53.7% year-on-year. EBITDA margin also rose, to 40.2% from 38.9%.

Volumes in the beer market fell for AmBev partly due to a weak economy and falling real wages in Brazil. The launch of the new Nova Schin brand, by rival Schincariol also hit the company. The less expensive Schincariol brands pushed AmBev’s total market share down to 66% from 70% at the end of the second quarter, as Schincariol’s share rose to 11.5% in September from 9.7% in June, a source recently told Dow Jones.

Argentine unit Quinsa, in which AmBev increased its stake to 48% during the quarter, also performed well in Q3. Quinsa contributed EBITDA of $16.4m from its Latin American beer sales and $2.1m from soft drinks.

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