Ambev S.A. (ABEV) Q4 2012 Earnings Report, Transcript and Summary

Good morning, and thank you for waiting. We would like to welcome everyone to Ambev's Fourth Quarter and Full Year 2012 Results Conference Call. Today with us, we have Mr. João Castro Nevis, CEO for Ambev; and Mr. Nelson Jamel, CFO and Investor Relations Officer. We would like to inform you that this event is being recorded. [Operator Instructions] Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Ambev's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and, therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Ambev and could cause results to differ materially from those expressed in such forward-looking statements. I would also like to remind everyone that, as usual, the percentage changes that will be discussed during today's call are both organic and normalized in nature and, unless otherwise stated, percentage changes refer to comparisons with Q4 and full year 2011 results. Normalized figures refer to performance measures before special items, which are either income or expenses that do not occur regularly as part of Ambev's normal activities. As normalized figures are non-GAAP measures, the company discloses the consolidated profit, EPS, EBIT and EBITDA on a fully-reported basis in the earnings release. Now I'll turn the conference over to Mr. Nelson Jamel, CFO and Investor Relations Officer. Mr. Jamel, you may begin your conference call, sir. Nelson José Jamel: Thank you, Mike, and hello, everyone. Thanks for attending our 2012 Fourth Quarter and Full Year Earnings Call. I'll start with a brief overview of our performance and then João will comment on our results by division. And to wrap things up, I'll return to discuss our financial figures before we move to Q&A. So let's begin. Our fourth quarter performance gave us a strong finish for the year. Net revenues grew 13.7% in the quarter, EBITDA was up 15.7% organically, and our normalized EBITDA margin was 54.4%, an organic expansion of 90 basis points. For the year, we delivered net revenue growth of 12.4%, EBITDA growth of 13.6%, as well as 50 basis points of margin expansion, giving us 48.6% for the year. If we focus on the highlights of our divisional performance, Brazil net revenues increased 14.3% in the fourth quarter, while volume is rebounding and growing 3.5%. EBITDA grew 15.8%, with EBITDA margin expanding 70 basis points to 58.4%. For the year, net revenues grew 12.7%, while EBITDA performance was 14.3% better and EBITDA margins expanded 80 basis points to 52.6%. Latin America South delivered 20.6% of net revenue growth in the quarter, 28% of EBITDA growth and 310 basis points of EBITDA margin expansion, which related to 53.5%. All this, another quarter of [indiscernible] , the lack of volume decline of 3.2%. In the year, net revenue grew to 19.9%; EBITDA, 21.6%; and EBITDA margin was 46.8%, an expansion of 60 basis points. Canada delivered 0.9% EBIT growth in the fourth quarter despite the 2.1% volume decline, which was mostly industry-driven. Net revenue per hectoliter meanwhile posted an improvement of 1.7% and EBITDA margin expanded 50 basis points to 44%. For the full year, despite the slight volume decline of 0.5%, EBITDA actually increased 0.7%, thanks to 1.5% net revenue growth, while we delivered the margin EBITDA of 41.9%. In HILA-ex, how it's up -- it's just transformational year by delivering organic volume growth of 3.1% and BRL 117.7 million of EBITDA in the quarter, with an EBITDA margin of 24.8%. EBITDA totaled BRL 204.9 million in 2012 and EBITDA margin jumped to 50.3%, both of which are substantial improvements versus our historic performance. Our normalized profit in the fourth quarter exceeded BRL 3.7 billion. Now I'll turn it to João. João? João Mauricio Giffoni de Castro Neves: Thank you, Nelson, and good afternoon, everyone. I am extremely pleased with how we ended the year, to deliver double-digit EBITDA growth with margin expansion and operational leverage in the type of the environment we face in Brazil and Latin America South is quite an accomplishment. Moreover, albeit for different reasons, 2012 was a truly remarkable year for Brazil soft drinks in our HILA-ex business. We take pride in these results, especially because the ability of our people to execute the plan in the fourth quarter, which really paved the way for another year of strong results despite the uncertainties and threats surrounding us. So I would like to congratulate and thank our team for the fourth quarter and full year results I'm about to share with you. Let's first take a closer look at our actual performance starting with Beer Brazil. After very little volume growth in Q3, Beer Brazil volumes bounced back and grew 2.9% for the quarter, while net revenues per hectoliter increased a solid 10.9%, giving us top line growth of roughly 14% for the quarter. Volumes benefited from industry being up an estimated 4.7%, though market share year-over-year continued to be under short-term pressure given our third quarter pricing activity. Sequentially, however, the good news is that we actually started recovering market share by the end of the year, which helped us reach an average of 68.5% for the year -- for the full year. For the year, both the industry and our volumes performed better than 2011, growing 3.2% and 2.5%, respectively. And as we highlighted, during the course of the year, our focus on innovation, premium brands, north and northeast in returnables had a lot to do with this improved performance. On the cost side, cost per hectoliter increased 11.9% in the fourth quarter 2012. This was mostly caused by greater volume in aluminum costs, as well as higher depreciation of our industrial assets and a negative packaging mix due to greater one-way volume growth. Also as mentioned in our press release, the different mix also impacted our full year performance for COGS in Brazil, which has rose 6.6%, slightly ahead of inflation. In terms of expenses, SG&A, excluding depreciation and amortization in the quarter, were up 7%, primarily due to a decline in admin expenses tied for the