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 November, 2019
Commission File Number 1565025
AMBEV S.A.
(Exact name of registrant as specified in its charter)
AMBEV S.A.
(Translation of Registrant's name into English)
Rua Dr. Renato Paes de Barros, 1017 - 3rd 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____
Ambev S.A.
Interim consolidated
financial statements at
September 30 2019
and report on review
Report on review interim
consolidated financial statements
To the Board of Directors and Stockholders
Ambev S.A.
Introduction
We have reviewed the accompanying interim consolidated balance sheets of Ambev S.A and its subsidiaries as at September 30, 2019 and the related interim consolidated income statements and interim consolidated statements of comprehensive income for the quarter and nine-month period then ended, and the interim consolidated statements of changes in equity and interim consolidated cash flows statements for the nine-month period then ended, and a summary of significant accounting policies and other explanatory notes.
Management is responsible for the preparation and fair presentation of these interim consolidated financial statements 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, of the International Accounting Standards Board (IASB). Our responsibility is to express a conclusion on these interim consolidated financial statements 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
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim consolidated financial statements referred to above do not present fairly, in all material respects, the financial position of Ambev S.A. and its subsidiaries as at September 30, 2019, and the consolidated financial performance for the quarter and nine-month period then ended and the consolidated cash flows for the nine-month period then ended, in accordance with CPC 21 and IAS 34.
Other matters
Audit and review of prior year information
The interim consolidated financial statements referred to above includes accounting information corresponding to the consolidated balance sheet at December 31, 2018, and the related consolidated statement of income and comprehensive income for the quarter and nine month periods ended September 30, 2018, and the consolidated changes in equity and cash flow for the nine month period ended September 30, 2018. These information were previously restated as a result of the matters described in Note 3.
The consolidated statement of income and comprehensive income for the quarter and nine month periods ended September 30, 2018, and the consolidated changes in equity and cash flow for the six month period ended September 30, 2018 were reviewed and the consolidated balance sheet at December 31, 2018 was audited by other independent auditors, who have issued unqualified review report and unqualified audit opinion, both dated May 6, 2019.
São Paulo, November 4, 2019
PricewaterhouseCoopers
Auditores Independentes
CRC 2SP000160/O-5
Alessandro Marchesino de Oliveira
CRC 1SP265450/O-8
INTERIM CONSOLIDATED FINANCIAL STATEMENTS - AMBEV S.A.
Interim Consolidated Balance Sheets
(All amounts in thousands of reais unless otherwise stated)
Assets
|
Note
|
09/30/2019
|
12/31/2018(i)
(restated)
|
01/01/2018(i)
(restated)
|
|
|
|
|
|
Cash and cash equivalents
|
5
|
15,016,914
|
11,463,498
|
10,354,527
|
Investment securities
|
6
|
14,304
|
13,391
|
11,883
|
Derivative financial instruments
|
20
|
350,401
|
220,032
|
350,036
|
Trade receivable
|
|
4,236,257
|
4,879,256
|
4,406,372
|
Inventories
|
7
|
5,978,812
|
5,401,793
|
4,318,973
|
Income tax and social contributions recoverable
|
|
737,248
|
1,285,424
|
2,953,452
|
Other recoverable taxes
|
|
1,808,616
|
863,290
|
600,165
|
Other assets
|
|
861,474
|
1,202,921
|
1,367,282
|
Current assets
|
|
29,004,026
|
25,329,605
|
24,362,690
|
|
|
|
|
|
|
|
|
|
|
Investment securities
|
6
|
166,068
|
147,341
|
121,956
|
Derivative financial instruments
|
20
|
-
|
34,900
|
35,188
|
Income tax and social contributions recoverable
|
|
3,721,451
|
3,834,413
|
2,312,664
|
Other recoverable taxes
|
|
616,294
|
539,795
|
225,036
|
Deferred tax assets
|
8
|
3,761,761
|
2,064,742
|
2,310,906
|
Other assets
|
|
1,615,022
|
1,687,419
|
1,964,424
|
Employee benefits
|
|
69,271
|
64,285
|
58,443
|
Investments in joint ventures
|
|
303,511
|
257,135
|
237,961
|
Property, plant and equipment
|
9
|
21,597,197
|
21,638,008
|
20,705,145
|
Intangible
|
|
6,328,636
|
5,840,598
|
4,674,704
|
Goodwill
|
10
|
35,292,080
|
34,276,176
|
31,401,874
|
Non-current assets
|
|
73,471,291
|
70,384,812
|
64,048,301
|
|
|
|
|
|
Total assets
|
|
102,475,317
|
95,714,417
|
88,410,991
|
(i) 2018 restated to reflect the impact of adoption of IFRS 16 under the full retrospective application (Note 3).
The accompanying notes are an integral part of these interim consolidated financial statements.
1
Ambev S.A.
Interim Consolidated Balance Sheets (continued)
(All amounts in thousands of reais unless otherwise stated)
Equity and liabilities
|
Note
|
09/30/2019
|
12/31/2018(i)
(restated)
|
01/01/2018(i)
(restated)
|
|
|
|
|
|
Trade payables
|
|
12,394,359
|
14,050,045
|
11,853,928
|
Derivative financial instruments
|
20
|
310,499
|
679,298
|
215,090
|
Interest-bearing loans and borrowings
|
11
|
1,719,831
|
1,941,221
|
1,699,358
|
Bank overdrafts
|
5
|
-
|
-
|
1,792
|
Wages and salaries
|
|
957,856
|
851,619
|
1,047,182
|
Dividends and interest on shareholders’ equity payable
|
|
986,994
|
806,981
|
1,778,633
|
Income tax and social contribution payable
|
|
1,520,831
|
1,558,589
|
1,668,407
|
Taxes and contributions payable
|
|
2,332,796
|
3,781,622
|
3,825,440
|
Put option granted on subsidiary and other liabilities
|
|
1,475,901
|
1,366,589
|
6,807,925
|
Provisions
|
12
|
143,268
|
172,997
|
168,957
|
Current liabilities
|
|
21,842,335
|
25,208,961
|
29,066,712
|
|
|
|
|
|
Trade payables
|
|
337,271
|
126,142
|
175,054
|
Derivative financial instruments
|
20
|
459
|
2,450
|
2,434
|
Interest-bearing loans and borrowings
|
11
|
2,370,327
|
2,162,442
|
2,831,189
|
Deferred tax liabilities
|
8
|
2,368,661
|
2,424,567
|
2,329,229
|
Income tax and social contribution payable
|
|
2,033,395
|
2,227,795
|
2,418,027
|
Taxes and contributions payable
|
|
671,412
|
675,564
|
771,619
|
Put option granted on subsidiary and other liabilities
|
|
2,888,736
|
2,661,799
|
429,102
|
Provisions
|
12
|
464,588
|
426,227
|
512,580
|
Employee benefits
|
|
2,476,681
|
2,343,662
|
2,310,685
|
Non-current liabilities
|
|
13,611,530
|
13,050,648
|
11,779,919
|
|
|
|
|
|
Total liabilities
|
|
35,453,865
|
38,259,609
|
40,846,631
|
|
|
|
|
|
Equity
|
13
|
|
|
|
Issued capital
|
|
57,866,759
|
57,710,202
|
57,614,140
|
Reserves
|
|
70,120,665
|
70,122,561
|
63,298,135
|
Carrying value adjustments
|
|
(70,901,001)
|
(71,584,756)
|
(74,966,573)
|
Retained earnings
|
|
8,665,336
|
-
|
(355,383)
|
Equity attributable to equity holders of Ambev
|
|
65,751,759
|
56,248,007
|
45,590,319
|
Non-controlling interests
|
|
1,269,693
|
1,206,801
|
1,974,041
|
Total Equity
|
|
67,021,452
|
57,454,808
|
47,564,360
|
|
|
|
|
|
Total equity and liabilities
|
|
102,475,317
|
95,714,417
|
88,410,991
|
(i) 2018 restated to reflect the impact of adoption of IFRS 16 under the full retrospective application (Note 3).
The accompanying notes are an integral part of these interim consolidated financial statements.
2
Ambev S.A.
Interim Consolidated Income Statements
(All amounts in thousands of reais unless otherwise stated)
|
|
Nine-month period ended:
|
|
Three-month period ended:
|
|
Note
|
09/30/2019
|
09/30/2018 (i)
(restated)
|
|
09/30/2019
|
09/30/2018 (i)
(restated)
|
|
|
|
|
|
|
|
Net sales
|
15
|
36,742,911
|
34,213,507
|
|
11,957,652
|
11,063,743
|
Cost of sales
|
|
(15,298,734)
|
(13,204,058)
|
|
(5,229,732)
|
(4,365,818)
|
Gross profit
|
|
21,444,177
|
21,009,449
|
|
6,727,920
|
6,697,925
|
|
|
|
|
|
|
|
Distribution expenses
|
|
(4,994,743)
|
(4,715,761)
|
|
(1,717,853)
|
(1,548,656)
|
Sales and marketing expenses
|
|
(4,196,538)
|
(4,347,199)
|
|
(1,360,307)
|
(1,310,673)
|
Administrative expenses
|
|
(2,001,388)
|
(1,768,645)
|
|
(632,466)
|
(615,809)
|
Other operating income/(expenses), net
|
16
|
559,747
|
697,384
|
|
137,727
|
198,296
|
Exceptional items
|
|
(66,880)
|
16,868
|
|
(14,558)
|
(12,827)
|
Income from operations
|
|
10,744,375
|
10,892,096
|
|
3,140,463
|
3,408,256
|
|
|
|
|
|
|
|
Finance cost
|
17
|
(2,950,104)
|
(3,080,783)
|
|
(1,173,003)
|
(906,024)
|
Finance income
|
17
|
1,404,801
|
718,874
|
|
867,205
|
245,289
|
Net finance cost
|
|
(1,545,303)
|
(2,361,909)
|
|
(305,798)
|
(660,735)
|
|
|
|
|
|
|
|
Share of result of joint ventures
|
|
(11,115)
|
(100)
|
|
(8,248)
|
(3,272)
|
Income before income tax
|
|
9,187,957
|
8,530,087
|
|
2,826,417
|
2,744,249
|
|
|
|
|
|
|
|
Income tax expense
|
18
|
(1,218,603)
|
(646,096)
|
|
(222,032)
|
141,109
|
Net income
|
|
7,969,354
|
7,883,991
|
|
2,604,385
|
2,885,358
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
Equity holders of Ambev
|
|
7,680,260
|
7,634,368
|
|
2,497,677
|
2,824,411
|
Non-controlling interests
|
|
289,094
|
249,623
|
|
106,708
|
60,947
|
|
|
|
|
|
|
|
Basic earnings per share – common - R$
|
|
0.4884
|
0.4857
|
|
0.1588
|
0.1797
|
Diluted earnings per share – common - R$
|
|
0.4843
|
0.4818
|
|
0.1576
|
0.1782
|
(i) 2018 restated to reflect the impact of adoption of IFRS 16 under the full retrospective application (Note 3).
The accompanying notes are an integral part of these interim consolidated financial statements.
3
Ambev S.A.
Interim Consolidated Statements of Comprehensive Income
(All amounts in thousands of reais unless otherwise stated)
|
Nine-month period ended:
|
|
Three-month period ended:
|
|
09/30/2019
|
09/30/2018(i)
|
|
09/30/2019
|
09/30/2018(i)
|
|
|
(restated)
|
|
|
(restated)
|
|
|
|
|
|
|
Net income
|
7,969,354
|
7,883,991
|
|
2,604,385
|
2,885,358
|
|
|
|
|
|
|
Items that will not be recycled to profit or loss:
|
|
|
|
|
|
Full recognition of actuarial gains/(losses)
|
4,013
|
(7,605)
|
|
340
|
101
|
|
|
|
|
|
|
Items that may be recycled subsequently to profit or loss:
|
|
|
|
|
|
Exchange differences on translation of foreign operations (gains/(losses)
|
|
|
|
|
|
Investment hedge in foreign operations
|
-
|
(174,528)
|
|
-
|
(45,401)
|
Investment hedge - put option granted on subsidiary
|
(58,555)
|
(133,742)
|
|
(95,741)
|
(41,444)
|
Gains/losses on translation of other foreign operations
|
663,001
|
3,266,411
|
|
1,111,356
|
530,165
|
Gains/losses on translation of foreign operations
|
604,446
|
2,958,141
|
|
1,015,615
|
443,320
|
|
|
|
|
|
|
Cash flow hedge - gains/(losses)
|
|
|
|
|
|
Recognized in Equity (Hedge reserve)
|
802,486
|
2,036,460
|
|
515,519
|
860,079
|
Removed from Equity (Hedge reserve) and included in profit or loss
|
(683,259)
|
(785,904)
|
|
(58,868)
|
(423,719)
|
Total cash flow hedge
|
119,227
|
1,250,556
|
|
456,651
|
436,360
|
|
|
|
|
|
|
Other comprehensive (loss)/income
|
727,686
|
4,201,092
|
|
1,472,606
|
879,781
|
|
|
|
|
|
|
Total comprehensive income
|
8,697,040
|
12,085,083
|
|
4,076,991
|
3,765,139
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
Equity holders of Ambev
|
8,371,303
|
11,680,034
|
|
3,902,001
|
3,704,228
|
Non-controlling interest
|
325,737
|
405,049
|
|
174,990
|
60,911
|
(i) 2018 restated to reflect the impact of adoption of IFRS 16 under the full retrospective application (Note 3).
The accompanying notes are an integral part of these interim consolidated financial statements. The consolidated statements of comprehensive income are presented net of income tax. The income tax effects of these items are disclosed in Note 8 - Deferred income tax and social contribution.
4
Ambev S.A.
Interim Consolidated Statements of Changes in Equity
(All amounts in thousands of reais unless otherwise stated)
|
Attributable to equity holders of Ambev
|
|
|
|
|
Capital
|
Capital reserves
|
Net income reserves
|
Retained earnings
|
Carrying value adjustments
|
Total
|
|
Non-controlling interests
|
Total equity
|
At December 31, 2018
|
57,710,202
|
54,781,194
|
15,434,093
|
-
|
(71,584,866)
|
56,340,623
|
|
1,206,801
|
57,547,424
|
Impact of the adoption of IFRS 16 (i)
|
-
|
-
|
(92,726)
|
-
|
110
|
(92,616)
|
|
-
|
(92,616)
|
At January 1, 2019 (restated) (i)
|
57,710,202
|
54,781,194
|
15,341,367
|
-
|
(71,584,756)
|
56,248,007
|
|
1,206,801
|
57,454,808
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
-
|
-
|
-
|
7,680,260
|
-
|
7,680,260
|
|
289,094
|
7,969,354
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
Gains/(losses) on translation of foreign operations
|
-
|
-
|
-
|
-
|
567,764
|
567,764
|
|
36,682
|
604,446
|
Cash flow hedges
|
-
|
-
|
-
|
-
|
119,253
|
119,253
|
|
(26)
|
119,227
|
Actuarial gains/(losses)
|
-
|
-
|
-
|
-
|
4,026
|
4,026
|
|
(13)
|
4,013
|
Total comprehensive income
|
-
|
-
|
-
|
7,680,260
|
691,043
|
8,371,303
|
|
325,737
|
8,697,040
|
Capital increase (Note 13)
|
156,557
|
(143,742)
|
-
|
-
|
-
|
12,815
|
|
-
|
12,815
|
Effect of application of IAS 29 (hyperinflation) (ii)
|
-
|
-
|
-
|
985,076
|
-
|
985,076
|
|
(1,934)
|
983,142
|
Gains/(losses) of controlling interest´s share
|
-
|
-
|
-
|
-
|
(352)
|
(352)
|
|
109,201
|
108,849
|
Tax on fictitious dividends
|
-
|
-
|
-
|
-
|
(6,936)
|
(6,936)
|
|
-
|
(6,936)
|
Dividends distributed
|
-
|
-
|
-
|
-
|
-
|
-
|
|
(370,112)
|
(370,112)
|
Purchase of shares and result on treasury shares
|
-
|
(17,342)
|
-
|
-
|
-
|
(17,342)
|
|
-
|
(17,342)
|
Share-based payments
|
-
|
159,188
|
-
|
-
|
-
|
159,188
|
|
-
|
159,188
|
At September 30, 2019
|
57,866,759
|
54,779,298
|
15,341,367
|
8,665,336
|
(70,901,001)
|
65,751,759
|
|
1,269,693
|
67,021,452
|
(i) As described in Note 3 - Summary of significant account police.
(ii) As described in Note 1 (b) Application of inflation accounting and Financial Reporting in Hyperinflationary Economies.
The accompanying notes are an integral part of these interim consolidated financial statements.
5
Ambev S.A.
Interim Consolidated Statements of Changes in Equity
(All amounts in thousands of reais unless otherwise stated)
|
Attributable to equity holders of Ambev
|
|
|
|
|
Capital
|
Capital reserves
|
Net income reserves
|
Retained earnings
|
Carrying value adjustments
|
Total
|
|
Non-controlling interests
|
Total equity
|
At December 31, 2017
|
57,614,140
|
54,700,909
|
8,660,235
|
-
|
(74,966,470)
|
46,008,814
|
|
1,974,041
|
47,982,855
|
Impact of the adoption of IFRS 15 (i)
|
-
|
-
|
-
|
(355,383)
|
-
|
(355,383)
|
|
-
|
(355,383)
|
Impact of the adoption of IFRS 16 (ii)
|
-
|
-
|
(63,009)
|
-
|
(103)
|
(63,112)
|
|
-
|
(63,112)
|
At January 1, 2018 (restated) (ii)
|
57,614,140
|
54,700,909
|
8,597,226
|
(355,383)
|
(74,966,573)
|
45,590,319
|
|
1,974,041
|
47,564,360
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
-
|
-
|
-
|
7,634,368
|
-
|
7,634,368
|
|
249,623
|
7,883,991
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
Gains/(losses) on translation of foreign operations
|
-
|
-
|
-
|
-
|
2,801,782
|
2,801,782
|
|
156,359
|
2,958,141
|
Cash flow hedges
|
-
|
-
|
-
|
-
|
1,250,776
|
1,250,776
|
|
(220)
|
1,250,556
|
Actuarial gains/(losses)
|
-
|
-
|
-
|
-
|
(6,892)
|
(6,892)
|
|
(713)
|
(7,605)
|
Total comprehensive income
|
-
|
-
|
-
|
7,634,368
|
4,045,666
|
11,680,034
|
|
405,049
|
12,085,083
|
Capital increase
|
96,062
|
(89,876)
|
-
|
-
|
-
|
6,186
|
|
-
|
6,186
|
Effect of application of IAS 29 (hyperinflation) (iii)
|
-
|
(9,272)
|
-
|
2,450,352
|
491,999
|
2,933,079
|
|
(1,481)
|
2,931,598
|
Gains/(losses) of controlling interest´s share (iv)
|
-
|
-
|
-
|
-
|
1,042,504
|
1,042,504
|
|
(1,085,373)
|
(42,869)
|
Tax on fictitious dividends
|
-
|
-
|
-
|
-
|
(6,931)
|
(6,931)
|
|
-
|
(6,931)
|
Dividends distributed
|
-
|
-
|
-
|
(2,515,101)
|
-
|
(2,515,101)
|
|
(227,617)
|
(2,742,718)
|
Purchase of shares and result on treasury shares
|
-
|
10,636
|
-
|
-
|
-
|
10,636
|
|
-
|
10,636
|
Share-based payments
|
-
|
124,320
|
-
|
-
|
-
|
124,320
|
|
-
|
124,320
|
Prescribed/(complement) dividends
|
-
|
-
|
-
|
(50)
|
-
|
(50)
|
|
-
|
(50)
|
At September 30, 2018 (restated) (ii)
|
57,710,202
|
54,736,717
|
8,597,226
|
7,214,186
|
(69,393,335)
|
58,864,996
|
|
1,064,619
|
59,929,615
|
(i) As described in Note 3 - Summary of significant account police.
(ii) 2018 restated to reflect the impact of adoption of IFRS 16 under the full retrospective application (Note 3).
(iii) As described in Note 1 (b) Application of inflation accounting and Financial Reporting in Hyperinflationary Economies. These effects did not contains the impact refers of income for the period, which is reflects in the income statement as net income, by the amount of R$273,415.
(iv) As described in Note 1 (b) Renegotiation of shareholders agreement from Tenedora.
The accompanying notes are an integral part of these interim consolidated financial statements.
6
Ambev S.A.
