Ambev SA (ADR)(NYSE: ABEV) in the first quarter of FY 17 has missed first-quarter profit estimates due to the rapid growth in costs that offset a decline in financial expenses and higher volumes. The adjusted net income came in at 2.316 billion reais ($732.1 million), below a consensus estimate of 2.795 billion by the analysts. The income fell 20.1 percent from a year earlier. The normalized Net Profit was R$ 2,316 million in 1Q17, 20.1% below 1Q16, driven mainly due to a lower EBITDA and currency translation due to the appreciation of the Brazilian Real. The normalized earnings per share in the first quarter was R$ 0.14.
However, the top line grew to 8.0% in the first quarter, driven by the growth in all operations, that includes Brazil (+0.6%), Latin America South (LAS) (+27.4%), Central America and the Caribbean (CAC) (+5.5%) and Canada (+2.3%). The consolidated volumes grew 2.4%, growing in most regions, and net revenue per hectoliter (NR/hl) has increased by 5.3%. In Brazil, the volumes grew by 2.6%, while NR/hl fell down 1.9%. In CAC, while organic volumes were up 1.2% with a NR/hl growth of 3.4%, reported volumes increased by 27.3%, as a result of the swap of assets carried out with ABI and our operations in Panama. In LAS, the volumes grew by 3.1% and NR/hl was up 23.3%, reflecting the high inflation in the region. In Canada, volumes were slightly down (-0.9%), with a solid 3.3% NR/hl growth. Hence the stock rose over 2.2% this morning (as of 1:25PM EDT on May 4th, 2017)
Additionally, ABEV has generated cash from operations in the first quarter of FY 17 is R$ 3.1 billion compared to the R$ 2.3 billion in the corresponding period last year, which is a growth of 37.7%. In the quarter, the CAPEX reached R$ 559 million, that is 20.9% lower than in 1Q16. Further, ABEV has recorded in the Equity a cash gain of R$ 159 million, related to the recovery of restricted funds, to be received in 36 installments as of January, 2017.
In addition, in the first quarter of FY 17, ABEV has returned approximately R$ 1.1 billion to equity holders in dividends. As of March 31st, 2017, the company’s net cash position was R$ 2,106 million.
Ambev expects its cost of goods sold per hectoliter to grow in the double-digit region during the first half of this year before stabilizing or narrowing to single-digit rises between July and December. Ambev stock has risen 9.9% in the last six months (source: Google Finance).