SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 6-K
 
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
 
For the month of August, 2013

Commission File Number 1-15194
 

 

COMPANHIA DE BEBIDAS DAS AMÉRICAS-AMBEV
(Exact name of registrant as specified in its charter)
 

American Beverage Company-AMBEV
(Translation of Registrant's name into English)
 

Rua Dr. Renato Paes de Barros, 1017 - 4 th Floor
04530-000 São Paulo, SP
Federative Republic of Brazil
(Address of principal executive office)
 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. 


Form 20-F ___X___ Form 40-F _______

  Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  

Yes _______ No ___X____


 
 

 

 

Companhia de Bebidas das Américas - AmBev

Interim Consolidated Financial Statements as at June 30, 2012

and Report on Review of

Consolidated Interim

Accounting Informaiton

 

 


 
 

Report on Review of Consolidated Interim

Accounting Information

 

 

To the Board of Directors and Shareholders

Companhia de Bebidas das Américas – AmBev

 

 

 

 

Introduction

 

We have reviewed the accompanying consolidated interim accounting information of Companhia de Bebidas das Américas – AmBev, included in the Quarterly Information Form ( ITR) for the quarter ended June 30, 2013, comprising the interim consolidated balance sheet at that date and the interim consolidated income statements, interim consolidated statements of comprehensive income for the quarter and six-month periods then ended, and the interim consolidated statements of changes in equity and cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory information.

 

Management is responsible for the preparation of the consolidated interim accounting information in accordance with the accounting standard CPC 21, Interim Financial Reporting, of the Brazilian Accounting Pronouncements Committee (CPC) and International Accounting Standard (IAS) 34 - Interim Financial Reporting issued by the International Accounting Standards Board (IASB). Our responsibility is to express a conclusion on this consolidated interim accounting information based on our review.

 

Scope of review

 

We conducted our review in accordance with Brazilian and International Standards on Reviews of Interim Financial Information (NBC TR 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Brazilian and International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion on the

interim information

 

Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim accounting information included in the quarterly information referred to above has not been prepared, in all material respects, in accordance with CPC 21 and IAS 34, applicable to the preparation of the consolidated interim accounting information.

 


 
 

 

Other matters

 

Statement of value added

 

We have also reviewed the interim consolidated value added statements for the six-month period ended June 30, 2013, considered to be supplementary information under IFRS which does not require the presentation of the statement of value added. This statement has been submitted to the same review procedures described above and, based on our review, nothing has come to our attention that causes us to believe that they have not been prepared, in all material respects, in a manner consistent with the consolidated interim accounting information taken as a whole.

 

 

 

São Paulo, July 30, 2013.  

 

 

 

PricewaterhouseCoopers

Auditores Independentes

CRC 2SP000160/O-5

 

 

 

Eduardo Rogatto Luque

Contador CRC 1SP166259/O-4

 

 


 

 

 

 

 

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

Interim Consolidated Balance Sheets

As of June 30, 2013 and December 31, 2012

 

(Expressed in thousands of Brazilian Reais)

 

Assets

Note

06/30/2013

12/31/2012

 

 

 

 

Current assets

 

 

 

Cash and cash equivalents

 

4,435,765

8,926,165

Investment securities

4

486,133

476,607

Trade and other receivables

 

4,256,192

4,268,221

Inventories

5

2,726,250

2,466,341

Taxes receivable

 

109,998

114,502

Assets held for sale

 

-

4,086

 

 

12,014,338

16,255,922

 

 

 

 

Non-current assets

 

 

 

Investment securities

4

246,662

249,379

Trade and other receivables

 

1,930,007

1,855,013

Deferred tax assets

6

1,913,318

1,418,515

Taxes receivable

 

10,843

12,316

Employee benefits

 

25,480

25,480

Investments in associates

 

18,117

24,012

Property, plant and equipment

7

11,717,979

11,412,280

Intangible assets

 

3,139,819

2,935,396

Goodwill

8

19,966,183

19,971,456

 

 

38,968,408

37,903,847

 

 

 

 

Total assets

 

50,982,746

54,159,769

 

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 

 

 


 
 

 

Interim Consolidated Balance Sheets (continued)

As of June 30, 2013 and December 31, 2012

 

 (Expressed in thousands of Brazilian Reais)

 

Equity and Liabilities

Note

06/30/2013

12/31/2012

 

 

 

 

Current liabilities

 

 

 

Trade and other payables

 

8,282,429

13,570,776

Interest-bearing loans and borrowings

9

897,002

837,772

Bank overdrafts

 

-

123

Income tax and social contribution payable

 

736,860

972,556

Provisions

10

140,022

137,452

 

 

10,056,313

15,518,679

 

 

 

 

Non-current liabilities

 

 

 

Trade and other payables

 

3,280,231

3,063,989

Interest-bearing loans and borrowings

9

2,111,693

2,305,957

Deferred tax liabilities

6

1,138,266

1,048,343

Provisions

10

458,387

518,076

Employee benefits

 

1,834,645

1,780,908

 

 

8,823,222

8,717,273

 

 

 

 

Total liabilities

 

18,879,535

24,235,952

 

 

 

 

Equity

11

 

 

Share capital

 

12,742,017

12,187,349

Reserves

 

14,534,961

16,676,395

Retained earnings

 

3,711,327

-

Equity attributable to equity holders of Ambev

 

30,988,305

28,863,744

 

 

 

 

Non-controlling interests

 

1,114,906

1,060,073

 

 

 

 

Total equity and liabilities

 

50,982,746

54,159,769

 

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 

 


 
 

 

Interim Consolidated Income Statements

For the six and three-month period ended June 30, 2013 and 2012

(Expressed in thousands of Brazilian Reais)

 

 

 

Six-month period ended:

 

Three-month period ended:

 

Note

06/30/2013

06/30/2012

 

06/30/2013

06/30/2012

 

 

 

 

 

 

 

Net sales

13

15,275,939

14,061,117

 

7,503,133

6,825,403

Cost of sales

 

(5,215,093)

(4,612,360)

 

(2,592,270)

(2,299,979)

Gross profit

 

10,060,846

9,448,757

 

4,910,863

4,525,424

 

 

 

 

 

 

 

Sales and marketing expenses

 

(4,073,523)

(3,553,091)

 

(2,084,616)

(1,804,658)

Administrative expenses

 

(748,180)

(674,139)

 

(396,440)

(356,893)

Other operating income/(expenses)

14

608,257

308,477

 

294,759

169,292

Income from operations before special items

 

5,847,400

5,530,004

 

2,724,566

2,533,165

 

 

 

 

 

 

 

Special items

 

(6,245)

(26,774)

 

(5,269)

(26,774)

Income from operations

 

5,841,155

5,503,230

 

2,719,297

2,506,391

 

 

 

 

 

 

 

Finance cost

16

(795,430)

(600,156)

 

(398,024)

(309,573)

Finance income

16

286,584

331,689

 

129,865

123,744

Net finance cost

 

(508,846)

(268,467)

 

(268,159)

(185,829)

 

 

 

 

 

 

 

Share of results of associates

 

1,785

59

 

97

(301)

Income before income tax

 

5,334,094

5,234,822

 

2,451,235

2,320,261

 

 

 

 

 

 

 

Income tax expense

17

(1,034,313)

(971,261)

 

(527,947)

(391,206)

Net income

 

4,299,781

4,263,561

 

1,923,288

1,929,055

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

Equity holders of Ambev

 

4,225,971

4,218,112

 

1,882,440

1,903,839

Non-controlling interests

 

73,810

45,449

 

40,848

25,216

 

 

 

 

 

 

 

Basic earnings per share – preferred

 

1.42

1.43

 

0.63

0.64

Diluted earnings per share– preferred

 

1.42

1.42

 

0.63

0.64

Basic earnings per share – common

 

1.29

1.30

 

0.58

0.58

Diluted earnings per share– common

 

1.29

1.29

 

0.57

0.58

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 


 
 

 

Interim Consolidated Statements of Comprehensive Income

For the six and three-month period ended June 30, 2013 and 2012

 

(Expressed in thousands of Brazilian Reais)

 

 

Six-month period ended:

 

Three-month year ended:

 

06/30/2013

06/30/2012

 

06/30/2013

06/30/2012

 

 

 

 

 

 

Net income

4,299,781

4,263,561

 

1,923,288

1,929,055

 

 

 

 

 

 

Exchange differences on translation of foreign operations (gains/ (losses))

175,474

542,052

 

350,539

596,778

Actuarial gains and (losses)

7,326

(46,181)

 

6,528

(28,565)

Gains/losses of non-controlling interest´s share

-

866,606

 

-

866,606

Put option of a subsidiary interest

-

(1,958,262)

 

-

(1,958,262)

Change in adjustment international standards

-

60,718

 

-

-

Cash flow hedges - gains / (losses)

 

 

 

 

 

Recognized in Equity (cash flow hedge)

65,948

364,087

 

215,765

348,993

Removed from Equity and included in profit or loss

(72,945)

(211,541)

 

(20,535)

(121,927)

Deferred income tax variance in Equity and other changes

(2,302)

(85,570)

 

(60,340)

(122,840)

Total cash flow hedges

(9,299)

66,976

 

134,890

104,226

Net income (loss) recognized directly in Equity

173,501

(468,091)

 

491,957

(419,217)

 

 

 

 

 

 

Total comprehensive income

4,473,282

3,795,470

 

2,415,245

1,509,838

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

Equity holders of Ambev

4,366,709

2,877,001

 

2,308,528

638,813

Non-controlling interest

106,573

918,469

 

106,717

871,025

 

 

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 


 
 

 

  Interim Consolidated Statements of Changes in Equity

  

  (Expressed in thousands of Brazilian Reais)

 

 

Attributable to equity holders of Ambev

 

 

 

 

 

 

 

 

 

 

 

 

Capital

Capital reserves

Net income reserve

Retained earnings

Comprehensive Income

Total

Non-controlling interest

Total equity

At January 1, 2013

12,187,349

4,768,925

13,254,995

-

(1,347,525)

28,863,744

1,060,073

29,923,817

Effects of changes in accounting standards

-

-

-

(253,516)

253,516

-

-

-

At January 1, 2013 adjusted

12,187,349

4,768,925

13,254,995

(253,516)

(1,094,009)

28,863,744

1,060,073

29,923,817

 

 

 

 

 

 

 

 

 

Net income

-

-

-

4,225,971

-

4,225,971

73,810

4,299,781

Other comprehensive income

 

 

 

 

 

 

 

 

Translation reserves - gains / (losses)

-

-

-

-

144,283

144,283

31,191

175,474

Cash flow hedges - gains / (losses)

-

-

-

-

(10,855)

(10,855)

1,556

(9,299)

Actuarial gain / (losses)

-

-

-

-

7,310

7,310

16

7,326

Total Comprehensive income

-

-

-

4,225,971

140,738

4,366,709

106,573

4,473,282

Shares issued

554,668

(373,404)

-

-

-

181,264

-

181,264

Put option to acquire interest in a subsidiary

-

1,980,887

-

-

(2,024,066)

(43,179)

-

(43,179)

Gains/(losses) of non-controlling interest´s share

-

-

-

-

(311,822)

(311,822)

-

(311,822)

Dividends

-

-

(1,854,010)

-

-

(1,854,010)

(51,740)

(1,905,750)

Interest on shareholder's equity

-

-

-

(261,128)

-

(261,128)

-

(261,128)

Share-based payment

-

74,190

-

-

-

74,190

-

74,190

Treasury shares

-

(27,463)

-

-

-

(27,463)

-

(27,463)

At June 30, 2013

12,742,017

6,423,135

11,400,985

3,711,327

(3,289,159)

30,988,305

1,114,906

32,103,211

 

  

 


 
 

 

 

Attributable to equity holders of Ambev

 

 

 

 

 

 

 

 

 

 

 

 

Capital

Capital reserves

Net income reserve

Retained earnings

Comprehensive Income

Total

Non-controlling interest

Total equity

At January 1, 2012

8,303,936

7,030,058

12,581,184

-

(2,303,858)

25,611,320

217,525

25,828,845

 

 

 

 

 

 

 

 

 

Net income

-

-

-

4,218,112

-

4,218,112

45,449

4,263,561

Other comprehensive income

 

 

 

 

 

 

 

 

Change in adjustment international standards

-

-

-

-

60,718

60,718

-

60,718

Translation reserves - gains / (losses)

-

-

-

-

371,392

371,392

170,660

542,052

Cash flow hedges - gains / (losses)

-

-

-

-

67,407

67,407

(431)

66,976

Gains/(losses) of non-controlling interest´s share

-

-

-

-

163,919

163,918

702,688

866,606

Put option to acquire interest in a subsidiary

-

-

-

-

(1,958,262)

(1,958,262)

-

(1,958,262)

Actuarial gain / (losses)

-

-

-

-

(46,284)

(46,284)

103

(46,181)

Total Comprehensive income

-

-

-

4,218,112

(1,341,111)

2,877,001

918,469

3,795,470

Shares issued

3,439,122

(122,491)

(3,290,295)

-

-

26,336

-

26,336

Dividends

-

-

(681,355)

(177,681)

-

(859,036)

(30,670)

(889,706)

Share-based payment

-

54,032

-

-

-

54,032

-

54,032

Treasury shares

-

(20,230)

-

-

-

(20,230)

-

(20,230)

Others

-

-

-

14,757

-

14,757

-

14,757

At June 30, 2012

11,743,058

6,941,369

8,609,534

3,078,986

(3,644,969)

26,727,978

1,105,324

27,833,302

 

  

The accompanying notes are an integral part of the interim consolidated financial statements.

 


 
 

 

Interim Consolidated Cash Flow Statements

For the six and three-month period ended  June 30, 2013 and 2012

 

  (Expressed in thousands of Brazilian Reais)

 

 

 

Six-month period ended:

 

Three-month period ended:

 

Note

06/30/2013

06/30/2012

 

06/30/2013

06/30/2012

 

 

 

 

 

 

 

Net income

 

4,299,781

4,263,561

 

1,923,288

1,929,055

Depreciation, amortization and impairment

 

969,481

806,998

 

493,331

427,873

Impairment losses on receivables and inventories

 

72,653

68,484

 

32,306

35,848

Additions/(reversals) in provisions and employee benefits

 

74,378

105,933

 

25,799

58,184

Net finance cost

16

508,846

268,467

 

268,159

185,829

Loss/(gain) on sale of property, plant and equipment and intangible assets

 

(2,569)

3,578

 

(7,203)

873

Loss/(gain) on assets held for sale

 

-

3,676

 

-

3,251

Equity-settled share-based payment expense

18

80,763

63,162

 

37,837

30,033

Income tax expense

17

1,034,313

971,261

 

527,947

391,206

Share of result of associates

 

(1,785)

(59)

 

(97)

301

Other non-cash items included in results

 

(74,227)

(108,567)

 

(24,640)

(51,595)

Cash flow from operating activities before changes in working capital and use of provisions

 

6,961,634

6,446,494

 

3,276,727

3,010,858

 

 

 

 

 

 

 

Decrease/(increase) in trade and other receivables

 

(58,566)

161,097

 

(243,257)

196,765

Decrease/(increase) in inventories

 

(289,047)

(254,640)

 

164,972

(83,732)

Increase/(decrease) in trade and other payables

 

(2,313,640)

(2,345,780)

 

(627,813)

(374,903)

Cash generated from operations

 

4,300,381

4,007,171

 

2,570,629

2,748,988

 

 

 

 

 

 

 

Interest paid

 

(161,203)

(132,866)

 

(10,732)

(73,593)

Interest received

 

186,675

348,253

 

(27,821)

150,771

Income tax paid

 

(1,897,653)

(918,665)

 

(836,133)

(229,376)

Cash flow from operating activities

 

2,428,200

3,303,893

 

1,695,943

2,596,790

 

 

 

 

 

 

 

Proceeds from sale of property, plant and equipment and intangible assets

7

27,189

11,833

 

19,776

3,676

Acquisition of property, plant and equipment and intangible assets

7

(1,300,095)

(993,774)

 

(756,441)

(628,161)

Acquisition of subsidiaries, net of cash acquired

 

(169,436)

(2,453,302)

 

(106,806)

(2,453,302)

Investment in short term debt securities and net proceeds/(acquisition) of debt securities

 

(35,000)

(43,787)

 

(113,758)

1,226,756

Net proceeds/(acquisition) of other assets

 

(1)

(12,970)

 

-

(6,833)

Cash flow from investing activities

 

(1,477,343)

(3,492,000)

 

(957,229)

(1,857,864)

 

 

 

 

 

 

 

Capital increase

11

160,344

26,336

 

4,035

20,391

Advances for future capital increase

 

-

170,485

 

-

170,485

Proceeds/repurchase of treasury shares

 

(8,920)

(20,230)

 

(7,407)

(20,033)

Proceeds from borrowings

 

284,295

649,290

 

275,099

(57,466)

Repayment of borrowings

 

(649,850)

(1,318,675)

 

(343,534)

(335,795)

Cash net of finance costs other than interests

 

(260,546)

(143,270)

 

(52,345)

(160,191)

Payment of finance lease liabilities

 

(757)

(4,106)

 

(386)

(3,077)

Dividends (paid) / received

 

(4,976,017)

(2,531,260)

 

13,154

(2,465,758)

Cash flow from financing activities

 

(5,451,451)

(3,171,430)

 

(111,384)

(2,851,444)

 

 

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

(4,500,594)

(3,359,537)

 

627,330

(2,112,518)

Cash and cash equivalents less bank overdrafts at begin of period

 

8,926,042

8,063,935

 

3,665,299

6,706,551

Effect of exchange rate fluctuations

 

10,317

185,804

 

143,136

296,169

Cash and cash equivalents less bank overdrafts at end of period

 

4,435,765

4,890,202

 

4,435,765

4,890,202

 

The accompanying notes are an integral part of the interim consolidated financial statements.

7

 


 
 

 

Interim Consolidated Value Added Statements

Six-month period ended June 30, 2013 and 2012

 

  (Expressed in thousands of Brazilian Reais)

 

 

Six-month period ended:

 

06/30/2013

06/30/2012

 

 

 

Revenues

24,052,059

22,130,615

Sale of goods, products and services

23,777,651

21,972,979

Other operating income

301,268

209,601

Allowance for/reversal of doubful accounts

(26,860)

(51,965)

Input acquired from third parties

(8,798,433)

(7,712,855)

Costs of products, goods and services sold

(5,663,620)

(5,192,333)

Materials - energy - third party services - others

(3,103,004)

(2,489,417)

(Loss)/recovery of assets

(31,809)

(31,105)

Gross added value

15,253,626

14,417,760

Retention

(937,668)

(775,890)

Depreciation and amortization

(937,668)

(775,890)

Net added value produced

14,315,958

13,641,870

Value added received in transfer

208,417

250,549

Share of results of associates

1,785

59

Finance income

286,584

331,689

Others

(79,952)

(81,199)

Total added value to be distribute

14,524,375

13,892,419

Distribution of value added

14,524,375

13,892,419

Employees

1,420,213

1,429,904

Direct remuneration

1,130,659

1,140,752

Benefits

112,415

111,582

Government severance indemnity fund for employees

37,807

33,692

Others

139,332

143,878

Taxes, fees and contribution

7,973,358

7,550,030

Federal

4,229,715

3,276,911

State

3,734,995

4,264,238

Municipal

8,648

8,881

Remuneration of third party capital

831,023

648,924

Interest

742,461

564,531

Rent

88,562

84,393

Remuneration of own capital

4,299,781

4,263,561

Interest on shareholder's equity

261,128

976,309

Dividends

-

162,758

Retained earnings/losses for the period

3,964,843

3,079,045

Non-controlling interest

73,810

45,449

 

The accompanying notes are an integral part of the interim consolidated financial statements.

