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 March, 2021

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____

 
 

 

 

 

MANUAL FOR THE ORDINARY AND EXTRAORDINARY

GENERAL SHAREHOLDERS’ MEETINGS

TO BE HELD ON APRIL 29, 2021

 

 

 

INDEX

 

 

1. Message from the Co-Chairman of the Board of Directors

 

2. General Information – Procedures and Deadlines

 

3. Call Notice

 

4. Information Regarding the Matters in the Agenda

 

4.1 Ordinary Shareholders’ Meeting

4.2 Extraordinary Shareholders’ Meeting

4.3 Published Documents to the Shareholders

 

5. Exhibit - Management Proposal

 

 

 
 
1. MESSAGE FROM THE CO-CHAIRMAN OF THE BOARD OF DIRECTORS

 

São Paulo, March 29, 2021.

 

To the Shareholders,

 

We are delighted to invite you to read our Manual for the Ordinary and Extraordinary General Shareholders’ Meetings of Ambev S.A. (“Company”) to be held, cumulatively, on April 29, 2021, at 2:00 pm, at the Company’s headquarters (“AGOE”).

 

The main matters in the agenda for the AGOE are, in short: in the Annual Shareholders’ Meeting, (i) analysis and approval of the management accounts and examination, discussion and voting on the financial statements of the Company for the fiscal year ended December 31, 2020; (ii) resolution on the allocation of the net profits for the year ended December 31, 2020, and ratification of the payment of interest on own capital and dividends related to the fiscal year ended December 31, 2020, approved by the Board of Directors at meetings held, respectively, on December 9 and 21, 2020 and; (iii) election of the effective and alternate members of the Fiscal Council for a term in office of one (1) year, which shall end on the Annual Shareholders’ Meeting to be held in 2022; (iv) establishment of the overall compensation of the management and the members of the Fiscal Council for year 2021; and, in the Extraordinary Shareholders’ Meeting, (v) amendment of the Company's by-laws to: (a) amend the heading of article 2 to reflect the change in the management body responsible for deciding on the opening, maintenance and closure of branches, offices, deposits or representation agencies of the Company; (b) amend items “b”, “h”, “i” and “m” and include items “o” and “p”, all of article 3 to detail in the corporate purpose the ancillary activities related to the main activities performed by the Company; (c) amend the heading of article 5 in order to reflect the capital increases approved by the Board of Directors up to the date of the AGOE, within the authorized capital limit; (d) amend item “s” of article 21 to specify the competence of the Board of Directors when deciding on the participation of the Company in other companies and ventures; and (vi) consolidation of the Company’s Bylaws.

 

The Call Notice included in item 3 of this Manual describes in detail the matters included in the agenda to be resolved on the AGOE. Additional Information may be found in the Management Proposal, an exhibit to this Manual.

 

We encourage the participation of all shareholders in our AGOE and, considering the current recommendations of the Health Ministry, the State Government of São Paulo and the City Hall of São Paulo for the prevention and confrontation of coronavirus (COVID-19), and aiming at the safety of its shareholders, the Company suggests that, if possible, preference should be given to using the distance voting instruments, specially by sending such instruments through the service providers that are able to collect and transmit instructions for filling out the voting instruments (custodian or Banco Bradesco S.A., as the bookkeeper of the Company’s shares), given the greater simplicity of such procedure.

 

Sincerely,

Victorio Carlos De Marchi

 

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2. GENERAL INFORMATION – PROCEDURES AND DEADLINES

 

The participation of the shareholders in the AGOE is of great importance. The Ordinary Shareholders’ Meeting will be declared open upon a first call with the attendance of shareholders representing at least 1/4 of the voting capital. The Extraordinary Shareholders’ Meeting will be declared open upon a first call with the attendance of shareholders representing at least 2/3 of the voting capital. We note that, should there not be sufficient quorum for declaring the shareholders’ meetings open, a new call will take place. Upon a second call, the shareholders’ meetings will be declared open with any number of shareholders present.

 

The participation of the shareholders may be in person, by proxy or by distance voting.

 

2.1. IN PERSON

 

The shareholders willing to participate in person in the AGOE shall be present at 2:00 pm on April 29, 2021, at the Company’s headquarters, located at Rua Dr. Renato Paes de Barros, 1,017, 4th floor, Itaim Bibi, in the City and State of São Paulo, wearing a protective mask, according to coronavirus (COVID-19) safety and prevention protocols, with the following documents:

 

2.1.1. Individuals

 

Identity document with photo of the shareholder (Identity Card (RG), Foreigner’s Identity Card (RNE), Driver’s License (CNH), passport or a document issued by a duly recognized professional association); and

 

Extract stating their respective stock ownership, issued by the custodian entity, within 48 hours prior to the date of the AGOE, for the shareholders taking part in the Registered Stocks Fungible Custody of B3 S.A. – Brasil, Bolsa, Balcão (“B3”).

 

2.1.2. Legal Entities

 

(a) last consolidated by-laws or articles of association, as the case may be, (b) other documents that evidence the powers granted to the legal representative(s) of the shareholder, pursuant to its by-laws or articles of association, including, without limitation, minutes of election of directors, officers, powers of attorney, etc., and (c) identity document with photo of the legal representative(s); and

 

Extract stating their respective stock ownership, issued by the custodian entity, within 48 hours prior to the date of the AGOE, for the shareholders taking part in the Registered Stocks Fungible Custody of B3.

 

2.1.3. Investment Funds

 

(a) last consolidated regulations of the fund, (b) by-laws or articles of association of its administrator or manager, as the case may be, subject to the voting policy of the fund, (c) other documents that evidence the powers granted to the legal representative(s) of the manager or administrator of the fund, as the case may be, and (d) identity document with photo of the legal representative(s); and

 

Extract stating their respective stock ownership, issued by the custodian entity, within 48 hours prior to the date of the AGOE, for the shareholders taking part in the Registered Stocks Fungible Custody of B3.

 

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2.2. PROXY

 

The shareholders that are unable to attend the AGOE may be represented by a proxy granted within less than one year, pursuant to article 126, §1 of Law No. 6,404/76. In this case, in order to take part in the AGOE, the shareholder’s representative must bear an instrument attesting the respective powers of representation at the AGOE.

 

Exceptionally due to the coronavirus pandemic, in order to facilitate the participation at a distance in the AGOE, the Company waives the formalities of signature certification and notarization, consularization and sworn translation of the proxies granted by shareholders, as applicable, which may be signed by digital certificate.

 

The Company requires that, if possible, the powers of attorney with special powers of representation in the AGOE are (a) filed in the Company’s headquarters, directed to the Legal Department, to the attention of the Legal Vice President Officer, Mrs. Letícia Rudge Barbosa Kina; or (b) sent to the email of the Company’s Investor Relations Department (ri@ambev.com.br), with at least 3 business days in advance of the date set forth for the meeting.

 

2.3. DISTANCE VOTING

 

The shareholder that elects to exercise its distance voting right may do so by sending its voting instrument to the services providers that are able to collect and transmit instructions for filling out the instrument, or directly to the Company.

 

The shareholders may send the instructions for completion of the distance voting instrument to service providers which provide services of collection and transmission of instructions for completion of the distance voting instrument, such as:

 

(i) the shareholder’s custodian, in case the shares are deposited in a central depository; or

 

(ii) Banco Bradesco S.A., as the financial institution hired by the Company to provide securities bookkeeping services, in case the shares are not deposited in a central depository.

 

If the shareholder wishes to vote at distance by sending the voting instrument directly to the Company, it shall send the documents below to the Company (a) at Rua Dr. Renato Paes de Barros, 1017, 4th floor, ZIP Code 04530-001, São Paulo/SP, to the attention of the Investor Relations Department (Departamento de Relações com Investidores); or, alternatively, (b) to the email of the Company’s Investor Relations Department (ri@ambev.com.br):

 

(i)distance voting instrument concerning the general meeting, duly filled out and signed, with all of its pages initialized, being allowed signatures by digital certificate;

(ii)   extract containing their respective stock ownership; and

(iii)copy of the following documents:

·   for individuals - identity document with photo of the shareholder;

·   for legal entities - (a) last consolidated by-laws or articles of association, as the case may be, (b) other documents that evidence the powers granted to the legal representative(s) of the shareholder, pursuant to its by-laws or articles of association, including, without limitation, minutes of election of directors, officers, powers of attorney, etc., and (c) identity document with photo of the legal representative(s);

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·   for investment funds - (a) last consolidated regulations of the fund, (b) by-laws or articles of association of its administrator or manager, as the case may be, subject to the voting policy of the fund, (c) other documents that evidence the powers granted to the legal representative(s) of the manager or administrator of the fund, as the case may be, and (d) identity document with photo of the legal representative(s).

 

The following identity documents will be accepted, provided they have a photo of the bearer: Identity Card (RG), Foreigner’s Identity Card (RNE), Driver’s License (CNH), passport or a document issued by a duly recognized professional association.

 

Exceptionally due to the coronavirus pandemic, in order to facilitate the participation at a distance in the AGOE, the Company waives the formalities of signature certification and notarization, consularization and sworn translation for items (i) to (iii) above, accepting a free translation of the documents for purposes of verifying the bulletins for distance vote sent directly to the Company.

 

The distance voting instruments, along with their respective documentation under the terms of this Manul, will only be considered at the AGOE if received by the Company, in good order and in compliance with the provisions above, with at least 7 days in advance of the date of the date of the AGOE. Pursuant to Article 21-U of CVM Instruction No. 481/09, the Company will inform the shareholder whether the documents received are sufficient for the vote to be deemed valid or the procedures and terms for any rectification or for resending, if necessary.

 

If any shareholder wishes to include proposals for resolution or candidates to be members of the board of directors or the fiscal council in the distance voting instruments, it will be required to send such proposals by mail to Rua Dr. Renato Paes de Barros, 1017, 4th floor, ZIP Code 04530-001, São Paulo/SP, to the attention of the Investor Relations Department (Departamento de Relações com Investidores), along with the documents concerning the proposal (including the information mentioned in Article 21-M of CVM Instruction 481/09) and the status and interest of the shareholder, within the terms and in the manner established in the applicable regulation.

 

Considering the current recommendations of the Health Ministry, the State Government of São Paulo and the City Hall of São Paulo for the prevention and confrontation of coronavirus (COVID-19), and aiming at the safety of its shareholders, the Company suggests that, if possible, preference should be given to using the distance voting instruments for participating in the AGOE, specially by sending such instruments through the service providers that are able to collect and transmit instructions for filling out the voting instrument (custodian or Banco Bradesco S.A., as the bookkeeper of the Company’s shares), given the greater simplicity of such procedure.

 

2.4. MECHANISMS FOR CONFLICT OF INTERESTS MANAGEMENT

 

According to the practice recommended in item 5.2.3 of the Brazilian Code of Corporate Governance (Código Brasileiro de Governança Corporativa), the Company has mechanisms for managing conflicts of interests in the voting submitted to the shareholders’ meetings.

 

Article 115, §1 of Law No. 6,404/76 provides that the shareholder may not vote on the resolutions at the shareholders’ meeting that relate to the appraisal report of assets to which the shareholder may contribute on the formation of the capital stock and to the approval of its accounts as manager, nor in any other resolutions that might benefit the shareholder in a particular way, or in which the shareholder has a conflicting interest with the Company’s interest.

 

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During the AGOE, in case of allegation, by any of the shareholders present at the meeting, of an alleged conflict of interest of another shareholder that impedes him of voting at the meeting, or, even, in case of occurrence of another legal hypothesis of voting impediment (including, as the case may be, of participation in a separate voting for the election of a member of the Fiscal Council), and if the shareholder himself has not declared an impediment, the chairman or secretary of the meeting shall postpone the resolution in order to listen and receive such allegation (which shall include the name of the shareholder in potential conflict, the matter to be resolved and the alleged existent conflict), with the possible manifestation in contrary from the relevant shareholder, before putting the matter to a vote. The chairman of the meeting himself may, in identifying a potential voting impediment, request clarifications on the situation from the shareholder, before putting the matter to a vote. If an impediment is confirmed, the relevant shareholder must be immediately absent from the discussions on the matter and abstain from voting.

 

If a conflict situation is identified by a shareholder and such situation is not informed as set forth above, such shareholder must inform the Company of the situation within fifteen days as of the date of the AGOE, so that the management of the Company can take the appropriate measures with regard to the resolution.

 

In line with the understandings of the Brazilian Securities Commission (“CVM”), in situations in which the voting impediment is clear and the shareholder does not abstain from voting, the chairman of the meeting has the power to declare such impediment, not being allowed to impede the voting in other situations, notwithstanding the legal provisions on the potential nullity of the casted vote.

 

 

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3.  CALL NOTICE

 

The shareholders of Ambev S.A. (“Company”) are invited to attend the Ordinary and Extraordinary General Meetings (“AGOE”) to be held on April 29, 2021, at 2:00 p.m., at the Company’s headquarters, located at Rua Dr. Renato Paes de Barros, 1,017, 4 floor, Itaim Bibi, in the City and State of São Paulo, to resolve on the following agenda:

 

(a) Ordinary General Meeting:

 

(i) analyze and approve the management accounts, with examination, discussion and voting on the financial statements related to the fiscal year ended December 31, 2020;

 

(ii) discuss the allocation of the net profits for the fiscal year ended December 31, 2020 and ratification of the payments of interest on own capital and dividends related to the fiscal year ended December 31, 2020, approved by the Board of Directors at the meetings held, respectively, on December 9 and December 21, 2020;

 

(iii) elect the effective and alternate members of the Fiscal Council for a term in office of one (1) year, which shall end on the Ordinary General Meeting to be held in 2022; and

 

(iv) establish the overall compensation of the management and of the members of the Fiscal Council for the fiscal year of 2021.

 

(b) Extraordinary General Meeting:

 

(i) amend the Company's bylaws to:

 

(a) amend the heading of article 2 to reflect the change in the management body responsible for approving the opening, maintenance and closure of branches, offices, deposits or representation agencies of the Company,

 

(b) amend items “b”, “h”, “i” and “m” and add items “o” and “p”, all in article 3, to include in the corporate purpose of the Company ancillary activities related to the core activities developed by the Company,

 

(c) amend the heading of article 5 in order to reflect the capital increases approved by the Board of Directors up to the date of the AGOE, within the authorized capital limit,

 

(d) amend item “s” of article 21 to specify the competence of the Board of Directions in deciding on the participation of the Company in other companies and ventures; and

 

(ii) consolidate the Company’s by-laws.

 

General Information:

 

1. On February 25, 2021 the following documents were published on the newspapers “Diário Oficial do Estado de São Paulo” and “Valor Econômico”: (i) the annual management report; (ii) the financial statements regarding the fiscal year ended on December 31, 2020; (iii) the report of the independent accountant’s opinion; and (iv) the Fiscal Council’s opinion.

 

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2. The documents and information referred to above and those listed in CVM Ruling No. 481/09 were presented to the Comissão de Valores Mobiliários (“CVM”) by means of its information system Empresas.Net, in accordance with Article 6 of such Ruling, and are available to the shareholders at the Company’s headquarters, on its Investor Relations website (ri.ambev.com.br), and on the websites of B3 S.A. – Brasil, Bolsa Balcão (“B3”) (www.b3.com.br) and CVM (www.cvm.gov.br).

 

3. The shareholder or its legal agent must present valid identification in order to vote at the AGOE. Proxies containing special powers for representation in the general meeting shall be deposited at the Company’s headquarters (att. Mrs. Letícia Rudge Barbosa Kina, Legal Vice President Officer) or sent by email to the Investor Relations Department (ri@ambev.com.br), at least three (3) business days prior to the date scheduled for the meetings.

 

4. Shareholders taking part in the Registered Stocks Fungible Custody of B3 that plan on attending the AGOE shall submit a statement containing their respective stock ownership, issued by qualified entity, within forty-eight (48) hours prior to the meetings.

 

5. The shareholder that wishes may opt to exercise its voting right through the distance voting system, under the terms of CVM Ruling No. 481/09, sending the correspondent distance voting instrument through its relevant custodian agents or directly to the Company, according to the instructions provided on item 12.2 of the Company’s Reference Form and the Management Proposal for the AGOE. Considering the current recommendations of the Health Ministry, the State Government of São Paulo and the City Hall of the city of São Paulo for the prevention and confrontation of coronavirus (COVID-19), and aiming at the safety of its shareholders, the Company suggests that, if possible, preference should be given to using the distance voting instruments for participating in the AGOE now convened, specially by sending such instruments through their service providers that are able to collect and transmit instructions for filling out the voting instruments (custodian or Banco Bradesco S.A., as the bookkeeper of the Company’s shares), given the greater simplicity of such procedure.

