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 May, 2024

Commission File Number 1565025

 


 

AMBEV S.A.

(Exact name of registrant as specified in its charter)

 

AMBEV S.A.

(Translation of Registrant's name into English)

 

Rua Dr. Renato Paes de Barros, 1017 - 3rd Floor
04530-000 São Paulo, SP
Federative Republic of Brazil

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. 


Form 20-F ___X___ Form 40-F _______

 Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  

Yes _______ No ___X____

 
 

 

Ambev S.A.

Interim consolidated

financial statements at
March 31, 2024
and report on review

 
 

 

 

Report on review of interim
consolidated financial statements

 

 

To the Board of Directors and Shareholders

Ambev S.A.

 

 

 

 

Introduction

 

We have reviewed the accompanying interim consolidated balance sheet of Ambev S.A. and its subsidiaries ("Company") as at March 31, 2024 and the related interim consolidated income statement, comprehensive income, changes in equity and cash flows for the quarter then ended, and notes, comprising a summary of material accounting policies and other explanatory information.

 

Management is responsible for the preparation and fair presentation of these interim consolidated financial statements in accordance with the accounting standard International Accounting Standard (IAS) 34 - Interim Financial Reporting, of the International Accounting Standards Board (IASB). Our responsibility is to express a conclusion on these interim consolidated financial statements based on our review.

 

Scope of review

 

We conducted our review in accordance with International Standards on Reviews of Interim Financial Information (ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Brazilian and International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim consolidated financial statements referred to above is not prepared, in all material respects, in accordance with IAS 34.

 

São Paulo, May 15, 2024

 

 

PricewaterhouseCoopers

Auditores Independentes Ltda.

CRC 2SP000160/O-5

Sergio Eduardo Zamora

Contador CRC 1SP168728/O-4

 

 

PricewaterhouseCoopers Auditores Independentes Ltda., Avenida Brigadeiro Faria Lima, 3732, Edifício B32, 16o

São Paulo, SP, Brasil, 04538-132

T: +55 (11) 4004-8000, www.pwc.com.br

 

 

AMBEV S.A.

 

CONTENTS

 

INTERIM CONSOLIDATED BALANCE SHEET 2
INTERIM CONSOLIDATED INCOME STATEMENT 4
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 5
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 6
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS 8
1.   CORPORATE INFORMATION 9
2.   BASIS OF PREPARATION AND PRESENTATION OF THE FINANCIAL STATEMENTS 10
3.   SUMMARY OF MATERIAL ACCOUNTING POLICIES 12
4.   USE OF ESTIMATES AND JUDGMENTS 13
5.   CASH AND CASH EQUIVALENTS AND INVESTMENT SECURITIES 14
6.   INVENTORY 14
7.   RECOVERABLE TAXES 15
8.   INCOME TAX AND SOCIAL CONTRIBUTION 16
9.   PROPERTY, PLANT AND EQUIPMENT 20
10.   GOODWILL 22
11.   TRADE PAYABLES 22
12.   INTEREST-BEARING LOANS AND BORROWINGS 23
13.   PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS 24
14.   CHANGES IN EQUITY 27
15.   SEGMENT REPORTING 31
16.   NET SALES 34
17.   OTHER OPERATING INCOME/(EXPENSES) 34
18.   EXCEPTIONAL ITEMS 34
19.   FINANCE RESULT 35
20.   SHARE-BASED PAYMENTS 36
21.   FINANCIAL INSTRUMENTS AND RISKS 38
22.   COLLATERAL AND CONTRACTUAL COMMITMENTS WITH SUPPLIERS, ADVANCES FROM CUSTOMERS AND OTHERS 46
23.   RELATED PARTIES 47
24.   EVENTS AFTER THE REPORTING PERIOD 51

 

 

AMBEV S.A.

 

 

INTERIM CONSOLIDATED BALANCE SHEET

All amounts in thousands of Brazilian Reais unless otherwise stated

 

Assets Note 03/31/2024 12/31/2023
       
Cash and cash equivalents 5.1 12,844,524  16,059,003 
Investment securities 5.2 1,077,190  277,164 
Trade receivables   5,260,569  5,741,457 
Derivative financial instruments 21 281,974  378,049 
Inventories 6 10,698,373  9,619,022 
Recoverable taxes 7 3,161,071  3,435,688 
Other assets   1,351,310  1,052,667 
Current assets   34,675,011  36,563,050 
       
       
Investment securities 5.2 244,767  242,168 
Derivative financial instruments 21 -    1,673 
Recoverable taxes 7 11,458,144  11,325,096 
Deferred tax assets 8.1 8,206,059  7,969,592 
Other assets   1,183,074  1,520,701 
Employee benefits   59,585  57,261 
Long term assets   21,151,629  21,116,491 
       
Investments in associates and joint ventures   296,046  289,063 
Property, plant and equipment 9 27,626,093  26,630,156 
Intangible   10,699,872  10,041,733 
Goodwill 10 39,368,150  38,003,640 
       
Non-current assets   99,141,790  96,081,083 
       
Total assets   133,816,801  132,644,133 

 

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

AMBEV S.A.

INTERIM CONSOLIDATED BALANCE SHEET (CONTINUED)

All amounts in thousands of Brazilian Reais unless otherwise stated

 

Equity and liabilities Note 03/31/2024 12/31/2023
       
Trade payables 11 21,848,439  23,195,101 
Derivative financial instruments 21 408,133  751,362 
Interest-bearing loans and borrowings 12 1,646,816  1,298,091 
Wages and salaries   1,678,889  2,128,547 
Dividends and interest on shareholders’ equity payable   1,523,102  1,526,151 
Income tax and social contribution payable   1,311,479  1,340,492 
Taxes and contributions payable   3,856,107  6,236,626 
Other liabilities, including put option granted on subsidiaries 1.2.1 2,126,605  4,110,138 
Provisions 13 512,253  418,389 
Current liabilities   34,911,823  41,004,897 
       
Trade payables 11 319,473  307,300 
Derivative financial instruments 21 -    11,643 
Interest-bearing loans and borrowings 12 2,170,614  2,202,975 
Deferred tax liabilities 8.1 3,718,607  3,318,448 
Income tax and social contribution payable   1,443,700  1,487,125 
Taxes and contributions payable   536,776  513,315 
Other liabilities, including put option granted on subsidiaries   834,551  1,083,221 
Provisions 13 485,428  559,614 
Employee benefits   2,019,113  2,011,793 
Non-current liabilities   11,528,262  11,495,434 
       
Total liabilities   46,440,085  52,500,331 
       
Equity 14    
Issued capital   58,226,036  58,177,929 
Reserves   98,694,726  98,669,404 
Carrying value adjustments   (76,859,207) (77,878,043)
Retained earnings/(losses)   6,532,773  -   
Equity attributable to the equity holders of Ambev   86,594,328  78,969,290 
Non-controlling interests   782,388  1,174,512 
Total equity   87,376,716  80,143,802 
       
Total equity and liabilities   133,816,801  132,644,133 

 

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

AMBEV S.A.

INTERIM CONSOLIDATED INCOME STATEMENT

For the periods ended March 31

All amounts in thousands of Brazilian Reais unless otherwise stated

 

  Note 2024 2023
       
Net sales 16 20,276,297  20,531,743 
Cost of sales   (10,058,994) (10,131,684)
Gross profit   10,217,303  10,400,059 
       
Distribution expenses   (2,691,010) (2,916,696)
Commercial expenses   (1,884,524) (1,741,300)
Administrative expenses   (1,332,368) (1,305,552)
Other operating income/(expenses) 17 593,029  481,076 
Exceptional items 18 (17,569) (27,889)
Income from operations   4,884,861  4,889,698 
       
Finance expenses 19 (1,012,469) (1,454,719)
Finance income 19 640,466  734,304 
Exchange differences, net 19 (33,941) (277,447)
Net finance result (i)   (405,944) (997,862)
       
Share of results of associates and joint ventures   (3,570) (14,172)
Income before income tax   4,475,347  3,877,664 
       
Income tax expense 8.2 (671,165) (58,415)
Net income   3,804,182  3,819,249 
       
Attributable to:      
Equity holders of Ambev   3,700,276  3,699,575 
Non-controlling interest   103,906  119,674 
       
Basic earnings per share – common – R$   0.2350  0.2350 
Diluted earnings per share – common – R$   0.2336  0.2335 

 

(i) As detailed in note 19 – Net finance result, the Company changed the split between financial result lines, including for comparative purposes.

 

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

AMBEV S.A.

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the periods ended March 31

All amounts in thousands of Brazilian Reais unless otherwise stated

 

  2024 2023
     
Net income 3,804,182  3,819,249 
     
Items that may be subsequently reclassified to profit or loss:    
Exchange differences on the translation of foreign operations (gains/(losses))    
Investment hedge – put option granted on subsidiaries (37,671) 65,667 
Gains/losses on translation of other foreign operations  991,063  (2,027,761)
Gains/losses on translation of foreign operations  953,392  (1,962,094)
     
Cash flow hedge – gains/(losses)    
Recognized in equity (Hedge reserve) (517,115) (12,952)
Reclassified from equity (Hedge reserve) and included in profit or loss 84,949  (93,916)
Total cash flow hedge (432,166) (106,868)
     
Items that will not be reclassified to profit or loss:    
Recognition of actuarial gains/(losses) 1,415  4,616 
     
Other comprehensive (loss)/income 522,641  (2,064,346)
     
Total comprehensive (loss)/income 4,326,823  1,754,903 
     
Attributable to:    
   Equity holders of Ambev 4,202,655  1,655,897 
   Non-controlling interest 124,168  99,006 

 

The consolidated statement of comprehensive income is presented net of income tax. The income tax effects of these items are disclosed in note 8 –Income tax and social contribution.

 

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

AMBEV S.A.

 

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the periods ended March 31

All amounts in thousands of Brazilian Reais unless otherwise stated

 

  Attributable to equity holders of Ambev      
  Issued capital Capital reserves Net income reserves Retained earnings Carrying value adjustments Total   Non-controlling interests Total equity
At January 1, 2023 58,130,517  55,339,694  36,906,900  -    (68,421,478) 81,955,633    1,372,194  83,327,827 
                   
 Net Income  -    -    -    3,699,575  -    3,699,575    119,674  3,819,249 
                   
Comprehensive income:                  
Gains/(losses) on the translation of foreign operations -      -    -    (1,941,515) (1,941,515)   (20,579) (1,962,094)
Cash flow hedges -      -    -    (106,869) (106,869)   (106,868)
Actuarial gains/(losses) -      -    -    4,706  4,706    (90) 4,616 
Total comprehensive income  -    -    -    3,699,575  (2,043,678) 1,655,897    99,006  1,754,903 
Capital increase (note 14) 47,412  (32,869) -    -    -    14,543    -    14,543 
Effect of application of IAS 29 (hyperinflation) -    -    -    1,269,900  -    1,269,900    3,115  1,273,015 
Options granted on subsidiaries -    -    -    -    4,700  4,700    -    4,700 
Gains/(losses) of controlling interest -    -    -    -    (44) (44)   -    (44)
Dividends paid -    -    -    -    -    -      (37,039) (37,039)
Purchases of shares, results from treasury shares and share-based payments -    98,962  -    -    -    98,962    -    98,962 
At March 31, 2023 58,177,929  55,405,787  36,906,900  4,969,475  (70,460,500) 84,999,591    1,437,276  86,436,867 

 

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

AMBEV S.A.