Interim Consolidated Cash Flow Statements
(All amounts in thousands of reais unless otherwise stated)
|
|
Nine-month period ended:
|
|
Note
|
09/30/2019
|
09/30/2018(ii)
|
|
|
|
(restated)
|
|
|
|
|
Net income
|
|
7,969,354
|
7,883,991
|
Depreciation, amortization and impairment
|
|
3,411,113
|
3,179,988
|
Impairment losses on receivables and inventories
|
|
101,408
|
105,081
|
Additions/(reversals) in provisions and employee benefits
|
|
139,533
|
131,354
|
Net finance cost
|
17
|
1,545,303
|
2,361,909
|
Losses/(gain) on sale of property, plant and equipment and intangible assets
|
|
(59,180)
|
62,501
|
Equity-settled share-based payment expense
|
19
|
159,588
|
118,377
|
Income tax expense
|
18
|
1,218,603
|
646,096
|
Share of result of joint ventures
|
|
11,115
|
100
|
Other non-cash items included in the profit
|
|
(783,669)
|
(810,062)
|
Cash flow from operating activities before changes in working capital and use of provisions
|
|
13,713,168
|
13,679,335
|
|
|
|
|
(Increase)/decrease in trade and other receivables
|
|
253,111
|
425,374
|
(Increase)/decrease in inventories
|
|
(653,589)
|
(989,975)
|
Increase/(decrease) in trade and other payables
|
|
(2,082,369)
|
(1,892,672)
|
Cash generated from operations
|
|
11,230,321
|
11,222,062
|
|
|
|
|
Interest paid
|
|
(336,051)
|
(420,358)
|
Interest received
|
|
394,305
|
515,359
|
Dividends received
|
|
2,245
|
1,102
|
Income tax paid
|
|
(2,544,414)
|
(1,762,499)
|
Cash flow from operating activities
|
|
8,746,406
|
9,555,666
|
|
|
|
|
Proceeds from sale of property, plant and equipment and intangible assets
|
|
67,186
|
40,234
|
Proceeds from sale of subsidiaries operations
|
|
203,557
|
-
|
Acquisition of property, plant and equipment and intangible assets
|
|
(3,065,552)
|
(2,218,154)
|
Acquisition of subsidiaries, net of cash acquired
|
|
(79,264)
|
(141,992)
|
Acquisition of other investments
|
|
(45,484)
|
(5,000)
|
Investment in short term debt securities and net proceeds/(acquisition) of debt securities
|
|
(9,246)
|
(17,358)
|
Net proceeds/(acquisition) of other assets
|
|
2,867
|
(38,421)
|
Cash flow from investing activities
|
|
(2,925,936)
|
(2,380,691)
|
|
|
|
|
Capital increase
|
|
12,815
|
6,186
|
Capital increase of non-controlling interest
|
|
2,275
|
-
|
Proceeds/(repurchase) of treasury shares
|
|
(17,016)
|
6,355
|
Acquisition of non-controlling interest
|
|
(471)
|
(3,060,537)
|
Proceeds from borrowings
|
|
900,050
|
5,092,994
|
Repayment of borrowings
|
|
(1,136,386)
|
(2,962,515)
|
Cash net of finance costs other than interests
|
|
(1,105,901)
|
(580,912)
|
Payment of lease liabilities
|
|
(363,814)
|
(437,769)
|
Dividends and Interest on shareholder´s equity paid
|
|
(227,032)
|
(3,684,846)
|
Cash flow from financing activities
|
|
(1,935,480)
|
(5,621,044)
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents
|
|
3,884,990
|
1,553,931
|
Cash and cash equivalents less bank overdrafts at beginning of year (i)
|
|
11,463,498
|
10,352,735
|
Effect of exchange rate fluctuations
|
|
(331,574)
|
295,349
|
Cash and cash equivalents less bank overdrafts at end of year (i)
|
|
15,016,914
|
12,202,015
|
(i) Net of bank overdrafts.
(ii) 2018 restated to reflect the impact of adoption of IFRS 16 under the full retrospective application (Note 3).
The accompanying notes are an integral part of these interim consolidated financial statements.
7
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
1.
|
Corporate information
|
2.
|
Statement of compliance
|
3.
|
Summary of significant accounting policies
|
4.
|
Use of estimates and judgments
|
5.
|
Cash and cash equivalents
|
6.
|
Investment securities
|
7.
|
Inventories
|
8.
|
Deferred income tax and social contribution
|
9.
|
Property, plant and equipment
|
10.
|
Goodwill
|
11.
|
Interest-bearing loans and borrowings
|
12.
|
Provisions
|
13.
|
Changes in equity
|
14.
|
Segment reporting
|
15.
|
Net sales
|
16.
|
Other operating income/(expenses)
|
17.
|
Finance cost and income
|
18.
|
Income tax and social contribution
|
19.
|
Share-based payments
|
20.
|
Financial instruments and risks
|
21.
|
Collateral and contractual commitments with suppliers, advances from customers and other
|
22.
|
Contingent liability
|
23.
|
Non-cash items
|
24.
|
Related parties
|
8
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
1. CORPORATE INFORMATION
(a) Description of business
Ambev S.A. (referred to as the “Company” or “Ambev”), is headquartered in São Paulo, Brazil, and either directly or through participation in other companies, produces and sells beer, draft beer, soft drinks, other non-alcoholic beverages, malt and food in general, as well as advertising its own and third-party products, selling promotional and advertising materials and direct or indirect exploitation of bars, restaurants, snack bars and other establishments.
The Company’s shares and ADR’s (American Depositary Receipts) are listed on the B3 S.A.- Brasil, Bolsa, Balcão as “ABEV3” and on the New York Stock Exchange (NYSE) as “ABEV”.
The Company’s direct controlling shareholders are Interbrew International B.V. (“IIBV”), AmBrew S.A. (“Ambrew”), both subsidiaries of Anheuser-Busch InBev N.V. (“AB InBev”) and Fundação Antonio e Helena Zerrenner Instituição Nacional de Beneficência (“Fundação Zerrenner”).
The interim financial statements were approved by the Board of Directors on October 24, 2019.
(b) Major corporate events in 2019 and 2018:
Application of inflation accounting and financial reporting in hyperinflationary economies
In June 2018, the Argentinean peso underwent a severe devaluation resulting in cumulative inflation for three years exceeding 100%, thereby triggering the requirement to transition to hyperinflation accounting as prescribed by IAS 29 Financial Reporting in Hyperinflationary Economies as of 1 January 2018 (the beginning of the reporting period which the hyperinflation have been considered).
Under IAS 29, the non-monetary assets and liabilities, the equity and the income statement of subsidiaries operating in hyperinflationary economies are restated for changes in the general purchasing power of the local currency applying a general price index.
9
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
The financial statements of an entity whose functional currency is the currency of a hyperinflationary economy, whether they are based on a historical cost approach or a current cost approach, must be stated in terms of the measuring unit current at the end of the reporting period and conversion into Brazilian Real at the period-closing exchange rate.
Consequently, the Company has applied hyperinflation accounting for its Argentinean subsidiaries in these consolidated interim financial statements, applying the IAS 29 rules as follows:
·
|
hyperinflation accounting was applied as of 1 January 2018 (under paragraph 4 of IAS 29, the standard applies to the financial statements of any entity from the beginning of the reporting period in which it identifies the existence of hyperinflation);
|
·
|
non-monetary assets and liabilities stated at historical cost (e.g. property plant and equipment, intangible assets, goodwill, etc.) and equity were restated using an inflation index. The hyperinflation impacts resulting from changes in the general purchasing power until 31 December 2017 were reported in retained earnings and the impacts of changes in the general purchasing power from 1 January 2018 were reported through the income statement on a dedicated account for hyperinflation monetary adjustments in the finance line (see also Note 17 - Finance cost and income). Under paragraph 3 of IAS 29, there is no general price index, but judgement may be exercised when restatement of financial statements becomes necessary. As a result, the index used was based on Resolution 539/18 issued by Argentine Federation of Professional Boards on Economic Sciences: i) from January 1, 2017 onwards the national IPC (national consumer price index) and; ii) to December 31,2016 the IPIM (wholesale price index).
|
·
|
the income statement was adjusted at the end of each reporting period using the change in the general price index and is converted at the closing exchange rate of each period (rather than the year to date average rate for non-hyperinflationary economies), thereby restating the year-to-date income statement account both for the inflation index and currency conversion;
|
·
|
the income statements for the prior year and the first two quarters of 2018 and the balance sheet of the Argentinean subsidiaries were not restated. Under paragraph 42 (b) of IAS 21, when amounts are translated into the currency of a non-hyperinflationary economy, comparative amounts will be those that were presented as current year amounts in the relevant prior year financial statements (i.e. not adjusted for subsequent changes in the price level or subsequent changes in exchange rates).
|
10
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
Information Released by the Press
During this quarter, there were news reports based on alleged leaks of statements by Mr. Antonio Palocci in a classified legal procedure to which the Company did not have access. As previously stated in a press release dated August 9, 2019, the Company, consistent with its Code of Business Conduct, reaffirms its commitment towards ethics and lawfulness and continues taking proper measures to review and monitor this matter.
Exchange contracts for future financial flows - equity swap
On May 15, 2018 Ambev's Board of Directors approved the execution, by the Company or its subsidiaries, of equity-swap contracts through financial institutions to be defined by the Company's Management, having as their underlying asset shares issued by the Company or ADR’s, without losses on the liquidation, within the regulatory term, of the contracts still in force. The settlement of the approved equity-swap contracts will occur within a maximum period of 18 months from approval, such contracts may result in exposure up to 80 million common shares (of which all or part may be through ADR's), with a limit value up to R$1.8 billion.
On December 20, 2018, the Board of Directors of Ambev approved the conclusion of new equity-swap contracts, without prejudice to the liquidation, within the regulatory term, of the equity-swap contracts still in force. The settlement of the new approved equity-swap contracts will occur within a maximum period of 18 months from approval, and such contracts may result in exposure up to 80 million common shares (of which all or part may be through ADRs), with a limit value up to R$1.5 billion.
On May 15, 2019, the Board of Directors of Ambev approved the conclusion of new equity-swap contracts, without prejudice to the liquidation, within the regulatory term, of the equity-swap contracts still in force. The settlement of the new approved equity-swap contracts will occur within a maximum period of 18 months from approval, and such contracts may result in exposure up to 80 million common shares (of which all or part may be through ADRs), with a limit value up to R$1.5 billion, in addition to contracts already executed in the context of the approvals of May 15, 2018 and December 20, 2018, and which have not yet been settled on the date of approval, may result in an exposure up to 137,394,353 common shares (all or part of which may be through ADRs).
11
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
Addendum to the Agreement with PepsiCo
The long-term agreement with PepsiCo, under which the Company has the exclusive right to bottle, sell and distribute certain brands on PepsiCo’s portfolio of soft drinks in Brazil, including Pepsi Cola, Gatorade, H2OH! and Lipton Ice Tea, was amended in October 2018 to reflect certain changes in the trade agreement between the parties. The new terms of the agreement were approved by CADE in December 2018 and became effective as of January 1, 2019. The agreement will be in force until December 31, 2027.
Sale of subsidiary
On June 8, 2018 the Company concluded the sale of all shares of the subsidiary Barbados Bottling Co. Limited, active in the soft drink segment, in the amount of US$53 million, corresponding to R$179 million. As a result of this transaction the Company recorded a gain of US$22 million, corresponding to R$75 million on the transaction date and to R$79 million in December 31, 2018, in the income statement as an exceptional item.
Perpetual licensing agreement with Quilmes
In September 2017, Quilmes, a subsidiary of Ambev, entered into an agreement whereby AB InBev would grant a perpetual license to Quilmes in Argentina for Budweiser and other North American brands upon the recovery of the distribution rights by AB InBev from the Chilean company Compañia Cervecerías Unidas S.A. - CCU. The agreement also foresaw the transfer of the brewery of Cerveceria Argentina Sociedad Anonima Isenbeck by AB InBev to Quilmes and the transfer of some Argentinean brands (Norte, Iguana and Baltica) and related business assets along with US$50 million by Quilmes to CCU. The transaction was closed on May 2, 2018, following approval, on April 27, 2018, by the Argentinean antitrust authority (Comisión Nacional de Defensa de la Competencia) of the main transaction documents and verification of other usual conditions closing. The Company recorded a gain of 306 million Argentinean pesos, corresponding to R$50 million on the transaction date and to R$30 million as at December 31, 2018 in the income statement as a result of the application of the accounting practice for the exchange of assets involving transactions under common control as an exceptional item.
Renegotiation of shareholders agreement from Tenedora
On December 1, 2017, Ambev informed its shareholders and the general market that E. León Jimenes, S.A. (“ELJ”), partner of Ambev in Tenedora, S.A. (“Tenedora”), which holds almost all the shares of Cervecería Nacional Dominicana, S.A (“CND”), would
exercise partially, as provided for in the shareholders’ agreement of Tenedora, a put option with relation to approximately 30% of the capital stock by Tenedora. As a result, the Company will pay to ELJ the amount of USD 926.5 million and would be the holder of approximately 85% of Tenedora, and ELJ will remain with 15% interest of CND. Considering the strategic importance of alliance with the ELJ, the Board of Directors of Ambev approved a change to the date of the call option term from 2019 to 2022. The transaction was subject to certain conditions precedent that was concluded on January 18, 2018.
12
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
2. STATEMENT OF COMPLIANCE
The consolidated financial statements have been prepared using the accounting basis of going concern and are being presented in accordance with IAS 34 - Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”).
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, 2018. To avoid duplication of disclosures which are included in the annual financial statements, the following notes were not subject to full filling:
(a) Summary of significant accounting policies (Note 3);
(b) Exceptional items (Note 8);
(c) Payroll and related benefits (Note 9);
(d) Additional information on operating expenses by nature (Note 10);
(e) Goodwill (Note 14);
(f) Intangible (Note 15);
(g) Investment securities (Note 16);
(h) Trade receivables (Note 19);
(i) Changes in equity (Note 21);
(j) Interest-bearing loans and borrowings (Note 22);
(k) Employee benefits (Note 23);
(l) Trade payables (Note 25);
(m) Contingent liabilities (Note 29);
(n) Group Companies (Note 32);
(o) Insurance (Note 33)
13
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There were no significant changes in accounting policies and calculation methods used for the financial statements as at September 30, 2019, in relation to those presented in the financial statements for the year ended December 31, 2018, except for the policy described below:
IFRS 16 Leases (effective from annual periods beginning on or after January 1, 2019) replaces the current lease accounting requirements and introduces significant changes in the accounting, this change removes the distinction between operating and finance leases under IAS 17 Leases and related interpretations, and requires a lessee to be recognized as right-of-use asset and a liability classified according to the contract period.
Having adopted the standard as of January 1, 2019, the Company has adopted the retrospectively presentation for the consolidated financial statements. The impact to the financial statements is demonstrated below:
- Recognition of right-of-use assets and lease liabilities in the balance sheet, initially measured at the present value of future lease payments;
- Recognition of depreciation expenses of right-of-use assets in the income statement;
- Recognition of interest expenses in the financial result on the lease liabilities in the income statement; and
- Segregation of the payment of the leases by a principal portion presented within the financing activities and an interest component presented within the operational activities in the cash flows.
The new lease definitions have been applied to all identified contracts in effect on the date of adoption of the standard. IFRS 16 determines that the contract contains a lease if it transmits to the lessee the right to control the use of the identified asset for a period of time by exchange of counter payments.
The Company carried out an inventory of the contracts, evaluating whether or not they contain a lease in accordance with IFRS 16. This analysis identified impacts mainly related to the leasing operations of real estate from third parties, trucks, cars, forklifts and servers.
14
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
Short-term (12 months or less) and low value (USD 5,000 or less) leases were not subject to this analysis, as permitted by the standard. For these contracts, the Company will continue to recognize a lease expense on a straight-line basis.
When measuring lease liabilities, the Company discounted lease payments using incremental borrowing rates at January 1, 2019. The weighted average rate applied is 12.6%.
The Company has adopted the presentation retrospectively for the consolidated financial statements. The tables below summarize the impacts on the adoption of the standard in the balance sheet, income statement, statement of comprehensive income and statement of cash flows:
|
|
|
12/31/2018
|
|
|
|
01/01/2018
|
Consolidated Balance Sheets
|
Originally
|
IFRS16
|
Restated
|
|
Originally
|
IFRS16
|
Restated
|
Assets
|
Submitted
|
|
Submitted
|
|
|
|
|
|
|
|
|
Current assets
|
25,329,605
|
-
|
25,329,605
|
|
24,362,690
|
-
|
24,362,690
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
2,017,475
|
47,267
|
2,064,742
|
|
2,279,339
|
31,567
|
2,310,906
|
Investments in joint ventures
|
257,135
|
-
|
257,135
|
|
237,961
|
-
|
237,961
|
Property, plant and equipment
|
20,096,996
|
1,541,012
|
21,638,008
|
|
18,822,327
|
1,882,818
|
20,705,145
|
Other items, not restated
|
46,424,927
|
-
|
46,424,927
|
|
40,794,289
|
-
|
40,794,289
|
Non-current assets
|
68,796,533
|
1,588,279
|
70,384,812
|
|
62,133,916
|
1,914,385
|
64,048,301
|
|
|
|
|
|
|
|
|
Total assets
|
94,126,138
|
1,588,279
|
95,714,417
|
|
86,496,606
|
1,914,385
|
88,410,991
|
|
|
|
|
|
|
|
|
Equity and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing loans and borrowings
|
1,560,630
|
380,591
|
1,941,221
|
|
1,321,122
|
378,236
|
1,699,358
|
Other items, not restated
|
23,267,740
|
-
|
23,267,740
|
|
27,367,354
|
-
|
27,367,354
|
Current liabilities
|
24,828,370
|
380,591
|
25,208,961
|
|
28,688,476
|
378,236
|
29,066,712
|
|
|
|
|
|
|
|
|
Interest-bearing loans and borrowings
|
862,138
|
1,300,304
|
2,162,442
|
|
1,231,928
|
1,599,261
|
2,831,189
|
Other items, not restated
|
10,888,206
|
-
|
10,888,206
|
|
8,948,730
|
-
|
8,948,730
|
Non-current liabilities
|
11,750,344
|
1,300,304
|
13,050,648
|
|
10,180,658
|
1,599,261
|
11,779,919
|
|
|
|
|
|
|
|
|
Total liabilities
|
36,578,714
|
1,680,895
|
38,259,609
|
|
38,869,134
|
1,977,497
|
40,846,631
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves
|
70,215,287
|
(92,726)
|
70,122,561
|
|
63,361,144
|
(63,009)
|
63,298,135
|
Carrying value adjustments
|
(71,584,866)
|
110
|
(71,584,756)
|
|
(74,966,470)
|
(103)
|
(74,966,573)
|
Other items, not restated
|
57,710,202
|
-
|
57,710,202
|
|
57,258,757
|
-
|
57,258,757
|
Equity attributable to equity holders of Ambev
|
56,340,623
|
(92,616)
|
56,248,007
|
|
45,653,431
|
(63,112)
|
45,590,319
|
Non-controlling interests
|
1,206,801
|
-
|
1,206,801
|
|
1,974,041
|
-
|
1,974,041
|
Total Equity
|
57,547,424
|
(92,616)
|
57,454,808
|
|
47,627,472
|
(63,112)
|
47,564,360
|
|
|
|
|
|
|
|
|
Total equity and liabilities
|
94,126,138
|
1,588,279
|
95,714,417
|
|
86,496,606
|
1,914,385
|
88,410,991
|
15
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
|
Nine-month period ended:
|
|
Three-month period ended:
|
|
|
|
09/30/2018
|
|
09/30/2018
|
Consolidated Income Statements
|
Originally
|
IFRS16
|
Restated
|
|
Originally
|
IFRS16
|
Restated
|
Submitted
|
|
Submitted
|
|
|
|
|
|
|
|
|
Cost of sales
|
(13,218,694)
|
14,636
|
(13,204,058)
|
|
(4,370,713)
|
4,895
|
(4,365,818)
|
Other items, not restated
|
34,213,507
|
-
|
34,213,507
|
|
11,063,743
|
-
|
11,063,743
|
Gross profit
|
20,994,813
|
14,636
|
21,009,449
|
|
6,693,030
|
4,895
|
6,697,925
|
|
|
|
|
|
|
|
|
Distribution expenses
|
(4,790,976)
|
75,215
|
(4,715,761)
|
|
(1,575,691)
|
27,035
|
(1,548,656)
|
Sales and marketing expenses
|
(4,365,928)
|
18,729
|
(4,347,199)
|
|
(1,316,950)
|
6,277
|
(1,310,673)
|
Administrative expenses
|
(1,772,008)
|
3,363
|
(1,768,645)
|
|
(617,105)
|
1,296
|
(615,809)
|
Other items, not restated
|
714,252
|
-
|
714,252
|
|
185,469
|
-
|
185,469
|
Income from operations
|
10,780,153
|
111,943
|
10,892,096
|
|
3,368,753
|
39,503
|
3,408,256
|
|
|
|
|
|
|
|
|
Finance cost
|
(2,923,315)
|
(157,468)
|
(3,080,783)
|
|
(856,369)
|
(49,655)
|
(906,024)
|
Other items, not restated
|
718,874
|
-
|
718,874
|
|
245,289
|
-
|
245,289
|
Net finance cost
|
(2,204,441)
|
(157,468)
|
(2,361,909)
|
|
(611,080)
|
(49,655)
|
(660,735)
|
|
|
|
|
|
|
|
|
Share of result of joint ventures
|
(100)
|
-
|
(100)
|
|
(3,272)
|
-
|
(3,272)
|
Income before income tax
|
8,575,612
|
(45,525)
|
8,530,087
|
|
2,754,401
|
(10,152)
|
2,744,249
|
|
|
|
|
|
|
|
|
Income tax expense
|
(661,716)
|
15,620
|
(646,096)
|
|
137,705
|
3,404
|
141,109
|
Net income
|
7,913,896
|
(29,905)
|
7,883,991
|
|
2,892,106
|
(6,748)
|
2,885,358
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
Equity holders of Ambev
|
7,664,273
|
(29,905)
|
7,634,368
|
|
2,831,159
|
(6,748)
|
2,824,411
|
Non-controlling interests
|
249,623
|
-
|
249,623
|
|
60,947
|
-
|
60,947
|
|
|
|
|
|
|
|
|
Basic earnings per share – common - R$
|
0.4877
|
(0.0020)
|
0.4857
|
|
0.1801
|
(0.0005)
|
0.1797
|
Diluted earnings per share – common - R$
|
0.4838
|
(0.0020)
|
0.4818
|
|
0.1787
|
(0.0005)
|
0.1782
|
|
Nine-month period ended:
|
|
Three-month period ended:
|
|
|
|
09/30/2018
|
|
09/30/2018
|
Consolidated Statements of Comprehensive Income
|
Originally Submitted
|
IFRS16
|
Restated
|
|
Originally Submitted
|
IFRS16
|
Restated
|
|
|
|
|
|
|
|
|
Net income
|
7,913,896
|
(29,905)
|
7,883,991
|
|
2,892,106
|
(6,748)
|
2,885,358
|
|
|
|
|
|
|
|
|
Gains/losses on translation of foreign operations
|
2,957,864
|
277
|
2,958,141
|
|
442,272
|
1,048
|
443,320
|
|
|
|
|
|
|
|
|
Other items, not restated
|
1,242,951
|
-
|
1,242,951
|
|
436,461
|
-
|
436,461
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
12,114,711
|
(29,628)
|
12,085,083
|
|
3,770,839
|
(5,700)
|
3,765,139
|
Attributable to:
|
|
|
|
|
|
|
|
Equity holders of Ambev
|
11,709,662
|
(29,628)
|
11,680,034
|
|
3,709,928
|
(5,700)
|
3,704,228
|
Non-controlling interest
|
405,049
|
-
|
405,049
|
|
60,911
|
-
|
60,911
|
16
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
|
Nine-month period ended:
|
|
Three-month period ended:
|
|
|
|
09/30/2018
|
|
09/30/2018
|
Consolidated Cash Flow Statements
|
Originally Submitted
|
IFRS16
|
Restated
|
|
Originally Submitted
|
IFRS16
|
Restated
|
|
|
|
|
|
|
|
|
Net income
|
7,913,896
|
(29,905)
|
7,883,991
|
|
2,892,106
|
(6,748)
|
2,885,358
|
Depreciation, amortization and impairment
|
2,861,299
|
318,689
|
3,179,988
|
|
1,068,990
|
103,209
|
1,172,199
|
Net finance cost
|
2,204,441
|
157,468
|
2,361,909
|
|
611,080
|
49,655
|
660,735
|
Income tax expense
|
661,716
|
(15,620)
|
646,096
|
|
(137,705)
|
(3,404)
|
(141,109)
|
Share of result of joint ventures
|
100
|
-
|
100
|
|
3,272
|
-
|
3,272
|
Other items, not restated
|
(392,749)
|
-
|
(392,749)
|
|
(119,836)
|
-
|
(119,836)
|
Cash flow from operating activities before changes in working capital and use of provisions
|
13,248,703
|
430,632
|
13,679,335
|
|
4,317,907
|
142,712
|
4,460,619
|
|
|
|
|
|
|
|
|
Cash generated from operations
|
10,791,430
|
430,632
|
11,222,062
|
|
4,729,846
|
142,712
|
4,872,558
|
|
|
|
|
|
|
|
|
Cash flow from operating activities
|
9,125,034
|
430,632
|
9,555,666
|
|
5,257,317
|
142,712
|
5,400,029
|
|
|
|
|
|
|
|
|
Payment of lease liabilities
|
(7,139)
|
(430,630)
|
(437,769)
|
|
(2,675)
|
(142,710)
|
(145,385)
|
Cash flow from financing activities
|
(5,190,414)
|
(430,630)
|
(5,621,044)
|
|
(2,634,612)
|
(142,710)
|
(2,777,322)
|
|
|
|
|
|
|
|
|
Other items, not restated
|
(2,380,691)
|
-
|
(2,380,691)
|
|
(996,589)
|
-
|
(996,589)
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents
|
1,553,929
|
2
|
1,553,931
|
|
1,626,116
|
2
|
1,626,118
|
Effect of exchange rate fluctuations
|
295,351
|
(2)
|
295,349
|
|
295,351
|
(2)
|
295,349
|
(a) Basis of preparation and measurement
The interim financial statements are presented in thousands of Brazilian Real (“R$”), unless otherwise indicated, rounded to the nearest thousand indicated. Depending on the applicable IFRS requirement, the measurement basis used in preparing the interim financial statements is historical cost, net realizable value, fair value or recoverable amount.
