Q3 2023 Ambev SA Earnings Call

Should any participant need assistance during this call. Please press star zero to reach the operator before proceeding let me mention that forward looking statements are being made under the safe Harbor of the Securities Litigation Reform Act up 1996 forward looking statements are based on the beliefs and assumptions of our best management and on there.

[noise] formation currently available to the company.

Being both 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 Ambev 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 third quarter 2022 results.

Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of them back to normal activities as.

So all of these figures are non-GAAP measures the company discloses the cultural debated profit E. P. S operating profit at E. B I T D. A on a fully reported basis in the earnings release now I'll turn the conference over to Mr. XI hours a day Saatchi <unk> Saatchi you may begin your conference.

Hello, everyone and thank you for joining our Q3 earnings call in our last call I left you with two final messages. We worked golf. This in terms of our ability to deliver operational leverage thanks to sustained commercial momentum and an improved cost and expenses out.

Look.

But that we had less visibility in terms of industry volumes in Brazil and on the overall operating environment in Argentina.

Looking at our Q3 results, it's great to see that the team delivered operational leverage once again, while industry volumes in Brazil, and our business, even Argentina, where both resilience in fact, our performance really came together in Q.

Three.

Net revenues grew roughly 19%.

EBITDA grew nearly 44% and grew over 30% ex Argentina with 560 basis points off the beat the margin expansion.

Normalize it profit grew about 25%, thanks to better and better and better financial results.

Cash flow from operating activities increased almost 30%.

Totally close to 8 billion, which is about 1.8 billion ahead of 2022.

What's more it was great to see that our focus on the things. We can control has continued to pay off.

Let's look by geography, starting with Brazil beer.

Industry was just slightly positive while our volumes declined by about 1% as we cycle the record levels set in Q3 2022.

Premium volumes outperformed once again, while our core brands grew pretty much in line with the industry and our value brands declined more than 40% versus last year.

Our commercial strategy remains in good shape, our premium and superpremium brands grew low teens led by Corona or do you should know and spot them. We estimate we gained market share in the premium and superpremium segments. Once again this quarter.

Oh, so the continued investments in our brands led to another quarter of focus brand house improvement with our premium and superpremium brands improving in health metrics ahead of competition.

Net revenue per hectoliter, excluding non ambev marketplace product continued to grow ahead of inflation and grew 6.4%. Thanks to revenue mandated met initiatives Bryce inquiries carryover and positive brand mix.

This is the fifth consecutive quarter of net revenue per hectoliter growth outperforming inflation as we remain nimble regarding pricing decisions.

EBITDA grew 35% with margin expansion of 720 basis points.

Cash Cogs per hectoliter, excluding non ambev marketplace products actually decreased 2% driven by expected effects and aluminum tailor wins as well as more efficient supply chain, given a better production and distribution footprint country.

Good thing to have gross margin expansion of 340 basis points.

And cash SG&A also decreased by 4% as continued investments in sales and marketing were more than offset by savings in distribution and administrative expenses.

Turning to Brazil, Nab volume grew almost 3% with market share pretty much flat according to our estimates.

The momentum of our health and wellness brands continued as our diet light zero brands grew volumes in the mid twenties, resulting in market share gains for this category, where we over index compared to known alcoholic beverages overall Pepsi.

The black continues to be the highlight with growth above 90% versus last year and already representing over 20% of our diet light zero volumes.

Net revenue per hectoliter grew two 3% as our revenue management initiatives and price carry overs were partially offset by an increase in stage V teeth textbook base in certain states across Brazil, and also package and channel mix EBITDA grew one per.

<unk> in the quarter with cash Cogs per hectoliter, growing 4.5% and cash SG&A up 5%.

International operations also had a consistent performance overall stuck.

Starting with <unk>, where we remain steady on a recovery track this quarter, we lapped the toughest water off last year.

As a recap by Q3 last year, we had solved most of our bottled supply constraints. However, we faced a tougher than expected demand and inefficient supply chain, given logistics and import needs.

This time volume grew more than 13% with Brexit density in the Dominican Republic, improving health in reaching volumes up above Q3 19 levels Rev.

Revenue grew 22% on the back of the continued recovery in the Dominican Republic, as we see improved commercial execution in the country with overall client N P. S above 75.

EBITDA grew by over 62% with EBITDA margin expanding to over 37%.

He loves the highlight is that preparation pays off.

On one hand topline performance was primarily impacted by volumes declining in Argentina, where the highly inflationary environment continued to impact consumer purchasing power on the other hand cash flow generated in dollars, which has been a particular pool.

Coos of ours in Argentina was ahead of last year. Despite the 22% currency devaluation that took place in the mid August.

This shows that all the work that started back in Q3 2022 is being rewarded the combination of reducing our financial hedge while also lowering dollars exposure in supplier agreements and readiness in terms of revenue manage.

Man as well with cost and expenses management are making the difference.

Outside of Argentina performance was driven by a core plus and premium brands in Chile, and power away well, we know Lazar EBITDA grew 94% with gross margins expanding 200 basis points in the beat the margins expanding 360 basis.

Points.

Lastly, Canada delivered stable with better growth of three 5% in line with H, one to 80, 23, and 310 basis points of margin expansion were a challenging industry was more than offset by revenue management initiatives.

And cost and expenses management co.

Commercially our core plus and premium brands improved health and gained market share with a highlight to call on them that is the leading brand in the premium segment in the country.

Before wrapping up I would like to spend some time on our digital platforms.

At this time last year I mentioned that we were excited about the prospects of having b's and set delivery doing a memorable FIFA World Cup for our clients and consumers.

And sees them both platforms have continued to grow in the right way.

With Bes this water biz marketplace products totaled an annualize at G. M V off 1.8 billion re is 32% above last year.

Over 80% of beef customers also benefited from the marketplace.

The top three categories food known Oklahoma like beverages, and spirits had roughly similar weight in terms of Jim Z.

As we previously mentioned, we cede that S. SKU perp walk as one of the major growth opportunities for the marketplace and we've seen another quarter of evolution with 21% growth year over year as we continue to improve the user experience.

As far as the delivery this quarter awareness increased 25% versus last year.

We reach at the $4 7 million monthly active users and Jimmy V grew by 8% year over year.

We more than doubled our coverage versus last year with Z now available in more than 640 cities across Brazil, we continue to develop and expand our marketplace by increasing the assortment of products and brands available in the platform does enhancing.

The consumer experience.

This also represents a great opportunity to monetize the beer deliver network, we built through our marketplace with accretive returns on invested capital to the company Similarly to bes marketplace.

And results have been promising year to date, we sold over 3000 don't Ambev S. Skus on the marketplace in about 20% of the orders contain at least one known ambev marketplace product representing low teens all possess.

G M D.

Given that this is our last goal for the year I would like to put our performance into perspective before wrapping up you know I talk about our transformation journey since joining Sweeney and how consistent C is a priority for us.

So I believe is important to highlight how things are coming together quarter after quarter. Despite all the challenges that have been thrown our way ceased.

Since the beginning of 2021 we grew net revenue double digits in all quarters. Thanks to our consistent Colbert show strategy execution, we delivered 10 quarters off a bit the growth out of which seven were above inflation. Despite <unk>.

FX and commodities headwinds and continued S. G&A investments in the short and long term in the beta margins have expanded for the last four consecutive quarters in.

In closing Q4 is always an exciting time for us and I am looking forward to what my team has in store for the big season.

With the arrival of summer in South America.

As usual, we want to deliver a strong finish for 2023 and position ourselves well for 'twenty 'twenty four.

So thank you very much. Thank you for your time and now let me hand, it over to Lucas.

Thanks, Yeah, Hello, everyone.

Our financial performance in the quarter illustrates well, how our renewed focus around value creation is translating into results.

I'd like to say to our team that there is life beyond the beta and that the way forward is to keep embedding into our decision making process greater focus around cash flow generation and invested capital.

The changes we implemented in Argentina that Jim alluded to are a great example of this approach working well, but let me focus on our consolidated performance.

We delivered in the quarter about 4 billion, where I live normalized profit of 25% increase versus last year.

In addition to our a bit the growth what made a big difference, where our net finance results, which improved a little over 400 million reais year over year.