 

 

São Paulo, March 29, 2021.

 

Victorio Carlos De Marchi

Co-Chairman of the Board of Directors

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4.  INFORMATION REGARDING THE MATTERS IN THE AGENDA

 

4.1. ORDINARY SHAREHOLDER’S MEETING

 

4.1.1. Analysis of the management accounts, examination, discussion and voting on the financial statements for the fiscal year ended December 31, 2020;

 

We propose that the management accounts are approved and the financial statements relating to the fiscal year ended December 31, 2020, as disclosed on February 25, 2021 on the websites of the Brazilian Securities Commission (“CVM”) and the B3 S.A. – Brasil, Bolsa, Balcão, through the Periodic Information System (Sistema de Informações Periódicas), on the Company’s website (www.ri.ambev.com.br) and on the newspapers Valor Econômico and the Official Gazette of the State of São Paulo.

 

We stress that, under the terms of article 9, item III, of CVM Ruling No. 481, of December 17, 2009 (“CVM Ruling 481/09”), the information disclosed in Exhibit A.I to the Management Proposal reflect our comments on the financial situation of the Company.

 

4.1.2. Allocation of the net profits for the year ended December 31, 2020 and ratification of the payment of interest on own capital and dividends for the year ended December 31, 2020, approved by the Board of Directors at the meetings held, respectively, on December 9 and 21, 2020;

 

We propose that the net profit for the fiscal year ended on December 31, 2020 be allocated as indicated below, which is defined in details in Exhibit A.II of this Management Proposal, prepared in accordance with article 9, sole paragraph, item II, of CVM Ruling 481/09. It is further proposed to ratify the payments of interest on own capital and dividends relating to the fiscal year ended on December 31, 2020, approved by the Board of Directors at the meetings held, respectively, on December 9 and 21, 2020, respectively.

 

Net Profits R$ 11,379,394,019.03
Amount allocated to the Tax Incentives Reserve R$ (1,332,751,795.49)
Amount allocated to payment of dividends and / or interest on own capital (gross), declared based on the net profit relating to the fiscal year ended December 31, 2020

R$ (7,716,366,664.66)

 

 

Amount allocated to the Investments Reserve(1) R$ 3,713,041,678.34
(1) Including values relating to (i) reversion of effects of the revaluation of fixed assets in the amount of R$ 11,823,167.53; (ii) effect of application of IAS 29/CPC 42 (hyperinflation) in the amount of R$ 1,344,887,000.00; and (iii) expired dividends in the amount of R$ 26,055,951.93, as detailed in Exhibit A.II to the Management Proposal.

 

4.1.3. Election of the effective and alternate members of the Fiscal Council for a term in office ending at the Ordinary Shareholders’ Meeting to be held in 2022, pursuant to the terms of the Company's by-laws.

 

The controlling shareholders appoint as members of the Fiscal Council the individuals qualified below, who will compose the “Controlling Shareholder Slate – Fiscal Council”:

 

(i) by reelection, José Ronaldo Vilela Rezende, Brazilian, married, accountant, bearer of Identity Card RG No. M-2.399.128 SSP/MG, enrolled with the CPF/ME under No. 501.889.846-15, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an effective member of the Fiscal Council of the Company;
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(ii) by reelection, Elidie Palma Bifano, Brazilian, married, lawyer, bearer of Identity Card RG No. 3.076.167SSP/SP, enrolled with the CPF/ME under No. 395.907.558-87, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an effective member of the Fiscal Council of the Company;

 

(iii) by reelection, Emanuel Sotelino Schifferle, Brazilian, married, engineer, bearer of Identity Card RG No. 01.433.665-5 IFP/RJ, enrolled with the CPF/ME under No. 009.251.367-00, resident and domiciled in the City of Rio de Janeiro, State of Rio de Janeiro, to take office as an alternate member of the Fiscal Council of the Company; and

 

(iv) by reelection, Eduardo Rogatto Luque, Brazilian, married, accountant, bearer of the Identity Card RG No. 17.841.962-X SSP/SP, enrolled with the CPF/ME under No. 142.773.658-84, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an alternate member of the Fiscal Council of the Company.

 

Additionally, Caixa de Previdência dos Funcionários do Banco do Brasil – PREVI, pursuant to article 161, paragraph 4, item “a”, of Law No. 6,404/76 informed the Company's management that it will appoint for the position of members of the Fiscal Council:

 

(i) by reelection, Mr. Vinicius Balbino Bouhid, Brazilian citizen, single, engineer, bearer of Identity Card RG No. 029.562.824 - DETRAN/RJ, enrolled with the CPF/ME under No. 667.460.867/04, resident and domiciled in the City of Rio de Janeiro, State of Rio de Janeiro, to take office as an effective member of the Company's Fiscal Council; and

 

(ii) by reelection, Carlos Tersandro Fonseca Adeodato, Brazilian, divorced, economist, bearer of Identity Card RG No. 10482 CRE/RJ, enrolled with the CPF/ME under No. 337.770.397-72, resident and domiciled in the City of Rio de Janeiro, State of Rio de Janeiro, to take office as an alternate member of the Company’s Fiscal Council.

 

We clarify that, under the terms of article 10 of CVM Ruling 481/09, the information referring to the candidates nominated as members of the Fiscal Council of the Company listed above are further detailed in Exhibit A.III of this Management Proposal.

 

4.1.4. Establishment of the global compensation of the managers and members of the Fiscal Council for year 2021.

 

We propose that the global compensation of the managers for the year 2021 (that is, between January 1, 2021 and December 31, 2021) be established in the global amount of up to R$ 123,529,137.63.

 

According to the CVM guidance (item 3.4.6 of Circular-Notice/CVM/SEP/No. 01/2021 – “Circular Notice”), the global amount of managers’ compensation to be approved in the Ordinary Shareholders’ Meeting according to article 152 of Law No. 6,404/76 must include, besides the fixed compensation and short-term variable of the managers, the expenses relating to the recognition of the fair value of the call options and/or the shares that the Company intends to grant in the fiscal year. We stress that, therefore, in the global amount of managers’ compensation are included (i) the expenses associated with the recognition of the fair value of the stick options the Company intends to grant in this fiscal year based on the Stock Option Plan, dated as of June 30, 2013; and (ii) the expenses associated with the recognition of the fair value of the share-based compensation the Company intends to enforce in this fiscal year based on the Share-Based Compensation Plan, dated as of April 29, 2016, as amended on April 24, 2020, in both cases with accounting, and not financial, effects set forth in CPC 10. Additionally, according to the understanding of the CVM Collegiate body in the Proceeding No. 19957.007457/2018-10, included in the Circular Notice, the overall compensation of the management must be net of employer’s payroll charges, which are not covered by the definition of “benefit of any kind” set forth in article 152 of Law No. 6,404/76. For comparative purposes, this year’s payroll charges were separately disclosed by the Company in item 13.16 of Exhibit A.IV to the Management Proposal.

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As far as the global compensation of the Fiscal Council is concerned, for the year 2021 (that is, between January 1, 2021 and December 31, 2021), we propose the establishment of the global amount of up to R$ 1,845,504.00, with the compensation of the alternate members corresponding to half of the amount received by the effective members, which is in compliance with Law No. 6,404/76.

 

We inform that the amounts paid as global compensation attributed to the managers and members of the Fiscal Council of the Company for the year 2020 were, respectively, R$ 68,616,298.58 and R$ 2,059,972.00. Such amounts are inferior to the limits approved by the Annual Shareholders’ Meeting held on April 24, 2020, of R$ 111,079,130.00 for the managers and R$ 2,162,700.00 for the members of the Fiscal Council. The difference verified between the limits approved by the Ordinary Shareholders’ Meeting of the Company on April 24, 2020 and the amounts actually paid as per the global compensation attributed to the managers is justified, mainly, due to the variable component of the compensation, which is linked to specific performance goals of the managers and the Company, that were not entirely met.

 

Please note that the information required for the necessary analysis of the proposal of compensation of the managers and the Fiscal Council, as provided in article 12 of CVM Ruling 481/09, is set forth in Exhibit A.IV to the Management Proposal, more specifically in items 13.1 and 13.4.

 

 

4.2. EXTRAORDINARY SHAREHOLDERS’ MEETING

 

4.2.1. Amendment of the Company’s Bylaws to:

 

We propose that the Company’s Bylaws be amended, as detailed in Exhibit B.I to the Management Proposal, in order to:

 

(a)  amend the heading of article 2 to reflect the change in the management body responsible for deciding on the opening, maintenance and closure of branches, offices, deposits or representation agencies of the Company;

 

The Management proposes that the Chief Financial and Investor Relations Officer jointly with the Legal Vice President Officer become responsible for deciding on the opening, maintenance and closure of branches, offices, deposits or representation agencies, anywhere in Brazil or abroad, as a replacement to the Board of Directors, as detailed in Exhibit B.I to the Management Proposal.

 

(b)  amend items “b”, “h”, “i” and “m” and include items “o” and “p”, all of article 3:

 

The Management proposes the amendment to detail in the business purpose (i) the production, trading, rental, maintenance and repair of appliances, machinery, utensils and equipment; (ii) the agency of advertising space and the production or rental of promotional and advertising materials; (iii) the rendering of information and internet content services and business intermediation; (iv) the promotion and intermediation of financial services’ and payments’ offers directly or indirectly related to the Company’s main activities; (v) contracting, sale and/or distribution of third parties’ products; (vi) rendering of logistics services, including warehousing, stock management and inventories in storages owned by the Company or by third parties, and cargo transportation in general; (vii) generation and trading of energy and equipment for generating energy, as well as any other ancillary activity to enable the implementation of projects for generation, use or trade of energy related to the Company’s main activities; and (viii) collection, transportation, treatment, recycling, reuse, disposition and/or trading of scrap and solid waste of the Company or of third parties, as well as the reuse of such waste, in its transformation cycle or any other productive cycle of third parties, or any other environmentally appropriate final destination (for reverse logistics), among other related activities, as detailed in Exhibit B.I to the Management Proposal.

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The detailing of the corporate purpose proposed herein does not modify the Company’s operating segment and its predominant activities, representing nothing more than an addition of ancillary or integrated activities with those already performed by the Company, compatible with its purposes and, therefore, if approved, will not give rise to shareholders’ right to withdraw under the terms of articles 136, VI, and 137, I, of Law No. 6,404/76.

 

(c)  amend the heading of article 5 to reflect the capital increases approved by the Company’s Board of Directors, within the authorized capital limit until the date of the Annual Shareholders’ Meeting:

 

If this proposal is approved, the language of the heading of article 5 of the Company’s Bylaws will be in force as set provided in Exhibit B.I to the Management Proposal.

 

(d)  amend item “s” of article 21 to specify the competence of the Board of Directors to decide on the participation of the Company in other companies and ventures:

 

The Management proposes to specify the Board of Directors’ competence to decide on the Company’s participation in other companies and ventures with regard to transactions with a material relevance to the Company, as detailed in Exhibit B.I to the Management Proposal.

 

4.2.2. Approve the consolidation of the Company’s Bylaws.

 

In order to reflect the foregoing amendments, the Management proposes the restatement of the Company’s Bylaws, under the terms of the Exhibit B.I to the Management Proposal.

 

4.3. DOCUMENTS DISCLOSED TO SHAREHOLDERS

 

The following documents were published on February 25, 2021 on the newspapers “Diário Oficial do Estado de São Paulo” and “Valor Econômico”: (i) the annual management report; (ii) the financial statements regarding the fiscal year ended on December 31, 2020; (iii) the report of the independent accountant’s opinion; and (iv) the Fiscal Council’s opinion.

 

The documents and information referred to above and those listed in CVM Ruling No. 481/09 were presented to the Comissão de Valores Mobiliários – CVM by means of its information system Empresas.Net, in accordance with Article 6 of such Ruling, and are available to the shareholders at the Company’s headquarters, on its Investor Relations website (ri.ambev.com.br), and on the websites of B3 (www.b3.com.br) and CVM (www.cvm.gov.br).

 

12 
 


EXHIBIT

 

 

 

AMBEV S.A.

 

 

MANAGEMENT PROPOSAL

 

 

ORDINARY AND EXTRAORDINARY

SHAREHOLDERS’ MEETINGS

 

 

 

MARCH 29, 2021

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AMBEV S.A.

CNPJ/ME [National Corporate Taxpayers Register of the Ministry of Economy] No. 07.526.557/0001-00

NIRE [Corporate Registration Identification Number] 35.300.368.941

 

To the Shareholders,

 

We hereby present the following Management Proposal regarding the matters set forth in the agenda for the Ordinary and Extraordinary Shareholders’ Meetings of Ambev S.A. (“Company” and “AGOE”, respectively) to be held, cumulatively, on April 29, 2021, at 2:00 p.m. (“Proposal”):

 

A. Annual Shareholders’ Meeting:

 

1.  Analysis of the management accounts, examination, discussion and voting on the financial statements for the fiscal year ended December 31, 2020;

 

We propose that the management accounts are approved and the financial statements relating to the fiscal year ended December 31, 2020, as disclosed on February 25, 2021 on the websites of the Brazilian Securities Commission (“CVM”) and the B3 S.A. – Brasil, Bolsa, Balcão, through the Periodic Information System (Sistema de Informações Periódicas), on the Company’s website (www.ri.ambev.com.br) and on the newspapers Valor Econômico and the Official Gazette of the State of São Paulo.

 

We stress that, under the terms of article 9, item III, of CVM Ruling No. 481, of December 17, 2009 (“CVM Ruling 481/09”), the information disclosed in Exhibit A.I to this Management Proposal reflect our comments on the financial situation of the Company.

 

2.  Allocation of the net profits for the year ended December 31, 2020 and ratification of the payment of interest on own capital and dividends for the year ended December 31, 2020, approved by the Board of Directors at the meetings held, respectively, on December 9 and 21, 2020;

 

We propose that the net profit for the fiscal year ended on December 31, 2020 be allocated as indicated below, which is defined in details in Exhibit A.II of this Management Proposal, prepared in accordance with article 9, sole paragraph, item II, of CVM Ruling 481/09. It is further proposed to ratify the payments of interest on own capital and dividends relating to the fiscal year ended on December 31, 2020, approved by the Board of Directors at the meetings held, respectively, on December 9 and 21, 2020, respectively.

 

Net Profits R$ 11,379,394,019.03
Amount allocated to the Tax Incentives Reserve R$ (1,332,751,795.49)
Amount allocated to payment of dividends and / or interest on own capital (gross), declared based on the net profit relating to the fiscal year ended December 31, 2020

R$ (7,716,366,664.66)

 

 

Amount allocated to the Investments Reserve(1) R$ 3,713,041,678.34
(1) Including values relating to (i) reversion of effects of the revaluation of fixed assets in the amount of R$ 11,823,167.53; (ii) effect of application of IAS 29/CPC 42 (hyperinflation) in the amount of R$ 1,344,887,000.00; and (iii) expired dividends in the amount of R$ 26,055,951.93, as detailed in Exhibit A.II to this Management Proposal.

 

14 
 

3. Election of the effective and alternate members of the Fiscal Council for a term in office ending at the Ordinary Shareholders’ Meeting to be held in 2022, pursuant to the terms of the Company's by-laws.

 

The controlling shareholders appoint as members of the Fiscal Council the individuals qualified below, who will compose the “Controlling Shareholder Slate – Fiscal Council”:

 

(v) by reelection, José Ronaldo Vilela Rezende, Brazilian, married, accountant, bearer of Identity Card RG No. M-2.399.128 SSP/MG, enrolled with the CPF/ME under No. 501.889.846-15, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an effective member of the Fiscal Council of the Company;

 

(vi) by reelection, Elidie Palma Bifano, Brazilian, married, lawyer, bearer of Identity Card RG No. 3.076.167SSP/SP, enrolled with the CPF/ME under No. 395.907.558-87, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an effective member of the Fiscal Council of the Company;

 

(vii) by reelection, Emanuel Sotelino Schifferle, Brazilian, married, engineer, bearer of Identity Card RG No. 01.433.665-5 IFP/RJ, enrolled with the CPF/ME under No. 009.251.367-00, resident and domiciled in the City of Rio de Janeiro, State of Rio de Janeiro, to take office as an alternate member of the Fiscal Council of the Company; and

 

(viii) by reelection, Eduardo Rogatto Luque, Brazilian, married, accountant, bearer of the Identity Card RG No. 17.841.962-X SSP/SP, enrolled with the CPF/ME under No. 142.773.658-84, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an alternate member of the Fiscal Council of the Company.

