Ambev SA (ADR) (NYSE:ABEV) updated its guidance for the FY2016, stating that it does not expect to experience revenue growth, during the current year. The company stated that this was being done in light of the challenges being faced by the Brazilian market. The country is in recession and has a rising rate of unemployment, which has adversely affected beer sales.
In its conference call to announce the 3Q2016 financial results, the management stated that it was experiencing a surge in operating expenses and associated costs, owing to the recession. The company’s CEO, Bernardo Pinto Paiva, voiced his optimism by stating that although consumption in the country continues to remain low, they expect FY2017 to be much better. Analysts believe that diverging annual price comparisons was another reason, to cut guidance for the FY2016, which the management did not specify. However, the management hinted at pursuing growth opportunities outside Brazil, after it claimed the 3Q2016 to be the toughest period so far.
Ambev posted a revenue of $3.23 billion and a net income of $942.7 million, for its 3Q2016, 3.6% higher than the 3Q2015. The company noted that its revenue had increased 2.3%, quarter-over-quarter, despite a 6.6% decline in revenues from Brazil, which was offset by revenue growth experienced outside Brazil, particularly North America. Moreover, ABEV’s revenue management initiatives also helped the company continue to perform, in the current environment.
Moreover, the cost of goods sold, during the 3Q2016, surged by 15.5%, along with a 11.3% surge in selling and general administrative expenses. It should be noted here that the reais has been weaker against the US dollar, as of late. As such, the costs seem to be temporarily inflated for the period. However, the Rio Olympics were also held during the 3Q2016, which caused a surge in marketing and selling expenses for the Ambev.
Ambev SA (ADR) (NYSE:ABEV) declined by 0.51%, to close at $5.9 per share, at the end of the October 31 trading session. The stock had a trade volume of 18.74 million, during the session.
