Ambev S A : Reports 2020 Third Quarter Results

Third Quarter 2020 Results

October 29, 2020

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AMBEV REPORTS 2020 THIRD QUARTER RESULTS UNDER IFRS

São Paulo, October 29, 2020 - Ambev S.A. [B3: ABEV3; NYSE: ABEV] announces its results for the third quarter of 2020. The following operating and financial information, unless otherwise indicated, is presented in nominal Reais and prepared according to the International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and to the accounting practices issued by the Brazilian Accounting Standards Committee ("CPC") and approved by the Brazilian Securities and Exchange Commission ("CVM"). The information herein should be read together with our financial information for the nine-month period ended September 30, 2020 filed with the CVM and submitted to the U.S. Securities andExchange Commission ("SEC").

OPERATING AND FINANCIAL HIGHLIGHTS

Net revenue: Net revenue was up 15.1% in 3Q20, with volume growing by 12.0% and net revenue per hectoliter (NR/hl) up 2.8%. Net revenue grew in Brazil (21.2%), Central America and the Caribbean (CAC) (1.9%), Latin America South (LAS)1 (15.1%) and in Canada (6.4%). In Brazil, volume was up 19.8% and NR/hl was up 1.2%. In CAC, volume declined by 9.9% and NR/hl grew by 13.0%. In LAS, volume was down 0.4% and NR/hl rose by 15.6%. In Canada, volume increased by 7.1% while NR/hl decreased by 0.7%. In 9M20, on a consolidated basis, net revenue was up 0.5%, with volume decreasing 1.1% and NR/hl growing by 1.6%.

Cost of goods sold (COGS): In 3Q20, COGS and cash COGS (excluding depreciation and amortization) were up 26.6% and 30.3%, respectively. On a per hectoliter basis, COGS grew by 13.0% while cash COGS was up 16.4%, mainly due to inflationary pressures in Argentina, transactional currency headwinds and package mix impacts. In 9M20, COGS and cash COGS increased by 14.8% and 16.3%, respectively. On a per hectoliter basis, COGS rose by 16.0% and cash COGS by 17.6%.

Selling, general & administrative (SG&A) expenses: SG&A and cash SG&A (excluding depreciation and amortization) were up 8.9% and 13.0%, supporting top line recovery in the markets where we operate. In 9M20, SG&A grew by 3.7% while cash SG&A grew by 3.3%.

EBITDA, gross margin and EBITDA margin: In 3Q20, EBITDA reached R$ 5,073.5 million, which corresponds to an organic growth of 1.4%, with a gross margin of 52.4% (-440bps) and EBITDA margin of 32.5% (-440bps). In 9M20, EBITDA was R$ 12,654.2 (-17.4%) with gross margin and EBITDA marginreaching 52.6% (-600bps)and 31.8% (-690bps),respectively.

Normalized profit and EPS: Normalized profit was R$ 2,495.9 million, 2.2% higher than in 3Q19, due to higher EBITDA partially offset by higher financial expenses. Normalized EPS was R$ 0.15 (3.2%). In 9M20, normalized profit decreased by 35.6%, reaching R$ 5,096.3 million, with normalized EPS of R$ 0.31 (-36.5%).

Cash generation and CAPEX: Cash flow from operating activities was R$ 7,079.4 million (+99.3%) and CAPEX reached R$ 1,144.8 million (-29.5%). In 9M20, cash flow from operating activities totaled R$ 10,462.2 million (19.6%) and CAPEX increased by 7.6% to R$ 3,298.3 million.

• The impacts resulting from applying Hyperinflation Accounting for our Argentinean subsidiaries, in accordance to IAS 29, are detailed in the section Financial Reporting in Hyperinflationary Economies - Argentina (page 19).

AMBEV REPORTS 2020 THIRD QUARTER RESULTS UNDER IFRS

Third Quarter 2020 Results

October 29, 2020

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Financial highlights - Ambev consolidated			% As	%			% As	%
R$ million	3Q19	3Q20	Reported	Organic	YTD19	YTD20	Reported	Organic
Volume ('000 hl)	37,785.7	42,378.8	12.2%	12.0%	115,947.3	114,855.9	-0.9%	-1.1%
Net revenue	11,957.7	15,604.5	30.5%	15.1%	36,742.9	39,822.4	8.4%	0.5%
Gross profit	6,727.9	8,181.3	21.6%	6.2%	21,444.2	20,954.2	-2.3%	-9.8%
% Gross margin	56.3%	52.4%	-390 bps	-440 bps	58.4%	52.6%	-580 bps	-600 bps
Normalized EBITDA	4,410.5	5,073.5	15.0%	1.4%	14,222.4	12,654.2	-11.0%	-17.4%
% Normalized EBITDA margin	36.9%	32.5%	-440 bps	-440 bps	38.7%	31.8%	-690 bps	-690 bps
Profit	2,604.4	2,359.0	-9.4%		7,969.4	4,841.5	-39.2%
Normalized profit	2,441.8	2,495.9	2.2%		7,916.4	5,096.3	-35.6%
EPS (R$/shares)	0.16	0.14	-8.9%		0.49	0.29	-40.2%
Normalized EPS (R$/shares)	0.15	0.15	3.2%		0.48	0.31	-36.5%

Note: Earnings per share calculation is based on outstanding shares (total existing shares excluding shares held in treasury).

MANAGEMENT COMMENTS

Ambev's third quarter was marked by the continued V-shaped recovery driven by the company's commercial strategy coming together as innovation, flexibility and operational excellence gained momentum.

All countries showed sustained volume improvements from second quarter as restrictions were gradually lifted in the markets where we operate, with limited exceptions. Moreover, seven of our top ten markets delivered volume growth year over year.

In the charts below, we separated our countries as per the weight of the off-trade channel in each beer market and the household consumer expenditure2 to illustrate the status of channel dynamics in our main markets. We also ranked the countries based on beer volumes performance during the third quarter:

Source: Canback, Euromonitor, Nielsen, Internal Sources

On a consolidated basis, our organic volumes grew 12% in the quarter, driven by the strong performance of Brazil Beer:

• In Brazil Beer, we considerably outperformed the industry, driven by the successful implementation of our commercial strategy, the adaptability of our pricing calendar and the net positive effect of government subsidies helping to support consumer disposable income, more than offsetting the closing impact of the on-trade, which is still in the process of reopening.

• Household consumer expenditure for each country is indexed at the USA household consumer expenditure, which was set at 100.
  AMBEV REPORTS 2020 THIRD QUARTER RESULTS UNDER IFRS