 

Additionally, Caixa de Previdência dos Funcionários do Banco do Brasil – PREVI, pursuant to article 161, paragraph 4, item “a”, of Law No. 6,404/76 informed the Company's management that it will appoint for the position of members of the Fiscal Council:

 

(iii) by reelection, Mr. Vinicius Balbino Bouhid, Brazilian citizen, single, engineer, bearer of Identity Card RG No. 029.562.824 - DETRAN/RJ, enrolled with the CPF/ME under No. 667.460.867/04, resident and domiciled in the City of Rio de Janeiro, State of Rio de Janeiro, to take office as an effective member of the Company's Fiscal Council; and

 

(iv) by reelection, Carlos Tersandro Fonseca Adeodato, Brazilian, divorced, economist, bearer of Identity Card RG No. 10482 CRE/RJ, enrolled with the CPF/ME under No. 337.770.397-72, resident and domiciled in the City of Rio de Janeiro, State of Rio de Janeiro, to take office as an alternate member of the Company’s Fiscal Council.

 

We clarify that, under the terms of article 10 of CVM Ruling 481/09, the information referring to the candidates nominated as members of the Fiscal Council of the Company listed above are further detailed in Exhibit A.III of this Management Proposal.

 

4.Establishment of the global compensation of the managers and members of the Fiscal Council for year 2021.

 

We propose that the global compensation of the managers for the year 2021 (that is, between January 1, 2021 and December 31, 2021) be established in the global amount of up to R$ 123,529,137.63.

15 
 

 

According to the CVM guidance (item 3.4.6 of Circular-Notice/CVM/SEP/No. 01/2021 – “Circular Notice”), the global amount of managers’ compensation to be approved in the Ordinary Shareholders’ Meeting according to article 152 of Law No. 6,404/76 must include, besides the fixed compensation and short-term variable of the managers, the expenses relating to the recognition of the fair value of the call options and/or the shares that the Company intends to grant in the fiscal year. We stress that, therefore, in the global amount of managers’ compensation are included (i) the expenses associated with the recognition of the fair value of the stick options the Company intends to grant in this fiscal year based on the Stock Option Plan, dated as of June 30, 2013; and (ii) the expenses associated with the recognition of the fair value of the share-based compensation the Company intends to enforce in this fiscal year based on the Share-Based Compensation Plan, dated as of April 29, 2016, as amended on April 24, 2020, in both cases with accounting, and not financial, effects set forth in CPC 10. Additionally, according to the understanding of the CVM Collegiate body in the Proceeding No. 19957.007457/2018-10, included in the Circular Notice, the overall compensation of the management must be net of employer’s payroll charges, which are not covered by the definition of “benefit of any kind” set forth in article 152 of Law No. 6,404/76. For comparative purposes, this year’s payroll charges were separately disclosed by the Company in item 13.16 of Exhibit A.IV to this Proposal.

 

As far as the global compensation of the Fiscal Council is concerned, for the year 2021 (that is, between January 1, 2021 and December 31, 2021), we propose the establishment of the global amount of up to R$ 1,845,504.00, with the compensation of the alternate members corresponding to half of the amount received by the effective members, which is in compliance with Law No. 6,404/76.

 

We inform that the amounts paid as global compensation attributed to the managers and members of the Fiscal Council of the Company for the year 2020 were, respectively, R$ 68,616,298.58 and R$ 2,059,972.00. Such amounts are inferior to the limits approved by the Annual Shareholders’ Meeting held on April 24, 2020, of R$ 111,079,130.00 for the managers and R$ 2,162,700.00 for the members of the Fiscal Council. The difference verified between the limits approved by the Ordinary Shareholders’ Meeting of the Company on April 24, 2020 and the amounts actually paid as per the global compensation attributed to the managers is justified, mainly, due to the variable component of the compensation, which is linked to specific performance goals of the managers and the Company, that were not entirely met.

 

Please note that the information required for the necessary analysis of the proposal of compensation of the managers and the Fiscal Council, as provided in article 12 of CVM Ruling 481/09, is set forth in Exhibit A.IV to this Management Proposal, more specifically in items 13.1 and 13.4.

 

B. Extraordinary Shareholders’ Meeting:

 

5.Amendment of the Company’s Bylaws to:

 

We propose that the Company’s Bylaws be amended, as detailed in Exhibit B.I to this Proposal, in order to:

 

(e)  amend the heading of article 2 to reflect the change in the management body responsible for deciding on the opening, maintenance and closure of branches, offices, deposits or representation agencies of the Company;

 

16 
 

The Management proposes that the Chief Financial and Investor Relations Officer jointly with the Legal Vice President Officer become responsible for deciding on the opening, maintenance and closure of branches, offices, deposits or representation agencies, anywhere in Brazil or abroad, as a replacement to the Board of Directors, as detailed in Exhibit B.I to this Proposal.

 

(f)   amend items “b”, “h”, “i” and “m” and include items “o” and “p”, all of article 3:

 

The Management proposes the amendment to detail in the business purpose (i) the production, trading, rental, maintenance and repair of appliances, machinery, utensils and equipment; (ii) the agency of advertising space and the production or rental of promotional and advertising materials; (iii) the rendering of information and internet content services and business intermediation; (iv) the promotion and intermediation of financial services’ and payments’ offers directly or indirectly related to the Company’s main activities; (v) contracting, sale and/or distribution of third parties’ products; (vi) rendering of logistics services, including warehousing, stock management and inventories in storages owned by the Company or by third parties, and cargo transportation in general; (vii) generation and trading of energy and equipment for generating energy, as well as any other ancillary activity to enable the implementation of projects for generation, use or trade of energy related to the Company’s main activities; and (viii) collection, transportation, treatment, recycling, reuse, disposition and/or trading of scrap and solid waste of the Company or of third parties, as well as the reuse of such waste, in its transformation cycle or any other productive cycle of third parties, or any other environmentally appropriate final destination (for reverse logistics), among other related activities, as detailed in Exhibit B.I to this Proposal.

 

The detailing of the corporate purpose proposed herein does not modify the Company’s operating segment and its predominant activities, representing nothing more than an addition of ancillary or integrated activities with those already performed by the Company, compatible with its purposes and, therefore, if approved, will not give rise to shareholders’ right to withdraw under the terms of articles 136, VI, and 137, I, of Law No. 6,404/76.

 

(g)  amend the heading of article 5 to reflect the capital increases approved by the Company’s Board of Directors, within the authorized capital limit until the date of the Annual Shareholders’ Meeting:

 

If this proposal is approved, the language of the heading of article 5 of the Company’s Bylaws will be in force as set provided in Exhibit B.I to this Proposal.

 

(h)  amend item “s” of article 21 to specify the competence of the Board of Directors to decide on the participation of the Company in other companies and ventures:

 

The Management proposes to specify the Board of Directors’ competence to decide on the Company’s participation in other companies and ventures with regard to transactions with a material relevance to the Company, as detailed in Exhibit B.I to this Management Proposal.

 

6.Approve the consolidation of the Company’s Bylaws.

 

In order to reflect the foregoing amendments, the Management proposes the restatement of the Company’s Bylaws, under the terms of the Exhibit B.I to this Management Proposal.

 

 

São Paulo, March 29, 2021.

 

 

The Management

Ambev S.A.

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EXHIBIT A.I – COMMENTS FROM THE MANAGEMENT

 

(as Item 10 to Annex 24 to CVM Instruction 480/09)

 

10.1– General financial and asset conditions

 

The financial information included in this section, except if otherwise expressly set forth, refer to our consolidated financial statements related to the fiscal years that ended on December 31, 2020, 2019 and 2018. Our consolidated audited financial statements were prepared in accordance with the International Financial Reporting Standards (“IFRSs”), issued by the International Accounting Standards Board (“IASB”), and in accordance with the accounting practices adopted in Brazil, that comprehend the accounting practices set forth in Law No. 6404/76 and the pronouncements, guidance and interpretations issued by the Accounting Pronouncement Committee (Comitê de Pronunciamentos Contábeis – CPC) and approved by CVM.

 

On January 1, 2019, we adopted IFRS 16 which establishes principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. IFRS 16 Leases replaces the current lease accounting requirements and introduces significant changes in the accounting, removing the distinction between operating and finance leases under IAS 17 Leases and related interpretations, and requires a lessee to recognize a right-of-use asset and a lease liability at lease commencement date. The impact to the financial statements is demonstrated in the recognition of right-of-use assets and lease liabilities in the balance sheet. As a result of the above, our audited consolidated financial statements for the year ended December 31, 2018 have been restated for comparative purposes using the full retrospective method.

 

The information under this item 10 of the Reference Form must be read and analyzed together with our consolidated financial statements, available at our website (ri.ambev.com.br/en/) and at the CVM’s website (cvm.gov.br).

 

a) general financial and asset conditions.

 

The Executive Board understands that the Company presents sufficient equity and financial conditions to implement its business plan and perform its obligations of short and medium term.

 

2020

As of December 31, 2020, the Company had, in its current assets, a total of R$ 35,342.6 million, with R$ 18,790.4 million in cash and cash equivalents of the Company. The current liabilities as of December 31, 2020 amounted to R$ 33,478.0 million. The current liquidity ratio, used to assess the Company’s capacity of payment of the short-term obligations, was 1.1x. Its positions of cash net of bank overdrafts and cash net of debt[1] were R$ 17,090.3 million and R$ 13,998.1 million, respectively. The indebtedness indicator of net debt/EBITDA[2] was -0.65.

 

2019

As of December 31, 2019, the Company had, in its current assets, a total of R$ 27,621.1 million, with R$ 11,915.2 in cash and cash equivalents of the Company. The current liabilities as of December 31, 2019 amounted to R$ 25,011.0 million. The current liquidity ratio, used to assess the Company’s capacity of payment of the short-term obligations, was 1.1x. Its positions of cash net of bank overdrafts and cash net of debt were R$ 11,900.6 million and R$ 8,852.4 million, respectively. The indebtedness indicator of net debt/EBITDA was -0.42.

 


[1] The cash net of bank overdrafts position is represented by the balances of cash and cash equivalents being deducted the balance of bank overdrafts. The cash net of debt position is represented by the cash net of bank overdrafts position added by balances of current financial investments and being deducted the balances of loans and financings. Both the cash net of bank overdrafts position and the cash net of debt position are performance indicators used by the Company, and they are not measures according to the Accounting Practices Adopted in Brazil or according to IFRS.

 

[2] The Company calculates the net debt as the balances of loans and financings being deducted the balances of current financial investments and cash net of bank overdrafts. The net debt/EBITDA is a performance indicator used by the Company, and it is not a measure according to the Accounting Practices Adopted in Brazil or according to IFRS.

18 
 

 

2018

As of December 31, 2018, the Company had total current assets in the amount of R$ 25,329.6 million, with R$ 11,476.9 in cash and cash equivalents of the Company. The current liabilities as of December 31, 2018 amounted to R$ 25,208.9 million. The liquidity ratio, used to assess the Company’s capacity of payment of the short-term obligations, was 1.0x. Its positions of cash net of bank overdrafts and cash net of debt were R$ 11,476.9 million and R$ 7,373.2 million, respectively. The indebtedness indicator of net debt/EBITDA was -0.34.

 

(in million of Reais) 12/31/2020 12/31/2019 12/31/2018
Total Current Assets 35,342.6 27,621.1 25,329.6
Total Current Liabilities 33,478.0 25,011.0 25,208.9
Net Working Capital Ratio (CA-CL) 1,864.7 2,610.1 120.7
Net Cash of Bank Overdrafts 17,090.3 11,900.6 11,476.9
Cash net of debt 13,998.1 8,852.4 7,373.2

 

  12/31/2020 12/31/2019 12/31/2018
Current Liquidity 1.1 1.1 1.0
Net Debt/EBITDA -0.65 -0.42 -0.34

 

b) capital structure.

 

Capital Structure On December 31
2020 2019 2018
R$ million % R$ million % R$ million %
Third-party financing(1) 50,045.5 40 39,186.9 39 38,259.6 40
Equity(2) 75,151.1 60 62,556.0 61 57,454.8 60

(1) The Company’s third-party financing is represented by the totality of the current and non-current liabilities.

(2) The Company’s equity is represented by the consolidated owner’s equity.

 

The Company’s capital structure was the following: (i) as of December 31, 2018, 60% of equity and 40% of third-party financing; (ii) as of December 31, 2019, 61% of equity and 39% of third-party financing; and (iii) as of December 31, 2020, 60% of equity and 40% of third-party financing.

 

c) payment capacity in relation to financial commitments undertaken.

 

(in million of Reais) 12/31/2020 12/31/2019 12/31/2018
Total debt 4,792.2 3,062.8 4,103.7
Short-term debt 2,738.8 653.1 1,941.2
Total current assets 35,342.6 27,621.1 25,329.6
Cash and cash equivalents 18,790.4 11,915.2 11,476.9
Current liquidity ratio 1.1x  1.1x   1.0x
Cash net of debt 13,998.1 8,852.4 7,373.2

 

 

2020

Considering the Company’s debt profile, as described in 10.1(f) below (total debt of R$ 4,792.2 million as of December 31, 2020, of which R$ 2,738.8 million is short-term debt), its cash flow and liquidity position evidenced by total current assets (R$ 35,342.6 million), cash and cash equivalents (R$ 18,790.4 million), current liquidity ratio (1.1x) and cash net of debt (R$ 13,998.1 million), all as of December 31, 2020, indicated in 10.1 (a) above, the directors believe that the Company has sufficient liquidity and capital resources to cover the investments, costs, expenses, debts and other amounts payable over the next few years, although they cannot guarantee that this situation will remain unchanged. In case it may be necessary to take out new loans to finance its investments and acquisitions, the directors believe that the Company has capacity to do so.

19 
 

 

2019

Considering the Company’s debt profile, as described in 10.1(f) below (total debt of R$ 3,062.8 million as of December 31, 2019, of which R$ 653.1 million is short-term debt), its cash flow and liquidity position evidenced by total current assets (R$ 27,621.1 million), cash and cash equivalents (R$ 11,915.2 million), current liquidity ratio (1.1x) and cash net of debt (R$ 8,852.4 million), all as of December 31, 2019, indicated in 10.1 (a) above, the directors believe that the Company has sufficient liquidity and capital resources to cover the investments, costs, expenses, debts and other amounts payable over the next few years, although they cannot guarantee that this situation will remain unchanged. In case it may be necessary to take out new loans to finance its investments and acquisitions, the directors believe that the Company has capacity to do so.

 

2018

Considering the Company’s debt profile, as described in 10.1(f) below (total debt of R$4,103.7 million as of December 31, 2018, of which R$ 1,941.2 million is short-term debt), its cash flow and liquidity position evidenced by total current assets (R$25,329.6 million), cash and cash equivalents (R$ 11,476.9 million), current liquidity ratio (1.0x) and cash net of debt (R$ 7,373.2 million), all as of December 31, 2018, indicated in 10.1 (a) above, the officers believe that the Company has sufficient liquidity and capital resources to cover the investments, costs, expenses, debts and other amounts payable over the next few years, although they cannot guarantee that this situation will remain unchanged. In case it may be necessary to take out new loans to finance its investments and acquisitions, the officers believe that the Company has capacity to do so.

 

d) sources of financing for working capital and investments in non-current assets used.

 

The Company’s working capital cycle has substantially evolved every year since 2014, and as of December 31, 2020, 2019 and 2018, it reported a positive working capital, meaning that there is no need to raise new loans to finance working capital.

 

With regard to investments in non-current assets, the Company’s current cash position and the expected cash flow generation are sufficient to cover these investments. In any case, the Company has wide access to funding sources should there be an occasional need for supplemental cash funding for such investments.

 

 

e) sources of financing for working capital and for investments in non-current assets that it intends to use to cover liquidity shortfalls.

 

The Company has access to credit facilities extended by leading Brazilian and foreign banks, and has already raised funds in domestic and international capital markets. The Company’s current investment grade rating issued by key international rating agencies facilitates its access to additional financing arrangements that could be used to compensate any potential liquidity shortcomings. The Company has a Baa3 risk credit by Moody`s and BBB by S&P.

 

f) levels of indebtedness and characteristics of debts.

 

i. relevant financing and loan agreements

 

Please, find below additional information related to each one of the fiscal years that ended on December 31, 2020, 2019 and 2018:

 

20 
 

2020

 

The Company's debt was structured in a manner to avoid significant concentration of maturities in each year and is tied to different interest rates. The most significant rates are: (i) fixed rate for the Bond 2021, BNDES/FINEP and loan from Banco BNP Paribas; (ii) Long-Term Interest Rate (TJLP) for loans from Brazilian Bank of Economic and Social Development (“BNDES”); (iii) Reference Interest Rate (“TR”) for the CRI 2030 operation; and (iv) floating rate (Libor) for international loans and (“CDI”) for the loan from Itaú.