8

 


 
 

 

 

Notes to the interim consolidated financial statements:

1.

Corporate information

2.

Statement of compliance

3.

Summary of significant accounting policies

4.

Investment securities

5.

Inventories

6.

Deferred income tax and social contribution

7.

Property, plant and equipment

8.

Goodwill

9.

Interest-bearing loans and borrowings

10.

Provisions

11.

Changes in equity

12.

Segment reporting

13.

Net Sales

14.

Other operating income/(expenses)

15.

Special items

16.

Finance cost and income

17.

Income tax and social contribution

18.

Share-based payments

19.

Financial instruments and risks

20.

Collateral and contractual commitments, advances from customers and other

21.

Contingencies

22.

Related parties

23.

Events after the balance sheet date

 

9

 


 
 

 

1. CORPORATE INFORMATION

 

Companhia de Bebidas das Américas - AmBev (referred to as the “Company” or “Ambev”), headquartered in São Paulo, Brazil; produces and sells beer, draft beer, soft drinks, other non-alcoholic beverages, malt and food in general, either directly or by participating in other Brazilian-domiciled companies and elsewhere in the Americas.

The Company has an agreement with PepsiCo International, Inc. (“PepsiCo”) to bottle, sell and distribute Pepsi products in Brazil and in other Latin American countries, including Pepsi Cola, 7Up, Lipton Ice Tea, Gatorade and H2OH!.

The Company has a licensing agreement with Anheuser-Busch, Inc., to produce, bottle, sell and distribute Budweiser products in Brazil, Canada, Ecuador, Guatemala, Dominican Republic and Paraguay. The Company produces and distributes Stella Artois products under license to Anheuser-Busch InBev S.A./N.V. (“AB InBev”) in Brazil, Canada, Argentina and other countries and, by means of a license granted to AB InBev, it also distributes Brahma’s product in parts of Europe, Asia and Africa.

The Company’s shares are traded on the Brazilian Stock Exchange – BM&FBOVESPA Bolsa de Valores S.A., Mercadorias e Futuros and on the New York Stock Exchange – NYSE, the latter in the form of American Depositary Receipts (“ADRs”).

Major corporate events in 2013:

In January 2013 the subsidiary CRBS S.A. (“CRBS”) acquired all the shares of Bemais Distribuidora de Bebidas Ltda., Laguna Distribuidora de Bebidas Ltda., Casa Pinto Ltda. and Poços Beer Distribuidora de Bebidas Ltda, located in the south of the state of Minas Gerais. The total amount paid for these companies was R$96,100 which generated goodwill of R$90,754. The Company is in the process of finalizing the allocation of the purchase price to the individual assets acquired and liabilities assumed in compliance with IFRS 3.

The Company announced to the market on December 7, 2012 its proposed corporate restructuring to transition the Company’s current dual stock capital structure (common shares and preferred shares) to a new, single stock capital structure comprised exclusively of voting Common shares. Ambev S.A. will hold all shares of Ambev (the “Stock Swap Merger”).

On May 10, 2013, the Fiscal Council approved the proposal of the Board of Directors and recommended that the corporate restructuring proposal be submitted for approval at the Extraordinary General Meeting (“EGM”).

On June 17, 2013, as a preliminary step to the corporate restructuring, the parent company AB InBev contributed, through its subsidiaries AmBrew S.A. (“AmBrew”) and Interbrew International BV (“IIBV”), all shares of Ambev to Ambev S.A. (“Contribution Shares”).

10

 


 
 

 

On June 28, 2013 Ambev announced that the EGM to be held on July 30, 2013 (Note 23 - Events after the balance sheet date ), would submit the Stock Swap Merger for approval under the terms disclosed whereby each Common and Preferred shares of Ambev, not owned by Ambev S.A. will be exchanged for five new Common shares of Ambev S.A.

Major corporate events between January and June of 2012:

On April 13, 2012 the Company and E. León Jimenes S.A. (“ELJ”), which owns 83.5% of Cervecería Nacional Dominicana S.A. (“CND”), entered into an agreement to combine their businesses in the Caribbean area.

Upon closing of the transaction, Ambev Brasil Bebidas S.A. (“Ambev Brasil”), a closely-held subsidiary of the Company, became indirectly a shareholder, together with ELJ, of Tenedora CND S.A., a holding company which own the shares of CND and 100% of Ambev Dominicana S.A. (“Ambev Dominicana”), with Ambev Brasil owning an indirect interest in CND.

 

In March 2012, the subsidiary CRBS S.A. acquired Lugano Distribuidora de Bebidas Ltda. (formerly Lambert & Cia. Ltda.), located in the south of Brazil.

In January 2012, in connection with the operational and corporate restructuring of the Ambev Group , the following events occurred: (i) capital contribution with the distribution assets of Ambev in its subsidiary CRBS and (ii) the merger of Morena Distribuidora de Bebidas S.A. by CRBS.

In January 2012, Arosuco Aromas e Sucos Ltda. (“Arosuco”), which is responsible mainly for the production of concentrates needed in the production of soft drinks, teas and sports drinks, acquired all the shares of Lachaise Aromas e Participações Ltda. (“Lachaise”), whose main corporate purpose is the production of flavorings used in the production of concentrates, thus reducing the need for the Ambev Group to acquire the component from third parties. With the objective of streamlining and simplifying the corporate structure of the Ambev Group, Lachaise was merged into Arosuco.

 

The interim consolidated financial statements were approved by the Board of Directors on July 30, 2013.

 

2. STATEMENT OF COMPLIANCE

 

The interim consolidated financial statements have been prepared in accordance with IAS 34 - Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”).

 

11

 


 
 

 

 

The information does not meet all disclosure requirements for the presentation of full annual financial statements and thus should be read in conjunction with the consolidated financial statements prepared in accordance with international financial reporting standards (“IFRS”) for the year ended December 31, 2012. To avoid duplication of disclosures which are included in the annual financial statements, the following notes have been omitted:

 

(a) Summary of significant accounting policies (Note 3);

(b) Acquisition and disposals of subsidiaries (Note 5);

(c) Payroll and related benefits (Note 9);

(d) Additional information on operating expenses by nature (Note 10);

(e) Intangible assets (Note 15);

(f) Trade and other receivables (Note 19);

(g) Cash and cash equivalents (Note 20);

(h) Interest-bearing loans and borrowings (Note 22);

(i) Employee benefits (Note 23);

(j) Trade and other payables (Note 25);

(k) Operating leases (Note 28);

(l) Contingencies (Note 30);

(m) Group Companies (Note 32);

(n) Insurance (Note 33).

 

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

There were no significant changes in accounting policies for the interim financial statements as of June 30, 2013, in the calculation methods used in relation to those presented in the financial statements for the year ended December 31, 2012, except for the prospective change in the functional currency of certain non-significant malting operation, in accordance with paragraph 35 of IAS 21 – The Effects of Changes in Foreign Exchange Rates, and for the items described below.

 

  Recently issued IFRS

 

 

IFRSs with effective application for annual periods beginning on January 1, 2013:

 

 

IFRS 10 Consolidated Financial Statements:

 

Provides a single consolidation model that identifies control as the basis for consolidation for all types of entities.

 

 

12

 


 
 

 

IFRS 11 Joint Arrangements:

 

 Replaces the current proportionate consolidation method by the equity method in joint arrangements.

 

IFRS 12 Disclosure of Interests in Other Entities:

 

Combines, enhances and replaces the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities.

 

IFRS 13 Fair Value Measurement:

 

It does not establish new requirements for when fair value is required but provides a single source of guidance on how fair value is measured.

 

IAS 19 Employee Benefits (Revised 2011):

 

The amendments, due to the revision, that caused the most significant impacts in the Company’s financial statements include:

 

  • Expected returns on plan assets will no longer be recognized in profit or loss. Expected returns are replaced by recording interest income in profit or loss, which is calculated using the discount rate used to measure the pension obligation.

 

  • Unvested past service costs can no longer be deferred and recognized over the future vesting period. Instead, all past service costs will be recognized when the Company recognizes related restructuring or termination costs.

 

IAS 19 (Revised 2011) is effective for annual periods beginning on January 1, 2013 and requires retrospective application. Accordingly, the amounts presented in the consolidated financial statements for the year ended December 31, 2012 are restated below in accordance with IAS 19 (Revised 2011), for comparison purposes.

 

Similar to the 2012 version of IAS 19, IAS 19 (Revised 2011) does not specify where in profit of loss an entity should present the net interest on net defined benefit liabilities. As a consequence, the Company has determined that, upon initial application of IAS 19 (Revised 2011), the net interest component would be presented as part of the Company’s net finance cost. This change in presentation is consistent with IAS 1, which permits entities to provide disaggregated information in the performance statements.

 

Had IAS 19 (Revised 2011) been adopted in 2012, the adjusted total pre-tax pension expense would have been 139,489 higher than previously reported. The impact is mainly caused by the change in the calculation of returns on assets afore mentioned. Accordingly, if the Company had presented net interest on net defined benefit liabilities separately from net finance cost, income from operations before special items would be lower by R$57,480, and net finance costs would be higher by R$82,009. 

 

13

 


 
 

 

The adjusted figures upon implementation of IAS 19 (Revised 2011) and the previously reported figures are demonstrated below:

Interim Consolidated Income Statements

For the six-month period and the year ended June 30, 2012 and December 31, 2012, respectively

(Expressed in thousands of Brazilian Reais)

 

 

06/30/2012

 

06/30/2012

 

12/31/2012

 

12/31/2012

 

Adjusted

 

Reported

 

Adjusted

 

Reported

 

 

 

 

 

 

 

 

Net sales

14,061,117

 

14,061,117

 

32,231,027

 

32,231,027

Cost of sales

(4,612,360)

 

(4,613,137)

 

(10,289,748)

 

(10,291,518)

Gross profit

9,448,757

 

9,447,980

 

21,941,279

 

21,939,509

 

 

 

 

 

 

 

 

Sales and marketing expenses

(3,553,091)

 

(3,550,916)

 

(7,346,589)

 

(7,346,589)

Administrative expenses

(674,139)

 

(646,618)

 

(1,605,785)

 

(1,546,535)

Other operating income/(expenses)

308,477

 

308,477

 

863,991

 

863,991

Income from operations before special items

5,530,004

 

5,558,923

 

13,852,896

 

13,910,376

 

 

 

 

 

 

 

 

Special items

(26,774)

 

(26,774)

 

(50,378)

 

(50,378)

Income from operations

5,503,230

 

5,532,149

 

13,802,518

 

13,859,998

 

 

 

 

 

 

 

 

Finance cost

(600,156)

 

(560,005)

 

(1,556,440)

 

(1,474,431)

Finance income

331,689

 

331,689

 

661,617

 

661,617

Net finance cost

(268,467)

 

(228,316)

 

(894,823)

 

(812,814)

 

 

 

 

 

 

 

 

Share of results of associates

59

 

59

 

481

 

481

Income before income tax

5,234,822

 

5,303,892

 

12,908,176

 

13,047,665

 

 

 

 

 

 

 

 

Income tax expense

(971,261)

 

(979,613)

 

(2,388,089)

 

(2,405,110)

Net income

4,263,561

 

4,324,279

 

10,520,087

 

10,642,555

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Equity holders of Ambev

4,218,112

 

4,278,830

 

10,385,598

 

10,508,066

Non-controlling interests

45,449

 

45,449

 

134,489

 

134,489

 

Interim Consolidated Balance Sheets

As of December 31, 2012

 

There was no impact on Equity and Non-Current liabilities.

 

Except for IAS 19 (Revised 2011), the standards above did not have a significant impact on Ambev’s consolidated financial statements upon initial application.

 

 

14

 


 
 

 

Other Standards, Interpretations and Amendments to Standards

 

The additional mandatory amendments with effective application for the financial year beginning  on January 1, 2013 have not been listed because of either their non-applicability to or their immateriality to the Company.

 

4 . INVESTMENT SECURITIES

 

 

06/30/2013

12/31/2012

Current investments

 

 

Financial asset at fair value through profit or loss-held for trading

486,133

291,183

Equity securities available-for-sale

-

185,424

 

486,133

476,607

 

 

 

Non-current investments

 

 

Equity securities available-for-sale

172,004

187,943

Debt held-to-maturity

74,658

61,436

 

246,662

249,379

 

Financial asset s at fair value through profit or loss - held for trading

In general, investments in debt securities with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year may be classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations of the Company.

Financial assets at fair value through profit or loss are presented in Investments activities as part of changes in working capital in the Cash flow statement. Changes in fair values of financial assets at fair value through profit or loss are recorded as net finance cost in the income statement (Note 16 - Finance cost and income ) .  

Equity securities available-for-sale

Equity securities of R$172,004 (R$187,943 at December 31, 2012), classified as available-for-sale (non-current assets) in the  financial statements as of June 30, 2013, refers to the operation on October 20, 2010 pursuant to which Ambev and Cervecería Regional S.A. (“Cervecería Regional”) combined their businesses in Venezuela, whereupon Cervecería Regional assumed an 85% interest and Ambev the remaining 15%, which was recorded at fair value on the purchase date and adjusted by exchange variation, net of reductions in the recoverable amount of the asset. As of June 30, the Company recorded in the income statement an impairment charge of R$29,070 against this investment, mainly as a result of the currency devaluation, registered as other financial cost (Note 16 - Finance cost and income )

 

15

 


 
 

 

5. INVENTORIES

 

06/30/2013

12/31/2012

 

 

 

Finished goods

1,047,559

697,966

Work in progress

240,246

204,455

Raw material

1,082,394

1,195,153

Consumables

41,327

59,470

Spare parts and other

213,782

248,660

Prepayments

128,101

88,346

Impairment losses

(27,159)

(27,709)

 

2,726,250

2,466,341

 

Losses on inventories recognized in the income statement amounted to R$45,793 as of June 30, 2013 (R$43,280 in June 30, 2012).

 

6. DEFERRED INCOME TAX AND SOCIAL CONTRIBUTION

 

 

Deferred taxes for income tax and social contribution taxes are calculated on tax losses, the negative tax basis of social contributions and the temporary differences between the tax bases and the carrying amount in the financial statement of assets and liabilities. The current tax rates in Brazil, used for deferred taxes, are 25% for income tax and 9% for social contribution. For the other regions, the rates used, including the rates applicable to distribution of dividend, are as follows:

 

 

HILA-ex (Guatemala and Dominican Republic)

from 23% to 31%

Latin America - South

from 14% to 35%

Canada Operational

26%

 

16

 


 
 

 

The deferred taxes by type of temporary difference is detailed as follows:           

 

06/30/2013

 

12/31/2012

 

Assets

Liabilities

Net

 

Assets

Liabilities

Net

Trade and other receivables

50,308

-

50,308

 

37,733

-

37,733

Derivatives

374,688

(5,312)

369,376

 

294,775

(171)

294,604

Inventories

120,300

(5,390)

114,910

 

115,053

(609)

114,444

Loss carryforwards

538,548

-

538,548

 

332,633

-

332,633

Tax credits for corporate restructuring

54,306

-

54,306

 

229,807

-

229,807

Employee benefits

499,723

(479)

499,244

 

523,724

-

523,724

Property, plant and equipment

25,546

(344,660)

(319,114)

 

27,647

(288,249)

(260,602)

Intangible assets

5,924

(620,141)

(614,217)

 

5,753

(610,295)

(604,542)

Goodwill

29,200

-

29,200

 

29,200

-

29,200

Trade and other payables

-

(515,547)

(515,547)

 

-

(413,921)

(413,921)

Interest-bearing loans and borrowings

120,809

-

120,809

 

120,068

(4,419)

115,649

Provisions

266,137

(9,162)

256,975

 

287,908

(6,103)

281,805

Partnership profit

-

(14,738)

(14,738)

 

-

(291,165)

(291,165)

Other items

204,992

-

204,992

 

-

(19,197)

(19,197)

Gross deferred tax assets / (liabilities)

2,290,481

(1,515,429)

775,052

 

2,004,301

(1,634,129)

370,172

Netting by taxable entity

(377,163)

377,163

-

 

(585,786)

585,786

-

Net deferred tax assets / (liabilities)

1,913,318

(1,138,266)

775,052

 

1,418,515

(1,048,343)

370,172

 

The Company only offsets the balances of deferred income tax and social contribution assets against liabilities when they are within the same entity and jurisdiction and are expected to be realized in the same period.

Tax losses and negative basis of social contribution and temporary deductible differences in Brazil, on which the deferred income tax and social contribution were calculated, have no expiry date.

At June 30, 2013 the deferred tax assets related to consolidated tax losses has an expected utilization as follows:

 

06/30/2013

12/31/2012

2013

262,802

31,090

2014

61,697

79,858

2015

50,458

48,064

Beyond 2016 (i)

163,591

173,621

 

538,548

332,633

(i) There is no expected realization that exceed the period of 10 years.

 

Part of the tax benefit corresponding to the tax losses from previous periods and temporary differences of subsidiaries abroad was not recorded as an asset, as Management is unable to conclude with a sufficient degree of certainty that realization is probable.

 

The tax losses carried forward in relation to these unrecognized deferred tax assets are equivalent to approximately R$910,00 0 at June 30, 2013 (R$1.1 billion at December 31, 2012). The total unrecognized deferred tax assets related to tax losses carried forward for these subsidiaries amount to R$230,063 at June 30, 2013 (R$331,151 at December 31, 2012) and the expiry term is on average five years.

 

17

 


 
 

 

The change in net deferred taxes recorded in the consolidated statement of financial position is detailed as follows:

Balance at December 31, 2012

370,172

Recognized in Income statement

(1,034,313)

Recognized in Equity

1,439,193

Balance at June 30, 2013

775,052

 

 

7. PROPERTY, PLANT AND EQUIPMENT

 

 

06/30/2013

 

12/31/2012

 

Land and buildings

Plant and equipment

Fixtures and fittings

Under construction

Total

 

Total

Acquisition cost

 

 

 

 

 

 

 

Balance at end of previous year

4,488,978

14,139,613

2,825,966

1,601,521

23,056,078

 

19,818,381

Effect of movements in foreign exchange

45,834

153,451

20,541

3,239

223,065

 

582,016

Acquisitions through business combinations

-

-

-

2,590

2,590

 

721,862

Acquisitions

4,574

118,595

19,266

1,044,693

1,187,128

 

2,971,471

Disposals

(4,925)

(204,833)

(213,902)

-

(423,660)

 

(941,721)

Transfer to other asset categories

325,265

800,546

148,867

(1,297,982)

(23,304)

 

(97,831)

Others

252

495

(570)

-

177

 

1,900

Balance at end

4,859,978

15,007,867

2,800,168

1,354,061

24,022,074

 

23,056,078

 

 

 

 

 

 

 

 

Depreciation and Impairment

 

 

 

 

 

 

 

Balance at end of previous year

(1,489,346)

(8,169,640)

(1,984,812)

-

(11,643,798)

 

(10,553,171)

Effect of movements in foreign exchange

(13,934)

(100,992)

(13,689)

-

(128,615)

 

(378,608)

Depreciation

(73,376)

(617,998)

(159,298)

-

(850,672)

 

(1,560,812)

Impairment losses

-

(31,806)

-

-

(31,806)

 

(56,443)

Disposals

4,686

172,692

211,575

-

388,953

 

855,779

Transfer to other asset categories

(7,536)

(36,292)

4,819

-

(39,009)

 

46,144

Others

-

902

(50)

-

852

 

3,313

Balance at end

(1,579,506)

(8,783,134)

(1,941,455)

-

(12,304,095)

 

(11,643,798)

Carrying amount:

 

 

 

 

 

 

 

December 31, 2012

2,999,632

5,969,973

841,154

1,601,521

11,412,280

 

11,412,280

June 30, 2013

3,280,472

6,224,733

858,713

1,354,061

11,717,979

 

 

  

Acquisitions in the period refer substantially to modernization, refurbishment, extension of production lines and construction of new plants in order to increase capacity.

