Financial Data and Key Metrics Changes - The company reported a high single-digit organic EBITDA increase with a margin expansion of 110 basis points despite soft interest volumes in several markets due to adverse weather conditions [5][6] - EBITDA grew double digits with a margin expansion of 160 basis points, while EPS increased by 6.5% and cash flow from operating activities grew by 4% [6][20] - The Board of Directors approved an intermediary dividend payout of BRL2 billion, totaling BRL6 billion declared this year [6] Business Line Data and Key Metrics Changes - Premium and super premium brands delivered low teens growth, expanding in seven out of the top 10 markets, while the balanced choice portfolio grew in the low 20s [7][15] - In Brazil, beer volumes declined by 9% primarily due to unfavorable weather, but premium and super premium brands grew mid-teens, gaining market share [14][15] - The core segment volumes declined by low teens, reflecting higher sensitivity to industry performance and revenue management decisions [15][40] Market Data and Key Metrics Changes - In Brazil, the beer industry experienced a mid single-digit sellout decline, largely attributed to adverse weather conditions, with 70% of the decline explained by weather [36][39] - Argentina saw a sequential improvement in beer volumes, returning to growth after seven quarters, while the premium segment grew double digits [16][17] - In Canada, volumes grew by 0.8%, offsetting a soft industry affected by colder temperatures [18] Company Strategy and Development Direction - The company is focused on executing a disciplined growth strategy with an emphasis on revenue and cost management [5][6] - The digital ecosystem is seen as a bridge between core business and new revenue streams, with significant growth in the marketplace GMV [9][65] - The company aims to optimize its business through cost efficiency, with a disciplined focus on reducing non-commodity cost inflation [13][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current challenges, citing improved brand equity and a strong portfolio [29][30] - The company anticipates a significant improvement in performance in the second half of the year, driven by better weather conditions and easing consumer price relativity [42][80] - Management emphasized that there is no structural change in consumer demand in Brazil, and they remain optimistic about future growth opportunities [36][42] Other Important Information - The company has reduced the number of SKUs by around 10% to increase productivity and manage costs effectively [23][92] - The effective tax rate for the quarter was 18.4%, a decrease from 28.6% in the previous year, driven by non-recurrent events and favorable court rulings [25][26] Q&A Session Summary Question: Concerns about volume performance in Brazil - Management explained that the volume decline was primarily due to adverse weather, with 70% of the decline attributed to this factor, and expressed confidence in recovery in the second half of the year [36][42] Question: Insights on cost management and future initiatives - Management highlighted ongoing efforts in cost optimization and SKU rationalization, indicating that there is still room for further efficiency improvements [43][44] Question: Dynamics between on-trade and off-trade channels - Management noted that revenue management initiatives were implemented across all segments, with a focus on maintaining pricing aligned with inflation while managing cost inflation [55][56] Question: Digital marketplace performance - The company reported a 90% growth in marketplace GMV, driven by partnerships and an increase in customer engagement [64][65] Question: Update on brand equity and Skol strategy - Management provided insights into brand equity improvements based on tracking metrics and discussed ongoing efforts to revamp the Skol brand, indicating positive trends in distribution and support [99][102]