 

As of December 31, 2020, the Company was in compliance with its contractual obligations for its loans and financings and with any applicable borrowing limits.

 

Debt Profile – December 31, 2020

 

Debt Instruments 2021 2022 2023 2024 2025 After Total
TJLP BNDES debt or TR floating rate              
Par Value 11.60 12.29 12.27 13.43 14.69 96.94 161.2
TJLP or TR + Average Pay Rate 9.3% 9.3% 9.3% 9.3% 9.3% 9.3%  
International Debt              
Other Latin-American currencies – fixed rate 436.33 95.30 9.73 7.18 14.24 27.21 590.0
Average Pay Rate 8% 8% 8% 8% 8% 8%  
US dollar – fixed rate 4.9           4.9
Average Pay Rate 4.2%            
US dollar – floating rate              
Average Pay Rate              
Canadian dollar – floating rate              
Average Pay Rate              
Canadian dollar – fixed rate 64.9 54.8 51.1 42.8 24.7 104.3 342.6
Average Pay Rate 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%  
Debt in Reais - ICMS fixed rate              
Par Value 36.7 34.1 20.7 3.0 5.6 35.5 135.7
Average Pay Rate 4.5% 4.5% 4.5% 4.5% 4.5% 4.5%  
Debt in Reais - fixed rate              
Par Value 1,333.1 337.0 278.2 169.1 195.0 393.1 2,705.5
Average Pay Rate 5.4% 5.4% 5.4% 5.4% 5.4% 5.4%  
Debt in Reais - floating rate              
Par Value 851.3 1.1         852.4
Average Pay Rate 3.9% 3.9%          
Total indebtedness 2,738.8 534.6 372.0 235.6 254.2 657.1 4,792.2

 

2019

The Company's debt was structured in a manner to avoid significant concentration of maturities in each year and is tied to different interest rates. The most significant rates are: (i) fixed rate for the Bond 2021 and BNDES/FINEP; (ii) Long-Term Interest Rate (TJLP) for loans from Brazilian Bank of Economic and Social Development (“BNDES”); (iii) reference interest rate (“TR”) for the CRI 2030 operation; and (iv) floating rate (Libor) for international loans.

21 
 

 

As of December 31, 2019, the Company was in compliance with its contractual obligations for its loans and financings and with any applicable borrowing limits.

 

Debt Profile – December 31, 2019

 

Debt Instruments 2020 2021 2022 2023 2024 After Total
TJLP BNDES debt or TR floating rate              
Par Value 10.0 10.5 14.0 12.3 13.4 111.6 171.8
TJLP or TR + Average Pay Rate 9.3% 9.3% 9.3% 9.3% 9.3% 9.3%  
International Debt              
Other Latin-American currencies – fixed rate 34.4 230.6 14.1 13.0 17.5 38.3 348.0
Average Pay Rate 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%  
US dollar – fixed rate 10.9 8.1 - - - - 19.1
Average Pay Rate 4.7% 4.7% 0.0% 0.0% 0.0% 0.0%  
US dollar – floating rate 95.1 0.2 - - - - 95.3
Average Pay Rate 4.1% 4.1% 0.0% 0.0% 0.0% 0.0%  
Canadian dollar – floating rate 38.0 39.3 36.3 55.2 26.4 48.5 243.7
Average Pay Rate 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%  
Canadian dollar – fixed rate 0.5 - - - - - 0.5
Average Pay Rate 2.7% - - - - -  
Debt in Reais - ICMS fixed rate              
Par Value 40.4 34.7 23.2 4.9 0.8 22.4 126.4
Average Pay Rate 6.1% 6.1% 6.1% 6.1% 6.1% 6.1%  
Debt in Reais - fixed rate              
Par Value 423.9 568.5 368.8 161.4 80.7 454.9 2,058.1
Average Pay Rate 7.9% 7.8% 7.8% 7.8% 7.8% 7.8%  
Total indebtedness 653.1 892.0 456.4 246.8 138.8 675.6 3,062.8

 

2018

The Company's debt was structured in a manner to avoid significant concentration of maturities in each year and is tied to different interest rates. The most significant rates are: (i) fixed rate for the Bond 2021 and BNDES/FINEP; (ii) Long-Term Interest Rate (TJLP) for loans from Brazilian Bank of Economic and Social Development (“BNDES”); (iii) reference interest rate (“TR”) for the CRI 2030 operation; and (iv) floating rate (Libor and CAD BA) for international loans.

 

As of December 31, 2018, the Company was in compliance with its contractual obligations for its loans and financings and with any applicable borrowing limits.

22 
 

 

Debt Profile – December 31, 2018

Debt Instruments 2019 2020 2021 2022 2023 After Total
TJLP BNDES debt or TR floating rate              
Par Value 75.3 9.7 10.1 10.8 11.8 120 237.7
TJLP or TR  + Average Pay Rate 9.1% 9.3% 9.3% 9.3% 9.3% 9.3%  
International Debt              
Other Latin-American currencies - fixed rate 26.1 80.9 120.6 33.8 - - 261.3
Average pay rate 10.0% 10.0% 10.0% 10.0%      
US Dollar - fixed rate 32.4 2.2 - 7.8 - - 42.4
Average pay rate 4.4% 2.2% - 4.3% - -  
US Dollar -floating rate 538.8 91.2 - - - - 630.0
Average pay rate 3.6% 5.1% - - - -  
Canadian Dollar -floating rate 743.9 2.8 2.9 1.8 1.8 - 753.2
Average pay rate 2.4% 2.8% 2.8% 2.8% 2.8% -  

Canadian dollar -

fixed rate

25.2 23.4 21.5 21.2 16.4 37.9 145.5
Average Pay Rate 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%  
Debt in Reais – ICMS fixed rate              
Par value 37.2 38 22.7 5.4 2.8 22.4 128.5
Average pay rate 5.8% 5.8% 5.8% 5.8% 5.8% 5.8%  
Debt in Reais – fixed rate              
Par value 462.3 497.5 538.6 284.1 57.2 65.2 1,905.0
Average pay rate 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%  
Total debt 1,941.2 745.7 716.5 364.9 89.9 245.5 4,103.7

 

ii. other long-term relations with financial institutions

 

The Company has other long-term relations with financial institutions, such as payroll agreements, derivative operations and guarantee agreements.

 

iii. subordination degree among the debts

 

In the years ended on December 31, 2020, 2019 and 2018, 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 BNDES, where collateral is provided on assets acquired with the credit granted which serve as collateral; other loans and financing contracted by the Company provide only personal guarantees as collateral, or are unsecured.

 

iv. any restrictions imposed to the issuer, especially concerning the limit of indebtedness and contracting of new debts, the distribution of dividends, the sale of assets, the issue of new securities and the sale of the corporate control, as well as if those restrictions are being complied with by the issuer

 

Most of the loan contracts contain financial covenants including:

 

(i) financial covenants, including restrictions on new borrowing;

(ii) going-concern;

(iii) maintenance, in use or in good condition for the business, of the Company's assets;

23 
 

(iv) restrictions on acquisitions, mergers, sale or disposal of its assets;

(v) disclosure of accounting statements and balance sheets;

(vi) prohibition related to new real guarantees for loans contracted, except if (a) expressly authorized under the agreement or (b) new loans contracted from financial institutions linked to the Brazilian government - including the BNDES or foreign governments; - or foreign governments, multilateral financial institutions (e.g., World Bank) or located in jurisdictions in which the Company operates.

 

As of December 31, 2020, the Company was in compliance with its contractual obligations for its loans and financings.

 

g) borrowing limits contracted and percentages utilized

 

As of December 31, 2020, the Company had loans with BNDES, FINEP and FINAME credit facilities with private banks in the amount of R$ 4,792.2 billion. Of this total, R$ 2,671.2 billion (55.7%) are being used, with R$ 2,121.1 billion (44.3%) still available.

 

 

h) significant changes to each item of the Financial Statements

 

The following table shows the amounts outstanding on the Company balance sheet for the periods indicated.

 

BALANCE SHEET

(in million of Reais)      
  December 31
Assets 2020 2019 2018
       
Cash and cash equivalents 17,090.3 11,900.7 11,463.5
Investment securities 1,700.0 14.6 13.4
Derivative financial instruments 505.9 172.1 220.0
Trade receivables 4,303.1 4,495.5 4,879.3
Inventories 7,605.9 5,978.6 5,401.8
Income tax and social contributions recoverable 1,759.2 1,831.4 1,285.4
Recoverable taxes 1,527.9 2,242.7 863.3
Other assets 850.0 985.5 1,202.9
Current Assets 35,342.3 27,621.1 25,329.6
       
       
Investment securities 213.9 163.6 147.3
Derivative financial instruments 3.4 1.2 34.9
Income tax and social contributions recoverable 4,495.0 4,331.9 3,834.4
 Recoverable taxes 5,695.8 671.1 539.8
Deferred tax assets 4,560.8 2,950.1 2,064.7
Other assets 2,141.6 1,751.7 1,687.4
Employee Benefits 33.6 56.2 64.3
Investments 337.4 303.4 257.1
Property, plant and equipment 24,768.4 22,576.3 21,638.0
Intangible 7,580.6 6,306.4 5,840.6
Goodwill 40,023.5 35,009.9 34,276.2
Non-current assets 89,854.0 74,121.8 70,384.7
       
Total assets 125,196.3   101,742.9 95,714.3
       
Equity and liabilities      
       
Trade payables 19,339.2 15,069.6 14,050.0
Derivative financial instruments 329.8 355.3 679.3
Interest-bearing loans and borrowings 2,738.8 653.1 1,941.1
Bank overdrafts  - - -
Wages and salaries 925.5 833.0 851.6
Dividends and interest on shareholders’ equity payable 2,454.7 956.6 807.0
Income tax and social contribution payable 1,167.3 1,394.2 1,558.6
Taxes and contributions payable 4,549.5 4,108.5 3,781.6
Other liabilities 1,848.1 1,530.7 1,366.6
24 
 

 

Provisions 124.9 110.0 173.0
Current liabilities 33,477.8   25,011.0 25,208.8
       
Trade payables 655.8 309.5 126.1
Derivative financial instruments 0.0 0.1 2.5
Interest-bearing loans and borrowings 2,053.5 2,409.7 2,162.4
Deferred tax assets 3,043.4 2,371.1 2,424.6
Income tax and social contribution payable (i) 1,912.6 2,219.5 2,227.8
Taxes and contributions payable 684.3   645.2 675.6
Put option granted on subsidiaries and other liabilities 4,226.6 3,145.3 2,661.8
Provisions 447.1 371.0 426.2
Employee benefits 3,544.0 2,704.5 2,343.7
Non-current liabilities 16,567.3   14,175.9 13,050.7
       
Total liabilities 50,045.1 39,186.9 38,259.5
       
Equity      
Issued capital 57,899.1 57,866.8 57,710.2
Reserves 80,905.6 75,685.7 70,122.6
Carrying value adjustments (64,989.0) (72,274.5) (71,584.8)
Equity attributable to the equity holders of Ambev 73,815.7 61,278.0 56,248.0
Non-controlling interests 1,335.5 1,278.0 1,206.8
Total  Equity 75,151.2 62,556.0 57,454.8
       
 Total equity and liabilities 125,196.3 101,742.9 95,714.3

 

For additional information on the accounting practices adopted by the Company, see section 10.5.

 

Comparative analysis of Balance Sheets - As of December 31, 2020 and December 31, 2019

 

(in million of Reais, except percentages)      
  December 31
  2020 Vertical Analysis 2019 Vertical Analysis

Variation

2020/2019

 
Assets          
Cash and cash equivalents 17,090.3 13.7%  11,900.7 11.7% 5,189.6
Investment securities 1,700.0 1.4%  14.6 0.0% 1,685.4
Derivative financial instruments 505.9 0.4%  172.1 0.2% 333.8
Trade receivables 4,303.1 3.4%  4,495.5 4.4% (192.4)
Inventories 7,605.9 6.1%  5,978.6 5.9% 1,627.3
Income tax and social contributions recoverable 1,759.2 1.4% 1,831.4 1.8% (72.2)
Recoverable taxes 1,527.9 1.2% 2,242.7 2.2% (714.8)
Other assets 850.0 0.7% 985.5 1.0% (135.5)
Current assets 35,342.3 28.2% 27,621.1 27.1% 7,721.2
           
Investment securities 213.9 0.2%  163.6 0.2% 50.3
Derivative financial instruments 3.4 0.0%  1.2 0.0% 2.2
Income tax and social contributions recoverable 4,495.0 3.6% 4,331.9 4.3% 163.1
Recoverable taxes 5,695.8 4.5% 671.1 0.7% 5,024.7
Deferred tax assets 4,560.8 3.6% 2,950.1 2.9% 1,610.7
Other assets 2,141.6 1.7%  1,751.7 1.7% 389.9
Employee benefits 33.6 0.0%  56.2 0.1% (22.6)
Investments 337.4 0.3%  303.4 0.3% 34.0
Property, plant and equipment 24,768.4 19.8%  22,576.3 22.2% 2,192.1
Intangible 7,580.6 6.1%  6,306.4 6.2% 1,274.2
Goodwill 40,023.5 32.0%  35,009.9 34.4% 5,013.6
Non-current assets 89,854.0 71.8%  74,121.8 72.9% 15,732.2
           
25 
 

 

Total assets 125,196.3 100.0% 101,742.9 100.0% 23,453.4
           
Equity and Liabilities          
           
Trade payables 19,339.2 38.6%  15,069.6 38.5% 4,269.6
Derivative financial instruments 329.8 0.7%  355.3 0.9% (25.5)
Interest-bearing loans and borrowings 2,738.8 5.5%  653.1 1.7% 2,085.7
Overdraft account  - 0.0%  - 0.0% (0.0)
Wages and salaries 925.5 1.8%  833.0 2.1% 92.5
Dividends and interest on shareholders’ equity payable 2,454.7 4.9%  956.6 2.4% 1,498.1
Income tax and social contribution payable 1,167.3 2.3% 1,394.2 3.6% (226.9)
Taxes and contributions payable 4,549.5 9.1%  4,108.5 10.5% 441.0
Other liabilities 1,848.1 3.7%  1,530.7 3.9% 317.4
Provisions 124.9 0.2%  110.0 0.3% 14.9
Current liabilities 33,477.8 66.9%  25,011.0 63.8% 8,466.8
           
Trade payables 655.8   1.3%  309.5 0.8% 346.3
Derivative financial instruments 0.0 0.0%  0.1 0.0% (0.1)
Interest-bearing loans and borrowings 2,053.5 4.1%  2,409.7 6.1% (356.2)
Deferred tax assets 3,043.4 6.1%  2,371.1 6.1% 672.3
Income tax and social contribution payable 1,912.6 3.8%  2,219.5 5.7% (306.9)
Taxes and contributions payable 684.3 1.4%  645.2 1.6% 39.1
Put option granted on subsidiary and other liabilities 4,226.6 8.4%  3,145.3 8.0%

1,081.3

 

Provisions 447.1 0.9%  371.0 0.9% 76.1
Employee benefits 3,544.0 7.1%  2,704.5 6.9% 839.5  
Non-current liabilities 16,567.3 33.1% 14,175.9 36.2% 2,391.4
           
Total liabilities 50,045.1 100,0% 39,186.9 100.0% 10,858.2
           
Equity          
Issued capital 57,899.1 46.2%  57,866.8 56.9%  32.3
Reserves 80,905.6 64.6%  75,685.7 74.4% 5,219.9
Carrying value adjustments (64,989.0) -51.9% (72,274.5) -71.0% 7,285.5
Equity attributable to equity holders of Ambev 73,815.7 59.0% 61,278.0 60.2% 12,537.7
Non-controlling interests 1,335.5 1.1% 1,278.0 1.3% 57.5
Total equity 75,151.2   60.0% 62,556.0 61.5% 12,595.2
           
Total equity and liabilities 125,196.3 100.0% 101,742.9 100.0% 23,453.4

 

26 
 

 

 

Assets

 

Cash and cash equivalents

 

As of December 31, 2020, the balance of cash and cash equivalents and short-term financial investments amounted to R$ 18,790.3 million, compared to R$ 11,915.3 million as of December 31, 2019. The increase of R$ 6,875.0 million, or 57.7%, is a result particularly from (i) the operational performance; and (ii) the increase in the accounts payable partially compensated by an increase in the interests paid in 2020 and an increase in debts taken at the beginning of the pandemic and partially paid by December.

 

 

Trade receivables

 

As of December 31, 2020, the balance of trade receivables amounted to R$ 4,303.1 million, compared to R$ 4,495.5 million as of December 31, 2019, a reduction of R$ 192.4 million, or -4.3%.