 

Capitalized interest on loans, which is directly attributable to the acquisition and construction of qualifying assets, is mainly recognized on investments in Brazil. The interest capitalization average rate used in 2013 was 6.36% per year.

 

The Company leases plant, equipment, fixtures and fittings, which are accounted for as financial leases. The carrying amount of the leased assets was R$21,812 as of June 30, 2013 (R$47,772 as of December 31, 2012).

 

Contractual commitments to purchase property, plant and equipment amounted to R$199,090 as of June 30, 2013 (R$212,668 as of December 31, 2012).

 

18

 


 
 

 

8. GOODWILL

 

06/30/2013

12/31/2012

 

 

 

 

 

Balance at the end of previous period

19,971,456

17,454,019

 

Movements in the period

(5,273)

2,517,437

(i)

Balance at the end of period

19,9 66 ,183

19,971,456

 

 

(i) In 2012, the change refers mainly to the acquisition of CND as already presented in the annual financial statement.

 

The carrying amount of goodwill was allocated to the different cash generating units as follows

 

 

Functional Currency

06/30/2013

12/31/2012

LAN:

 

 

 

Brazil

BRL

685,093

594,262

Ecuador

USD

770

770

Dominican Republic

DOP

2, 337 ,295

2,484,679

Peru

PEN

44,468

44,479

 

 

 

 

LAS:

 

 

 

Argentina

ARS

1,221,852

1,227,366

Bolivia

BOB

437,850

403,839

Paraguay

PYG

351,495

342,207

Uruguay

UYU

86,299

83,917

 

 

 

 

NA:

 

 

 

Canada Holding

BRL (i)

14,414,448

14,414,448

Canada Operational

CAD

386,613

375,489

 

 

19,966,183

19,971,456

 

(i) For acquisitions occurred prior to January 1, 2005, the goodwill was recorded in accordance with the accounting practices adopted in Brazil at that time.

 

Annual impairment testing

 

The cash-generating unit to which the goodwill based on expected future profitability was allocated, is tested annually for impairment, or whenever there is an indication that the cash-generating unit is undervalued, comparing its carrying amount (including goodwill based on expected futures profitability) with the recoverable amount of the unit. As of June 30, 2013 the Company had not observed any indication that a cash-generating unit could be undervalued. The impairment test will be performed during the last quarter of the current year.

 

19

 


 
 

 

9. INTEREST-BEARING LOANS AND BORROWINGS

This note provides information about contractual information on the position of loans and financing of the Company. Note 19 - Financial instruments and risks discloses additional information with respect to exposure risks of interest rate and currency.

 

 

06/30/2013

12/31/2012

 

 

 

Current liabilities

 

 

Secured bank loans

63,713

65,170

Unsecured bank loans

808,900

753,819

Other unsecured loans

23,320

17,200

Financial leasing

1,069

1,583

 

897,002

837,772

 

 

 

Non-current liabilities

 

 

Secured bank loans

183,546

243,833

Unsecured bank loans

1,365,505

1,462,331

Debentures and unsecured bond issues

410,141

429,745

Other unsecured loans

132,757

151,493

Financial leasing

19,744

18,555

 

2,111,693

2,305,957

 

Contract clauses (covenants)

During the period there were no significant changes in contract clauses of loans and borrowings contracted by the Company.

As of June 30, 2013 the Company was in compliance with all its contractual obligations for its loans and financings.

 

10. PROVISIONS

 

 

Balance as of December 31, 2012

Effect of changes in foreign exchange rates

Provisions made

Provisions used and reversed

Balance as of June 30, 2013

 

 

 

 

 

 

Restructuring

 

 

 

 

 

Non-current restructuring

4,382

130

-

(3,581)

931

 

 

 

 

 

 

Contingencies

 

 

 

 

 

Civil

30,531

(799)

9,837

(10,450)

29,119

Taxes on sales

183,643

-

49,779

(93,666)

139,756

Income tax

150,868

728

3,155

(6,178)

148,573

Labor

180,133

271

114,694

(122,525)

172,573

Others

105,971

2,788

8,519

(9,821)

107,457

Total

651,146

2,988

185,984

(242,640)

597,478

 

 

 

 

 

 

Total provisions

655,528

3,118

185,984

(246,221)

598,409

 

20

 


 
 

 

 

Total

1 year or less

1-2 years

2-5 years

Over 5 years

 

 

 

 

 

 

Restructuring

 

 

 

 

 

Non-current restructuring

931

839

92

-

-

 

 

 

 

 

 

Contingencies

 

 

 

 

 

Civil

29,119

7,182

6,884

14,027

1,026

Taxes on sales

139,756

41,449

30,850

62,858

4,599

Income tax

148,573

29,103

37,491

76,390

5,589

Labor

172,573

48,935

38,799

79,055

5,784

Others

107,457

12,514

29,794

60,707

4,442

Total

597,478

139,183

143,818

293,037

21,440

 

 

 

 

 

 

Total provisions

598,409

140,022

143,910

293,037

21,440

 

The expected settlement was based on management´s best estimate at the balance sheet date.

 

Main lawsuits with probable likelihood of loss:

ICMS, IPI, PIS and COFINS (Taxes on sales)

In Brazil, the Company and its subsidiaries are involved in several administrative and judicial proceedings related to ICMS, IPI, PIS and COFINS taxes. Such proceedings include, among others, tax offsets, credits and judicial injunctions exempting tax payment. The provisions for these taxes as of June 30, 2013 are R$139,756 (R$183,643 as of December 31, 2012).

Labor

The Company and its subsidiaries are involved in 4,240 thousand labor proceedings, with probable likelihood of loss, with former employees or former employees of service providers. The main issues involve overtime and related effects and respective charges. The provisions for labor contingencies as of June 30, 2013 was R$172,573 (R$180,133 as of December 31, 2012).

Other lawsuits

The Company is involved in several lawsuits brought by former distributors mainly in Brazil, which are mainly claiming damages resulting from the termination of their contracts.

The lawsuits with possible likelihood of loss are disclosed in Note 21.

 

11. CHANGES IN EQUITY

 

(a) Capital stock

 

Outstanding shares

 

 

 

 

 

(in thousand of shares)

 

 

06/30/2013

 

12/31/2012

 

 

 

 

 

 

 

Preferred

Common

Total

 

Total

At the end of the previous year

1,372,093

1,755,466

3,127,559

 

3,117,797

Changes during the year

2,858

2,520

5,378

 

9,762

 

1,374,951

1,757,986

3,132,937

 

3,127,559

 

  

21

 


 
 

 

Treasury shares

 

 

 

 

 

(in thousand of shares)

 

 

06/30/2013

 

12/31/2012

 

Preferred

Common

Total

 

Total

At the end of the previous year

166

484

650

 

608

Changes during the year

(4)

4

-

 

42

 

162

488

650

 

650

 

Our Common shares grant the right to vote at shareholder meetings. Our Preferred shares are non-voting (except when established in law), but have priority in the return of capital in the event of liquidation and are entitled to a dividend premium of 10% over the amount paid to the Common shareholders. As determined by its By-laws, the Company is required to distribute to its shareholders, as a mandatory dividend in respect of each fiscal year ending on December 31, an amount not less than 35% of its net income determined under Brazilian law, as adjusted in accordance with applicable law, unless payment of such amount would be incompatible with Ambev’s financial situation. The mandatory dividend includes amounts paid as interest on shareholder’s equity.

 

Changes in equity during the period of 2013:

The Board of Directors meeting held on May 10, 2013 approved, within the limit of the authorized capital of the Company in accordance with article 9 of its By-laws, as well as article 168 of Law No. 6,404/76, as amended, a capital increase of R$11,484, upon issuance of 511 thousand Preferred shares without preemptive rights, pursuant to paragraph 3 of article 171 of Law No. 6,404/76 and the rules established under the Stock Option Plan applicable.

 

The Board of Directors meeting held on March 27, 2013 approved, within the limit of the authorized capital of the Company in accordance with article 9 of its By-laws, as well as article 168 of Law No. 6,404/76, as amended, a capital increase of R$25,613, upon issuance of 377 thousand Preferred shares without preemptive rights, pursuant to paragraph 3 of article 171 of Law No. 6,404/76 and the rules established under the Stock Option Plan applicable.

Thus, after verification of the subscription and payment by the shareholders of the Company of 2,520 thousand new Common shares and 1,970 thousand Preferred shares were issued as deliberated by the Board of Directors at a meeting held on January 31 and February 1, 2013, increasing capital by R$410,101, of which R$250,764 refers to the capitalization of 70% of the tax benefit earned by the Company upon the partial amortization of the special reserve of goodwill in fiscal year 2012, which was proposed in the Board of Directors held on January 31 and February 1, 2013.


The Board of Directors meeting held on January 31 and February 1, 2013, approved a capital increase of R$107,470, corresponding to the capitalization of 30% of the tax benefit earned by the Company upon the partial amortization of the special reserve of goodwill in fiscal year 2012, without issuing new shares.

 

22

 


 
 

 

After the changes described above, the Company's capital stock was R$12,742,017 as of June 30, 2013, divided into 3,132,937 thousand shares, consisting of 1,757,986 thousand Common shares and 1,374,951 thousand Preferred shares.

 

Changes in equity during the period of 2012:

 

The Board of Directors at a meeting held on May 30, 2012, approved and ratified, within the Company’s limit of authorized capital, in accordance with article 9 of its By-laws, as well as article 168 of Law n. 6,404/76, as amended, a capital increase of R$20,391, upon issuance of 1,034 thousand new Preferred shares, with an average issuance price of R$ 19,71 per share, without preemptive rights, pursuant to paragraph 3 of article 171 of Law n. 6,404/76 and the rules established under the Stock Option Plan applicable. Thus, the Company’s capital stock increased from R$ 11,722,667 to R$ 11,743,057, divided into 3,119,162 shares, of which 1,751,135 are Common shares and 1,368,027 are Preferred shares, without par value.

 

The Extraordinary General Meeting held on April 27, 2012, approved the following destinations to the Company’s capital stock:

i)  Capital increase of R$110,964, without issuance of new shares, corresponding to the capitalization of 30% of the tax benefit earned by the Company upon the partial amortization of the Special reserve of goodwill in fiscal year 2011.

ii) Capital increase of R$3,290,295, without issuance of new shares, through the partial capitalization of the Investments Reserve balance on the Equity of the Company.

 

The same Extraordinary General Meeting held on April 27, 2012 approved a c apital increase of a minimum amount of R$258,918 and maximum of R$432,285 through the issuance of: (a) at least 3,157 thousand and a maximum of 4,264 thousand Common shares, without par value, (b) at least 1,506 thousand and a maximum of 3,328 thousand Preferred shares without par value, still subject to approval. After the expiry date for exercising the subscription rights by the shareholders, the Board of Directors will allocate any surplus and, as appropriate, fully or partially approve this capital increase, as it reaches the value minimum threshold.

 

The Board of Directors at a meeting held on March 22, 2012, approved and ratified, within the Company’s limit of authorized capital, in accordance with article 9 of its By-laws, as well as article 168 of Law No. 6,404/76, as amended, a capital increase of R$17,472, upon issuance of 330 thousand new Preferred shares, without preemptive rights, pursuant to paragraph 3 of article 171 of Law No. 6,404/76 and the rules established under the Stock Option Plan currently in force, fully subscribed by the beneficiaries of the options granted in connection with the Company’s Stock Option Program for 2012. Thus, the Company’s capital stock increased from  R$8,303,936 to R$8,321,408, divided into 3,118,128 shares, of which 1,751,135 are Common shares and 1,366,992 are Preferred shares, without par value.

23

 


 
 

(b) Authorized capital

The Company is authorized to increase its capital stock up to 3,500,000 thousand shares, without need of  by-law amendment, upon the Board of Directors’ resolution, which may resolve on the payment terms and conditions, characteristics of shares to be issued and issuance price, and also establish whether the capital stock shall be increased by means of public or private subscription.

(c) Interest on shareholders’ equity / Dividends

Brazilian companies are permitted to distribute interest attributed to shareholders’ equity calculated based on the long-term interest rate (TJLP), such interest being tax-deductible and, when distributed, may be considered part of the mandatory dividends.

Events during the period of 2013:

Event

 

Approval

 

Type

 

Date of payment

 

Type of share

 

Ammount per share

Total amount

 

Board of Directors Meeting

 

02/25/2013

 

Dividends

 

03/28/2013

 

Common

 

0.5680

996,830

(i)

Board of Directors Meeting

 

02/25/2013

 

Dividends

 

03/28/2013

 

Preferred

 

0.6248

857,180

(i)

 

 

 

 

 

 

 

 

 

 

 

1,854,010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Board of Directors Meeting

 

02/25/2013

 

Interest on shareholder's equity

 

03/28/2013

 

Common

 

0.0800

140,398

 

Board of Directors Meeting

 

02/25/2013

 

Interest on shareholder's equity

 

03/28/2013

 

Preferred

 

0.0880

120,730

 

 

 

 

 

 

 

 

 

 

 

 

261,128

 

(i) These dividends refer to the total amount approved for distribution in the period, and were accrued in fiscal year of 2012.

 

Events during the period of 2012:

Event

 

Approval

 

Type

 

Date of payment

 

Type of share

 

Ammount per share

Total amount

 

Board of Directors Meeting

 

02/17/2012

 

Dividends

 

04/10/2012

 

Common

 

0.6000

1,050,375

(i)

Board of Directors Meeting

 

02/17/2012

 

Dividends

 

04/10/2012

 

Preferred

 

0.6600

901,928

(i)

Board of Directors Meeting

 

05/30/2012

 

Dividends

 

07/27/2012

 

Common

 

0.2140

374,634

 

Board of Directors Meeting

 

05/30/2012

 

Dividends

 

07/27/2012

 

Preferred

 

0.2354

321,689

 

Board of Directors Meeting

 

05/30/2012

 

Dividends

 

07/27/2012

 

Common

 

0.0500

87,532

 

Board of Directors Meeting

 

05/30/2012

 

Dividends

 

07/27/2012

 

Preferred

 

0.0550

75,226

 

 

 

 

 

 

 

 

 

 

 

 

2,811,384

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Board of Directors Meeting

 

02/17/2012

 

Interest on shareholder's equity

 

04/10/2012

 

Common

 

0.1800

315,113

 

Board of Directors Meeting

 

02/17/2012

 

Interest on shareholder's equity

 

04/10/2012

 

Preferred

 

0.1980

270,578

 

Board of Directors Meeting

 

05/30/2012

 

Interest on shareholder's equity

 

07/27/2012

 

Common

 

0.1200

210,077

 

Board of Directors Meeting

 

05/30/2012

 

Interest on shareholder's equity

 

07/27/2012

 

Preferred

 

0.1320

180,434

 

 

 

 

 

 

 

 

 

 

 

 

976,202

 

(i) These dividends refer to the total amount approved for distribution in the period, and were accrued in fiscal year of 2011.

 

24

 


 
 

 

Net income reserve

(d) Statutory Reserve

From net income, 5% will be applied before any other allocation, to the statutory reserve, which shall not exceed 20% of capital stock. The Company is not required to supplement the statutory reserve in the year when the balance of this reserve, plus the amount of capital reserves, exceeds 30% of the capital stock.     

The statutory reserve is to preserve capital resources and can only be used to offset losses or increase capital.

(e) Investments reserve

The investment reserve refers to the allocation of profits in order to meet the project business growth, set out in the investment plan of the Company.

(f) Proposed dividends and additional dividends

The reserves for proposed dividends and additional dividends proposed aim to segregate the dividends to be distributed during the following fiscal year.

(g) Hedging reserves

 

The hedging reserves comprise the effective portion of the cumulative net change in the fair value of cash flow hedges to the extent the hedged risk has not yet impacted profit or loss (Note 19).

 

25

 


 
 

 

(h) Translation reserves

 

The translation reserves comprise all foreign currency exchange differences arising from the translation of the financial statements with a functional currency different from the Real.

 

(i) Actuarial gains and losses

The actuarial gains and losses include expectations with regards to the future pension plans obligations . Consequently, the results of actuarial gains and losses are recognized on a timely basis considering best estimate obtained by Management. Accordingly, the Company recognizes on a quarterly basis the results of these estimated actuarial gains and losses according to the expectations presented based on an independent actuarial report.

(j) Share-based payment

Different share-based payment programs and stock option plans allow the Company’s senior management and members of the Board of Directors to receive or acquire shares of the Company.

The share-based payment reserve recorded a charge of R$82,134  at June 30, 2013 ( R$63,162 at June 30, 2012) (Note 18).

(k)Treasury shares

The treasury shares comprise own issued shares reacquired by the Company. The gains and losses related to share-based payments transactions and resale of treasury shares are recorded in the Result on Treasury Shares reserve.

Change in treasury shares in thousand of Brazilian Reais, for the years ended

06/30/2013

06/30/2012

 

 

 

At the begining of the year

(3,875)

2,750

Shares reacquired in accordance with the stock option plan

(8,920)

(20,230)

Shared-based payments - transfer

8,270

4,318

Shares plans

-

1,061

At the end of the year

(4,525)

(12,101)

 

(l) Tax incentives

The Company participates in ICMS (VAT) tax benefit programs offered by various States in order to attract investments to their region, in the form of financing, VAT deferral or partial reductions of amounts due. These State programs aim to promote employment, regional decentralization, complementation and diversification of the State’s industrial framework. In these States, the grace and enjoyment periods, reductions and other conditions are provided by the tax legislation.

26

 


 
 

 

Some States and Public Prosecutors have filed Direct Actions of Unconstitutionality (ADIs) in the Supreme Court to challenge the constitutionality of certain State laws imposing tax incentive programs unilaterally, without the prior approval of CONFAZ (the Council formed by all the 27 Treasury Secretaries).

