Q1 2022 Ambev SA Earnings Call
Sure.
Okay.
Okay.
Okay.
<unk>.
Okay.
Okay.
Thank you.
Perfect.
Okay.
Thank you.
Thank you.
Okay.
Thank you.
Okay.
Okay.
Okay.
Okay.
Okay.
[music] accuracy.
Okay.
Yes.
Okay.
Okay.
Thank you.
Thank you.
Perfect.
Yes.
And restaurants.
Okay.
Thank you.
Okay.
Sure.
Okay.
Okay.
No.
Okay.
Okay.
Thanks Keith.
Got it.
Yes.
Yes.
Thank you.
Great.
Sure.
So.
Yes.
Yes.
Okay.
Okay.
Right.
Okay.
You too.
Okay.
Yes.
Global.
Yes.
Great.
Sure.
Good morning.
Q4 weighted.
Wed like to welcome everyone to Ambev, Inc. First quarter 2022 results conference call.
Hey, this is Luke.
Okay.
For old Navy.
Yes.
In the event of relations officer.
As a reminder, <unk> presentation is available for downloading.
Our izod and that's got to come back to BR as well as through the webcast link of this call.
Well wed 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 these remarks are completed there will be a question and answer section at that time further instructions will be given.
Any participant need assistance during this call. Please press star zero tourists and the operator.
Before proceeding let me mention that for the locals are being made under the safe Harbor of the Securities Litigation Reform Act of 90 to 92 six.
The statements are based on the beliefs and assumptions out there with management.
Formation coring tool available to the company.
He's over weeks Im sorry, since isn't that simple 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 <unk> and could cause results to differ materially from those expressed in such a forward looking statement.
I would also like to remind everyone that as usual the presentation Chen.
It will be discussed during today's call are both organic and normalized in nature and unless otherwise stated presents H Chan refer to comparisons with first quarter 2020 chorizo.
Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of some bad news normal activity.
Normalized figures are non <unk> 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. <unk> for them Baby. Mr. <unk> you may begin your conference.
Good morning, Good afternoon, everyone. Thank you for joining our earnings call for the first quarter of 2022.
Three weeks ago.
Investors day, we focused on.
Our culture, our strategy and our business model has evolved.
Oh, we breached technology in many of our customers and consumers.
Why we see several opportunities to create value going forward in our overall company transformation.
Good day.
<unk> focus more on our Q1 results.
That's a good news I will also highlight Halloween.
Things, we show Q2, when the vessels.
Our already positive.
Impacting our short term performance.
So let's talk about the quarter.
Moving our full year 2021 call I explained why I believe we were starting 2020 to better position.
While acknowledging we expected a tough start to the year.
Q1, 2021 has a very strong performance with volumes up 12% net revenue up to 88% and the visa up 24% record growth rates for the first quarter of the year.
This year, we work off towards Lodestone, because we had the one off January a very tough months in many markets.
It wont be growth for Rogers.
However, I was happy to see that the demand is.
Delivered a better overall performance than we expected, particularly in Brazil and loans.
Leases, Brazil volumes bounced back in February already it works.
In March which drove consolidated volume growth of five 5% in the quarter.
Brazil net revenue per hectoliter grew not only year over year, but sequentially versus Q4 'twenty one.
Both in beer and in App.
Beer volumes grew two 1% despite the tough January .
Thanks to premium portfolio growing high teens in core portfolio growing mid single digits.
According to our estimates we once again gained market share versus last year.
Our three main core brands grow montage for Ensco were ranked in the top of the 10, most valuable brands in Brazil.
478 range.
Six different categories. According to Brinci.
In the corporate segment.
We made expanding its distribution in volume for openness and ramp up of the molecule launches you returnable and one way presentations, which we will address more consumption occasions.
Napp volume grew 16, 9%.
<unk> market share gains according to our estimates the premium brands volume grew up for the rest of the portfolio less maybe by energy drinks <unk> tool Pepsi and gateway.
<unk> volumes grew two 9% despite a strong comparable in Argentina.
In the bottom impacting believe yet due to another COVID-19 weighs in Jim.
In Chile, we gained market share according to our estimates and expanded distribution. Despite lapping the start of the partnership with both of them.
Our core fluids, therefore portfolio continued to grow in GB as well in Paraguay and Bolivia.
Of course, not everything worked.
<unk> volumes declined at four 7% due to supply constraints in the Dominican Republic, our largest market in the region.
Supply constraints to ease going forward, however, above the core portfolio continued to gain weight in our coatings, thanks to brands, such as Corona and Modelo.
In Canada volumes declined eight 4%, mainly driven by the worst industry of the last 30 years in January which then recovered in February and March sequentially.