most part to lower accruals for variable compensation as compared to last year. But also thanks to distribution cost, which continues to grow at a slower pace. All in all, the end product was a 16.6% EBITDA growth with 130 basis points of EBITDA margin expansion in the quarter and 13.9% EBITDA growth with 80 basis points of EBITDA margin expansion for 2012. Moving along to Brazil soft drinks and non-alcoholic noncarbonated business. In the fourth quarter, volumes grew ahead of beer at 5.1%, thanks mostly to an estimated industry growth of 3% and market share gains of 20 basis points, averaging 18.1% for the quarter and for the year. As was the case in beer, our price increase in the third quarter contributed to solid net revenue per hectoliter growth of 9.7% for Brazil division in the fourth quarter. And consistency in our commercial strategy has continued to pay off with our efforts around Guaraná Antarctica, Pepsi, the 1 liter returnable glass bottle and the 237 milliliter PET bottle, all still working very well and very strong for us. On the COGS side, Brazil soft drinks unit COGS per hectoliter grew below inflation for the quarter and for the year, 5.5% and 5.1%, respectively. In both instance, our favorable currency hedges were decisive in offsetting the commodity headwinds we face in terms of sugar and PET resin costs. SG&A, excluding depreciation and amortization, increased much less than previous quarters, up only 4.9% in the fourth quarter, also benefiting from lower admin expenses. At the end of the day, Brazil soft drinks EBITDA improved 11.1% in the quarter, leading to 16.4% growth for the full year. And though EBITDA margins contracted 200 basis points in the fourth quarter, for the year, they still managed to expand 80 basis points to an unprecedented 49.4% margin. Turning to HILA-ex. Jamel has already highlighted how we finished 2012 on a high note by delivering substantial improvements on our reported figures. Our integration efforts in Dominican Republic continued to move along as planned and, in addition, I just would like to give some color on our organic volume performance, which has kept improving considerably, most notably in countries such as Guatemala where accelerated volume growth has driven our market share to nearly 30% in the fourth quarter 2012. There's still much to be done but we think we are once again on the right path. In Latin America South, the overall dynamic over the fourth quarter in terms of top line performance remained unchanged since the second quarter in that volumes continue to suffer from a slowdown in economic activity in Argentina, while our net revenues per hectoliter continue to deliver strong results. Volumes declined 3.2% in the region but net revenue per hectoliter grew 24.5% in the quarter, giving us 20.6% of top line growth. For the year, volumes were down 0.8%, but net revenue rose 19.9%. Equally important, our brands continue to be in good shape, with market share gains in most of the region, Argentina included. In spite the short-term hardship in Argentina, we continue to be very active in the marketplace by adding capacity, by having even stronger communication and therefore supporting our mainstream and premium brands and also through innovation. For example, in the fourth quarter, we launched Quilmes Night and Stella Artois Noire. While in CSD, the top performer was H2Oh! Limonito. Full year COGS and SG&A for the region grew 15.6% and 21.4%, respectively, mainly impacted by inflationary pressures in Argentina. We ended up delivery in Latin American South of 20% growth of EBITDA in the quarter, with EBITDA margin up 210 basis points to 53.5%, whereas for the year, we delivered double-digit growth of 21.6% as per our guidance, as well as 60 basis points of margin expansion to arrive at 46.8%. As for Canada, in the fourth quarter, Labatt's volume declined by 2.1%, largely driven by a weaker industry. By our estimates, the Canadian beer industry declined by 1.9% versus the same period in 2011, mainly driven by the impact of the hockey lockout. Our market share averaged 4.5% in the quarter and 40.6% for the year. Bud Light delivered another quarter of strong results, gaining market share both in the quarter and full year 2012. Net revenues per hectoliter increased by 1.7%, as promotional activities declined and benefit from earlier price increases were realized. This performance topped off an overall better year in terms of pricing with net revenues per hectoliter up 2% for the year. As for cost and expenses in the quarter, COGS per hectoliter increased by 3.3% due to higher commodity costs and continued shift in product and packaging mix. But SG&A decreased by 2.2%, mostly due to the timing of marketing investments behind our key programming in previous quarters, as there was a lower team sponsorship cost as a result of the shortened hockey season. The net result was an increase in EBITDA of 0.9% in the quarter and 0.7% for the year. In this retrospect, we are encouraged by the significant progress made on some key fronts. First, Budweiser's association with hockey and its position as the most preferred brand among young adults. Second, the growth of our light segment brands in every quarter led by Bud Light. Third, the contribution of our innovations took market share in good [ph] health performance, especially Michelob Ultra, Bud Light Lime-A-Rita. And fourth, the achievement of a better equilibrium between price and market share. I'd like now to comment on our expectations for 2013. As we mentioned in our press release, 2013 should be another year in which we'll have to deal with macroeconomic environment that has been rather difficult to predict in the year where we will face yet again higher taxes in Brazil. Though our results over the past 2 years should be evidence that we have managed to perform well when up against similarly-challenging environments, it's equally true that 2013 should not be any easier than 2012. We see no reason for pessimism, however, quite the contrary. We continue to focus on delivering a combination of volume and net revenue per