And within our net finance results. The biggest factor was the reduction in losses on derivative instruments, thanks toward decisions relating to hedging in Argentina, namely structural reduction of our USD exposure and the shorter hedging time horizon as well as lower carry costs in Brazil.

We should continue to see a benefit for the remainder of the year, albeit to a lesser extent.

Cash flow from operating activities totaled nearly 8 billion reais in the quarter, which is about 1.8 billion rise above Q3, 2022.

Year to date, we've delivered almost 2 billion raised more than 2022.

Performance improved across the board with better cash flow from operating activities in all regions led by Brazil and attack.

And in terms of working capital the highlight was around reduced inventory levels, particularly in terms of packaging and raw materials, which continued to improve year over year, given our team's focus and how much input cost pressures and supply chain disruptions in recent years adversely impacted our inventory costs going into 2023.

Despite the stronger performance through September 30, Q4 is historically the most relevant quota in terms of cash flow generation. So we still have a lot of work to do.

Now I want to turn to a couple of other relevant topics taxes and the exercise of the put option related to the Dominican Republic, let.

Let me start with tax reforms in Brazil.

As you May recall the tax reform on consumption is intended to simplify the different federal state and municipal indirect taxes, while not increasing the overall tax burden.

The text approved by the House of Representatives is currently being reviewed in the Senate and the amended tax is expected to go to a vote in the Senate floor in November.

We will be better positioned to comment further upon the final approval by Congress, which is still expected before year end.

In our view the focus of any tax reform should be on reducing the complexity of the Brazilian tax system and not increasing the total tax burden, which is already among the highest in the world.

As for income taxes. There are two important updates first during Q3 draft legislation was finally submitted to Congress by the federal government regarding the deductibility of the IOC.

Operator: Truxos will be given. Should any participant need assistance during this call, please press star zero to reach the operator.

Operator: Before proceeding, let me mention that Ford's Lucky Statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Ford's Lucky Statements are based on the beliefs and assumptions of advance management and uninformation 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 an advance and could cause results to defer materially from those expressed in such Ford looking statements.

The text is currently in the house of Representatives and timing going forward remains unclear. However, it's worth noting that instead of the complete elimination of the IOC deductibility the potential changes to the existing framework may also include either adjustments to the legal parameters for purposes of the calculation and deduct.

Ability of the IOC or substitution of the IOC within allowance for corporate equity mechanism.

We will keep the market informed should the legislative process for encore.

And the second important update is that the federal government also suddenly.

Kelly of state tax incentives.

Operator: I would also like to remind everyone that, as usual, the percentage changes that we'll be discussing today's call are both organic and normalized in nature, and, unless otherwise stated, percentage changes refer to comparisons with third quarter 2022 results. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of an advance normal activities. As the localized figures are non-gap measures, the company discloses the consolidated profit, EPS, operating profit, and EBI-TGA, on a fully reported basis in the earnings release.

The potential implications to our business will ultimately depend on the nature and the extent of potential changes to the existing framework, which are still rather unclear and therefore may or may not have a relevant impact to the company.

And regarding the put option in the Dominican Republic last week, we received notice that imprisons Leo in Humana's decided to exercise its put option that was set to expire next December with respect to part of their stake in our business in the Dominican Republic and certain other CAC to markets.

We expect the disbursement to acquire such stake to take place in January 2024, and should total approximately 1.8 billion reais subject to the terms of the existing agreements with employers as Leon human.

Jean Neto: Now, I'll turn the conference over to Mr. Gerjade Sachi.

Jean Neto: Mr. Gerjade Sachi, you may begin your conference.

For further details please refer to note 27 to our financial statements.

Jean Neto: Hello everyone, and thank you for joining our Q3 earnings call. In our last call, I left you with two final messages. We were confident in terms of our ability to deliver operational leverage thanks to sustained commercial momentum and an improved cost and expenses outlook, but that we had less visibility in terms of industry volumes in Brazil and on the overall operating environment in Argentina. Looking at our Q3 results, it's great to see that the team delivered operational leverage once again while industry volumes in Brazil and our business in Argentina were both resilient.

Finally, I would like to invite everyone to join our sustainability update which will take place on November 23rd.

In addition to providing an update on our progress in terms of sustainability initiatives. The idea for this year's broadcast is to also cover how for US sustainability is about ensuring a solid governance and ethics framework for creating long term value.

The program includes the participation of our senior management as well as representatives of our board of directors and fiscal Council.

That's it for me, Thank you and we can move to Q&A.

Ladies and gentlemen, well now begin the question and answer session. If you have a question. Please press the star key followed by the one key on your Touchtone phone now.

Jean Neto: In fact, our performance really came together in Q3. Net revenues grew roughly 19%, a bit that grew nearly 44% and grew over 30% X Argentina with 560 basis points of a bit of margin expansion. Normalized profit grew about 25% thanks to better EBITDA and better finance results. And cash flow from operating activities increased almost 30%, totaling close to 8 billion, which is about 1.8 billion ahead of 2022. What's more, it was great to see that our focus on the things we can control has continued to pay off.

If at any time, you would like to remove yourself from the questioning queue. Please press Star then two please.

Please hold while we connect collect question.

Okay.

Yeah.

The first question.

Comes with Isabella <unk> with Bank of America. Please go ahead.

Thank you.

Hi, everyone. Thank you for the call I have a couple of questions.

Jean Neto: Let's look by geography, starting with Brazil Beer. Industry was slightly positive while our volumes declined by about 1%. As we cycle, the record levels set in Q3 2022. Premium volumes outperformed once again, while our core brands grew pretty much in line with the industry and our value brands declined more than 40% versus last year. Our commercial strategy remains in good shape. Our premium and super premium brands grew low things, led by Corona, Original and Spaten.

Yeah, and you mentioned in the remarks right that the cost performance for beer in Brazil was not only driven by.

FX and raw materials, but also by efficiencies right.

Across our supply chain. So I was wondering if we could get a little bit more color on the contribution of each factor on on.

Another way right out of this 2% decline.

The proportion that you attribute to lower raw materials versus.

Versus the efficiencies you're getting so that could be the first one and the second one in C O R Onvia, Brazil, but.

We saw a lower than expected that she need pretty much across the board.

Jean Neto: We estimate we gained market share in the premium and super premium segment once again this quarter. Also, the continued investments in our brands led to another quarter of focus brand health improvement, with our premium and super premium brands improving in health metrics ahead of competition. Net revenue per hectoliter, excluding non-ambat marketplace products, continued to grow ahead of inflation and grew 6.4%. Thanks to revenue management initiatives, price increase carry over and positive brand mix.

Uh huh.

How how can we think about this line going forward right can we still think SG&A going up in line with inflation for 2024 or.

Is there anything.

Different that we should take into consideration. Thank you.

Thank you.

Taylor, So yes, our GIC per hectoliter was.

Really good in this quarter.

Everybody.

Was anticipating a FX and commodities.

But we have a lot of initiatives in place for us to really be a structurally more efficient on overall costs are on our company.

Jean Neto: This is the first consecutive quarter of net revenue per hectoliter growth outperforming inflation, as we remain nimble regarding pricing decisions. EBITDA grew 35% with margin expansion of 720 basis points. Cashcogs per hectoliter, excluding non-ambat marketplace products, actually decreased 2%, driven by expected effects and aluminum tailwinds, as well as more efficient supply chain, given a better production and distribution footprint. Contributing to a growth margin expansion of 340 basis points. And cashcogs also decreased by 4% as continued investments in sales and marketing were more than offset by savings in distribution and administrative expenses.

We have seen.

Since the pandemic, we lost a little bit of efficiencies in general are the supply chain was confused there.

The volumes were growing very fast. So so we have a box off the best that we grew in a in a way that we were not that the fishes that we are getting the grip back. So a part of it is really our efficiencies.

Our view Bryce outside of FX and commodities is really below inflation.

With the deals and the contracts that we are doing with our suppliers and overall the footprints that we have been working.

In distribution and in the supply is getting a much better was that since June 22, and you have been innovating a lot and now we had time to catch up to really prepare oh, the breweries are the national footprint.