 

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)

For the periods ended March 31

All amounts in thousands of Brazilian Reais unless otherwise stated

 

  Attributable to equity holders of Ambev      
  Issued capital Capital reserves Net income reserves Retained earnings Carrying value adjustments Total   Non-controlling interests Total equity
At January 1, 2024 58,177,929  55,479,564  43,189,840  -    (77,878,043) 78,969,290    1,174,512  80,143,802 
                   
 Net Income  -    -    -    3,700,276  -    3,700,276    103,906  3,804,182 
                   
Comprehensive income:                  
Gains/(losses) on the translation of foreign operations -      -    -    933,680  933,680    19,712  953,392 
Cash flow hedges -      -    -    (432,721) (432,721)   555  (432,166)
Actuarial gains/(losses) -      -    -    1,420  1,420    (5) 1,415 
Total comprehensive income  -    -    -    3,700,276  502,379  4,202,655    124,168  4,326,823 
Capital increase (note 14) 48,107  -    -    -    -    48,107    -    48,107 
Effect of application of IAS 29 (hyperinflation) -    -    -    2,811,677  -    2,811,677    6,006  2,817,683 
Gains/(losses) of controlling interest (i) -    1,958  -    -    516,457  518,415    (518,430) (15)
Dividends paid -    -    -    -    -    -      (4,212) (4,212)
Purchases of shares, results from treasury shares and share-based payments -    23,364  -    -    -    23,364    344  23,708 
Prescribed/(complementary) dividends -    -    -    20,820  -    20,820    -    20,820 
At March 31, 2024 58,226,036  55,504,886  43,189,840  6,532,773  (76,859,207) 86,594,328    782,388  87,376,716 

 

(i) Amount of R$518.415 refers to renegotiation of shareholders agreement from Tenedora, as described in note 1.2.1.

 

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

AMBEV S.A.

 

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

For the periods ended March 31

All amounts in thousands of Brazilian Reais unless otherwise stated

 

  Note 2024 2023
       
Net income   3,804,182  3,819,249 
Depreciation, amortization and impairment   1,632,327  1,526,837 
Impairment losses on receivables and inventory   94,980  109,423 
Additions/(reversals) in provisions and employee benefits   55,773  24,013 
Net finance costs 19 405,944  997,862 
Losses/(gains) on sale of property, plant and equipment and intangible assets   (20,683) (28,077)
Share-based payment expenses 20 101,290  77,166 
Income tax expense 8 671,165  58,415 
Share of results of associates and joint ventures   3,570  14,172 
Hedge operations results   106,992  (104,828)
Cash flow from operating activities before changes in working capital and use of provisions   6,855,540  6,494,232 
       
(Increase)/decrease in trade and other receivables   86,776  (256,344)
(Increase)/decrease in inventories   (991,534) (496,438)
Increase/(decrease) in trade and other payables   (3,064,768) (4,092,002)
Cash generated from operations   2,886,014  1,649,448 
       
Interest paid   (143,791) (140,669)
Interest received   390,817  163,908 
Dividends received   6,664  4,949 
Income tax paid   (2,421,505) (2,253,903)
Cash flow from operating activities   718,199  (576,267)
       
Proceeds from sales of property, plant and equipment and intangible assets   36,217  23,830 
Acquisitions of property, plant and equipment and intangible assets   (1,015,895) (1,152,953)
Acquisitions of subsidiaries, net of cash acquired   (278) -   
Capital increase in associates and subsidiaries   -    (6,519)
Investments in short-term debt securities and net proceeds/(acquisitions) of debt securities   (799,676) 54,915 
Cash flow from investing activities   (1,779,632) (1,080,727)
       
Capital increase   17,486  14,543 
Proceeds/(buyback) treasury shares   (76,223) (4,851)
Acquisitions of non-controlling interest 1.2.1 (1,714,029) -   
Proceeds from borrowings   412,891  45,448 
Repayment of borrowings   (63,306) (77,233)
Cash net of finance costs other than interests   (546,087) (727,330)
Lease Payments   (321,235) (228,732)
Dividends and interest on shareholders’ equity paid   (11,599) (38,175)
Cash flow from financing activities   (2,302,102) (1,016,330)
       
Net increase/(decrease) in cash and cash equivalents   (3,363,535) (2,673,324)
Cash and cash equivalents less bank overdrafts at the beginning of the year   16,059,003  14,852,092 
Effect of exchange rate fluctuations on cash and cash equivalents   149,056  (121,775)
Cash and cash equivalents less bank overdrafts at the end of the year   12,844,524  12,056,993 

 

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

AMBEV S.A.

 

1.CORPORATE INFORMATION

 

1.1 Description of business

 

Ambev S.A. (referred to as the “Company” or “Ambev”) together with its subsidiaries (the “Group” or “Consolidated”), headquartered in São Paulo - SP, Brazil, has as its social purpose, either directly or through participation in other companies, the production and sale of beer, draft beer, soft drinks, other non-alcoholic beverages, malt and food in general, as well as the advertising of its own and of third party products, the sale of promotional and advertising materials and the direct or indirect exploitation of bars, restaurants, snack bars and similar establishments, among others.

 

The Group portfolio includes several own brands, like Brahma®, Skol®, Antarctica®, Original®, Colorado®, Bohemia®, Serramalte®, Quilmes®, Patagonia®, Guaraná Antarctica®, Beats® among others, and licensed brands, like Budweiser®, Corona®, Stella Artois®, Spaten® Beck’s® and Mike’s®.

 

The Company’s shares and American Depositary Receipts (“ADRs”) are listed on the Brasil, Bolsa, Balcão S.A. (“B3”), under the ticker “ABEV3” and on the New York Stock Exchange (“NYSE”) under the ticker “ABEV”, respectively.

 

The Company’s direct controlling shareholders are Interbrew International B.V. (“ITW International”), AmBrew S.à.r.l (“Ambrew”), both of which are subsidiaries of Anheuser-Busch InBev N.V. (“AB InBev”).

 

1.2 Major corporate events in the three-month period ended March 31, 2024

 

1.2.1 Exercise the put option under the Tenedora Shareholders' Agreement

 

The Company and E. León Jimenes, S.A. (“ELJ”), as the shareholders of Tenedora CND, S.A. (“Tenedora”), a holding company headquartered in the Dominican Republic, the owner of almost the entire share capital of Cervecería Nacional Dominicana, S.A., on July 2, 2020, signed the second amendment to Tenedora’s Shareholders Agreement (the “Shareholders Agreement”), extending their partnership in the country and postponing the terms of the put and call options defined in the original Agreement. At December 31, 2023, ELJ was the owner of 15% of Tenedora’s shares, and its put option was divided into two tranches: (i) Tranche A, corresponding to 12.11% of Tenedora’s shares and (ii) Tranche B, corresponding to 2.89% remaining. On January 31, 2024, ELJ exercised the Tranche A put option to sell to Ambev, in accordance with the Shareholders' Agreement. The instrument was settled through: (i) a cash disbursement of R$1,704 million; and (ii) the offset of ELJ's debt held by the Group in the amount of R$335 million. As the transaction has been concluded, Ambev Group now holds a 97.11% stake in Tenedora, with the remaining 2.89% held by ELJ and object of put option to sell, exercisable starting in 2026 (Tranche B). The Company, on the other hand, has a call option over Tranche B shares to be exercised starting in 2029.The assumptions used for these options are described in note 21 Financial Instruments and risks (Item 21.3.1).

 

AMBEV S.A.

 

2.BASIS OF PREPARATION AND PRESENTATION OF THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

The consolidated interim financial statements on March 31, 2024 have been prepared using the going-concern accounting basis and are being presented in accordance with IAS 34 – Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB®”).

 

The information does not meet all disclosure requirements for the presentation of full annual consolidated financial statements and are disclosed with relevant information and changes in the period, without the level of detail in certain accompanying notes previously disclosed, avoiding repetition which, in Management's opinion, provides an understanding of the Company's equity position and performance during the interim period. Therefore, the consolidated interim financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2023, prepared in accordance with International Financial Reporting Standards (“IFRS®”) issued by the IASB®.

 

To avoid duplication of disclosures which are included in the annual consolidated financial statements, the following notes below are not disclosed:

 

(a)Payroll and related benefits (Note 9 of annual financial statements);
(b)Additional information on operating expenses by nature (note 10 of annual financial statements);
(c)Earnings per share (note 12 of annual financial statements);
(d)Intangibles (note 17 of annual financial statements);
(e)Impairment of non-financial assets (note 16 of annual financial statements)
(f)Trade receivables (note 20 of annual financial statements); and
(g)Employee benefits (note 24 of annual financial statements);

 

In addition, the material accounting policies presented in the respective accompanying notes are not disclosed in these interim consolidated financial statements. The following notes are not in the same level of detail presented in the consolidated annual financial statements, for the year ended December 31, 2023:

 

(a)Summary of material accounting policies (note 3 of annual financial statements);
(b)Use of estimates and judgments (note 4 of annual financial statements);
(c)Income tax and social contribution (note 13 of annual financial statements);
(d)Goodwill (note 15 of annual financial statements);
(e)Changes in equity (note 22 of annual financial statements);
(f)Interest-bearing loans and borrowings (note 23 of annual financial statements);
(g)Share-based payments (note 25 of annual financial statements);
(h)Provisions, contingent liabilities and contingent asset (note 27 of annual financial statements);
(i)Financial instruments and risks (note 28 of annual financial statements); and
(j)Related parties (note 30).

 

In preparing the consolidated financial statements, management uses judgments, estimates and assumptions that affect the application of accounting practices and the reported amounts of assets, liabilities, income and expenses. The relevant estimates and judgments are disclosed in note 4 - Use of estimates and judgments.

 

AMBEV S.A.

 

The interim consolidated financial statements were approved, in their final form, by the Board of Directors on May 07, 2024.

 

2.1 Functional and presentation currency

 

The functional and presentation currency of the Company consolidated financial statements is the Brazilian Real, which is the currency of its main economic operating environment. For presentation purposes, the financial statements are presented in millions of Brazilian Reais (“R$”), unless otherwise indicated, rounded to the nearest million.

 

Foreign currency transactions are accounted for at the exchange rates prevailing as at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated using the balance sheet date rate. Non-monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rate prevailing as at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies stated at fair value are translated at the exchange rate in force as at the date on which the fair value was determined. Gains and losses arising from the settlement of transactions in foreign currencies and resulting from the conversion of assets and liabilities denominated in foreign currencies are recognized in the income statement.

 

Assets and liabilities of subsidiaries located abroad are translated at the foreign exchange rates prevailing at the balance sheet date, while amounts from the income statement and cash flow are translated at the average exchange rate for the year, and changes in equity are translated at the historical exchange rate of each transaction. Translation adjustments arising from the difference between the average exchange rates and the historical rates are recorded directly in Carrying value adjustments.

 

In the consolidation process, exchange differences arising from the translation of equity in foreign operations and borrowing and other currency instruments designated as net investment hedges are recognized in Carrying value adjustments, an equity reserve, and included in Other comprehensive income.

 

Even when recorded in the acquiring entity, the goodwill and fair value adjustments arising from the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the foreign exchange rate at the balance sheet date.

 

 

AMBEV S.A.