hectoliter growth at the right mix in terms of channel, regional and packaging, as well as applying our usual cost management discipline. We believe that the beer industry in Brazil can grow around the same levels as 2012, since the overall environment is not materially different from what we saw during last year. Hecto [ph] is scheduled to rise again -- this time, a part of it in April and a part of it in October. But in the other hand, we expect increasing minimum wage and low unemployment levels to translate once more into support -- supportive disposable income growth. Moreover, the Brazilian federal government remains in pursuit of accelerated growth rates, and we believe domestic consumption should benefit as a result. January was actually a very strong month for the industry, but since the industry's performance in general is positively impacted by inventory building to be ready for the earlier Carnival, it's too early to treat any short-term reading as a valid proxy for the remainder of the year. Our view for 2013 if that when one looks at fundamental drivers of industry growth, pricing, disposable income and weather, one should find good reason for the beer industry to grow around the same levels of 2012. That said, we do expect the beginning of the year to be especially challenging for the industry because of the earlier Carnival and slightly poorer weather, mainly rain. As for our commercial strategy, the top priorities remain essentially the same, with some improvements based on what we learned during 2012. One additional reason why the execution of the sales and marketing initiatives will be key is the World Cup, which is right around the corner, not to mention the Confederation Cup, which happens this year. 2013 will be the year to test and/or accelerate with scalability many of the initiatives we have in place for the actual games, but also things we believe can leave a legacy for our business. During 2012, we began sharing with you some of the concepts we have been testing, such as the microevents, as well as some of the platforms that have been investing behind. For instance, Brahma's sponsorship of local soccer teams. There are many more things in store. The focus execution of our sales and marketing plans will also be decisive for net revenues per hectoliter performance, which we expect to be high-single digit for the year. The carryover of our 2012 pricing should be helpful, but we also expect greater premium volume growth and higher direct distribution should also contribute towards this level of performance. On the cost side, however, we will face, perhaps, the greatest headwind when comparing 2013 to 2012. As you know, a relevant portion of our COGS is linked to U.S. dollar, and our hedging policy mandates that, on average, we remain hedged 12 months ahead. Therefore even though our commodity hedges should generate a gain year-over-year, this will be far from enough to offset the headwind resulted from the devaluation of the Brazilian Real. Also with the changes to the federal tax for soft drinks in 2012, we will put additional headwinds in that business unit. Net-net, we expect COGS per hectoliter in Brazil to grow high-single to low-double digits for the year based on our current product mix, with COGS per hectoliter for soft drinks growing high-teens. And we firmly believe that Brazil's medium- and long-term prospects remain unparalleled as the country's beer market offers growth and profitability opportunities for which we are well positioned. Of course, we must continue to execute but the opportunities are there. And in order to fully capture the growth that lies ahead, we have announced our intent to invest around BRL 3 billion in CapEx for Brazil, most of which will be supply chain-related, which is our highest ever. First, late last year, we have already announced our plans to build greenfield brewers in the state of Minas Gerais and Paraná; second, our continued efforts behind the 300-millimeter returnable glass bottle, Budweiser and the 1 liter returnable glass bottle for Guaraná Antarctica requiring further capacity to support the type of growth we are striving for on the commercial side; and third, we believe it's important to have the majority of our 2014 capacity requirements in place by the end of this year, as we will not have the ability to add a lot of capacity in any material way during 2014 given the World Cup. Nelson, back to you. Nelson José Jamel: Thanks, João. Let me now walk you through the main items between the normalized EBIT of a little over than BRL 5 billion and profits of around BRL 3.7 billion for the quarter as set forth on Page 5 of our press release. Our net financial results were amount of BRL 240 million. This results primarily from the BRL 65 million noncash accretion expense in connection with the put option, associated before recession in Cervecería Nacional Dominicana, lower interest rates income due to lower interest rates versus the same periods in the previous year; and higher expense related to derivative instruments. Our effective tax rate for the quarter ended up being 20.4%, which was mostly due to high interest on capital with the amortization and other tax adjustments as compared to the fourth quarter of 2011, all of which were important to offset the greater textbook [ph] basis because of our higher EBIT performance in the quarter. Finally, we finished the year with a net cash position of approximately BRL 6.2 billion. Since then, on January 21, we paid out roughly BRL 3 billion in dividend and interest on capital and an additional payment of about BRL 2.1 billion is due to be paid as from March 28, as we announced yesterday morning. Going forward, we'll continue to pursue the appropriate balance of reinvesting in the growth of our business, be organic through the BRL 3 billion of CapEx in Brazil mentioned by João, or through targeted M&A, while maintaining appropriate level of liquidity and returning excess cash to shareholders over time. Now I'm going to open up for Q&A. So Mike, can you remind folks the procedure to get to the Q&A, please?