(b) Recently issued IFRS
(b.1) Uncertainty over Income Tax Treatment - IFRIC 23
The interpretation is applicable when there are uncertainties as to the acceptance of the treatment by the Fiscal Authority. If acceptance is not likely, the values of tax assets and liabilities should be adjusted to reflect the best resolution of the uncertainty.
The Company has evaluated the changes introduced by this new standard and based on the analysis carried out, did not identify material changes that have an impact on its consolidated interim financial information, or alter the recognition and measurement of uncertainties about tax treatment of income.
17
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
Other Standards, Interpretations and Amendments to Standards
There are no Other Standards, Interpretations and Amendments to Standards that are not yet effective that would be expected to have material impact on the Company consolidated interim financial information.
4. USE OF ESTIMATES AND JUDGMENTS
The preparation of interim financial statements in conformity with IFRS requires Management to make judgments, estimates and assumptions that affect the application of accounting practices and the reported amounts of assets and liabilities, income and expenses. The estimates and judgments are based on past experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for decision making regarding the judgments about carrying amounts of assets and liabilities that are not readily evident from other sources. Actual results may differ from these estimates.
The estimates and assumptions are reviewed on a regular basis. Changes in accounting estimates may affect the period in which they are realized, or future periods.
Although each of its significant accounting policies reflects judgments, assessments or estimates, the Company believes that the following accounting practices reflect the most critical judgments, estimates and assumptions that are important to its business operations and the understanding of its results:
(i) predecessor accounting;
(ii) business combinations;
(iii) impairment;
(iv) provisions;
(v) share-based payments;
(vi) employee benefits;
(vii) current and deferred tax;
(viii) joint arrangements;
(ix) measurement of financial instruments, including derivatives;
(x) inflation accounting and financial reporting in hyperinflationary economies; and
(xi) leasing operations.
The fair values of acquired identifiable intangibles of indefinite useful life are based on an assessment of future cash flows. Impairment analyses of goodwill and intangible assets
with an indefinite life are performed at least annually and whenever a triggering event occurs, in order to determine whether the carrying value exceeds the recoverable amount.
18
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
The Company uses its judgment to select a variety of methods including the net fair value of expenses approach and option valuation models and makes assumptions about the fair value of financial instruments that are mainly based on market conditions existing at each balance sheet date.
Actuarial assumptions are established to anticipate future events and are used in calculating pension and other long-term employee benefit expense and liability. These factors include assumptions with respect to interest rates, rates of increase in health care costs, rates of future compensation increases, turnover rates, and life expectancy.
The Company is subject to income tax in numerous jurisdictions. Significant judgment is required in determining the worldwide provision for income tax. There are some transactions and calculations for which the ultimate tax determination is uncertain. Some subsidiaries within the Company are involved in tax audits usually in relation to prior years. These audits are ongoing in various jurisdictions at the balance sheet date and, by their nature, these can take considerable time until its conclusion.
As described in Note 1 (b) Application of inflation accounting and financial reporting in hyperinflationary economies, under paragraph 3 of IAS 29, there are no a general price index, but allow to be executed judgement when restatement of financial statements becomes necessary. That way, the index used was based in Resolution 539/18 issued by the Argentine Federation of Professional Boards on Economic Sciences: i) from January 1, 2017 onwards the national IPC (national consumer price index); ii) to December 31, 2016 the IPIM (wholesale price index).
5. CASH AND CASH EQUIVALENTS
|
09/30/2019
|
12/31/2018
|
|
|
|
Cash
|
129,203
|
594,995
|
Current bank accounts
|
4,529,869
|
4,875,673
|
Short term bank deposits (i)
|
10,357,842
|
5,992,830
|
Cash and cash equivalents
|
15,016,914
|
11,463,498
|
(i) The balance refers mostly to Bank Deposit Certificates - CDB, high liquidity, which are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value.
Current account balances included guarantee deposits in the amount of R$359 million as at September 30, 2019 (R$356 million on December 31, 2018) held by the subsidiary of
Cuba, which are not freely transferable to the parent company for reasons of exchange restrictions.
19
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
6. INVESTMENTS SECURITIES
|
09/30/2019
|
12/31/2018
|
|
|
|
Financial asset at fair value through profit or loss-held for trading
|
14,304
|
13,391
|
Current investments securities
|
14,304
|
13,391
|
|
|
|
Debt held-to-maturity (i)
|
166,068
|
147,341
|
Non-current investments securities
|
166,068
|
147,341
|
|
|
|
Total
|
180,372
|
160,732
|
(i) The balance refers substantially to Bank Deposit Certificates (CDB) linked to tax incentives and do not have an immediate convertibility in a known amount of cash.
7. INVENTORIES
|
09/30/2019
|
12/31/2018
|
|
|
|
Finished goods
|
2,464,778
|
1,687,954
|
Work in progress
|
468,064
|
339,459
|
Raw material
|
2,197,821
|
2,517,305
|
Consumables
|
102,833
|
106,989
|
Spare parts and other
|
623,785
|
597,030
|
Prepayments
|
251,547
|
304,442
|
Impairment losses
|
(130,016)
|
(151,386)
|
|
5,978,812
|
5,401,793
|
Write-offs and losses on inventories recognized in the income statement amounted to R$64,840 in the period ended on September 30, 2019 (R$57,513 in the period ended on September 30, 2018).
8. DEFERRED INCOME TAX AND SOCIAL CONTRIBUTION
Deferred taxes for income tax and social contribution taxes are calculated on temporary differences between the tax bases of these taxes and the accounting calculation of the Company, among which, tax losses. The rates of these taxes in Brazil, which are expected at the realization of deferred taxes, are 25% for income tax and 9% for social contribution. For the other regions in which the Company operates, the expected rates are as follow:
Central America and the Caribbean
|
from 23% to 31%
|
Latin America - South (i)
|
from 14% to 30%
|
Canada
|
26%
|
(i) Amendments to Argentine tax legislation approved on December 29, 2017 affected the Company beginning in October 2018 and reduced the income tax rate in the first two years from 35% to 30% and, as a after, to 25%.
20
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
Deferred tax assets are recognized to the extent that it is probable that future taxable profit is probable, which may be offset against temporary differences recorded currently, with a special emphasis on tax losses.
The amount of deferred income tax and social contribution by type of temporary difference is detailed as follows:
|
09/30/2019
|
|
12/31/2018
(restated)
|
|
Assets
|
Liabilities
|
Net
|
|
Assets
|
Liabilities
|
Net
|
Investment securities
|
9,971
|
-
|
9,971
|
|
10,010
|
-
|
10,010
|
Intangible
|
-
|
(1,078,638)
|
(1,078,638)
|
|
-
|
(1,031,160)
|
(1,031,160)
|
Employee benefits
|
691,282
|
(3,998)
|
687,284
|
|
614,842
|
-
|
614,842
|
Trade payables
|
2,307,453
|
(245,457)
|
2,061,996
|
|
1,807,744
|
(271,922)
|
1,535,822
|
Trade receivable
|
51,298
|
(3,566)
|
47,732
|
|
41,245
|
(2,274)
|
38,971
|
Derivatives
|
29,967
|
(300,713)
|
(270,746)
|
|
18,711
|
(304,178)
|
(285,467)
|
Interest-Bearing Loans and Borrowings
|
-
|
(5,437)
|
(5,437)
|
|
2,480
|
(78,480)
|
(76,000)
|
Inventories
|
316,150
|
(73,170)
|
242,980
|
|
266,732
|
(44,769)
|
221,963
|
Property, plant and equipment
|
185,993
|
(1,421,592)
|
(1,235,599)
|
|
109,643
|
(1,386,445)
|
(1,276,802)
|
Withholding tax over undistributed profits and royalties
|
-
|
(1,072,228)
|
(1,072,228)
|
|
-
|
(863,832)
|
(863,832)
|
Investments in joint ventures
|
-
|
(421,589)
|
(421,589)
|
|
-
|
(421,589)
|
(421,589)
|
Interest on shareholders' equity
|
1,139,682
|
-
|
1,139,682
|
|
-
|
-
|
-
|
Loss carryforwards
|
890,108
|
-
|
890,108
|
|
791,001
|
-
|
791,001
|
Provisions
|
375,765
|
(7,480)
|
368,285
|
|
363,122
|
(23,981)
|
339,141
|
Complement of income tax of foreign subsidiaries due in Brazil
|
-
|
(86,212)
|
(86,212)
|
|
-
|
-
|
-
|
Impact of the adoption of IFRS 16 (leasing operations)
|
55,634
|
(1,701)
|
53,933
|
|
47,267
|
-
|
47,267
|
Other items
|
78,475
|
(16,897)
|
61,578
|
|
50,568
|
(54,560)
|
(3,992)
|
Gross deferred tax assets / (liabilities)
|
6,131,778
|
(4,738,678)
|
1,393,100
|
|
4,123,365
|
(4,483,190)
|
(359,825)
|
Reclassification to net presentation
|
(2,370,017)
|
2,370,017
|
-
|
|
(2,058,623)
|
2,058,623
|
-
|
Net deferred tax assets / (liabilities)
|
3,761,761
|
(2,368,661)
|
1,393,100
|
|
2,064,742
|
(2,424,567)
|
(359,825)
|
The Company only offsets the balances of deferred income tax and social contribution assets against liabilities to net presentation when they are within the same entity, of the same nature and expected to be realized in the same period.
21
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
At September 30, 2019 the assets and liabilities deferred taxes related to combined tax losses had an expected utilization or settlement by temporary differences as follows:
|
09/30/2019
|
Deferred taxes not related to tax losses
|
to be realized until 12 months
|
to be realized after 12 months
|
Total
|
|
|
|
|
Investment securities
|
-
|
9,971
|
9,971
|
Intangible
|
(1,223)
|
(1,077,415)
|
(1,078,638)
|
Employee benefits
|
81,777
|
605,507
|
687,284
|
Trade payables
|
(196,395)
|
2,258,391
|
2,061,996
|
Trade receivable
|
46,476
|
1,256
|
47,732
|
Derivatives
|
(132,424)
|
(138,322)
|
(270,746)
|
Interest-bearing loans and borrowings
|
-
|
(5,437)
|
(5,437)
|
Inventories
|
254,913
|
(11,933)
|
242,980
|
Property, plant and equipment
|
(113,708)
|
(1,121,891)
|
(1,235,599)
|
Withholding tax over undistributed profits and royalties
|
(83,559)
|
(988,669)
|
(1,072,228)
|
Investments in joint ventures
|
-
|
(421,589)
|
(421,589)
|
Interest on shareholders' equity
|
1,139,682
|
-
|
1,139,682
|
Provisions
|
199,556
|
168,729
|
368,285
|
Complement of income tax of foreign subsidiaries due in Brazil
|
(86,212)
|
-
|
(86,212)
|
Impact of the adoption of IFRS 16 (leasing operations)
|
-
|
53,933
|
53,933
|
Other items
|
(523)
|
62,101
|
61,578
|
Total
|
1,108,360
|
(605,368)
|
502,992
|
The majority of tax losses and negative social contribution bases on which deferred income tax and social contribution were calculated do not have a limitation period. Their use is based on the projection of the future existence of taxable profits, according to the reality of the past years and to the projections of the Company's business in the economies where it is located, in compliance, therefore, with the applicable fiscal and accounting rules.
Deferred tax related to tax losses
|
09/30/2019
|
2019
|
368,357
|
2020
|
60,206
|
2021
|
49,973
|
2022
|
24,784
|
2023
|
39,938
|
2024 to 2026
|
268,844
|
2027 to 2029 (i)
|
78,006
|
Total
|
890,108
|
(i) There is no expectation of realization that exceeds the term of 10 years.
At September 30, 2019, deferred tax assets in the amount of R$704,592 (R$624,272 in December 31, 2018) related to tax losses that were not recorded as the realization was not probable.
22
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
The major part of the tax losses do not have a carryforward limit for utilization and the tax losses carried forward in relation to the credit were equivalent to R$2,818,287 on September 30, 2019 (R$2,496,838 in December 31, 2018).
The net change in deferred income tax and social contribution is detailed as follows:
At December 31, 2018 (restated)
|
(359,825)
|
Full recognition of actuarial gains/(losses)
|
2,653
|
Investment hedge - put option of a subsidiary interest
|
30,165
|
Cash flow hedge - gains/(losses)
|
31,415
|
Gains/(losses) on translation of other foreign operations
|
683,856
|
Recognized in other comprehensive income
|
748,089
|
Recognized in income statement
|
1,217,376
|
Changes directly in balance sheet
|
(212,540)
|
Recognized in deferred tax
|
(214,742)
|
Effect of application of IAS 29 (hyperinflation)
|
(214,742)
|
Recognized in other group of balance sheet
|
2,202
|
At September 30, 2019
|
1,393,100
|
23
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
9. PROPERTY, PLANT AND EQUIPMENT
|
09/30/2019
|
|
12/31/2018
(restated)
|
|
Land and buildings
|
Plant and equipment
|
Fixtures and fittings
|
Under construction
|
Assets of right of use
|
Total
|
|
Total
|
Acquisition cost
|
|
|
|
|
|
|
|
|
Balance at end of previous year
|
10,375,533
|
28,075,659
|
5,690,374
|
1,422,048
|
2,394,070
|
47,957,684
|
|
42,144,416
|
Effect of movements in foreign exchange
|
(93,185)
|
(559,302)
|
(198,928)
|
(1,970)
|
25,651
|
(827,734)
|
|
(13,170)
|
Effect of application of IAS 29 (hyperinflation)
|
201,940
|
804,242
|
248,246
|
33,872
|
-
|
1,288,300
|
|
3,589,040
|
Impact of the adoption of IFRS 16 (leasing operations)
|
-
|
-
|
-
|
-
|
-
|
-
|
|
70,078
|
Acquisition through exchange transaction of shareholdings
|
-
|
-
|
-
|
-
|
-
|
-
|
|
218,411
|
Acquisition through business combinations
|
209
|
14
|
2,074
|
5,687
|
-
|
7,984
|
|
-
|
Acquisitions
|
168
|
380,445
|
34,487
|
2,101,260
|
472,153
|
2,988,513
|
|
3,520,513
|
Disposals and write-off
|
(5,965)
|
(450,698)
|
(66,173)
|
-
|
-
|
(522,836)
|
|
(1,416,610)
|
Transfer to other asset categories
|
243,569
|
1,015,876
|
384,917
|
(1,872,305)
|
43,138
|
(184,805)
|
|
(162,939)
|
Others
|
-
|
-
|
-
|
15
|
-
|
15
|
|
7,945
|
Balance at end
|
10,722,269
|
29,266,236
|
6,094,997
|
1,688,607
|
2,935,012
|
50,707,121
|
|
47,957,684
|
|
|
|
|
|
|
|
|
|
Depreciation and Impairment
|
|
|
|
|
|
|
|
|
Balance at end of previous year
|
(3,031,365)
|
(18,246,620)
|
(4,185,211)
|
-
|
(856,480)
|
(26,319,676)
|
|
(21,439,271)
|
Effect of movements in foreign exchange
|
(1,662)
|
292,868
|
161,393
|
-
|
(9,905)
|
442,694
|
|
(130,695)
|
Effect of application of IAS 29 (hyperinflation)
|
(35,301)
|
(465,050)
|
(198,789)
|
-
|
-
|
(699,140)
|
|
(1,908,732)
|
Write-ff through exchange transaction of shareholdings
|
-
|
-
|
-
|
-
|
-
|
-
|
|
(20,518)
|
Depreciation
|
(257,454)
|
(1,869,588)
|
(491,554)
|
-
|
(330,249)
|
(2,948,845)
|
|
(3,965,671)
|
Impairment losses
|
-
|
(91,173)
|
(1,482)
|
-
|
-
|
(92,655)
|
|
(179,982)
|
Disposals and write-off
|
320
|
445,951
|
62,715
|
-
|
-
|
508,986
|
|
1,351,814
|
Transfer to other asset categories
|
(728)
|
5,877
|
(800)
|
-
|
(6,191)
|
(1,842)
|
|
(30,670)
|
Others
|
-
|
6,166
|
-
|
-
|
(5,612)
|
554
|
|
4,049
|
Balance at end
|
(3,326,190)
|
(19,921,569)
|
(4,653,728)
|
-
|
(1,208,437)
|
(29,109,924)
|
|
(26,319,676)
|
Carrying amount:
|
|
|
|
|
|
|
|
|
December 31, 2018
|
7,344,168
|
9,829,039
|
1,505,163
|
1,422,048
|
1,537,590
|
21,638,008
|
|
21,638,008
|
September 30, 2019
|
7,396,079
|
9,344,667
|
1,441,269
|
1,688,607
|
1,726,575
|
21,597,197
|
|
|
Capitalized interests and fixed assets provided as security are not material.
Effective from annual periods beginning on or after January 1, 2019, IFRS 16 replaces the existing lease accounting requirements and represents a significant change in the accounting and reporting of leases that were previously classified as operating leases, with more assets and liabilities to be reported on the balance sheet and a different recognition of lease costs and related interpretations, and requires a lessee to recognize a right-of-use asset and a lease liability at lease commencement date Note 3.