Financial Performance - Normalized net income increased by 15% in 2Q25, reaching BRL 2.83 billion, compared to BRL 2.46 billion in 2Q24[59, 67] - The company declared approximately BRL 60 billion in dividends year-to-date[16] - Cash and cash equivalents at the end of June 2025 stood at BRL 164 billion, a 4% increase year-over-year[69, 71, 73, 75, 77] Business Unit Performance - Brazil Beer's net revenue per hectoliter increased by 62%, despite an 89% decrease in volume[39] - Brazil NAB (Non-Alcoholic Beverages) experienced a 02% increase in volume and a 65% increase in net revenue per hectoliter[43] - LAS (Latin America South) saw a 29% increase in volume and a 194% increase in net revenue per hectoliter[45] - Canada achieved its best 2Q EBITDA growth, with volume up by 08% and net revenue per hectoliter up by 20%[51] Strategic Initiatives & Digital Platforms - Bees Marketplace GMV (Gross Merchandise Volume) increased by 90%, driven by 3P (third party) partnerships, reaching BRL 74 billion annualized GMV[24] - Zé Delivery GMV grew by 7%, with an 11% increase in average order value[24] Cost & Efficiency - The company achieved 22x operational leverage through cost and expense management initiatives[32] - A 10% reduction in SKU (Stock Keeping Unit) numbers was achieved[57]

Core Viewpoint - The article emphasizes the importance of value investing as a strategy to identify strong stocks, particularly highlighting Ambev (ABEV) as a notable example of a potentially undervalued stock with strong earnings outlook [2][6]. Group 1: Value Investing - Value investing is a preferred method for finding strong stocks across various market conditions, relying on traditional analysis of key valuation metrics [2]. - Zacks has developed a Style Scores system to identify stocks with specific traits, particularly focusing on those with high grades in the "Value" category [3]. Group 2: Ambev (ABEV) Analysis - Ambev (ABEV) currently holds a Zacks Rank of 2 (Buy) and has a Value grade of A, indicating strong potential for value investors [4]. - ABEV's current P/E ratio is 13.38, which is lower than the industry average of 15.57, suggesting it may be undervalued [4]. - The stock's Forward P/E has fluctuated between 9.82 and 14.38 over the past year, with a median of 12.90 [4]. - ABEV has a PEG ratio of 2.48, which is comparable to the industry average of 2.63, indicating a reasonable valuation considering its expected earnings growth [5]. - Over the last 12 months, ABEV's PEG ratio has ranged from 2.39 to 7.28, with a median of 5.00 [5]. - The combination of these metrics suggests that Ambev is likely undervalued and stands out as one of the strongest value stocks in the market [6].

Group 1 - The recommendation to buy Ambev (NYSE: ABEV) shares is reiterated following the release of its first-quarter 2025 results [1] - The article serves as a continuation of the initial coverage published on May 8, 2024, indicating ongoing analysis and insights into the company's performance [1] - The analyst has over 5 years of experience in equity analysis in Latin America, providing in-depth research and insights for informed investment decisions [1]

Core Insights - Steven Cress is a key figure in quantitative strategy and market data at Seeking Alpha, contributing to the development of the platform's quantitative stock rating system and analytical tools [1][2][3] - The Seeking Alpha Quant Rating system aims to interpret data for investors, providing insights that save time and enhance investment decision-making [1][2] - Cress has a strong background in investment research, having founded CressCap Investment Research and Cress Capital Management, and previously worked at Morgan Stanley and Northern Trust [3][4] Company and Industry Summary - Seeking Alpha utilizes a data-driven approach to investment research, focusing on removing emotional biases and simplifying complex analyses through algorithms and technologies [2] - The platform offers a systematic stock recommendation tool called Alpha Picks, designed for long-term investors to build high-quality portfolios [1][2] - With over 30 years of experience in equity research and portfolio management, Cress is well-equipped to address various investment topics, enhancing the credibility of Seeking Alpha's offerings [4]