Jean Neto: Turning to Brazil NAB, volume grew almost 3% with market share pretty much flat according to our estimates. The momentum of our health and wellness brands continued as our diet-like zero brands grew volumes in the mid-20s, resulting in market share gains for this category, where we overindex compared to non-alcoholic beverages overall. Pepsi Black continued to be the highlight, with growth above 90% versus last year, and already representing over 20% of our diet-like zero volumes.

Direction of innovation that when we put all these things together the early really leading to this performance that goes beyond there.

The effects and commodity impact. So there is a thesis deep listed at prices better than inflation. There is a really piece that.

It is capabilities that we are driving another piece is really overall efficiency in the supply chain and in the distribution footprint. Okay. So this is one thing.

Jean Neto: Net revenue per hectoliter grew 2.3% as our revenue management initiatives and price carry-overs were partially offset by an increase in state-VAT taxable base in certain states across Brazil and also package and channel-mix. A bit that grew 1% in the quarter with cashcogs per hectoliter growing 4.5% and cash SGNA up 5%.

When we talk about SG&A.

And we talked about so in the end we are really died doing very.

Very discipline.

Across the board, but then we when we look particularly onshore Brazil, one thing that we really changed and we don't talk that much about it. It is that we have been growing and organize it.

Jean Neto: International operations also had a consistent performance overall, starting with CAC, where we remain steady on the recovery track. This quarter we left the toughest quarter of last year. As a recap, by Q3 last year, we had solved most of our bottle supply constraints. However, we faced a tougher than expected demand and inefficient supply chain given logistics and importance. This time, volume grew more than 13%, with Presidente in the Dominica Republic improving health and reaching volumes above Q319 levels.

In a company that wasn't designed to be very siloed and we have been transitioning this company to be more of a platform.

We need to work a waiver.

Excellent centers to to work more in a way.

That we would really protect customer and consumer ex furious with bees is that delivery with logistics, but we really reorganized the company.

Back door.

In a way that we could be much more efficient.

In terms of of administrative costs in terms of structure.

Jean Neto: Revenue grew 22% on the back of the continued recovery in the Dominica Republic as we see improved commercial execution in the country with overall clients and PS above 75%. A bit that grew by over 62% with a bit of margin expanding to over 37%.

And in the call when he sold so this was a had a big impact overall on our SG&A. This is very structural.

And it will continue moving forward.

That's clear thank you.

Jean Neto: In last, the highlight is that preparation pays off. On one hand, top line performance was primarily impacted by volumes declining in Argentina, where the highly inflationary environment continued to impact consumer purchasing power. On the other hand, cash flow generation in dollars, which has been a particular focus of hours in Argentina, was ahead of last year despite the 22% currency devaluation that took place in the mid-August. This shows that all the work that started back in Q3 2022 has been rewarded. The combination of reducing our financial hedge while also lowering dollars exposure in supplier agreements and readiness in terms of revenue management as well as cost and expenses management are making the difference.

The next question comes with Robert <unk> with Evercore. Please go ahead.

Great. Thank you very much I'm wondering if you could give us.

Some details on the competitive environment in Brazil, and in particularly the a the timing of your price increases, which usually come in kind of August September October.

You know, which how much price are you taking in and you know which price pack brands are and what the competitive reaction is thank you.

Yeah.

Thank you Robert So we are really is really important for us we are very focused on having a sustainable balance between volumes and net revenue per hectoliter really.

Protecting the industry.

Really organizing ourselves to drive the trade up with our brands.

Jean Neto: Outside of Argentina, performance was driven by corporals and premium brands in Chile and Paraguay. All we know was a bit that grew 94% with gross margins expanding 200 basis points and a bit of margins expanding 360 basis points. Lastly, Canada delivered stable a bit of growth of 3.5% in line with H1 2023 and 310 basis points of margin expansion where a challenging industry was more than offset by revenue management initiatives and cost and expenses management. Commercially, our corporals and premium brands improved health and gained market share with a highlight to Corona that is the leading brand in the premium segment in the.., and the country.

And our mid June and long term pricing strategy is unchanged.

That's all we are really looking to ensure disposable income looking into the consumer or more than the competitors.

To really decide on the pricing.

And then try to over deliver with.

Our brand mix and and with innovation.

So dish did change did not change pretty much so but we have been we are in a scenario where CPI is going down.

And we are understanding how does affect disposable income and we are being more nimble more flexible.

Two really guarantee that we maximize the.

The top line looking at our.

Consumer.

Pocket, so having said that the industry is structurally better.

Jean Neto: Before wrapping up, I would like to spend some time on our digital platforms. As this time last year, I mentioned that we were excited about the prospects of having bees and their delivery, doing a memorable, thoughtful workup for our clients and consumers. And since then, both platforms have continued to grow in the right way. Starting with bees, this quarter, bees marketplace products totaled an annualized GMZ of 1.8 billion reais, 32% above last year.

The competitive scenario and competitive landscape. It is a more rational in general.

And we feel that this is this will continue.

Of course, the Brazilian market was always very competitive always has been very competitive and we are more disk.

Discounted or not at some point in time.

Or not when you look at our bachelors, but somehow the we see more rationality inkjet.

In general in the competitive landscape.

Thank you.

Jean Neto: Over 80% of bees customers also benefited from the marketplace. The top three categories, food, non-alcoholic beverages and spirits had roughly similar weight in terms of GMZ. As we previously mentioned, we see that SKU per poc as one of the major growth opportunities for the marketplace. And we've seen another quarter of evolution, with 21% growth year over year, as we continue to improve the user experience. As for the delivery, this quarter awareness increased 25% versus last year.

The next question comes with Chocolate chip last year with BTG Pactual. Please go ahead.

Thank you Hello, Lucas everybody, Yeah I would.

Like to circle back to the your Brazil business in and enjoy if I assume he you know.

Talk a little bit about the moving parts within the brand portfolio in Brazil, right. I mean, many years ago. It was really about the core and then in the last few years, you know theres been this push towards the core plus and there's a lot of innovation.

It happened there, but in the last few quarters, it really fuels that the premium, but what do you call. It premium Super premium brands are the ones that are really really pushing the growth.

Jean Neto: We reached 4.7 million monthly active users and GMV grew by 8% year over year. We more than doubled our coverage versus last year, with that now available in more than 640 cities across Brazil. We continue to develop and expand our marketplace by increasing the assortment of products and brands available in the platform, does enhancing the consumer experience. This also represents a great opportunity to monetize the Beer Delivered Network we build through a marketplace, with a creative returns on capital to the company similarly to bees marketplace. And results have been promising. Year to date, we sold over 3,000 non-unbath SKUs on the marketplace. And about 20% of the orders contain at least one non-unbath marketplace product, representing low teams of ZS GMV.

In and gaining and gaining space right. So so just if you could comment a little bit John on how you know.

Do you agree with that if that's how we should be thinking about.

The portfolio going forward and more towards I would say the premium spectrum of it and because it does seem at this point. The core pledge is the one that is you know along with value as you guys mention before the ones that are there that they are suffering a little bit more so and and and is still on this topic and you know you you.

<unk> one more time this quarter about the the brand power Inc.

Improving right for for the portfolio. So also if you could add a little bit on which which segments premium core plus core where you see that Brent powering proving and and whether you you few weeks, it's improving relative to your market share right to whether you are in that point.

Where your brand preference is really starting to overcome your overall market share. So so that would be the first question.

Jean Neto: Given that this is our last call for the year, I would like to put our performance into perspective before wrapping up. You know, I talk about our transformation journey since 2020 and how consistency is a priority for us. So I believe it's important to highlight how things are coming together, quarter as the quarter, despite all the challenges that have been thrown our way. Since the beginning of 2021, we grew net revenue double digits in all quarters, thanks to our consistent commercial strategy execution.

The topic and then if I may a follow up on the SG&A discussion I appreciate your comments you own them.

The efforts you guys are making and so one but if I could specifically talking about SG&A and the CAC division, so along with Brazil and.

In Brazil in particular this was a strong positive surprise. So if I could you know if you could you know help us understanding a little bit more where you are there in the in the elements behind are the efficiency gains there that'd be great as well. Thank you.

Okay shovel. So thank you for the question, let's talk a little bit about brand portfolio. So when you look or a more long term basis from 2000 from pre pandemic levels stood today.