24
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
10. GOODWILL
|
09/30/2019
|
12/31/2018
|
|
|
|
Balance at end of previous year
|
34,276,176
|
31,401,874
|
Effect of movements in foreign exchange
|
513,357
|
1,224,804
|
Effect of application of IAS 29 (hyperinflation)
|
476,098
|
1,686,487
|
Acquisition, Addition, (Write-off) and disposal through business combinations (i)
|
26,449
|
(36,989)
|
Balance at the end of period
|
35,292,080
|
34,276,176
|
The carrying amount of goodwill was allocated to the different cash-generating units as follows:
|
Functional currency
|
09/30/2019
|
12/31/2018
|
|
|
|
|
Brazil
|
BRL
|
17,694,842
|
17,668,393
|
Goodwill
|
|
102,937,475
|
102,911,026
|
Non-controlling transactions (i)
|
|
(85,242,633)
|
(85,242,633)
|
|
|
|
|
CAC:
|
|
|
|
Dominican Republic
|
DOP
|
3,627,980
|
3,510,138
|
Cuba (ii)
|
USD
|
1,678
|
1,952
|
Panama
|
PAB
|
1,446,917
|
1,346,288
|
|
|
|
|
Latin America - South:
|
|
|
|
Argentina
|
ARS
|
1,853,206
|
1,950,744
|
Bolivia
|
BOB
|
1,473,040
|
1,370,601
|
Chile
|
CLP
|
50,200
|
48,695
|
Paraguay
|
PYG
|
874,217
|
873,147
|
Uruguay
|
UYU
|
167,193
|
177,417
|
|
|
|
|
Canada
|
CAD
|
8,102,807
|
7,328,801
|
|
|
35,292,080
|
34,276,176
|
(i) It refers to the exchange of shareholdings operation occurred in 2013 as a result of the adoption of the predecessor basis of accounting.
(ii) The functional currency of Cuba, the Cuban convertible peso (CUC), has fixed parity with the dollar (USD) at balance sheet date.
25
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
11. INTEREST-BEARING LOANS AND BORROWINGS
|
09/30/2019
|
12/31/2018
(restated)
|
|
|
|
Secured bank loans
|
1,316,270
|
1,404,852
|
Unsecured bank loans
|
348
|
86,572
|
Other unsecured loans
|
41,178
|
39,163
|
Leasing
|
362,035
|
410,634
|
Current liabilities
|
1,719,831
|
1,941,221
|
|
|
|
Secured bank loans
|
394,466
|
434,709
|
Unsecured bank loans
|
219,146
|
212,283
|
Debentures and unsecured bond issues
|
106,127
|
104,675
|
Other unsecured loans
|
117,888
|
99,048
|
Leasing
|
1,532,700
|
1,311,727
|
Non-current liabilities
|
2,370,327
|
2,162,442
|
Additional information regarding the exposure of the Company to the risks of interest rate and foreign-currency changes are disclosed in Note 20 – Financial instruments and risks.
Contractual clauses (Covenants)
As at September 30, 2019, the Company's loans had equal rights to payment without subordination clauses. Except for the credit lines due to FINAME contracted by the Company with Banco Nacional de Desenvolvimento Econômico e Social – BNDES (“BNDES”), where collateral was provided on assets acquired with the credit granted, which served as collateral; other loans and financing contracted by the Company predicted only guarantees as personal collateral or were unsecured. Most loan contracts contained financial covenants including: financial covenants, including limitation on new indebtedness; going-concern; maintenance, in use or in good condition for the business, of the Company's assets; restrictions on acquisitions, mergers, sale or disposal of its assets; disclosure of financial statements under Brazilian GAAP and IFRS; and/or no prohibition related to new real guarantees for loans contracted, except if: (i) expressly authorized under the loan agreement; or (ii) new loans contracted from financial institutions linked to the Brazilian government - including the BNDES or foreign governments; - or foreign governments, multilateral financial institutions (eg World Bank) or located in jurisdictions in which the Company operates.
As at September 30, 2019, the Company was in compliance with all its contractual obligations for its loans and financing.
26
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
12. PROVISIONS
(a) Provision changes
|
Balance as at December 31, 2018
|
Effect of changes in foreign exchange rates
|
Additions
|
Provisions used and reversed
|
Balance as at September 30, 2019
|
|
|
|
|
|
|
Provision for disputes and litigations
|
|
|
|
|
|
Taxes on sales
|
137,841
|
18
|
4,009
|
(17,707)
|
124,161
|
Income tax
|
169,289
|
2,698
|
104,618
|
(98,062)
|
178,543
|
Labor
|
118,167
|
(3,454)
|
125,884
|
(114,667)
|
125,930
|
Civil
|
54,916
|
(1,327)
|
49,973
|
(44,481)
|
59,081
|
Others
|
110,283
|
(7,759)
|
37,651
|
(29,599)
|
110,576
|
Total of provision for disputes and litigations
|
590,496
|
(9,824)
|
322,135
|
(304,516)
|
598,291
|
|
|
|
|
|
|
Restructuring
|
8,728
|
921
|
-
|
(84)
|
9,565
|
|
|
|
|
|
|
Total provisions
|
599,224
|
(8,903)
|
322,135
|
(304,600)
|
607,856
|
(b) Disbursement expectative
|
Balance as at September 30, 2019
|
1 year or less
|
1-2 years
|
2-5 years
|
Over 5 years
|
|
|
|
|
|
|
Provision for disputes and litigations
|
|
|
|
|
|
Taxes on sales
|
124,161
|
31,941
|
85,336
|
1,609
|
5,275
|
Income tax
|
178,543
|
36,219
|
116,149
|
26,175
|
-
|
Labor
|
125,930
|
31,017
|
41,927
|
30,300
|
22,686
|
Civil
|
59,081
|
13,106
|
37,402
|
4,462
|
4,111
|
Others
|
110,576
|
22,976
|
22,794
|
62,021
|
2,785
|
Total of provision for disputes and litigations
|
598,291
|
135,259
|
303,608
|
124,567
|
34,857
|
|
|
|
|
|
|
Restructuring
|
9,565
|
8,009
|
-
|
1,556
|
-
|
|
|
|
|
|
|
Total provisions
|
607,856
|
143,268
|
303,608
|
126,123
|
34,857
|
The expected settlement of provisions was based on Management’s best estimate at the interim balance sheet date.
(c) Main lawsuits with probable likelihood of loss:
(c.1) Income and Sales taxes
In Brazil, the Company and its subsidiaries are involved in several administrative and judicial proceedings related to Income tax, ICMS, IPI, PIS and COFINS taxes. Such proceedings include, among others, tax offsets, credits and judicial injunctions exempting tax payment.
27
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
(c.2) Labor
The Company and its subsidiaries are involved in labor proceedings with former employees, including from service providers. The main issues involve overtime and related effects and respective charges.
(c.3) Civil
The Company is involved in civil lawsuits with probable likelihood of loss. The most relevant portion of these lawsuits refers to former distributors, mainly in Brazil, which are mostly claiming damages resulting from the termination of their contracts.
The processes with possible probabilities are disclosed in Note 22 - Contingent liability.
13. CHANGES IN EQUITY
(a) Capital stock
|
|
09/30/2019
|
|
|
09/30/2018
|
|
Thousands of common shares
|
Thousands of Real
|
|
Thousands of common shares
|
Thousands of Real
|
Beginning balance as per statutory books
|
15,722,147
|
57,710,202
|
|
15,717,615
|
57,614,140
|
Share issued
|
11,428
|
156,557
|
|
4,532
|
96,062
|
|
15,733,575
|
57,866,759
|
|
15,722,147
|
57,710,202
|
(b) Capital reserves
|
Capital Reserves
|
|
|
Treasury shares
|
Share Premium
|
Others capital reserves
|
Share-based Payments
|
Total
|
|
|
|
|
|
|
At December 31, 2018
|
(882,734)
|
53,662,811
|
700,898
|
1,300,219
|
54,781,194
|
Capital Increase
|
(43,515)
|
-
|
-
|
(100,227)
|
(143,742)
|
Purchase of shares and result on treasury shares
|
(17,342)
|
-
|
-
|
-
|
(17,342)
|
Share-based payments
|
-
|
-
|
-
|
159,188
|
159,188
|
At September 30, 2019
|
(943,591)
|
53,662,811
|
700,898
|
1,359,180
|
54,779,298
|
28
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
|
Capital Reserves
|
|
|
Treasury shares
|
Share Premium
|
Others capital reserves
|
Share-based Payments
|
Total
|
|
|
|
|
|
|
At December 31, 2017
|
(894,994)
|
53,662,811
|
700,898
|
1,232,194
|
54,700,909
|
Capital Increase
|
-
|
-
|
-
|
(89,876)
|
(89,876)
|
Effect of application of IAS 29 (hyperinflation)
|
-
|
-
|
-
|
(9,272)
|
(9,272)
|
Purchase of shares and result on treasury shares
|
10,636
|
-
|
-
|
-
|
10,636
|
Share-based payments
|
-
|
-
|
-
|
124,320
|
124,320
|
At September 30, 2018
|
(884,358)
|
53,662,811
|
700,898
|
1,257,366
|
54,736,717
|
(b.1) Purchase of shares and result of treasury shares
The treasury shares comprise own issued shares reacquired by the Company and the result on treasury shares that refers to gains and losses related to share-based payments transactions and others.
Follows the changes of treasury shares:
|
Purchase /realization shares
|
|
Result on Treasure Shares
|
|
Total Treasure Shares
|
|
Thousands shares
|
|
Thousands Brazilian Real
|
|
Thousands shares
|
|
Thousands Brazilian Real
|
|
|
|
|
At December 31, 2018
|
1,028
|
|
(20,841)
|
|
(861,893)
|
|
(882,734)
|
Changes during the year
|
2,338
|
|
(41,800)
|
|
(19,057)
|
|
(60,857)
|
At September 30, 2019
|
3,366
|
|
(62,641)
|
|
(880,950)
|
|
(943,591)
|
|
Purchase /realization shares
|
|
Result on Treasure Shares
|
|
Total Treasure Shares
|
|
Thousands shares
|
|
Thousands Brazilian Real
|
|
Thousands shares
|
|
Thousands Brazilian Real
|
|
|
|
|
At December 31, 2017
|
7,394
|
|
(139,665)
|
|
(755,329)
|
|
(894,994)
|
Changes during the year
|
(5,423)
|
|
99,181
|
|
(88,545)
|
|
10,636
|
At September 30, 2018
|
1,971
|
|
(40,484)
|
|
(843,874)
|
|
(884,358)
|
(b.2) Share premium
The share premium refers to the difference between the subscription price that the shareholders paid for the shares and their nominal value. Since this is a capital reserve, it can only be used to increase capital, offset losses, redemptions, reimbursement or repurchase shares.
(b.3) Share-based payment
Different share-based payment programs and stock purchase option plans allow the senior Management from Ambev economic group to acquire shares of the Company.
29
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
The share-based payment reserve recorded a charge of R$159,588 at September 30, 2019 (R$118,377 at September 30, 2018) (Note 19 – Share-based payments).
(c) Net income reserves
|
Net income reserves
|
|
Investments reserve
|
Statutory reserve
|
Fiscal incentive
|
Total
|
At December 31, 2018
|
6,710,053
|
4,456
|
8,719,584
|
15,434,093
|
Impact of the adoption of IFRS 16 (i)
|
(92,726)
|
-
|
-
|
(92,726)
|
At January 1, 2019 (restated)
|
6,617,327
|
4,456
|
8,719,584
|
15,341,367
|
|
|
|
|
|
At September 30, 2019
|
6,617,327
|
4,456
|
8,719,584
|
15,341,367
|
|
Net income reserves
|
|
Investments reserve
|
Statutory reserve
|
Fiscal incentive
|
Total
|
At December 31, 2017
|
1,267,721
|
4,456
|
7,388,058
|
8,660,235
|
Impact of the adoption of IFRS 16 (i)
|
(63,009)
|
-
|
-
|
(63,009)
|
At January 1, 2018 (restated)
|
1,204,712
|
4,456
|
7,388,058
|
8,597,226
|
|
|
|
|
|
At September 30, 2018 (restated)
|
1,204,712
|
4,456
|
7,388,058
|
8,597,226
|
(i) 2018 restated to reflect the impact of adoption of IFRS 16 under the full retrospective application.
(c.1) Investments reserve
From net income after deductions, the aim will be up to 60% investment reserve to support future investments.
(c.2) Statutory reserve
From net income, 5% will be applied before any other allocation, to the statutory reserve, which cannot 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.
(c.3) Tax incentives
The Company has tax incentives framed in certain state and federal industrial-development programs in the form of financing, deferred payment of taxes or partial reductions of the amount due. These programs aim to promote the expansion of employment generation, regional decentralization, complement and diversify the industrial base of the states. In these states, the grace periods, enjoyment and reductions are permitted under the tax law.
30
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
The portion of income for the period related to tax incentives, which will be allocated to the profit reserve at the end of the fiscal year on December 31, 2019 and therefore not being used as a basis for dividend distribution, was composed of:
|
09/30/2019
|
09/30/2018
|
ICMS (brazilian state value-added tax)
|
1,298,214
|
1,288,718
|
Income tax
|
187,001
|
237,561
|
|
1,485,215
|
1,526,279
|
(c.4) 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, in accordance with the applicable law and, when distributed, may be considered part of the minimum mandatory dividends.
As determined by its by-laws, the Company is required to distribute to its shareholders, as a minimum mandatory dividend in respect of each fiscal year ending on December 31, an amount not less than 40% 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 minimum mandatory dividend includes amounts paid as interest on shareholders’ equity.
There was no payment of dividends or interest on shareholders' equity in the nine-month period ended September 30, 2019.
Events during nine-month period ended September 30, 2018:
Event
|
Approval
|
Type
|
Date of payment
|
Year
|
Type of share
|
Amount per share
|
Total amount
|
Board of Directors Meeting
|
05/15/2018
|
Dividends
|
07/30/2018
|
2018
|
ON
|
0,1600
|
2.515.101
|
|
|
|
|
|
|
|
2.515.101
|
31
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
(d) Carrying-value adjustments
|
Carrying value adjustments
|
|
|
Translation reserves
|
Cash flow hedge
|
Actuarial gains/ (losses)
|
Options granted on subsidiary
|
Gains/(losses) of non-controlling interest´s share
|
Business combination
|
Accounting adjustments for transactions between shareholders
|
Total
|
At December 31, 2018
|
4,089,111
|
777,123
|
(1,116,114)
|
(120,083)
|
19,558
|
156,091
|
(75,390,552)
|
(71,584,866)
|
Impact of the adoption of IFRS 16 (i)
|
110
|
-
|
-
|
-
|
-
|
-
|
-
|
110
|
At January 1, 2019 (restated)
|
4,089,221
|
777,123
|
(1,116,114)
|
(120,083)
|
19,558
|
156,091
|
(75,390,552)
|
(71,584,756)
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
Gains/(losses) on translation of foreign operations
|
567,764
|
-
|
-
|
-
|
-
|
-
|
-
|
567,764
|
Cash flow hedges
|
-
|
119,253
|
-
|
-
|
-
|
-
|
-
|
119,253
|
Actuarial gains/(losses)
|
-
|
-
|
4,026
|
-
|
-
|
-
|
-
|
4,026
|
Total Comprehensive income
|
567,764
|
119,253
|
4,026
|
-
|
-
|
-
|
-
|
691,043
|
Gains/(losses) of controlling interest´s share
|
-
|
-
|
-
|
-
|
(352)
|
-
|
-
|
(352)
|
Tax on fictitious dividends
|
-
|
-
|
-
|
-
|
(6,936)
|
-
|
-
|
(6,936)
|
At September 30, 2019
|
4,656,985
|
896,376
|
(1,112,088)
|
(120,083)
|
12,270
|
156,091
|
(75,390,552)
|
(70,901,001)
|
|
Carrying value adjustments
|
|
|
Translation reserves
|
Cash flow hedge
|
Actuarial gains/ (losses)
|
Options granted on subsidiary
|
Gains/(losses) of non-controlling interest´s share
|
Business combination
|
Accounting adjustments for transactions between shareholders
|
Total
|
At December 31, 2017
|
1,639,099
|
368,806
|
(1,144,468)
|
(2,771,248)
|
2,099,921
|
156,091
|
(75,314,671)
|
(74,966,470)
|
Impact of the adoption of IFRS 16 (i)
|
(103)
|
-
|
-
|
-
|
-
|
-
|
-
|
(103)
|
At January 1, 2018 (restated)
|
1,638,996
|
368,806
|
(1,144,468)
|
(2,771,248)
|
2,099,921
|
156,091
|
(75,314,671)
|
(74,966,573)
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
Gains/(losses) on translation of foreign operations
|
2,801,782
|
-
|
-
|
-
|
-
|
-
|
-
|
2,801,782
|
Cash flow hedges
|
-
|
1,250,776
|
-
|
-
|
-
|
-
|
-
|
1,250,776
|
Actuarial gains/(losses)
|
-
|
-
|
(6,892)
|
-
|
-
|
-
|
-
|
(6,892)
|
Total Comprehensive income
|
2,801,782
|
1,250,776
|
(6,892)
|
-
|
-
|
-
|
-
|
4,045,666
|
Effect of application of IAS 29 (hyperinflation) (ii)
|
933,337
|
(441,338)
|
-
|
-
|
-
|
-
|
-
|
491,999
|
Gains/(losses) of controlling interest´s share (iii)
|
460,105
|
787
|
3,540
|
2,651,165
|
(2,073,093)
|
-
|
-
|
1,042,504
|
Tax on fictitious dividends
|
-
|
-
|
-
|
-
|
(6,931)
|
-
|
-
|
(6,931)
|
At September 30, 2018 (restated)
|
5,834,220
|
1,179,031
|
(1,147,820)
|
(120,083)
|
19,897
|
156,091
|
(75,314,671)
|
(69,393,335)
|
(i) Balances of 2018 restated to reflect the impact of adopting IFRS 16 under full retrospective application.
(ii) As described in Note 1 (b) Application of inflation accounting and Financial Reporting in Hyperinflationary Economies.
(iii) Of this amount, R$1,035,218 refers to renegotiation of shareholders agreement from Tenedora, as described in Note 1 (b).
32
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
(d.1) Translation reserves
The translation reserves comprise all foreign currency exchange differences arising from the translation of the interim financial statements with functional currency different from the Real.
The translation reserves also comprise the portion of the gain or loss on the foreign currency liabilities and on the derivative financial instruments determined to be effective net investment hedges.
(d.2) Cash flow hedge 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 (For additional information, see Note 20 – Financial instruments and risks).
(d.3) Actuarial gains and losses
The actuarial gains and losses include expectations with regards to future pension plan obligations. Consequently, the results of actuarial gains and losses are recognized on timely basis considering best estimate obtained by Management. Accordingly, the Company recognizes on a monthly basis the results of these estimated actuarial gains and losses based on the expectations presented in the independent actuarial report.
(d.4) Options granted on subsidiary
As part of the agreement to acquire the shares of Tenedora, an option to sell (“put”) was issued by Ambev in favor of ELJ and an option to purchase (“call”) was issued from ELJ in favor of Ambev, which may result in an acquisition by Ambev of the remaining shares of Tenedora, for a value based on EBITDA, discounted of net debt, from operations, being put exercisable at any time. As disclosed in Note 1 (b) Renegotiation of shareholders agreement from Tenedora, on January 18, 2018, ELJ partially exercised its put option related to approximately 30% of capital stock by Tenedora. As a result, the Company became the owner of approximately 85% of Tenedora. Additionally, it was approved to change the call-option term from 2019 to 2022.
On September 30, 2019 the put option held by ELJ was valued at R$2,701,049 (R$2,449,334 on December 31, 2018) and the liability categorized as “Level 3”, as under Note 20 (b) and in accordance with the IFRS 3. No value has been assigned to the call option held by the Company. 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 the fair value is revaluated on an annual basis.
33
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
As part of the agreement to acquire the shares of Sucos do Bem, the Company has been granted a put option and a call option on minority shareholders' participation determined by gross revenue of its products and exercisable until 2020, with a few exceptions. On September 30, 2019 the put option was valued at R$139,973 (R$136,034 on December 31, 2018).
The reconciliation of changes in these options is presented in Note 20 – Financial instruments and risks.
(d.5) Accounting for acquisition of non-controlling interests
Transactions with non-controlling interests of the same business, even when performed at arm's length terms, that present valid economic grounds and reflect normal market conditions, will be consolidated by the same applicable accounting standards as are used within the same accounting entity.
As determined by IFRS 10, any difference between the amount paid (fair value) for the acquisition of non-controlling interests and are related to carrying amount of such non-controlling interest shall be recognized directly in controlling shareholders’ equity. The acquisition of non-controlling interest related to Old Ambev, the above mentioned adjustment was recognized in the carrying value adjustments when applicable, due to the adoption of the predecessor basis of accounting.