Core Viewpoint - Investors are evaluating Ambev (ABEV) and Constellation Brands (STZ) for potential undervalued stock opportunities in the Beverages - Alcohol sector [1] Group 1: Zacks Rank and Earnings Outlook - ABEV has a Zacks Rank of 2 (Buy), indicating a positive earnings outlook, while STZ has a Zacks Rank of 4 (Sell) [3] - The Zacks Rank system emphasizes companies with positive earnings estimate revisions, suggesting ABEV is likely to see greater improvement in its earnings outlook [3][7] Group 2: Valuation Metrics - ABEV has a forward P/E ratio of 14.29 compared to STZ's forward P/E of 14.77, indicating ABEV may be more attractively priced [5] - ABEV's PEG ratio is 3.03, while STZ's PEG ratio is significantly higher at 8.87, suggesting ABEV offers better value relative to its expected earnings growth [5] - ABEV's P/B ratio is 2.42, compared to STZ's P/B of 4.74, further supporting ABEV's valuation advantage [6] - Based on these metrics, ABEV earns a Value grade of B, while STZ receives a Value grade of D [6]

Group 1 - Ambev (NYSE: ABEV) is experiencing growth driven by premiumisation, contributing to decent EBITDA growth [2] - The non-alcoholic product portfolio is performing well in terms of volume, indicating a positive trend in consumer preferences [2] - Net revenues for Ambev have increased modestly, which is crucial for maintaining operational stability [2] Group 2 - The Value Lab focuses on long-only value investment ideas, targeting international mispriced equities with a portfolio yield of approximately 4% [1] - The Valkyrie Trading Society consists of analysts sharing high conviction investment ideas that are expected to generate non-correlated and outsized returns in the current economic environment [3]

Financial Performance - Net revenue increased by 6.7% year-over-year, with net revenue per hectoliter growing by 5.9%, driven by a 19.5% increase in Latin America South and an 11.4% increase in Brazil NAB[7]. - Consolidated net revenue reached R$ 22,497.4 million, an 11.0% increase, with organic growth of 6.7%[43]. - Gross profit improved from R$ 10,217.3 million in Q1 2024 to R$ 11,551.6 million in Q1 2025, marking a 9.9% growth[77]. - Normalized Operating Profit increased by 15.6%, from R$ 4,902.4 million in Q1 2024 to R$ 5,731.4 million in Q1 2025[77]. - Normalized EBITDA grew by 12.7%, from R$ 6,534.8 million in Q1 2024 to R$ 7,444.6 million in Q1 2025[77]. - The company reported a profit of R$ 3,804.6 million in Q1 2025, slightly up from R$ 3,804.2 million in Q1 2024[81]. Market and Volume Growth - Consolidated volumes grew by 0.7%, with Brazil increasing by 1.4% and Latin America South by 1.1%, while Central America and the Caribbean and Canada saw declines of 4.9% and 4.2%, respectively[6][7]. - Brazil NAB achieved record volumes of 8,934.6 thousand hl in 1Q25, reflecting a 3.2% organic growth compared to 1Q24[31]. - In Brazil, total volume reached 32,093.3 thousand hl in 1Q25, representing a 1.4% organic growth[34]. - Latin America South (LAS) reported a net revenue increase of 25.8% to R$ 5,536.1 million, with organic growth of 19.5%[38]. - The core beer segment represented close to 70% of total beer volumes, with megabrands increasing volumes by 3.5% and non-alcoholic beer brands growing volumes by mid-thirties[16][30]. Cost and Profitability - Normalized EBITDA grew by 12.7%, with margins expanding by 180 basis points to 33.1%, supported by disciplined cost management[8][26]. - Cash COGS per hl in Brazil increased by 12.1% primarily due to commodity headwinds, impacting overall profitability[32]. - The company reported a gross profit margin of 51.1% in Q1 2025, compared to 49.2% in Q1 2024[77]. - The normalized EBITDA margin improved from 32.2% in Q1 2024 to 33.1% in Q1 2025[77]. Cash Flow and Dividends - Cash flow from operating activities increased by 67.6% to R$ 1,204.0 million compared to R$ 718.2 million in 1Q24, driven by Normalized EBITDA growth and lower cash taxes[9][26]. - The Board of Directors approved the distribution of intermediary dividends of approximately R$ 2 billion to be paid in July[11][26]. - Dividends and interest on shareholders' equity paid surged from R$ 11.6 million in Q1 2024 to R$ 6,611.4 million in Q1 2025[83]. Financial Position and Debt - The company's total consolidated debt decreased from R$ 3,452.7 million as of December 31, 2024, to R$ 3,218.2 