With difficult from Q1 'twenty one.
Despite weak volume performance, we have made.
Having gained market share in beer.
Our net revenue per hectoliter grew 4% due to consistent implementation of revenue management initiatives.
So let's go deep and what's behind this performance, let's talk about our five pillars of our how should we frame.
The first pillar brands for each and everyone.
In Brazil focus brands <unk> and Budweiser added over 500000 fans versus same period of last year. According to our estimates any loss number of fans increases by 300000.
After reaching a better balanced right relativity between one way RGB, our pack price strategy, our returnable packaging grew double digits in Brazil, mainly in the 600 ml presentation and preview industry.
And with ml presentation team core portfolios.
Second pillar is to lead this future.
Our innovations continue to over index market share according to our estimates reaching 17, 6%.
Brazil beer net revenue thanks to the continued success of our local margin spotty interstellar would lead free.
Innovations also reached over 17% both lost net revenue.
We launched new can sizes and secondary packaging to serve more occasions in the off trade channel two brands, such as Budweiser, but im a local market and the reason our true.
Third pillar of tools to our customers' success.
The digitalization of our customers continue to prove successful and supported our nast business to achieve a higher penetration per outlet increased its number of customers.
And we continued the successful expansion of these in Paraguay and Argentina.
These marketplace in Brazil grew GMB, almost 10 times versus the first quarter of last year.
In the last six months, serving more than 500000 customers offering 400, Skus, which include partners such as <unk> and <unk>.
<unk> Bank continues its rollout in our operations, reaching more than 270000 accounts and more than $1 4 billion TTC in the month of March.
And lastly in April we announced the deal between US instead of spoke to the major which is a relevant player in the logistics industries in Brazil, together, we will further advance on the urban distributions cancers develop.
Yes.
Pass code has been confirmed please wait while you are joined to the conference.
720.
Monthly active users.
Fifth pillar together for a better world.
We launched a collective effort to tackle scope three emissions with more than 165 suppliers.
That represents over 65% of our total scope three emissions.
And for the first time.
More than 50% of our newly hired employees in the quarter.
Women.
All in all I come out of Q1 encouraged.
We will remain focused on seizing the moment for the main consumption occasions to come during the reminder of the year.
We continue to expect volatility in some of our markets and cost pressures coming from commodities for the reminder of the year, but we are not making any changes to our outlook for the year.
Therefore, the full year guidance relating to Brazil, cash Cogs per hectoliter growth between 16% and 19% excluding the sale none of them best products on the marketplace remains unchanged.
And despite the challenges ahead, we are on track in terms of our main ambitions for the year.
Get Brazil back to Bottomline growth too.
You have consolidated organic EBITDA growth ahead of 10, 9%.
Organic growth that we had in <unk>.
And improve our ROIC.
To close I would like to once again, thank all our people that managed to deliver this quarter's performance.
And I would like to thank you for your attention and handled this over to you Lukas.
Thanks, Jim Good morning, good afternoon, and good evening.
During our full year 2021 call I laid out our approach towards 2022, and I mentioned, what should be the same and what should change during the year as compared to 2021.
So let me walk you through how Q1 performance stacked up using this exact same logic.
Starting with what wouldn't change.
First topline growth would remain a priority and a key performance driver. The result, 18, 5% net revenue growth overall with Brazil being the main highlights.
Second input cost pressure would remain a headwind the result cash Cogs per hectoliter grew nearly 20% at the consolidated level and for Brazil beer. It grew a little over 15%, excluding non ambev marketplace products.
And third we will continue to focus on value creation drivers.
Here during our recent Investor day, we shared the financial logic behind our strategy and why we believe there is a path to sustainable long term value creation for Ambev.
Starting with our focus on improving our return on invested capital building on our progress in 2021.
And as John pointed out there are some good examples already of how our bets are translating into improvements in the short term performance.
Now in terms of what should be different in 2022.
First.
Net revenue performance should be more driven by net revenue per hectoliter than volumes as we adapt to a higher inflationary environment.
The result, net revenue per hectoliter grew around 14% and volumes grew nearly 4%.
Second.
Cost headwinds would come mostly from commodity inflation rather than effects. The result commodity inflation represented over two thirds of the increase in Brazil beer cash Cogs per hectoliter, driven mostly by aluminum and barley.
Third SG&A growth should improve the result, cash SG&A grew almost 16% with sales and marketing growing a little over 12% distribution growing 24%, mainly due to rising diesel prices and administrative expenses growing just about 3% given lower variable compensation accrual.
And for <unk>.
Over the last two years, we had significant tax credit one offs in Brazil that positively impacted our EBITDA financial results and effective tax rate. This was not a major factor in Q1, but will be a factor in Q2, given how much. These tax credit one offs positively impacted the second quarter of 2021.