Jean Neto: We delivered 10 quarters of a bit of growth out of which seven were above inflation, despite aspects and commodities, headwinds, and continued S-DNA investments in the short and long term. And the beta margins have expanded for the last four consecutive quarters.

And we add it up are the new volume that we grew compared with 2019, so pretty much. We grew one third in the core one towards.

Jean Neto: In closing, Q4 is always an exciting time for us and I am looking forward to what my team has in store for the big season with the arrival of summer in South America. As usual, we want to deliver a strong finish for 2023 and position ourselves well for 2024.

In the core plus and one thirds into high end in the premium okay. So when when you understand this 15 million hectoliter that we grew you Brent we break it down it is pretty much.

Our growth in all of this reset and that's okay.

So this is a very important thing for me so.

Jean Neto: So, thank you for your time and now let me head it over to Lucas. Thanks, Jean.

So having said that Oh, we had this this view of our rentals 18 re accessing our push for Ya a piece of our strategy was to occupy innovate a white space in spaces of the future and we.

Lucas Ferreira: Hello, everyone. Our financial performance in the quarter illustrates well how our renewed focus around value creation is translating into results. I like to say to our team that there is life beyond the beta and that the way forward is to keep embedding into our decision-making process greater focus around cash flow generation and invested capital. The changes we implemented in Argentina that Jean alluded to are a great example of this approach working well but let me focus on our consolidated performance.

Have been doing this since 2019.

And we are very excited and in and we are very proud.

Proud about what we accomplished so far okay. So I foresee in the future that this will continue like that the growth should should continue like that.

Lucas Ferreira: We delivered in the quarter about 4 billion reais of normalized profit, a 25% increase versus last year. In addition to our abit the growth, what made a big difference were our net finance results which improved a little over 400 million reais year over year. And within our net finance results the biggest factor was the reduction in losses on derivative instruments thanks to our decisions relating to hedging in Argentina, namely structural reduction of our USD exposure and a shorter hedging time horizon as well as lower carry costs in Brazil.

One third one third one third are there is not that we're going to be towards one segment or the or the ice I believe on that.

And what really what really change it a little bit this equation in a way that we mention it is that Spartan ER was designed to be core plus blues like Aintree premium over there and because it's really selling more than we expected we are really being very disciplined on this.

Lucas Ferreira: We should continue to see a benefit for the remainder of the year albeit to a lesser extent. Cash flow from operating activities totaled nearly 8 billion reais in the quarter which is about 1.8 billion reais above Q3 2022. Year to date we've delivered almost 2 billion reais more than 2022. Performance improved across the board with better cash flow from operating activities in all regions led by Brazil and CAC. And in terms of working capital the highlight was around reduced inventory levels particularly in terms of packaging and raw materials which continued to improve year over year given our team's focus and how much input cost pressures and supply chain disruptions in recent years adversely impacted our inventory cost going into 2023.

Got it and then it went to the basket of the high end and then it's we are.

Reporting its volumes on the high end, but it's really in the ancillary premium over there. So this is really what change it.

In our in the conversation, but for the future a core plus is a relevant segment. We are playing alone in the core plus today.

There was no other brands in Brazil in the core plus so that the other brands that are premium or are they went down.

All the way to core so that space is still there we are really much over there.

And we want to point, she neutral bathroom desk, but we had material success in the high end, we are super excited about.

Lucas Ferreira: Despite the stronger performance through September 30 Q4 is historically the most relevant quarter in terms of cash flow generation so we still have a lot of work to do. Now I want to turn to a couple of other relevant topics. Taxes and the exercise of the put option related to the Dominican Republic. Let me start with tax reforms in Brazil. As you may recall the tax reform on consumption is intended to simplify the different federal state and municipal indirect taxes while not increasing the overall tax burden.

The success that we have been having in the high end corridor is really doing well. So we had a sharp.

Shortage of capacity for a while and now we are unlocking it seems like the brand equity is really really going up.

Lucas Ferreira: The tax approved by the House of Representatives is currently being reviewed in the Senate and the amended tax is expected to go to a vote in the Senate floor in November. We will be better positioned to comment further upon the final approval by Congress which is still expected before year end. In our view, the focus of any tax reform should be on reducing the complexity of the Brazilian tax system and not increasing the total tax burden which is already among the highest in the world.

In spots in is a reality is really really doing very well with shoe so far.

And they are in the high yen Budweiser now that is in the industry premium going into.

The core plus Reaganite itself in terms of brand equity is doing okay and in terms of volume mainly because of the new banks that we launch it that they are more.

In better price points. So it is really doing well and is that in this core plus plus entry premium now because of the new Bax and then when we go beyond the the Mega brands that we saw the core is really performing in line with the overall industry.

Lucas Ferreira: As for income taxes, there are two important updates. First, during Q3, draft legislation was finally submitted to Congress by the Federal Government regarding the deductibility of the IOC. The tax is currently in the House of Representatives and timing going forward remains unclear. However, it's worth noting that instead of the complete elimination of the IOC deductibility, the potential changes to the existing framework may also include either adjustments to the legal parameters for purposes of the calculation and deductibility of the IOC or substitution of the IOC with an allowance for corporate equity mechanism.

So that's that's good in the long term so we should really accelerate there's a little bit, but overall is doing okay, and and and and overall.

Talking about the broader portfolio and the innovation strategy that we have match.

There is adjacencies is doing very well we are leading this segment.

The segment Op zero beer are doing very well, leading this segment too. So all her all the portfolio is very well established and I foresee the growth really coming.

Lucas Ferreira: We will keep the market informed should the legislative process perform. And the second important update is that the Federal Government also said that the state of the AT tax incentives, the potential implications to our business will ultimately depend on the nature and the extent of potential changes to the existing framework which are still rather unclear and therefore may or may not have a relevant impact to the company. And regarding the put option in the Dominican Republic, last week we received notice that in prison Leon Jimenez decided to exercise its put option that was set to expire next December with respect to part of their stake in our business in the Dominican Republic and certain other tax markets.

From the three segments from premium from the core plus and from a and from the God. Okay. So this is one thing in terms of brand equity.

We are really doing well with our with our focus brands.

Brahma overall is a brand that's very solid and then we have Boston corridor and are really really doing well really on fire.

C or lesion, how true that is a brand that are that we have been expanding from outside the south east is doing very well in terms of brand equity Sterlite is doing very well true.

Budweiser is really reignited the volumes.

We have a brand there is really the leading branding in specialties in Brazil. There is a growing and that we don't talk about that much doing very well too so brands overall defaulters ones.

Lucas Ferreira: We expected disbursement to acquire such stake to take place in January 2024 and should total approximately 1.8 billion reais subject to the terms of the existing agreements within Playsas Leon Jimenez. For further details, please refer to note 27 to our financial statements.

Are really performing very well.

Chad This is Lucas I'll take the second one on SG&A and pack.

I think the first point to mention Chagal is that the approach towards SG&A for a pack follows the approach for SG&A that Joe mentioned for Brazil, and his first answer what I mean by this is that the idea.

Lucas Ferreira: Finally, I would like to invite everyone to join our sustainability update which will take place on November 23rd. In addition to providing an update on our progress in terms of sustainability initiatives, the idea for this year's broadcast is to also cover how for us sustainability is about ensuring a solid governance and ethics framework for creating long-term value. The program includes the participation of our senior management as well as representatives of our Board of Directors and Fiscal Council.

Lucas Ferreira: That's it for me.

<unk> to be to be very disciplined and diligent.

Particularly around distribution and administrative expenses in order to free up resources to continue to invest behind our brands in sales and marketing.

Operator: Thank you and we can move to Q&A. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press the start key followed by the one key on your touchstone phone now. If at any time you would like to remove yourself from the question in Q, please press start then two. Please hold while we collect questions.

That continues to be the prevailing logic.

Across our across our different business units.

With respect to Q3 in particular, the highlight them in CAC was really lower distribution expenses year over year.

And that's mainly because last year.

We suffered a lot in the region given all the supply chain constraints that the region. The region kind of went through and let's not forget that kaki is comprised of several islands are and where logistics are extremely complicated.

And so as the supply chain constraints were removed.

We began to benefit from kind of a meaningful reduction in our distribution expenses for the region, Okay and.