 

Inventories

As of December 31, 2020, the balance of inventories amounted to R$ 7,605.9 million, compared to R$ 5,978.6 million as of December 31, 2019. The increase of R$ 1,627.3 million, or 27.2%, is demonstrated in the chart below:

 

(in million Reais) 2020 2019
Finished products 2,575.5 2,080.7
Work in progress 518.3 450.8
Raw materials and consumables 3,513.0 2,637.4

Spare parts and other

 

758.8 602.6
Prepayments 381.4 328.3
Impairment losses (141.1) (121.2)
  7,605.9 5,978.6

 

Tax receivable

 

As of December 31, 2020, the balance of taxes and contributions receivable, current and non-current, amounted to R$ 13,477.9 million, compared to R$ 9,077.1 million as of December 31, 2019. The variation in the balances is mainly explained by the recognition of PIS/COFINS credits.

 

Property, plant and equipment

  2020 2019
Property, plant and equipment 22,852.9 20,547.7
Right of use assets 1,915.5 2,028.6
  24,768.4 22,576.3

 

As of December 31, 2020, the balance of property, plant and equipment amounted to R$ 24,768.4 million, compared to R$ 22,576.3 million as of December 31, 2019. The movement that resulted in a net increase of R$ 2,192.1 million or 9.7% is demonstrated in the chart below:

27 
 

 

 

  2020   2019
  Land and buildings Plant and equipment Fixtures and fittings Under construction Total   Total
Acquisition Cost              
Initial balance 10,886.9 29,676.1 6,367.7 2,184.3 49,115.0   45,564.1
Effect of movements in foreign exchange in balance sheet 724.8 1,811.9 392.1 173.2 3,102.0   (1,540.7)
Effect of application of IAS 29 (hyperinflation)

 

 

310.5

 

 

1,160.4

 

 

291.8

 

 

130.3

 

 

1,893.0

  1,871.9
Acquisition through share exchange - - - - -   -
Acquisitions through business combination

 

4.0

 

9.8

 

1.7

 

-

 

15.5

  8.0
Acquisitions 17.2 514.8 74.3 3,815.6 4,421.9   4,475.9
Disposals and write-offs (23.7) (1,422.2) (247.0) 0.2 (1,692.7)   (906.0)
Transfers to other asset categories

 

465.4

 

2,286.6

 

338.8

 

(3,472.9)

 

(382.1)

  (358.2)
Others  -  -  -  -  -   -
Final balance 12,385.1 34,037.4 7,219.4 2,830.7 56,472.6   49,115.0
               
Depreciation and Impairment              
Initial balance (3,400.6) (20,381.7) (4,785.0)  - (28,567.3)   (25,463.7)
Effect of movements in foreign exchange in balance sheet

 

 

(174.3)

 

 

(1,205.7)

 

 

(278.5)

 

 

-

 

 

(1,658.5)

  810.9

 

Effect of application of IAS 29 (hyperinflation)

 

 

(51.4)

 

 

(670.4)

 

 

(300.0)

 

 

-

 

 

(1,021.8)

  (1,025.2)
Write-off through equity interest  -  -  -  -  -    -
Depreciation  (401.8) (2,795.4) (699.2)  - (3,896.4)   (3,530.1)
Loss due to reduction of the recovery amount  -  -  -  -  -    -
Disposals and write-offs  7.8  1,409.0  245.9  -  1,662.7    784.2
Transfers  to other asset categories  29.8  (3.6)  22.0  -  48.2    -
Others  (3.1)  (183.2)  (0.3)  -  (186.6)    (143.4)
Final balance  (3,993.6)  (23,831.0)  (5,795.1)  -  (33,619.7)   (28,567.3)

 

Carrying amount::

             
At December 31, 2019 7,486.3 9,294.4 1,582.7 2,184.3 20,547.7    
At December 31, 2020 8,391.5 10,206.4 1,424.3 2,830.7 22,852.9    

 

28 
 

 

 

Right of use assets:

 

  2020   2019
     
  Properties Plant and Equipment Others Total   Total
Acquisition Cost            
Initial balance 1,339.8 1,865.1 156.2 3,361.1   2,394.1
Effect of movements in foreign exchange in balance sheet 131.8 8.2 9.3 149.3   19.5
Additions 321.8 32.6 12.2 366.6   898.8
Transfers from (to) other asset categories

 

(1.8)

 

-

 

(2.2)

 

(4.0)

  48.7
Final balance 1,791.6 1,905.9 175.5 3,873.0   3,361.1
             
Depreciation and Impairment            
Initial balance (494.5) (756.9) (81.1) (1,332.5)   (856.5)
Effect of movements in foreign exchange in balance sheet (40.9) (4.5) (3.9) (49.3)   (5.7)
Depreciation (280.7) (256.5) (43.4) (580.6)   (467.2)
Transfers from (to) other asset categories

 

3.2

 

-

 

1.7

 

4.9

  (3.1)
Final balance (812.9) (1,017.9) (126.7) (1,957.5)   (1,332.5)
Carrying amount::            
At December 31, 2019 845.3 1,108.2 75.1 2,028.6    
At December 31, 2020 978.6 888.0 48.8 1,915.5    

(i) Balances adjusted for comparative purposes.

 

Intangible Assets

 

As of December 31, 2020, the balance of the intangible assets amounted to R$ 7,580.6 million, compared to R$ 6,306.4 million, as of December 31, 2019. The net increase of R$ 1,274.2 million, or 20.2%, is a result mainly of the application of the Accounting and Disclosure Rule in Highly Inflationary Economy (IAS 29) in Argentina, as described in item 10.5 – Critical accounting policies – “(x) Accounting and disclosure rule in highly inflationary economy”.

 

Goodwill

 

As of December 31, 2020, the balance of goodwill amounted to R$ 40,023.5 million, compared to R$ 35,009.9 million as of December 31, 2019. The movement that resulted in a net increase of R$ 5,013.6 million is demonstrated in the chart below:

 

  2020 2019
Initial Balance 35,009.9 34,276.2
Effect of movements in foreign exchange in balance sheet

 

4,006.9

16.1
Effect of application of IAS 29/ (hyperinflation)

 

605.4

691.2
Acquisition, (write-off) and disposal through business combinations 401.3 26.4
Final balance 40,023.5 35,009.9

 

29 
 

 

 

Liabilities

 

Trade payables

 

As of December 31, 2020, the balance of the current trade payables amounted to R$ 19,339.2million, compared to R$ 15,069.6 million as of December 31, 2019, an increase of R$ 4,269.6 million or 28.3%. The balance of non-current trade payables amounted to R$ 655.8 million as of December 31, 2020, compared to R$ 309.5 million in the same period in 2019, an increase of R$ 346.3 million, or 111.9%.

 

Interest-bearing loans and borrowings

The current and non-current interest-bearing loans and borrowings amounted to R4,792.3 million as of December 31, 2020, compared to R$ 3,062.8 million as of December 31, 2019, an increase of R$ 1,729.5 million, or 56.5% in the gross indebtedness in the year ended on December 31, 2020.

 

Income tax and social contribution

 

As of December 31, 2020, the balance of current and non-current income tax and social contribution amounted to R$ 3,079.9 million, compared to R$ 3,613.7 million as of December 31, 2019, a reduction of R$ 533.8 million, explained mainly by the payment of the installments regarding adhesion to PERT 2017. As announced on September 29, 2017, the Company adhered to a special tax regularization program, involving tax contingencies under dispute, including contingencies related to the income tax and social contribution on profits. The total amount to be paid is approximately R$ 3.5 billion, of which approximately R$ 1.0 billion was paid in 2017, and the remaining is being paid in 145 monthly installments as from January 2018, added by interests.

 

Equity

 

As of December 31, 2020, the balance of equity amounted to R$ 75,151.2 million, compared to R$ 62,556.0million as of December 31, 2019. The main reasons for the variation in equity accounts were: (i) profit in the year of R$ 11,731.9 million; (ii) the effect of the application of the Accounting and Disclosure Rule in Highly Inflationary Economy (IAS 29) in Argentina, as described in item 10.5 – Critical accounting policies – “(x) Accounting and disclosure rule in highly inflationary economy”; and (iii) distribution of IOC of R$ 6,509.5 million.

 

Deferred income tax and social contribution (Assets and Liabilities)

 

As of December 31, 2020, the balance of the deferred income tax and social contribution (assets and liabilities) amounted to R$ 1,517.4 million in assets, compared to R$ 579.0 million in assets as of December 31, 2019. The variation of R$ 938.4 million is described in the charts below, which demonstrate the composition of the deferred tax by type of temporary difference.

30 
 

 

 

 

(in million Reais) 2020
  Assets Liabilities Net
Investment securities 10.1 - 10.1
Intangible - (1,253.0) (1,253.0)
Employee Benefits 971.2 (3.0) 968.2
Trade payables 3,917.1 (230.3) 3,686.8
Trade receivables 53.0 (0.0) 53.0
Derivatives 36.3 (118.7) (82.4)
Interest-Bearing Loans and Borrowings - (1.8) (1.8)
Inventories 288.7 (67.6) 221.1
Property, plant and equipment

 

430.8

 

(1,609.0)

 

(1,178.2)

Withholding tax over undistributed profits and royalties

 

 

-

 

 

(1,538.8)

 

 

(1,538.8)

Investments - (421.6) (421.6)
Loss carry forwards 1,739.7 - 1,739.7
Provisions 636.0 (1.3) 634.7
Impact of the adoption of IFRS 16/ (Leases)

 

 

124.2

 

 

(1.6)

 

 

122.6

ICMS from the assessment bases of PIS/COFINS

 

-

 

(1,460.8)

 

(1,460.8)

Other items 79.2 (61.4) 17.8
Gross deferred tax assets/(liabilities) 8,286.3 (6,768.9) 1,517.4
Netting by taxable entity

 

(3,725.5)

 

3,725.5

 

-

Net deferred tax assets/(liabilities)

 

4,560.8

 

(3,043.4)

 

1,517.4

 

 

(in million Reais) 2019
  Assets Liabilities Net
Investment securities 10.0 - 10.0
Intangible - (1,067.5) (1,067.5)
Employee Benefits 750.0 (3.9) 746.1
Trade payables 2,330.3 (246.6) 2,083.7
Trade receivables 45.5 (3.3) 42.2
Derivatives 38.9 (217.2) (178.3)
Interest-Bearing Loans and Borrowings - - -
Inventories 372.0 (67.1) 304.9
Property, plant and equipment 290.4 (1,423.4) (1,133.0)
Withholding tax over undistributed profits and royalties - (1,115.1) (1,115.1)
Investments - (421.6) (421.6)
Loss carry forwards 877.3 (148.4) 728.9
Provisions 465.9 (2.3) 463.6
Impact of the adoption of IFRS 16 (Leases) 44.6 (1.9) 42.7
Other items 89.0 (16.6) 72.4
Gross deferred tax assets/(liabilities) 5,313.9 (4,734.9) 579.0
Netting by taxable entity (2,363.8) 2,363.8 -
Net deferred tax assets/(liabilities) 2,950.1 (2,371.1) 579.0

 

31 
 

 

 

(in million Reais) 2018
  Assets Liabilities Net
Investment securities 10.0 - 10.0
Intangible - (1,031.1) (1,031.1)
Employee Benefits 614.8 - 614.8
Trade payables 1,807.8 (271.9) 1,535.9
Trade receivables 41.3 (2.3) 39.0
Derivatives 18.7 (304.2) (285.5)
Interest-Bearing Loans and Borrowings 2.5 (78.5) (76.0)
Inventories 266.7 (44.8) 221.9
Property, plant and equipment 109.6 (1,386.4) (1,276.8)
Withholding tax over undistributed profits and royalties - (863.8) (863.8)
Investments - (421.6) (421.6)
Loss carry forwards 791.0 - 791.0
Provisions 363.1 (24.0) 339.1
Impact of the adoption of IFRS 16 (Leases) 47.2 - 47.2
Other items 50.6 (54.6) (4.0)
Gross deferred tax assets/(liabilities) 4,123.3 (4,483.2) (359.9)
Netting by taxable entity (2,058.6) 2,058.6 -
Net deferred tax assets/(liabilities) 2,064.7 (2,424.6) (359.9)

 

32 
 

 

Comparative analysis of Balance Sheets as of December 31, 2019 and December 31, 2018

 

(in million of Reais, except percentages)

 

     
  December 31
  2019 Vertical Analysis 2018

Vertical

Analysis

Variation

2019/2018

Assets          
           
Cash and cash equivalents 11,900.7 11.7% 11,463.5 12.0% 437.2

Investment securities

 

14.6 0.0% 13.4 0.0% 1.2
Derivative financial instruments 172.1 0.2% 220.0 0.2% (47.9)
Trade receivables 4,495.5 4.4% 4,879.3 5.1% (383.8)
Inventories 5,978.6 5.9% 5,401.8 5.6% 576.8

Income tax and social contributions recoverable

 

1,831.4 1.8% 1,285.4 1.3% 546.0

Recoverable taxes

 

2,242.7 2.2% 863.3 0.9% 1,379.4
Other assets 985.5 1.0% 1,202.9 1.3% (217.4)
Current assets 27,621.1 27.1% 25,329.6 26.5% 2,291.5
           

Investment securities

 

163.6 0.2% 147.3 0.2% 16.3
Derivative financial instruments 1.2 0.0% 34.9 0.0% (33.7)

Income tax and social contributions recoverable

 

4,331.9 4.3% 3,834.4 4.0% 497.5

Recoverable taxes

 

671.1 0.7% 539.8 0.6% 131.3

Deferred tax assets

 

2,950.1 2.9% 2,064.7 2.2% 885.4
Other assets 1,751.7 1.7% 1,687.4 1.8% 64.3
Employee benefits 56.2 0.1% 64.3 0.1% (8.1)
Investments 303.4 0.3% 257.1 0.3% 46.3
Property, plant and equipment 22,576.3 22.2% 21,638.0 22.6% 938.3
Intangible 6,306.4 6.2% 5,840.6 6.1% 465.8
Goodwill 35,009.9 34.4% 34,276.2 35.8% 733.7
Non-current assets 74,121.8 72.9% 70,384.7 73.5% 3,737.1
           
Total assets 101,742.9 100.0% 95,714.3 100.0% 6,028.6
           
Equity and Liabilities          
           
Trade payables 15,069.6 38.5% 14,050.0 36.7% 1,019.6
Derivative financial instruments 355.3 0.9% 679.3 1.8% (324.0)

Interest-bearing loans and borrowings

 

653.1 1.7% 1,941.1 5.1% (1,288.0)
Overdraft account 0.0 0.0% - 0.0% 0.0

Wages and salaries

 

833.0 2.1% 851.6 2.2% (18.6)

Dividends and interest on shareholders’ equity payable

 

956.6 2.4% 807.0 2.1% 149.6

Income tax and social contribution payable

 

1,394.2 3.6% 1,558.6 4.1% (164.4)
33 
 

 

Taxes and contributions payable

 

4,108.5 10.5% 3,781.6 9.9% 326.9
Other liabilities 1,530.7 3.9% 1,366.6 3.6% 164.1
Provisions 110.0 0.3% 173.0 0.5% (63.0)
Current liabilities 25,011.0 63.8% 25,208.8 65.9% (197.8)
           
Trade payables 309.5 0.8% 126.1 0.3% 183.4
Derivative financial instruments 0.1 0.0% 2.5 0.0% (2.4)

Interest-bearing loans and borrowings

 

2,409.7 6.1% 2,162.4 5.7% 247.3

Deferred tax assets

 

2,371.1 6.1% 2,424.6 6.3% (53.5)
Income tax and social contribution payable 2,219.5 5.7% 2,227.8 5.8% (8.3)

Taxes and contributions payable

 

645.2 1.6% 675.6 1.8% (30.4)

Put option granted on subsidiary and other liabilities

 

3,145.3 8.0% 2,661.8 7.0% 483.5
Provisions 371.0 0.9% 426.2 1.1% (55.2)
Employee benefits 2,704.5 6.9% 2,343.7 6.1% 360.8
Non-current liabilities 14,175.9 36.2% 13,050.7 34.1% 1,125.2
           
Total liabilities 39,186.9 100.0% 38,259.5 100.0% 927.4
           
Equity          

Issued capital

 

57,866.8 56.9% 57,710.2 60.3% 156.6
Reserves 75,685.7 74.4% 70,122.6 73.3% 5,563.1

Carrying value adjustments

 

(72,274.5) -71.0% (71,584.8) -74.8% (689.7)
Equity attributable to equity holders of Ambev 61,278.0 60.2% 56,248.0 58.8% 5,030.0
Non-controlling interests 1,278.0 1.3% 1,206.8 1.3% 71.2
Total Equity 62,556.0 61.5% 57,454.8 60.0% 5,101.2
           
Total equity and liabilities 101,742.9 100.0% 95,714.3 100.0% 6,028.6

 

34 
 

 

 

Assets

 

Cash and cash equivalents

 

As of December 31, 2019, the balance of cash and cash equivalents and short-term financial investments amounted to R$ 11,915.3 million, compared to R$ 11,476.9 million as of December 31, 2018. The increase of R$ 438.4 million, or 3.8%, is a result particularly from (i) the operational performance; (ii) an increase in the accounts payable; and (iii) a reduction in the interest paid in 2019.