The portion of the expected income for the period relating to tax incentives, which will be used for the net income reserve at the close of the period ended December 31, 2013, and are therefore not available as a basis for distribution of dividends, is composed of:

(Expressed in thousand of Brazilian Reais)

 

 

 

06/30/2013

06/30/2012

 

 

 

ICMS (Brazilian State value added)

340,901

195,912

Income tax

21,693

43,316

 

362,594

239,228

 

27

 


 
 

 

(m) Other Reserves

 

Attributable to equity holders of Ambev

 

Capital reserves

 

Net income reserve

 

Comprehensive Income

 

 

Treasury shares

Share Premium

Gain on shares issued

Others capital reserve

Share-based payments

Results on treasury shares

Capital reserves

Investments reserve

Statutory reserve

Fiscal incentive

Additional dividends

Net income reserve

Translation reserves

Cash flow hedge 

Gains/losses of non-controlling interest´s share

Business combination

Put option to acquire interest in a subsidiary

Actuarial gains/ losses

Comprehensive Income

At January 1, 2013

(3,875)

8,335

4,983,374

(609,813)

554,048

(163,144)

4,768,925

9,748,260

208,832

1,427,308

1,870,595

13,254,995

(119,788)

86,936

(5,213)

156,091

-

(1,465,551)

(1,347,525)

Effects of changes in accounting standards

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

253,516

253,516

At January 1, 2013 adjusted

(3,875)

8,335

4,983,374

(609,813)

554,048

(163,144)

4,768,925

9,748,260

208,832

1,427,308

1,870,595

13,254,995

(119,788)

86,936

(5,213)

156,091

-

(1,212,035)

(1,094,009)

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Translation reserves - gains / (losses)

-

-

-

-

-

-

-

-

-

-

-

-

144,283

-

-

-

-

-

144,283

Cash flow hedges - gains / (losses)

-

-

-

-

-

-

-

-

-

-

-

-

-

(10,855)

-

-

-

-

(10,855)

Actuarial gain / (losses)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

7,310

7,310

Total Comprehensive income

-

-

-

-

-

-

-

-

-

-

-

-

144,283

(10,855)

-

-

-

7,310

140,738

Shares issued

-

-

-

(358,235)

(15,169)

-

(373,404)

-

-

-

-

-

-

-

-

-

-

-

-

Put option to acquire interest in a subsidiary

-

-

-

1,980,887

-

-

1,980,887

-

-

-

-

-

-

-

-

-

(2,024,066)

-

(2,024,066)

Gains/(losses) of non-controlling interest´s share

-

-

-

-

-

-

-

-

-

-

-

-

-

-

(311,822)

-

-

-

(311,822)

Dividends

-

-

-

-

-

-

-

-

-

-

(1,854,010)

(1,854,010)

-

-

-

-

-

-

-

Share-based payment

-

-

-

-

74,190

-

74,190

-

-

-

-

 

-

-

-

-

-

-

-

Treasury shares

(650)

-

-

-

-

(26,813)

(27,463)

-

-

-

-

-

-

-

-

-

-

-

-

At June 30, 2013

(4,525)

8,335

4,983,374

1,012,839

613,069

(189,957)

6,423,135

9,748,260

208,832

1,427,308

16,585

11,400,985

24,495

76,081

(317,035)

156,091

(2,024,066)

(1,204,725)

(3,289,159)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to equity holders of Ambev

 

Capital reserves

 

Net income reserve

 

Comprehensive Income

 

 

Treasury shares

Share Premium

Gain on shares issued

Others capital reserve

Share-based payments

Results on treasury shares

Capital reserves

Investments reserve

Statutory reserve

Fiscal incentive

Additional dividends

Net income reserve

Translation reserves

Cash flow hedge 

Gains/losses of non-controlling interest´s share

Business combination

Put option to acquire interest in a subsidiary

Actuarial gains/ losses

Comprehensive Income

At January 1, 2012

2,750

8,335

4,983,056

1,740,957

435,075

(140,115)

7,030,058

10,643,510

208,832

1,030,977

697,865

12,581,184

(997,025)

46,304

1,473

-

-

(1,354,610)

(2,303,858)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in adjustment international standards

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

60,718

60,718

Translation reserves - gains / (losses)

-

-

-

-

-

-

-

-

-

-

-

-

371,392

-

-

-

-

-

371,392

Cash flow hedges - gains / (losses)

-

-

-

-

-

-

-

-

-

-

-

-

-

67,407

-

-

-

-

67,407

Gains/(losses) of non-controlling interest´s share

-

-

-

-

-

-

-

-

-

-

-

-

-

-

(6,685)

170,604

-

-

163,919

Put option to acquire interest in a subsidiary

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

(1,958,262)

-

(1,958,262)

Actuarial gain / (losses)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

(46,284)

(46,284)

Total Comprehensive income

-

-

-

-

-

-

-

-

-

-

-

-

371,392

67,407

(6,685)

170,604

(1,958,262)

14,434

(1,341,110)

Share-based payment

-

-

-

(110,964)

(11,527)

-

(122,491)

(3,290,295)

-

-

-

(3,290,295)

-

-

-

-

-

-

-

Dividends

-

-

-

-

-

-

-

-

-

-

(681,355)

(681,355)

-

-

-

-

-

-

-

Share-based payment

-

-

-

-

54,032

-

54,032

-

-

-

-

-

-

-

-

-

-

-

-

Treasury shares

(14,851)

-

-

-

-

(5,379)

(20,230)

-

-

-

-

-

-

-

-

-

-

-

-

At June 30, 2012

(12,101)

8,335

4,983,056

1,629,993

477,580

(145,494)

6,941,369

7,353,215

208,832

1,427,308

16,510

9,005,865

(625,633)

113,711

(5,212)

170,604

(1,958,262)

(1,340,176)

(3,644,969)

 

 

 

 

28

 


 
 

 

12. SEGMENT REPORTING

 

Segment information is presented in geographical areas, since the risks and return rates are affected predominantly by the fact that the Company operates in different regions. The Company's management structure and the information reported to the main decision maker are structured in a similar way. Ambev operates its business through three areas identified as reportable segments (Latin America - North, Latin America - South and Canada). The performance information by business units (Beer and Carbonated soft drinks – “CSD”), is also used by the decision maker for the Company and is presented as additional information, even though it does not qualify as a reportable segment. Internally, the Company’s management uses performance indicators, such as normalized earnings before interest and taxes (normalized EBIT) and normalized earnings before interest, taxes, depreciation and amortization (normalized EBITDA) as measures of segment performance to make decisions about resource allocation and performance analysis. These indicators are reconciled to the profit of the segment in the tables below. Whenever used in this document, the term “normalized” refers to performance measures (EBITDA, EBIT, Profit, EPS) before exceptional item adjustments.

The information is presented in thousands of Brazilian Reais, except for volumes, which are presented in thousands of hectoliters.

 

As from January 1, 2013, the Company transferred management responsibility for Ecuador and Peru to the Latin America South Zone.  These countries were previously reported within the Latin America North Zone. The 2012 Latin America South and Latin America North information have been adjusted for comparative purposes.

 

 

29

 


 
 

 

(a) Reportable segments - For the six-month periods ended:

 

Latin America - north (i)

Latin America - south

Canada

Consolidated

(Expressed in thousand of Brazilian Reais)

06/30/2013

06/30/2012

06/30/2013

06/30/2012

06/30/2013

06/30/2012

06/30/2013

06/30/2012

 

 

 

 

 

 

 

 

 

Volume

55,191

56,546

17,373

18,557

4,350

4,507

76,914

79,610

 

 

 

 

 

 

 

 

 

Net sales

10,258,302

9,525,833

3,082,748

2,705,995

1,934,889

1,829,289

15,275,939

14,061,117

Cost of sales

(3,429,931)

(2,990,503)

(1,221,302)

(1,111,061)

(563,860)

(510,796)

(5,215,093)

(4,612,360)

Gross profit

6,828,371

6,535,330

1,861,446

1,594,934

1,371,029

1,318,493

10,060,846

9,448,757

Sales and marketing expenses

(2,779,311)

(2,375,507)

(671,083)

(564,532)

(623,129)

(613,052)

(4,073,523)

(3,553,091)

Administrative expenses

(544,482)

(505,351)

(119,701)

(95,978)

(83,998)

(72,810)

(748,181)

(674,139)

Other operating income/(expenses)

628,477

316,828

(20,065)

(12,913)

(155)

4,562

608,257

308,477

Normalized income from operations (normalized EBIT)

4,133,055

3,971,300

1,050,597

921,511

663,747

637,193

5,847,399

5,530,004

Special items

(2,163)

(26,774)

(4,082)

-

-

-

(6,245)

(26,774)

Income from operations (EBIT)

4,130,892

3,944,526

1,046,515

921,511

663,747

637,193

5,841,154

5,503,230

Net finance cost

(489,359)

(244,154)

(29,084)

5,964

9,597

(30,279)

(508,846)

(268,469)

Share of result of associates

968

(1)

-

-

817

60

1,785

59

Income before income tax

3,642,501

3,700,371

1,017,431

927,475

674,161

606,974

5,334,093

5,234,820

Income tax expense

(517,071)

(499,879)

(330,969)

(257,653)

(186,273)

(213,729)

(1,034,313)

(971,261)

Net income

3,125,430

3,200,492

686,462

669,822

487,888

393,245

4,299,780

4,263,559

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Normalized EBITDA

4,841,759

4,545,441

1,241,534

1,093,312

733,583

698,244

6,816,876

6,336,997

Special items

(2,163)

(26,774)

(4,082)

-

-

-

(6,245)

(26,774)

Depreciation, amortization and impairment

(708,704)

(574,141)

(190,937)

(171,801)

(69,836)

(61,051)

(969,477)

(806,993)

Net finance costs

(489,359)

(244,154)

(29,084)

5,964

9,597

(30,279)

(508,846)

(268,469)

Share of results of associates

968

(1)

-

-

817

60

1,785

59

Income tax expense

(517,071)

(499,879)

(330,969)

(257,653)

(186,273)

(213,729)

(1,034,313)

(971,261)

Net income

3,125,430

3,200,492

686,462

669,822

487,888

393,245

4,299,780

4,263,559

 

 

 

 

 

 

 

 

 

Normalized EBITDA margin in %

47.2%

47.7%

40.3%

40.4%

37.9%

38.2%

44.6%

45.1%

 

 

 

 

 

 

 

 

 

Acquisition of property, plant and equipment

1,060,930

816,726

185,846

175,133

84,774

43,241

1,331,550

1,035,100

Additions to / (reversals of) provisions

110,089

114,959

1,508

1,848

-

11,702

111,597

128,509

Full time employee - Average

35,370

36,237

9,881

9,736

4,868

4,797

50,119

50,770

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

06/30/2013

12/31/2012

06/30/2013

12/31/2012

06/30/2013

12/31/2012

06/30/2013

12/31/2012

 

 

 

 

 

 

 

 

 

Segment assets

19,680,158

19,159,354

7,746,555

7,609,711

17,638,606

17,301,943

45,065,319

44,071,008

Intersegment elimination

 

 

 

 

 

 

(2,163,778)

(1,884,566)

Non-segmented assets

 

 

 

 

 

 

8,079,169

11,973,327

Total assets

 

 

 

 

 

 

50,982,746

54,159,769

 

 

 

 

 

 

 

 

 

Segment liabilities

9,929,124

14,651,098

3,141,233

3,642,076

2,884,119

2,490,474

15,954,476

20,783,648

Intersegment elimination

 

 

 

 

 

 

(2,163,778)

(1,884,566)

Non-segmented liabilities

 

 

 

 

 

 

37,190,012

35,260,687

Total liabilities

 

 

 

 

 

 

50,982,746

54,159,769

 

 (i) Latin America – North: includes operations in Brazil and HILA-ex: Guatemala and  Dominican Republic.

(ii) Latin America – South: includes operations in Argentina, Bolivia, Chile, Ecuador, Paraguay , Peru and Uruguay.

 

 

30

 


 
 

 

(b) Additional information – by Business unit - For the six-month periods ended:

 

Latin America - north

 

Beer

Soft drink

Total

(Expressed in thousand of Brazilian Reais)

06/30/2013

06/30/2012

06/30/2013

06/30/2012

06/30/2013

06/30/2012

 

 

 

 

 

 

 

Volume

40,729

41,768

14,462

14,778

55,191

56,546

 

 

 

 

 

 

 

Net sales

8,512,510

7,950,838

1,745,793

1,574,995

10,258,303

9,525,833

Cost of sales

(2,558,575)

(2,281,269)

(871,356)

(709,234)

(3,429,931)

(2,990,503)

Gross profit

5,953,935

5,669,569

874,437

865,761

6,828,372

6,535,330

Sales and marketing expenses

(2,362,599)

(2,037,283)

(416,712)

(338,224)

(2,779,311)

(2,375,507)

Administrative expenses

(492,588)

(454,624)

(51,894)

(50,727)

(544,482)

(505,351)

Other operating income/(expenses)

505,105

242,611

123,372

74,217

628,477

316,828

Normalized income from operations (normalized EBIT)

3,603,853

3,420,273

529,203

551,027

4,133,056

3,971,300

Special items

(1,603)

(26,270)

(560)

(504)

(2,163)

(26,774)

Income from operations (EBIT)

3,602,250

3,394,003

528,643

550,523

4,130,893

3,944,526

Net finance cost

(489,359)

(244,154)

-

-

(489,359)

(244,154)

Share of result of associates

968

(1)

-

-

968

(1)

Income before income tax

3,113,859

3,149,848

528,643

550,523

3,642,502

3,700,371

Income tax expense

(517,071)

(499,879)

-

-

(517,071)

(499,879)

Net income

2,596,788

2,649,969

528,643

550,523

3,125,431

3,200,492

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Normalized EBITDA

4,172,311

3,872,442

669,449

673,001

4,841,760

4,545,443

Special items

(1,603)

(26,270)

(560)

(504)

(2,163)

(26,774)

Depreciation, amortization and impairment

(568,458)

(452,169)

(140,246)

(121,974)

(708,704)

(574,143)

Net finance costs

(489,359)

(244,154)

-

-

(489,359)

(244,154)

Share of results of associates

968

(1)

-

-

968

(1)

Income tax expense

(517,071)

(499,879)

-

-

(517,071)

(499,879)

Net income

2,596,788

2,649,969

528,643

550,523

3,125,431

3,200,492

 

 

 

 

 

 

 

Normalized EBITDA margin in %

49.0%

48.7%

38.3%

42.7%

47.2%

47.7%

 

 

 

Brazil

 

Beer

Soft drink

Total

(Expressed in thousand of Brazilian Reais)

06/30/2013

06/30/2012

06/30/2013

06/30/2012

06/30/2013

06/30/2012

 

 

 

 

 

 

 

Volume

38,693

40,531

13,882

14,250

52,574

54,781

 

 

 

 

 

 

 

Net sales

8,063,547

7,728,069

1,606,763

1,519,171

9,670,310

9,247,240

Cost of sales

(2,396,740)

(2,166,605)

(756,869)

(668,510)

(3,153,609)

(2,835,115)

Gross profit

5,666,807

5,561,464

849,894

850,661

6,516,701

6,412,125

Sales and marketing expenses

(2,233,037)

(1,958,057)

(376,735)

(309,397)

(2,609,772)

(2,267,454)

Administrative expenses

(458,838)

(437,816)

(39,989)

(41,203)

(498,827)

(479,019)

Other operating income/(expenses)

513,428

241,318

117,338

74,127

630,766

315,445

Normalized income from operations (normalized EBIT)

3,488,360

3,406,909

550,508

574,188

4,038,868

3,981,097

Special items

-

(19,079)

-

-

-

(19,079)

Income from operations (EBIT)

3,488,360

3,387,830

550,508

574,188

4,038,868

3,962,018

Net finance cost

(478,111)

(226,949)

-

-

(478,111)

(226,949)

Share of result of associates

968

(1)

-

-

968

(1)

Income before income tax

3,011,217

3,160,880

550,508

574,188

3,561,725

3,735,068

Income tax expense

(486,376)

(498,100)

-

-

(486,376)

(498,100)

Net income

2,524,841

2,662,780

550,508

574,188

3,075,349

3,236,968

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Normalized EBITDA

4,006,296

3,836,014

673,699

685,972

4,679,995

4,521,986

Special items

-

(19,079)

-

-

-

(19,079)

Depreciation, amortization and impairment

(517,936)

(429,105)

(123,191)

(111,784)

(641,127)

(540,889)

Net finance costs

(478,111)

(226,949)

-

-

(478,111)

(226,949)

Share of results of associates

968

(1)

-

-

968

(1)

Income tax expense

(486,376)

(498,100)

-

-

(486,376)

(498,100)

Net income

2,524,841

2,662,780

550,508

574,188

3,075,349

3,236,968

 

 

 

 

 

 

 

Normalized EBITDA margin in %

49.7%

49.6%

41.9%

45.2%

48.4%

48.9%

 

31

 


 
 

 

 

HILA-ex

 

Beer

Soft drink

Total

(Expressed in thousand of Brazilian Reais)

06/30/2013

06/30/2012

06/30/2013

06/30/2012

06/30/2013

06/30/2012

 

 

 

 

 

 

 

Volume

2,036

1,237

581

528

2,617

1,765

 

 

 

 

 

 

 

Net sales

448,963

222,769

139,030

55,824

587,992

278,593

Cost of sales

(161,835)

(114,664)

(114,487)

(40,724)

(276,322)

(155,388)

Gross profit

287,128

108,105

24,542

15,100

311,670

123,205

Sales and marketing expenses

(129,562)

(79,226)

(39,977)

(28,827)

(169,539)

(108,053)

Administrative expenses

(33,750)

(16,808)

(11,905)

(9,524)

(45,655)

(26,332)

Other operating income/(expenses)

(8,323)

1,293

6,034

90

(2,289)

1,383

Normalized income from operations (normalized EBIT)

115,493

13,364

(21,306)

(23,161)

94,187

(9,797)

Special items

(1,603)

(7,191)

(560)

(504)

(2,163)

(7,695)

Income from operations (EBIT)

113,890

6,173

(21,866)

(23,665)

92,024

(17,492)

Net finance cost

(11,248)

(17,205)

-

-

(11,248)

(17,205)

Income before income tax

102,642

(11,032)

(21,866)

(23,665)

80,776

(34,697)

Income tax expense

(30,695)

(1,779)

-

-

(30,695)

(1,779)

Net income

71,947

(12,811)

(21,866)

(23,665)

50,081

(36,476)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Normalized EBITDA

166,015

36,428

(4,251)

(12,971)

161,764

23,457

Special items

(1,603)

(7,191)

(560)

(504)

(2,163)

(7,695)

Depreciation, amortization and impairment

(50,522)

(23,064)

(17,055)

(10,190)

(67,577)

(33,254)

Net finance costs

(11,248)

(17,205)

-

-

(11,248)

(17,205)

Income tax expense

(30,695)

(1,779)

-

-

(30,695)

(1,779)

Net income

71,947

(12,811)

(21,866)

(23,665)

50,081

(36,476)

 

 

 

 

 

 

 

Normalized EBITDA margin in %

37.0%

16.4%

-3.1%

-23.2%

27.5%

8.4%

 

 

Latin America - south

 

Beer

Soft drink

Total

(Expressed in thousand of Brazilian Reais)

06/30/2013

06/30/2012

06/30/2013

06/30/2012

06/30/2013

06/30/2012

 

 

 

 

 

 

 

Volume

10,262

10,842

7,111

7,715

17,373

18,557

 

 

 

 

 

 

 

Net sales

2,221,311

1,889,923

861,437

816,072

3,082,748

2,705,995

Cost of sales

(698,813)

(599,447)

(522,489)

(511,614)

(1,221,302)

(1,111,061)

Gross profit

1,522,498

1,290,476

338,948

304,458

1,861,446

1,594,934

Sales and marketing expenses

(440,933)

(364,669)

(230,150)

(199,863)

(671,083)

(564,532)

Administrative expenses

(88,943)

(73,411)

(30,758)

(22,567)

(119,701)

(95,978)

Other operating income/(expenses)

(16,902)

(14,564)

(3,163)

1,651

(20,065)

(12,913)

Normalized income from operations (normalized EBIT)

975,720

837,832

74,877

83,679

1,050,597

921,511

Special items

(4,082)

-

-

-

(4,082)

-

Income from operations (EBIT)

971,638

837,832

74,877

83,679

1,046,515

921,511

Net finance cost

(21,232)

5,327

(7,852)

637

(29,084)

5,964

Income before income tax

950,406

843,159

67,025

84,316

1,017,431

927,475

Income tax expense

(329,969)

(256,694)

(1,000)

(959)

(330,969)

(257,653)

Net income

620,437

586,465

66,025

83,357

686,462

669,822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Normalized EBITDA

1,123,139

968,375

118,395

124,937

1,241,534

1,093,312

Special items

(4,082)

-

-

-

(4,082)

-

Depreciation, amortization and impairment

(147,419)

(130,543)

(43,518)

(41,258)

(190,937)

(171,801)

Net finance costs

(21,232)