[Operator Instructions] And the first question we have comes from Lore Serra of Morgan Stanley.

I guess, I wanted to just start out, João, if you could give us a little bit of your perspective on sort of the market right now in terms of how well your pricing actions last year in September, October have been absorbed in the market? How much you see competitors sort of following the pricing? And then how you think about this year, I mean, you mentioned in a number of the comments in the call but we will see an environment this year with less increase in minimum wages. And I think embedded in your guidance is the view that you can do sort of with the consumer level low double-digit pricing in order to meet that guidance. So how you're thinking about that, what you're seeing and how we should think about that for this year? That would be helpful. João Mauricio Giffoni de Castro Neves: Okay, great. Lore, thanks for the question. I mean, I'm actually -- we feel very, very positive about the current pricing environment. We mentioned high single for the net sales per hectoliter and double digit for total top line, okay? So that's a little bit of a difference. But the pricing momentum is very positive. And I think the 2 reasons to feel that way, I mean, first, is the fourth quarter volumes given all the pricing that we had in the third quarter, which saw the full impact in the fourth quarter and the quarter being a very good one on the volume and/or the combination. I mean, we're always looking for the right balance of price and volume. I think we had a good one, a better one in 2012 and a very good one in the fourth quarter before we started 2013, excited, given that we accomplished what we wanted for the end of the year. And second, I mean, I think given that the market is becoming more and more formal, we're seeing, maybe for that reason also, a much greater followship. I mean, followship is above average, okay? So the combination of a strong volume in the fourth quarter, the confirmation of pricing is sticking. Some consumer resilience, if you want, and then pricing followship above average and therefore now, 3 months, 3 consecutive months of either neutral or positive share gains, which are putting us strongly into our desired range of 67 to 69, but actually being above 68. I think the whole combination of pricing and share we have started -- ended 2012 on certainly a good foot, which therefore puts us in a good one for the beginning of 2013.

Perfect. And I know that you gave a lot of information in terms of your cost outlook. I guess, it was a bit higher than expected in terms of the COGS pressure. Is there any concern that you have in terms of differential kind of trends versus the market as you head into 2013? I mean, I suppose I would've guessed that the commodity part of it would have helped you more, and I just wonder what that means as you think about the market dynamics in 2013? João Mauricio Giffoni de Castro Neves: Sure. I actually think -- I think from a competitive marketing environment, I see an overall positive. I mean number one, ending up the year with the plane moving up, with more formality, which is true for beer and true big time for soft drinks. And then on top of that, everyone feeling the same thing, not just from tax, even more from taxes and the same one from the hedges. I see no reason -- because we are very close to the average. Jamel mentioned the numbers and can get into the details of the average, but the average are even slightly better than what you see in the -- for people that are buying spot. So I see people either mimicking our sort of policy or buying spots. So the ones that are buying spots are even buying more expensive than our average hedge rates. So I see the pressure to be equal or greater for both taxes or COGS when compared to us, competition versus us. Nelson José Jamel: I think just to add one point, Lore. I think in terms of our COGS guidance, as you mentioned and asked, I think it's important to emphasize that, of course, we have -- the biggest hit is coming from the currency evaluation as part of our hedging policy, as João mentioned. And that's, again, partially offset by commodities, which we were able to hedge at most favorable prices. And I think it's also important to distinguish what we're going to see in beer from soft drinks. Let's say beer being 80% of our business in Brazil, we feel more comfortable about the overall dilution of our results. As we said, we are guiding for a high-single digit net revenue. We think total Brazil could be between high-single and low-double digit but beer should be more towards high-single. So we should have sort of a, as João mentioned, double-digit top line growth in beer, with gross margins therefore given the outlook we gave, following the same pattern. When you go to soft drinks there, because not only of the currency impact but also some changes in terms of tax credits we have on raw materials, they recognize more of a pressure. And that's what we try to emphasize that only, I'll say, 20% of our business will be more of a gross margin pressure. But it's not the case for beer.

And next, we have Bob Ford with Merrill Lynch.

I guess, with respect to the offsets, right, if I'm doing the math correctly, it seems to me that if you get a high-single-digit price increase in Brazil and that if Felipe's representation on the ABI cost, correct, right -- that 60% of your COGS in Brazil are dollar linked, then you should have no difficulty maintaining margins. Am I missing something, or is there greater brand investments, or other things that could adversely impact the outlook? João Mauricio Giffoni de Castro Neves: Yes, Bob, it is -- the guidance we give regarding currency we had last year. So the 1.6 is 60 flagweight [ph] in our COGS. And for this year, it's going to be around 1.93, is already locked, right. So on roughly 40% of our COGS, we should be more precise, we have this currency valuation impact, which accounts for, for you to have an idea, at the EBITDA margin level for Brazil as a whole, that could take away roughly 180 bps of our margin, right? That alone...

Right. But that's only -- but that would be a 14% drag on 40% of COGS, right, for a 65% gross margin business when you blend it. It's a little bit more than that, now if I'm not mistaken, just off the top of my head. It seems to me that high-single-digit pricing will more than compensate for this. Nelson José Jamel: Yes, for sure for soft drinks we think we're going to have more of the pressure like I just said in the previous question to Lore because there, we could have high-teens. So that will be one of the pressure. But definitely for beer, we're going to have much less of a pressure in terms of gross margin. And if we think in absolute terms, if we think of double-digit top line growth, we could also think of double-digit gross margin growth for beer, if you will. That's, I mean, the basic math on the calculation we are providing or the guidance we are providing, sorry. But for soft drinks, again, that should be more of a pressure for us.

And the soft drinks, that's primarily due to the juice component, right? There was a favorable treatment for some juice-based beverages, and that disappears even if you used it as like a -- lemon and -- Pepsi with lemon and that sort of thing, is that correct? João Mauricio Giffoni de Castro Neves: Well, in fact the lemon and guarana raw materials, they have an impact on the net revenue, because they have a higher excise, has this benefit of having natural flavors has gone up with a -- discount. What really is affecting COGS is the combination of currency as well, but also tax creates some concentrates and incentives that we have in raw materials that was shortened by 1/3. So that's going to drive us from the high-single to the -- in fact, the high-teens growth in COGS.