 

Trade receivables

 

As of December 31, 2019, the balance of trade receivables amounted to R$ 4,495.5 million, compared to R$ 4,879.3 million as of December 31, 2018, a reduction of R$ 383.8 million, or -7.9%.

 

Inventories

 

As of December 31, 2019, the balance of inventories amounted to R$ 5,978.6million, compared to R$ 5,401.8million as of December 31, 2018. The increase of R$ 576.8million, or 10.7%, is demonstrated in the chart below:

 

(in million Reais) 2019 2018
Finished products  2,080.7 1,688.0

Work in progress

 

 450.8 339.5
Raw materials  2,637.4 2,517.3
Production materials - 107.0

Spare parts and other

 

602.6 597.0

Prepayments

 

328.3 304.4

Impairment losses

 

(121.1) (151.4)
  5,978.6 5,401.8

 

Income tax, social-contribution and other taxes receivable

 

As of December 31, 2019, the balance of taxes and contributions receivable, current and noncurrent, amounted to R$ 9,077.1million, compared to R$ 6,522.9million as of December 31, 2018. The variation in the balances is explained mainly to the recognition of PIS/COFINS credits.

 

Property, plant and equipment

 

  2019 2018
Property, plant and equipment  20,547.7 20,100.4
Right of use assets  2,028.6 1,537.6
   22,576.3 21,638.0

 

35 
 

 

 

As of December 31, 2019, the balance of property, plant and equipment amounted to R$ 22,576.3million, compared to R$ 21,638.0million as of December 31, 2018. The movement that resulted in a net increase of R$ 938.3 million or 4.3% is demonstrated in the chart below:

 

  2019   2018
  Land and buildings Plant and equipment Fixtures and fittings Under construction   Total   Total
Acquisition Cost                
Initial balance 10,375.6 28,075.8 5,690.6 1,422.1   45,564.1   39,835.1
Effect of movements in foreign exchange in balance sheet (240.9) (979.5) (300.8) (19.5)   (1,540.7)   (27.7)
Effect of application of IAS 29 (hyperinflation)

 

 

291.3

 

 

1,169.9

 

 

399.6

 

 

11.1

 

 

 

1,871.9

 

 

 

3,589.1

Acquisition through share exchange - - - -   -   218.5
Acquisitions through business combination

 

0.2

 

0.0

 

2.1

 

5.7

 

 

8.0

 

 

-

Acquisitions 14.8 606.1 147.9 3,707.1   4,475.9   3,520.5
Disposals and write-offs (33.4) (739.3) (133.3) -   (906.0)   (1,416.6)
Transfers to other asset categories

 

479.3

 

1,543.1

 

561.6

 

(2,942.2)

 

 

(358.2)

 

 

(162.8)

Others - - - -   -   8.0
Final balance 10,886.9 29,676.1 6,367.7 2,184.3   49,115.0   45,564.1
                 
Depreciation and Impairment                
Initial balance (3,031.5) (18,247.1) (4,185.1) -   (25,463.7)   (21,012.8)

Effect of movements in foreign exchange in balance sheet

 

23.9 549.1 237.9 -   810.9   (129.6)
Effect of application of IAS 29 (hyperinflation)

 

 

(51.1)

 

 

(686.0)

 

 

(288.1)

 

 

-

 

 

 

(1,025.2)

 

 

 

(1,908.8)

Write-off through equity interest

 

 

-

 

 

-

 

 

-

 

 

-

 

 

 

-

 

 

 

(20.6)

Depreciation (350.3) (2,516.6) (663.2) -   (3,530.1)   (3,536.9)

Impairment losses

 

 

-

 

-

 

-

 

-

 

 

-

 

 

(180.0)

Disposals and write-offs 9.2 649.8 125.2 -   784.2   1,351.7
Transfers  to other asset categories

 

-

 

-

 

-

 

-

 

 

-

 

 

(30.7)

Others (0.8) (130.9) (11.7) -   (143.4)   4.0
Final balance (3,400.6) (20,381.7) (4,785.0) -   (28,567.3)   (25,463.7)
Carrying amount:                
At December 31, 2018 7,344.1 9,828.7 1,505.5 1,422.1   20,100.4    
At December 31, 2019 7,486.3 9,294.4 1,582.7 2,184.3   20,547.7    

 

36 
 

 

 

Right of use asset:

  2019   2018
   
  Buildings Plant and Equipament Others Total   Total
Acquisition cost            
Initial balance  972.5  1,343.3  78.3  2,394.1   2,309.5
Effect of movements in foreign exchange in the balance sheet  17.7  0.6  1.2  19.5    14.5
Additions  317.8  521.2  59.8  898.8    70.1
Transfers from (to) other asset categories  31.8  -  16.9  48.7   0.0
Final balance  1,339.8  1,865.1  156.2  3,361.1   2,394.1
             
Depreciation            
Initial balance  (308.4)  (490.7)  (57.4)  (856.5)   (426.6)
Effect of movements in foreign exchange in the balance sheet  (4.6)  (0.5)  (0.6)  (5.7)    (1.0)
Depreciation  (173.3)  (263.3)  (30.6)  (467.2)    (428.9)
Transfer from (to) other asset categories  (8.2)  (2.4)  7.5  (3.1)   0.0
Final balance  (494.5)  (756.9)  (81.1)  (1,332.5)   (856.5)

 

Carring amount:

           
At December 31, 2018 664.1 852.6 20.9 1,537.6    
At December 31, 2019  845.3  1,108.2  75.1  2,028.6    

 

Intangible Assets

 

As of December 31, 2019, the balance of the intangible assets amounted to R$ 6,306.4 million, compared to R$ 5,840.6 million, as of December 31, 2018. The net increase of R$ 465.8 million, or 8.0%, is a result mainly of the application of the Accounting and Disclosure Rule in Highly Inflationary Economy (IAS 29) in Argentina, as described in item 10.5 – Critical accounting policies – “(x) Accounting and disclosure rule in highly inflationary economy”.

 

Goodwill

 

As of December 31, 2019, the balance of goodwill amounted to R$ 35,009.9 million, compared to R$ 34,276.2 million as of December 31, 2018. The movement that resulted in a net increase of R$ 733.7million is demonstrated in the chart below:

 

  2019 2018
Initial Balance 34,276.2 31,401.9
Effect of foreign-exchange variation 16.1 1,224.8
Effect of application of IAS 29 (hyperinflation) 691.2 1,686.5
Acquisition, (write-off) and exchange of subsidiaries 26.4 (37.0)
Final balance 35,009.9 34,276.2

 

Liabilities

 

Trade payables

 

As of December 31, 2019, the balance of the current trade payables amounted to R$ 15,069.6 million, compared to R$ 14,050.0 million as of December 31, 2018, an increase of R$ 1,019.6 million or 7.3%.

37 
 

The balance of non-current accounts payable amounted to R$ 309.5 million as of December 31, 2019, compared to R$ 126.1 million in the same period in 2018, an increase of R$ 183.4 million, or 145.4%.

 

Interest-bearing loans and borrowings

The current and non-current interest-bearing loans and borrowings amounted to R$ 3,062.8 million as of December 31, 2019, compared to R$ 4,103.5 million as of December 31, 2018, a reduction of R$ 1,040.7 million, or -25.4% in the gross indebtedness in the year ended on December 31, 2019.

 

Income tax and social contribution

 

As of December 31, 2019, the balance of current and non-current income tax and social contribution amounted to R$ 3,613.7 million, compared to R$ 3,786.4 million as of December 31, 2018, a reduction of R$ 172.7 million, explained mainly by the payment of the installments regarding adhesion to PERT 2017. As announced on September 29, 2017, the Company adhered to a special tax regularization program, involving tax contingencies under dispute, including contingencies related to the income tax and social contribution on profits. The total amount to be paid is approximately R$ 3.5 billion, of which approximately R$1.0 billion was paid in 2017, and the remaining has been paid in 145 monthly installments as from January 2018, added by interests.

 

In addition, the balance of the income tax and social contribution is also a result of a lower effective tax rate, which, in 2019, was 5.8%, compared to an effective tax rate of 13.5% in 2018. The main events that took place in the period and that impacted the effective tax rate were:

 

- Government grants related to taxes on sales: the reduction of the tax expenses reflects the deductibility of the subsidies for investment arising out of deferred or presumed credits on ICMS.

 

- Benefit of deductibility of interest on capital (“IOC”): according to the Brazilian legislation, the companies can opt for distributing IOC calculated based on the Long-Term Interest Rate (“TJLP”), which is deductible for income tax purposes under the applicable legislation, whose amount distributed until the date hereof was of R$ 7,717.4 million, and the tax impact was of R$ 2,623.8 million.

 

Equity

 

As of December 31, 2019, the balance of equity amounted to R$ 62,556.0 million, compared to R$ 57,454.8 million as of December 31, 2018. The main reasons for the variation in equity accounts were: (i) profit in the year of R$ 12,188.4 million; (ii) the effect of the application of the Accounting and Disclosure Rule in Highly Inflationary Economy (IAS 29) in Argentina, as described in item 10.5 – Critical accounting policies – “(x) Accounting and disclosure rule of highly inflationary economy”; and (iii) distribution of IOC of R$ 7,717.4 million.

 

Deferred income tax and social contribution (Assets and Liabilities)

 

As of December 31, 2019, the balance of the deferred income tax and social contribution (assets and liabilities) amounted to R$ 579.0 million assets, compared to R$ 359.9 million liabilities as of December 31, 2018. The variation of R$ 938.9 million is described in the charts below, which demonstrates the composition of the deferred tax by type of temporary difference.

 

38 
 

 

(in million Reais) 2019
  Assets Liabilities Net

Investment securities

 

10.0 - 10.0
Intangible - (1,067.5) (1,067.5)
Employee Benefits 750.0 (4.0) 746.0
Trade payables 2,330.3 (246.7) 2,083.7
Trade receivables 45.5 (3.3) 42.2
Derivatives 38.9 (217.2) (178.3)

Interest-Bearing Loans and Borrowings

 

 - (0.0) (0.0)
Inventories 372.0 (67.1) 304.9
Property, plant and equipment 290.4 (1,423.4) (1,133.0)

Withholding tax over undistributed profits and royalties

 

 

-

 

(1,115.1)

 

(1,115.1)

Investments - (421.6) (421.6)

Loss carry forwards

 

877.3 (148.4) 729.0
Provisions 465.9 (2.3) 463.6
Impact of the adoption of IFRS 16 (Leases) 44.6 (1.9) 42.7
Other items 89.0 (16.6) 72.4
Gross deferred tax assets/(liabilities) 5,313.9 (4,734.9) 579.0

Netting by taxable entity

 

(2,363.8) 2,363.8 -
Net deferred tax assets/(liabilities) 2,950.1 (2,371.1) 579.0

 

 

(in million Reais) 2018
  Assets Liabilities Net

Investment securities

 

10.0 - 10.0
Intangible - (1,031.1) (1,031.1)
Employee Benefits 614.8 - 614.8
Trade payables 1,807.8 (271.9) 1,535.9
Trade receivables 41.3 (2.3) 39.0
Derivatives 18.7 (304.2) (285.5)

Interest-Bearing Loans and Borrowings

 

2.5 (78.5) (76.0)
Inventories 266.7 (44.8) 221.9
Property, plant and equipment 109.6 (1,386.4) (1,276.8)

Withholding tax over undistributed profits and royalties

 

- (863.8) (863.8)
Investments - (421.6) (421.6)

Loss carry forwards

 

791.0 - 791.0
Provisions 363.1 (24.0) 339.1
Impact of the adoption of IFRS 16 (Leases) 47.2 - 47.2
Other items 50.6 (54.6) (4.0)
Gross deferred tax assets/(liabilities) 4,123.3 (4,483.2) (359.9)

Netting by taxable entity

 

(2,058.6) 2,058.6 -
Net deferred tax assets/(liabilities) 2,064.7 (2,424.6) (359.9)

 

39 
 

 

 

Comparative analysis of Operational Results as of December 31, 2020 and December 31, 2019

 

The consolidated results of the Company are presented as follows:

 

Highlights of Consolidated Financial Information

(in million Reais, except for amounts related to volume, percentages*)

  2020

Vertical

Analysis

2019(i)

Vertical

Analysis

Variation 2020/2019
Net revenue 58,379.0 100.0% 52,005.1 100.0% 6,373.9
Cost of sales (27,066.1) -46.4% (21,678.2) -41.7% (5,387.9)
Gross profit 31,312.9 53.6% 30,326.9 58.3% 986.0
           
Distribution expenses (8,245.0) -14.1% (6,951.4) -13.4% (1,293.6)
Sales and Marketing expenses (6,374.6) -10.9% (5,696.1) -11.0%  (678.5)
Administrative expenses (2,948.5) -5.1% (2,680.0) -5.2% (268.5)
Other operational income (expenses) 2,679.4 4.6% 1,472.7 2.8% 1,206.7
Costs arising from business combination (18.2) 0.0% - 0.0% (18.2)
Restructuring (146.5) -0.3% (101.8) -0.2% (44.7)
Effect of application of IAS 29 (hyperinflation) (9.3) 0.0% (5.3) 0.0% (4.0)
State Amnesty - 0.0% (290.1) -0.6% 290.1
COVID-19 Impacts (263.2) -0.5%  - 0.0% (263.2)
Stella recall (14.8) 0.0% - 0.0% (14.8)
Income from operations 15,972.2 27.4% 16,074.9 30.9% (102.7)
           
Finance expenses (5,430.5) -9.3% (4,748.4) -9.1% (682.1)
Finance income 2,996.0 5.1% 1,638.9 3.2% 1,357.1
Net finance result (2,434.5) -4.2% (3,109.5) -6.0% 675.0
           

Share of result of joint ventures

 

(43.3) -0.1% (22.3) 0.0% (21.0)

Income before income tax

 

13,494.4 23.1% 12,943.1 24.9% 551.3
           
Income tax expense (1,762.5) -3.0% (754.7) -1.5% (1,007.8)
Net income 11,731.9 20.1% 12,188.4 23.4% (456.5)
Attributed to:          
Equity holders of Ambev 11,379.4   11,780.0   (400.6)
Non-controlling interests 352.5   408.4   (55.9)

 

* Discrepancy in the sums of the amounts is due to rounding.

(i) The balances of 2019 were reclassified, between Net revenue and Other operating income/(expenses), for comparative purposes, according to the change in accounting policy indicated in item 10.4 of this Exhibit A.I.

40 
 

Highlights of the Financial Information per Business Segment

The table below contains some of the financial information per business segment regarding the years ended on December 31, 2020 and 2019:

 

  2020 2019(i)
  Brazil CAC(1) LAS(2) Canada Total Brazil CAC(1) LAS(2) Canada Total
Net revenue 30,196.5 7,319.3 11,560.8 9,302.4 58,379.0 28,129.9 6,757.9 10,028.7 7,088.6 52,005.1
Cost of sales (14,112.9) (3,307.5) (5,937.4) (3,708.3) (27,066.1) (12,096.3) (2,934.1) (3,998.0) (2,649.8) (21,678.2)
Gross profits 16,083.6 4,011.8 5,623.4 5,594.1 31,312.9 16,033.6 3,823.8 6,030.7 4,438.8 30,326.9
Administrative, sales and marketing expenses (9,315.6) (1,598.9) (3,233.3) (3,420.3) (17,568.1) (8,585.7) (1,494.0) (2,540.5) (2,707.3) (15,327.5)
Other operational income (expenses) 2,887.2 (23.5) (159.9) (24.4) 2,679.4 1,421.0 85.8 (18.0) (16.1) 1,472.7
Non-recurring items (173.8) (70.5) (145.7) (62.0) (452.0) (328.2) (17.1) (51.9) - (397.2)
Income from operations 9,481.4 2,318.9 2,084.5 2,087.4 15,972.2 8,540.7 2,398.5 3,420.3 1,715.4 16,074.9

 

(1) Beer and soft drink operation in the Central America and in the Caribbean.

(2) It includes the operations of Argentina, Bolivia, Paraguay, Uruguay and Chile.