Isabella Simonato: The first question comes with Isabella Simonato with Bank of America. Please go ahead. Thank you. Good afternoon, everyone. Thank you for the call. I have a couple of questions. Jean, you mentioned in the remarks, right? That the cost performance for beer in Brazil was not only driven by effects and marmoteurs, but also by efficiencies, right, across the supply chain. I was wondering if we could get a little bit more color on the contribution of each factor in another way, right out of the 2% decline, what is the proportion that you attribute to lower ramoteurs versus the efficiencies you are getting?

And that's more than offset the administrative expenses that we that that grew year over year. While also allowed us to keep investing behind our brands as part of our as part of our plan for the year.

And then my last comment here chug with I think it's important just to take a step back and look at our year to date for SG&A as opposed to the quarter itself.

And when we look at full year SG&A right FERC kaki.

The logic that I mentioned from the outset I think is what's where is what we're going to continue to pursue meaning a strong focus in distribution and administrative expenses to free up resources and continued to invest in our brands behind us.

Isabella Simonato: That could be the first one and the second one still on beer in Brazil, but I think we saw a lower than expected actually pretty much across the board. How can we think about this line going forward, right? Can we still think as Jean, going up in line with inflation for 2024, or is there anything different that we should take into consideration? Thank you. Thank you, Isabela. So yes, our VIC per hecto litter was pretty good in this water.

And marketing expenses okay.

Yeah, that's great. Thank you both for the color.

The next question comes with Fendt rare with Barclays. Please go ahead.

Yeah. Good morning, well. Thank you very much for taking my question. Congrats on the results I wanted to switch a little furbished shelf into Argentina, Latin America yourself in general obviously.

Obviously the trends here during the quarter <unk> been much more pressured than kind of in line with what you any way expected, but wanted to get your sense about how you feel about the region going forward, where you see opportunities to maybe reignite volume growth.

Isabella Simonato: Everybody was anticipating effects and commodities, but we have a lot of initiatives in place for us to really be structurally more efficient on overall costs on our company. We have since the pandemic, we lost a little bit of efficiencies in general. The supply chain was confused, the volumes were growing very fast. So we have a part of the past that we grew in a way that we were not that efficient, that we are getting the grip back.

Particularly in Argentina are there any strategies, you're thinking off or is it an implementation or do you. Just think you have to go through the challenges right now and time will heal some of the issues you have right now.

Any update you have on that would be much appreciated. Thank you.

So so thank you very much I will start first with our ex Argentina loss ex Argentina, Okay, and and and the truth is that we cannot.

We do not disclose exactly the numbers, but we have been doing very well in this region.

And in Chile, Bolivia, and Paraguay idea of doing very well with a great performance.

Isabella Simonato: So a part of it is really efficiencies. Our pure price outside of effects and commodities is really below inflation with the de-use and the contracts that we are doing with our suppliers. And overall, the food print that we have been working in distribution and in the supply, it is getting much better once that since 2020, we have been innovating a lot. And now we had time to catch up, to really prepare all the breweries, the national food print of production of innovation, that when we put all the things together, they are really leading to this performance that goes beyond the effects and commodities.

Our overall, Chile, we have been working for a while to really get critical mass we invested in our supply chain capabilities. Our local production we gained market share. According to our estimates and efficiencies are really kidding.

King.

Materially so the our business is really getting a much stronger over there.

I.

Believe here, we have our renewal rates in our portfolio, they're launching new bax and in a new presentations and in innovation and new products.

I really igniting the accounts with overall.

With our leading brand by senior over there and in quarter. One that's doing very well true in Paraguay has been a place where we have been for life.

Isabella Simonato: In fact, so there is a piece of people's tea, the price is better than inflation, there is a really piece that it is capabilities that we are driving. Another piece is really overall efficiency in the supply chain in the distribution food print. So this is one thing.

Four five years right now really a compounding growth over there so doing very well. So this is in sight loss.

Jean Neto: When we talk about this G&A, so in the end, we are really tight doing very disciplined across the boards, but then when we look particularly into Brazil, one thing that we really change and we don't talk that much about it, it is that we have been growing and organizing in a company that was designed to be very siloed and we have been transitioning this company to be more of a platform really to work with excellent centers to work more in a way that we would really protect customer and consumer experience with BZ delivery, with logistics, but we really reorganize the company backdoor in a way that we could be much more efficient in terms of administrative costs in terms of structure in the company. So this was a had a big impact overall on our SG&A. This is very structural and it will continue moving forward.

The performance is really really solid in this three colleges when we go to Argentina.

Argentina, we knew that.

The winter was Colombian right over.

Over there that are the scenario of Oh currencies.

Control in and everything was something that at some point in time would change.

And and we were really trying to over protect ourselves with financial instruments.

That was really a consuming cash so we really changed the way we operate it over there. So we are really Ah Ah.

For one year preparing for the volatility for the changes on the on the macro scenario and in Indiana during like this year in the next.

More important for US is really to go through this correction in a way that we can protect the business for the future a bus really go through that turbulence. So we are pretty much looking more in terms of on the commercial side on market share.

In brand equity. So these are the two things that we that we is a must for us.

But overall volumes are this.

This year and probably the next it will be depending on the equation of how how we should protect our sales swung from a devaluation from a cost increase and in this is a more is a variable there is more free.

Robert Ottenstein: The next question comes with Robert Ottenstein with Evercore. Please go ahead. Great, thank you very much.

Jean Neto: I'm wondering if you could give us some details on the competitive environment in Brazil and particularly the timing of your price increases which usually come in August, September, October, which how much of your price are you taking and which price pack brands and what the competitive reaction is. Thank you. Robert, we are really important for us. We are very focused on having a sustainable balance between volumes and net revenue per hecto leader, really protecting the industry, really organizing ourselves to drive the trade up with our brands.

To move up and down in a way that would protect ourselves from the macro scenario. So so having said that we.

We are happy with our performance because we had been able to protect.

Cash flow generation.

Reality to increase cash flow generation should change the way we are operating over there thinking more how to protect the business operationally in not just financially. So we change at the relation with suppliers, we change our price condo, depending on on the forecast that we have.

So we are happy.

And we feel strong to go over.

The volatility that looks.

Jean Neto: Our medium and long-term pricing strategy hasn't changed. We are really looking into disposable income, looking into the consumer, more than the competitors to really decide on the pricing and then try to over deliver with brand mix and with innovation. So this did change, did not change pretty much. We have been, we are in a scenario where CPI is going down and we are understanding how this affects disposable income and we are being more nimble, more flexible to really guarantee that we maximize the top line looking at our consumer pocket.

<unk> already came a bit and then it will come more so volumes is the equation that can fluctuate that are more free.

Market share is our most equity is a must in cash is a must for us over there and that's how we are operating and moving forward I would just add one point here is young.

Then for for illustration purposes. We included in our release if you go to page 17, our simulation that we did regarding the impact on our year to date consolidated profit right to have a potential devaluation of the peso and the Argentinian peso that took place in mid August right.

Allusive Lee in terms of FX translation effects and the transactional effects caused by the FX exposure and as asper that simulation right.

Jean Neto: So having said that, the industry is structurally better, the competitive scenario in competitive landscape. It is more rational in general and we feel that this will continue. Of course, the Brazilian market was always very competitive, always has been very competitive and we are more discounted or not at some point in time or not when we look at competitors but somehow we see more rationality in general in the competitive landscape. Thanks. Thank you.

The net impact from that negative.

Negative impact would be approximately a 2% okay just to give just to give us kind of the performance in perspective, okay.

Yeah, Yeah that was very clear. Thank you very much Luca and fixture on Joe.

The next question comes with Philippe Chris with Kosher Bank. Please go ahead.

Thanks, operator, and good morning, John locals and team. Thanks for taking my question.

So two questions that are willing to sort of related to the same issue around value shop.

So the first one that I wanted to ask is how do you think about the propylene situation and how that relates to the volume shortfall.

Thiago Duarte: The next question comes with Thiago Duarte with BTG Pact 12. Please go ahead. Thank you. Hello, Lucas, everybody. Yeah, I would like to circle back to the Bureau of Brazil business and share if I, if you may, you know, talk a little bit about moving parts within the brand portfolio in Brazil. Right? I mean, many years ago, we was really about the core and then in the last few years, you know, there's been this push towards the core plus and a lot of innovation happened there.