5,327

(7,852)

637

(29,084)

5,964

Income tax expense

(329,969)

(256,694)

(1,000)

(959)

(330,969)

(257,653)

Net income

620,437

586,465

66,025

83,357

686,462

669,822

 

 

 

 

 

 

 

Normalized EBITDA margin in %

50.6%

51.2%

13.7%

15.3%

40.3%

40.4%

 

 

32

 


 
 

 

 

Canada

 

06/30/2013

 

06/30/2012

(Expressed in thousand of Brazilian Reais)

Beer

 

Total

 

Beer

 

Total

 

 

 

 

 

 

 

 

Volume

4,350

 

4,350

 

4,507

 

4,507

 

 

 

 

 

 

 

 

Net sales

1,934,889

 

1,934,889

 

1,829,289

 

1,829,289

Cost of sales

(563,860)

 

(563,860)

 

(510,796)

 

(510,796)

Gross profit

1,371,029

 

1,371,029

 

1,318,493

 

1,318,493

Sales and marketing expenses

(623,129)

 

(623,129)

 

(613,052)

 

(613,052)

Administrative expenses

(83,9 97 )

 

(83,997)

 

(72,810)

 

(72,810)

Other operating income/(expenses)

(155)

 

(155)

 

4,562

 

4,562

Normalized income from operations (normalized EBIT)

663,748

 

663,748

 

637,193

 

637,193

Income from operations (EBIT)

663,748

 

663,748

 

637,193

 

637,193

Net finance cost

9,597

 

9,597

 

(30,277)

 

(30,277)

Share of result of associates

817

 

817

 

60

 

60

Income before income tax

674,162

 

674,162

 

606,976

 

606,976

Income tax expense

(186,273)

 

(186,273)

 

(213,729)

 

(213,729)

Net income

487,889

 

487,889

 

393,247

 

393,247

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Normalized EBITDA

733,584

 

733,584

 

698,244

 

698,244

Depreciation, amortization and impairment

(69,836)

 

(69,836)

 

(61,051)

 

(61,051)

Net finance costs

9,597

 

9,597

 

(30,277)

 

(30,277)

Share of results of associates

817

 

817

 

60

 

60

Income tax expense

(186,273)

 

(186,273)

 

(213,729)

 

(213,729)

Net income

487,889

 

487,889

 

393,247

 

393,247

 

 

 

 

 

 

 

 

Normalized EBITDA margin in %

37.9%

 

37.9%

 

38.2%

 

38.2%

 

(c) Reportable segments - Three-month period ended:

 

Latin America - north (i)

Latin America - south

Canada

Consolidated

(Expressed in thousand of Brazilian Reais)

06/30/2013

06/30/2012

06/30/2013

06/30/2012

06/30/2013

06/30/2012

06/30/2013

06/30/2012

 

 

 

 

 

 

 

 

 

Volume

26,906

27,135

7,547

7,611

2,531

2,632

36,985

37,379

 

 

 

 

 

 

 

 

 

Net sales

5,032,977

4,559,956

1,337,482

1,165,150

1,132,674

1,100,297

7,503,133

6,825,403

Cost of sales

(1,680,680)

(1,475,733)

(585,327)

(520,387)

(326,263)

(303,859)

(2,592,270)

(2,299,979)

Gross profit

3,352,297

3,084,223

752,155

644,763

806,411

796,438

4,910,863

4,525,424

Sales and marketing expenses

(1,453,545)

(1,190,019)

(312,523)

(271,033)

(318,548)

(343,606)

(2,084,616)

(1,804,658)

Administrative expenses

(289,599)

(266,869)

(69,946)

(49,729)

(36,895)

(40,295)

(396,440)

(356,893)

Other operating income/(expenses)

306,724

169,809

(11,463)

(4,909)

(502)

4,392

294,759

169,292

Normalized income from operations (normalized EBIT)

1,915,877

1,797,144

358,223

319,092

450,466

416,929

2,724,566

2,533,165

Special items

(1,187)

(26,774)

(4,082)

-

-

-

(5,269)

(26,774)

Income from operations (EBIT)

1,914,690

1,770,370

354,141

319,092

450,466

416,929

2,719,297

2,506,391

Net finance cost

(301,925)

(186,850)

12,129

8,957

21,637

(7,936)

(268,159)

(185,829)

Share of result of associates

(325)

(1)

-

-

422

(300)

97

(301)

Income before income tax

1,612,440

1,583,519

366,270

328,049

472,525

408,693

2,451,235

2,320,261

Income tax expense

(249,048)

(157,966)

(120,503)

(79,654)

(158,396)

(153,586)

(527,947)

(391,206)

Net income

1,363,392

1,425,553

245,767

248,395

314,129

255,107

1,923,288

1,929,055

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Normalized EBITDA

2,274,051

2,101,807

456,606

408,667

487,240

450,563

3,217,897

2,961,037

Special items

(1,187)

(26,774)

(4,082)

-

-

-

(5,269)

(26,774)

Depreciation, amortization and impairment

(358,174)

(304,664)

(98,383)

(89,575)

(36,774)

(33,634)

(493,331)

(427,873)

Net finance costs

(301,925)

(186,850)

12,129

8,957

21,637

(7,936)

(268,159)

(185,829)

Share of results of associates

(325)

(1)

-

-

422

(300)

97

(301)

Income tax expense

(249,048)

(157,966)

(120,503)

(79,654)

(158,396)

(153,586)

(527,947)

(391,206)

Net income

1,363,392

1,425,553

245,767

248,395

314,129

255,107

1,923,288

1,929,054

 

 

 

 

 

 

 

 

 

Normalized EBITDA margin in %

45.2%

46.1%

34.1%

35.1%

43.0%

40.9%

42.9%

43.4%

 

 

 

 

 

 

 

 

 

Acquisition of property, plant and equipment

592,786

518,410

114,029

95,733

62,259

27,041

769,074

641,184

Additions to / (reversals of) provisions

60,451

78,458

1,106

598

-

2,506

61,557

81,562

Full time employee

35,370

36,237

9,881

9,736

4,868

4,797

50,119

50,769

 

33

 


 
 

 

(d) Additional information – by business unit – Three-month period ended:

 

 

Latin America - north

(Expressed in thousand of Brazilian Reais)

Beer

Soft drink

Total

 

06/30/2013

06/30/2012

06/30/2013

06/30/2012

06/30/2013

06/30/2012

 

 

 

 

 

 

 

Volume

19,943

19,860

6,963

7,275

26,906

27,135

 

 

 

 

 

 

 

Net sales

4,178,339

3,780,627

854,638

779,329

5,032,977

4,559,956

Cost of sales

(1,262,130)

(1,136,311)

(418,550)

(339,422)

(1,680,680)

(1,475,733)

Gross profit

2,916,209

2,644,316

436,088

439,907

3,352,297

3,084,223

Sales and marketing expenses

(1,227,822)

(1,025,651)

(225,723)

(164,368)

(1,453,545)

(1,190,019)

Administrative expenses

(263,250)

(238,828)

(26,349)

(28,041)

(289,599)

(266,869)

Other operating income/(expenses)

240,047

126,563

66,677

43,245

306,724

169,809

Normalized income from operations (normalized EBIT)

1,665,184

1,506,400

250,693

290,743

1,915,877

1,797,143

Special items

(876)

(26,270)

(311)

(504)

(1,187)

(26,774)

Income from operations (EBIT)

1,664,308

1,480,130

250,382

290,239

1,914,690

1,770,369

Net finance cost

(301,925)

(186,850)

-

-

(301,925)

(186,850)

Share of result of associates

(325)

(1)

-

-

(325)

(1)

Income before income tax

1,362,058

1,293,279

250,382

290,239

1,612,440

1,583,518

Income tax expense

(249,048)

(157,966)

-

-

(249,048)

(157,966)

Net income

1,113,010

1,135,313

250,382

290,239

1,363,392

1,425,552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Normalized EBITDA

1,953,438

1,748,130

320,613

353,677

2,274,051

2,101,808

Special items

(876)

(26,270)

(311)

(504)

(1,187)

(26,774)

Depreciation, amortization and impairment

(288,254)

(241,730)

(69,920)

(62,934)

(358,174)

(304,664)

Net finance costs

(301,925)

(186,850)

-

-

(301,925)

(186,850)

Share of results of associates

(325)

(1)

-

-

(325)

(1)

Income tax expense

(249,048)

(157,966)

-

-

(249,048)

(157,966)

Net income

1,113,010

1,135,313

250,382

290,239

1,363,392

1,425,552

 

 

 

 

 

 

 

Normalized EBITDA margin in %

46.8%

46.2%

37.5%

45.4%

45.2%

46.1%

 

 

Brazil

 

Beer

Soft drink

Total

(Expressed in thousand of Brazilian Reais)

06/30/2013

06/30/2012

06/30/2013

06/30/2012

06/30/2013

06/30/2012

 

 

 

 

 

 

 

Volume

18,875

18,946

6,660

6,990

25,535

25,936

 

 

 

 

 

 

 

Net sales

3,940,412

3,594,429

784,081

746,466

4,724,493

4,340,895

Cost of sales

(1,177,323)

(1,042,659)

(359,226)

(314,845)

(1,536,549)

(1,357,504)

Gross profit

2,763,089

2,551,770

424,855

431,621

3,187,944

2,983,391

Sales and marketing expenses

(1,164,245)

(972,181)

(206,631)

(149,097)

(1,370,876)

(1,121,278)

Administrative expenses

(243,654)

(226,393)

(20,119)

(21,640)

(263,773)

(248,033)

Other operating income/(expenses)

240,967

124,328

62,785

43,164

303,752

167,492

Normalized income from operations (normalized EBIT)

1,596,157

1,477,524

260,890

304,048

1,857,047

1,781,572

Special items

-

(19,079)

-

-

-

(19,079)

Income from operations (EBIT)

1,596,157

1,458,445

260,890

304,048

1,857,047

1,762,493

Net finance cost

(300,997)

(178,537)

-

-

(300,997)

(178,537)

Share of result of associates

(325)

(1)

-

-

(325)

(1)

Income before income tax

1,294,835

1,279,907

260,890

304,048

1,555,725

1,583,955

Income tax expense

(226,282)

(156,606)

-

-

(226,282)

(156,606)

Net income

1,068,553

1,123,301

260,890

304,048

1,329,443

1,427,349

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Normalized EBITDA

1,857,761

1,700,426

322,339

361,041

2,180,100

2,061,467

Special items

-

(19,079)

-

-

-

(19,079)

Depreciation, amortization and impairment

(261,604)

(222,902)

(61,449)

(56,993)

(323,053)

(279,895)

Net finance costs

(300,997)

(178,537)

-

-

(300,997)

(178,537)

Share of results of associates

(325)

(1)

-

-

(325)

(1)

Income tax expense

(226,282)

(156,606)

-

-

(226,282)

(156,606)

Net income

1,068,553

1,123,301

260,890

304,048

1,329,443

1,427,349

 

 

 

 

 

 

 

Normalized EBITDA margin in %

47.1%

47.3%

41.1%

48.4%

46.1%

47.5%

 

 

34

 


 
 

 

 

HILA-ex

 

Beer

Soft drink

Total

(Expressed in thousand of Brazilian Reais)

06/30/2013

06/30/2012

06/30/2013

06/30/2012

06/30/2013

06/30/2012

 

 

 

 

 

 

 

Volume

1,067

914

303

285

1,370

1,199

 

 

 

 

 

 

 

Net sales

237,927

186,198

70,557

32,863

308,484

219,061

Cost of sales

(84,807)

(93,652)

(59,324)

(24,577)

(144,131)

(118,229)

Gross profit

153,120

92,546

11,233

8,286

164,353

100,832

Sales and marketing expenses

(63,577)

(53,470)

(19,092)

(15,271)

(82,669)

(68,741)

Administrative expenses

(19,596)

(12,435)

(6,230)

(6,401)

(25,826)

(18,836)

Other operating income/(expenses)

(920)

2,236

3,892

82

2,972

2,318

Normalized income from operations (normalized EBIT)

69,027

28,877

(10,197)

(13,304)

58,830

15,573

Special items

(876)

(7,191)

(311)

(504)

(1,187)

(7,695)

Income from operations (EBIT)

68,151

21,686

(10,508)

(13,808)

57,643

7,878

Net finance cost

(928)

(8,313)

-

-

(928)

(8,313)

Income before income tax

67,223

13,373

(10,508)

(13,808)

56,715

(435)

Income tax expense

(22,766)

(1,360)

-

-

(22,766)

(1,360)

Net income

44,457

12,013

(10,508)

(13,808)

33,949

(1,795)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Normalized EBITDA

95,677

47,705

(1,726)

(7,363)

93,951

40,342

Special items

(876)

(7,191)

(311)

(504)

(1,187)

(7,695)

Depreciation, amortization and impairment

(26,650)

(18,828)

(8,471)

(5,941)

(35,121)

(24,769)

Net finance costs

(928)

(8,313)

-

-

(928)

(8,313)

Income tax expense

(22,766)

(1,360)

-

-

(22,766)

(1,360)

Net income

44,457

12,013

(10,508)

(13,808)

33,949

(1,795)

 

 

 

 

 

 

 

Normalized EBITDA margin in %

40.2%

25.6%

-2.4%

-22.4%

30.5%

18.4%

 

 

Latin America - south

 

Beer

Soft drink

Total

(Expressed in thousand of Brazilian Reais)

06/30/2013

06/30/2012

06/30/2013

06/30/2012

06/30/2013

06/30/2012

 

 

 

 

 

 

 

Volume

4,371

4,368

3,176

3,243

7,547

7,611

 

 

 

 

 

 

 

Net sales

958,913

810,630

378,569

354,520

1,337,482

1,165,150

Cost of sales

(346,884)

(287,879)

(238,443)

(232,508)

(585,327)

(520,387)

Gross profit

612,029

522,751

140,126

122,012

752,155

644,763

Sales and marketing expenses

(208,336)

(176,573)

(104,187)

(94,460)

(312,523)

(271,033)

Administrative expenses

(53,694)

(36,518)

(16,252)

(13,211)

(69,946)

(49,729)

Other operating income/(expenses)

(10,130)

(6,910)

(1,333)

2,001

(11,463)

(4,909)

Normalized income from operations (normalized EBIT)

339,869

302,750

18,354

16,342

358,223

319,092

Special items

(4,082)

-

-

-

(4,082)

-

Income from operations (EBIT)

335,787

302,750

18,354

16,342

354,141

319,092

Net finance cost

19,480

9,306

(7,351)

(349)

12,129

8,957

Income before income tax

355,267

312,056

11,003

15,993

366,270

328,049

Income tax expense

(120,017)

(79,165)

(486)

(489)

(120,503)

(79,654)

Net income

235,250

232,891

10,517

15,504

245,767

248,395

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Normalized EBITDA

416,490

371,193

40,116

37,474

456,606

408,667

Special items

(4,082)

-

-

-

(4,082)

-

Depreciation, amortization and impairment

(76,621)

(68,443)

(21,762)

(21,132)

(98,383)

(89,575)

Net finance costs

19,480

9,306

(7,351)

(349)

12,129

8,957

Income tax expense

(120,017)

(79,165)

(486)

(489)

(120,503)

(79,654)

Net income

235,250

232,891

10,517

15,504

245,767

248,395

 

 

 

 

 

 

 

Normalized EBITDA margin in %

43.4%

45.8%

10.6%

10.6%

34.1%

35.1%

 

             

35

 


 
 

 

 

Canada

 

06/30/2013

 

06/30/2012

(Expressed in thousand of Brazilian Reais)

Beer

 

Total

 

Beer

 

Total

 

 

 

 

 

 

 

 

Volume

2,531

 

2,531

 

2,632

 

2,632

 

 

 

 

 

 

 

 

Net sales

1,132,674

 

1,132,674

 

1,100,297

 

1,100,297

Cost of sales

(326,263)

 

(326,263)

 

(303,859)

 

(303,859)

Gross profit

806,411

 

806,411

 

796,438

 

796,438

Sales and marketing expenses

(318,548)

 

(318,548)

 

(343,606)

 

(343,606)

Administrative expenses

(36,895)

 

(36,895)

 

(40,295)

 

(40,295)

Other operating income/(expenses)

(502)

 

(502)

 

4,392

 

4,392

Normalized income from operations (normalized EBIT)

450,466

 

450,466

 

416,929

 

416,929

Income from operations (EBIT)

450,466

 

450,466

 

416,929

 

416,929

Net finance cost

21,637

 

21,637

 

(7,936)

 

(7,936)

Share of result of associates

422

 

422

 

(300)

 

(300)

Income before income tax

472,525

 

472,525

 

408,693

 

408,693

Income tax expense

(158,396)

 

(158,396)

 

(153,586)

 

(153,586)

Net income

314,129

 

314,129

 

255,107

 

255,107

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Normalized EBITDA

487,240

 

487,240

 

450,563

 

450,563

Depreciation, amortization and impairment

(36,774)

 

(36,774)

 

(33,634)

 

(33,634)

Net finance costs

21,637

 

21,637

 

(7,936)

 

(7,936)

Share of results of associates

422

 

422

 

(300)

 

(300)

Income tax expense

(158,396)

 

(158,396)

 

(153,586)

 

(153,586)

Net income

314,129

 

314,129

 

255,107

 

255,107

 

 

 

 

 

 

 

 

Normalized EBITDA margin in %

43.0%

 

43.0%

 

40.9%

 

40.9%

 

13. NET SALES

The reconciliation of gross sales to net sales is as follows:

 

 

Six-month period ended:

 

Three-month period ended:

 

06/30/2013

06/30/2012

 

06/30/2013

06/30/2012

Gross sales

30,226,531

27,835,286

 

14,875,468

13,394,070

Deductions from gross revenue

(14,950,592)

(13,774,169)

 

(7,372,335)

(6,568,667)

 

15,275,939

14,061,117

 

7,503,133

6,825,403

 

 

The deductions of the gross revenue are represented by the taxes and rebates. Services provided by distributors, such as the promotion of our brands, logistics services and strategic location in stores are not considered as reduction in revenue when separately identifiable.

 

36

 


 
 

 

14. OTHER OPERATING INCOME / (EXPENSES)

 

 

Six-month period ended:

 

Three-month period ended:

 

06/30/2013

06/30/2012

 

06/30/2013

06/30/2012

Government grants/NPV of long term fiscal incentives

553,787

266,675

 

228,850

138,127

(Additions to )/reversal of provisions

(1,310)

(11,791)

 

(1,275)

(11,063)

Net gain on disposal of property, plant and equipment and intangible assets

2,569

(4,004)

 

7,203

(874)

Net rental income

1,801

1,211

 

694

621

Net other operating income

51,410

56,386

 

59,287

42,481

 

608,257

308,477

 

294,759

169,292

 

Government grants are related to ICMS (Brazilian State value added) tax incentives.

 

During the first six-month period of 2013 the Company reassessed the discount rate used to measure the financial subsidy in government loans in accordance with their cost of external funding.

 

15. SPECIAL ITEMS

 

Special items are those that in Management’s judgment need to be disclosed by virtue of their size or nature.  In determining whether an event or transaction classifies as special, Management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence, and the potential impact of profit or loss variation.  These items are disclosed on the face of the consolidated income statement or separately disclosed in the notes to the financial statements.  Transactions which may give rise to special items are principally restructuring activities, impairments, and gains or losses on disposal of assets and investments. The Company considers these items to be significant and accordingly, has excluded them from the measurement of segment performance (Note 12).