That's very helpful. Then one last question that is when you look at the informal or the Tubaína section of the marketplace, how much of your market share do you think you've taken from the Tubaínas, and what kind of an opportunity do they represent for you going forward? João Mauricio Giffoni de Castro Neves: Bob, this is João, thanks for the question. Well, I think as we look -- I mean, if we look at the last 12 to 18 months, since we launched the 1 liter returnable and since the Tubaínas have been more under pressure from the tax reform, I think the combination of SICOBE on them for the last 18 months and the changes in the tax regulation that João just mentioned, combination of the juice law and the Manaus tax incentive will put even additional pressure on them. We probably already took between 50 to 100, if you want, basis points. And I think there is 2x, 3x of that looking out 2, 3 years ahead. So I think there's much to be done as an opportunity for our flavor brands and the core brands we have both Guaraná, Paso and Pepsi to even take more space. If we think about, I think we mentioned, our main competitor had launched returnable glass bottles about 8 years ago. We give them a lot of space for many years. We decided to stop that. About 1.5 years ago we started with very good results. And I think the future is bright in terms of being able to capture more share coming ahead. So your question is right on the target.

The next question we have comes from Alan Alanis of JPMorgan. Alan Alanis - JP Morgan Chase & Co, Research Division: Well, I have a couple of questions. The first one has to do with working capital. I mean, before putting the question, I think, it's a congratulation for Jamel and his team. I think it's the sixth consecutive year that you have working capital improvement as a percentage of sales and I'm seeing it as a record level of 24%. So the first question has to do -- do you think that, that kind of improvement can continue in 2013? And then I have a question for João on a different topic. Nelson José Jamel: Sure, Alan, thanks. Indeed when we think of our working capital, this is something we have been focusing on for 3 or 4 years now. And of course, the low-hanging fruits are not there anymore but have been consistently improving our performance, while managing our accounts receivables, inventory levels but mainly our payables. And I think there are still opportunities there to be captured. We always like to think about it like when we think of CBB for instance, we have been practicing [ph] for more than 10 years now and year-after-year and 2012 was no different, was an important contributor to our results as well. We're always learning and doing better, so we think we can still do much better in terms of our working capital management. And that's, of course, is heading up, show our ability to keep up and then make a strong free cash flow, right? So we think the company can do even better in 2013 as well. Alan Alanis - JP Morgan Chase & Co, Research Division: Good. That's very useful. And then a quick question for João. I think it's similar to the question that had been asked but from a different angle and putting more emphasis on the operating expenses of the beer business, João. You mentioned all this innovation about the Brahma sponsorships or the investments in the market on top of the innovations. The Brahma sponsorship, the mini events and obviously the move that you're doing towards premiumization. I think a lot of the questions that we, as analysts, are asking have to do with -- will be answered in one way or the other if with the level of operating expenses that you can maintain in 2013. So I guess, the way to frame the question is how much more investment, or how much are you going to put the accelerator on all of these events and all of this more continued innovation in 2013 in order to grow operating expenses at a pace that's sort of similar to the past, or you're going to say, look this is a great opportunity, the World Cup is next few year. I'm going to spend little bit more on the market in anticipation of that and I think that will give us a lot of the answer in terms of what we should expect in terms of margins and EBITDA growth on the beer business in Brazil. João Mauricio Giffoni de Castro Neves: Okay, great, Alan. A very good question. I think first, taking from your first question to Jamel, so you're right. I mean, I also have to congratulate him and his team for what he did. But every time we do that, I mean, it just gives us good idea to stretch the target even further for 2013. So that's one point. And I think second, I mean, here, he's committed in his team and our team and my team, we're all committed to do the best 0-based budget planning execution ever. So we're committed of having the best ever for the next couple of years. Why? Well, number one, because it's always good to practice what we believe in; and second, because I think the opportunities on the non-fixed packages, let's put it this way, especially on the commercial side, they're very big every time. And you have to remember the discipline of looking risk/return. So if we find the mini event to be positive project, it will mean that it will be a positive project almost for sure in 12 months. So most of the time, the things we are, from a P&L standpoint, are investing on, it will give us a return between 1 year and 1.5 years. So if we find positive NPV projects as we do believe the micro events are -- the association between Brahma and soccer is we will put the accelerator big time on. If we think they're not coming with the return that we expect, we have shown that we can answer headwinds or tailwinds very quickly. I mean, we had 2009 and 2010, very good volume years and we adjusted very quickly and played on the aggressive -- on the offense side very quickly. And 2011 and 2012 were slower years, more pricing years than volume years and we quickly adjust the CBB or the commercial investments to be adequate to that. While, of course, protecting our share and at the same time, reaching our EBITDA targets. So I think being positively pressured by the combination of having to achieve the bid and the share [ph] objectives give us the right framework to look at the projects on a manner that they will be positive return once. I actually feel one of the best year average in terms of the commercial initiatives that we have for 2013 and 2014. I think you mentioned an important point. Right now, I think one difference when you look at 2013 for other years is, is that now we are almost looking on a 2-year because World Cup is now around the corner, right? So a lot of the things we do now will have an impact in 2014 and we want to have the best World Cup ever in Brazil and before we are -- we'll be planning during the, let's say, the Confederation Cup is a great pilot that I think will also be -- affect sales on a positive manner but more than that, we'll be able to cast everything that we want for the game, which is the World Cup. And I think a way to tie all this is the CapEx, because we're not investing the highest amount ever in company's history if we do not believe in a strong 2014. So I think the combination of 2013 and 2014 for many things we'll look at our investments, both from an operating expenses but mainly from a CapEx standpoint, looking at the combination of both years.