What this all means to US is that these results are a clear indication that we are on track to deliver a better EBITDA organic growth. In 2022, then the 10, 9% organic growth that we delivered in 2021.
I would now like to cover two more topics.
First our financial performance below EBITDA and cash flow and then ESG.
Cash flow from operating activities totaled about 520 million reais in the quarter, which represents a decline of about 82%.
Q1, 2021 cash flow from operating activities has grown about 84% and this quarter. There were two main factors that adversely impacted our operational cash generation.
First payment of variable compensation in March and second higher capex payments to start the year given the calendar ization of our 2021 capex commitments.
Normalized profit however grew nearly 29% in the quarter given EBITDA growth a lower net finance expense versus Q1, 2021 of about $600 million Ti and the lower effective tax rate.
But as I mentioned, we faced a very tough comp in Q2, given the tax credit one offs that totaled about $1 6 billion reais.
Of which approximately $1 2 billion reais impacted our EBITDA and almost 400 million Reais impacted our net finance results last year.
Yeah.
Turning to sustainability recently, we had some very important milestones.
I would like to highlight three related to our focus on environmental sustainability.
First we announced two more carbon neutral breweries in Brazil are good. This brewery in the state of sample and cash waivers <unk> brewery in the state of huge venue.
Together, they represent an emission reduction of over 14000 tons of greenhouse gases per year.
We intend to deliver another seven carbon neutral operations by year end.
Second well in our basket is now packaged and bottles that are made with 100% recycled PDT.
This was a groundbreaking initiative that our team embraced and managed to deliver a great outcome. We're very proud of Guatemala Bachelors heritage in Brazil, what it represents to Brazilian consumers and its leadership in the circular packaging and Tim.
Third another impressive entered initiative, but regarding scope three emissions.
As part of our ambition to reach net zero in the value chain by 2040, we engaged over a 165 suppliers that represent over 65% of our total scope three emissions covering not only reporting but also concrete actions to decarbonize.
And lastly, our 2021 ESG report is out and can be found on our Investor Relations website.
We plan to host another ESG day in the second half of the year. So we can cover in greater detail, our ambition, our progress and learning so far and what's to come.
That's it folks.
Better start to the year than we expected, which is encouraging challenges and volatility remain a reality. So our guard remains high and we have more work to do let's move to Q&A.
Okay.
Ladies and gentlemen, well now begin the Q&A session.
To ask a question.
<unk> I'll start with my.
All point to your question has been altered.
A question from detail by pressing too.
Okay.
The first question.
The Berlin and Milan.
With bank of America.
Yes.
Good morning, everyone. Good morning, John Luca Thank you for the call and the question.
I would like to acquire two to ask about beer, Brazil, you mentioned that the penetration of RGB right has been improving.
Can you can extrapolate how much is it.
So the.
Recovery of the on trade itself and how much of the strategy.
The repositioning of the RGB that you've mentioned in the Investor day, right with more adequate prices and.
What we can expect from that going forward.
You're already in.
Optimized mix of RGB is or there is more to come.
That would be my my first question and the second question is beyond the consumption environment right I think.
Exclusive of that generally are very weak and then we saw improvements.
Cross different sectors in February and March, but can you give us a sense. How are you guys seeing the beginning of Q2 in terms of.
Yeah consumption environment.
Eventually mixed performance how are you.
Feeling.
Overall, the overall market now and thank you. Thank you.
Hi, Isabella Thank you very much for the questions. So.
The first one.
Beer, Brazil, entrees recovery right and RGB borders.
What I can mention it as debt.
We still don't see in Q1, the full recovery of the social out of home or Cajun as we compared to the pre pandemic level in terms of mix. Okay. So we are still seeing mid single digits down in.
In terms of mix.
And but it's really accelerating so we saw that this is this trend this recovery was.
Happening quarter after quarter, then we had a sequential.
Sequential improvement in Q1 compared with <unk>.
Q4 of last year, but we are not there yet, but moving okay. So still.
Stu opportunity on that front.
But happy to Youll see sequentially moving.
So the first question the second one.
As I mentioned in the.
In the last quarter.
Previous call the <unk>.
The question of this year really would be about the volumes right. So I think the other things were well set so we had.
Good starting point in terms of market share.
The price sequentially look solid.
It is.
Really something that we confirmed the guidance. So the question is was really about the volumes.
We were going through a very tough January .
<unk> grown at that point at this moment and we had the questions about disposable AECOM any inflation impacting the industry, but we knew that this year. We would have to have carnival is a lot of occasions related with beer World Cup into some sort of the big questions.
Really about the volumes.