 

Special items disclosed on the face of the consolidated income statement are detailed below:

 

Six-month period ended:

 

Three-month period ended:

 

06/30/2013

06/30/2012

 

06/30/2013

06/30/2012

Restructuring

(6,245)

(7,695)

 

(5,269)

(7,695)

Acquisition of subsidiaries

-

(15,829)

 

-

(15,829)

Others

-

(3,250)

 

-

(3,250)

 

(6,245)

(26,774)

 

(5,269)

(26,774)

 

 

The restructuring expenses relate to the realignment of the structure and processes in geographical segment of Latin America - South. In 2012 acquisition of subsidiaries expenses relate to the acquisition of CND.

 

 

37

 


 
 

 

16. FINANCE COST AND INCOME

 

Six-month period ended:

 

Three-month period ended:

Finance costs

06/30/2013

06/30/2012

 

06/30/2013

06/30/2012

 

 

 

 

 

 

Interest expense

(280,732)

(198,997)

 

(143,818)

(116,157)

Capitalized borrowings

31,249

41,348

 

12,426

13,043

Net Interest on Pension Plans

(42,815)

(40,151)

 

(21,306)

(17,510)

Losses on derivatives not considered as hedge accounting

(232,592)

(169,510)

 

(144,304)

(37,167)

Hedge ineffectiveness losses

(9,625)

-

 

(4,206)

-

Interest on tax contingencies

(56,133)

(45,144)

 

(38,375)

(38,481)

Interest and foreign exchange rate on loans

-

-

 

-

(200)

Exchange variation

(57,848)

(58,522)

 

-

(49,187)

Tax on financial transactions

(42,416)

(75,050)

 

(15,007)

(35,577)

Bank guarantee expenses

(38,188)

(34,936)

 

(18,907)

(19,884)

Other financial costs, including bank fees

(66,330)

(19,194)

 

(24,527)

(8,453)

 

(795,430)

(600,156)

 

(398,024)

(309,573)

 

Other financial costs increase mainly relates to an impairment recognized by Ambev on its investment in Venezuela followed the devaluation of the country’s currency in the amount of R$ 29,070.

 

Interest expenses are presented net of the effect of derivative instruments which mitigate Ambev’s interest rate risk (Note 19 ) The interest expense recognized on hedged or not financial liabilities and the net interest expense from the related hedging derivative instruments are as follows:

 

 

Six-month period ended:

 

Three-month period ended:

Interest expense

06/30/2013

06/30/2012

 

06/30/2013

06/30/2012

 

 

 

 

 

 

Financial liabilities measured at amortized cost

(138,914)

(196,251)

 

(69,422)

(111,082)

Financial liabilities at fair value through profit or loss

(130,330)

(19,635)

 

(68,174)

(19,635)

Fair value hedge - hedged items

10,558

(1,390)

 

7,512

(2,015)

Fair value hedge - hedging instruments

(22,046)

21,140

 

(13,734)

16,664

Cash flow hedges - hedged items

-

(5,547)

 

-

(177)

Cash flow hedges - hedging instruments (reclassified from equity)

-

2,686

 

-

88

 

(280,732)

(198,997)

 

(143,818)

(116,157)

 

Foreign exchange gains and losses are presented net of the effect of foreign exchange derivative instruments designated as hedges.

 

 

Six-month period ended:

 

Three-month period ended:

Finance income

06/30/2013

06/30/2012

 

06/30/2013

06/30/2012

 

 

 

 

 

 

Interest income

140,324

144,726

 

61,608

71,093

Net gains on hedging instruments that are not part of a hedge accounting relationship

88,501

135,725

 

31,583

32,867

Hedge ineffectiveness gains

-

1,771

 

-

530

Gains on no derivative instrument at fair (value through profit or loss)

44,353

37,424

 

22,745

10,205

Interest and foreign exchange rate on loans

-

411

 

-

211

Exchange rate

-

-

 

3,968

-

Others

13,406

11,632

 

9,961

8,838

 

286,584

331,689

 

129,865

123,744

 

 

38

 


 
 

 

 

Interest income arises from the following financial assets:

 

Six-month period ended:

 

Three-month period ended:

Interest income

06/30/2013

06/30/2012

 

06/30/2013

06/30/2012

 

 

 

 

 

 

Cash and cash equivalents

105,950

117,113

 

44,043

46,905

Investment securities held for trading

34,374

27,613

 

17,565

24,188

 

140,324

144,726

 

61,608

71,093

 

The net result of the operational hedge, of the net investment hedge and of the fiscal hedge recognized directly in other comprehensive income is presented below:

 

 

Six-month period ended:

 

Three-month period ended:

Hedging reserve

06/30/2013

06/30/2012

 

06/30/2013

06/30/2012

Recognized in Equity (cash flow hedge)

65,948

364,087

 

215,765

348,993

Removed from Equity and included in profit or loss

(72,945)

(211,541)

 

(20,535)

(121,927)

Deferred income tax variance in Equity and other changes

(2,302)

(85,570)

 

(60,340)

(122,840)

 

(9,299)

66,976

 

134,890

104,226

 

 

 

 

 

 

Exchange differences on translation of foreign operations (gains/ (losses))

 

 

 

 

 

Effective portion of changes in fair value of net investment hedges

(187,843)

(225,353)

 

(242,206)

(274,651)

  

17. INCOME TAX AND SOCIAL CONTRIBUTION

 Income taxes reported in the income statement are analyzed as follows:

 

 

Six-month period ended:

 

Three-month period ended:

 

06/30/2013

06/30/2012

 

06/30/2013

06/30/2012

 

 

 

 

 

 

Income tax expense - current

(1,410,729)

(1,345,479)

 

(642,361)

(566,839)

 

 

 

 

 

 

Deferred tax (expense)/income on temporary differences

171,318

156,298

 

30,443

65,215

Deferred tax on taxes losses

205,098

217,920

 

83,971

110,418

Total deferred tax (expense)/income

376,416

374,218

 

114,414

175,633

 

 

 

 

 

 

Total income and expenses

(1,034,313)

(971,261)

 

(527,947)

(391,206)

 

 

 

 

39

 


 
 

 

The reconciliation from the weighted nominal to the effective tax rate is summarized as follows:

 

 

Six-month period ended:

 

Three-month period ended:

 

06/30/2013

06/30/2012

 

06/30/2013

06/30/2012

 

 

 

 

 

 

Profit before tax

5,334,094

5,234,822

 

2,451,235

2,320,261

Adjustment on taxable basis

 

 

 

 

 

Non-taxable income

(185,837)

(233,834)

 

(85,974)

(139,301)

Government grants related to sales taxes

(340,901)

(195,912)

 

(184,421)

(106,170)

Share of results of associates

(1,785)

(59)

 

(97)

301

Expenses not deductible for tax purposes

138,021

48,312

 

118,057

31,819

4,943,592

4,853,329

 

2,298,800

2,106,910

Aggregated weighted nominal tax rate

32.32%

32.32%

 

31.77%

31.89%

Taxes – nominal rate

(1,597,660)

(1,568,596)

 

(730,388)

(682,127)

Adjustment on tax expense

 

 

 

 

 

Regional incentives - income taxes

21,693

44,891

 

(10,357)

17,501

Deductible interest attributed to shareholders

124,612

272,945

 

-

135,604

Tax savings from goodwill amortization on tax books

125,215

60,376

 

62,608

30,188

Withholding tax and other income

(51,444)

(29,610)

 

(38,348)

(17,246)

Other tax adjustments

343,271

248,733

 

188,538

124,874

Income tax and social contribution expense

(1,034,313)

(971,261)

 

(527,947)

(391,206)

Effective tax rate

19.39%

18.55%

 

21.54%

16.86%

           

 

The main events occurred in the period that impacted the effective tax rate were:

(a) Tax benefit related to the amortization of goodwill arising from the acquisition of CND; (b) higher income from companies with an average tax rate of less than 34%, which were partially offset by the reduction in regional income tax incentives; (c) decrease in interest on shareholder’s equity expense.

The Company has been granted with income tax incentives by the Brazilian Federal Government to promote economic and social development in certain areas of the North and Northeast. These incentives are recorded in income on an accrual basis and allocated at year-end on tax incentive reserve account.

 

18. SHARE-BASED PAYMENTS

Different share-based payment programs and stock option plans allow the company’s senior management and members of the Board of Directors to receive or acquire shares of the Company. For all option plans, the fair value of share-based payment compensation is estimated at grant date, using the Hull binomial pricing model.

 

This current model of share based payment includes two types of grants: (i) on the first type of grant, the Beneficiary may choose to allocate 30%, 40%, 60%, 70% or 100% of the amount related to the profit share he received in the year, at the immediate exercise of options, thus acquiring the corresponding Preferred shares of the Company, and the delivery of a substantial part of the acquired shares is conditioned to the permanency in the Company for a period of five-years from the date of exercise (“Grant 1”) and; (ii) on the second type of grant, the Beneficiary may exercise the options after a period of five years (“Grant 2”). In this new model, the exercise of options is not subject to the fulfillment of performance goals of the Company.

40

 


 
 

 

The 2010.2 Program included two types of grants described above (Grant 1 and 2), the 2011.1 program included only Grant 1 and 2010.3 and 2011.2 Programs contemplated only Grant 2.

 

Additionally, to encourage managers to be mobile, some options granted in previous years were modified, where the dividend protection features of such options were canceled in exchange for issuing 26 thousand options in 2013 (69 thousand options in 2012), representing the economic value of the dividend protection feature eliminated. As there was no change in the fair value of the original award immediately prior to the modification and the fair value of the modified award immediately after the change, no additional expense was recorded as a result of this change.

 

The weighted average fair value of the options and assumptions used in applying the Ambev option pricing model for the 2013 and 2012 grants are as follows:

 

In R$, except when mentioned

06/30/2013 (i) 

 

12/31/2012 (i)

 

 

 

 

 

 

Fair value of options granted

32.36

 

27.88

 

Share price

94.43

 

85.26

 

Exercise price

94.43

 

85.26

 

Expected volatility

35.4%

 

33.0%

 

Vesting year

5

 

4

 

Expected dividends

de 0% a 5%

 

de 0% a 5%

 

Risk-free interest rate

1,9% à 9,8%

(ii)

2.1% à 11.2%

(ii)

  

(i)     Information based on weighted average plans granted, except for the expected dividends and risk-free interest rate.

(ii) The  percentages  include  the  grants  of  stock options and  ADRs  during the period, for which the risk-free interest rate of ADRs is calculated in U.S. dollar

 

 

The total number of outstanding Ambev options are as follows:

Thousand options

06/30/2013

 

12/31/2012

 

 

 

 

Options outstanding at January 1

28,783

 

29,562

Options issued during the period

26

 

3,103

Options exercised during the period

(726)

 

(2,500)

Options forfeited during the period

(367)

 

(1,382)

Options outstanding at ended year

27,716

 

28,783

 

The range of exercise prices of the outstanding options is between R$9.79 (R$11.52 as of December 31, 2012) and R$89.20 ( R$89.20 as of December 31, 2012) and the weighted average remaining contractual life is approximately  7.92 years (8.15 years as of December 31, 2012).

41

 


 
 

 

 

Of the 27,716 thousand outstanding options (28,783 thousand as of December 31, 2012), 7,512 thousand options are vested as of June 30, 2013 (5,042 thousand as of December 31, 2012). 

 

The weighted average exercise price of the Ambev  options is as follows:

In R$ per share

06/30/2013

 

12/31/2012

Options outstanding at January 1

36.16

 

29.87

Options issued during the period

88.41

 

85.73

Options forfeited during the period

36.32

 

13.93

Options exercised during the period

21.67

 

14.12

Options outstanding at ended period

35.57

 

36.16

Options exercisable at ended period

17.95

 

18.96

 

For the options exercised during 2013, the weighted average share price at the date of exercise was R$85.25.

To settle stock options, the Company may use treasury shares. The current limit of authorized capital is considered sufficient to meet all stock option plans, if necessary the issuance of new shares to meet the programs grants.

In 2013, Ambev issued 831 thousand (967 thousand in 2012) deferred stock units related to exercise of the options in the model “Grant 1”. These deferred stock units are valued at the share price of the day of grant, representing a fair value of approximately R$74,465 (R$47,549 in 2012), and have vesting period of five years.

The total number of shares purchased under the plan of shares by employees, which delivery is deferred to a future time under certain conditions (deferred stock), is shown below:

Thousand deferred shares

06/30/2013

 

12/31/2012

 

 

 

 

Deferred shares outstanding at January 1

2,306

 

1,392

New deferred shares during the period

831

 

967

Deferred shares forfeited during the period

(30)

 

(53)

Deferred shares outstanding at ended year

3,107

 

2,306

 

Additionally, certain employees and directors of Ambev received options to acquire AB InBev shares, the compensation cost of which is recognized in the income statement against equity in the Company’s interim consolidated financial statements as of June 30, 2013

These share-based payments transactions mentioned above generated an expense of R$ 82,134  in the period ended June 30, 2013 (R$ 63,162    for the six-month period ended June 30, 2012), recorded as administrative expenses.

 

 

42

 


 
 

 

19. FINANCIAL INSTRUMENTS AND RISKS

 

1) Risk factors

 

The Company is exposed to foreign currency, interest rate, commodity price, liquidity and credit risk in the ordinary course of business. The Company analyzes each of these risks both individually and as a whole to define strategies to manage the economic impact on the Company's performance consistent with its Financial Risk Management Policy.

The Company’s use of derivatives strictly follows its Financial Risk Management Policy approved by the Board of Directors. The purpose of the policy is to provide guidelines for the management of financial risks inherent to the capital markets in which Ambev carries out its operations. The policy comprises four main aspects: (i) capital structure, financing and liquidity, (ii) transactional risks related to the business, (iii) financial statements translation risks and (iv) credit risks of financial counterparties.

The policy establishes that all the financial assets and liabilities in each country where the Company operates must be denominated in their respective local currencies. The policy also sets forth the procedures and controls needed for identifying, whenever possible, measuring and minimizing market risks, such as variations in foreign exchange rates, interest rates and commodities (mainly aluminum, wheat, corn and sugar) that may affect the Company’s revenues, costs and/or investment amounts. The policy states that all the currently known risks (e.g. foreign currency and interest) shall be mitigated by contracting derivative instruments. Existing risks not yet evident (e.g. future contracts for the purchase of raw material and property, plant and equipment) shall be mitigated using projections for the period necessary for the Company to adapt to the new costs scenario that may vary from 10 to 14 months, also through the use of derivative instruments. Not all financial statements translations risks are mitigated. Any exception to the policy must be approved by the Board of Directors.

The Company's operations are subject to the risk factors described below:

1.1) Foreign currency risk

Ambev incurs foreign currency risk on borrowings, investments, purchases, dividends and interest expense/income whenever they are denominated in a currency other than the functional currency of the subsidiary. The main derivatives financial instruments used to manage foreign currency risk are futures contracts, swaps, options, non deliverable forwards and full deliverables forwards.

 

Foreign currency risk on operational activities

As far as foreign currency risk on firm commitments and forecasted transactions is concerned, Ambev’s policy is to hedge operational transactions which are reasonably expected to occur. The table below shows the main net foreign currency positions on June 30, 2013, and the exposure may vary from 10 to 14 months, according to the Company’s Financial Risk Management Policy. Positive values ?? indicate that the Company is long (net future cash inflows) in the first currency of the currency pairs, while negative values indicate that the Company is short (net future cash outflows) in the first currency of the currency pairs. The second currency of the currency pairs listed is the functional currency of the related subsidiary.

43

 


 
 

 

 

 

06/30/2013

 

12/31/2012

 

Total exposed

Derivatives total

Open position

 

Total exposed

Derivatives total

Open position

Dollar / Canadian Dollar

(360,261)

360,261

-

 

(378,573)

378,573

-

Dollar / Paraguayan Guarani

(93,337)

93,337

-

 

(129,607)

129,607

-

Dollar / Argentinean Peso

(565,047)

565,047

-

 

(612,969)

612,969

-

Dollar / Bolivian Peso

(150,234)

150,234

-

 

(142,170)

142,170

-

Dollar / Chilean Peso

(99,718)

99,718

-

 

(90,948)

90,948

-

Dollar / Dominican Peso

-

-

-

 

(30,653)

30,653

-

Dollar / Uruguayan Peso

(58,414)

58,414

-

 

(62,368)

62,368

-

Dollar / Real

(3,355,526)

3,355,526

-

 

(3,141,779)

3,141,779

-

Dollar / Peruvian Sol

(117,727)

117,727

-

 

(157,193)

157,193

-

Euro / Canadian Dollars

(74,956)

74,956

-

 

(62,622)

62,622

-

Euro / Real

(231,338)

231,338

-

 

(132,317)

132,317

-

Pound Sterling / Canadian Dollars

(12,114)

12,114

-

 

(22,104)

22,104

-

 

(5,118,672)

5,118,672

-

 

(4,963,303)

4,963,303

-

 

In conformity with IAS 39, these instruments denominated in foreign currency are designated as cash flow hedges.

 

Foreign currency on operating activities sensitivity analysis

 

Net positions in foreign currencies are converted into the functional currency through the use of derivatives. Ambev's strategy is to minimize open positions to the market, thereby reducing operational exposure to foreign currency fluctuations.

Foreign currency risk on net investments in foreign operations

 

Ambev enters into hedging activities to mitigate exposures related to part of its investments in foreign operations. These derivatives have been appropriately classified as net investment hedges and recorded on the statements of comprehensive income as gains and (losses) on translation of foreign operations (gains/losses).

1.2) Interest rate risk

The Company applies a dynamic interest rate hedging approach whereby the target mix between fixed and floating rate debt is reviewed periodically. The purpose of Ambev’s policy is to achieve an optimal balance between cost of funding and profitability of financial results, while taking into account market conditions as well as Ambev’s overall business strategy.

44

 


 
 

 

 

Bond Hedges (interest rate risk on borrowings in Brazilian Real)

 

In July 2007, Ambev International Finance Co. issued a Brazilian Real bond (Bond 2017), of R$300,000, which bears interest at 9.5% and is repayable semi-annually with final maturity in July 2017.

 

Ambev entered into a swap transaction to hedge the interest rate risk on the Bond 2017. These derivative instruments have been designated as fair value hedge.

Debt Securities Hedge (interest rate on debt securities in Brazilian Real)

 

During the period, Ambev invested in government (fixed income) bonds. These instruments are categorized as held for trading. The Company also purchased interest rate futures contracts to compensate the exposure to real interest rate on the government bonds. Although both instruments are measured at fair value, with the changes recorded in the income statement, there is  no hedge accounting structure.

 

Interest rate sensitivity analysis

 

The table below shows the debt structure, before and after hedging, segregated by currency in which the debt is designated, as the interest rates of the respective transactions.

 

 

06/30/2013

 

12/31/2012

 

Pre - Hedge

 

Post - Hedge

 

Pre - Hedge

 

Post - Hedge

 

Interest rate

Amount

 

Interest rate

Amount

 

Interest rate

Amount

 

Interest rate

Amount

Brazilian Real

7.2%

1,449,301

 

7.4%

2,258,115

 

6.8%

1,527,230

 

6.9%

2,211,292

American Dollar

2.0%

814,601

 

3.4%

294,021

 

2.5%

650,056

 

3.4%

279,989

Dominican Peso

9.7%

80,145

 

9.7%

80,145

 

10.6%

189,004

 

10.6%

189,004

Argentinean Peso

15.0%

2,035

 

15.0%

2,035

 

0.0%

-

 

0.0%

-

Interest rate postfixed

 

2,346,082

 

 

2,634,316

 

 

2,366,290

 

 

2,680,285

 

 

 

 

 

 

 

 

 

 

 

 

Brazilian Real

6.8%

574,703

 

4.0%

286,469

 

6.6%

695,151

 

5.3%

381,156

Argentinean Peso

17.4%

121

 

17.4%

121

 

0.0%

-

 

0.0%

-

Dominican Peso

12.0%

15,203

 

12.0%

15,203

 

17.0%

206

 

17.0%

206

American Dollar

6.0%

72,586

 

6.0%

72,586

 

12.0%

33,110

 

12.0%

33,110

Guatemala´s Quetzal

0.0%

-

 

0.0%

-

 

0.0%

-

 

0.0%

-

Peruvian Sol

0.0%

-

 

0.0%

-

 

5.7%

49,095

 

5.7%

49,095

Interest rate pre-set

 

662,613

 

 

374,379

 

 

777,562

 

 

463,567

 

To perform the sensitivity analysis, the Company took into account that the greatest possible impact on income / interest expense in the case of a short position in an interest rate future contract is when the Referential Rate (“TR”) rises. Ambev estimated the possible loss, considering a scenario of variable interest rates.