(i) The balances of 2019 were reclassified, between Net revenue and Other operating income/(expenses), for comparative purposes, according to the change in accounting policy indicated in item 10.4 of this Exhibit A.I.

 

Net revenue

 

For more information about the sales net revenue, see section 10.2(b).

 

Cost of sales

 

The total cost of products sold increased 24.9% in the year ended on December 31, 2020, reaching R$ 27,066.1 million, compared to R$ 21,678.2 million in the same period in 2019. As a percentage of the Company’s net revenue, the total cost of sales increased to 46.4% in 2020, in relation to 41.7% in 2019.

 

Cost of products sold per hectoliter

 

  Year ended on December 31
  2020 2019 % Variation
  (in Reais, except for percentages)
Brazil 126.8 113.3 12.0%
Brazil Beer(1) 140.8 125.1 12.6%
NAB(2) 82.0 77.5 5.7%
CAC(3) 288.8 211.7 36.4%
Latin America South 179.6 121.2 48.2%
Canada 370.9 276.4 34.2%
Company Consolidated 163.2 132.8 22.9%

 

(1) Beer and “future beverages” operations of the Company in Brazil.

(2) Non-alcoholic beverages.

(3) Beer and soft drink operations in Central America and in the Caribbean.

 

Brazilian Operations

 

The total cost of sales of the Company’s Brazilian operations increased 16.7% in the year ended on December 31, 2020, reaching R$ 14,112.9 million in relation to R$ 12,096.3 million in the same period in 2019. The cost of the products sold in the Company’s Brazilian operations, per hectoliter, increased 12.0% in the year ended on December 31, 2020, reaching R$ 126.8/hl in relation to R$ 113.3/hl in the same period in 2019.

 

 

 

41 
 

Beer Operation in Brazil

 

The cost of products sold in the beer and “future beverages” operation in Brazil increased 19.0%, reaching R$ 11,941.7 million in the year ended on December 31, 2020. The cost of products sold, per hectoliter, increased 12.6%. The main factors that contributed to such increase were the depreciation of Real against the US dollar, impacting the cost of our raw materials indexed to US dollar, the increased weight of aluminum cans in package mix driven by a change in channels caused by restrictions on people circulation imposed by the local governments in response to the COVID-19 pandemic, and volume growth.

 

Non-alcoholic beverages operation in Brazil (“NAB”)

 

The cost of products sold in the non-alcoholic beverages operation in Brazil increased 5.5%, reaching R$ 2,171.2 million. The cost of products sold per hectoliter increased 5.7%, amounting to R$ 82.0/hl, negatively impacted by a depreciation of Real against US dollar, impacting the cost of our raw materials indexed by US Dollar, which was partially offset by the reduction of the sugar price.

 

Operation in Central America and the Caribbean (“CAC”)

 

The cost of products sold in CAC operations increased 12.7% in 2020, reaching R$ 3,307.5 million. The cost of products sold per hectoliter increased 36.4% in reported terms, but increased 12.9% in organic terms, disregarding effects of currency variation in the conversion to Reais. The increase of the cost per hectoliter in local currency is explained by the package mix driven by a change in channels caused by restrictions on people circulation imposed by the local governments in response to the COVID-19 pandemic and the operational deleverage generated by the decrease in volumes in the region.

 

Latin America South Operations (“LAS”)

 

The cost of products sold in LAS amounted to R$ 5,937.4 million in 2020, representing an increase of 48.5% compared to 2019. The cost of products sold, per hectoliter, increased 48.2 % in reported terms, but increased 40.7% in organic terms, disregarding effects of currency variation in the conversion to Reais. The main factors that explain such an increase in local currency are the high inflation in Argentina, the depreciation of Argentinean Peso against US Dollar, which raised the cost of our raw materials indexed to US Dollar, and the modification in package mix driven by a change in channels caused by restrictions on people circulation imposed by the local governments in response to the COVID-19 pandemic.

 

Operations in Canada

 

The cost of products sold in our operations in Canada increased 39.9% in the year ended on December 31, 2020, amounting to R$ 3,708.3 million compared to the same period in the previous year. The cost of products sold, per hectoliter, increased 34.2% in reported terms, but increased 3.7% in organic terms, disregarding effects of currency variation in the conversion to Reais. The main factor that explains the increase in local currency is the modification in package mix driven by a change in channels caused by restrictions on people circulation imposed by the local governments in response to the COVID-19 pandemic.

42 
 

 

 

Gross profit

 

The gross profit increased 3.3% in the year ended on December 31, 2020, amounting R$ 31,312.9 million, compared to R$ 30,921.6 million in the same period of 2019. The table below shows the contribution of each business unit to the consolidated gross profit of the Company.

 

  Gross profit
  2020 2019(i)
  (in million Reais, except for percentages)
  Amount % Contrib. Margin Amount % Contrib. Margin
Brazil 16,083.6 51.4% 53% 16,033.6 52.9% 57%
Brazil Beer(1) 14,011.3 44.7% 54% 13,727.6 45.3% 58%
NAB(2) 2,072.3 6.6% 49% 2,306.0 7.6% 53%
CAC(3) 4,011.8 12.8% 55% 3,823.8 12.6% 57%
Latin America South 5,623.4 18.0% 49% 6,030.7 19.9% 60%
Canada 5,594.1 17.9% 60% 4,438.8 14.6% 63%
Company Consolidated 31,312.9 100.0% 54% 30,326.9 100.0% 58%

 

(1) Beer and “future beverages” operation of the Company in Brazil.

(2) Non-alcoholic beverages.

(3) Beer and soft drink operation in Central America and in the Caribbean.

(i) The balances of 2019 were reclassified, between Net revenue and Other operating income/(expenses), for comparative purposes, according to the change in accounting policy indicated in item 10.4 of this Exhibit A.I.

 

Administrative, Distribution, and Sales and Marketing Expenses

The administrative, distribution, and sales and marketing expenses of the Company amounted to R$ 17,568.1 million in the year ended on December 31, 2020, representing an increase of 14.6% compared to the same period in 2019. The analysis of the administrative, distribution, and sales and marketing expenses in each of the business units is as follows.

 

Brazilian Operations

 

The administrative, distribution, and sales and marketing expenses, in Brazil, amounted to R$ 9,315.6 million in the year ended on December 31, 2020, an increase of 8.5% compared to the same period in 2019.

 

Beer Operation in Brazil

 

The administrative, distribution, and sales and marketing expenses amounted to R$ 7,933.2 million in the year ended on December 31, 2020, an increase of 9.4% compared to the same period in 2019, mainly explained by an increase in distribution expenses associated with the last-mile cost of our direct-to-consumer platform Zé Delivery and the regional mix, and by the expenses with sales and marketing to support volume growth in the country.

 

Non-alcoholic and beverages operation in Brazil (“NAB”)

 

The administrative, distribution, and sales and marketing expenses related to the non-alcoholic beverages segment amounted to R$ 1,382.4 million in the year ended on December 31, 2020, an increase of 3.7% compared to the same period in 2019 mainly due to higher distribution costs related to positive volume performance in northern regions of the country.

 

Operation in Central America and the Caribbean (“CAC”)

 

The administrative, distribution, and sales and marketing expenses related to the Company’s operations in CAC amounted to R$ 1,598.9 million in the year ended on December 31, 2020, an increase of 7.0% compared to the same period in 2019, mainly as a consequence of the impact of the currency conversion as local currencies appreciated against Real over the period, and of higher depreciation. In organic terms, disregarding the effects of the foreign-exchange variations, our administrative, distribution, and sales and marketing expenses decreased 12.5%, reflecting the efficient review of discretionary expenses in the region.

43 
 

 

Operations in Latin America South (“LAS”)

 

The administrative, distribution, and sales and marketing expenses of the Company in LAS amounted to R$ 3,233.3 million in the year ended on December 31, 2020, an increase of 27.3%, if compared to the same period in 2019, driven by the logistic and administrative expenses, impacted by the high inflation in Argentina and amplified by the impact of the currency conversion as local currencies appreciated against Real over the period. In organic terms, disregarding the effects of the foreign-exchange variation and changes to the scope of the operation, our administrative, distribution, and sales and marketing expenses increased 23.4%, mainly impacted by inflationary pressures in Argentina.

 

Operations in Canada

 

The administrative, distribution, and sales and marketing expenses in our operation in Canada amounted to R$ 3,420.3 million in the year ended on December 31, 2020, an increase of 26.3%, if compared to the same period in 2019, as a result of the impact of currency conversion as Canadian dollar appreciated against Real over the period. In organic terms, disregarding the effects of foreign-exchange variation, our administrative, distribution, and sales and marketing expenses decreased 3.9%, reflecting the efficient review of discretionary expenses in the country.

 

Other Operational Income (Expenses)

 

The net balance of other operational income and expenses related to the year of 2020 posted gains of R$ 2,679.4 million, compared to gains of R$ 1,472.7 million reported in 2019. The decrease of 81.9% is explained mainly due to the effect of the recognition of tax credits in Brazil related to the unconstitutionality of the inclusion of ICMS state tax in the PIS and COFINS calculation base.

 

Non-recurring items

 

The non-recurring items amounted to an expense of R$ 452.0 million in 2020, compared to an expense of R$ 397.2 million reported in 2019. The expenses recorded in 2020 are mainly explained by the (i) non-recurring expenses incurred due to the COVID-19 pandemic, including actions taken to ensure the health and safety of Company’s employees, as well as the purchase of hand sanitizers and masks, additional cleaning of the facilities and donations to the community; and (ii) restructuring expenses mainly linked to centralization and sizing projects in Brazil and Latin America South.

 

Operating Income

 

The operating income decreased 0.6% in the period ended on December 31, 2020, reaching R$ 15,972.2 million in relation to the amount of R$ 16,074.9 million in the same period in 2019, mainly as a result of higher costs, partially offset by the increase of revenue.

 

Net Financial Result

 

The financial result in the period ended on December 31, 2020 was an expense of R$ 2,434.5 million, compared to an expense of R$ 3,109.5 million in 2019. The decrease of 21.7% was driven by (i) higher interest income, impacted by our cash balance, mainly in Reais, and the gain of R$ 1.753 million related to extemporaneous tax credits; and (ii) a positive impact resulting from the application of the Accounting and Disclosure Rule in Highly Inflationary Economy (IAS 29), since the effect of the adjustment for cumulative inflation, from January 1, 2019, of non-monetary assets on the balance sheet of our operations in Argentine was reported in a dedicated account in the finance results. Such effects above were partially offset by (a) higher losses on derivative instruments, mainly driven by the carry cost of our currency hedges, primarily linked to the exposure of our cost of goods sold in Argentina, (b) losses related to the balance sheet exposure (intercompany and accounts payable), mainly linked to the depreciation of Argentine peso and Brazilian reais, and (c) taxes on financial transactions. The finance result includes the non-recurring impact of the recognition of tax credits from litigations in Brazil related to the unconstitutionality of the inclusion of ICMS state tax in the PIS and COFINS calculation base.

44 
 

 

The total debt of the Company, including current and non-current debt, in the period ended on December 31, 2020 increased R$ 1,729.5 million compared to 2019, while its amount of cash and cash equivalents, net of bank overdrafts, and financial investments, increased R$ 6,875.0 million.

 

Expense with income tax and social contribution

 

The expenses with income tax and social contribution in 2020 amounted to R$ 1,762.5 million, compared to R$ 754.7 million registered in 2019. The effective social contribution and income tax rate in 2020 was 13.1% compared to the effective tax rate of R$ 5.8% in 2019. The main events that took place in the period and that impacted the effective tax rate were:

 

- Government grants related to taxes on sales: the reduction of the tax expenses reflects the deductibility of the subsidies for investment arising out of deferred or presumed credits on ICMS.

 

- Benefit of deductibility of interest on capital (“IOC”): according to the Brazilian legislation, the companies can opt for distributing IOC calculated based on the Long-Term Interest Rate (“TJLP”), which is deductible for income tax purposes under the applicable legislation, whose amount distributed in 2020 was of R$ 6,509.5 million, and the tax impact was of R$ 2,213.2 million.

 

Net Profit

 

The net profit obtained by the Company in the year ended on December 31, 2020 was R$ 11,731.9 million, representing a decrease of 3.7%, if compared to R$ 12,188.4 million in 2019, while adjusted by the non-recurring items, the net profit decreased 3.6% in 2020 to R$ 12,104.3 million.

 

Comparative analysis of Operational Results as of December 31, 2019 and December 31, 2018

 

The consolidated results of the Company are presented as follows:

 

Highlights of Consolidated Financial Information

(in million Reais, except for amounts related to volume, percentages*)

  2019(i)

Vertical

Analysis

2018

Vertical

Analysis

Variation 2019/2018
Net revenue 52,005.1 100.0% 50,231.3 100.0% 1,773.8
Cost of sales

 

(21,678.2)

 

-41.7%

(19,249.4) -38.3%

 

(2,428.8)

Gross profit 30,326.9 58.3% 30,981.9 61.7% (655.0)
           
Distribution expenses (6,951.4) -13.4% (6,607.2) -13.2% (344.2)

 

Sales and Marketing expenses

 

(5,696.1)

 

-11.0%

(5,721.3) -11.4%

 

25.2

 

Administrative expenses

 

(2,680.0)

 

-5.2%

(2,363.4) -4.7%

 

(316.6)

Other operational income /(expenses)

 

1,472.7

 

2.8%

947.3 1.9%

 

525.4

           

Result through exchange transaction of shareholdings

 

 

 

-

 

 

0.0%

30.0 0.1%

 

 

(30.0)

Restructuring (101.8) -0.2% (175.5) -0.3% 73.7
Result from the sale of a subsidiary

 

 

-

 

 

0.0%

78.6 0.2%

 

 

(78.6)

Acquisition of subsidiaries

 

-

 

0.0%

(1.5) 0.0%

 

1.5

45 
 

 

Effect of application of IAS 29 (hyperinflation)

 

 

 

(5.3)

 

 

 

0.0%

(18.0) 0.0%

 

 

 

12.7

State Amnesty (290.1) -0.6% - 0.0% (290.1)

Income from operations

 

 

16,074.9

 

30.9%

17,150.9 34.1% (1,076.0)
           
Finance expenses

 

(4,748.4)

 

-9.1%

(4,684.2) -9.3%

 

(64.2)

Finance income 1,638.9 3.2% 653.9 1.3% 985.0
Net finance result

 

(3,109.5)

 

-6.0%

(4,030.3) -8.0% 920.8
           

Share of result of joint ventures

 

(22.3) 0.0% 1.0 0.0% (23.3)

Income before income tax

 

 

 

 

12,943.1

 

 

 

24.9%

13,121.6 26.1% (178.5)
           
Income tax expense

 

(754.7)

 

-1.5%

(1,773.9) -3.5% 1,019.2
Net income

 

12,188.4

 

23.4%

11,347.7 22.6% 840.7
Attributed to:          
Equity holders of Ambev 11,780.0   10,995.0   785.0
Non-controlling interests 408.4   352.7   55.7

 

* Discrepancy in the sums of the amounts is due to rounding.

(i) The balances of 2019 were reclassified, between Net revenue and Other operating income/(expenses), for comparative purposes, according to the change in accounting policy indicated in item 10.4 of this Exhibit A.I.

46 
 

 

 

Highlights of the Financial Information per Business Segment

The table below contains some of the financial information per business segment regarding the years ended on December 31, 2019 and 2018:

 

  2019(i) 2018
  Brazil CAC(1) LAS(2) Canada Total Brazil CAC(1) LAS(2) Canada Total
Net revenue 28,129.9 6,757.9 10,028.7 7,088.6 52,005.1 26,814.2 5,813.9 10,753.9 6,849.3 50,231.3
Cost of sales (12,096.3) (2,934.1) (3,998.0) (2,649.8) (21,678.2) (10,014.8) (2,559.1) (4,261.7) (2,413.8) (19,249.4)
Gross profits 16,033.6 3,823.8 6,030.7 4,438.8 30,326.9 16,799.4 3,254.8 6,492.2 4,435.5 30,981.9
Administrative, sales and marketing expenses

 

(8,585.7)

 

(1,494.0)

 

(2,540.5)

 

(2,707.3)

 

(15,327.5)

(8,127.4) (1,470.9) (2,580.4) (2,513.2) (14,691.9)
Other operational income (expenses)

 

1,421.0

 

85.8

 

(18.0)

 

(16.1)

 

1,472.7

965.0 20.0 (24.6) (13.1) 947.3
Non-recurring items (328.2) (17.1) (51.9) - (397.2) (43.7) 62.4 (88.3) (16.8) (86.4)
Income from operations 8,540.7 2,398.5 3,420.3 1,715.4 16,074.9 9,593.3 1,866.3 3,798.9 1,892.4 17,150.9

 

(1) Beer and soft drink operation in the Central America and in the Caribbean.