The next question we have comes from Enrico Grimaldi of BTG Pactual.

My question is related to your statement in your release. I mean, you said the first quarter of 2013 should be challenging, mainly due to an earlier Carnival and a slightly poorer weather, right? I understand the reasons you mentioned that, the way they can impact in your first quarter, but I would just like to understand the size of the impacts. I mean, are we talking about flat volumes in the first quarter, decreasing volumes or just there's small growth? And also, is this problem related to the sell-in or the sellout of the beer because as far as we can tell, the industry have a strong production level in January, right? So if you could elaborate a bit more on that, I would appreciate. João Mauricio Giffoni de Castro Neves: Sure. For sure, let's try to elaborate a little bit more on that. We had some, let's say, reports on Monday, which affected the way people are looking at things. We'll not answer precisely in terms of what is the exact number for the quarter for the obvious reason. But what we can say first is that January was a very strong month for the industry. However, since January was positively impacted by the inventory-building to be ready for February, which is the earlier Carnival. We cannot treat January figures as a proxy for the remainder of the year, okay? So it's actually the opposite from what was in the Brazilian press. But having said that, we expect the beginning of the year to be challenging because of the early Carnival and a lot of the rain in 2 very important regions, mostly the southeast of Brazil. So anytime the Carnival commences earlier, this will have an impact on the first quarter. It's early to say how much but that's why we said among all the quarters in Brazil, we expect this one to be the most difficult one. But again, that doesn't change our view for the year given that the fundamental drivers of the industry, pricing, disposable income and weather. And on top of that, Confederations Cup, which is something that never happened in the custom [ph] for which we've been preparing for the past couple of years. We believe this will change a little bit the potential prospective. So therefore, no material changes in our view.

And the next question we have comes from José Yordán of Deutsche Bank. José J. Yordán - Deutsche Bank AG, Research Division: My first question was asked, but I wanted to also ask you about the reclassification of Peru and Ecuador into LAS. You could have done this when you exited the active management of Venezuela. You could have done it, I suppose, when you took over CND last year and I was just curious as to why now, and should we be reading anything into your future strategy in Central America, which is, I guess, the remainder of HILA-ex as a result of this change right now? João Mauricio Giffoni de Castro Neves: Okay, José, thanks for the question. I mean, you almost answered for me, but I'll detail a little bit. I mean, basically, given that the acquisition was done in May, it would be very awkward to do the change during the year. You never know when an acquisition is going to be finalized. We had thought about this change actually for a couple of years. Many times, when I moved to Latin America South, we thought again when -- not because I'm moved back but because when there were changes in the zone presence on the beer [ph] leaders of the region, we thought about it. We didn't think it was the right timing back then. But now that we have already won major business and therefore business unit that has the potential of $200 million, $300 million, $400 million, we think it's enough to take away and there are some synergies by putting Peru and Ecuador close to Chile and Bolivia. So the synergies were there. But now, we are doing a couple of things that is the right timing to move. And what you mentioned is very important. We have -- had always high hopes for Central American and the Caribbean. Now the hopes have transformed into something real, which is Dominican Republic, with also now very good results. Already in Guatemala as I mentioned in the speech having reached 30% in the fourth quarter. So we feel very excited and we see, to be quite honest, many more opportunity in the region. So by having a full business unit focused on the region, we think, is the right thing for our Ambev business to be focused in that manner. And we're already seeing the benefits of having organized this now for the future. José J. Yordán - Deutsche Bank AG, Research Division: If I can just follow up on your comment there. Given that your market share is increasing quite a bit in Guatemala, are we any closer to potentially executing, I guess, the acquisition you've always hoped to achieve there? Does it -- it certainly seems like it's -- like we're getting closer to the point of something happening there, although I appreciate it if you can't comment on that, no problem, but any color you could give us there would be great. João Mauricio Giffoni de Castro Neves: Yes, so we don't comment on any speculation on inorganic growth, but what we can tell you is that we are very focused on very strong organic growth in Guatemala but also in the region. We see a lot of opportunities, even exports to different islands, so really a lot to do. Very, very excited with the region and what we can do with either organic or inorganic but we cannot comment on anything that is not organic.

The next question we have comes from Alex Robards of Citi.

