AmBev Earnings: Solid Top-Line Growth Overshadowed by Brazilian Tax Issues Distorting Earnings

Wide-moat AmBev reported solid results for the second quarter of 2024, with net organic revenue growing by 5% compared with last year and net revenue per hectoliter increasing by 5%. The top-line growth was largely driven by strong performance in Brazil and Central America and the Caribbean, while Latin America South and Canada struggled with declining volumes caused by weak demand. Overall volume growth of 0.4% was in line with the company-compiled consensus, while normalized EBITDA outpaced the estimates by 3%, showing a 110-basis-point margin improvement compared with the last year. However, AmBev fell short of the consensus on normalized profit by 7% because of lower income tax deductibility in Brazil after a change in legislation in December 2023. We keep our fair value estimate of BRL 18 per share.