And then we figure out during the quarter that January look like really a one off because of army growth and then February got better in March It was a very strong month and we have momentum we have seen this continuing.
That's clear thank you very much.
Good morning.
Sure.
Question comes from Luke.
Goodbye.
But could they pitches that 12.
Well.
Yeah.
Hello, Good afternoon, everybody thanks for the opportunity.
Two questions on my side.
First one.
First of all we appreciate very much the breakdown youre, giving in terms of the known Ambev marketplace sales and the impact on the results I mean this is very helpful.
And particularly on that.
Was I was looking for some more color.
When do we think of the revenue per hectoliter performance in the Brazil Beer Division.
Can you break down.
To Andy.
The extent, how packaging and brand mix impacted the year over year performance or even the sequential performance I mean.
Just discussed.
The how the RGB is gaining traction there, but not there yet fully so can you can you talk a little bit how again packaging and brand mix impacted the revenue per hectoliter.
That would be great.
And the second question is regarding the performance of the core plus segment right. It's clear from from the statement that <unk>.
Premium did really well core was once again resilient, but there is a sense of the core plus loss a little bit of ground. So just wanted to see and hear your your thoughts on that.
How that specific segment performed during the quarter. Thank you.
Okay.
Okay. Thank you.
So, let's see let's see if I can break it down I'm not sure if I can break it completely talbots overall.
Our brand mix was.
Over indexing right. This the net revenue per hectoliter and effects and <unk>.
A little bit down as we mentioned in our investors day.
Debt.
During the previous year, we were rebalancing our pack price strategy on own ways and Rgb's.
So so in the end net net it was positive.
Somehow we have.
We are confident on the net revenue per hectoliter I think it's I think one way for you choose to look at it is that sequentially. It is going up.
Compared with Q4.
And if you look at my previous year due to specific Q1 of the previous year was really something that that it was a strong but then moving forward so the mix effects diluted.
A little bit in the previous year, and we are confident that now it's really sequentially going up and very solid.
Good level when you look at the full year in the level, where we are now okay. So in terms of.
Revenue per hectoliter.
Talking about our brands.
<unk>.
I think.
We are very pleased with the volumes right. So.
So if you look at our volumes compared with the pre pandemic levels.
With 2019, if you look at production numbers.
6% above 5% above 2019, and we are seeing overall.
Competitors in a net level there is much below that.
And in the short term year over year, we are happy with the 2%.
So the bright spots it was really the high end so that we grew.
Hi.
High teens right. So for me not to say its wrong high teens.
So the main stream was very solid to mid single digits.
Combining brands in the core plus.
We put a basket there that braemar <unk> spotting.
Both EMEA and it's already represent more than 10% of our volumes with the highlights for Brahma promotion and spotting and boy Bohemia.
We took some discounts out.
Regionally.
But so.
Core players we feel that.
That the strategy is right.
And represent more than 10% of our of our volumes so far.
<unk> seen choice that I mentioned is that in terms of.
Our strategy of portfolio and brands.
B.
Basket, It really went up double digits.
And it's not there okay. So it's as I mentioned to his umbrella. So the mix of 600 <unk> not skew in the pre pandemic level, but when we look at the full basket of RGB.
They are really growing double digits more on their own niche ways. Okay.
Thank you that's helpful. John .
Hey, Nick question kind of a trial.
Okay.
Yes, good morning, I wanted to.
Ask deeper on.
One of the topics that came out in the Investor day about those.
For brands.
The <unk> plus button.
And kind of.
I ask you about how do you balance between go those priority brands.
Versus a complementary brand.
No.
Do you.
See spot than Budweiser and expect those to you.
Not as big as Brahma too.
To kind of get just as big over the medium to long term.
Perhaps overtake those size of Antarctica.
Skull.
How are you how do you see this balance between these quarters.
Thank you Scott.
Priority Brett.
Okay.
For the question.
I think when we when we put our vision on innovation and white spaces.
To launch new brands and build the portfolio of the future.
<unk>.
What is very clear for us it was that we have in our space in Brazil on the core plus segment.
Ed.
<unk> highly developed across the board.
In China, and the U S in the high maturity markets in Canada and UK.
And somehow the.
So the space that would be created over there on the core plus.
The potential should be something around 25% of the industry right. So somehow in the long term I think.
So premium at some point in time could be like <unk> 25, and then.
We have.
Koreans value.
Core a little bit more than 30 for you and the rest of this value. So so this opportunity that we are focusing on the core plus.
In the interim premium. So they are we are aiming on builds something that we over indexed market share in 25% of of the of the market and so far our two bets.
Our.
<unk> margin spotting so sparkling has to be sizable and it has to be a play that can together with <unk> lead.