million by March 31, 2025[51]. - Total assets decreased from R$ 162,507.9 million as of December 31, 2024, to R$ 147,299.0 million as of March 31, 2025[79]. - Total liabilities reduced from R$ 62,927.4 million to R$ 51,823.1 million during the same period[79]. Market Share and Digital Initiatives - The company gained market share in carbonated soft drinks, with no-sugar variants like Guaraná Antarctica Zero and Pepsi Black growing by mid-twenties and mid-thirties, respectively[32]. - BEES Marketplace reached 1.4 million monthly active buyers, a 9% increase year-over-year, with Gross Merchandise Value (GMV) growing by 60%[20]. - The digital initiative BEES covered 83% of net revenue in Argentina, 76% in Bolivia, and 87% in Paraguay[39]. Financial Results and Expenses - Net finance results in 1Q25 totaled R$ (856.4) million, a significant decrease of R$ 450.4 million compared to R$ (405.9) million in 1Q24[48]. - Interest income decreased slightly from R$ 585.6 million in 1Q24 to R$ 564.2 million in 1Q25, while interest expenses also decreased from R$ (549.5) million to R$ (506.2) million[49]. - The effective tax rate increased from 15.0% in 1Q24 to 21.7% in 1Q25, with income tax and social contribution expense rising from R$ (671.2) million to R$ (1,051.7) million[53]. - Other operating income increased from R$ 593.0 million in 1Q24 to R$ 615.2 million in 1Q25, reflecting a growth of 3.7%[45]. Forward-Looking Statements - The company remains focused on investing in brands and operational efficiency, despite anticipated FX and commodity headwinds in the second quarter[27]. - Forward-looking statements indicate potential risks and uncertainties affecting future performance, with no guarantee that current expectations will be met[74].

Group 1 - Heineken reported a mid-single-digit decline in both sales volume and revenue in the Brazilian market for Q1 FY2025, attributed to last year's high base effect [1] - The management indicated a market share growth from a "sold" perspective, with the mainstream product line, particularly the Amstel brand, showing a slight increase in sales volume [1] - Goldman Sachs views the flat year-on-year pricing as a negative surprise, reinforcing concerns about an increasingly competitive environment and some consumers shifting to lower-priced brands [1] Group 2 - Ambev is the largest beer brewer in Latin America and the Caribbean, and a subsidiary of Anheuser-Busch InBev, producing and distributing beer and PepsiCo products in Brazil and other Latin American countries [2] - Key upside risks for Ambev's stock price include higher dividend payout rates, faster-than-expected recovery of the Skol brand in Brazil, currency appreciation, and cost reductions [2] - Maintaining market share, achieving sales growth, and actual price increases in the Brazilian market, along with improvements in Argentina's macroeconomic conditions and the continuation of certain tax incentives in Brazil, are also considered potential positive factors [2]

Economic Indicators - Brazilian GDP growth was 3.4% in 2024, up from 3.2% in 2023 and 3.0% in 2022, indicating a positive trend in economic conditions [447]. - Brazilian unemployment rate decreased to 6.8% in 2024 from 7.8% in 2023 and 9.3% in 2022, reflecting improved labor market conditions [448]. - Brazilian inflation, measured by IGP-M, was 6.5% in 2024, compared to a deflation of 3.2% in 2023 and inflation of 5.5% in 2022, indicating rising cost pressures [451]. - The real depreciated against the U.S. dollar by 27.9% in 2024, following appreciations of 7.2% in 2023 and 6.5% in 2022, which may create inflationary pressures [452]. - Argentine GDP contracted by 2.6% in 2024, marking the second consecutive year of decline, with inflation rates reaching 117.8% [458]. - The average exchange rate for the Argentine Peso against the U.S. dollar was ARS 916.75 in 2024, reflecting significant depreciation [456]. Company Financial Performance - Net sales increased by 12.2% in 2024, reaching R$89,452.7 million compared to R$79,736.9 million in 2023, driven by a 13.3% growth in net revenue per hectoliter [475]. - Sales volume decreased by 0.9% to 181,920.5 thousand hectoliters in 2024 from 183,659.0 thousand