It's the value segment essentially disappear in Brazil.

You guys sort of decreasing the focus on that in football suffering.

So the consumers into mainstream and then I guess a related question is how do we think about the importance of value. So we have delivered many quarters of very successful premier managed solution.

I understand the value obviously hasn't performed.

It's nicely so how do we think about the value cycle.

It's important work to go into a market.

No doubt.

Yeah.

Thiago Duarte: But in the last few quarters, it really fused at the premium and the way you call it, premium and super premium brands are the ones that are really, really pushing the growth in gaining and gaining space. Right?

So Philippe thank you very much for the question.

So so so we have we.

We always had a very tactical play.

On the value segments.

It was usually through line extensions like arch because subsidiary rule or like a regional brands that we have for one state and afford the other.

Jean Neto: So, just if you could comment a little bit, Joan, on how, you know, if you agree with that, if that's how we should be thinking about the portfolio going forward and more towards, I would say, the premium spectrum of it, because it does seem at this point that core plus is the one that is, you know, along with value as you guys mentioned before, the one that are suffering a little bit more. So, and still on this topic, you know, you mentioned one more time, this quarter, about the brand power improving, right, for the portfolio.

So it was always played that it was more tactical than strategic for us in general.

And what's really because we know that there is a piece of the market that price points and so the affordability is really necessary.

But our bet in our commitments is really with the core brands in the long term.

Okay. So having said that I think what change it is that are we.

Jean Neto: So, also, if you could add a little bit on which segments, premium, core plus core, where you see that brand power improving and whether you feel it's improving relative to your market share, right, whether you are in that point where your brand preference is really starting to overcome your overall market share.

We.

We had a mark for a while now we are with March.

Martha play on the back side on the core segments. So we really reignited this threat as your returnable glass bottles 300 ml.

Jean Neto: So, that would be the first question in the topic. And if I may, I follow up on the S&A discussion, I appreciate your comments, you know, on the, the efforts your guys are making. And so, one, but if I could specifically talking about S&A in the CAC division, so along with Brazil and Brazil being particular, this was a strong positive surprise. So, if I could, you know, if you could, you know, help us understanding a little bit more, where you are there and the elements behind the efficiency gains there, that would be great as well.

And and really gave this back.

For the core brands more than.

To the value brand the value brands they are usually.

On cans are.

And then we brought a.

Is the affordability to the core with our with the returnable strategy and this is really paying off okay. So and together with the strategy, we really unplugged discounts.

Discounts our overall debt.

Jean Neto: Thank you. Okay, Chagu. So, thank you for the question. Let's talk a little bit about brand workforce. So, when you look, or a more long-term basis from 2000, from pre-pandemic levels to today, and we add up the new volume that we grew compared with 2019. So, pretty much, we grew one-third in the core, one-third in the core plus and one-third in the high end in the premium. Okay, so, when you understand this 15 million hectolitas that we grew, we break it down.

That that made this this segments are really diminish in our volume's, okay, but having said that we see like Antarctica. A brand that is a much stronger right now with this strategy in the best we had them starch and attached to <unk>.

Zero now we see it nationally on starch occupying this rule in and be more in the stronger one that we see a brahma there is like our leading brand is really with a piece of affordability on display at some point in time, we had Brahma fresh and didn't.

Jean Neto: It is pretty much... Gros in all these three segments. So this is an important information. So having said that, we had this view of renovating, re-accessing our portfolio. A piece of our strategy was to occupy and innovate a wide space in spaces of the future. And we have been doing this since 2019. And we are very excited and we are very proud about what we accomplished so far. Okay, so I foreseen the future that this will continue like that.

Nor so we don't have it anymore now, but I'm a has to really occupy space in the mind of consumers and we have to have some facts that deliver the affordability. So so yes. So we moved from a tactical play on the value to a more.

Bold and strategic move on the core and I think this will make the core much more resilient and sustainable for the next two years.

Okay.

Very very cool.

Thanks, a lot.

Yeah.

The next question comes with alone allow news with sometimes that please go ahead.

Thank you so much.

Jean Neto: The growth should continue like that. One third, one third, one third. That is not that we're going to be towards one segment or the other. I believe on that. And what really, what really changed a little bit this equation in a way that we mentioned. It is that spotting was designed to be corpus plus like entry premium over there. And because it's really selling more than we expected. We are really being very disciplined and discounted.

Congratulations on the results I wanted to shift gears completely with my two questions.

The first one's deferred wants to do with Canada.

The first time that we see a double digit volume declining 12 years could you speak a little bit more of what happened in Canada and what's the outlook in the second and most important question I think you strive to understand your capital deployment criteria cash back to shareholders.

For him, but I mean, let me contextualize this.

Your parent company Abi analysis of $1 billion share buyback program today when they are.

Jean Neto: And then it went to the basket of the high end. And then we are reporting its volumes on the high end. But it's really in the entry premium over there. So this is really what changed in our in the conversation. But for the future corpus is a relevant segment. We are playing alone in the corpus today. There is no other brand in Brazil in the corpus. So the other brands are premium or they went down all the way to core.

About three times net debt to EBITDA and their stock is trading at a 50% higher multiple that umbrella.

Beverage sitting on more than $2 $5 billion of net cash no debt and the stock is trading at a steep discounts to Abi. So I guess the point blank question is why isn't Ambev also announcing.

The share buyback program is the multiple these are such a discount versus Abi and.

In Europe with over $2 $5 billion. Okay got you. Thank you.

Hello, Alan Lucas here. Thank you for thank you for the questions regarding.

Jean Neto: So pretty much over there. And we want to continue to bet on that. But we had material success in the high end. We are super excited about the success that we have been having in the high end. Corona is really doing well. So we had a shortage of capacity for a while. And now we are unlocking Corona. The brand equity is really going up. And spotting is a reality is really doing very well too.

Regarding Canada.

You are right that it was indeed, a very very tough very tough quarter from a volume perspective.

When we break that volume performance down.

Bye bye driver more than half of that was really the industry. Okay.

And within the industry. It was a combination of.

Less household penetration.

Very poor weather.

Throughout the quarter.

Jean Neto: So both are in the high end. But why is it now that is in the entry premium going into the corpus reignite itself in terms of brand equity is doing okay and in terms of volume. Mainly because of the new packs that we launched that they are more in better price points. So it's really doing well when it's this in this corpus plus entry premium now because of the new packs. And then when we go beyond the the mega brands that we talk the core is really performing in line with the overall industry.

Not only in terms of precipitation, but you had <unk>.

Higher than in non carrier you had floods in Nova Scotia, and cut back so whether for for sure. It did not help.

Number one number two less household penetration also did not help number three there was also some destocking in the trade over the course of the of the third quarter, Okay, and all of this kind of impacted the industry as a whole. In addition to that we have underperformed the industry.

And one of the main one of the main impact there was the fact that we cycled recycled.

Jean Neto: So that's that's good in the long term. So we should really accelerate this a little bit, but overall is doing okay. And overall talking about a broader portfolio in the innovation strategy that we have matched. There is adjacencies doing very well. We are leading the segment the segment of a zero deer doing very well leading the segment too. So overall the portfolio is very well established.

A very strong performance market share wise.

During the summer of last year. So in Q2, and Q3 of last year, we managed to gain market share.

During the summer season, there, where there were some disruptions in the market in terms of strikes and so on and so forth then and we managed to two to perform better from a market share perspective, and as we laughed that tough comp. It was up was a record market share performance for us in <unk>.

Lucas Ferreira: And I foresee the growth really coming from the three segments from premium from the corpus and from and from the courts. So this is one thing. In terms of brand equity, we are really doing well with our focused brands. Bram overall is a brand that's very solid, and then we have spotting Corona, really, really doing well, really on fire. We see original two that is a brand that we have been expanding from outside the South East, and doing very well in terms of brand equity, still doing very well too.

And in the last year and so as we as we lap that obviously, we had a we had a high watermark, but when you break.

Share performance down by by segment, what we what we think is important to stress right. Because you talked about going forward how to think of things is that Canada is a premium monetization strategy.