 

2.1.1 Exchange rates

 

The most significant exchange rates used for the preparation of the Company’s consolidated financial statements are as follow:

 

      Closing rate   Average rate
Currency Name Country 03/31/2024 12/31/2023   03/31/2024 03/31/2023
               
CAD Canadian Dollar Canada 3.6814  3.6536    3.6626  3.8259 
DOP Dominican Peso Dominican Republic 0.0843  0.0831    0.0838  0.0920 
USD US Dollar Panamá and Cuba 4.9962  4.8413    4.9238  5.1736 
GTQ Quetzal Guatemala 0.6421  0.6189    0.6308  0.6603 
ARS Argentinean Peso  Argentina 0.0058  0.0060    0.0058  0.0277 
BOB Bolivian Peso Bolivia 0.7178  0.6956    0.7074  0.7433 
PYG Guarani Paraguay 0.0007  0.0007    0.0007  0.0007 
UYU Uruguayan Peso Uruguay 0.1330  0.1241    0.1260  0.1320 
CLP Chilean Peso Chile 0.0051  0.0055    0.0053  0.0062 
BBD Barbadian Dollar Barbados 2.4629  2.3866    2.4272  2.5504 

 

3.SUMMARY OF MATERIAL ACCOUNTING POLICIES

 

The accounting practices adopted by the Company are consistent in all the years presented. There were no changes in the accounting policies and calculation methods used for the interim consolidated financial statements as at March 31, 2024 compared to those presented in the consolidated financial statements for the years ended December 31, 2023.

 

3.1 Recently issued IFRS

 

The changes in standards and new standards, which became effective in 2024 are not applicable or did not have any material impact in these consolidated financial statements. Below are the main changes in accounting standards which, in management's opinion, could possibly have an impact on subsequent disclosures:

 

(i)In December 2021, the Organisation for Economic Cooperation and Development ("OECD"), as part of the Inclusive Framework on Base Erosion and Profit Shifting ("BEPS") project, released the Pillar Two model rules (or Global Anti-Base Erosion Model Rules - GloBE), aiming at a common approach to international corporate taxation, in order to ensure that multinational economic groups within the scope of these rules calculate taxes on profit at a minimum effective rate of 15% in each country where they operate. These rules will have to be approved locally in each country that adheres to the proposal, via applicable legislation, some of which have already promulgated new laws or are in the process of discussing and approving them. In May 2023, the IASB® issued scope changes to IAS 12 – Income Taxes to allow a temporary exemption in accounting for deferred income taxes arising from promulgated or substantially promulgated legislation implementing OECD Pillar Two, an exemption which has been adopted by the Group. In the Group's case, the Pillar Two Rules are effective in 2024 in some jurisdictions and no material impacts have been identified in the interim financial statements as of March 31, 2024, and currently there is no expectation that there will be a material impact on subsequent financial statements.

 

 

AMBEV S.A.

(ii)On May 25, 2023, the IASB® published amendments to IAS 7 – Statement of Cash Flows and IFRS 7 – Financial Instruments: Disclosures, which establish new disclosure requirements for financing transactions with suppliers, the so-called "drawn risk". These requirements must be adopted by companies that adhere to the IFRS® as of 2024, but no additional presentation is required in the interim financial statements in the first year of adoption. The Company is evaluating the impacts of these changes, even though these transactions are not material to the Group, as disclosed in note 11 – Trade payables.

 

(iii)In August 2023, the IASB® issued amendments to IAS 21 – The Effects of Changes in Foreign Exchange Rates. The modifications implemented will require the application of a consistent approach when assessing whether a currency can be exchanged for another currency and, when it cannot, determining the exchange rate to be used, and the related disclosures. The Company is evaluating the impacts of these standards, the adoption of which is required for fiscal years beginning on January 1, 2025.

 

Is not expected that these changes have a significant impact in the interim consolidated financial statements of the entity. In addition, there are no other standards, standard changes or IFRIC interpretations that still haven’t been in force and that may have a material impact in entity’s consolidated financial statements. In addition, the company has not adopted any standards in advance.

 

4.USE OF ESTIMATES AND JUDGMENTS

 

The preparation of interim consolidated financial statements in compliance with IFRS requires Management to make use of judgments, estimates and assumptions that affect the application of accounting practices and the reported amounts of assets and liabilities, income and expenses. The estimates and assumptions are based on past experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for decision-making regarding judgments relating to the carrying amounts of assets and liabilities that are not readily evident from other sources. The actual results may differ from these estimates.

 

The estimates and assumptions are reviewed on a regular basis. Changes in accounting estimates may affect the period during which they are realized, or future periods.

 

The accounting policy which reflects significant estimates and judgments used in the preparation of these interim consolidated financial statements for the three-month period ended March 31,2024 have not changed from those valid on December 31, 2023.

 

AMBEV S.A.

 

5.CASH AND CASH EQUIVALENTS AND INVESTMENT SECURITIES

 

5.1 Cash and equivalents

 

  03/31/2024 12/31/2023
     
Cash 230,627  267,077 
Current bank accounts 5,516,948  6,818,336 
Short-term bank deposits (i) 7,096,949  8,973,590 
Cash and cash equivalents 12,844,524  16,059,003 

 

(i) The balance refers mostly to Bank Deposit Certificates (“CDBs”), of high liquidity, which are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value.

 

The cash and cash equivalents balance include the amount of R$4,042 million as at March 31, 2024 (R$3,768 million in 2023), which is not freely transferable to the parent company due to remittance restrictions in Cuba and Argentina, although available for use in the local operations of the subsidiaries in question.

 

5.2 Investment securities

 

  03/31/2024 12/31/2023
     
Financial assets at fair value through profit or loss 1,077,190  277,164 
Current investment securities 1,077,190  277,164 
     
Investment on debt securities (i) 244,767  242,168 
Non-current investment securities 244,767  242,168 
     
Total 1,321,957  519,332 

 

(i) The balance refers substantially to financial investments linked to tax incentives that do not have immediate convertibility into a known amount of cash.

 

6.INVENTORY

 

  03/31/2024 12/31/2023
     
Finished goods  3,657,488  2,990,337 
Work in progress 833,340  826,520 
Raw materials and consumables 5,086,425  4,599,874 
Spare parts and others 863,784  806,867 
Prepayments 385,052  537,871 
Impairment losses (127,716) (142,447)
  10,698,373  9,619,022 

 

The changes in impairment losses on inventory are as follows:

  03/31/2024 12/31/2022
Beginning balance (142,447) (160,173)
Effects of movements in foreign exchange in the balance sheet (509) 12,932 
Provisions (70,573) (262,884)
Write-offs 85,813  267,678 
Final balance (127,716) (142,447)

 

 

AMBEV S.A.

 

7.RECOVERABLE TAXES

  03/31/2024 12/31/2023
PIS/COFINS exclusion of ICMS (i) 120,504  219,010 
PIS/COFINS 181,796  170,426 
ICMS 422,117  426,936 
IPI 116,379  112,541 
Income tax and social contributions 2,259,717  2,436,614 
Other 60,558  70,161 
Current 3,161,071  3,435,688 
     
PIS/COFINS exclusion of ICMS (i) 6,684,378  6,490,398 
ICMS 427,897  436,508 
Income tax and social contributions 4,103,259  4,087,032 
Other 242,610  311,158 
Non-current 11,458,144  11,325,096 
     
Total 14,619,215  14,760,784 

 

(i) Over the last few years, and as disclosed in the respective annual financial statements, the Company recognized PIS and COFINS credits arising from the exclusion of ICMS, including in the form of tax substitution, from the calculation basis. The corresponding entry for recognition is recorded in the item Recoverable PIS/COFINS – exclusion of ICMS, according to the table above.

 

 

AMBEV S.A.

8.INCOME TAX AND SOCIAL CONTRIBUTION

 

8.1 Deferred income tax and social contribution

 

The details of the amount of deferred income tax and social contribution by type of temporary difference are as follows:

 

  03/31/2024   12/31/2023
  Assets Liabilities Net   Assets Liabilities Net
Investment securities 7,957  -    7,957    8,231  -    8,231 
Intangible -    (1,632,761) (1,632,761)   -    (1,369,738) (1,369,738)
Employee benefits 741,216  -    741,216    856,512  -    856,512 
Trade payables 2,835,992  (2,641) 2,833,351    2,843,806  (3,281) 2,840,525 
Trade receivables 34,553  (4,326) 30,227    43,807  (7,002) 36,805 
Derivatives 31,174  (44,246) (13,072)   31,091  (77,210) (46,119)
Interest-bearing loans and borrowings 7,671  -    7,671    7,518  -    7,518 
Inventories 309,129  (110,044) 199,085    268,589  (59,561) 209,028 
Property, plant and equipment 936,273  (2,187,439) (1,251,166)   714,218  (1,837,179) (1,122,961)
Withholding tax on undistributed profits and royalties -    (1,539,189) (1,539,189)   -    (1,385,500) (1,385,500)
Investments in associates and joint ventures -    (383,678) (383,678)   -    (383,678) (383,678)
Interest on shareholders’ equity 292,192  -    292,192    -    -    -   
Losses carried forward 4,343,336  -    4,343,336    4,383,261  -    4,383,261 
Provisions 1,140,928  (16,410) 1,124,518    1,026,343  (4,637) 1,021,706 
Complement of income tax of foreign subsidiaries due in Brazil -    (30,891) (30,891)   -    -    -   
Impact of the adoption of IFRS 16 (Leases) 6,348  (21,160) (14,812)   14,484  (19,679) (5,195)
ICMS on the assessment bases of PIS/COFINS -    (75,989) (75,989)   -    (228,510) (228,510)
Other items 293,100  (443,643) (150,543)   266,340  (437,081) (170,741)
Gross deferred tax assets/(liabilities) 10,979,869  (6,492,417) 4,487,452    10,464,200  (5,813,056) 4,651,144 
Netting by taxable entity (2,773,810) 2,773,810  -      (2,494,608) 2,494,608  -   
Net deferred tax assets/(liabilities) 8,206,059  (3,718,607) 4,487,452    7,969,592  (3,318,448) 4,651,144 

 

Among the deferred tax assets on tax losses carried forward, the tax authorities unilaterally offset in tax proceedings the total amount of R$268,602, which is equivalent to R$790,005 in tax losses basis. Such proceedings are classified as having a possible likelihood of loss.

 

AMBEV S.A.

 

8.1.1 Realization of deferred taxes

 

As at March 31, 2024 the deferred tax assets and liabilities are expected to be utilized/settled, as follows:

 

  03/31/2024
Deferred taxes not related to tax losses to be realized until 12 months to be realized after 12 months Total
       
Investment securities -    7,957  7,957 
Intangible (1,267) (1,631,494) (1,632,761)
Employee benefits 67,866  673,350  741,216 
Trade payables (198,473) 3,031,824  2,833,351 
Trade receivables 22,876  7,351  30,227 
Derivatives (15,159) 2,087  (13,072)
Interest-bearing loans and borrowings 205  7,466  7,671 
Inventories 278,801  (79,716) 199,085 
Property, plant and equipment (3,911) (1,247,255) (1,251,166)
Withholding tax on undistributed profits and royalties -    (1,539,189) (1,539,189)
Investments in associates and joint ventures -    (383,678) (383,678)
Interest on shareholders’ equity 292,192  -    292,192 
Provisions 556,092  568,426  1,124,518 
Complement of income tax of foreign subsidiaries due in Brazil (30,891) -    (30,891)
Impact of the adoption of IFRS 16 (Leases) -    (14,812) (14,812)
ICMS on the assessment bases of PIS/COFINS -    (75,989) (75,989)
Other items 92,726  (243,269) (150,543)
Total 1,061,057  (916,941) 144,116 

 

Deferred tax related to tax losses 03/31/2024
2025 378,171 
2026 1,509,387 
2027 1,150,411 
2028 to 2030 888,348 
2031 onward (i) 417,019 
Total 4,343,336 

 

(i) There is no expectation of realization beyond a term of ten years.

 

8.1.2 The net change of deferred taxes

 

The net change in deferred income tax and social contribution is detailed as follows:

 

 

AMBEV S.A.