I guess, I wanted to start off first on this challenging first quarter reference in the press release. I heard your answer just now, and I was just -- I mean, I was just wondering the first quarter of last year had a couple of things as well. You increased your SG&A with the Carnival and -- in the northeast there in Salvador, and it seems also that your hedge will be still favorable in this first quarter. Am I missing something or -- I mean it seems to me that those 2 things would make it so that it perhaps would offset some of this rain and the inventory buildup, or if you could comment a little bit more on that, that would be great about the first quarter? I guess, the second question I had really relates to the soft drink. It's interesting how the industry grew slower in Brazil than beer. And I was hoping you could kind of give us some color about that differential and specifically on soft drink, is it only -- are you only seeing share gains from the informal B brands or not? And the third and final thing, obviously, we think that there's probably going to be a conclusion to the acquisition of Modelo in the coming months. And if you could give us any color of what that might mean, or any comment what that might mean for you guys vis-a-vis brand launches or geographical reconfigurations within the structure of your company that would be great. João Mauricio Giffoni de Castro Neves: Okay, well, both Jamel and I will take some of the questions. Let me start with the last one. I think Modelo, there's very little to comment. Of course, this is more for ABI and whenever they are able to close the deal. Of course, we, as operators, and knowing and having run many of the Latin American countries, I mean, the Corona brand's a very good one. We have taken already in Uruguay and in Peru, we already operate the brand in those 2 countries and we're happy with the results. But it's always different when the relationship changes. I mean, we will be probably more proactive. There are many other countries in Latin America that we run and that we see the good potential for. I think that's the main change that I can see that if and when the deal is closed but -- so before anything besides that, it's more for ABI. In terms of soft drinks, I think the industry in 2012 was very close, to be quite honest. What was different was our own volume because of the share gain we had. If I'm not mistaken, the main competitor had very similar shares, okay? So I mean, I guess, the consequence if they have similar shares and we gain a lot, I mean, we're probably taking more from everybody else, okay? More from a macro conclusion, which was a little bit of the answer on the previous question. And therefore, a lot more to do. I think what's also interesting is, I mean, of course, there are the pushbacks or the already highlighted threats, especially from the COGS and tax changes in soft drinks. But having said that, I mean, the last quarter was very strong and the tax changes were already in place. And we continue to believe also in the new juice. I mean, not just the 1 liter returnable bottle, which is great for share and volume but also the PET 237 that we continue to grow like 20%, 30%, 40%. So very strong single-serve opportunity. We are also very excited with what we've been able to do so far with Fusion, our own energy drinks brand. But also, we have mentioned that we have signed an agreement with Monster, so we believe that combination of Monster and Fusion will be a very strong competitor in that segment, which we see it's growing and we see foreseeable growth from what we're seeing in Brazil but -- from seeing what happened in other markets. And we have also signed an agreement and we'll start serving soon the Nestlé water products as we have in other countries. And we think that's also an opportunity going forward. So great solid business, great new news, Guaraná Antarctica brand is stronger than ever and the #1 consumer brand in Facebook, so in social media; above 10 million, so we just celebrated that in the last quarter. So it's great to have one of our brands as the #1 digital brand in the country. And the new news of Fusion, Monster and water. And now, I think for the remainder of your questions, Jamel will take over. Nelson José Jamel: Yes. So, Alex, the guidance we gave for Q1, of course, it was about volume only. So we talk about the early Carnival, more rain. In terms of volume -- and that's the only guidance we're going to give. I mean, of course, the points you raised, they are all valid in the sense that SG&A did increase last year because of the Carnival activities we took over and but it's already [ph] on the dates, so that's not going to create any hurdle for us in terms of comparison. We did it last year and we're doing it this year as well. So that's pretty much comparable. And regarding COGS, indeed we're going to have more favorable COGS, more favorable hedges in terms of dollar in our COGS in Q1. But the commodity gain in terms of hedge, they are also for the balance of the year. So it will be less of a negative from currency but less of a positive from commodity. So we don't have major differences among quarters in terms of our COGS outlook and that's how far we can go in terms of guidance at this stage.

Very helpful. Just to clarify, the 1.93 on the hedge, does that kick in, in the first quarter or is it safe to assume that given your kind of -- your activity, your period of 9 months to 14 months that perhaps that starts to kick in more in the second quarter? Nelson José Jamel: It will be a ramp-up. So we're going to be, of course, below 1.93 in Q1 and by year end, for instance in Q4, it's going to be above 1.93. So that will be -- the average is 1.93 and is growing in line with what we saw in the spot rates last year as part of our hedging policy.

And the next question we have comes from Lauren Torres with HSBC.

My question is on product and brand mix. This morning, InBev spoke a lot about in Brazil, in beer focusing on domestic and international premium brands, and I was hoping you could talk a bit more about that with respect to skewing maybe more out of mainstream into premium and how directionally that, that's working for you. And as we think about margins and how that helps the bottom line, just curious, if volume growth maybe isn't that dynamic, it's more of the upside coming more in the value end of the equation. João Mauricio Giffoni de Castro Neves: Lauren, it's João. We mentioned a couple of quarters ago, maybe a year ago that we thought we could double the size or the weight of the premium brands within the total portfolio. I mean, it used to be not many years ago, it was around 5 and then it declined to 4 with all the growth from mainstream in 2009 and 2010. So we went from 4 already to 6 within 1 year or 1.5 years, so we are pleased with the rapid growth. And we ended the fourth quarter even higher. Therefore, we think we are -- we're then on our way of doubling from 4 to 8 within 3 to 4 years. So that's the first good news with both international and domestic growing and therefore trading up from consumer. It's very positive from the volume equation, but also it's been very positive from the total macro perspective. I mean, with greater macro for most part and therefore already having a positive impact, both in net turnover per hectoliter and also macro but even greater, which I think is more important at the end of the day on the total macro. So great combination of pricing and volume and strong -- developing stronger brands along the way, giving a positive upside, current and perspective upside on total macro for the next couple of years.