This segment, Okay, and then and then.
Can do you can do the math for this we are very excited is just starting.
But we are very excited about the performance about the feedback that we are having so we believe that it really can be.
<unk> a sizeable bit.
Brin spot being in the core plus talking about.
The premium segments.
We are really.
Thinks that.
Budweiser as well.
Benefits from from the reopening.
They're all something entertainment agenda, the word cup that it was very depressed prices.
In the previous years.
And we believe that back same corona.
They can play really.
Portance growth coming from.
From above and building the superpremium, the superpremium segment Sophie.
I'm not quite sure if I really answered exactly but it is a little bit.
Division I think the core plus can be 25% premium can be 20%.
We have we.
We have a dream really to over index overall.
And these brands should get sizable true to make this this mission for us.
Yes.
Yes, it does.
Does it make sense of it sounds like.
But then there's a lot of opportunity that you see.
Sure.
Forward.
So that's something that we should keep our narita hub.
Thanks very much.
Sure.
The next question comment Tony Lucas data.
Banco <unk>, Oregon.
Hi, good afternoon, everybody. Thanks for your time.
My first question is regarding the cost the.
Cost guidance that you have for the year.
Specifically, if the volumes come in.
Stronger performing well put it this way.
If you if you start seeing a bit more comfortable with.
Just kind of coming more towards the low end of the range provincially.
Coming even below that range like it was the case in the first quarter adjusted for the marketplace.
Is this something that we can say or not yet.
And the second question, maybe to Lucas regarding the working capital specifically this quarter, which was a bit heavier put it this way.
Question on the on the accounts payable line.
If there is anything particular about this quarter.
That you can highlight and how to think about that going forward. Thank you.
Okay. So I will get the first one and then and then Lucas get the second one so I think.
So when we gave this guidance.
In the previous quarter.
<unk>.
It was in the date that the the awards start is right. So at some point in time, we we were a little bit anxious about it because we didn't know how.
Everything would evolve.
With the war, but we were confident so we did a lot of math.
To get to this range and we are very confident that that.
We will be in that range, we are working very hard for that.
More accessing.
And.
It is hard to say, it's too early to mention that we can go under but we are very confident to say that we want to be inside that range.
Okay, Hi, Lucas this is Lucas here, so on working capital I think the two youre spot on I think the big difference in the quarter is really when it comes to payables and within payables. There were two main main factors factor number one was.
Yes.
The payment of the variable compensation, Okay in Q1 remember.
'twenty was a no bonus year. So 2021, there was no cash outlay for variable compensation.
It was not the case in 2021, where there was a bonus paid out and it hit us in the first quarter of 2022, Okay. So that was.
The first big impact that we saw in the payables line and.
And second.
Related to Capex.
As you May remember we have.
Payment terms that.
That varies depending on the category of suppliers and many of our suppliers, particularly capex, we have longer payment terms and so depending on the calendar ization of our capex spend.
There are instances, where we commit we book the expense in one fiscal year, but the actual payments of cash outlay falls in the next in the next fiscal year and so what happened this quarter was exactly that so there were capex commitments that were.
Booked in Q3, and Q4 and the cash outlay is going to has fallen in Q1 of this year. Okay. So those are the two main drivers of this variation on the payables line I think for the year, we continue to work very hard on improving working capital.
<unk> overall.
So I would see Q1 performance as these two factors in that.
More than that and then we're continuing to work on it okay.
Excellent. Thank you very much.
The next question comes Earl.
Gustavo <unk> with <unk>.
Okay.
Hi, Lucas Hi, everyone. Thanks for taking my question.
Wondering if we could explore a little bit the EBITDA organic growth forecast for 2022 or 11% that you have mentioned in the fourth quarter, especially trying to analyze how this first quarter compares with your initial expectations. So they're really helpful to hear from you with this board came in line with our forecast, especially.
Focusing on our business unit breakdown. So is there a business unit that has surprised you to the upside or to the downside and looking forward as we work through the second quarter do you believe this positive or negative highlights are on track to reach our <unk>.
<unk> forecast so any color that you can give us on these sites would be really helpful. Thank you.
So thank you for the question.
So let me try to elaborate on this visit.
Is there a bit.
Be sure that we had so we mentioned that we should grow faster than in the consolidated level with Ambev. Then we grew last year. The number is $10 nine.
So we feel that somehow.
What's happened in the in the.
If you look at the growth on the previous year.
Yes.
Brazil into negative territory.
And international operations.
Doing well.
We believe that our acceleration for the year. It will be the continued performance of international operations and the rebound of Brazil.
And net net when we look at this Florida everything that I look on it makes me confident that we are in line.
To make this.
This.
This guidance is.