 

Applying the sensitivity analysis where the interest rate rises, and all other variables remain constant, showed a fluctuation of 25% (adverse scenario) in the interest rate up to June 30, 2013 would produce an increase of approximately R$ 23 million in interest expense and approximately R$ 46 million in interest income from cash investments, while a fluctuation of 50% (remote scenario) would present an increase of approximately R$ 70 million in expense and R$ 140 million in income.

45

 


 
 

 

 

1.3) Commodity Risk

A significant portion of Ambev’s inputs comprises commodities, which historically have experienced substantial price fluctuations. Ambev therefore uses both fixed price purchasing contracts and commodity derivatives to minimize exposure to commodity price volatility. The Company has important exposures to the following commodities: aluminum, sugar, wheat and corn. These derivative instruments have been designated as cash flow hedges.

 

06/30/2013

 

12/31/2012

 

Total Exposure

Total of Derivatives

Open Position

 

Total Exposure

Total of Derivatives

Open Position

Aluminum

(1,040,840)

1,040,840

-

 

(667,598)

667,598

-

Sugar

(384,841)

384,841

-

 

(334,755)

334,755

-

Wheat

(362,096)

362,096

-

 

(249,943)

249,943

-

Heating oil

(36,300)

36,300

-

 

(29,682)

29,682

-

Crude oil

(23,937)

23,937

-

 

(20,377)

20,377

-

Natural Gas

(5,859)

5,859

-

 

(6,805)

6,805

-

Paraxylene

(80,626)

80,626

-

 

-

-

-

Corn

(265,092)

265,092

-

 

(319,901)

319,901

-

Total

(2,199,591)

2,199,591

-

 

(1,629,061)

1,629,061

-

 

Commodity sensitivity analysis

 

Due to the volatility of commodities prices, Ambev uses fixed price future contracts and derivatives instruments to minimize exposure to market movements that could affect income.

 

The table below shows the estimated impact on Equity from fluctuations in commodities prices. Hedge operations for transactions which may impact Equity will generate results inversely proportional to the impact on the acquisition cost of commodities.

 

46

 


 
 

 

 

Impact on Equity

 

06/30/2013

 

12/31/2012

 

Adverse scenario 25%

Remote scenario 50%

 

Adverse scenario 25%

Remote scenario 50%

 

 

 

 

 

 

Aluminum

(260,211)

(520,420)

 

(165,146)

(330,291)

Sugar

(96,210)

(192,420)

 

(83,689)

(167,378)

Wheat

(90,524)

(181,048)

 

(62,486)

(124,971)

Heating oil

(9,075)

(18,150)

 

(7,249)

(14,499)

Crude oil

(5,984)

(11,969)

 

(5,094)

(10,189)

Natural Gas

(1,465)

(2,930)

 

(1,584)

(3,167)

Paraxylene

(20,156)

(40,313)

 

-

-

Corn

(66,273)

(132,546)

 

(79,975)

(159,951)

Total

(549,898)

(1,099,796)

 

(405,223)

(810,446)

 

1.4) Credit Risk

Concentration of credit risk on trade receivables

A substantial part of the Company’s sales is made to distributors, supermarkets and retailers, within a broad distribution network. Credit risk is reduced because of the widespread number of customers and control procedures used to monitor risk. Historically, the Company has not experienced significant losses on receivables from customers.

Concentration of credit risk on counterpart

In order to minimize the credit risk of its investments, the Company has adopted procedures for the allocation of cash and investments, taking into consideration limits and credit analysis of financial institutions, avoiding credit concentration, i.e., the credit risk is monitored and minimized to the extent that negotiations are carried out only with a select group of highly rated counterparties.

The selection process of financial institutions authorized to operate as the Company’s counterparties is set forth in our Credit Risk Policy. This policy establishes maximum limits of exposure to each counterparty based on the risk rating and on each counterparty's capitalization.

In order to minimize the risk of credit with its counterparties on significant derivative transactions, the Company has adopted bilateral “trigger” clauses. According to these clauses, when the fair value of an operation exceeds a percentage of its notional value (generally between 10% and 15%), the debtor settles the difference in favor of the creditor.

As of June, 2013, the Company held its main short-term investments with the following financial institutions: Banco do Brasil, Caixa Econômica Federal, BNP Paribas, Bradesco, Merrill Lynch, Morgan Stanley, Deutsche Bank, Itaú-Unibanco, Citibank, Toronto Dominion Bank, ING, JP Morgan Chase, Patagonia, Santander, Barclays and HSBC. The Company contracted derivative instruments with the following financial institutions: Barclays, Citibank, Merrill Lynch, Morgan Stanley, Deutsche Bank, Itaú-Unibanco, JP Morgan Chase, Santander, ScotiaBank, Sociète Generale, Banco Bisa, Banco de Crédito do Peru, BNB, BNP Paribas, Macquarie and TD Securities.

47

 


 
 

 

The carrying amount of financial assets represents the maximum exposure to credit risk. The carrying amount ​​ of cash and cash equivalents, investment securities, trade and other receivables excluding prepaid expenses, taxes receivable and derivative financial instruments are disclosed net of provisions for impairment and represents the maximum exposure of credit risk as of June 30, 2013. There was no concentration of credit risk with any counterparty as of June 30, 2013.

1.5) Liquidity risk

The Company believes that cash flows from operating activities, cash and cash equivalents and short-term investments, together with the derivative instruments and access to loan facilities are sufficient to finance capital expenditures, financial liabilities and dividend payments in the future.

2) Financial instruments:

Management of these instruments is effected through operational strategies and internal controls to assure liquidity, profitability and transaction security. Financial instruments transactions contracted with hedge objectives are regularly reviewed for the effectiveness of the risk exposure that management intends to cover (foreign exchange, interest rate etc.).

Transactions involving financial instruments, segregated by category, are recognized in the financial statements, as below:

 

Loans and receivables

Financial asset at fair value through profit or loss

Derivatives
hedge

Held to maturity

Avaiable for sale

Total

June 30, 2013

 

 

 

 

 

 

Assets due to Balance sheet

 

 

 

 

 

 

Cash and cash equivalents

4,435,765

-

-

-

-

4,435,765

Investment securities

-

486,133

-

74,658

172,004

732,795

Trade and other receivables excluding prepaid expenses and taxes receivable

3,895,023

-

-

-

-

3,895,023

Financial instruments derivatives

-

189,555

316,653

-

-

506,208

Total

8,330,788

675,688

316,653

74,658

172,004

9,569,791

 

48

 


 
 

 

 

Loans and receivables

Financial asset at fair value through profit or loss

Derivatives
hedge

Held to maturity

Avaiable for sale

Total

December 31, 2012

 

 

 

 

 

 

Assets due to Balance sheet

 

 

 

 

 

 

Cash and cash equivalents

8,926,165

-

-

-

-

8,926,165

Investment securities

-

291,183

-

61,436

373,367

725,986

Trade and other receivables excluding prepaid expenses and taxes receivable

4,037,097

-

-

-

-

4,037,097

Financial instruments derivatives

-

200,106

171,015

-

-

371,121

Total

12,963,262

491,289

171,015

61,436

373,367

14,060,369

 

 

 

Financial liabilities through amortized cost

Financial liabilities at fair value through profit and loss

Derivatives
hedge

Total

June 30, 2013

 

 

 

 

 

Liabilities due to Balance sheet

 

 

 

 

 

Trade and other payables excluding tax payables

 

6,467,850

2,383,620

-

8,851,470

Financial instruments derivatives

 

-

616,401

449,549

1,065,950

Interest-bearning loans and borrowings

 

3,008,695

-

-

3,008,695

Total

 

9,476,545

3,000,021

449,549

12,926,115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities through amortized cost

Financial liabilities at fair value through profit and loss

Derivatives
hedge

Total

December 31, 2012

 

 

 

 

 

Liabilities due to Balance sheet

 

 

 

 

 

Trade and other payables excluding tax payables

 

11,155,875

2,125,754

-

13,281,629

Financial intruments derivatives

 

-

686,738

369,093

1,055,831

Interest-bearning loans and borrowings

 

3,143,729

-

-

3,143,729

Total

 

14,299,604

2,812,492

369,093

17,481,189

 

Classification of financial instruments by type of fair value measurement

Pursuant to IFRS 7, the classification of financial instruments measured at fair value as of June 30, 2013 is shown below:

 

Level 1 – valuation at quoted prices (unadjusted) in active markets;

Level 2 – other data besides those quoted in an active market (Level 1) that may price the obligations and rights directly (e.g., active market prices) or indirectly (e.g., valuation techniques that use data derived from active markets); and,

Level 3 – valuation inputs that are not based on observable market data (unobservable inputs).

49

 


 
 

 

 

06/30/2013

 

12/31/2012

 

Level 1

Level 2

Level 3

Total

 

Level 1

Level 2

Level 3

Total

Financial assets

 

 

 

 

 

 

 

 

 

Financial asset at fair value through profit or loss

646,229

29,458

-

675,687

 

325,108

166,181

-

491,289

Derivatives - cash flow hedge

197,113

54,217

-

251,330

 

32,815

67,225

-

100,040

Derivatives - fair value hedge

-

-

-

-

 

-

20,827

-

20,827

Derivatives - investment hedge

29,329

35,994

-

65,323

 

31,562

18,586

-

50,148

 

872,671

119,669

-

992,340

 

389,485

272,819

-

662,304

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

 

Financial liabilities at fair value through profit and loss (i)

139,632

476,769

2,383,620

3,000,021

 

40,006

646,732

2,125,754

2,812,492

Derivatives - cash flow hedge

182,734

177,307

-

360,041

 

87,746

156,728

-

244,474

Derivatives - fair value hedge

-

4,791

-

4,791

 

-

-

-

-

Derivatives - investment hedge

84,717

-

-

84,717

 

23,509

101,110

-

124,619

 

407,083

658,867

2,383,620

3,449,570

 

151,261

904,570

2,125,754

3,181,585

 

(i) As part of the shareholders agreement between the Ambev and ELJ, an option to sell (“put”) and to purchase (“call”) was issued, which may result in an acquisition by Ambev of the remaining shares of CND, for a value based  on EBITDA multiples and exercisable annually until 2019. On June 30, 2013 the put option held by ELJ is valued at approximately R$2.4 billion and the liability was recorded against equity in accordance with the IFRS 3 and categorized as “Level 3”. No value has been assigned to the call option held by Ambev. The fair value of this consideration deferred was calculated by using standard valuation techniques (present value of the principal amount and future interest rates, discounted by the market rate). The criteria used are based on market information and from reliable sources and they are revaluated on an annual basis at the same moment that the Company applies the impairment test. The changes in Level 3 are presented as follows:

 

Reconciliation of changes in the categorization of Level 3

 

Balance of financial liabilities at December 31, 2012

2,125,754

Total gains and losses in the period

257,866

Expense recognized in the income

214,687

Expense recognized in equity

43,179

Balance of financial liabilities at June 30, 2013

2,383,620

 

2.1) Derivative instruments

To meet its objectives, the Company and its subsidiaries use currency, interest, and commodity derivative instruments. Derivative instruments authorized by the Financial Risk Management Policy are futures contracts traded on exchanges, deliverable forwards, non-deliverable forwards, swaps and options. At June 30, 2013, the Company and its subsidiaries had no target forward operations, swaps with currency verification or any other derivative operations representing a risk level above the nominal value of the contracts. The derivative operations are classified by strategy according to their purpose, as follows:

i) Operational hedge – operations contracted with the purpose of reducing the Company’s exposure, net of taxes, to the volatility of foreign exchange rates and raw material prices, commitments for investments, equipment and services to be acquired. All such derivatives are classified as Cash Flow Hedge instruments. Thus, the net results of such operations calculated at fair value, are recorded in equity accounts until recognition of the hedged item, when the accumulated results are recycled to the appropriate income statement account.

50

 


 
 

 

ii) Financial hedge - operations contracted with the purpose of mitigating the Company’s net indebtedness against foreign exchange and interest rate risk. Cash net positions and foreign currency debts are continually assessed for identification of new exposures. Derivative used to protect the risks related to Bond 2017 was designated as Fair Value Hedge instrument. Thus, their results, measured according to their fair value, are recognized in each year in financial results.

iii) Fiscal hedge - operations contracted with the purpose of minimizing the Brazilian fiscal impact related to the foreign exchange gains/losses on transactions in U.S. dollars, between the Company and its subsidiaries abroad. Such contracts are represented by long-term borrowings, duly recorded at Brazilian Central Bank, adjusted for foreign exchange variation plus market interest rate.

In order to offset the tax effect on unmatched exposures, the Company contracted derivative instruments, the results of which are measured at fair value and recognized on an accrual basis within income tax expense of each period.

iv) Net investment hedge - transactions entered into in order to minimize exposure of the exchange differences arising from translation of net investment in the Company's subsidiaries located abroad for translation account balance. All derivatives allocated to this type of transaction are classified as Net Investment Hedge instruments.

The effective part of the hedge is allocated to equity and the ineffectiveness part is recorded directly in financial results.

As of June 30, 2013 and December 31, 2012, the contracted amounts of these instruments and their respective fair values, as well as the cumulative effects in each period, are detailed in the table below:

Purpose / Risk / Instruments

Notional (i)

 

Fair value

 

 

 

06/30/2013

12/31/2012

 

06/30/2013

12/31/2012

 

 

 

 

 

 

Assets

Liabilities

Assets

Liabilities

 

Foreign currency

Future contracts (ii)

2,667,390

3,274,096

 

78,611

(27,519)

4,363

(16,440)

 

Foreign currency

Option to acquire

919,474

-

 

99,767

-

-

-

 

Foreign currency

Non Deliverable Forwards

1,084,476

1,225,907

 

16,541

(25,982)

10,547

(51,434)

 

Foreign currency

Deliverable Forwards

447,331

463,299

 

17,182

(55)

-

(4,105)

 

Commodity

Future contracts (ii)

1,122,451

933,770

 

27,152

(166,034)

76,928

(107,886)

 

Commodity

Swaps

1,077,139

695,291

 

27,267

(152,771)

41,049

(92,211)

Operational hedge

 

7,318,261

6,592,363

 

266,520

(372,361)

132,887

(272,076)

 

Foreign currency

Future contracts (ii)

1,857,448

(664,240)

 

112,776

(76,886)

13,989

(14,670)

 

Foreign currency

Swaps

255,860

239,101

 

1,062

(220,628)

21,699

(180,696)

 

Foreign currency

Non Deliverable Forwards

-

1,351,282

 

-

-

19,803

(10,533)

 

Interest rates

Future contracts (ii)

(250,000)

(400,000)

 

2,926

(2,428)

219

(356)

 

Interest rates

Swaps

300,000

300,000

 

-

(4,791)

20,827

-

Financial hedge

 

2,163,308

826,143

 

116,764

(304,733)

76,537

(206,255)

 

Foreign currency

Future contracts (ii)

(925,869)

(3,985)

 

36,427

(54,253)

6,037

(6,003)

 

Foreign currency

Swaps / Non Deliverable Forwards

(1,823,439)

(2,182,458)

 

21,173

(249,886)

105,512

(446,878)

Fiscal hedge

 

(2,749,308)

(2,186,443)

 

57,600

(304,139)

111,549

(452,881)

 

Foreign currency

Future contracts (ii)

(2,866,543)

(2,462,826)

 

29,329

(84,717)

31,562

(23,509)

 

Foreign currency

Non Deliverable Forwards

886,240

-

 

35,994

-

18,586

(101,110)

Investment hedge

 

(1,980,303)

(2,462,826)

 

65,323

(84,717)

50,148

(124,619)

Total Derivatives

 

4,751,958

2,769,237

 

506,207

(1,065,950)

371,121

(1,055,831)

 

(i) The negative positions refer to long positions and the positive positions refer to short positions.

(ii) The future contracts are traded on organized futures exchanges, while other derivative financial instruments are negotiated directly with financial institutions.

51

 


 
 

 

The Company recorded gains and losses on derivative financial instruments in the period ended June 30, 2013 and 2012 as below:

 

 

 

Result (iii)

 

 

 

Six-month period ended:

 

Three-month period ended:

Purpose / Risk / Instruments

 

06/30/2013

06/30/2012

 

06/30/2013

06/30/2012

 

 

 

 

 

 

 

 

 

Foreign currency

Future contracts

120,715

352,436

 

170,471

333,107

 

Foreign currency

Option to acquire

42,842

-

 

42,842

-

 

Foreign currency

Non Deliverable Forwards

148,203

25,957

 

112,442

79,512

 

Foreign currency

Deliverable Forwards

7,744

11,726

 

8,062

2,127

 

Commodity

Future contracts

(140,628)

11,435

 

(61,995)

6,496

 

Commodity

Swaps

(112,928)

(37,467)

 

(56,057)

(72,249)

Operational hedge

 

 

65,948

364,087

 

215,765

348,993

 

Foreign currency

Future contracts

90,799

111,275

 

106,874

95,547

 

Foreign currency

Option to acquire

(7,601)

(937)

 

(7,601)

(937)

 

Foreign currency

Swaps

(6,385)

(9,861)

 

(2,706)

(4,505)

 

Foreign currency

Non Deliverable Forwards

(37,326)

(8,869)

 

(27,522)

10,291

 

Foreign currency

Deliverable Forwards

(10,703)

-

 

(10,703)

-

 

Interest rates

Future contracts

(5,761)

10,998

 

8,328

4,914

 

Interest rates

Swaps

(22,046)

21,599

 

(13,734)

17,012

Financial hedge

 

 

977

124,205

 

52,936

122,322

 

Foreign currency

Future contracts

(41,582)

(3,899)

 

(73,766)

(40,063)

 

Foreign currency

Swaps / Non Deliverable Forwards

(103,260)

(103,270)

 

(40,474)

(112,859)

Fiscal hedge

 

 

(144,842)

(107,169)

 

(114,240)

(152,922)

 

Foreign currency

Future contracts

(154,899)

(127,292)

 

(209,262)

(172,339)

 

Foreign currency

Non Deliverable Forwards

(32,944)

(98,061)

 

(32,944)

(102,312)

Investment hedge

 

 

(187,843)

(225,353)

 

(242,206)

(274,651)

Total Derivatives

 

 

(265,760)

155,770

 

(87,745)

43,742

 

(iii) The result of R$ 65,948 related to hedge operations was recognized in equity (Hedge reserves) as well as the result of net investment hedge in an amount of R$(187,843) which was allocated as income (losses) on translation of subsidiaries operations as presented in Other comprehensive income.

The result of the financial hedging of R$977 was fully recorded in the financial results.

The effect of R$( 144,842 ) related to derivatives designated as Fiscal hedges, was recognized in the income tax and social contribution.