 

At December 31, 2023 4,651,144 
Recognition of actuarial gains/(losses) (29)
Investment hedge – put option granted on subsidiaries 19,406 
Cash flow hedge – gains/(losses) (95,237)
Gains/(losses) on translation of other foreign operations  (11,988)
Recognized in other comprehensive income (87,848)
Recognized in the income statement 331,997 
Changes directly in the balance sheet (407,841)
Recognized in deferred tax (379,330)
Effect of application of IAS 29 (hyperinflation) (379,330)
Recognized in other balance sheet group (28,511)
At March 31, 2024 4,487,452 

 

8.1.3 Deferred tax asset related to tax losses

 

As of March 31, 2024, besides the tax credits related to tax losses effectively recognized in the amounts disclosed above, other tax credits related to accumulated tax losses in the amount of R$671,127 (R$669,024 in 2023) - which are equivalent, in value basis, to R$2,531,665 at March 31, 2024 (R$2,521,047 in December 31, 2023) - were not recorded, since their realization is not probable in currently Management evaluation.

 

8.2 Income tax and social contribution

 

Income taxes reported in the income statement are analyzed as follows:

  03/31/2024 03/31/2023
Income tax expense – current (1,003,162) (849,957)
     
Deferred tax expense on temporary differences 371,922  584,944 
Deferred tax on tax loss carryforward movements in the current period (39,925) 206,598 
Total deferred tax (expense)/income 331,997  791,542 
     
Total income tax expenses (671,165) (58,415)

 

 

AMBEV S.A.

 

The reconciliation between the weighted nominal tax rate and the effective tax rate is summarized as follows:

 

  03/31/2024 03/31/2023
Profit before tax 4,475,347  3,877,664 
Adjustment on a taxable basis    
Others non-taxable income (130,623) (150,431)
Government grants related to sales taxes  -    (682,700)
Share of results of associates and joint ventures 3,570  14,172 
Non-deductible expenses 6,915  16,227 
Foreign profit calculation (12,003) 146,413 
  4,343,206  3,221,345 
Aggregated weighted nominal tax rate 30.13% 30.32%
Taxes payable – nominal rate  (1,308,690) (976,608)
Adjustment on tax expense    
Income tax incentives 248,539  27,957 
Deductible interest on shareholders’ equity 285,113  856,682 
Tax savings from goodwill amortization 896  4,289 
Withholding income tax (105,180) (57,556)
Recognition/(write-off) of deferred charges on tax losses 78,295  (9,841)
Effect of application of IAS 29 (hyperinflation) 52,292  (120,591)
Others with reduced taxation 77,570  217,253 
Income tax and social contribution expense (671,165) (58,415)
Effective tax rate 15.00% 1.51%

 

The main events that impacted the effective tax rate for the period were:

 

·Government grants for sales taxes: Related to regional incentives and economic development policies, these are related primarily to local production, contributing to economic and social impact, and, when reinvested, are not subject to income tax and social contribution, which explains the impact on the effective tax rate. Any amounts described under this heading are usually impacted by fluctuations in the volume, price and any eventual increases in state VAT (“ICMS”), reflected in other operating income or net sales depending on its nature. Since January 2024, the government subsidy amounts relating to sales taxes have no more been deducted from the taxable base, due to the implementation of Federal Law No. 14.789/24. The amounts relating to tax incentives are duly allocated to the profit reserve each year, in accordance with item (14.3.1) "Tax incentives" of note 14 – Changes in equity.

 

·Complement of income tax on foreign subsidiaries due in Brazil: shows the result of the calculation of universal taxation of profits, according to the regulations of Law 12,973/14.

 

·Income tax incentive: refers to income tax incentives granted by the Federal Government to promote regional development in some areas of the North and Northeast of the country. These incentives are recorded in the income statement on an accrual basis and allocated to the tax incentive reserves account, in accordance with item (14.3.1) "Tax incentives" of note 14 – Changes in equity.

 

·Withholding income tax: The amount is mainly related to dividends already distributed and to be distributed by subsidiaries located outside of Brazil, applicable according to local tax legislation. The recorded values in 2024 are mainly related to withholding tax on dividends distributed in 2024 and the exchange rate variation of the deferred income tax related to subsidiary profits undistributed.

 

 

AMBEV S.A.

·Deductible interest on shareholders’ equity: under Brazilian law, companies have an option to remunerate their shareholders through the payment of Interest on shareholders’ equity, which amount is impacted by the taxable result, net income reserves of the Company and by the long-term interest rate (“TJLP”). These remunerations are deductible for income tax purposes. On December 29, 2023, Law 14.789/23 was enacted, effective as of January 1, 2024, limiting, as from that date, the equity accounts that must be used in the JCP calculation.

 

·Effect of application of IAS 29 (hyperinflation): our subsidiary in Argentina, for operating in a hyperinflationary economy, is subject to monetary correction of non-financial assets and liabilities, equity and income statement, which, at times, reflects in the consolidated effective tax rate and implies variation between periods.

 

 

AMBEV S.A.

 

9.PROPERTY, PLANT AND EQUIPMENT

 

  03/31/2024 12/31/2023
Property, plant and equipment 24,685,993  23,662,728 
Right of use assets 2,940,100  2,967,428 
  27,626,093  26,630,156 

 

9.1 Changes in the carrying amount of property, plant, and equipment

 

                    Carrying amount
  At December 31, 2022 Effects of movements in foreign exchange in the balance sheet Effects of application of IAS 29 (hyperinflation) Acquisitions  Depreciation Disposals and write-offs Transfers  At December 31, 2023   Acquisition cost Depreciation
Land and buildings 9,698,425  (1,485,238) 663,123  44,741  (481,587) (3,738) 800,535  9,236,261    14,287,840  (5,051,579)
Plant and equipment 11,589,556  (1,726,730) 779,390  1,230,174  (3,533,364) (39,135) 2,488,955  10,788,846    39,509,056  (28,720,210)
Fixtures and fittings 1,323,571  (193,404) 86,460  56,419  (541,605) (13,471) 373,702  1,091,672    7,074,126  (5,982,454)
Under construction 4,349,748  (311,718) 120,197  3,283,918  -    (3,391) (4,892,805) 2,545,949    2,545,949  -   
  26,961,300  (3,717,090) 1,649,170  4,615,252  (4,556,556) (59,735) (1,229,613) 23,662,728    63,416,971  (39,754,243)

 

                    Carrying amount
  At December 31, 2023 Effects of movements in foreign exchange in the balance sheet Effects of application of IAS 29 (hyperinflation) Acquisitions  Depreciation Disposals and write-offs Transfers  At March 31, 2024   Acquisition cost Depreciation
Land and buildings 9,236,261  (9,589) 514,980  1,750  (117,007) (10,061) 130,466  9,746,800    15,023,563  (5,276,763)
Plant and equipment 10,788,846  5,694  576,922  229,186  (915,085) (2,945) 393,096  11,075,714    42,076,197  (31,000,483)
Fixtures and fittings 1,091,672  1,223  42,588  3,622  (132,457) (2,840) 43,427  1,047,235    7,421,179  (6,373,944)
Under construction 2,545,949  8,024  76,205  754,869  -    -    (568,803) 2,816,244    2,816,244  -   
  23,662,728  5,352  1,210,695  989,427  (1,164,549) (15,846) (1,814) 24,685,993    67,337,183  (42,651,190)

 

 

AMBEV S.A.

 

9.2 Changes in the carrying amount of right-of-use assets

 

                    Carrying amount
  At December 31, 2022 Effects of movements in foreign exchange in the balance sheet Effects of application of IAS 29 (hyperinflation) Additions Depreciation Disposals and write-offs Transfers  At December 31, 2023   Acquisition cost Depreciation
Buildings 1,350,836  (49,482) 11,951  343,028  (451,693) (30,532) (1,842) 1,172,266    2,925,946  (1,753,680)
Machinery, vehicles and others 1,743,554  (32,731) 15,496  1,313,799  (773,939) (475,532) 4,515  1,795,162    3,534,476  (1,739,314)
Total 3,094,390  (82,213) 27,447  1,656,827  (1,225,632) (506,064) 2,673  2,967,428    6,460,422  (3,492,994)

 

                    Carrying amount
  At December 31, 2023 Effects of movements in foreign exchange in the balance sheet Effects of application of IAS 29 (hyperinflation) Additions Depreciation Disposals and write-offs Transfers  At March 31, 2024   Acquisition cost Depreciation
Buildings 1,172,266  5,658  4,574  63,238  (97,492) (7,294) 260  1,141,210    2,996,441  (1,855,231)
Machinery, vehicles and others 1,795,162  2,737  10,559  210,186  (219,149) (308) (297) 1,798,890    3,762,611  (1,963,721)
Total 2,967,428  8,395  15,133  273,424  (316,641) (7,602) (37) 2,940,100    6,759,052  (3,818,952)
 

AMBEV S.A.

 

10.GOODWILL

 

  03/31/2024 12/31/2023
     
Balance at the end of the previous year 38,003,640  40,594,038 
Effects of movements in foreign exchange in the balance sheet 208,947  (4,067,916)
Effect of application of IAS 29 (hyperinflation) 1,155,563  1,481,136 
Acquisitions, (write-offs) and disposal through business combinations -    (3,618)
Balance at the end of the year 39,368,150  38,003,640 

 

Impairment testing

The impairment test is performed annually considering the most accurate estimates calculated by Management. There are no indications of impairment until March 31, 2024.

 

11.TRADE PAYABLES

 

  03/31/2024 12/31/2023
     
Trade payables 19,994,474  21,278,615 
Related parties (note 23) 1,853,965  1,916,486 
Current 21,848,439  23,195,101 
     
Trade payables 113,458  107,386 
Related parties (note 23) 206,015  199,914 
Non-current 319,473  307,300 
     
Total 22,167,912  23,502,401 

 

The present value adjustment recorded for trade payables, at March 31, 2024 is R$265 million (R$308 million at December 31, 2023).

 

The subsidiaries in Argentina, Chile, Paraguay and Panama have discount transactions for invoices with endorsement (trade payables securitization) with vendors in the amount of R$143 million at March 31, 2024 (R$159 million at December 31, 2023). In general, abovementioned discount transactions occur by legal impositions existing in these jurisdictions. These transactions maintain commercial characteristics since there are no change in previously established conditions (amount, terms, and counterpart) and its vendor’s choice to carry out the anticipation of its receivables with the Company. Therefore, these operations do not result in any additional obligations for the Company.

 

 

AMBEV S.A.

 

12.INTEREST-BEARING LOANS AND BORROWINGS

 

  03/31/2024 12/31/2023
     
Secured bank loans 420,224  14,938 
Other secured loans 127,365  136,269 
Lease liabilities 1,099,227  1,146,884 
Current liabilities 1,646,816  1,298,091 
     
Secured bank loans 96,940  111,628 
Other secured loans 266,798  279,401 
Lease liabilities 1,806,876  1,811,946 
Non-current liabilities 2,170,614  2,202,975 
     
Total 3,817,430  3,501,066 

 

Additional information regarding the exposure of the Company to interest rate, foreign currency risk and debt repayment schedule is disclosed in note 21 - Financial instruments and risks.

 

12.1 Contractual clauses (Covenants)

 

In the three-month period ended March 31, 2024, as well as at December 31, 2023 and until the date of issue of these interim consolidated financial statements there were no events of default, breach of covenant clauses or significant contractual changes that would result in changes to the payment terms of loan and financing contracts.

 

12.2 Leasing contracts for term and discount rate

 

The Company estimated discount rates, based on risk-free interest rates observed in the Brazilian market, for the terms of its contracts, adjusted to their reality (credit spread). Spreads were obtained with financial institutions. The following table shows the weighted average of rates applied:

 

  Rate %
Lease Term 03/31/2024
2024 - 2027 11.18%
 2028 - 2035  11.85%

 

 

AMBEV S.A.