34
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
14. SEGMENT REPORTING
(a) Reportable segments – Nine-month period ended in:
|
Brazil
|
CAC (i)
|
Latin America - South (ii)
|
Canada
|
Consolidated
|
|
09/30/2019
|
09/30/2018
|
09/30/2019
|
09/30/2018
|
09/30/2019
|
09/30/2018
|
09/30/2019
|
09/30/2018
|
09/30/2019
|
09/30/2018
|
|
|
(restated)
|
|
(restated)
|
|
(restated)
|
|
(restated)
|
|
(restated)
|
Net sales
|
19,831,103
|
18,163,906
|
4,804,768
|
4,099,327
|
6,781,521
|
6,770,178
|
5,325,519
|
5,180,096
|
36,742,911
|
34,213,507
|
Cost of sales
|
(8,490,991)
|
(6,799,999)
|
(2,090,371)
|
(1,779,054)
|
(2,737,358)
|
(2,795,661)
|
(1,980,014)
|
(1,829,344)
|
(15,298,734)
|
(13,204,058)
|
Gross profit
|
11,340,112
|
11,363,907
|
2,714,397
|
2,320,273
|
4,044,163
|
3,974,517
|
3,345,505
|
3,350,752
|
21,444,177
|
21,009,449
|
Distribution expenses
|
(2,748,628)
|
(2,649,033)
|
(481,685)
|
(437,127)
|
(746,127)
|
(667,260)
|
(1,018,303)
|
(962,341)
|
(4,994,743)
|
(4,715,761)
|
Sales and marketing expenses
|
(2,286,738)
|
(2,343,972)
|
(401,948)
|
(420,437)
|
(755,332)
|
(831,391)
|
(752,520)
|
(751,399)
|
(4,196,538)
|
(4,347,199)
|
Administrative expenses
|
(1,246,309)
|
(1,038,352)
|
(195,170)
|
(225,167)
|
(307,646)
|
(276,445)
|
(252,263)
|
(228,681)
|
(2,001,388)
|
(1,768,645)
|
Other operating income/(expenses)
|
565,557
|
733,765
|
52,829
|
18,616
|
(32,581)
|
(49,252)
|
(26,058)
|
(5,745)
|
559,747
|
697,384
|
Exceptional items
|
(27,958)
|
(17,223)
|
(5,720)
|
74,543
|
(33,202)
|
(40,452)
|
-
|
-
|
(66,880)
|
16,868
|
Income from operations (EBIT)
|
5,596,036
|
6,049,092
|
1,682,703
|
1,330,701
|
2,169,275
|
2,109,717
|
1,296,361
|
1,402,586
|
10,744,375
|
10,892,096
|
Net finance cost
|
(568,638)
|
(1,391,179)
|
(52,103)
|
(62,405)
|
(870,161)
|
(831,518)
|
(54,401)
|
(76,807)
|
(1,545,303)
|
(2,361,909)
|
Share of result of joint ventures
|
(3,736)
|
(5,687)
|
(2,211)
|
4,439
|
-
|
-
|
(5,168)
|
1,148
|
(11,115)
|
(100)
|
Income before income tax
|
5,023,662
|
4,652,226
|
1,628,389
|
1,272,735
|
1,299,114
|
1,278,199
|
1,236,792
|
1,326,927
|
9,187,957
|
8,530,087
|
Income tax expense
|
(34,822)
|
638,913
|
(444,600)
|
(317,149)
|
(252,481)
|
(492,547)
|
(486,700)
|
(475,313)
|
(1,218,603)
|
(646,096)
|
Net income
|
4,988,840
|
5,291,139
|
1,183,789
|
955,586
|
1,046,633
|
785,652
|
750,092
|
851,614
|
7,969,354
|
7,883,991
|
|
|
|
|
|
|
|
|
|
|
|
Normalized EBITDA (iii)
|
7,739,569
|
8,016,669
|
2,077,359
|
1,581,001
|
2,865,489
|
2,857,301
|
1,539,951
|
1,599,116
|
14,222,368
|
14,054,087
|
Exceptional items
|
(27,958)
|
(17,223)
|
(5,720)
|
74,543
|
(33,202)
|
(40,452)
|
-
|
-
|
(66,880)
|
16,868
|
Depreciation. amortization and impairment
|
(2,115,575)
|
(1,950,354)
|
(388,936)
|
(324,843)
|
(663,012)
|
(707,132)
|
(243,590)
|
(196,530)
|
(3,411,113)
|
(3,178,859)
|
Net finance costs
|
(568,638)
|
(1,391,179)
|
(52,103)
|
(62,405)
|
(870,161)
|
(831,518)
|
(54,401)
|
(76,807)
|
(1,545,303)
|
(2,361,909)
|
Share of result of joint ventures
|
(3,736)
|
(5,687)
|
(2,211)
|
4,439
|
-
|
-
|
(5,168)
|
1,148
|
(11,115)
|
(100)
|
Income tax expense
|
(34,822)
|
638,913
|
(444,600)
|
(317,149)
|
(252,481)
|
(492,547)
|
(486,700)
|
(475,313)
|
(1,218,603)
|
(646,096)
|
Net income
|
4,988,840
|
5,291,139
|
1,183,789
|
955,586
|
1,046,633
|
785,652
|
750,092
|
851,614
|
7,969,354
|
7,883,991
|
|
|
|
|
|
|
|
|
|
|
|
Normalized EBITDA margin in %
|
39.0%
|
44.1%
|
43.2%
|
38.6%
|
42.3%
|
42.2%
|
28.9%
|
30.9%
|
38.7%
|
41.1%
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and equipment
|
2,045,381
|
1,301,564
|
416,094
|
302,986
|
471,596
|
491,408
|
132,481
|
122,196
|
3,065,552
|
2,218,154
|
35
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
(continued)
|
Brazil
|
CAC (i)
|
Latin America - South (ii)
|
Canada
|
Consolidated
|
|
09/30/2019
|
12/31/2018
(restated)
|
09/30/2019
|
12/31/2018
(restated)
|
09/30/2019
|
12/31/2018
(restated)
|
09/30/2019
|
12/31/2018
(restated)
|
09/30/2019
|
12/31/2018
(restated)
|
Segment assets
|
41,844,781
|
41,478,586
|
11,811,358
|
11,270,219
|
14,731,997
|
14,472,056
|
12,359,540
|
11,065,962
|
80,747,676
|
78,286,823
|
Intersegment elimination
|
|
|
|
|
|
|
|
|
(2,673,947)
|
(2,246,449)
|
Non-segmented assets
|
|
|
|
|
|
|
|
|
24,401,588
|
19,674,043
|
Total assets
|
|
|
|
|
|
|
|
|
102,475,317
|
95,714,417
|
|
|
|
|
|
|
|
|
|
|
|
Segment liabilities
|
16,115,551
|
18,252,112
|
3,626,320
|
3,420,931
|
4,176,672
|
4,484,598
|
3,886,629
|
3,584,762
|
27,805,172
|
29,742,403
|
Intersegment elimination
|
|
|
|
|
|
|
|
|
(2,673,928)
|
(2,246,443)
|
Non-segmented liabilities
|
|
|
|
|
|
|
|
|
77,344,073
|
68,218,457
|
Total liabilities
|
|
|
|
|
|
|
|
|
102,475,317
|
95,714,417
|
(i) CAC: includes operations in El Salvador, Guatemala, Nicaragua, Dominican Republic, Saint Vincent, Dominica, Antigua, Cuba, Barbados, Panama, Puerto Rico and Costa Rica.
(ii) Latin America – South: includes operations in Argentina, Bolivia, Chile, Paraguay and Uruguay.
(iii) Normalized EBITDA is calculated excluding of the net income the following effects: (i) income tax expense, (ii) share of results of joint ventures (iii) net finance result, (iv) exceptional items, and (v) depreciation, amortization and impairment of property, plant and equipment.
36
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
(b) Reportable segments – three-month periods ended in:
|
Brazil
|
CAC (i)
|
Latin America - South (ii)
|
Canada
|
Consolidated
|
|
09/30/2019
|
09/30/2018
|
09/30/2019
|
09/30/2018
|
09/30/2019
|
09/30/2018
|
09/30/2019
|
09/30/2018
|
09/30/2019
|
09/30/2018
|
|
|
(restated)
|
|
(restated)
|
|
(restated)
|
|
(restated)
|
|
(restated)
|
Net sales
|
6,340,561
|
6,160,753
|
1,656,862
|
1,572,076
|
1,971,400
|
1,290,141
|
1,988,829
|
2,040,773
|
11,957,652
|
11,063,743
|
Cost of sales
|
(2,824,005)
|
(2,260,028)
|
(726,182)
|
(719,131)
|
(897,711)
|
(685,261)
|
(781,834)
|
(701,398)
|
(5,229,732)
|
(4,365,818)
|
Gross profit
|
3,516,556
|
3,900,725
|
930,680
|
852,945
|
1,073,689
|
604,880
|
1,206,995
|
1,339,375
|
6,727,920
|
6,697,925
|
Distribution expenses
|
(936,719)
|
(888,611)
|
(168,629)
|
(166,321)
|
(220,100)
|
(112,123)
|
(392,405)
|
(381,601)
|
(1,717,853)
|
(1,548,656)
|
Sales and marketing expenses
|
(738,384)
|
(687,767)
|
(147,452)
|
(146,704)
|
(199,840)
|
(200,187)
|
(274,631)
|
(276,015)
|
(1,360,307)
|
(1,310,673)
|
Administrative expenses
|
(417,805)
|
(392,012)
|
(57,930)
|
(79,297)
|
(72,743)
|
(49,881)
|
(83,988)
|
(94,619)
|
(632,466)
|
(615,809)
|
Other operating income/(expenses)
|
152,115
|
201,628
|
(3,371)
|
3,266
|
(5,294)
|
(12,422)
|
(5,723)
|
5,824
|
137,727
|
198,296
|
Exceptional items
|
(6,127)
|
(8,816)
|
(2,695)
|
840
|
(5,736)
|
(4,851)
|
-
|
-
|
(14,558)
|
(12,827)
|
Income from operations (EBIT)
|
1,569,636
|
2,125,147
|
550,603
|
464,729
|
569,976
|
225,416
|
450,248
|
592,964
|
3,140,463
|
3,408,256
|
Net finance cost
|
304,675
|
(552,346)
|
(3,105)
|
(35,971)
|
(239,977)
|
(60,545)
|
(367,391)
|
(11,873)
|
(305,798)
|
(660,735)
|
Share of result of joint ventures
|
(1,843)
|
(1,994)
|
(430)
|
(1,692)
|
-
|
-
|
(5,975)
|
414
|
(8,248)
|
(3,272)
|
Income before income tax
|
1,872,468
|
1,570,807
|
547,068
|
427,066
|
329,999
|
164,871
|
76,882
|
581,505
|
2,826,417
|
2,744,249
|
Income tax expense
|
(98,895)
|
542,939
|
(112,062)
|
(131,586)
|
163,462
|
(71,168)
|
(174,537)
|
(199,076)
|
(222,032)
|
141,109
|
Net income
|
1,773,573
|
2,113,746
|
435,006
|
295,480
|
493,461
|
93,703
|
(97,655)
|
382,429
|
2,604,385
|
2,885,358
|
|
|
|
|
|
|
|
|
|
|
|
Normalized EBITDA (iii)
|
2,404,579
|
2,773,049
|
688,134
|
583,970
|
752,479
|
576,134
|
565,286
|
660,319
|
4,410,478
|
4,593,472
|
Exceptional items
|
(6,127)
|
(8,816)
|
(2,695)
|
840
|
(5,736)
|
(4,851)
|
-
|
-
|
(14,558)
|
(12,827)
|
Depreciation. amortization and impairment
|
(828,816)
|
(639,086)
|
(134,836)
|
(120,081)
|
(176,767)
|
(345,867)
|
(115,038)
|
(67,355)
|
(1,255,457)
|
(1,172,389)
|
Net finance costs
|
304,675
|
(552,346)
|
(3,105)
|
(35,971)
|
(239,977)
|
(60,545)
|
(367,391)
|
(11,873)
|
(305,798)
|
(660,735)
|
Share of result of joint ventures
|
(1,843)
|
(1,994)
|
(430)
|
(1,692)
|
-
|
-
|
(5,975)
|
414
|
(8,248)
|
(3,272)
|
Income tax expense
|
(98,895)
|
542,939
|
(112,062)
|
(131,586)
|
163,462
|
(71,168)
|
(174,537)
|
(199,076)
|
(222,032)
|
141,109
|
Net income
|
1,773,573
|
2,113,746
|
435,006
|
295,480
|
493,461
|
93,703
|
(97,655)
|
382,429
|
2,604,385
|
2,885,358
|
|
|
|
|
|
|
|
|
|
|
|
Normalized EBITDA margin in %
|
37.9%
|
45.0%
|
41.5%
|
37.1%
|
38.2%
|
44.7%
|
28.4%
|
32.4%
|
36.9%
|
41.5%
|
(i) Latin America – North: includes operations in Brazil and CAC (El Salvador, Guatemala, Nicaragua, Dominican Republic, Saint Vincent, Dominica, Antigua, Cuba, Barbados, Panama, Puerto Rico and Costa Rica).
(ii) Latin America – South: includes operations in Argentina, Bolivia, Chile, Paraguay and Uruguay.
(iii) Normalized EBITDA is calculated excluding of the net income the following effects: (i) income tax expense, (ii) share of results of joint ventures (iii) net finance result, (iv) exceptional items, and (v) depreciation, amortization and impairment of property, plant and equipment.
37
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
(c) Additional information – by business unit:
|
|
|
|
Nine-month period ended:
|
|
|
|
|
Three-month period ended:
|
|
Brazil
|
|
Brazil
|
|
Beer
|
Soft drink and
Non-alcoholic and
non-carbonated
|
Total
|
|
Beer
|
Soft drink and
Non-alcoholic and
non-carbonated
|
Total
|
|
09/30/2019
|
09/30/2018
|
09/30/2019
|
09/30/2018
|
09/30/2019
|
09/30/2018
|
|
09/30/2019
|
09/30/2018
|
09/30/2019
|
09/30/2018
|
09/30/2019
|
09/30/2018
|
|
|
(restated)
|
|
(restated)
|
|
(restated)
|
|
|
(restated)
|
|
(restated)
|
|
(restated)
|
Net sales
|
16,743,208
|
15,536,963
|
3,087,895
|
2,626,943
|
19,831,103
|
18,163,906
|
|
5,313,882
|
5,256,792
|
1,026,679
|
903,961
|
6,340,561
|
6,160,753
|
Cost of sales
|
(6,990,220)
|
(5,598,043)
|
(1,500,771)
|
(1,201,956)
|
(8,490,991)
|
(6,799,999)
|
|
(2,285,623)
|
(1,914,168)
|
(538,382)
|
(345,860)
|
(2,824,005)
|
(2,260,028)
|
Gross profit
|
9,752,988
|
9,938,920
|
1,587,124
|
1,424,987
|
11,340,112
|
11,363,907
|
|
3,028,259
|
3,342,624
|
488,297
|
558,101
|
3,516,556
|
3,900,725
|
Distribution expenses
|
(2,243,569)
|
(2,159,048)
|
(505,059)
|
(489,985)
|
(2,748,628)
|
(2,649,033)
|
|
(759,198)
|
(720,400)
|
(177,521)
|
(168,211)
|
(936,719)
|
(888,611)
|
Sales and marketing expenses
|
(1,992,198)
|
(2,204,680)
|
(294,540)
|
(139,292)
|
(2,286,738)
|
(2,343,972)
|
|
(632,627)
|
(656,461)
|
(105,757)
|
(31,306)
|
(738,384)
|
(687,767)
|
Administrative expenses
|
(1,075,355)
|
(878,578)
|
(170,954)
|
(159,774)
|
(1,246,309)
|
(1,038,352)
|
|
(363,767)
|
(329,677)
|
(54,038)
|
(62,335)
|
(417,805)
|
(392,012)
|
Other operating income/(expenses)
|
398,007
|
524,189
|
167,550
|
209,576
|
565,557
|
733,765
|
|
127,781
|
111,057
|
24,334
|
90,571
|
152,115
|
201,628
|
Exceptional items
|
(27,958)
|
(14,584)
|
-
|
(2,639)
|
(27,958)
|
(17,223)
|
|
(6,127)
|
(7,529)
|
-
|
(1,287)
|
(6,127)
|
(8,816)
|
Income from operations (EBIT)
|
4,811,915
|
5,206,219
|
784,121
|
842,873
|
5,596,036
|
6,049,092
|
|
1,394,321
|
1,739,614
|
175,315
|
385,533
|
1,569,636
|
2,125,147
|
Net finance cost
|
(548,145)
|
(1,371,852)
|
(20,493)
|
(19,327)
|
(568,638)
|
(1,391,179)
|
|
311,316
|
(546,212)
|
(6,641)
|
(6,134)
|
304,675
|
(552,346)
|
Share of result of joint ventures
|
(3,736)
|
(5,687)
|
-
|
-
|
(3,736)
|
(5,687)
|
|
(1,843)
|
(1,994)
|
-
|
-
|
(1,843)
|
(1,994)
|
Income before income tax
|
4,260,034
|
3,828,680
|
763,628
|
823,546
|
5,023,662
|
4,652,226
|
|
1,703,794
|
1,191,408
|
168,674
|
379,399
|
1,872,468
|
1,570,807
|
Income tax expense
|
(34,822)
|
638,913
|
-
|
-
|
(34,822)
|
638,913
|
|
(98,895)
|
542,939
|
-
|
-
|
(98,895)
|
542,939
|
Net income
|
4,225,212
|
4,467,593
|
763,628
|
823,546
|
4,988,840
|
5,291,139
|
|
1,604,899
|
1,734,347
|
168,674
|
379,399
|
1,773,573
|
2,113,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normalized EBITDA (i)
|
6,705,415
|
6,919,207
|
1,034,154
|
1,097,462
|
7,739,569
|
8,016,669
|
|
2,143,514
|
2,304,724
|
261,065
|
468,325
|
2,404,579
|
2,773,049
|
Exceptional items
|
(27,958)
|
(14,584)
|
-
|
(2,639)
|
(27,958)
|
(17,223)
|
|
(6,127)
|
(7,529)
|
-
|
(1,287)
|
(6,127)
|
(8,816)
|
Depreciation, amortization and impairment
|
(1,865,542)
|
(1,698,404)
|
(250,033)
|
(251,950)
|
(2,115,575)
|
(1,950,354)
|
|
(743,066)
|
(557,581)
|
(85,750)
|
(81,505)
|
(828,816)
|
(639,086)
|
Net finance costs
|
(548,145)
|
(1,371,852)
|
(20,493)
|
(19,327)
|
(568,638)
|
(1,391,179)
|
|
311,316
|
(546,212)
|
(6,641)
|
(6,134)
|
304,675
|
(552,346)
|
Share of result of joint ventures
|
(3,736)
|
(5,687)
|
-
|
-
|
(3,736)
|
(5,687)
|
|
(1,843)
|
(1,994)
|
-
|
-
|
(1,843)
|
(1,994)
|
Income tax expense
|
(34,822)
|
638,913
|
-
|
-
|
(34,822)
|
638,913
|
|
(98,895)
|
542,939
|
-
|
-
|
(98,895)
|
542,939
|
Net income
|
4,225,212
|
4,467,593
|
763,628
|
823,546
|
4,988,840
|
5,291,139
|
|
1,604,899
|
1,734,347
|
168,674
|
379,399
|
1,773,573
|
2,113,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normalized EBITDA margin in %
|
40.0%
|
44.5%
|
33.5%
|
41.8%
|
39.0%
|
44.1%
|
|
40.3%
|
43.8%
|
25.4%
|
51.8%
|
37.9%
|
45.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) Normalized EBITDA is calculated excluding of the net income the following effects: (i) income tax expense, (ii) share of results of joint ventures, (iii) net finance result, (iv) exceptional items, and (v) depreciation, amortization and impairment of property, plant and equipment.
38
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
15. NET SALES
Reconciliation between gross sales and net sales:
|
Nine-month period ended:
|
|
Three-month period ended:
|
|
09/30/2019
|
09/30/2018
|
|
09/30/2019
|
09/30/2018
|
|
|
|
|
|
|
Gross sales and/or services
|
53,631,259
|
50,615,765
|
|
17,239,068
|
16,233,846
|
Excise duty
|
(11,376,548)
|
(11,161,021)
|
|
(3,556,572)
|
(3,758,075)
|
Discounts
|
(5,511,800)
|
(5,241,237)
|
|
(1,724,844)
|
(1,412,028)
|
|
36,742,911
|
34,213,507
|
|
11,957,652
|
11,063,743
|
Services provided by distributors, such as the promotion of our brands and logistics services, are considered as expenses when separately identifiable.
16. OTHER OPERATING INCOME / (EXPENSES)
|
Nine-month period ended:
|
|
Three-month period ended:
|
|
09/30/2019
|
09/30/2018
|
|
09/30/2019
|
09/30/2018
|
Government grants/NPV of long term fiscal incentives
|
510,959
|
622,137
|
|
115,761
|
213,236
|
(Additions)/Reversals to provisions
|
(1,365)
|
(33,049)
|
|
6,979
|
(17,292)
|
Gains/(losses) on disposal of property, plant and equipment, intangible assets and operation in associates
|
27,603
|
(62,501)
|
|
14,774
|
(41,580)
|
Other operating income/(expenses), net
|
22,550
|
170,797
|
|
213
|
43,932
|
|
559,747
|
697,384
|
|
137,727
|
198,296
|
Government grants are not recognized until there is reasonable assurance that the Company will meet related conditions and that the grants will be received. Government grants are systematically recognized in income during the periods in which the Company recognizes as expenses the related costs that the grants are intended to offset.
17. FINANCE COST AND INCOME
(a) Finance costs
|
Nine-month period ended:
|
|
Three-month period ended:
|
|
09/30/2019
|
09/30/2018
|
|
09/30/2019
|
09/30/2018
|
|
|
(restated)
|
|
|
(restated)
|
Interest expense
|
(1,168,072)
|
(1,093,388)
|
|
(393,842)
|
(342,785)
|
Capitalized borrowings
|
-
|
402
|
|
-
|
284
|
Net Interest on pension plans
|
(76,322)
|
(77,308)
|
|
(25,801)
|
(26,927)
|
Losses on hedging instruments
|
(710,313)
|
(676,011)
|
|
(311,664)
|
(181,261)
|
Interest on provision for disputes and litigations
|
(65,818)
|
(108,781)
|
|
(42,013)
|
(62,248)
|
Exchange variation
|
(416,804)
|
(696,212)
|
|
(286,810)
|
(213,689)
|
Interest and foreign exchange rate on loans
|
(34,887)
|
(9,834)
|
|
(4,282)
|
(364)
|
Financial instruments at fair value through profit or loss
|
(4,266)
|
(4,977)
|
|
(2,133)
|
(2,133)
|
Tax on financial transactions
|
(130,281)
|
(234,553)
|
|
(57,631)
|
(38,675)
|
Bank guarantee expenses
|
(97,246)
|
(85,035)
|
|
(27,776)
|
(22,162)
|
Other financial results
|
(147,078)
|
(95,086)
|
|
(21,051)
|
(16,064)
|
|
(2,851,087)
|
(3,080,783)
|
|
(1,173,003)
|
(906,024)
|
|
|
|
|
|
|
Non-recurring finance cost
|
(99,017)
|
-
|
|
-
|
-
|
|
(2,950,104)
|
(3,080,783)
|
|
(1,173,003)
|
(906,024)
|
39
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
The exceptional net finance cost refers to the realization of the exchange variation of loans settled with related parties, historically recognized in shareholders' equity, in the amount of R$99,017 in September 30, 2019.