Think Canada it was a place Ken.
Canada in Dominican Republic. It was a place that they were a little bit off.
But somehow.
We saw the other areas really comping safety, so I really feel that this quarter confirms our journey to deliver their ambition of accelerating the beat the growth that we've mentioned before in the main changes really in Brazil.
Beer and not really bouncing back.
Broadly.
Welcome. Thank you.
Okay.
The next question will come from corporate.
At this time.
Evercore.
Great. Thank you very much.
First more detailed question on the operating environment and then a bigger picture question. So can you talk.
Give us a little bit more detail in terms of what kind of pricing is going on in the Brazil beer market today that you've done that the competition has done and maybe break it out a little bit more by tiers from from what we can tell it seems.
Much more geared to the high end.
And an increasing gap between core core plus and the high end, maybe we're wrong, but that's kind of what our trade visit suggested so that's the first topic on on pricing and then the second topic kind of just bigger picture.
Important management changes at the Abi level.
A growth officer Ricardo today al.
With a lot of businesses coming into him can you talk about how that impacts how you run your business.
And if anything changes there and whether it's beneficial thank you very much.
Okay. Thank you for the question.
Robert So Robert Q1, net revenue per hectoliter was eight 4% versus last year.
Excluding India, just talking mainly in beer right.
Excluding the marketplace.
It was driven mostly by the price increase is carryover that we had.
During Q4 and revenue management initiatives.
Our less price increase was in October 21.
So Q1 is really a tough comp.
That's.
When we look at what's happened in the previous year.
But sequentially, we've seen Q Q1 go in ahead of Q4 and solid.
Which puts us in a good position to the rest of the year sequentially, we improved with <unk>, 7% comp.
Compared with Q4 2021.
And historically Q1 and Q2 the goal because of seasonality in regions, it's really usually.
Goes down and we were able to put it up and we see it solid moving forward.
Going to remain flexible watching inflation inflation is not controlled in Brazil.
Watching disposable income in elasticity.
Demand among the factors to continue to be flexible and get all the opportunities that we.
We need talking about competition and segment.
I think.
From our perspective this segments that really.
Have rate of price increase.
The most it was really the value segment the value segment was the one that.
That's increased the most prices overall in the industry.
And.
What we saw in this Q1 to it it was the price to consumer relish DVT was open.
Removes the heads.
Competition took a little bit time.
To follow.
And follow more by the mid of the Q1.
And so when you look at Q1 that we had it was with.
I'll open relativity to competitors when we see these stores.
So I think this is a little bit what I can mention so we are <unk>.
Net debt.
That the things are solid then we have that we have momentum.
Talking about <unk>.
<unk>.
We have been working together for a while there is a lot of of collaborations.
With that.
He got to work with us many time.
Long time, which with us knows a lot our operations here in Brazil with respect to <unk> the collaboration on business banking in DTC.
That these are.
Big bet for us and I feel that this structure.
That Abi proposed with Chicago, it's really something that.
That's the right thing to do and we will help us to think all of this transformation like Holistically.
As a platform not silos and really.
We'll make all these things connect and deleverage so I'm very excited about.
He got to just structure.
And just on the price increases.
Value up the most yes, but thats not a segment that is very big for you.
How would you compare the difference in your price increases between.
Core core plus and premium.
So.
Sure.
So I think the and Robert this is a little bit of a sensitive.
Any formation, we do not.
That much.
On debt, but.
There is no big difference on that.
A little bit aligned.
What we are what we are doing across the segments.
It's pretty much pretty much the same of course insight we have.
A different strategy on branding as I mentioned in the call before we took some.
Some discounts of Bohemia for example that was a brand that it was a regional play in the core plus segment too.
<unk> really focused on but I am of the promotion is spotty. So insights there is some semi strategy brand lives, but segments overall they are pretty much.
Moving up.
Most of this the same rates, yes, just to just to complement here Robert Lucas speaking.
In 2020 in 2021.
Think there was.
There was a more deliberate decision on our part to focus pricing more on one way packaging right as opposed to RGB right as we kind of re visited the entire price three and also we didn't want to overburden the on premise, which was suffering a lot during the corporate.
Pandemic. So we felt that if we were to take pricing during that period of time, where the consumption occasions out of home or depressed right, we would be kind of overburdening and slowing down the recovery of the channels, but this was more of a reality of 2020 in 2021, and so now I think it's more of a.
More of our overall kind of pricing strategy, obviously looking at segment by segment brand by brand region by region channel by channel to see where there are fine tuning needed but.
I think this was more in the past okay.
Got it thank you very much okay.
The next question comes from Mr. Fernandez Hail with credit Suisse.