 

13.PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

 

The Company and its subsidiaries are involved in administrative and judicial proceedings and arbitrations arising from the normal course of business. The assessment of the prognosis of loss, carried out by the Company with the support of its legal advisors, considers the probability of the position of the Company and its subsidiaries being accepted at the end of the process, considering the applicable legislation, the case law on the subject and the existing evidence. Due to their nature, these processes involve inherent uncertainties, including, but not limited to, decisions by courts and tribunals, agreements between the parties involved and governmental actions and, as a result, management cannot, at this stage, estimate the exact time taken to resolve these issues.

 

13.1 Provision

 

The Company and some of its subsidiaries are involved in lawsuits, mainly of a tax, civil and labor nature, which are considered probable of loss, and which are fully provisioned, under the terms of IAS 37 - Provisions, Contingent Liabilities and Contingent Assets. Processes are considered with a probable likelihood of loss when there is consolidated or binding case law unfavorable to the thesis defended by the Company and its subsidiaries, or, in the case of a factual or evidentiary discussion, when the Company and its subsidiaries do not have the necessary and sufficient evidence to prove the right alleged.

 

13.1.1 Main lawsuits with a probable likelihood of loss:

 

Sales taxes: in Brazil, the Company and its subsidiaries are parties to various administrative and judicial proceedings related to ICMS, IPI, PIS and COFINS taxes, considered as probable likelihood of loss. Such proceedings include, among others, tax offsetting, appropriation of tax credits and alleged insufficient payment of the respective taxes.

 

Labor: the Company and its subsidiaries are parties to labor proceedings with former employees or former employees of service providers. The main issues involve overtime and related effects and respective charges.

 

Civil: the Company and its subsidiaries are involved in civil lawsuits considered as representing a probable likelihood of loss. The most relevant portion of these lawsuits refers to former distributors, mainly in Brazil, mostly claiming damages resulting from the termination of their contracts.

 

 

AMBEV S.A.

 

13.1.2 Provision changes

 

  Taxes on sales Labor Civil Other taxes (i) Restructuring Total
             
Saldo em 31 de dezembro de 2022 246,948  132,101  335,934  192,929  11,797  919,709 
Effect of changes in foreign exchange rates -    (2,774) (35,824) (6,283) (506) (45,387)
Additions 135,768  247,769  234,556  75,635  3,190  696,918 
Provisions consumed (27,321) (181,662) (121,944) (40,777) (11,211) (382,915)
Provisions reversed (73,223) (45,497) (72,545) (19,057) -    (210,322)
Saldo em 31 de dezembro de 2023 282,172  149,937  340,177  202,447  3,270  978,003 
Effect of changes in foreign exchange rates -    94  (427) 1,374  33  1,074 
Additions 50,049  47,310  15,508  6,624  10,303  129,794 
Provisions consumed (1,261) (38,729) (9,033) (352) (8,765) (58,140)
Provisions reversed (44,749) (5,600) (1,479) (1,222) -    (53,050)
Saldo em 31 de março de 2024 286,211  153,012  344,746  208,871  4,841  997,681 

 

(i) Other taxes refer to provisions for lawsuits concerning taxes unrelated to income taxation. The uncertain tax treatments related to taxes on profits with a prognosis of probable loss have their value reported directly in the income tax and social contribution payable, as per IFRIC 23 - Uncertainty on the Treatment of Income Taxes.

 

13.1.3 Expected settlement

 

  03/31/2024   12/31/2023
  Current Non-current Total   Current Non-current Total
               
Provision for disputes and litigation              
Taxes on sales 186,184  100,027  286,211    113,652  168,520  282,172 
Labor 69,657  83,355  153,012    67,248  82,689  149,937 
Civil 228,640  116,106  344,746    226,736  113,441  340,177 
Other taxes 22,931  185,940  208,871    7,483  194,964  202,447 
Total provision for disputes and litigation 507,412  485,428  992,840    415,119  559,614  974,733 
               
Restructuring 4,841  -    4,841    3,270  -    3,270 
               
Total provisions 512,253  485,428  997,681    418,389  559,614  978,003 

 

The expected settlement of provisions was based on management’s best estimate in conjunction with their internal and external legal advisors at the interim balance sheet date.

 

 

AMBEV S.A.

 

13.2 Contingencies

 

The Company and its subsidiaries maintain administrative and judicial discussions with fiscal authorities in Brazil related to certain fiscal positions adopted when calculating the income tax and social contribution, which, based on Management’s current evaluation, probably are going to be accepted in superior court decisions of last instance, considering the regular compliance with tax laws, case law, and evidence produced, aligned with IFRIC 23. The Company also has tax actions related to other taxes, which involve risk of a possible loss, according to management's assessment. To these uncertain tax treatments and possible contingencies there are no recorded provisions, due to the assessment carried out. The composition and estimates are as following:

 

  03/31/2024 12/31/2023
     
Income tax and social contribution 64,147,794  63,620,985 
Value-added and excise taxes 26,355,727  26,761,034 
PIS and COFINS 3,458,189  3,496,221 
Others 1,635,873  1,679,407 
  95,597,583  95,557,647 

 

Contingencies with a remote risk of loss are not disclosed, as the possibility of any settlement is remote, in accordance with IAS 37 - Provisions, Contingent Liabilities and Contingent Assets.

 

The Company and its subsidiaries have guarantee-insurance policies and letters of guarantee for some legal actions, disclosed as guarantee for civil, labor and tax execution or to enable resources of labor nature.

 

13.2.1 Main contingencies with a possible risk of loss

 

The changes in the amount of contingencies reported relate mainly to the increase resulting from monetary restatement. In addition, the main process classified with a possible loss probability, which changed in the quarter, is summarized in the table below, along with their respective estimated values involved in the cases.

 

  Indirect taxes

Estimates

(in million of Brazilian Reais)

# Description of the main process 03/31/2024 12/31/2023
1

IPI Suspension

In 2014 and 2015, Ambev received tax assessments from the Brazilian Federal Tax Authorities relating to IPI allegedly due to the suspension of finished products between its units. The cases are being challenged at both the administrative and judicial levels.

In January 2024, Ambev received a partially favorable decision from the Upper Administrative Court reducing 98% of the amount alleged to be owed by Ambev in this case, corresponding to approximately R$916 million. Ambev filed an appeal at the judicial level against the unfavorable portion of the decision.

In the judicial sphere, the first decision obtained in a case on this subject was rendered in July 2022, the decision was unfavorable to Ambev, and it filed an appeal. In July 2023, the Federal Court rendered its decision on the appeal, annulling the first-level decision and ordering the production of technical evidence as requested by Ambev in order to demonstrate the proper collection of IPI. The federal government has filed motions for clarification against this decision, which are pending judgment by the Federal Court.

Ambev estimates that the updated amount classified as a possible loss involved in these proceedings, as of March 31, 2024, is approximately R$855 million (R$1.8 billion as of December 31, 2023).

855 1,824

 

 

AMBEV S.A.

 

14.CHANGES IN EQUITY

 

14.1 Issued capital

 

At March 31, 2024, the authorized share capital, fully subscribed and paid-in, in the amount of R$58,226,036 (R$58,177,929 in 2023) in the amount of 15,757,657 common shares (15,753,833 in 2023) book entry, nominative, without nominal value, thus distributed:

 

  03/31/2024   03/31/2023
Shareholder Weighted (i) %   Weighted (i) %
Interbrew International B.V. 8,441,666  53.57%   8,441,896  53.59%
Ambrew S.A.R.L. 1,287,671  8.17%   1,287,671  8.17%
Fundação Zerrenner 1,609,987  10.22%   1,609,987  10.22%
Market 4,408,320  27.98%   4,406,420  27.97%
Treasury 10,013  0.06%   7,859  0.05%
  15,757,657  100.00%   15,753,833  100.00%

 

  03/31/2024   03/31/2023
  Thousands of common shares Thousands of Real   Thousands of common shares Thousands of Real
Beginning balance 15,753,833  58,177,929    15,750,217  58,130,517 
Capital increase (i) 3,824  48,107    3,616  47,412 
Final balance 15,757,657  58,226,036    15,753,833  58,177,929 

 

(i) Capital increase related to the issue of shares.

 

14.2 Capital reserves

 

  Capital Reserves   
  Treasury shares  Share Premium  Other capital reserves  Share-based Payments   Total 
At January 1, 2023 (1,073,506) 53,662,811  700,898  2,049,491  55,339,694 
Capital increase -    -    -    (32,869) (32,869)
Purchases of shares, results of treasury shares and share-based payments 8,151  -    -    90,811  98,962 
At March 31, 2023 (1,065,355) 53,662,811  700,898  2,107,433  55,405,787 

 

  Capital Reserves   
  Treasury shares  Share Premium  Other capital reserves  Share-based Payments   Total 
At January 1, 2024 (1,011,949) 53,662,811  700,898  2,127,804  55,479,564 
Gains/(losses) on participations -    -    -    1,958  1,958 
Purchases of shares, results of treasury shares and share-based payments (71,519) -    -    94,883  23,364 
At March 31, 2024 (1,083,468) 53,662,811  700,898  2,224,645  55,504,886 

 

 

AMBEV S.A.

 

14.2.1 Purchase of shares and result of treasury shares

 

Treasury shares represent the Company’s own issued shares reacquired by the Company, and the result of treasury shares related to gains and losses on share-based payment transactions and others. The changes in treasury shares are as follows:

 

  Acquisition/realization of shares   Result of Treasury Shares   Total Treasury Shares
  Thousands of shares   Thousands of Brazilian Reais   Thousands of shares   Thousands of Brazilian Reais
At January 1, 2023 8,482    (131,877)   (941,629)   (1,073,506)
Changes during the year (623)   9,814    (1,663)   8,151 
At March 31, 2023 7,859    (122,063)   (943,292)   (1,065,355)

 

 

  Acquisition/realization of shares   Result of Treasury Shares   Total Treasury Shares
  Thousands of shares   Thousands of Brazilian Reais   Thousands of shares   Thousands of Brazilian Reais
At January 1, 2024 4,384    (63,095)   (948,854)   (1,011,949)
Changes during the year 5,629    (70,843)   (676)   (71,519)
At March 31, 2024 10,013    (133,938)   (949,530)   (1,083,468)

 

14.2.2 Share-based payment

Different share-based payment programs and stock purchase option plans allow the senior management from Ambev’s economic group to acquire shares in the Company. The share-based payment reserve recorded a charge of R$104,504 on March 31, 2024 (R$77,166 at March 31, 2023) (note 20 – Share-based payments).

 

14.3 Net income reserves

 

  Net income reserves  
  Investments reserve  Legal reserve   Fiscal incentive  Total
At January 1, 2023 22,055,901  4,456  14,846,543  36,906,900 
At March 31, 2023 22,055,901  4,456  14,846,543  36,906,900 

 

  Net income reserves  
  Investments reserve  Legal reserve   Fiscal incentive  Total
At January 1, 2024 25,786,098  4,456  17,399,286  43,189,840 
At March 31, 2024 25,786,098  4,456  17,399,286  43,189,840 

 

There was no change in net income reserves in the first quarter of 2023 and 2024.

 

14.3.1 Tax incentives

 

The Company recognizes annually in its equity, in the net income reserves line, the tax incentives regarding tax benefits at the government subsidies for the current year.