 

 

52

 


 
 

 

As of June 30, 2013, the Notional and Fair Value amounts per instrument/ maturity were as follows:

 

Purpose / Risk / Instruments

Notional

 

 

 

2013

2014

2015

2016

>2016

Total

 

 

 

 

 

 

 

 

 

 

Foreign currency

Future contracts (i)

2,667,390

-

-

-

-

2,667,390

 

Foreign currency

Option to acquire

-

919,474

-

-

-

919,474

 

Foreign currency

Non Deliverable Forwards

826,693

257,783

-

-

-

1,084,476

 

Foreign currency

Deliverable Forwards

261,656

185,675

-

-

-

447,331

 

Commodity

Future contracts (i)

555,386

567,065

-

-

-

1,122,451

 

Commodity

Swaps

379,832

692,113

5,194

-

-

1,077,139

Operational hedge

 

4,690,957

2,622,110

5,194

-

-

7,318,261

 

Foreign currency

Future contracts (i)

1,857,448

-

-

-

-

1,857,448

 

Foreign currency

Swaps

3,874

-

251,986

-

-

255,860

 

Interest rates

Future contracts (i)

-

-

(220,000)

(30,000)

-

(250,000)

 

Interest rates

Swaps

-

-

-

-

300,000

300,000

Financial hedge

 

1,861,322

-

31,986

(30,000)

300,000

2,163,308

 

Foreign currency

Future contracts (i)

(925,869)

-

-

-

-

(925,869)

 

Foreign currency

Swaps / Non Deliverable Forwards

(1,823,439)

-

-

-

-

(1,823,439)

Fiscal hedge

 

(2,749,308)

-

-

-

-

(2,749,308)

 

Foreign currency

Future contracts (i)

(2,866,543)

-

-

-

-

(2,866,543)

 

Foreign currency

Non Deliverable Forwards

886,240

-

-

-

-

886,240

Investment hedge

 

(1,980,303)

-

-

-

-

(1,980,303)

Total Derivatives

 

1,822,668

2,622,110

37,180

(30,000)

300,000

4,751,958

 

 

Purpose / Risk / Instruments

Fair Value

 

 

 

2013

2014

2015

2016

>2016

Total

 

 

 

 

 

 

 

 

 

 

Foreign currency

Future contracts (i)

51,092

-

-

-

-

51,092

 

Foreign currency

Option to acquire

-

99,767

-

-

-

99,767

 

Foreign currency

Non Deliverable Forwards

(15,133)

5,692

-

-

-

(9,441)

 

Foreign currency

Deliverable Forwards

10,998

6,129

-

-

-

17,127

 

Commodity

Future contracts (i)

(93,142)

(45,740)

-

-

-

(138,882)

 

Commodity

Swaps

(84,739)

(40,683)

(82)

-

-

(125,504)

Operational hedge

 

(130,924)

25,165

(82)

-

-

(105,841)

 

Foreign currency

Future contracts (i)

35,890

-

-

-

-

35,890

 

Foreign currency

Swaps

(205,871)

-

(13,695)

-

-

(219,566)

 

Interest rates

Future contracts (i)

-

-

384

114

-

498

 

Interest rates

Swaps

-

-

-

-

(4,791)

(4,791)

Financial hedge

 

(169,981)

-

(13,311)

114

(4,791)

(187,969)

 

Foreign currency

Future contracts (i)

(17,826)

-

-

-

-

(17,826)

 

Foreign currency

Swaps / Non Deliverable Forwards

(228,713)

-

-

-

-

(228,713)

Fiscal hedge

 

(246,539)

-

-

-

-

(246,539)

 

Foreign currency

Future contracts (i)

(55,388)

-

-

-

-

(55,388)

 

Foreign currency

Non Deliverable Forwards

35,994

-

-

-

-

35,994

Investment hedge

 

(19,394)

-

-

-

-

(19,394)

Total Derivatives

 

(566,838)

25,165

(13,393)

114

(4,791)

(559,743)

 

Sensitivity analysis

 

The Company mitigates risks arising from non-derivative financial assets and liabilities substantially, through derivative instruments. The Company has identified the main risk factors that may generate losses from these derivative financial instruments and has developed a sensitivity analysis based on three scenarios, which may impact future results and /or cash flows, as described below:

1 – Base scenario: stable foreign exchange rate, interest rates and commodity prices at the same levels observed on June 30, 2013.

53

 


 
 

 

2 – Adverse scenario: 25% deterioration in each transaction’s main risk factor as compared to the level observed on June 30, 2013.

3 – Remote scenario: 50% deterioration in each transaction’s main risk factor as compared to the level observed on June 30, 2013.

In addition to the scenarios described above, the Company uses Value at Risk – VaR to measure the possible effects on the results of derivative transactions. VaR is a statistical measure developed through estimates of standard deviation and correlation between the returns of several risk factors. This model results in the loss limit expected for an asset over a certain time period and confidence interval. Under this methodology, we used the potential exposure of each financial instrument, a range of 95% and horizon of 21 days for the calculation, which are presented in module, as the following tables on June 30, 2013:

 

 

Risk factor

Financial instruments

Risk

Base scenario

Adverse scenario

Remote

scenario

VaR (R$)

 

Foreign currency

Future contracts

Dollar decrease

51,092

(615,755)

(1,282,603)

138,249

 

Foreign currency

Option to acquire

Dollar decrease

99,767

-

-

99,767

 

Foreign currency

Non Deliverable Forwards

Dollar and Euro decrease

(9,441)

(280,560)

(551,679)

24,320

 

Foreign currency

Deliverable Forwards

Dollar and Euro decrease

17,127

(94,706)

(206,539)

15,293

 

Commodity

Future contracts

Commodity decrease

(138,882)

(419,495)

(700,108)

139,206

 

Commodity

Swaps

Commodity decrease

(125,504)

(394,789)

(664,074)

123,120

Operational hedge

 

 

 

 

 

 

 

Foreign currency

Future contracts

Dollar decrease

35,890

(428,472)

(892,834)

96,270

 

Foreign currency

Swaps

Increase in tax interest

(230,294)

(294,259)

(358,224)

190

 

Foreign currency

Swaps

Dollar decrease

10,728

10,728

10,728

12,547

 

Interest rates

Future contracts

Increase in tax interest

498

416

341

-

 

Interest rates

Swaps

Increase in tax interest

(4,791)

(184,726)

(168,305)

14,711

Financial hedge

 

 

 

 

 

 

 

Foreign currency

Future contracts

Dollar incrase

(17,826)

(213,641)

(480,761)

47,987

 

Foreign currency

Swaps / Non Deliverable Forwards

Dollar incrase

(228,713)

(456,212)

(1,183,483)

98,338

Fiscal hedge

 

 

 

 

 

 

 

Foreign currency

Future contracts

Dollar incrase

(55,388)

(661,248)

(1,488,659)

148,571

 

Foreign currency

Non Deliverable Forwards

Dollar incrase

35,994

(185,566)

(407,126)

28,895

 

In addition to presenting the possible effects on individual results of derivative operations, we also show the effects of derivative operations contracted for asset protection along with each transaction´s hedged items.

54

 


 
 

 

Transaction

Risk

Base scenario

Adverse scenario

Remote

scenario

Foreign exchange hedge

Dollar and Euro decrease

32,342

(1,292,904)

(2,518,383)

Input purchase

 

(32,342)

1,292,904

2,518,383

Commodities hedge

Decrease on commodities price

(138,882)

(419,495)

(700,108)

Input purchase

 

138,882

419,495

700,108

Foreign exchange hedge

Dollar and Euro decrease

699

(92,907)

(186,512)

Capex purchase

 

(699)

92,907

186,512

Operational hedge

 

(105,841)

(1,805,306)

(3,405,003)

Operational purchase

 

105,841

1,805,306

3,405,003

Net effect

 

-

-

-

 

 

 

 

 

Foreign exchange hedge

Foreign currency increase

46,618

(428,056)

(892,493)

Net debt

 

(46,618)

(11,856)

12,670

Interest rate hedge

Increase in tax interest

(234,587)

(478,985)

(526,529)

Interest expense

 

234,587

478,985

526,529

Financial hedge

 

(187,969)

(907,041)

(1,419,022)

Net debt and interest

 

187,969

467,129

539,199

Net effect

 

-

(439,912)

(879,823)

 

 

 

 

 

Foreign exchange hedge

Dollar increase

(246,539)

(669,853)

(1,664,244)

Fiscal expense

 

246,539

669,853

1,664,244

Fiscal hedge

 

(246,539)

(669,853)

(1,664,244)

Fiscal expense

 

246,539

669,853

1,664,244

Net effect

 

-

-

-

 

 

 

 

 

Investment hedge

Dollar increase

(19,394)

(846,815)

(1,895,786)

Fiscal expense

 

19,394

846,815

1,895,786

Investment hedge (i)

 

(19,394)

(846,815)

(1,895,786)

Fiscal expense

 

19,394

846,815

1,895,786

Net effect

 

-

-

-

 

(i) It refers to operations of hedge of cash in functional currency different from Real in subsidiaries in which the Company applies Net Investment Hedge.

 

Calculation of fair value of derivatives

The Company measures derivative financial instruments by calculating their present value, through the use of market curves that impact the instrument on the computation dates. In the case of swaps, both the asset and the liability positions are estimated independently and brought to present value and the difference between the result of the asset and liability amount generates the swaps market value. For the exchange-traded derivative financial instruments, the fair value is calculated according to the adjusted exchange-listed price.

Margins given in guarantee

In order to comply with the guarantee requirements of the derivative exchanges and/or counterparties in certain operations with derivative instruments, as of June 30, 2013 the Company held R$672,403 in investments securities or cash investments available on demand, classified as cash and cash equivalents (R$626,428 on December 31, 2012).

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2.2) Debt instruments

The Company’s financial liabilities, mainly represented by debt securities are recorded at amortized cost according to the effective rate method, plus indexation and foreign exchange gains/losses, based on closing indices for each period. The Bond 2017 is designated as a fair value hedge item, with changes in fair value of the hedged risk factors recognized in the income statement against the respective loans.

 

Had the Company recognized its financial liabilities at market value, it would have recorded an additional loss, before income tax and social contribution, of R$(13,998) on June 30, 2013 (R$28,622 on December, 31 2012), as presented below:

 

 

06/30/2013

 

12/31/2012

Financial liabilities

Book

Market

Difference

 

Book

Market

Difference

International financing (other currencies)

596,469

596,469

-

 

531,143

531,143

-

BNDES - National Currency

1,579,693

1,579,693

-

 

1,730,837

1,730,837

-

BNDES - International Currency

367,409

367,409

-

 

378,925

378,925

-

Bond 2017

288,234

302,232

(13,998)

 

313,993

342,615

(28,622)

Fiscal incentives

156,077

156,077

-

 

168,693

168,693

-

Finance leasing - International Currency

20,813

20,813

-

 

20,138

20,138

-

 

3,008,695

3,022,693

(13,998)

 

3,143,729

3,172,351

(28,622)

 

The criterion used to determine the market value of the debt securities was based on quotations of investment brokers, on quotations of banks which provide services to Ambev and on the secondary market value of bonds as of June 30, 2013, being approximately 100.74% for Bond 2017 (114.21% as of December 31, 2012).

 

Capital management

 

Ambev is constantly optimizing its capital structure to maximize the value of shareholders' investments, while retaining the desired financial flexibility to execute strategic projects. In addition to the minimum legal requirements for equity financing that apply to subsidiaries in various countries, Ambev is not subject to any external capital requirements. When analyzing the capital structure of the Company, Ambev uses the same ratio of debt and equity ratings applied to the Company’s financial statements.

 

20. COLLATERAL AND CONTRACTUAL COMMITMENTS, ADVANCES FROM CUSTOMERS AND OTHER

 

06/30/2013

12/31/2012

Collateral given for own liabilities

1,238,919

1,178,904

Other commitments

304,910

282,049

 

1,543,829

1,460,953

 

 

 

Commitments with suppliers

15,010,795

14,968,554

Commitments - Bond 17

300,000

300,000

 

15,310,795

15,268,554

 

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Collateral given for own liabilities and other commitments totaled approximately R$ 1.5 billion as of June 30, 2013 including R$ 566,515  of cash guarantees . Cash deposits for guarantees are presented as trade receivables. Additionally, to meet the guarantees required by derivative exchanges and/or counterparties contracted in certain derivative financial instrument transactions, the Company maintained as of June 30, 2013 , R$672,403 in highly liquid financial investments or in cash (Note 19 ).  

Most of  the balance amounts relates  to  commitments  with  suppliers of packaging.

The Company is guarantor of the Bond issued by Ambev International Finance Co. Ltd. (wholly-owned) valued at R$300 million to 9.5% per year, maturing in 2017.

Future contractual commitments as of June 30, 2013 and December 31, 2012 are as follows:

 

 

06/30/2013

12/31/2012

Less than 1 year

3,712,746

2,893,104

Between 1 and 2 years

2,398,987

2,304,955

More than 2 years

9,199,062

10,070,495

 

15,310,795

15,268,554

 

 

21. CONTINGENCIES

 

The Company has contingent liabilities arising from lawsuits in the normal course of its business.

Contingent liabilities with a probable likelihood of loss are fully recorded as liabilities (Note 10).

The Company also has lawsuits related to tax, civil and labor, for which the likelihood of loss is classified by management as possible, based on advice of legal counsel, and for which there are no provisions. Estimates of amounts of possible loss are as follows:

 

 

06/30/2013

12/31/2012

 

 

 

PIS and COFINS

333,685

306,817

ICMS and IPI

3,242,987

2,927,650

IRPJ and CSLL

7,698,302

7,583,005

Labor

140,714

146,730

Civil

170,595

174,206

Others

1,268,681

774,330

 

12,854,964

11,912,738

 

Lawsuits with possible likelihood of loss:

There were no changes in the other main processes with possible likelihood of loss classification as of June 30, 2013, compared to those presented in the financial statements as of December 31, 2012.

57

 


 
 

 

Contingent assets

As of June 30, 2013, the Company had no contingent assets, for which the probability of success is probable.

 

22. RELATED PARTIES

 

Policies and practices regarding the realization of transactions with related parties

The Company adopts corporate governance practices and those recommended and/or required by the applicable law.

Under the Company’s bylaws the Board of Directors is responsible for approving any transaction or agreements between the Company and/or any of its subsidiaries, directors and/or shareholders (including direct or indirect partners of the Company’s shareholders). The Compliance Committee of the Company is required to advise the Board of Directors of the Company in matters related to transactions with related parties.

Management is prohibited from interfering in any transaction in which conflict exists, even in theory, with the Company´s interests. It is also not permitted to interfere in decisions of any other management member, requiring documentation in the Minutes of Meeting of the Board any decision to abstain from the specific deliberation.

The Company's guidelines with related parties follow reasonable or commutative terms, similar to those prevailing in the market or under which the Company would contract similar transactions with third parties. These are clearly disclosed in the financial statements as reflected in written contracts.

Transactions with Management members:

In addition to short-term benefits, Management members are entitled to post-employment benefits, such as retirement benefits and health and dental care. Moreover, Management members are entitled to participate in Stock Option Plan (Note 18).

Total expenses related to Management members in key functions are as follows:

 

 

Six-month period ended:

 

06/30/2013

06/30/2012

 

 

 

Short-term benefits (i)

9,546

5,778

Share-based payments (ii)

19,615

8,983

Total key management remuneration

29,161

14,761

 

  (i) These correspond substantially to salaries and profit sharing (including performance bonuses).
(ii) These correspond to the compensation cost of stock options granted to Management. These amounts exclude remuneration paid to members of the Fiscal Council.

 

58

 


 
 

 

Excluding the above mentioned remuneration and the stock options plans (Note 18), Ambev no longer has any type of transaction with the management members or pending balances receivable or payable in its balance sheet.

Transactions with the Company's shareholders:

a) Medical, dental and other benefits

The Fundação Zerrenner is one of the Company’s shareholders, and at June 30, 2013 held 17.08% of the voting rights and 9.59% of total share capital. Fundação Zerrenner is also a independent legal entity whose main goal is to provide Ambev’s employees, both active and retirees, with health care and dental assistance, technical and superior education courses, facilities for assisting elderly people, through direct initiatives or through financial assistance agreements with other entities. On June 30, 2013 and 2012, actuarial responsibilities related to the benefits provided directly by Fundação Zerrenner are fully funded by plan assets, held for that purpose, which significantly exceeds the liabilities at that date. The Company recognizes the assets (prepaid expenses) of this plan to the extent of amounts from economic benefits available to the Company, arising from reimbursements or future contributions reduction.

The expenses incurred by Fundação Zerrenner, in Brazil, in providing the benefits mentioned above totaled R$ 83,189 in the six-month period ended June 30, 2013 (R$73,500 in the six-month period ended June 30, 2012), of which R$73,900 (R$ 65,360  - June 30, 2012 ) related to active employees and R$ 9,399 (R$ 8,140 - June 30, 2012 ) related to retirees.

b) Special Goodwill Reserve

 

As a result of the merger of InBev Holding Brazil S.A. by the Company in 2005, the Company benefits, each year, from the amortization of tax deductible goodwill pursuant to CVM Instruction 319/99. The balance of the special goodwill reserve as of June 30, 2013 was R$ 313,872  (R$672,107 as of December 31, 2012) which may be used for future capital increases.

c) Leasing

The Company, through its subsidiary BSA Bebidas Ltda. (labeling), has an asset leasing agreement with Fundação Zerrenner, for R$ 63,328, for ten years, maturing on March 31, 2018.

 

 

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d) Leasing – Ambev head office

The Fundação Zerrenner and Ambev have a leasing agreement of two commercial sets maturing on January 31, 2018 which the amount to pay of R$ 2,080 until January 2014, when the new amount will be renegotiated by the end the contract.

 

e) Licensing agreement

The Company maintains a licensing agreement with Anheuser-Busch, Inc., to produce, bottle, sell and distribute Budweiser products in Brazil, Canada, Ecuador, Guatemala, Dominican Republic and Paraguay. In addition, the Company produces and distributes Stella Artois products under license to AB InBev in Brazil, Canada, Argentina, and other countries and, by means of a license granted to AB InBev, it also distributes Brahma’s product in parts of Europe, Asia and Africa.. The amount recorded was R$7,304 (R$1,793 as of June 30, 2012) and R$112,104 (R$102,195 as of June 30, 2012) as licensing income and expense, respectively.

 

23. EVENTS AFTER THE BALANCE SHEET DATE

 

The Extraordinary General Meeting held on July 30, 2013, approved the following items with regards to the Stock Swap Merger:

 

(i) the Protocol and Justification, dated May 10, 2013, in connection with the Stock Swap Merger;

 

(ii) the Stock Swap Merger, in accordance with the Protocol and Justification, based on the economic value of the Company’s shares, calculated pursuant to their stock exchange trading price on April 26, 2013, it being noted that, as a result of the Stock Swap Merger, the Company’s shareholders will receive five Ambev S.A. Common shares for each Company Common or Preferred share exchanged, and holders of ADRs representing Common or Preferred shares of the Company, will receive five Ambev S.A. ADRs for each Company ADR exchanged; and

 

(iii) the authorization for the subscription, by Management, of the shares to be issued by Ambev S.A. as a result of the Stock Swap Merger, as well as the execution of all other requirements necessary to implement the Stock Swap Merger.

 

 

 

60

 

 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Date: August 20, 2013
     
 
COMPANHIA DE BEBIDAS DAS AMERICAS-AMBEV
     
 
By: 
/s/ Nelson Jose Jamel
 
Nelson Jose Jamel
Chief Financial and Investor Relations Officer
 
 
 
 

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