Interest expenses are presented net of the effect of interest rate derivative financial instruments which mitigate Ambev’s interest rate risk (Note 20 – Financial instruments and risks). The interest expenses were as follows:
|
Nine-month period ended:
|
|
Three-month period ended:
|
|
09/30/2019
|
09/30/2018
|
|
09/30/2019
|
09/30/2018
|
|
|
(restated)
|
|
|
(restated)
|
Financial instruments measured at amortized cost
|
(400,830)
|
(442,958)
|
|
(136,605)
|
(164,672)
|
Financial instruments at fair value through profit or loss
|
(767,242)
|
(650,430)
|
|
(257,237)
|
(178,113)
|
|
(1,168,072)
|
(1,093,388)
|
|
(393,842)
|
(342,785)
|
(b) Finance income
|
Nine-month period ended:
|
|
Three-month period ended:
|
|
09/30/2019
|
09/30/2018
|
|
09/30/2019
|
09/30/2018
|
Interest income
|
916,803
|
301,868
|
|
625,879
|
104,953
|
Gains on derivative
|
-
|
80,642
|
|
-
|
-
|
Financial instruments at fair value through profit or loss
|
36,942
|
189,541
|
|
266
|
390
|
Other financial results
|
22,902
|
31,418
|
|
(2,519)
|
24,541
|
|
976,647
|
603,469
|
|
623,626
|
129,884
|
|
|
|
|
|
|
Non-recurring finance income
|
173,693
|
-
|
|
173,693
|
-
|
Effect of application of IAS 29 (hyperinflation)
|
254,461
|
115,405
|
|
69,886
|
115,405
|
|
1,404,801
|
718,874
|
|
867,205
|
245,289
|
Interest income arose from the following financial assets:
|
Nine-month period ended:
|
|
Three-month period ended:
|
|
09/30/2019
|
09/30/2018
|
|
09/30/2019
|
09/30/2018
|
Cash and cash equivalents
|
317,888
|
169,759
|
|
115,621
|
59,618
|
Investment securities held for trading
|
4,233
|
20,169
|
|
100
|
9,720
|
Other receivables
|
594,682
|
111,940
|
|
510,158
|
35,615
|
|
916,803
|
301,868
|
|
625,879
|
104,953
|
40
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
18. INCOME TAX AND SOCIAL CONTRIBUTION
Income taxes reported in the income statement were as follows:
|
Nine-month period ended:
|
|
Three-month period ended:
|
|
09/30/2019
|
09/30/2018
|
|
09/30/2019
|
09/30/2018
|
|
|
(restated)
|
|
|
(restated)
|
Income tax expense - current
|
(2,435,979)
|
(1,866,535)
|
|
(649,270)
|
(475,185)
|
|
|
|
|
|
|
Deferred tax expense on temporary differences
|
1,118,269
|
868,795
|
|
446,993
|
479,130
|
Deferred tax over taxes losses carryforwards movements in the current period
|
99,107
|
351,644
|
|
(19,755)
|
137,164
|
Total deferred tax (expense)/income
|
1,217,376
|
1,220,439
|
|
427,238
|
616,294
|
|
|
|
|
|
|
Total income tax expenses
|
(1,218,603)
|
(646,096)
|
|
(222,032)
|
141,109
|
The reconciliation from the weighted nominal to the effective tax rate is summarized as follows:
|
Nine-month period ended:
|
|
Three-month period ended:
|
|
09/30/2019
|
09/30/2018
|
|
09/30/2019
|
09/30/2018
|
|
|
(restated)
|
|
|
(restated)
|
Profit before tax
|
9,187,957
|
8,530,087
|
|
2,826,417
|
2,744,249
|
Adjustment on taxable basis
|
|
|
|
|
|
Others non-taxable income
|
(805,530)
|
(294,879)
|
|
(676,165)
|
(241,436)
|
Government grants related to sales taxes
|
(1,298,214)
|
(1,288,718)
|
|
(372,355)
|
(436,885)
|
Share of result of joint ventures
|
11,115
|
100
|
|
8,248
|
3,272
|
Non-deductible expenses
|
198,996
|
175,091
|
|
70,586
|
75,402
|
Complement of income tax of foreign subsidiaries due in Brazil
|
253,564
|
109,792
|
|
2,042
|
57,107
|
Results of intercompany transactions
|
(403,096)
|
(557,093)
|
|
(143,023)
|
(190,002)
|
|
7,144,792
|
6,674,380
|
|
1,715,750
|
2,011,707
|
Aggregated weighted nominal tax rate
|
29.12%
|
29.11%
|
|
28.78%
|
27.92%
|
Taxes payable – nominal rate
|
(2,080,462)
|
(1,943,011)
|
|
(493,834)
|
(561,655)
|
Adjustment on tax expense
|
|
|
|
|
|
Income tax Incentives
|
187,001
|
237,561
|
|
30,584
|
136,471
|
Deductible interest on shareholders' equity
|
1,139,682
|
1,263,344
|
|
383,701
|
538,078
|
Tax savings from goodwill amortization
|
61,183
|
54,487
|
|
19,366
|
17,940
|
Withholding income tax
|
(354,241)
|
(257,046)
|
|
(120,444)
|
(49,950)
|
Recognition (write-off) of deferred charges on tax losses
|
(141,251)
|
57,591
|
|
(93,680)
|
38,602
|
Effect of application of IAS 29 (hyperinflation)
|
(39,202)
|
(87,570)
|
|
(999)
|
(87,570)
|
Others with reduced taxation
|
8,687
|
28,548
|
|
53,274
|
109,193
|
Income tax and social contribution expense
|
(1,218,603)
|
(646,096)
|
|
(222,032)
|
141,109
|
Effective tax rate
|
13.26%
|
7.57%
|
|
7.86%
|
-5.14%
|
The main events that impacted the effective tax rate in the period were:
§
|
Government subsidy on sales taxes: Related to regional incentives and local production, which, when reinvested, are not taxed for income tax and social contribution purposes; this explains the impact on the effective tax rate. The amount above is impacted by the fluctuation in volume, price and eventual variation on state VAT (ICMS).
|
41
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
§
|
Complement of income tax of foreign subsidiaries due in Brazil: shows the result of the calculation of universal taxation of profits, according to the regulations of Law 12.973/14.
|
§
|
Results of intercompany transactions: reflects the reality of the taxation in countries in which some subsidiaries with whom intercompany operations are made, are located.
|
§
|
Deductible interest on shareholders’ equity: under Brazilian law, companies have an option to remunerate their shareholders through payment of interest on capital (“IOC”), which is deductible for income tax purposes.
|
19. SHARE-BASED PAYMENTS
There are different stock-option and share-based payment programs which allow the employees and senior Management from the Company and its subsidiaries to acquire (through of exercise of the stock option) or receive shares of the Company. For all stock option programs, the fair value of the shares is estimated at the options grant date, using the “Hull Binomial” pricing model, adjusted to reflect the IFRS 2 requirement that assumptions about forfeiture before the end of the vesting period cannot impact the fair value of the option.
This current model of stock option, ruled by the Company’s stock option plan (“Stock Option Plan”), includes two types of grants: (I) Grant 1- the beneficiary can be allocated 30%, 40%, 60%, 70% or 100% of the amount related to the profit share the beneficiary received in the year, to the immediate exercise of options, thus acquiring the corresponding shares of the Company, which transfer to third parties or the Company will only be allowed after the five-year period counted from the date of exercise of the options; and (II) Grant 2 - the beneficiary may exercise the options after a five-year grace period, for a period of five years.
In addition, the Company has implemented a share-based payment plan (“Share-Based Plan”) under which certain employees and members of the Management of the Company or its subsidiaries are eligible to receive shares of the Company including in the form of ADR’s. The shares that are subject to the Share-Based Plan are designated as "restricted shares".
Additionally, as a mean of creating a long term incentive (wealth incentive) for certain senior employees and members of Management considered as having “high potential,” the Company grants, under the Share-Based Plan, shares to be delivered in the future divided in two separate lots – Lot A and Lot B, which will be delivered to the
participants of the relevant program, subject to maturation periods of five and ten years, respectively.
42
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
The weighted average fair value of the options and assumptions used in applying the Company’s option pricing model of 2019 and 2018 grants was as follows:
In R$, except when otherwise indicated
|
09/30/2019
|
(i)
|
12/31/2018
|
(i)
|
|
|
|
|
|
Fair value of options granted
|
5.27
|
|
5.62
|
|
Share price
|
17.02
|
|
18.04
|
|
Exercise price
|
17.02
|
|
18.04
|
|
Expected volatility
|
26.1%
|
|
26.2%
|
|
Vesting year
|
5
|
|
5
|
|
Expected dividends
|
5%
|
|
5%
|
|
Risk-free interest rate
|
9.1%
|
(ii)
|
9.6%
|
(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 ADR’s during the period, in which the risk-free interest rate of ADR’s are calculated in U.S. dollar.
The total number of outstanding options developed were as follows:
Thousand options
|
09/30/2019
|
|
12/31/2018
|
|
|
|
|
Options outstanding at January 1st
|
141,328
|
|
135,221
|
Options issued during the period
|
1,408
|
|
19,899
|
Options exercised during the period
|
(6,949)
|
|
(9,988)
|
Options forfeited during the period
|
(13,947)
|
|
(3,804)
|
Options outstanding at ended period
|
121,840
|
|
141,328
|
The range of exercise prices of the outstanding options was between R$0.001 (R$0.001 on December 31, 2018) and R$33.67 (R$27.43 on December 31, 2018) and the weighted average remaining contractual life was approximately 5.88 years (6.27 years on December 31, 2018).
Of the 121,840 thousand outstanding options (141,328 thousand on December 31, 2018), 35,468 thousand options were vested on September 30, 2019 (55,538 thousands on December 31, 2018).
The weighted average exercise price of the options is as follows:
In R$ per share
|
09/30/2019
|
|
12/31/2018
|
|
|
|
|
Options outstanding at January 1 st
|
16.16
|
|
15.27
|
Options issued during the period
|
18.13
|
|
18.04
|
Options forfeited during the period
|
21.21
|
|
18.55
|
Options exercised during the period
|
8.70
|
|
7.47
|
Options outstanding at ended period
|
18.53
|
|
16.16
|
Options exercisable at ended period
|
18.52
|
|
2.25
|
43
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
For the options exercised during the period ended September 30, 2019, the weighted average share price on the exercise date was R$18.68 (R$21.83 as of December 31, 2018).
To settle the exercised stock options, the Company may use treasury shares. The current limit of authorized capital is considered sufficient to meet all stock option plans if the issue of new shares is required to meet the grants awarded in the programs.
During the period, the Company did not grant deferred stocks under the stock option plan (as at December 2018, 426 thousand deferred stocks had been granted related to the exercise of stock options granted in the previous years, and such shares were valued based on the share price of the trading session immediately prior to the stock option grant, representing a fair value of R$7,518).
During the period, the Company granted 7,145,000 (13,055,000 as at December 31, 2018) restricted shares under the Share-Based Plan, which are valued based on the share price of the trading session immediately prior to the grant of shares, representing a fair value of approximately R$124,712 on September 30, 2019 (R$239,109 as at December 31, 2018). Such restricted share units are subject to a grace period of five years counted from the date of the grant.
The total number of shares purchased or granted, as the case may be, under the Stock Option Plan and Share-Based Plan by employees, the delivery of which will be performed in the future under certain conditions (deferred stock and restricted shares), is demonstrated below:
Thousand deferred shares
|
09/30/2019
|
|
12/31/2018
|
|
|
|
|
Deferred shares outstanding at January 1st
|
12,308
|
|
16,300
|
New deferred shares during the period
|
-
|
|
426
|
Deferred shares granted during the period
|
(4,067)
|
|
(3,429)
|
Deferred shares forfeited during the period
|
(365)
|
|
(989)
|
Deferred shares outstanding at ended period
|
7,876
|
|
12,308
|
Thousand restricted shares
|
09/30/2019
|
|
12/31/2018
|
|
|
|
|
Restricted shares outstanding at January 1st
|
12,656
|
|
-
|
New restricted shares during the period
|
7,145
|
|
13,055
|
Restricted shares granted during the period
|
-
|
|
(296)
|
Restricted shares forfeited during the period
|
(395)
|
|
(103)
|
Restricted shares outstanding at ended period
|
19,406
|
|
12,656
|
Additionally, certain employees and managers of the Company received options to acquire AB Inbev shares, the compensation cost of which is recognized in the income statement against equity.
44
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
The transactions with share-based payments described above generated an expense of R$177,725 (R$121,087 on September 30, 2018), recorded as administrative expenses.
20. FINANCIAL INSTRUMENTS AND RISKS
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 Company’s performance consistent with its Financial Risk Management Policy.
The Company’s use of derivatives strictly follows the 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 Ambev operates must be denominated in their respective local currencies. The policy also sets forth the procedures and controls needed for identifying, 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 Ambev’s revenues, costs and/or investment amounts. The policy states that all the known risks (e.g. foreign currency and interest) shall be hedged by contracting derivative financial instruments. Existing risks not yet recorded (e.g. future contracts for the purchase of raw material or property, plant and equipment) are mitigated using projections for the period necessary for the Company to adapt to the new cost scenario, which may vary from ten to fourteen months, also through the use of derivative financial instruments. Most of the translation risks are not hedged. Any exception to the policy must be approved by the Board of Directors.
Derivative financial Instruments
Derivative financial instruments authorized by the Financial Risk Management Policy are futures contracts traded on exchanges, full deliverable forwards, non-deliverable forwards, swaps and options. At September 30, 2019, the Company and its subsidiaries had no target forward, swaps with currency verification or any other derivative operations representing a risk level above the nominal value of their
contracts. The derivative operations are managed on a consolidated basis and are classified by strategies according to their purposes, as follows:
45
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
i) Cash-flow-hedge derivative instruments – The highly probable forecast transactions contracted in order to minimize the Company's exposure to fluctuations of exchange rates and prices of raw materials, investments, equipment and services to be procured, protected by cash flow hedges that will occur at various different dates during the next fourteen months. Gains and losses classified as hedging reserve in equity are recognized in the income statement in the period or periods when the forecast and hedged transaction affects the income statement.
ii) Fair-value-hedge derivative instruments – 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.
The results of these operations, measured according to their fair value, are recognized in financial results.
iii) Net-investment-hedge derivative instruments – transactions entered into in order to minimize exposure of the exchange differences arising from conversion of net investment in the Company's subsidiaries located abroad for translation account balance. The effective portion of the hedge is allocated to equity and the ineffectiveness portion is recorded directly in financial results.
The following tables summarize the exposure of the Company that were identified and protected in accordance with the Company's Risk Policy. The following denominations have been applied:
Operational Hedge: Refers to the exposures arising from the core business of Ambev, such as purchase of inputs, purchase of fixed assets and service contracts linked to foreign currency, which is protected through the use of derivatives.
Financial Hedge: Refers to the exposures arising from cash and financing activities, such as foreign-currency cash and foreign-currency debt, which is protected through the use of derivatives.
Investment hedge abroad: Refers mainly to exposures arising from cash hold in foreign currency in foreign subsidiaries whose functional currency is different from the consolidation currency.
Investment hedge - Put option granted on subsidiary: As detailed in Note 13 (d.4) the Company constituted a liability related to acquisition of Non-controlling interest in the Dominican Republic operations. This financial instrument is denominated in Dominican Pesos and is recorded in a Company which functional currency is the Real. The Company assigned this financial instrument as a hedging instrument for part of its net assets located in the Dominican Republic, in such manner the hedge result can be recorded in other comprehensive income of the group, following the result of the hedged item.
46
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
Transactions protected by derivative financial instruments in accordance with the Financial Risk Management Policy
|
|
|
|
|
|
|
09/30/2019
|
|
Nine-month period ended: 09/30/2019
|
|
Three-month period ended: 09/30/2019
|
|
|
|
|
|
|
|
Fair Value
|
|
Gain / (Losses)
|
|
Gain / (Losses)
|
Exposure
|
|
Risk
|
|
|
Notional
|
|
Assets
|
Liability
|
|
Finance Result
|
Operational Result
|
Equity
|
|
Finance Result
|
Operational Result
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
(11,557,028)
|
|
11,357,137
|
|
243,517
|
(279,603)
|
|
(682,365)
|
625,482
|
692,234
|
|
(258,155)
|
(35,042)
|
621,355
|
|
|
Commodity
|
(2,765,172)
|
|
2,565,281
|
|
9,128
|
(248,964)
|
|
(40,789)
|
(129,016)
|
(108,277)
|
|
(20,246)
|
(63,030)
|
(90,141)
|
|
|
American Dollar
|
(8,506,665)
|
|
8,506,665
|
|
198,523
|
(24,807)
|
|
(522,648)
|
798,256
|
821,660
|
|
(121,354)
|
38,741
|
695,255
|
|
|
Euro
|
(143,484)
|
|
143,484
|
|
-
|
(5,795)
|
|
(2,290)
|
(3,419)
|
(10,258)
|
|
(864)
|
(718)
|
(3,979)
|
|
|
Mexican Pesos
|
(141,707)
|
|
141,707
|
|
35,866
|
(37)
|
|
(116,638)
|
(40,339)
|
(10,891)
|
|
(115,691)
|
(10,035)
|
20,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets
|
|
|
(819,826)
|
|
819,826
|
|
59,729
|
(15,836)
|
|
(187,186)
|
155,916
|
177,313
|
|
(67,190)
|
154,147
|
135,450
|
|
|
American Dollar
|
(819,826)
|
|
819,826
|
|
59,729
|
(15,836)
|
|
(187,186)
|
155,916
|
177,313
|
|
(67,190)
|
154,147
|
135,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
(230,759)
|
|
230,759
|
|
20,927
|
(4,399)
|
|
(2,155)
|
2,269
|
1,937
|
|
33,259
|
1,705
|
(10,312)
|
|
|
American Dollar
|
(230,759)
|
|
230,759
|
|
20,927
|
(4,399)
|
|
(2,157)
|
2,427
|
2,043
|
|
33,259
|
1,705
|
(10,312)
|
|
|
Rupee
|
-
|
|
-
|
|
-
|
-
|
|
2
|
(158)
|
(106)
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
(15,000)
|
|
15,000
|
|
-
|
-
|
|
(42)
|
-
|
-
|
|
20
|
-
|
-
|
|
|
Interest rate
|
(15,000)
|
|
15,000
|
|
-
|
-
|
|
(42)
|
-
|
-
|
|
20
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debts
|
|
|
(822,835)
|
|
-
|
|
-
|
-
|
|
5,306
|
-
|
-
|
|
-
|
-
|
-
|
|
|
American Dollar
|
(531,294)
|
|
-
|
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
|
Interest rate
|
(291,541)
|
|
-
|
|
-
|
-
|
|
5,306
|
-
|
-
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Instrument
|
|
|
(1,676,820)
|
|
1,078,369
|
|
26,228
|
(11,120)
|
|
159,369
|
-
|
-
|
|
(36,241)
|
-
|
-
|
|
|
Stock exchange prices
|
(1,676,820)
|
|
1,078,369
|
|
26,228
|
(11,120)
|
|
159,369
|
-
|
-
|
|
(36,241)
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Investments
|
|
|
-
|
|
-
|
|
-
|
-
|
|
-
|
(28,487)
|
28,487
|
|
-
|
-
|
-
|
|
|
American Dollar
|
-
|
|
-
|
|
-
|
-
|
|
-
|
(28,487)
|
28,487
|
|
-
|
-
|
-
|
September 30, 2019
|
|
|
(15,122,268)
|
|
13,501,091
|
|
350,401
|
(310,958)
|
|
(707,073)
|
755,180
|
899,971
|
|
(328,307)
|
120,810
|
746,493
|
47
Ambev
S.A.