 

In general, these incentives are related to industrial development programs that aim to generate employment, promote regional decentralization, and complement and diversify the industrial base of the states. In these states, the grace periods and use and reductions are set out under the respective state normative acts, and when conditions for obtaining these grants exist, they are under Company’s control. The treatment of incentives complies with the provisions of current federal, state and municipal legislation, in particular set by Complementary Federal Law 160/2017 and by Convênio CONFAZ 190/2017. For the purposes of constituting the Tax Incentives reserve, the state tax incentives related to sales taxes are recognized as government subsidies for investments. in line with the interpretation of the Superior Court of Justice manifested mainly in the judgment of ERESP No. 1.517.492/PR, as well as in the judgment of Theme No. 1.182 and of the Federal Supreme Court, according to the manifestations expressed in the judgment of Theme 843.

 

AMBEV S.A.

 

The portion of income for the period related to tax incentives, which will be allocated to the profit reserve at the end of the fiscal year and therefore was not being used as a basis for dividend distribution, was composed of the following:

 

  03/31/2024 03/31/2023
 ICMS (Brazilian state value-added tax) 255,276  682,700 
 Income tax  248,539  27,957 
  503,815  710,657 

 

14.3.2 Interest on shareholders’ equity/dividends

 

There was no payment of dividends or interest on shareholders’ equity by the Company in the three-month periods ended March 31, 2023 and March 31, 2024.

 

AMBEV S.A.

14.4 Carrying value adjustments

 

  Carrying value adjustments  
  Translation reserves Cash flow hedge Actuarial gains/ (losses) Put option granted on subsidiary Gains/(losses) of non-controlling interest’s share Business combination Accounting adjustments for transactions between shareholders Total
At January 1, 2023 6,753,983  908,521  (664,985) (6,666) (130,578) 156,091  (75,437,844) (68,421,478)
Comprehensive income:                
Gains/(losses) on the translation of foreign operations (1,941,515) -    -    -    -    -    -    (1,941,515)
Cash flow hedges -    (106,869) -    -    -    -    -    (106,869)
Actuarial gains/(losses) -    -    4,706  -    -    -    -    4,706 
Total comprehensive income  (1,941,515) (106,869) 4,706  -    -    -    -    (2,043,678)
Options granted on subsidiaries -    -    -    -    4,700  -    -    4,700 
Gains/(losses) of controlling interest -    -    -    -    (44) -    -    (44)
At March 31, 2023 4,812,468  801,652  (660,279) (6,666) (125,922) 156,091  (75,437,844) (70,460,500)

 

  Carrying value adjustments  
  Translation reserves Cash flow hedge Actuarial gains/ (losses) Put option granted on subsidiary Gains/(losses) of non-controlling interest’s share Business combination Accounting adjustments for transactions between shareholders Total
At January 1, 2024 (2,458,382) 697,825  (678,235) -    (145,675) 156,091  (75,449,667) (77,878,043)
Comprehensive income:                
Gains/(losses) on the translation of foreign operations 933,680  -    -    -    -    -    -    933,680 
Cash flow hedges -    (432,721) -    -    -    -    -    (432,721)
Actuarial gains/(losses) -    -    1,420  -    -    -    -    1,420 
Total comprehensive income  933,680  (432,721) 1,420  -    -    -    -    502,379 
Gains/(losses) of controlling interest 385,670  (578) (1,174) -    132,539  -    -    516,457 
At March 31, 2024 (1,139,032) 264,526  (677,989) -    (13,136) 156,091  (75,449,667) (76,859,207)

 

 

AMBEV S.A.

 

15.SEGMENT REPORTING

 

(a)Reportable segments three-month–period ended in:
  Brazil CAC (i) Latin America – South (ii) Canada Consolidated
  03/31/2024 03/31/2023 03/31/2024 03/31/2023 03/31/2024 03/31/2023 03/31/2024 03/31/2023 03/31/2024 03/31/2023
                     
Net sales 11,711,918  11,046,716  2,314,702  2,305,599  4,401,921  5,131,944  1,847,756  2,047,484  20,276,297  20,531,743 
Cost of sales (5,949,878) (5,792,284) (1,087,690) (1,123,964) (2,190,853) (2,332,877) (830,573) (882,559) (10,058,994) (10,131,684)
Gross profit 5,762,040  5,254,432  1,227,012  1,181,635  2,211,068  2,799,067  1,017,183  1,164,925  10,217,303  10,400,059 
Distribution expenses (1,615,764) (1,573,917) (200,329) (216,807) (492,874) (650,366) (382,043) (475,606) (2,691,010) (2,916,696)
Sales and marketing expenses (1,106,523) (913,217) (168,940) (176,867) (400,338) (379,391) (208,723) (271,825) (1,884,524) (1,741,300)
Administrative expenses (821,640) (822,540) (94,514) (108,372) (230,646) (216,632) (185,568) (158,008) (1,332,368) (1,305,552)
Other operating income/(expenses) 588,505  446,604  5,369  11,208  (8,518) 16,531  7,673  6,733  593,029  481,076 
Exceptional items (4,809) (17,947) (821) (2,227) (1,636) (7,715) (10,303) -    (17,569) (27,889)
Income from operations 2,801,809  2,373,415  767,777  688,570  1,077,056  1,561,494  238,219  266,219  4,884,861  4,889,698 
Net finance costs                 (405,944) (997,862)
Share of results of associates and joint ventures                 (3,570) (14,172)
Income before income tax                 4,475,347  3,877,664 
Income tax expense                 (671,165) (58,415)
Net income                 3,804,182  3,819,249 
                     
Acquisition of property, plant and equipment 689,204  751,513  100,599  125,561  182,134  216,360  43,958  59,519  1,015,895  1,152,953 

 

 

AMBEV S.A.

 

(continued)

 

  Brazil CAC (i) Latin America – South (ii) Canada Consolidated
  03/31/2024 12/31/2023 03/31/2024 12/31/2023 03/31/2024 12/31/2023 03/31/2024 12/31/2023 03/31/2024 12/31/2023
                     
Segment assets 56,640,208  56,974,055  13,910,013  13,692,342  19,736,725  16,084,960  16,251,152  15,856,930  106,538,098  102,608,287 
Intersegment elimination                 (2,148,262) (2,162,090)
Non-segmented assets (iii)                 29,426,965  32,197,936 
Total assets                 133,816,801  132,644,133 
                     
Segment liabilities 23,138,842  28,841,281  4,659,964  4,981,469  4,969,098  5,095,432  4,912,308  5,130,990  37,680,212  44,049,172 
Intersegment elimination                 (2,148,262) (2,161,919)
Non-segmented liabilities (iii)                 98,284,851  90,756,880 
Total liabilities                 133,816,801  132,644,133 

 

(i) CAC: includes the Dominican Republic, Panama, Guatemala, Cuba, Barbados, Saint Vincent, Dominica, Nicaragua, Honduras and Antigua.

 

(ii) Latin America – South: includes operations in Argentina, Bolivia, Chile, Paraguay and Uruguay.

 

(iii) The non-segmented assets relate primarily to cash and cash equivalents, taxes and investments balances. The non-segmented liabilities relate primarily to shareholders' equity, taxes and derivatives balances.

 

Non-current assets attributed to Brazil (country of domicile of the company) and Canada amounted to R$45.1 billion and R$13.9billion, respectively as of March 31, 2024 (R$45.1 billion and R$13.9 billion, respectively, as of December 31, 2023). Furthermore, the net revenue attributable to the Company's operations in Argentine amount to R$2.6 billion as of March 31, 2024 (R$3.2 billion as of March 31, 2023), and segmented non-current assets attributed to the same country amounted R$8.8 billion for the same period ended March 31, 2024 (R$5.9 billion as of December 31, 2023).

 

 

AMBEV S.A.

 

(b)Additional information – by business unit:

 

  Brazil
  Beer Soft drinks and
Non-alcoholic and
non-carbonated
Total 
  03/31/2024 03/31/2023 03/31/2024 03/31/2023 03/31/2024 03/31/2023
             
Net sales 9,687,509  9,270,152  2,024,409  1,776,564  11,711,918  11,046,716 
Cost of sales (4,812,476) (4,791,491) (1,137,402) (1,000,793) (5,949,878) (5,792,284)
Gross profit 4,875,033  4,478,661  887,007  775,771  5,762,040  5,254,432 
Distribution expenses (1,296,008) (1,265,423) (319,756) (308,494) (1,615,764) (1,573,917)
Sales and marketing expenses (994,560) (823,646) (111,963) (89,571) (1,106,523) (913,217)
Administrative expenses (709,523) (709,494) (112,117) (113,046) (821,640) (822,540)
Other operating income/(expenses) 475,055  348,787  113,450  97,817  588,505  446,604 
Exceptional items (4,809) (15,734) -    (2,213) (4,809) (17,947)
Income from operations 2,345,188  2,013,151  456,621  360,264  2,801,809  2,373,415 
Net finance costs         (451,173) (711,387)
Share of results of associates and joint ventures         (3,401) (2,178)
Income before income tax         2,347,235  1,659,850 
Income tax expense         81,463  669,552 
Net income         2,428,698  2,329,402 

 

 

 

AMBEV S.A.

16.NET SALES

 

In compliance with the Brazilian Federal Law 6,404/76, Company discloses the reconciliation between gross and net sales presented in the consolidated income statement. The values by each operational segment are disclosed in note 15 – Segment reporting.

 

  03/31/2024 03/31/2023
     
Gross sales 30,354,533  31,805,237 
Excise duty (6,232,642) (6,239,600)
Discounts (3,845,594) (5,033,894)
  20,276,297  20,531,743 

 

At March 31, 2024 the Company calculated R$306.1 million (R$313.2 million at December 31, 2023), in government grants, registered in the net revenue As from March 2024, the Company is no longer required to pay PIS and Cofins on the amounts calculated as a government grant for investment related to the tax benefits called presumed ICMS credits, under the terms of Law No. 14,789/2024, due to a favorable preliminary decision obtained in the Federal Court.

 

17.OTHER OPERATING INCOME/(EXPENSES)

 

  03/31/2024 03/31/2023
     
Government grants/net present value of long-term fiscal incentives (i) 385,613  369,513 
(Additions)/reversals of provisions (6,092) (8,276)
Gains/(losses) on disposals of property, plant and equipment, intangible assets and the operations of associates 20,683  28,077 
Other operating income/(expenses), net 192,825  91,762 
  593,029  481,076 

 

(i) As detailed in note 16 – Net sales, as of March 2024, the Company is no longer required to pay PIS and Cofins on the amounts calculated as a government grant for investment related to the tax benefits called presumed ICMS credits, under the terms of Law No. 14,789/2024, due to a favorable preliminary decision obtained in the Federal Court.

 

18.EXCEPTIONAL ITEMS

 

  03/31/2024 03/31/2023
Restructuring (i) (17,569) (27,889)
  (17,569) (27,889)

 

(i) The restructuring expenses primarily related to centralization projects and resizing in Brazil, Latin America CAC and Canada.

 

AMBEV S.A.

