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Coronavirus

Brazil's Ambev Profit Dives 56%, Company Braces For More COVID-19 Fallout

Brazilian beverages company Ambev SA has posted a 56% year-on-year plunge in first-quarter net profit, far below forecasts, and executives said the coronavirus outbreak will hit results even harder in the current second quarter.

"Second-quarter will be tougher with all markets dealing with volumes decline and operational develerage," chief executive officer Jean Jereissati told investors and analysts in a call on quarterly results.

The pandemic began to hurt operations in March as governments restricted people's movement and shut down businesses, hurting distribution of alcoholic beverages.

Ambev, Latin America's largest brewer in which Anheuser Busch InBev holds a 61.9% stake, operates in 18 countries, including Argentina and Canada.

First-Quarter Performance

Net income was 1.21 billion reais ($211.9 million) in the quarter to 31 March, well below a consensus estimate of 2.5 billion reais ($438 million) compiled by Refinitiv.

Sales volume slid 5.6% drop in the first quarter, mostly in the company's largest market, Brazil, along with Central America and the Caribbean. Sales have already tumbled 27% in April as the second quarter got underway.

Beer volumes in Brazil fell 11.5% between January and March, as the slump during the pandemic offset higher sales during Carnival.

"Our sense is that the performance in Brazil beer could have been even worse, with some two-thirds of consumption still on-premises," analysts Thiago Duarte and Henrique Brustolin at Brazilian investment bank BTG Pactual wrote in a report, adding a severe round of earnings downgrades is likely.

Chief financial officer Lucas Lira said the maker of Budweiser, Corona and Stella Artois is reassessing cost structure and redirecting spending with events and travel to accelerate its digital strategy, including live streaming interactions with customers and e-commerce platforms.

In March and April, Ambev's Brazilian app Zé Delivery hit 1.6 million deliveries, more than the 2019 total, according to the company.

Ample Liquidity

Lira also said the beverages group has ample liquidity and financial discipline to overcome the crisis.

The company saw a spike in issues with receivables between late March and the beginning of April, but the situation has improved since then, he added.

"We're sitting down with key suppliers and wholesalers and working together with them to see what can be adjusted and guarantee that the ecosystem is healthy," the CFO said.

Ambev does not plan to change its pricing policy despite the coronavirus crisis. "Prices should grow in line with disposable income and inflation... I don't see a price war coming up even with COVID-19," Jereissati said.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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