Notes to the interim consolidated
financial statements
As at September 30,
2019
(All amounts in
thousands of reais unless otherwise stated)
|
|
|
|
|
|
|
12/31/2018
|
|
Nine-month period ended: 09/30/2018
|
|
Three-month period ended: 09/30/2018
|
|
|
|
|
|
|
|
Fair Value
|
|
Gain / (Losses)
|
|
Gain / (Losses)
|
Exposure
|
|
Risk
|
|
|
Notional
|
|
Assets
|
Liability
|
|
Finance Result
|
Operational Result
|
Equity
|
|
Finance Result
|
Operational Result
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
(11,793,199)
|
|
11,607,208
|
|
184,487
|
(394,167)
|
|
(346,736)
|
684,120
|
1,962,649
|
|
(138,098)
|
309,189
|
358,202
|
|
|
Commodity
|
(2,597,049)
|
|
2,411,058
|
|
14,900
|
(270,592)
|
|
(32,537)
|
76,973
|
(31,005)
|
|
8,998
|
3,512
|
(8,802)
|
|
|
American Dollar
|
(8,774,281)
|
|
8,774,281
|
|
128,429
|
(119,917)
|
|
(315,744)
|
573,135
|
1,931,111
|
|
(146,077)
|
298,518
|
365,387
|
|
|
Euro
|
(152,373)
|
|
152,373
|
|
2,234
|
(1,020)
|
|
(2,006)
|
5,666
|
(2,871)
|
|
(784)
|
2,065
|
(3,145)
|
|
|
Mexican Pesos
|
(269,496)
|
|
269,496
|
|
38,924
|
(2,638)
|
|
3,551
|
28,346
|
65,414
|
|
(235)
|
5,094
|
4,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets
|
|
|
(890,029)
|
|
890,029
|
|
23,701
|
(29,318)
|
|
29,887
|
-
|
-
|
|
3,942
|
-
|
-
|
|
|
American Dollar
|
(890,029)
|
|
890,029
|
|
23,701
|
(29,126)
|
|
23,427
|
-
|
-
|
|
2,816
|
-
|
-
|
|
|
Euro
|
-
|
|
-
|
|
-
|
(192)
|
|
6,460
|
-
|
-
|
|
1,126
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
(314,001)
|
|
314,001
|
|
11,403
|
(14,150)
|
|
(152)
|
14,474
|
5,026
|
|
3,518
|
2,218
|
155
|
|
|
American Dollar
|
(311,812)
|
|
311,812
|
|
11,362
|
(14,150)
|
|
(497)
|
15,067
|
5,964
|
|
3,409
|
2,373
|
740
|
|
|
Rupee
|
(2,189)
|
|
2,189
|
|
41
|
-
|
|
345
|
(593)
|
(938)
|
|
109
|
(155)
|
(585)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
(15,000)
|
|
15,000
|
|
359
|
-
|
|
(416,064)
|
-
|
-
|
|
(87,629)
|
-
|
-
|
|
|
American Dollar
|
-
|
|
-
|
|
265
|
-
|
|
(416,224)
|
-
|
-
|
|
(87,568)
|
-
|
-
|
|
|
Interest rate
|
(15,000)
|
|
15,000
|
|
94
|
-
|
|
160
|
-
|
-
|
|
(61)
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debts
|
|
|
(1,010,581)
|
|
338,219
|
|
34,900
|
(1,127)
|
|
273,885
|
-
|
-
|
|
75,070
|
-
|
-
|
|
|
American Dollar
|
(672,362)
|
|
-
|
|
-
|
-
|
|
259,235
|
-
|
-
|
|
70,281
|
-
|
-
|
|
|
Interest rate
|
(338,219)
|
|
338,219
|
|
34,900
|
(1,127)
|
|
14,650
|
-
|
-
|
|
4,789
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Instrument
|
|
|
(1,535,355)
|
|
1,108,416
|
|
82
|
(242,986)
|
|
(217,805)
|
-
|
-
|
|
(4,266)
|
-
|
-
|
|
|
American Dollar
|
(1,535,355)
|
|
1,108,416
|
|
82
|
(242,986)
|
|
(217,805)
|
-
|
-
|
|
(4,266)
|
-
|
-
|
Total
|
|
|
(15,558,165)
|
|
14,272,873
|
|
254,932
|
(681,748)
|
|
(676,985)
|
698,594
|
1,967,675
|
|
(147,463)
|
311,407
|
358,357
|
48
Ambev
S.A.
Notes to the interim consolidated
financial statements
As at September 30,
2019
(All amounts in
thousands of reais unless otherwise stated)
I.
Market risk
a.1)
Foreign-currency risk
The Company is
exposed to foreign currency risk on borrowings, investments, purchases,
dividends and/or interest expense and 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 deliverable
forwards.
a.2) Commodity
Risk
A significant
portion of the Company’s inputs comprise commodities which historically have
experienced substantial price fluctuations. The Company therefore uses both
fixed price purchasing contracts and derivative financial instruments to
minimize its exposure to commodity price volatility. The Company has important
exposures to the following commodities: aluminum, sugar, wheat and corn. These
derivative financial instruments have been designated as cash-flow
hedges.
a.3) Interest
rate risk
The Company
applies a dynamic interest rate hedging approach whereby the target mix between
fixed and floating rate debts is reviewed periodically. The purpose of the
Company’s policy is to achieve an optimal balance between cost of funding and
volatility of financial results, taking into account market conditions as well
as the Company’s overall business strategy and this strategy is reviewed
periodically.
The table below demonstrates the
Company’s exposure related to debts, before and after interest rates hedging
strategy.
|
09/30/2019
|
|
Pre -
Hedge
|
|
Post -
Hedge
|
|
Interest
rate
|
Amount
|
|
Interest
rate
|
Amount
|
Brazilian Real
|
10.0%
|
2,076,335
|
|
10.0%
|
2,076,335
|
Dominican Peso
|
9.7%
|
219,013
|
|
9.7%
|
219,013
|
American Dollar
|
3.6%
|
20,876
|
|
3.6%
|
20,876
|
Guatemala´s Quetzal
|
7.8%
|
12,320
|
|
7.8%
|
12,320
|
Canadian Dollar
|
3.5%
|
140,697
|
|
3.5%
|
140,697
|
Others
|
9.8%
|
108,909
|
|
9.8%
|
108,909
|
Interest rate pre-set
|
|
2,578,150
|
|
|
2,578,150
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazilian Real
|
9.4%
|
169,502
|
|
9.4%
|
169,502
|
American Dollar
|
3.4%
|
510,418
|
|
3.4%
|
510,418
|
Canadian Dollar
|
2.6%
|
832,088
|
|
2.6%
|
832,088
|
Interest rate post
fixed
|
|
1,512,008
|
|
|
1,512,008
|
49
Ambev
S.A.
Notes to the interim consolidated
financial statements
As at September 30,
2019
(All amounts in
thousands of reais unless otherwise stated)
|
12/31/2018
(restated)
|
|
Pre -
Hedge
|
|
Post -
Hedge
|
|
Interest
rate
|
Amount
|
|
Interest
rate
|
Amount
|
Brazilian Real
|
9.7%
|
2,034,555
|
|
10.1%
|
1,756,179
|
Dominican Peso
|
9.4%
|
217,450
|
|
9.4%
|
217,450
|
American Dollar
|
4.4%
|
42,392
|
|
4.4%
|
42,392
|
Guatemala´s Quetzal
|
7.8%
|
11,460
|
|
7.8%
|
11,460
|
Canadian Dollar
|
3.5%
|
145,513
|
|
3.5%
|
145,513
|
Other Latin American Currencies
|
10.2%
|
32,092
|
|
10.2%
|
32,092
|
Interest rate pre-set
|
|
2,483,462
|
|
|
2,205,086
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazilian Real
|
9.1%
|
237,658
|
|
6.8%
|
516,034
|
American Dollar
|
3.6%
|
629,973
|
|
3.6%
|
629,973
|
Canadian Dollar
|
2.8%
|
752,570
|
|
2.8%
|
752,570
|
Interest rate post fixed
|
|
1,620,201
|
|
|
1,898,577
|
Sensitivity
analysis
The Company
mitigates risks arising from non-derivative financial assets and liabilities
substantially, through derivative financial instruments. In this context, 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 the Company’s future results and/or cash
flow, as described below:
1 – Probable
scenario: Management expectations of deterioration in each transaction’s main
risk factor. To measure the possible effects on the results of derivative
transactions, the Company uses parametric Value at Risk (VaR), which 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 after September 30,
2019 for the calculation, which are presented in the module.
2 – Adverse scenario: 25% deterioration in each
transaction’s main risk factor as compared to the level observed on September
30, 2019.
3 – Remote
scenario: 50% deterioration in each transaction’s main risk factor as compared
to the level observed on September 30, 2019.
50
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
Transaction
|
Risk
|
Fair Value
|
Probable scenario
|
Adverse scenario
|
Remote
scenario
|
|
|
|
|
|
|
Commodities hedge
|
Decrease on commodities price
|
(239,836)
|
(309,588)
|
(881,156)
|
(1,522,476)
|
Input purchase
|
|
239,836
|
315,256
|
931,129
|
1,622,422
|
Foreign exchange hedge
|
Foreign currency decrease
|
203,750
|
107,445
|
(1,994,214)
|
(4,192,178)
|
Input purchase
|
|
(203,750)
|
(107,445)
|
1,994,214
|
4,192,178
|
Costs effects
|
|
-
|
5,668
|
49,973
|
99,946
|
|
|
|
|
|
|
Foreign exchange hedge
|
Foreign currency decrease
|
43,893
|
22,228
|
(161,064)
|
(366,020)
|
Capex Purchase
|
|
(43,893)
|
(22,228)
|
161,064
|
366,020
|
Fixed assets effects
|
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
Foreign exchange hedge
|
Foreign currency decrease
|
16,528
|
10,278
|
(41,162)
|
(98,852)
|
Expenses
|
|
(16,528)
|
(10,278)
|
41,162
|
98,852
|
Expenses effects
|
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
Interest Hedge
|
Decrease in interest rate
|
-
|
(227)
|
(277)
|
(330)
|
Interest revenue
|
|
-
|
227
|
277
|
330
|
Cash effects
|
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
Debt
|
Foreign currency decrease
|
-
|
3,668
|
132,823
|
265,647
|
Interest expenses
|
Increase in interest rate
|
-
|
1,548
|
15,217
|
28,633
|
Debt effects
|
|
-
|
5,216
|
148,040
|
294,280
|
|
|
|
|
|
|
Equity Instrument Hedge
|
Stock exchange price decrease
|
15,108
|
(25,522)
|
(254,484)
|
(524,076)
|
Expenses
|
|
(15,108)
|
45,557
|
404,097
|
823,301
|
Equity effects
|
|
-
|
20,035
|
149,613
|
299,225
|
|
|
-
|
30,919
|
347,626
|
693,451
|
As at September 30, 2019 the notional and fair value amounts per instrument and maturity were as follows:
|
|
Notional Value
|
Exposure
|
Risk
|
2019
|
2020
|
2021
|
2022
|
>2022
|
Total
|
|
|
|
|
|
|
|
|
Cost
|
|
7,393,615
|
3,963,522
|
-
|
-
|
-
|
11,357,137
|
|
Commodity
|
742,175
|
1,823,106
|
-
|
-
|
-
|
2,565,281
|
|
American Dollar
|
6,572,313
|
1,934,352
|
-
|
-
|
-
|
8,506,665
|
|
Euro
|
35,956
|
107,528
|
-
|
-
|
-
|
143,484
|
|
Mexican Peso
|
43,171
|
98,536
|
-
|
-
|
-
|
141,707
|
|
|
|
|
|
|
|
|
Fixed asset
|
|
581,740
|
238,086
|
-
|
-
|
-
|
819,826
|
|
American Dollar
|
581,740
|
238,086
|
-
|
-
|
-
|
819,826
|
|
|
|
|
|
|
|
|
Expenses
|
|
156,235
|
74,524
|
-
|
-
|
-
|
230,759
|
|
American Dollar
|
156,235
|
74,524
|
-
|
-
|
-
|
230,759
|
|
|
|
|
|
|
|
|
Cash
|
|
-
|
15,000
|
-
|
-
|
-
|
15,000
|
|
Interest rate
|
-
|
15,000
|
-
|
-
|
-
|
15,000
|
|
|
|
|
|
|
|
|
Equity Instrument
|
|
34,040
|
1,044,329
|
-
|
-
|
-
|
1,078,369
|
|
Stock prices
|
34,040
|
1,044,329
|
-
|
-
|
-
|
1,078,369
|
|
|
8,165,630
|
5,335,461
|
-
|
-
|
-
|
13,501,091
|
51
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
|
|
Fair Value
|
Exposure
|
Risk
|
2019
|
2020
|
2021
|
2022
|
>2022
|
Total
|
|
|
|
|
|
|
|
|
Cost
|
|
65,430
|
(101,516)
|
-
|
-
|
-
|
(36,086)
|
|
Commodity
|
(124,132)
|
(115,704)
|
-
|
-
|
-
|
(239,836)
|
|
American Dollar
|
160,242
|
13,474
|
-
|
-
|
-
|
173,716
|
|
Euro
|
(2,304)
|
(3,491)
|
-
|
-
|
-
|
(5,795)
|
|
Mexican Peso
|
31,624
|
4,205
|
-
|
-
|
-
|
35,829
|
|
|
|
|
|
|
|
|
Fixed asset
|
|
34,777
|
9,116
|
-
|
-
|
-
|
43,893
|
|
American Dollar
|
34,777
|
9,116
|
-
|
-
|
-
|
43,893
|
|
|
|
|
|
|
|
|
Expenses
|
|
15,454
|
1,074
|
-
|
-
|
-
|
16,528
|
|
American Dollar
|
15,454
|
1,074
|
-
|
-
|
-
|
16,528
|
|
|
|
|
|
|
|
|
Equity Instrument
|
|
4,587
|
10,521
|
-
|
-
|
-
|
15,108
|
|
Stock prices
|
4,587
|
10,521
|
-
|
-
|
-
|
15,108
|
|
|
120,248
|
(80,805)
|
-
|
-
|
-
|
39,443
|
II. Credit Risk
Concentration of credit risk on trade receivables
A substantial part of the Company’s sales are 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 counterparty is set forth in our Credit Risk Policy. This Credit Risk 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, where 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.
52
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
As at September 30, 2019, the Company held its main short-term investments with the following financial institutions: Banco do Brasil, Bradesco, Bank Mendes Gans, BNP Paribas, Caixa Econômica Federal, Citibank, Itaú, JP Morgan Chase, Santander, ScotiaBank and Toronto Dominion Bank. The Company had derivative agreements with the following financial institutions: Banco Bisa, Banco Galícia, BBVA, Barclays, BNB, BNP Paribas, Bradesco, Citibank, Deutsche Bank, Itaú, Goldman Sachs, JP Morgan Chase, Macquarie, Merrill Lynch, Morgan Stanley, Santander, Standard Bank, ScotiaBank and TD Securities.
The carrying amount of cash and cash equivalents, investment securities, trade receivables excluding prepaid expenses, recoverable taxes and derivative financial instruments are disclosed net of provisions for impairment and represents the maximum exposure of credit risks at September 30, 2019. There was no concentration of credit risk with any counterparties as at September 30, 2019.
III. Liquidity Risk
The Company believes that cash flows from operating activities, cash and cash equivalents and short-term investments, together with the derivative financial instruments and access to loan facilities are sufficient to finance capital expenditures, financial liabilities and dividend payments in the future.
IV. Equity price risk
Through the equity swap transactions approved on May 15th, 2018, December 20th, 2018 and May 15th, 2019 by Ambev’s Board of Directors (see Note 1 - Corporate information), the Company, or its subsidiaries, will receive the price variation related to its shares traded on the stock exchange or ADRs, neutralizing the possible effects of stock-price variation in view of the share-based payment of the Company. As these derivative instruments are not characterized as hedge accounting they were not therefore designated to any hedge.
At September 30, 2019, an exposure equivalent to R$1.7 billion (R$1.5 billion as of December 31, 2018) in AmBev’s shares (or ADR’s) was partially hedged, resulting in a gain in income statement of R$159,369 (a loss in income statement of R$217,805 as of September 30, 2018).
V. Capital management
Ambev is continuously optimizing its capital structure, aiming to maximize shareholder value while keeping the desired financial flexibility to execute the strategic projects. Besides the statutory minimum equity funding requirements that
apply to the Company’s subsidiaries in different countries, Ambev is not subject to any externally imposed capital requirements. When analyzing its capital structure, the Company uses the same debt ratings and capital classifications as applied in the Company’s interim financial statements.
53
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
Financial instruments
(a) Financial instruments categories
Management of the financial instruments held by the Company is effected through operational strategies and internal controls to assure liquidity, profitability and transaction security. Financial instruments transactions are regularly reviewed for the effectiveness of the risk exposure that Management intends to cover (foreign exchange, interest rate, etc.).
The table below shows all financial instruments recognized in the interim financial statements, segregated by category:
|
09/30/2019
|
|
Fair value through other comprehensive income
|
Amortized cost
|
Fair value through profit or loss
|
Total
|
Financial assets
|
|
|
|
|
Cash and cash equivalents
|
6,914,111
|
8,102,803
|
-
|
15,016,914
|
Trade receivables excluding prepaid expenses
|
-
|
6,127,358
|
-
|
6,127,358
|
Investment securities
|
-
|
166,068
|
14,304
|
180,372
|
Financial instruments derivatives
|
-
|
-
|
26,228
|
26,228
|
Derivatives hedge
|
-
|
-
|
324,173
|
324,173
|
Total
|
6,914,111
|
14,396,229
|
364,705
|
21,675,045
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
Trade payables and put option granted on subsidiary and other liabilities
|
-
|
14,184,265
|
2,912,002
|
17,096,267
|
Financial instruments derivatives
|
-
|
-
|
11,120
|
11,120
|
Derivatives hedge
|
-
|
-
|
299,838
|
299,838
|
Interest-bearning loans and borrowings
|
-
|
4,090,158
|
-
|
4,090,158
|
Total
|
-
|
18,274,423
|
3,222,960
|
21,497,383
|
54
Ambev
S.A.
Notes to the interim consolidated
financial statements
As at September 30,
2019
(All amounts in
thousands of reais unless otherwise stated)
|
12/31/2018
(restated)
|
|
Fair value
through other comprehensive income
|
Amortized
cost
|
Fair value
through profit or loss
|
Total
|
Financial
assets
|
|
|
|
|
Cash and cash equivalents
|
3,778,394
|
7,685,104
|
-
|
11,463,498
|
Trade receivables excluding
prepaid expenses
|
-
|
6,874,253
|
-
|
6,874,253
|
Investment securities
|
-
|
147,341
|
13,391
|
160,732
|
Financial instruments
derivatives
|
-
|
-
|
34,068
|
34,068
|
Derivatives hedge
|
-
|
-
|
220,864
|
220,864
|
Total
|
3,778,394
|
14,706,698
|
268,323
|
18,753,415
|
|
|
|
|
|
Financial
liabilities
|
|
|
|
|
Trade payables and put option granted
on subsidiary and other liabilities
|
-
|
15,535,632
|
2,669,561
|
18,205,193
|
Financial instruments
derivatives
|
-
|
-
|
243,359
|
243,359
|
Derivatives hedge
|
-
|
-
|
438,389
|
438,389
|
Interest-bearning loans and
borrowings
|
-
|
4,103,663
|
-
|
4,103,663
|
Total
|
-
|
19,639,295
|
3,351,309
|
22,990,604
|
(b)
Classification of financial instruments by type of fair value
measurement
IFRS 13
defines fair value as the price that would be received to sell an asset or be
paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
Also pursuant
to IFRS 13, financial instruments measured at fair value shall be classified
within the following categories:
Level 1 – quoted prices (unadjusted) in active markets
for identical assets or liabilities that the entity can access at the
measurement date valuation;
Level 2 –
inputs other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly or indirectly; and
Level 3 – unobservable inputs for the asset or
liability.
55
Ambev
S.A.
Notes to the interim consolidated
financial statements
As at September 30,
2019
(All amounts in
thousands of reais unless otherwise stated)
|
09/30/2019
|
|
12/31/2018
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Financial assets
|
|
|
|
|
|
|
|
|
|
Financial asset at fair value through
other comprehensive income
|
6,914,111
|
-
|
-
|
6,914,111
|
|
3,778,394
|
-
|
-
|
3,778,394
|
Financial asset at fair value through
profit or loss
|
14,304
|
-
|
-
|
14,304
|
|
13,391
|
-
|
-
|
13,391
|
Derivatives assets at fair value
through profit or loss
|
-
|
26,228
|
-
|
26,228
|
|
95
|
33,973
|
-
|
34,068
|
Derivatives - operational hedge
|
8,783
|
315,390
|
-
|
324,173
|
|
1,622
|
219,242
|
-
|
220,864
|
|
6,937,198
|
341,618
|
-
|
7,278,816
|
|
3,793,502
|
253,215
|
-
|
4,046,717
|
Financial
liabilities
|
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value
through profit and loss (i)
|
-
|
-
|
2,912,002
|
2,912,002
|
|
-
|
-
|
2,669,561
|
2,669,561
|
Derivatives liabilities at fair value
through profit or loss
|
-
|
11,120
|
-
|
11,120
|
|
511
|
242,848
|
-
|
243,359
|
Derivatives - operational hedge
|
18,989
|
280,849
|
-
|
299,838
|
|
36,583
|
401,806
|
-
|
438,389
|
|
18,989
|
291,969
|
2,912,002
|
3,222,960
|
|
37,094
|
644,654
|
2,669,561
|
3,351,309
|
(i) Refers to
the put option granted on subsidiary as described in Note 13 d(4).
Reconciliation of changes in the categorization of Level
3
Financial liabilities at December 31,
2018
|
2,669,561
|
Acquisition of
investments
|
(24,416)
|
Total gains and losses in the
period
|
266,857
|
Losses/(gains)
recognized in net income
|
167,671
|
Losses/(gains)
recognized in equity
|
99,186
|
Financial liabilities at September 30,
2019 (i)
|
2,912,002
|
(i) The
liability was recorded under “trade payables and put option granted on
subsidiary and other liabilities” on the balance sheet.
(c) Fair value
of financial liabilities measured at amortized cost
The Company’s
liabilities, interest-bearing loans and borrowings, trade payables excluding tax
payables, are recorded at amortized cost according to the effective rate method,
plus indexation and foreign exchange gains/losses, based on closing indices for
each exercise.
The financial
instruments recorded at amortized cost are similar to the fair value and are not
material for disclosure.
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, where the difference
between the result of the
asset and liability amount generates the swaps market value. For the traded
derivative financial instruments, the fair value is calculated according to the
adjusted exchange-listed price.
56
Ambev
S.A.
Notes to the interim consolidated
financial statements
As at September 30,
2019
(All amounts in
thousands of reais unless otherwise stated)
Margins given
in guarantee
In order to
comply with the guarantee requirements of the derivative exchanges and/or
counterparties in certain operations with derivative financial instruments, as
at September 30, 2019 the Company held R$739,045 in highly liquid financial
investments or in cash, classified as cash and cash equivalents and investment
securities (R$653,751 on December 31, 2018).