Hi, Jim Hi, Luca from Linda <unk> from Credit Suisse. Thank you for the opportunity to ask questions I have.
Two on my side. So first I was wondering if you could comment on market share dynamics across markets.
Typically.
Across segments and brands.
And then also if you could give us some more detail on what happened specifically in Canada.
And how you see the business going forward. Thank you.
Hi.
Yes.
Okay.
Thanks for the question fin another talk about region.
And then and then we jump into segments.
Overall, we are we have a solid market share at numbers right. So if you look at.
I'm really putting the rolling 12 volumes MOF.
Debt.
It's really something that.
That we are looking at each with we know that.
We are the leaders of the industry. So we have to think not just about gaining market share, but we really have to think about.
Okay Jens in industry expansion and we are very excited about our volumes.
When we were discussing in the previous quarter if we.
We have cycled all of the growth and then it would be.
The story of volume growing would be behind or if we were going to continue to be able to grow volumes and then we delivered.
S. Ambev level is that the rolling 24, our rolling 12 months again that it was very strong to lead us to $1 82000 hectare leaders at the Ambev level. So this is the first thing so going in thinking just in terms of market share the break.
Now on the market share on the regions. So it is solid too. So we are gaining market share in Brazil, we are gaining market share.
In Chile, Canada, we gained the market share we have a very solid position in terms of market share in Dominican Republic.
Argentina somehow we are in line with the market share that.
That we that we had that we always had over there.
And so region wise.
We are.
Pretty much with a good performance of market share.
And looking at segments.
In Brazil.
Somehow.
So let me just mention that we don't we don't mention the usually and then knobs. We are we are selling a lot and gaining a lot of market share.
With the strategy that we had on the portfolio.
Rebalance with digital platforms really helping us to gain market share overall in apps.
That we don't talk that much and it will be.
Really see us as a model of growth moving forward, okay. So talking about about specifically about Brazil.
And the segments. So we are seeing.
We were very excited about the high end performance that we have in Q1 that we had in Q1 in terms of volumes it was.
High teens performance.
Core plus it is solid with Brahma Docomo Chi in spotting.
The core is really outperforming.
The industry overall, and we make some decisions on the value side, mainly in cans on the value.
Two really.
Put prices up and then so there is less volumes and less market share over there, but somehow market share fuse feel solid and we are focusing on a basket of brands that you mentioned in the Investor day, we are focusing across the board on the core plus segment. So we have.
We launched two years ago <unk> call in Paraguay in the core plus segment that we have.
<unk>, Argentina, and the corporate segments. So we across the board focusing a lot on the corporate segments.
And and and.
And somehow.
The focus brands that we missed mission to Brazil on the on the Investors' day.
That's the strategy that we have over there.
They specifically Canada was.
Our sales teams.
Somehow the Heath of Omi, chrome and the tough comp.
That we had previous year.
It was really something that the good parts of this that this quarter is not a big.
Quarter in terms of seasonality for Canada, and we are seeing industry recovering and we have seen that the market share that we are gaining market share in Canada. So somehow it was pretty much.
A combination of a tough comp in <unk>.
In the bedding industry that we have in Canada, but the business is solid innovation is working.
The brand is working out.
Beyond beer that we are launching they are solid in Canada. So somehow.
We are confident when we when it comes to market share in Canada.
So just to add here on Canada, specifically I think just to give you a little bit more detail around the market share performance.
First I think we saw good good performance market share wise in premium.
This was led by Stella and Corona.
When you go to core plus Michelob Ultra continues to to also performed well. So these three brands have delivered for us over the last few quarters in Canada.
So it was great to see that despite a very negative industry, particularly in January these brands continue to outperform the market and gain and gained share. Okay. And then in addition to going beyond the volume because.
Net revenue per hectoliter was was actually positive growing 4%.
On the cost side.
The operation, obviously suffered from from the commodity headwinds that have been impacting.
Many many markets right across the board and in terms of SG&A I think the main impact was on the distribution side.
Given rising freight costs.
And so that was also a factor.
In Q1, but again going forward, we have a plan in place to to improve performance.
And but we have to deliver so that's the challenge going forward.
Thank you and congrats on the results.
Thank you.
Okay.
The next question comes from Chad will take to Louise <unk> with Goldman Sachs.
Yes, Hi, Joe Hey, Lukas grew by external everyone I have two questions. The first one following up on the discussions on market share could you. Please elaborate a little bit more in volume growth in Argentina. Please.
The first one.
And the second one regarding the additional information you shared on beef.
Especially the portfolio up from Ambev.
At this point cash gross margins of close to mid single digits right, but understand that part of this is basically because we are leveraging your existing footprint in existing capacity within the tracks. So most of that should flow to EBITDA.