hectoliters in 2023, primarily due to declines in Latin America South and Canada [475]. - Gross profit rose by 13.3% to R$45,837.6 million in 2024, with a gross margin improvement to 51.2% from 50.7% in 2023 [473]. - Net income slightly decreased by 0.8% to R$14,847.0 million in 2024, resulting in a net margin decline to 16.6% from 18.8% [473]. - Brazilian operations net sales increased by 4.8% to R$48,605.3 million, with volumes growing 1.5% to 128 million hectoliters, marking a historical high [477]. - Latin America South operations saw a significant net sales increase of 43.7% to R$19,829.7 million, driven by a 59.6% rise in net revenue per hectoliter [481]. - Cost of sales increased by 11.0% to R$43,615.1 million, but as a percentage of net sales, it decreased to 48.8% from 49.3% [485]. - Net revenue per hectoliter for total operations increased by 13.3% to R$491.7 in 2024, with notable increases in Latin America South (59.6%) and NAB (9.2%) segments [477]. - Canada operations net sales increased by 4.8% to R$9,993.9 million, supported by an 8.2% increase in net revenue per hectoliter despite a 3.1% decline in volume sold [482]. Tax and Credits - The company recognized R$19 billion in tax credits from the exclusion of ICMS from the PIS and COFINS calculation base from 2017 to 2024 [465]. - In 2024, the company recorded a positive impact of R$2,533.9 million in net revenue due to hyperinflation accounting adjustments in Argentina [463]. - The company has R$607.5 million in tax credits related to IRPJ and CSLL taxes unduly paid over SELIC interest, pending judicial proceedings [467]. - The company recorded R$3,243.1 million in tax credits for 2024, compared to R$3,040.4 million in 2023, reflecting gains from tax incentive programs [564]. - The total amount deferred in tax benefits as of December 31, 2024, was R$372.2 million, with a current portion of R$145.1 million [564]. Operational Changes and Market Dynamics - The impact of COVID-19 led to significant changes in market dynamics, with a notable increase in e-commerce sales despite restrictions on on-trade channels [468]. - Strategic revenue management initiatives contributed to the growth in net sales across various segments, particularly in Brazil and CAC operations [480]. Expenses and Income - Sales, marketing, distribution, and administrative expenses increased by 12.6% in 2024 to R$26,392.4 million [494]. - Other net operating income rose by 21.1% in 2024 to R$2,457.3 million, primarily due to higher VAT tax credits [502]. - Income from operations increased by 15.8% in 2024 to R$21,801.7 million [504]. - Net finance result improved, decreasing by 35.8% in 2024 to an expense of R$2,318.2 million [505]. - Consolidated income tax expense totaled R$4,640.4 million in 2024, with an effective tax rate of 23.8% [507]. Cash Flow and Debt - Cash flows generated from operating activities increased by 19.7% in 2023, to R$24,711.4 million from R$20,642.1 million in 2022 [553]. - Cash flows used in investing activities increased by 15.2% in 2023, to R$5,766.0 million from R$5,004.2 million in 2022 [554]. - Cash flows used in financing activities decreased by 1.4% in 2023, to R$16,115.2 million from R$16,337.8 million in 2022 [555]. - As of December 31, 2024, the total net cash position was R$26,384.9 million, an increase from R$12,835.1 million in 2023 [557]. - Short-term debt as of December 31, 2024, totaled R$1,276.4 million, with 27.0% in foreign currencies, compared to R$1,298.1 million and 19.6% in foreign currencies in 2023 [558]. - Long-term debt as of December 31, 2024, was R$2,176.3 million, with 28.0% in foreign currencies, down from R$2,203.0 million and 28.7% in foreign currencies in 2023 [560]. Leadership and Governance - Ambev's CEO, Carlos Eduardo Klutzenschell Lisboa, has been with the company since 1993 and has held various leadership positions, including Global Vice President for Global Brands [599]. - Lucas Machado Lira serves as the Chief Financial, Investor Relations, and Shared Services Officer, having joined Ambev in 2005 and held multiple leadership roles [600]. - Leticia Rudge Barbosa Kina is the Legal and Compliance Vice President, with a background in law and