Offsetting of
financial assets and liabilities
For financial
assets and liabilities subject to settlement agreements by the net or similar
agreements, each agreement between the Company and the counterparty allows this
type of settlement when both parties make this option. In the absence of such a
settlement, the assets and liabilities will be settled by their amounts, but
each party will have the option to settle on net, in case of default by the
counterparty.
21. COLLATERAL
AND CONTRACTUAL COMMITMENTS WITH SUPLLIERS, ADVANCES FROM CUSTOMERS AND
OTHER
|
09/30/2019
|
12/31/2018
|
|
|
|
Collateral given for own
liabilities
|
739,153
|
653,751
|
Other commitments
|
1,261,831
|
1,338,866
|
|
2,000,984
|
1,992,617
|
|
|
|
Commitments with suppliers
|
15,191,480
|
12,078,641
|
|
15,191,480
|
12,078,641
|
The collateral
provided for liabilities totaled approximately R$2,000,984 on September 30, 2019
(R$1,992,617 on December 31, 2018), including R$602,314 (R$574,726 on December
31, 2018) of cash guarantees. The deposits in cash used as guarantees are
presented as part of other assets. To meet the guarantees required by derivative
exchanges and/or counterparties contracted in certain derivative financial
instrument transactions, Ambev maintained on September 30, 2019, R$739,045
(R$653,751 on December 31, 2018) in highly liquid financial investments or in
cash, classified as cash and cash equivalents and investment securities (Note 20
– Financial instruments and risks).
Most of the
balance relates to commitments with suppliers of packaging.
57
Ambev
S.A.
Notes to the interim consolidated
financial statements
As at September 30,
2019
(All amounts in
thousands of reais unless otherwise stated)
Future contractual commitments on September 30,
2019 and
December 31, 2018 were as follows:
|
09/30/2019
|
12/31/2018
|
|
|
|
Less than 1 year
|
7,485,209
|
4,826,987
|
Between 1 and 2 years
|
4,077,376
|
2,932,420
|
More than 2 years
|
3,628,895
|
4,319,234
|
|
15,191,480
|
12,078,641
|
22. CONTINGENT
LIABILITY
The Company has contingent
liabilities related to lawsuits arising from its normal course of business.
Due to their nature, such legal proceedings involve
certain uncertainties including, but not limited to, court and tribunals
rulings, negotiations between affected parties and governmental actions, and as
a consequence the Company’s Management cannot estimate the likely timing of
resolution of these matters at this stage.
Contingent liabilities with a
probable outcome are fully recorded as liabilities (Note 12 – Provisions).
Additionally,
the Company has lawsuits related to tax, civil and labor for which the
likelihood of loss is classified as possible by Management, and for which there
are no provisions, as the composition and estimates of amounts as
follows:
|
09/30/2019
|
12/31/2018
|
|
|
|
IRPJ and CSLL
|
38,512,277
|
37,867,374
|
ICMS and IPI
|
22,985,087
|
23,891,369
|
PIS and COFINS
|
2,563,848
|
4,386,342
|
Labor
|
461,081
|
353,425
|
Civil
|
412,047
|
4,385,657
|
Others
|
1,022,275
|
1,171,252
|
|
65,956,615
|
72,055,419
|
Principal
lawsuits with a likelihood of possible loss:
Except for
monetary inflation and the cases described below, there was no relevant changes
in the main cases with possible chances of loss when compared to the period
ending on December 31, 2018.
58
Ambev
S.A.
Notes to the interim consolidated
financial statements
As at September 30,
2019
(All amounts in
thousands of reais unless otherwise stated)
Brazilian Federal Taxes
Profits earned
abroad
Since 2005,
certain subsidiaries of Ambev received assessments from the Brazilian Federal
Tax Authorities relating to profits of its foreign subsidiaries. The cases are being
challenged at both the administrative and judicial levels of the
courts.
The administrative proceedings
have partially favorable decisions, which are still subject to review by the
administrative court. On the other hand, at the judicial level the Company has a
favorable injunction, in order to suspend the enforceability of the tax credit,
and favorable first-level decisions still subject to review by the second-level
judicial court.
In September
2019, Ambev Management estimated an exposure with possible chances of loss of
approximately R$7.1 billion (R$7.7 billion at December 31, 2018) and
approximately R$51.8 million for which we have recorded a provision (R$45.8
million at December 31, 2018).
Disallowance of taxes paid
abroad
Since 2014,
Ambev has been receiving tax assessments related to the disallowance of
deductions associated with taxes paid abroad by its foreign subsidiaries, and
has been filing defenses. The cases are being challenged at the administrative
level and they are still waiting final decisions.
In
September 2017, Ambev decided to include part of those tax assessments in the
Brazilian Federal Tax Regularization Program of the Provisional Measure nº 783.
As
at September 30, 2019, Ambev Management estimates the exposure of approximately
R$10.0 billion (R$9.5 billion as of December 31, 2018) as possible loss.
Presumed Profit
In April 2016,
Arosuco (a subsidiary of Ambev) received a tax assessment regarding the use of
the “presumed profit” method for the calculation of income tax and social
contribution on net profits instead of the real profit method. In September,
2017, Arosuco received an unfavorable first level administrative decision and
filed an Appeal. In 2019, a definitive favorable decision was issued in favor of
the Company by the Lower Administrative Tax Court (“CARF”),
canceling the assessment.
In March 2019,
Ambev received a new tax assessment regarding the same subject and filed a
defense.
59
Ambev
S.A.
Notes to the interim consolidated
financial statements
As at September 30,
2019
(All amounts in
thousands of reais unless otherwise stated)
Arosuco
Management estimates the amount of possible losses in relation to this
assessment in September 2019 are approximately R$501.5 million (R$645.1 million
as at December 31, 2018).
PIS and COFINS
PIS/COFINS over bonus products
Since 2015, Ambev has received tax assessments issued by
the Brazilian federal tax authorities relating to amounts allegedly due under
the Integration Programme/Social Security Financing Levy (PIS/COFINS) over bonus
products granted to its customers. These cases are being challenged at the
administrative and judicial Courts. In 2019, Ambev had favorable decisions at
the administrative level. Part of these decisions are still subject to review.
The ongoing case in the judicial sphere is still at an early stage.
Ambev Management estimates the possible losses related to
these assessments in September 2019 to be approximately R$2.3 billion
(R$4.0 billion as at December 31, 2018), classified as a possible
loss.
ICMS and IPI
Manaus Free Trade Zone – IPI
Goods
manufactured within the Manaus Free Trade Zone for remittance elsewhere in
Brazil are exempt from IPI excise tax (“IPI”). Ambev’s subsidiaries have been
registering presumed credits for IPI upon the acquisition of exempted goods
manufactured therein. Since 2009, Ambev has been receiving tax assessments from
the Brazilian Federal Tax Authorities relating to the disallowance of such
presumed IPI excise tax credits. In addition, the Company has also received tax
assessments from the Brazilian Federal Tax Authorities charging federal taxes
allegedly unduly offset with the disallowed presumed IPI excise tax credits
which are under discussion in these proceedings.
In April,
2019, the Federal Supreme Court ("STF") concluded the judgment of Extraordinary
Appeal No. 592.891/SP, with binding effects, deciding on the right of taxpayers
registering IPI excise tax presumed credits on acquisitions of raw materials and
exempted inputs originated from the Manaus Free Trade Zone. As a result of this
decision, the Company reclassified part of the amounts related to the cases as
remote loss, maintaining as a possible loss only amounts related to other
additional discussions not submitted to the analysis of the STF.
As at
September 30, 2019, Ambev Management estimates exposure of approximately R$3.6
billion (R$3.8 billion at December 31, 2018), classified as a possible
loss.
60
Ambev
S.A.
Notes to the interim consolidated
financial statements
As at September 30,
2019
(All amounts in
thousands of reais unless otherwise stated)
Civil
Class action
against Brewers Retail Inc.
On
12 December 2014, claimants in Canada brought a lawsuit against the Liquor
Control Board of Ontario (“LCBO”), Brewers Retail Inc. (“The Beer Store”) and
the owners of The Beer Store (Molson Coors Canada, Sleeman Breweries Ltd. and
Labatt Breweries of Canada LP). The lawsuit, brought pursuant to the Ontario
Class Proceedings Act in the Ontario Superior Court of Justice, seeks a
declaration that LCBO and The Beer Store agreed with each to allocate sales,
territories, customers or markets for the supply of beer sold in Ontario since
June 1, 2000, and a declaration that the owners of The Beer Store agreed to fix
prices. In March, the Ontario Supreme Court granted the
summary judgment motions and dismissed the plaintiffs’ claims. In April, the
Ontario Court of Appeal dismissed the plaintiffs’ appeal. The time limit for the
plaintiffs to apply for permission to appeal to the Canadian Supreme Court
expired and in July we had confirmation that the favorable decision of the
Ontario Supreme Court is final. The amount involved in this lawsuit was
approximately R$4.4 billion (R$3.6 billion as of December 31, 2018).
Contingent
assets
In
accordance with IAS 37 - Provisions, Contingent Liabilities and Contingent
Assets, the contingent assets are not recognized in
consolidated financial statements, except when realization of income is
virtually certain.
The Company and its subsidiaries are demanding the refund
of the PIS and COFINS paid including the ICMS and/or ICMS-ST in their taxable
basis for the period from 1990 onwards. Considering the different taxation
systems applicable to the cold drinks sector, as well as due to corporate
reorganizations occurred over the years, the Company and its subsidiaries have
several lawsuits claiming such refund. For the period until 2009, as well as for
the period in which the special regime for cold drinks was in place – i.e. from
January 2009 to April 2015 (article 58-J of Law 10,833, of 2003, also known as
REFRI) – the amounts involved in the refund requests are still being calculated.
For the period after the termination of the special regime for cold drinks
(currently in place), the Company estimates that the contingent asset related to
the matter is R$2.2 billion.
In
September 2019, the Company obtained a final favorable decision and recognized
the right from Companhia Antarctica Paulista (incorporated by Ambev S.A.) to
exclude the ICMS from the COFINS taxable base in the period from March 2000 to
May 2005, reason why it recognizing a recoverable tax of approximately R$0.7
billion.
61
Ambev
S.A.
Notes to the interim consolidated
financial statements
As at September 30,
2019
(All amounts in
thousands of reais unless otherwise stated)
23.
NON-CASH ITEMS
|
Nine-month period ended:
|
|
Three-month period ended:
|
|
09/30/2019
|
12/31/2018
|
|
09/30/2019
|
09/30/2018
|
Cash financing cost other than
interests
|
(1,932)
|
(198,142)
|
|
(3)
|
(126,515)
|
Fair value of options granted on
subsidiary
|
31,767
|
135,092
|
|
(2,133)
|
2,132
|
Sale of subsidiary
|
-
|
-
|
|
-
|
(179,470)
|
Exchange transaction of shareholdings
|
-
|
(30,897)
|
|
-
|
28,177
|
Effect of application of IAS 29
(hyperinflation)
|
174,362
|
(19,678)
|
|
163,321
|
(19,678)
|
Acquisition of investment payable
|
20,000
|
-
|
|
-
|
-
|
24.
RELATED PARTIES
Policies and
practices regarding the realization of transactions with related
parties
The Company
adopts corporate governance practices recommended and/or required by the
applicable law.
Under the
Company’s by-laws, the Board of Directors is responsible for approving any
transaction or agreements between the Company and/or any of its subsidiaries
(except those fully subsidiaries), directors and/or shareholders (including
shareholders, direct or indirect shareholders of the Company). The Antitrust
Compliance and Related Parties 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 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 formalized in written contracts.
Transactions
with Management members:
In addition to
short-term benefits (primarily salaries), the Management members are entitled to
participate in the Stock Option Plan (Note 19 – Share-based
payments).
62
Ambev
S.A.
Notes to the interim consolidated
financial statements
As at September 30,
2019
(All amounts in
thousands of reais unless otherwise stated)
Total expenses
related to the Company’s Management members were as follows:
|
Nine-month
period ended:
|
|
Three-month
period ended:
|
|
09/30/2019
|
09/30/2018
|
|
09/30/2019
|
09/30/2018
|
|
|
|
|
|
|
Short-term benefits (i)
|
26,790
|
15,774
|
|
16,680
|
5,062
|
Share-based payments (ii)
|
21,601
|
19,935
|
|
20
|
5,401
|
Total key Management remuneration
|
48,391
|
35,709
|
|
16,700
|
10,463
|
(i) These
correspond substantially to Management’s salaries and profit sharing (including
performance bonuses).
(ii) These
correspond to the compensation cost of stock options and restricted stocks
granted to Management. These amounts exclude remuneration paid to members of the
Fiscal Council.
Excluding the
above mentioned plan (Note 19 – Share-based
payments), the Company 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
Antonio e Helena Zerrenner Instituição Nacional de Beneficiência (“Fundação
Zerrenner) is one of Ambev’s shareholders, and at September 30, 2019 held 10.2%
of its total share capital. Fundação Zerrenner is also an 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
September 30, 2019 and December 31, 2018, actuarial responsibilities related to
the benefits provided directly by Fundação Zerrenner were fully funded by plan
assets, held for that purpose, which significantly exceeded the liabilities at
these dates. Ambev recognizes the assets (prepaid expenses) of this plan to the
extent of amounts from economic benefit available to the Company, arising from
reimbursements or future contributions reduction.
The expenses
incurred by Fundação Zerrenner in providing these benefits totaled R$192,970
(R$207,488 on September 30, 2018), of which R$170,536 and R$22,434 related to
active employees and retirees respectively (R$180,758 and R$26,730 on September
30, 2018 related to active employees and retirees respectively).
b) Leasing
Ambev, through
its subsidiary BSA (labeling), has an asset leasing agreement with Fundação
Zerrenner, for R$85,028 maturing on May 31, 2020 that can be extended
for a further year.
63
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
c) Leasing – Ambev head office
Ambev has a leasing agreement of two commercial sets with Fundação Zerrenner in the annual amount of R$3,255, maturing on January, 2020.
d) Licensing agreement
The Company maintains a licensing agreement with Anheuser-Busch, Inc., to produce, bottle, sell and distribute Budweiser products in Brazil, Canada and Argentina, and sale and distribution agreements for Budweiser products in Guatemala, in Dominican Republic, in Paraguay, in El Salvador, in Nicaragua, in Uruguay, in Chile, in Panama, in Costa Rica e in Puerto Rico. In addition, the Company produces and distributes Stella Artois products under license to ABI in Brazil and Canada and, by means of a license granted to ABI, it also distributes Brahma’s product in the United States and several countries such as the United Kingdom, Spain, Sweden, Finland and Greece. The amount recorded was R$1,428 (R$1,600 at September 30, 2018) and R$344,128 (R$332,466 at September 30, 2018) as licensing income and expense, respectively.
Ambev has licensing agreements with the Group Modelo, subsidiaries of ABI, for to import, promote and sell products Corona (Corona Extra, Corona Light, Coronita, Pacifico and Negra Modelo) in the countries of the Latin America and Canada.
Transactions with related parties
|
|
|
|
09/30/2019
|
Current
|
Trade receivables (i)
|
Other Trade receivables (i)
|
Trade payables (i)
|
Other Trade payables (i)
|
AB InBev
|
14,998
|
-
|
(17,688)
|
-
|
AB Services
|
5,099
|
-
|
(281)
|
-
|
AB USA
|
31,233
|
4,611
|
(197,550)
|
-
|
Bavaria
|
1,074
|
-
|
(35,582)
|
-
|
Cervecería Modelo
|
7,828
|
16,395
|
(557,651)
|
-
|
Inbev
|
769
|
64,223
|
(41,447)
|
-
|
ITW International
|
-
|
-
|
(231,155)
|
(105,703)
|
Panama Holding
|
29,624
|
-
|
(1,483)
|
-
|
Others
|
24,021
|
688
|
(173,061)
|
-
|
|
114,646
|
85,917
|
(1,255,898)
|
(105,703)
|
(i) The amount represents the marketing operations (purchase and sale) and the reimbursement between the companies of the group.
|
|
|
|
12/31/2018
|
Current
|
Trade receivables (i)
|
Other Trade receivables (i)
|
Trade payables (i)
|
Other Trade payables (i)
|
AB InBev
|
16,381
|
-
|
(19,670)
|
-
|
AB Procurement
|
1,071
|
-
|
(28)
|
-
|
AB Services
|
43,728
|
-
|
(1,687)
|
-
|
AB USA
|
27,827
|
3,847
|
(265,206)
|
-
|
Cervecería Modelo
|
135,111
|
-
|
(583,806)
|
-
|
Inbev
|
601
|
45,575
|
(14,280)
|
-
|
ITW International
|
-
|
-
|
(248,942)
|
(66,452)
|
Panamá Holding
|
41,085
|
-
|
(15,821)
|
-
|
Others
|
28,645
|
538
|
(126,443)
|
-
|
|
294,449
|
49,960
|
(1,275,883)
|
(66,452)
|
(i) The amount represents the marketing operations (purchase and sale) and the reimbursement between the companies of the group.
64
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
The tables below represents the transactions with related parties recognized in the income statement:
|
|
Nine-month period ended: 09/30/2019
|
Company
|
Product Sales and Others
|
Service Fee / Expense Reimbursement and Others
|
|
Product Purchases and Others
|
Service Fee / Expense Reimbursement and Others
|
Net Finance Cost
|
AB USA
|
33,923
|
-
|
|
(604,499)
|
-
|
-
|
AB Package
|
-
|
-
|
|
(55,693)
|
-
|
-
|
Cervecería Modelo
|
93
|
-
|
|
(931,025)
|
-
|
-
|
Inbev
|
-
|
-
|
|
(118,785)
|
-
|
-
|
ITW International
|
-
|
-
|
|
-
|
-
|
(34,887)
|
Others
|
2,628
|
-
|
|
(175,655)
|
-
|
-
|
|
36,644
|
-
|
|
(1,885,657)
|
-
|
(34,887)
|
|
Three-month period ended: 09/30/2019
|
Company
|
Product Sales and Others
|
Service Fee / Expense Reimbursement and Others
|
|
Product Purchases and Others
|
Service Fee / Expense Reimbursement and Others
|
Net Finance Cost
|
AB USA
|
12,928
|
-
|
|
(202,305)
|
-
|
-
|
AB Package
|
-
|
-
|
|
(18,053)
|
-
|
-
|
Cervecería Modelo
|
(99)
|
-
|
|
(316,732)
|
-
|
-
|
Inbev
|
-
|
-
|
|
(38,629)
|
-
|
-
|
ITW International
|
-
|
-
|
|
-
|
-
|
(4,282)
|
Others
|
2,407
|
-
|
|
(58,399)
|
-
|
-
|
|
15,236
|
-
|
|
(634,118)
|
-
|
(4,282)
|
|
|
Nine-month period ended: 09/30/2018
|
Company
|
Product Sales and Others
|
Service Fee / Expense Reimbursement and Others
|
|
Product Purchases and Others
|
Service Fee / Expense Reimbursement and Others
|
Net Finance Cost
|
AB Procurement
|
17,113
|
-
|
|
-
|
(477)
|
-
|
AB USA
|
41,935
|
24
|
|
(553,125)
|
(1,652)
|
-
|
Ambev Peru
|
27
|
-
|
|
-
|
-
|
-
|
Cervecería Modelo
|
26
|
-
|
|
(741,042)
|
(2,125)
|
-
|
Inbev
|
-
|
-
|
|
(79,025)
|
-
|
-
|
Others
|
8,839
|
156
|
|
(108,360)
|
(16,742)
|
(8,221)
|
|
67,940
|
180
|
|
(1,481,552)
|
(20,996)
|
(8,221)
|
|
|
Three-month period ended: 09/30/2018
|
Company
|
Product Sales and Others
|
Service Fee / Expense Reimbursement and Others
|
|
Product Purchases and Others
|
Service Fee / Expense Reimbursement and Others
|
Net Finance Cost
|
AB Procurement
|
76
|
-
|
|
-
|
(477)
|
-
|
AB USA
|
15,566
|
9
|
|
(249,168)
|
(896)
|
-
|
Ambev Peru
|
(292)
|
-
|
|
-
|
-
|
-
|
Cervecería Modelo
|
(30)
|
-
|
|
(192,423)
|
(834)
|
-
|
Inbev
|
-
|
-
|
|
(37,992)
|
-
|
-
|
Others
|
1,413
|
46
|
|
(52,446)
|
(1,625)
|
(149)
|
|
16,733
|
55
|
|
(532,029)
|
(3,832)
|
(149)
|
65
Ambev S.A.
Notes to the interim consolidated financial statements
As at September 30, 2019
(All amounts in thousands of reais unless otherwise stated)
Denomination used in the tables above:
AB InBev Procurement GmbH (“AB Procurement”)
|
Anheuser-Busch InBev N.V. (“AB InBev”)
|
Anheuser-Busch Inbev Services LLC (“AB Services”)
|
Anheuser-Busch Inbev USA LLC (“AB USA”)
|
Anheuser-Busch Packaging Group Inc. (“AB Package”)
|
Bavaria S.A. (“Bavaria”)
|
Cervecería Modelo de Mexico S. de R.L. de C.V. (“Cervecería Modelo”)
|
Cerveceria Nacional S de RL (“Panamá Holding”)
|
Compañia Cervecera Ambev Peru S.A.C. (“Ambev Peru”)
|
Inbev Belgium N.V. (“Inbev”)
|
Interbrew International B.V. (“ITW International”)
|
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: November 4, 2019
|
|
|
|
AMBEV S.A.
|
|
|
|
|
By:
|
/s/ Fernando Mommensohn Tennenbaum
|
|
Fernando Mommensohn Tennenbaum
Chief Financial and Investor Relations Officer
|
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