And when you double click.

Into our not only market share, but also brand health performance, what what we're finding in the numbers is that both a core plus premium and Super premium brands continues to trend.

Lucas Ferreira: But why is it really big night at the volumes? We have a brand that is really the leading branding in specialties in Brazil, that is Patagonia, that we don't talk about that much, doing very well too. So brands overall, the focus ones are really performing very well.

Consistently extremely well in case of premium Super premium Corona is the highlight in the case of core plus and Michelob ultra as the highlight so yes short term very tough industry.

Different drivers.

But market share, where where our strategy is kind of a.

Lucas Ferreira: Chagu, this is Lucas, I'll take the second on SGNA and CACI. I think the first point to mention, Chagu, is that the approach towards SGNA for CACI follows the approach for SGNA that Jean mentioned for Brazil in his first answer. What I mean by this is the idea continues to be to be very disciplined and diligent, particularly around distribution and administrative expenses, in order to free up resources, to continue to invest behind our brands in sales and marketing.

Focus, which is premium super premium or above or better said, where we're confident in the strategy and how the team has X has been executing the strategy.

That's Canada, the Canada, the Canada question.

Regarding regarding capital deployment.

Alan.

We have this conversation right from time to time.

The thought process on our end remains the same. This is a this is a regular conversation that we have internally that we have with with our board of directors historically discussed.

Discussions around.

Lucas Ferreira: So that continues to be the prevailing logic across our different business units. With respect to Q3 in particular, the highlight in CACI was really lower distribution expenses year over year. And that's mainly because last year we suffered a lot in the region, given all the supply chain constraints that the region kind of went through. Let's not forget that CACI is comprised of several islands and where logistics are extremely complicated. As the supply chain constraints were removed, we began to benefit from a meaningful reduction in our distribution expenses for the region. That's more than offset the administrative expenses that grew year over year, while also allowed us to keep investing behind our brands as part of our plan for the year.

Capital structure discussions around returning excess cash to shareholders is kind of a year end conversation that we have with our board.

So this is a this is a this is one points to keep in mind.

The as I mentioned the thought process continues to be the same on.

Despite all the cash that we carry today.

As we see opportunities for good returns on investments and behind organic opportunities, we will continue to deploy cash towards that.

Part of the cash also rights can be deployed for growth opportunities inorganically.

I mentioned in my prepared remarks that are we anticipate right that at the beginning of next year.

We will have a cash disbursement of approximately $1 8 billion reais in connection with an M&A deal right that we struck a many many years ago and the time has come rights to to acquire an additional piece of the stake held by the buy in prison Liana Jimenez.

Lucas Ferreira: And then my last comment here, Chagu, is I think it's important just to take a step back and look at the year-to-date for SGNA as opposed to the quarter itself. When we look at full-year SGNA for CACI, the logic that I mentioned from the outset, I think is what we're going to continue to pursue, meaning a strong focus in distribution and administrative expenses to free up resources and continue to invest in our brands behind this. Sales and marketing expenses, okay?

So capital is going to be deployed to fulfill our obligations under that agreement and we continue to have dry powder right for four kind of selective M&A.

Operator: Yeah, that's great.

Return on investments going forward.

And number three a return excess cash to shareholders. After we've kind of looked at the organic and inorganic strategies that we have so that that thinking hasnt changed.

One of the lessons that we learned over around Covid.

Operator: Thank you, Bo, for the call.

It was around the importance of protecting liquidity I think one of the reasons that we managed to come out stronger of the pandemic was really around the liquidity cushion that we enjoyed where we built before.

Ben Drew Rear: The next question comes with Ben Drew Rear with Barclays. Please go ahead. Yeah, good morning and well thank you very much for taking my question, Congress under results. I wanted to switch a little further south into Argentina, Latin America, south in general. Obviously the trends here during the quarter have been much more pressured and kind of in line with what you anyway expected, but wanted to get your sense about how you feel about the region going forward, where you see opportunities to maybe re-ignite volume growth, particularly in Argentina.

Before during and after the pandemic. So we continue to be very conscious of the need to two two to be perhaps conservative around liquidity, but for us in the type of markets that we operate in and in the current environment. That's we the world that we live in today, we continue to see value in.

And having a good amount of liquidity.

And then finally, when we think about returning excess cash to shareholders.

Ben Drew Rear: Are there any strategies you're thinking of or is it an implementation or do you just think you have to go through the challenges right now and time will heal some of the issues you have right now. Any update you have on that would be much appreciated. Thank you. So thank you very much.

We consider our dividends, we considered IFC, we consider buybacks from.

From time to time as part of our as part of our equation and to date given the tax deductibility of the IFC. The view has been to continue.

Jean Neto: I will start Ben, first with X Argentina, last X Argentina okay. And the truth is that we do not disclose exactly the numbers, but we have been doing very well in this region and Chile, Bolivia and Paraguay, they are doing very well with a great performance. Overall, Chile, we have been working for a while to really get critical mass invested in supply chain capabilities, local production, we gained the market share according to our estimates and the efficiencies are really kicking, kicking materially.

Continue to prioritize returning excess cash to shareholders in the form of ALC.

To the extent the IOC is no longer deductible.

Then we will have to take into consideration, what's the balance between dividends and share buybacks, but for so long as the IOC remains deductible, our thinking is to continue to maximize the IOC.

Thank you.

No. Thank you I appreciate it thank you so much.

Thank you all ladies and gentlemen. This concludes today's question and answer session I would like to invite Mr. Shan Shan is Saatchi <unk> to proceed with his closing statements. Please go ahead Sir.

Thank you all who joined the call for your time and attention.

As the pandemic, we have been able to deliver consistent results. Despite challenges we faced.

Jean Neto: So Bolivia, we have a renewal rate in our portfolio there, launching new packs and new presentations and innovations, new products that are really igniting the country overall with our leading brand, Pasena over there and Corona doing very well too. And Paraguay has been a place where we have been for like four or five years right now really compounding growth over there. So doing very well. So this is inside last the performances is really solid in this three counts.

Brazil is really solid continues leading the way with a solid commercial strategy.

It was a very strong quarter and remains on its recovery Beth.

We have been doing our homework to go through go through what's going on in Argentina, and it has been paying off our ex Argentina. The business is very solid with momentum and finally, we will continue to work towards delivering growth and profitability in a true.

As well as better organic EBITDA growth in 'twenty or 'twenty three.

Dan This 17.1 that we delivered in 2022 so thank you very much and I see you in our sustainability update in November have a great day.

Jean Neto: When we go to Argentina, Argentina, we knew that the winter was coming right over there, that the scenario of currencies control and everything was something that at some point in time would change. And we were really trying to overprotect ourselves with financial instruments that was really consuming cash. So we really changed the way we operated over there. So we are really for one year preparing for the volatility, for the changes on the macro scenario.

Yeah.

Thank you.

This concludes our <unk> audio conference for today. Thank you very much for your participation have a good day and thank you for using chorus call.

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Jean Neto: And in the end, during like this year and the next, more important for us is really to go through this correction in a way that we can protect the business for the future, but really go through the turbulence. So we are pretty much looking more in terms of on the commercial side, on market share and brand equity. So these are the two things that we, that we is a must for us.

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Jean Neto: But overall volumes this year, and probably the next, it will be depending on the equation of how we should protect ourselves from a devaluation, from a cost increase. And this is a more, is a variable, there is more free to move up and down in a way that we could protect ourselves from the macro scenario. So having said that, we are happy with our performance because we have been able to protect cash flow generation in reality to increase cash flow generation to change the way we are operating over there, thinking more how to protect the business operationally and not just financially.

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Jean Neto: So we change the relation with suppliers, we change our price conduct, depending on on the forecast that we have. So we are happy. And we feel strong to go over the volatility that looks already came up this and it will come more. So volumes is the equation that can fluctuate that are more free market share is a must equity is a must and cash is a must for us over there. And that's how we are operating moving forward.

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Lucas Ferreira: Let's just add one point here, Jim, then for illustration purposes, we included in our release, if you go to page 17, a simulation that that we did regarding the impact on our year to date, consolidated profit, right of a potential devaluation of the peso, the Argentinian peso, that took place in mid August, right exclusively in terms of effects translation effects. And the transactional effects caused by the effects exposure. And as for that simulation, right, the net impact and that negative impact would be approximately of 2%. Okay, just to give just to give a sense and put kind of the performance in in perspective. Okay. Yeah, that was very clear. Thank you very much. Look at some. Thanks, John Joe.