 

19.FINANCE RESULT

 

  03/31/2024 03/31/2023
Finance expenses    
Interest on accounts payable present value adjustment (i) (332,140) (367,820)
Interest on bank debts and tax incentives (i) (46,960) (42,003)
Interest on provision for disputes and litigation (44,378) (17,314)
Interest on leases (i) (38,092) (51,268)
Interest on pension plans (26,510) (30,060)
Other interest expenses (i) (ii) (132,348) (155,718)
Losses on hedging instruments (195,182) (639,624)
Tax on financial transactions (55,292) (58,404)
Bank guarantee expenses and surety bond premiums (iii) (57,341) (37,362)
Other financial results (84,226) (55,146)
Total of finance expenses (1,012,469) (1,454,719)
     
Finance income    
Interest and foreign exchange rate on loans to/from related parties 296  16,799 
Income from cash and cash equivalents 384,384  148,819 
Income from debt securities 9,524  20,785 
Income from other receivables (iv) 191,692  174,814 
Other financial results 13,854  83,172 
Total 599,750  444,389 
     
Effect of application of IAS 29 (hyperinflation) 40,716  289,915 
Total of finance income 640,466  734,304 
     
Exchange differences, net (v) (33,941) (277,447)
     
Net finance result (405,944) (997,862)

 

(i) From the 1st quarter of 2024 onwards, the balances previously presented in the row “Interest expense” have been segregated between the rows, “Interest on bank debts and tax incentives”, “Interest on accounts payable present value adjustment”, “Interest on leases”, and “Other interest expenses”, including for comparative purposes.

 

(ii) Includes, among others, interest on tax payment financing, under the terms of the Special Tax Regularization Program (PERT) of 2017.

 

(iii) Description changed to “Bank guarantee expenses and surety bond premiums”, to better reflect the nature of the balances, including for comparative purposes, from the 1st quarter of 2024.

 

(iv) Refers, mainly, to monetary adjustment of recoverable taxes.

 

(v) From the 1st quarter of 2024 onwards, the Company changed the way it presents note 19 – Net finance result. The exchange differences, previously shown as financial expenses, are now presented net of the balances of the same category, formerly reported as financial revenues. The net presentation of such balances is now reported in the line item “Exchange differences, net”, both in this explanatory note and in the income statements.

 

As disclosed in its accounting policy, the term element, which can be separated and excluded from the designation of the financial instrument as a hedging instrument, is recognized in the financial result, in accordance with IFRS 9 - Financial Instruments.

 

Interest expenses are presented net of the effects of interest rate derivative financial instruments which mitigate Ambev’s interest rate risk (note 21- Financial instruments and risks).

 

 

 

AMBEV S.A.

 

20.SHARE-BASED PAYMENTS

 

Currently the Company has two plans of share-based payment programs: (i) the Stock Option Plan, approved in Extraordinary General Meeting of July 30, 2013 (“Stock Option Plan”) and (ii) Share-based Plan, approved in Extraordinary General Meeting of April 29, 2016, as amended in Extraordinary General Meeting of April 24, 2020 (“Share-Based Plan”). Under each of these plans, the Company can periodically issue different stock options and restricted share units programs. These programs allow certain Group employees and members of the Management, indicated by the Board of Directors and People Committee, to either buy shares of the Company by exercising stock options or receive shares directly.

 

20.1 Share-Based Plan

 

During the period, the Company granted 6,787 thousand restricted shares and performance shares under the Share-Based Plan (33,686 thousand in December 31, 2023), representing a fair value of approximately R$85,384 in March 31, 2024 (R$463,533 in December 31, 2023).

 

The total number of shares granted to the Company’s executives under the Share-Based Plan, which will be delivered in the future under certain conditions, is shown below:

 

Restricted and performance shares

 

Thousand restricted shares 03/31/2024   12/31/2023
       
Restricted and performance shares outstanding at January 118,996    108,854 
New restricted and performance shares during the period 6,787    33,686 
Restricted and performance shares granted during the period (204)   (18,309)
Restricted and performance shares forfeited during the period (1,486)   (5,235)
Restricted and performance shares outstanding at the end of the period 124,093    118,996 

 

20.2 Option Plan

 

The Company has not granted stock options, neither there were options exercised during the period ended March 31, 2024, and December 31, 2023. The total number of outstanding options developed was as follows:

 

Thousand options 03/31/2024   12/31/2023
       
Options outstanding at January 87,961    99,717 
Options forfeited during the period (460)   (11,756)
Options outstanding at the end of the period 87,501    87,961 

 

The range of exercise prices of the outstanding options is from R$15.95 in March 31, 2024 (R$15.95 in December 31, 2023) to R$32.25 in March 31, 2024 (R$32.81 in December 31, 2023) and the weighted average remaining contractual life is approximately 3.35 years (3.60 years in December 31, 2023).

 

Of the 87,501 thousand outstanding options (87,961 thousand on December 31, 2023), 68,369 thousand options were vested on March 31, 2024 (68,635 thousand on December 31, 2023).

 

 

AMBEV S.A.

 

The weighted average exercise price of the options is as follows:

 

In R$ per share 03/31/2024   12/31/2023
       
Options outstanding at January 1 18.86    19.39 
Options forfeited during the period 18.16    22.68 
Options outstanding at the end of the period 18.83    18.86 
Options exercisable at the end of the period 19.05    19.08 

 

To settle the exercised stock options, the Company may use treasury shares. The current limit on the authorized capital is considered sufficient to meet the Company’s obligations under all stock option plans if the issue of new shares is required to meet the grants awarded under the Programs.

 

20.3 Expenses related to share-based payments

 

The transactions with share-based payments described above generated an expense of R$105,199 on March 31, 2024 (R$77,569 on March 31, 2023), recorded as administrative expenses.

 

AMBEV S.A.

 

21.FINANCIAL INSTRUMENTS AND RISKS

 

21.1 Financial instruments categories

 

The financial instruments held by the Company are managed through operational strategies and internal controls to assure liquidity, profitability, and transaction security. Transactions involving financial instruments are regularly reviewed to assess the effectiveness of the risk exposure that management intends to cover (foreign exchange, and interest rate, among others).

 

The table below shows all of the consolidated financial instruments recognized in the financial statements, segregated by category:

 

  31/03/2024 31/12/2023
Assets    
Amortized cost    
Cash and cash equivalents less bank overdrafts (note 5.1) 12,844,524  16,059,003 
Trade receivables excluding prepaid expenses  6,933,390  7,566,654 
Investment securities (note 5.2) 244,767  242,168 
Subtotal 20,022,681  23,867,825 
Fair value through profit or loss    
Investment securities (note 5.2) 1,077,190  277,164 
Derivatives hedges (note 21.2) 281,974  379,722 
Subtotal 1,359,164  656,886 
Total assets 21,381,845  24,524,711 
     
Liabilities    
Amortized cost    
Trade payables (note 11) 22,167,912  23,502,401 
Interest-bearing loans and borrowings (note 12) 3,817,430  3,501,066 
Other liabilities 1,852,400  2,129,624 
Subtotal 27,837,742  29,133,091 
Fair value through profit or loss    
Put options granted on subsidiaries (i) 828,923  2,791,088 
Derivatives hedges (note 21.2) 408,133  763,005 
Other liabilities 279,833  272,647 
Subtotal 1,516,889  3,826,740 
Total liabilities 29,354,631  32,959,831 

 

(i) Put options granted on subsidiaries: the Company constituted a liability related to the acquisition of a non-controlling interest of the operations in the Dominican Republic. This financial instrument was denominated in US Dollars for Tranche A, exercised in January 2024 and remains denominated Dominican Pesos for Tranche B and is recorded by an entity, whose functional currency is the Real. The Company assigned this financial instrument as a hedging instrument for a portion of its net assets located in subsidiaries whose functional currency is the US Dollar and the Dominican Peso, in such a manner that the hedge result can be recorded in other comprehensive income of the group, following the result of the hedged item.

 

 

AMBEV S.A.

 

21.2 Derivative financial instruments

 

Transactions protected by derivative financial instruments in accordance with the Financial Risk Management Policy

 

              03/31/2024
          Fair Value   Gain / (Losses)
Hedge position   Risk Notional   Assets Liabilities   Finance Result Operational Result Equity
                     
Cost     16,455,313    286,752  (391,950)   (200,177) (109,041) (824,639)
    Commodities 4,081,901    76,399  (155,436)   (74,093) (73,668) (155,895)
    US Dollars 12,284,167    201,636  (237,644)   (127,215) (35,902) (668,985)
    Euros 26,891    102  (194)   (94) 120  78 
    Mexican Pesos 62,354    8,615  1,324    1,225  409  163 
                     
Importing of fixed assets     260,214    (3,766) (12,647)   516  1,645  5,158 
    US Dollars 260,214    (3,766) (12,647)   516  1,645  5,158 
                     
Expenses     66,649    (1,012) (3,536)   (1,826) 404  1,017 
    US Dollars 66,649    (1,012) (3,536)   (1,826) 404  1,017 
                     
Cash     (93,304)   -    -      -    -    -   
    US Dollars (93,304)   -    -      -    -    -   
As at March 31, 2024     16,688,872    281,974  (408,133)   (201,487) (106,992) (818,464)

 

 

AMBEV S.A.

 

 

      12/31/2023   03/31/2023
          Fair Value   Gain / (Losses)
Hedge position   Risk Notional   Assets Liabilities   Finance Result Operational Result Equity
                     
Cost     17,374,318    379,571  (741,901)   (567,258) 95,653  (81,789)
    Commodities 4,025,739    198,319  (219,325)   (100,768) (130,169) 4,326 
    US Dollars 13,200,032    164,916  (522,348)   (466,562) 224,627  (89,130)
    Euros 37,424    143  (228)   (237) 116  703 
    Mexican Pesos 111,123    16,193  -      309  1,079  2,312 
                     
Fixed Assets     249,716    62  (14,637)   (3,560) (1,229) (12,119)
    US Dollars 249,716    62  (14,637)   (3,560) (1,229) (12,119)
                     
Expenses     64,675    89  (4,212)   (8,454) 10,404  2,348 
    US Dollars 64,675    89  (4,212)   (8,454) 10,404  2,348 
                     
Cash     (59,306)   -    (2,255)   -    -    -   
    US Dollars (59,306)   -    (2,255)   -    -    -   
Total     17,629,403    379,722  (763,005)   (579,272) 104,828  (91,560)

 

 

AMBEV S.A.

 

21.2.1 Instrument maturity

 

As of March 31, 2024 the notional and fair value amounts per instrument and maturity were as follows:

 

    Notional Value
Hedge position Risk 2024 2025 >2026 Total
           
Cost   13,957,353  2,497,960  -    16,455,313 
   Commodities  3,522,701  559,200  -    4,081,901 
   US Dollars  10,345,407  1,938,760  -    12,284,167 
   Euros 26,891  -    -    26,891 
   Mexican Pesos  62,354  -    -    62,354 
           
Importing of fixed assets   207,116  53,098  -    260,214 
  US Dollars  207,116  53,098  -    260,214 
           
Expenses   51,666  14,983  -    66,649 
  US Dollars  51,666  14,983  -    66,649 
           
Cash   (93,304) -    -    (93,304)
  US Dollars  (93,304) -    -    (93,304)
    14,122,831  2,566,041  -    16,688,872 

 

    Fair Value
Hedge position Risk 2024 2025 >2026 Total
           
Costs   (123,897) 18,699  -    (105,198)
  Commodities (79,980) 943  -    (79,037)
  US Dollars (53,764) 17,756  -    (36,008)
  Euros (92) -    -    (92)
  Mexican Pesos 9,939  -    -    9,939 
           
Importing of fixed assets   (16,656) 243  -    (16,413)
  US Dollars (16,656) 243  -    (16,413)
           
Expenses   (4,442) (106) -    (4,548)
  US Dollars (4,442) (106) -    (4,548)
    (144,995) 18,836  -    (126,159)

 

21.2.2 Margins pledged as guarantees

 

In order to comply with the guarantee requirements regarding derivative exchanges and/or counterparties to certain operations with derivative financial instruments, as at March 31, 2024 the Company held R$143,666 in highly liquid financial investments or in cash, classified as cash and cash equivalents and investment securities (R$197,736 as at December 31, 2023).

 

 

AMBEV S.A.