economics, and has been with the company since 2002 [601]. - Ricardo Morais Pereira de Melo, the People and Management Vice President, has been with Ambev since 1996, holding various sales positions [602]. - Eduardo Braga Cavalcanti de Lacerda, the Commercial Vice President, has been with the company since 2001 and has held various roles including Non-Alcoholic Vice President [603]. - Valdecir Duarte, the Industrial Vice President, has been with Ambev since 1998 and has held several engineering and supply chain management positions [604]. - Paulo André Zagman, the Logistics Vice President, joined Ambev in 2002 and has held various roles including Chief People Officer [605]. - The Board of Directors includes independent members and experienced executives, enhancing governance and strategic oversight [593]. - The company has a strong focus on leadership development, with many executives holding advanced degrees and specialized training [599][600][601][602][603][604][605]. Compensation and Share Plans - The total compensation for all members of the Board of Directors, Executive Officers, and Fiscal Council in 2024 amounted to R$177.1 million, including fixed and variable remuneration, benefits, and share-based payments [614]. - The average compensation for Executive Officers in 2024 was R$11.7 million, with a maximum of R$46.3 million [617]. - As of December 31, 2024, there were 72.5 million stock options outstanding under the Ambev Stock Option Plan, covering approximately 528 employees [618]. - The Share Based Payment Plan allows for the granting of up to 3.0% of Ambev's share capital, with 120.5 million Restricted Shares offered to approximately 519 participants as of December 31, 2024 [630]. - The average individual compensation for members of the Board of Directors in 2024 was R$3.1 million, with a maximum of R$14.3 million [617]. - The total number of Board of Directors members in 2024 was 13, with 7 members compensated for their service [617]. - The variable remuneration for Executive Officers in 2024 was R$19.5 million, contributing to a total of R$152.7 million for this group [615]. - The minimum individual compensation for Executive Officers in 2024 was R$6.5 million [617]. - The Share Plan includes provisions for Restricted Shares and Performance Shares, which vest in three to five years depending on the program [630]. - The Board of Directors has the authority to manage the Share Plan and establish terms for each Share Based Payment Program [627]. Pension Plans and Profit-Sharing - As of December 31, 2024, Ambev had 8,896 participants in its pension plans, including 220 in the defined benefit plan and 7,448 in the defined contribution plan [637]. - The expenses under the profit-sharing programs amounted to R$1,431.3 million for the year ended December 31, 2024, compared to R$963.5 million in 2023 and R$1,119.2 million in 2022, indicating a significant increase [642]. - Ambev adopted a clawback policy on October 19, 2023, allowing recovery of incentive-based compensation from executives in case of financial restatements, applicable to compensation received after October 2, 2023 [632]. - The defined contribution pension plan covers substantially all new employees, while the defined benefit plan has been closed to new participants since May 1998 [634]. - The profit-sharing plan's variable payments are based on achieving corporate, departmental, and individual performance targets, with a three-tier distribution system [640]. - Ambev's pension plan assets are primarily composed of equity securities, government and corporate bonds, and real estate properties [637]. Shareholder Engagement - The company held individual and group meetings with shareholders and analysts in 2024 to discuss business performance and growth opportunities [643]. - The IAPP (Ambev Private Pension Institute) manages the pension plans, which are independent and benefit solely the employees [634]. - The company has a collective award system for operational employees based on performance at production sites and distribution centers [641]. - No ABI exceptional stock options or restricted stock units were outstanding or held by Ambev executives as of the date of the report [633].