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Felipe Okros: The next question comes with Felipe Okros with kosher bank. Thanks operator and good morning. John Lucas in tune. Thanks to taking my question. So two questions that are really sort of related to the same issue around the value set. So the first one that I wanted to ask is, how do you think about the particular situation and how that relates to the value set? Thank you. It's a value segment essentially going to disappear in Brazil.

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Felipe Okros: Would you guys sort of decreasing the focus on that and appropriately suffering? Is that forcing the consumers into mainstream? And then I got a related question and how do you think about the importance of value? So we have delivered many quarters of very successful criminalization and I understand that value obviously hasn't performed nearly as nicely. So how do you think about the values? The importance is the word to go into an economic slowdown.

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Jean Neto: So, Felipe, thank you very much for the question. So we have, we always had a very technical play on the value segments. It was usually through line extensions, like Antarctica Sub-0. Or like regional brands that we have for one state and for the other. So it was always a play that it was more tactical than strategic for us in general. So, and what really, because we know that there is a piece of the market that price points and so therefore the ability is really necessary.

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Jean Neto: But our bets and our commitment is really with the core brands in the long term. Okay, so having said that, I think what changes, it is that we had a smart for a while now we are with by smart is smarter play on the backside on the core segment. So we really reignited this strategy of a returnable glass bottles 300 ml and really gave this back for for the core brands more than to the value brands, the value brands, they are usually on cans.

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Jean Neto: And then we brought this affordability to the core with the returnable strategy. And this is really pain off. Okay, so, and together with this strategy, we really unplugged discounts overall that made this segment really diminished. In our volumes, okay, but having said that, we see like Antarctica brand that is much stronger right now with the strategy in the past we had Antarctica and Antarctica sub zero. Now, we see nationally on Antarctica occupying this role and and be more in be stronger on that we see a brama that is like our leading brand is really with a piece of affordability on display at some point in time we had brama fresh in the north.

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Jean Neto: So we don't have it anymore now brama has to really occupy this space in the mind of consumers and we have to have some facts that deliver the affordability. So, so yeah, so we moved from a tactical play on the value to a more bold and strategic move on the core. And I think this will make the core much more resilient and sustainable for for for the next year.

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Operator: Very, very quick. Thanks a lot.

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Alan Alanis: The next question comes with Alan Alanis with Standa. Please go ahead. Thank you so much today, Lucas, congratulations on the results.

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Lucas Ferreira: I want to achieve years completely with my two questions. The first one has to do with Canada. I mean, in the first time though, we see a double digit volume declining 12 years. Could you speak a little bit of more of what happened in Canada and what's the outlook?

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Lucas Ferreira: And the second and most important question, I think, is try to understand your capital deployment, particularly cashback to shareholder thinking for Ambev. I mean, let me contextualize this. Your parent company, ABI, announces a $1 billion share buyback program today when they are above $3,000 that we did and their stock is trading at a 50% higher multiple than Ambev. I'm very sitting on more than $2.5 billion of net cash. You have no debt.

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Lucas Ferreira: And the stock is trading at a steep discount to ABI. So I guess the point blind question is why isn't Ambev also announcing a share buyback program is the multiple, such as discounts versus ABI. And you're with over $2.5 billion of net cash. Thank you. Hello, Alan Lucas here. Thank you for the questions. Regarding Canada, you're right that it was indeed a very tough quarter from a volume perspective. When we break that volume performance down by driver more than half of that was really the industry.

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Lucas Ferreira: And within the industry, it was a combination of less household penetration, very poor weather throughout the quarter, not only in terms of precipitation, but you had fires in Ontario, you had floods in Nova Scotia and Quebec. So weather for sure did not help. Number one, number two, less household penetration also did not help. Number three, there was also some kind of destocking in the trade over the course of the third quarter.

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Lucas Ferreira: And all this kind of impacted the industry as a whole. In addition to that, we underperformed the industry. And one of the main impacts there was the fact that we cycled a very strong performance market share-wise during the summer of last year. So in Q2 and Q3 of last year, we managed to gain market share during the summer season. There were some disruptions in the market in terms of strikes and so on and so forth.

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Lucas Ferreira: And we managed to perform better from a market share perspective. And as we laughed that tough comp, it was a record market share performance for us in Canada last year. And so as we laughed that, obviously, we had a higher water[inaudible] Share performance, down by segment. What we think is important to stress, because you talked about going forward, how to think of things, is that Canada's a premiumization strategy, and when you double click into our, not only market share, but also brand health performance, what we're finding in the numbers, is that both core plus premium and super premium, brands continue to trend consistently, extremely well.

Lucas Ferreira: In case of premium, super premium, Corona is the highlight, in case of core plus, Nicola Boltra is the highlight. So yes, short term, very tough industry, different drivers, but market share, where our strategy is kind of focused, which is premium, super premium, or above core, better said, we're confident in the strategy and how the team has been executing the strategy. That's Canada, the Canada, the Canada question.

Lucas Ferreira: Regarding capital deployment, Alan, we have this conversation right from time to time. The process on our end remains the same, this is a regular conversation that we have internally, that we have with our board of directors, historically discussions around capital structure, discussions around returning excess cash to shareholders is kind of a year-end conversation that we have with our board. So this is one point to keep in mind. As I mentioned, the thought process continues to be the same, despite all the cash that we carry today.

Lucas Ferreira: As we see opportunities for good returns on investment in behind organic opportunities, we will continue to deploy cash toward that. Part of the cash also can be deployed for growth opportunities in organically. I mentioned in my prepared remarks that we anticipate that at the beginning of next year, we will have a cash disbursement of approximately 1.8 billion reais in connection with an M&A deal, that we struck many, many years ago, and the time has come to acquire an additional piece of the stake held by the Impresas Leoni men.

Lucas Ferreira: So capital is going to be deployed to fulfill our obligations under that agreement, and we continue to have dry powder right for kind of select a M&A with good return on investment going forward. And number three, return excess cash to shareholders after we've kind of looked at the organic and inorganic strategies that we have. So that thinking hasn't changed. One of the lessons that we learned over around COVID was around the importance of protecting liquidity.

Lucas Ferreira: I think one of the reasons that we managed to come out stronger of the pandemic was really around the liquidity question that we enjoyed or we built before, during and after the pandemic. So we continue to be very conscious of the needs to be perhaps conservative around liquidity, but for us in the type of markets that we operate in and in the current environment that we the world that we live in today, we continue to see value in having a good amount of liquidity.

Lucas Ferreira: And then finally, when we think about returning excess cash to shareholders, it's we consider dividends, we consider IOC, we consider buybacks from time to time as part of our equation, and today given the tax deductibility of the IOC, the view has been to continue to prioritize returning excess cash to shareholders in the form of IOC. To the extent the IOC is no longer deductible, then we will have to take into consideration what's the balance between dividends and share buybacks, but for so long as the IOC remains deductible, our thinking is to continue to maximize the IOC. Thank you. No, thank you. I appreciate it. Thank you so much for this.

Operator: Thank you all, ladies and gentlemen. This concludes today's question and answer session.

Jean Neto: I would like to invite Mr. Giajadeh Satu to proceed with his closing statements. Please go ahead, sir. Thank you all who joined the call for your time and attention. Since the pandemic, we have been able to deliver consistent results. Despite challenges we faced, Brazil is really solid, continues leading the way with a sound commercial strategy. CAC, it was a very strong quarter and remains on its recovery path. We have been doing our homework to go through what's going on in Argentina and it has been paying off.

Jean Neto: X Argentina, the business is very solid with momentum. And finally, we will continue to work towards delivering growth and profitability in age two, as well as better organically beat the growth in 2023, then the 17.1 that we delivered in 2022.

Jean Neto: So thank you very much, and I see you in our sustainability update in November. Have a great day. Thank you.

Operator: That concludes on behalf of your conference for today. Thank you very much for your participation. Have a good day.

Operator: And thank you for using course call. Thank you very much.