But could I interpret that as we'd see the lift from mix becoming more substantial over time rather than just driving pricing, absolute price -- increases in Brazil? Nelson José Jamel: Yes. Lauren, it's Nelson here. That's exactly the point when we guide for instance for our high-single-digit growth for top line. Part of it is pure pricing, what we normally do to manage inflation. But the upside normally comes from either direct distribution increase but strongly now from premium brands' growth as well. So that's standing on top of inflation our net revenue and I think it's important to add on what João just mentioned, we are growing so well with Budweiser, for instance. We are going to open up for a new brewery to produce Budweiser in Brazil. So that's part of that BRL 3 billion CapEx that we announced. So we move it for -- in the beginning year -- or in the end of 2011 for a more Southeast and south sort of distribution. Now at this stage, 2013, we already opening up for the entire country, of course, focusing on the main cities. And that's what we are going to be building our capacity by having Budweiser and another brewery as of this year.

Okay. And if I could just ask one other question. I know you can't be specific on M&A, but obviously, ABI going after Modelo and you having done CND. Opportunities maybe in other markets outside of Brazil for you, is there anything worth talking about or looking at, at this point that as we think about consolidation in other parts of Latin America, you'd be able and willing to engage in? João Mauricio Giffoni de Castro Neves: As I think we said in the other question, there are no comments on inorganic but we've been -- I think, the same -- the acquisition shows that we continue to be very active south of Mexico. I still think there's a lot of things to be done but no specific comments.

Next, we have Robert Ottenstein of ISI.

In the outlook statement, when you're talking about expecting a record year of capital expenditures, you have a little hedge in terms of subject to the level of federal excise taxes. Is there any particular reason for putting that in? Is there anything going on, on the excise tax side that would indicate any new issues there? João Mauricio Giffoni de Castro Neves: No. No new news. I mean, it's something that we have always said and we continue to say so. I mean, I think what we look for in 2013 is stability. And we believe this stability will be in place and given that the stability in getting that we look at 2014 as a very strong year. We rather say that but we think what's out there is what's going to be.

Great, that's good news. And then the other one that I'd like a little clarification on. When you're talking about Brazil COGS, for the quarter, you noted that you had a higher-than-expected was a result of higher-than-anticipated mix of more expensive of one-way volumes. Can you talk a little bit more about that? Why it was higher than expected? What the various drivers were there? João Mauricio Giffoni de Castro Neves: You mean specifically for the -- the comments regarding fourth quarter, right?

Right, right. João Mauricio Giffoni de Castro Neves: Well, I think the point here is what we have done in the past 4 years was really strengthening a lot, not just our returnable glass bottle business but also trying to enhance also the consumer experience at the bar. We see -- I mean, Nosso Bar, micro events, those are all ways for you to have even a better consumer experience. Therefore, the people go out of their place and meet their friends as is the usual occasion in Brazil for that to happen. I think especially in the past 4 years, that's not true for 2009 and 2010. I think 2009 and 2010, we did a good combination of RGB and one-ways. And then in 2011 and 2012, we focused much, much more on the RGB. I think a fine-tuning, a little bit of a fine-tuning on that was also to go back to the end. So continue to go very strong, even stronger behind the RGB and the consumption occasion at the bar. Also introducing more RGBs in the offtrade through the pit stop and also now, with the convenience pit stops. But giving some room for the offtrade also to grow, so -- sorry, for the one-way also to grow. That's why, I mean, by just putting -- you remember that we were able to postpone the taxes from the fourth quarter to April and then also moving from 4 years to 6 years, we mentioned that we were going to put some of that money that was postponed back in the marketplace and as we saw that, we some more opportunities of the one-way to grow and we let it happen and by that, we learn how to better execute the one-way a little bit better and therefore, we see also opportunities in the one-way going forward. And also remember that in occasions, such as World Cup and Confederations Cup, many times, is desirable and sometimes it's the law for you to sell one-way presentations rather than glass presentations. So for that, we are also making sure that we have the right footprint also for the one-ways going forward.

Terrific. And just as a follow-up on that. How pleased are you with the rollout of the 300 at this point? Do you have any metrics around that, that you can discuss? João Mauricio Giffoni de Castro Neves: Yes. I mean, we're seeing -- everything that we wanted to happen in 2012 happened. Well, first in terms of total volume, if you want, so I mean, we got to 2 million hectoliters. We got to the coverage where we wanted to be. The coverage was looking more towards off trade than the on trade. Therefore, we have already also approved new lines and new plants in new parts of the country. So I don't want to give too much information, because they are sensitive and confidential. But very pleased and it actually is one of those things that helps you in volume, pricing and share. And you don't find many of these all the time. So you when you find them, you better execute them well and rapidly.

Well, at this time, we'll go ahead and conclude our question-and-answer session. I would now like to turn the conference back over to Mr. Nelson Jamel for any closing remarks. Sir? Nelson José Jamel: All right. Thank you, Mike, and thank you, everybody, for joining us today. I'm looking forward to speaking with you again on April 30, and have a nice day. Thank you.

And we thank you, sir, and also to Mr. Neves for your time. The conference call has now concluded. At this time, you may disconnect your lines. Thank you all for joining, and have a great day.