And please correct me if I'm wrong on this but going forward as we scale up the platform how should we think about margins.
For this business unit.
On an underlying basis should we expect additional SG&A.
Come over the next quarters or should we take this current levels as an underlying base of our margins going forward.
Thanks.
I'll get the first one and then Luca has helped me with the second one so somehow let me talk first about.
About less Argentina.
We had the we had a good performance in topline.
Yes.
It was a 40% 40% to up so you have to remember that we have the countries that we have years, Argentina, Chile, Bolivia, Paraguay and Uruguay.
So it was a good performance is the area that.
It's relevant for a four hour growth talking specifically about Argentina.
Our volumes in Argentina.
Negative on this quarter.
In beer. So they were low single digits negative cycling nice strong Q1 that we have in the previous years with Nab.
On the more positive territory.
Over there.
With a market share that was pretty much in line with what we had in the previous year.
In Argentina, Okay, so talking about beef and margins I will hand over to Lucas. Thanks.
Thanks for the question Charles.
I think overall given that given that the platform is still there's still in expansion mode again, we've come a long way in the last in the last year, but there is there's still a lot of opportunity ahead.
The honest answer is still it's still too early to to establish a steady state type kind of margin level, okay for for the marketplace business.
But given given how we are structured and how we're working right with this meaning leveraging our hour the capillarity of our of our distribution network our reach to clients.
I think conceptually it makes sense to think about.
Gross margin.
Slowing flowing more right to EBITDA margin and less SG&A right expense than you would see if you look at other kind of similar type operations, Okay conceptually that makes sense.
It's hard to give more precise indication of how much of it flows through at this time, because we are still expanding.
And if I may follow up on this thanks for the color what you think it could make sense.
At some level of margins with the kitchen cabinet guys are wouldn't it make sense.
You guys are the experts here you guys are the experts on what are the best comp okay.
We obviously.
Look at other market participants and but again, we're focused on we're focused on the clients and delivering the best possible service and assortment to our clients.
I'll leave it to you guys. The experts on what are the best comps.
Thanks, Lucas Thanks again, okay.
The next question comes from.
And with that he <unk> listen Morgan Stanley .
Yes.
Hello, John Lucas Thanks, a lot for the call most of my questions have been answered just some more specific ones.
On administrative expenses in Brazil beer, we did see the year over year decline.
As a percentage of sales I think youre running at eight 8% or so.
But still seems a little bit above historical so did you guys expect this line to go lower from here did you expect to see.
A lower number.
Ready in the first quarter.
Just for the sake of modeling.
The rest of the year in 2022.
Color here would be would be helpful. If there's anything within the admin line that surprised negatively in the first quarter and maybe that will change going forward.
Yes, I think the big Lukas here. Thanks.
Thanks for the question.
Regarding Brazil beer statistically.
I think the main the main thing I would call out was that last year.
Sales and marketing expense was actually down year over year, Okay, and so in that sense, we actually had a tough comp on the sales and marketing portion okay of Brazil beer SG&A okay.
Number one on the distribution side, we we we continue rights to face.
Cost inflation, particularly from from diesel right. So we do operate a large.
Direct distribution network.
The logistics operations.
<unk> tends to suffer right as diesel fuel prices.
<unk> continued to increase so I think looking ahead to your question right.
That should continue to pressure.
And last but not least I think the administrative cost side of things.
Was a major factor in 2021, right given the variable compensation accruals.
That's we're done quarter after quarter and for this year, we're not seeing it.
Didn't see in Q1.
And.
And we don't expect to see going forward.
That type of growth.
On the variable comp accrual side.
Just because of the dynamics between 2020 in 2021.
And the level of performance that was ahead of our expectations in 2021, Okay. I hope this helps.
It does help.
Thanks for the details Lucas.
Okay.
Alright.
Clearly fashion is over I would like to turn the floor over to Mr. Yesterday, just for his final remarks.
So.
Thank you all safe all analysts and everyone who joined the call for your timing of station.
To wrap up.
We had an encouraging quarter and we will remain focused on seizing the moment for the main consumption occasions. During the reminder of the year, we still expect some volatility and cost pressures coming mainly from commodities by despite all the Chinese we remain on track in terms of our main ambitions for the year.
Here that I'd mention here.
To deliver consolidated augment organic EBITDA growth in 2022 ahead of our 10, 9% organic growth that we had between 'twenty, one mainly because of Brazil.
Back to growth. So thank you very much Sir in July and have a great day.
This concludes this conference call. Thank you for your participation and have a good day.
Yeah.
[music].
So you saw the bounce on Apple guys out there.
Yes.
Yes.
Good morning.
Mhm.
A lot there.
Got it.
No.
Yes.