 

21.3 Classification of financial instruments

 

  03/31/2024   12/31/2023
  Level 1 Level 2 Level 3 Total   Level 1 Level 2 Level 3 Total
Financial assets                  
Investment securities 1,077,190  -    -    1,077,190    277,164  -    -    277,164 
Derivatives – operational hedge 4,652  277,322  -    281,974    53,372  326,350  -    379,722 
  1,081,842  277,322  -    1,359,164    330,536  326,350  -    656,886 
Financial liabilities                  
Put options granted on subsidiaries -    -    828,923  828,923    -    -    2,791,088  2,791,088 
Other liabilities -    -    279,833  279,833    -    -    272,647  272,647 
Derivatives liabilities at fair value through profit and loss -    -    -    -      2,255  -    -    2,255 
Derivatives – operational hedge 38,755  369,378  -    408,133    70,007  690,743  -    760,750 
  38,755  369,378  1,108,756  1,516,889    72,262  690,743  3,063,735  3,826,740 

 

21.3.1 Financial instruments level 3

 

As part of the negotiations regarding the acquisition of the shares of Tenedora, the Company signed in 2020 the second amendment to the Shareholders' Agreement extending the partnership between the Company and ELJ. As at December 2023, ELJ was the owner of 15% of the shares of Tenedora, and its put options was divided into two tranches: (i) Tranche A, corresponding to 12.11% of the shares, that was exercised on January 31, 2024; and (ii) Tranche B, corresponding to 2.89% of the shares, exercisable by ELJ from 2026. The Company, on the other hand, has a call option over Tranche B shares, exercisable from 2029. On March 31, 2024, the fair value of Tranche B held by ELJ, is R$828,923 (R$2,791,088 on December 31, 2023, considering the sum of the two tranches existing up to this point).

 

The fair value of (i) Tranche A was calculated considering the interest under the contract, plus foreign exchange variations, less the dividends paid between the date of signature of the amendment and the exercise of the option. The fair value of (ii) Tranche B is calculated based on the EBITDA multiple defined in the contract, less the net debt, brought to its present value, calculated using standard valuation techniques (the present value of the principal amount and future interest, discounted by the local currency’s WACC rate as at the date of the calculation). The criteria used are based on market information from reliable sources and are categorized as “Level 3”.

 

21.3.2 Reconciliation of changes in the assets categorized at Level 3

 

Financial liabilities at December 31, 2023 3,063,735 
   Acquisition of investments (2,040,652)
Total gains and losses during the period 85,673 
   Losses/(gains) recognized in net income 30,453 
   Losses/(gains) recognized in equity 55,220 
Financial liabilities at March 31, 2024 1,108,756 

 

21.4 risk management

 

The Company is exposed to foreign currency, interest rate, commodity price, liquidity, and credit risk in the ordinary course of its business. The Company analyzes each of these risks both individually and on a consolidated basis, to define strategies to manage the economic impact on risk’s performance consistent with its Financial Risk Management Policy.

 

 

AMBEV S.A.


 

21.4.1 Market risk

 

21.4.1.1 Interest rate risk: consists of the possibility that the Company may incur losses due to fluctuations in interest rates, which may increase the financial expenses of financial liabilities, and/or decrease the financial income of financial assets, as well as negatively impact the fair value of financial assets measured at fair value. To mitigate this risk the Company applies a dynamic interest rate hedging approach, whereby the target mix between fixed and floating rate debt is reviewed periodically. The purpose of the Company’s policy is to achieve an optimal balance between the cost of funding and the volatility of financial results, considering market conditions. The Company’s overall business strategy, which is reviewed periodically.

 

The table below demonstrates the Company’s and its subsidiaries exposure related to debts. As at March 31, 2024, the Company and its subsidiaries does not hold hedge positions to the exposure described below:

 

  03/31/2024   12/31/2023
  Risk   Risk
  Interest rate Amount in Brazilian Real   Interest rate Amount in Brazilian Real
Brazilian Reais 10.1% 2,345,393    10.1% 2,372,010 
Other 11.4% 388,642    11.5% 405,613 
US Dollars 14.0% 25    14.0% 24 
Canadian Dollars 5.8% 856,045    5.6% 480,255 
Pre-fixed interest rate    3,590,105      3,257,902 
           
           
Brazilian Reais 8.0% 227,325    8.1% 243,164 
Post fixed interest rate    227,325      243,164 

 

Sensitivity analysis

 

The Company substantially mitigates the risks arising from non-derivative financial assets and liabilities through the use of derivative financial instruments. In this context, the Company has identified the main risk factors that could generate losses from these derivative financial instruments, and has developed a sensitivity analysis based on three scenarios which may impact the Company’s future results and/or cash flow.

 

Sensitivity analysis of exchange rate variations and commodity price variations:

 

 

AMBEV S.A.

 

Transaction Risk Fair Value Probable scenario Adverse scenario Remote scenario
           
Commodities hedge Increase in commodities price (79,037) 32,174  941,438  1,961,914 
Input purchases 79,037  (37,908) (987,278) (2,053,593)
Foreign exchange hedge Foreign currency increase (26,161) 107,483  3,067,192  6,160,545 
Input purchases 26,161  (260,872) (3,450,684) (6,927,530)
Cost effects   -    (159,123) (429,332) (858,664)
           
Foreign exchange hedge Foreign currency increase (16,413) (15,211) 48,641  113,694 
Capex Purchases 16,413  15,211  (48,641) (113,694)
Fixed asset effects   -    -    -    -   
           
Foreign exchange hedge Foreign currency increase (4,548) (4,182) 12,114  28,776 
Expenses 4,548  (7,414) (41,105) (86,758)
Result of expense effects   -    (11,596) (28,991) (57,982)
           
Foreign exchange hedge Foreign currency increase -    (388) (23,326) (46,652)
Cash -    388  23,326  46,652 
Cash effects   -    -    -    -   
    -    (170,719) (458,323) (916,646)

 

21.4.1.2 Foreign currency risk: the Company is exposed to foreign currency risk on borrowings, investments, purchases, dividends and/or interest expenses/income where these are denominated in a currency other than the functional currency of the Group entity. The main derivative financial instruments used to manage foreign currency risk are futures contracts, swaps, options, non-deliverable forwards, and full deliverable forwards.

 

21.4.1.3 Commodity Risk: A significant portion of the Company’s inputs is made up of commodities, which have historically experienced substantial price fluctuations. The Company therefore uses both fixed prices purchasing contracts and derivative financial instruments to minimize its exposure to volatility in the commodity prices of aluminum, sugar, wheat, corn and paraxylene. These derivative financial instruments have been designated as cash flow hedges.

 

21.4.2 Credit Risk

 

A substantial portion of the Company’s sales is made to distributors, supermarkets, and retailers, through a broad distribution network. Credit risk is reduced due to the large number of customers and control procedures used to monitor risk. Historically, the Company has not incurred significant losses on receivables from customers.

In order to minimize the credit risk of its investments, the Company has adopted procedures for the allocation of cash and investments, taking into consideration the credit limits and credit analysis of financial institutions, avoiding credit concentration, i.e., the credit risk is monitored and minimized by restricting negotiations to a select group of highly rated counterparties.

 

The counterparty risk is reassessed on a quarterly basis.

 

The carrying amounts of cash and cash equivalents, investment securities, trade receivables excluding prepaid expenses, recoverable taxes and derivative financial instruments are disclosed net of provisions for impairment and represent the maximum exposure to credit risk as at March 31, 2024. As at March 31, 2024, there was no concentration of credit risk in any counterparties in excess of the limits established by the Company’s risk policy.

 

AMBEV S.A.

 

21.4.3 Liquidity Risk

 

Historically, the Company’s primary sources of cash flow have been cash flow from operating activities, the issuance of debt, bank borrowings and equity securities. Ambev’s material cash requirements have included the following: debt servicing; capital expenditure; investments in companies; increases in the ownership of Ambev’s subsidiaries or companies in which it holds equity investments; share buyback programs; and payments of dividends and interest on shareholders’ equity.

 

The Company believes that cash flows from operating activities, cash and cash equivalents and short-term investments, together with derivatives and access to loan facilities are sufficient to finance capital expenditures, financial liabilities, and dividend payments in the future.

 

              03/31/2024
  Carrying amount Contractual cash flows Less than 1 year 1-2 years 2-3 years 3-5 years More than 5 years
Trade and other payables (i) 30,484,279  32,073,713  29,362,278  145,202  12,350  842,447  1,711,436 
Secured bank loans 517,164  556,620  430,712  25,181  25,182  50,364  25,181 
Other secured loans 394,163  558,957  145,508  176,389  122,862  60,363  53,835 
Lease liabilities  2,906,103  3,475,847  1,319,855  880,699  562,625  513,190  199,478 
  34,301,709  36,665,137  31,258,353  1,227,471  723,019  1,466,364  1,989,930 

 

              12/31/2023
  Carrying amount Contractual cash flows Less than 1 year 1-2 years 2-3 years 3-5 years More than 5 years
Trade and other payables (i) 36,817,788  38,453,664  35,522,500  439,912  10,606  808,553  1,672,093 
Secured bank loans 126,566  177,794  26,704  25,182  25,181  50,364  50,363 
Other secured loans 415,670  594,730  156,040  171,214  134,204  79,381  53,891 
Lease liabilities  2,958,830  3,473,027  1,343,980  608,305  552,630  452,614  515,498 
  40,318,854  42,699,215  37,049,224  1,244,613  722,621  1,390,912  2,291,845 

 

(i) Mainly includes amounts related to suppliers, taxes, fees and contributions payables, dividends, and interest on equity payable, salaries and charges, put options related to the Company’s participation in subsidiaries and other liabilities, except transactions with related parties.

 

 

AMBEV S.A.

 

21.4.4 Capital management

 

The Company is continuously optimizing its capital structure in order to maximize shareholder value while maintaining the desired financial flexibility to execute its strategic projects. Besides the statutory minimum equity funding requirements applicable to the Company’s subsidiaries in different countries, the Company is not subject to any externally imposed capital requirements. When analyzing the capital structure, the Company uses the same debt ratings and capital classifications applied to the financial statements.

 

The company evaluates its net debt in order to guarantee the continuity of its business in the long term.

 

    03/31/2024 12/31/2023
Debt details      
Interest-bearing loans and borrowings current and non-current   3,817,430  3,501,066 
(-) Financial assets at fair value through profit or loss   (1,077,190) (277,164)
(-) Cash and cash equivalents less bank overdraft   (12,844,524) (16,059,003)
Net debt/(cash)   (10,104,284) (12,835,101)

 

21.5 Offsetting financial assets and liabilities

 

For financial assets and liabilities subject to settlement agreements on a net basis or similar agreements, each agreement between the Company and the counterparty allows this type of settlement when both parties opt for this. In the absence of such a decision, the assets and liabilities will be settled at their gross amounts, but each party will have the option to settle on a net basis, in case of a default by the counterparty.

 

21.6 Risks management of climate change and the sustainability strategy

 

Considering the nature of the Company’s operations there is an inherent exposure to certain risks related to climate change, and relevant sustainability aspects.

 

There have been no changes in the key risks considered by management compared to those presented in the financial statements for the year ended December 31, 2023.

 

22.COLLATERAL AND CONTRACTUAL COMMITMENTS WITH SUPPLIERS, ADVANCES FROM CUSTOMERS AND OTHERS

 

  03/31/2024 12/31/2023
     
Collateral given for the Company’s own liabilities 592,477  581,019 
Other commitments 1,080,483  1,146,841 
  1,672,960  1,727,860 
     
Commitments to suppliers - Property, plant and equipment and Intangible 1,103,937  1,000,817