(2) It includes the operations of Argentina, Bolivia, Paraguay, Uruguay and Chile.

(i) The balances of 2019 were reclassified, between Net revenue and Other operating income/(expenses), for comparative purposes, according to the change in accounting policy indicated in item 10.4 of this Exhibit A.I.

 

Net revenue

 

For more information about the sales net revenue, see section 10.2(b).

 

Cost of sales

 

The total cost of sales increased 12.6% in the year ended on December 31, 2019, reaching R$ 21,678.2million, compared to R$ 19,249.4 million in the same period in 2018. As a percentage of the Company’s net revenue, the total cost of sales increased to 41.7% in 2019, in relation to 38.3% in 2018.

 

Cost of products sold per hectoliter

 

  Year ended on December 31
  2019 2018 % Variation
  (in Reais, except for percentages)
Brazil 113.3 98.5 14.9%
Brazil Beer(1) 125.1 105.6 18.4%
NAB(2) 77.5 75.5 2.8%
CAC(3) 211.7 194.5 8.9%
Latin America South 121.2 125.5 (3.4%)
Canada 276.4 242.8 13.9%
Company Consolidated 132.8 121.3 9.5%

(1) Beer and “future beverages” operations of the Company in Brazil.

(2) Non-alcoholic beverages.

(3) Beer and soft drink operations in Central America and in the Caribbean.

 

Brazilian Operations

 

The total cost of sales of the Company’s Brazilian operations increased 20.8% in the year ended on December 31, 2019, reaching R$ 12,096.3 million in relation to R$ 10,014.8 million in the same period in 2018. The cost of the products sold in the Company’s Brazilian operations, per hectoliter, increased 14.9% in the year ended on December 31, 2019, reaching R$ 113.3/hl in relation to R$ 98.5/hl in the same period in 2018.

 

 

 

47 
 

Beer Operation in Brazil

 

The cost of products sold in the beer and “future beverages” operation in Brazil increased 22.2%, reaching R$ 10,037.9 million in the year ended on December 31, 2019. The cost of products sold, per hectoliter, increased 18.4%. The main factors that contributed to such increase were a depreciation of Real against US Dollar, impacting the cost of our raw materials indexed to US Dollar, and the increase of commodities prices, particularly the malt.

 

Non-alcoholic beverages operation in Brazil (“NAB”)

 

The cost of products sold in the non-alcoholic beverages operation in Brazil increased by 14.3%, reaching R$ 2,058.4 million. The cost of products sold per hectoliter increased 2.8%, amounting to R$ 77.5/hl, negatively impacted by increased costs associated with higher sales volumes and a depreciation of Real against US Dollar, impacting the cost of our raw materials indexed to US Dollar, partially offset by a reduction in sugar price.

 

Operation in Central America and the Caribbean (“CAC”)

 

The cost of products sold in CAC operations increased 14.7% in 2019, reaching R$ 2,934.1 million. The cost of products sold per hectoliter increased 8.9% in reported terms, but increased 3.1% in organic terms, disregarding effects of currency variation in the conversion to Reais. The increase of the cost per hectoliter in local currency is explained by an increase in costs associated with a higher volume of sales and an increase in costs in Panama to guarantee the supply of the market with no disruptions, as our current infrastructure in Panama was insufficient to sustain the strong sales volume growth since 2017, leading to production capacity restraints in the country.

 

Latin America South Operations (“LAS”)

 

The cost of products sold in LAS amounted to R$ 3,998.0 million in 2019, representing a decrease of 6.2% compared to 2018. The cost of products sold, per hectoliter, decreased by 3.4% in reported terms, but increased by 16.5% in organic terms, disregarding effects of currency variation in the conversion to Reais and changes to the scope of the operation, regarding the perpetual licensing agreement to Quilmes (see item 10.3 - Events with effective or expected material effects on the Financial Statements and Income – b) constitution, acquisition or disposal of equity interest – Perpetual licensing agreement to Quilmes). The main factors that explain such an increase in local currency are the general inflation in Argentina and the depreciation of Argentinean Peso against US Dollar, which raised the cost of our raw materials indexed to US Dollar.

 

Operations in Canada

 

The cost of products sold in our operations in Canada increased 9.8% in the year ended on December 31, 2019, amounting to R$ 2,649.8 million compared with the same period in the previous year. The cost of products sold, per hectoliter, increased by 13.9% in reported terms, but increased by 7.9% in organic terms, disregarding effects of currency variation in the conversion to Reais. The main factor that explains the increase in organic terms is the increase of some commodities prices, particularly aluminum, which was partially offset by a 3.6% decrease in sales volume over the period.

48 
 

 

 

Gross profit

 

The gross profit decreased 2.1% in the year ended on December 31, 2019, reaching R$ 30,327.0 million, compared to R$ 30,326.9 million in the same period of 2018. The table below shows the contribution of each business unit to the consolidated gross profit of the Company.

 

  Gross profit
  2019(i) 2018
  (in million Reais, except for percentages)
  Amount % Contrib. Margin Amount % Contrib. Margin
Brazil 16,033.6 52.9% 57% 16,799.4 54.2% 63%
Brazil Beer(1) 13,727.6 45.3% 58% 14,794.3 47.8% 64%
NAB(2) 2,306.0 7.6% 53% 2,005.1 6.5% 53%
CAC(3) 3,823.8 12.6% 57% 3,254.8 10.5% 56%
Latin America South 6,030.7 19.9% 60% 6,492.2 21.0% 60%
Canada 4,438.8 14.6% 63% 4,435.5 14.3% 65%
Company Consolidated 30,326.9 100.0% 58% 30,981.9 100.0% 62%

(1) Beer and “future beverages” operation of the Company in Brazil.

(2) Non-alcoholic beverages.

(3) Beer and soft drink operation in Central America and in the Caribbean.

(i) The balances of 2019 were reclassified, between Net revenue and Other operating income/(expenses), for comparative purposes, according to the change in accounting policy indicated in item 10.4 of this Exhibit A.I.

 

Administrative, Distribution, and Sales and Marketing Expenses

 

The administrative, distribution, and sales and marketing expenses of the Company, amounted to R$ 15,327.5 million in the year ended on December 31, 2019, representing an increase of 4.3% compared to the same period in 2018. The analysis of administrative, distribution and sales and marketing expenses in each of the business units is shown below.

 

Brazilian Operations

 

The administrative, distribution, and sales and marketing expenses in Brazil amounted to R$ 8,585.7 million in the year ended on December 31, 2019, an increase of 5.6% if compared to the same period in 2018.

 

Beer Operation in Brazil

 

Administrative, distribution, sales and marketing expenses totaled R$ 7,252.5 million for the year ended on December 31, 2019, an increase of 2.9% compared to the same period in 2018, explained mainly by an increase of the administrative expenses driven by higher provisions related to the variable remuneration, an increase in distribution expenses, associated to inflation over the period, and a high depreciation. These effects were partially offset by lower sales and marketing expenses due to efficiency gains.

 

Non-alcoholic beverages operations in Brazil (“NAB”)

 

Administrative, distribution and sales and marketing expenses for the segment of non-alcoholic beverages totaled R$ 1,333.2 million for the year ended on December 31, 2019, an increase of 23.8% compared to the same period in 2018, mainly explained by higher sales and marketing expenses, reflecting the volume growth and our continued investment in our brands; by slightly higher distribution expenses, mainly driven by inflation; by a higher depreciation; and by an increase in administrative expenses, mainly due to higher variable compensation provisions.

 

49 
 

Central American and Caribbean Operations (“CAC”)

 

Administrative, distribution and sales and marketing expenses for the Company’s operations in CAC totaled R$ 1,494.0 million for the year ended on December 31, 2019, an increase of 1.6% compared to the same period in 2018, driven principally by the impact of currency conversion, and higher depreciation. In organic terms, ignoring the effects of the change in exchange rate and change in the scope of the operation, our administrative, distribution, sales and marketing expenses decreased 4.2%, reflecting efficiency gains in expenses with sales and marketing and administrative costs in the region.

 

Latin America South Operations (“LAS”)

 

Administrative, distribution, sales and marketing expenses of the Company in LAS amounted to R$ 2,540.5 million for the year ended on December 31, 2019, a decrease of 1.5%, if compared with the year 2018, since the currency conversion effect resulting from the depreciation of the Argentine Peso over the period was partially offset by the increase in logistics and administrative costs mainly driven by high inflation in Argentina. In organic terms, disregarding the effects of the change in exchange rate and changes in the scope of the operation, our administrative, distribution, sales and marketing expenses increased 25.2%, impacted, mainly, by inflationary pressures in Argentina, but still below the weighted inflation in the region.

 

Canada operations

 

Administrative, distribution, sales and marketing expenses of our Canada operations totaled R$ 2,707.3 million for the year ended December 31, 2019, an increase of 7.7% compared to 2018, as a result of a negative effect of currency conversion as Canadian dollar appreciated against Real over the period. In organic terms, disregarding the effects of the change in exchange rate, our administrative, distribution, sales and marketing expenses increased 2.1%, explained by higher administrative expenses, due to higher variable compensation provisions, partially offset by efficiency gains in sales and marketing and distribution initiatives.

 

Other Operating Income (Expenses)

 

The net balance of other operating income and operational expenses for the year 2019 showed a gain of R$ 1,472.7 million against a gain of R$ 947.3 million registered in 2018. The increase of 55.5% is mainly explained by the effect of the recognition of tax credits from litigations in Brazil related to a 2017 Brazilian supreme court decision that declared unconstitutional the inclusion of the ICMS in the PIS and COFINS calculation basis recognized in 2019, only partially offset by a decline in government grants related to state vat long-term tax incentives in Brazil, due to revenue geographic mix and the expiration of a tax incentive in the State of Santa Catarina.

 

Non-Recurring Items

 

Non-recurring items amounted to an expense of R$ 397.2 million in 2019, compared to an expense of R$ 86.4 million recorded in 2018. The expenses recorded in 2019 are explained mainly (i) due to an amnesty program in the State of Mato Grosso, in connection with requirements imposed in the context of the final validation of fiscal incentives granted by such state in the past, without the formal acceptance of other states and (ii) by restructuring costs primarily linked to centralization and resizing projects in Brazil and in the Latin America South, with blueprint review due to optimization of Full Time Equivalent (FTE), such as the centralization of processes in our shared services center.

 

Operating Income

 

Operating income decreased 6.3% in the period ended on December 31, 2019, reaching R$ 16,074.9 million in relation to R$ 17,150.9 million in the same period of 2018, due primarily to rising costs, partially offset by revenue growth.

 

50 
 

Net Financial Result

 

The financial result for the year ended December 31, 2019 comprised expenses of R$ 3,109.5 million compared to an expense of R$ 4,030.3 million in 2018. The decrease of 22.8% was driven by (i) higher interest income, driven by our cash balance, mainly in reais, US Dollars and Canadian Dollars, and by the recovery of a tax proceeding; and (ii) a positive impact resulting from the application of the Accounting and Disclosure Rule in Highly Inflationary Economy (IAS 29), since the effect of the adjustment for cumulative inflation, from January 1, 2019, of non-monetary assets on the balance sheet of our operations in Argentine was reported in a dedicated account in the finance results. Such effects above were partially offset by (i) higher losses with derivative instruments, mainly explained by the increase the carry cost of our currency hedges linked to the exposure of the cost of the product sold in Argentina, and (ii) higher losses with non-derivative instruments related to non-cash expenses due to the exchange rate change in loans among the companies of the group, as a result of the depreciation of Real and of the Argentinean Peso. The finance result includes the impact of a non-recurring financial expense amounting to R$ 18.2 million, explained by the payment of amnesty in the state of Mato Grosso in Brazil, partially offset by intercompany transactions with no cash effect.

 

The Company’s total indebtedness for the year ended December 31, 2019 decreased R$ 1,040.8 million compared to 2018, while its current cash and cash equivalents, net of overdrafts, and financial investments increased R$ 438.4 million.

 

Income tax and social contribution expense

 

Expenses for income tax and social contribution in 2019 amounted to R$ 754.7 million, compared to R$ 1,773.9 million recorded in 2018. The effective rate was 5.8%, against the previous year’s rate of 13.5%. The reduction in the effective tax rate in 2019 is mainly explained by a higher interest on equity deductibility benefit resulting from a higher payment of interest on own capital in 2019.

 

Net Profit

 

The Company’s net profit for the year ended on December 31, 2019 was of R$ 12,188.4 million representing an increase of 7.4%, if compared to the R$ 11,347.7 million in 2018 while adjusted by the non-recurring items, the net profit increased 8.5% in 2019 to R$ 12,549. 9 million.

 

Cash Flow for the Year Ended on December 31, 2020 compared with 2019

 

   
  2020 2019 Variation
Cash flow     2020/2019
Cash flow of the operating activities 18,855.8 18,381.3 474.5
Cash flow of the investment activities -6,799.6 -4,838.6 -1,961.0
Cash flow of financial activities -8,602.0 -12,283.5 3,681.5
Total 3,454.2 1,259.2 2,195.0

 

Operating activities

 

The Company’s cash flow from operating activities increased 2.6%, reaching R$ 18,855.8 million in the year ended on December 31, 2020, in relation to the R$ 18,381.3 million in the same period in 2019, mainly due to an improvement in the variation of working capital during 2020, with an increase of R$ 1,081.6 million in 2020 and an increase of 12.3% in net revenue, partially offset by (i) an increase of 24.9% in the cost of product sold (excluding depreciation and amortization) and an increase of 14.4% in the distribution, administrative, sales and marketing expenses (excluding depreciation and amortization), and (ii) an increase in income taxes paid.

 

Investment Activities

 

The cash flow used in the investment activities of the Company in the year ended on December 31, 2020 amounted R$ 6,799.6 million, compared to R$ 4,838.6 million in the same period of 2019, mainly explained by an increase in financial investments of R$ 1,764.3 million in 2020 compared to 2019.

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Financial Activities

 

The cash flow of the financial activities in the year ended on December 31, 2020 amounted to a cash outflow of R$ 8,602.0 million, compared to the cash outflow of R$ 12,283.5 million in the same period in 2019, mainly as a result of an increase in proceeds from borrowings and a reduction in disbursements related to the payment of dividends and interest on own capital.

 

Cash Flow for the Year Ended on December 31, 2019 compared with 2018

 

   
  2019 2018 Variation
Cash flow     2019/2018
Cash flow of the operating activities 18,381.3 18,346.1 35.2
Cash flow of the investment activities -4,838.6 -3,675.7 -1,162.9
Cash flow of financial activities -12,283.5 -13,656.5 1,373.0
Total 1,259.2 1,013.9 245.3
         

 

Operating activities

 

The Company’s cash flow from operating activities decreased 0.2%, reaching R$ 18,381.3 million in the year ended on December 31, 2019, in relation to the R$ 18,346.1 million in the same period in 2018, mainly due to (i) an increase of 14.7% in the cost of product sold (excluding depreciation and amortization) and an increase of 3.1% in the distribution, administrative, sales and marketing expenses (excluding depreciation and amortization), partially compensated by an increase of 4.7% in net sales revenue, which led to a worsening of the operating result, and (ii) an increase in income taxes paid, partially offset by an improvement in the variation of working capital during 2019, with an increase of R$ 262.6 million in 2019.

 

Investment Activities

 

The cash flow used in the investment activities of the Company in the year ended on December 31, 2019 amounted R$ 4,838.6 million, compared to the R$ 3,675.7 million in the same period of 2018, mainly explained by an increase in investments in property, plant and equipment and intangible assets of R$ 1,498.4 million in 2019 compared to 2018, combined with greater outflows related to the acquisition of other investments.

 

Financial Activities

 

The cash flow of the financial activities of the year ended on December 31, 2019 amounted to a cash outflow of R$ 12,283.5 million compared to the cash outflow of R$ 13,656.5 million in the same period in 2018, mainly as a function of a decrease in cash used for the acquisition of non-controlling shareholders, as a result of the partial exercise, in 2018, of put option by E. León Jimenes S.A. related to the interest in the equity capital of Tenedora (see item 10.3 - Events with effective or expected material effects on the Financial Statements and Income – b) organization, acquisition or disposal of equity interest – Renegotiation of the shareholders’ agreement of Tenedora CND). Such impact was partially offset by the decrease of proceeds from borrowings and the increase in disbursements related to cash net of finance costs other than interests.

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10.2 – Operating and financial income

 

a) Operating income of the Company, particularly: (i) the description of material income components; and (ii) factors with material impact on operating income.

 

i) Description of any material income components

 

The revenues of the Company and its subsidiaries primarily consist of the sale of beers, “fu