Nelson Jamel - CFO & Investor Relations Officer Bernardo Paiva - CEO Renato Nahas Batista - Vice President.

Andrea Teixeira - JP Morgan Fernando Ferreira - Bank of America Merrill Lynch Antonio Gonzalez - Credit Suisse Luca Cipiccia - Goldman Sachs Alex Robart - Citi Robert Ottenstein - Evercore Carlos Laboy - HSBC.

Good morning, and thank you for waiting. We would like to welcome everyone to AmBev’s Third Quarter 2015 Results Conference Call. Today with us, we have Mr. Bernardo Paiva, CEO for AmBev; and Mr. Nelson Jamel, CFO and Investor Relations Officer.

We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the company’s presentation. After AmBev’s remarks are complete, there will be a question-and-answer session. At that time, further instructions will be given.

[Operator Instructions] Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of AmBev’s management and on information currently available to the company.

They involve risks, uncertainties and assumptions because they relate to future events and, therefore, depend on circumstances that may or may not occur in the future.

Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of AmBev and could cause results to differ materially from those expressed in such forward-looking statements.

I would also like to remind everyone that, as usual, the percentage changes that will be discussed during today’s call are both organic and normalized in nature, and unless otherwise stated, percentage changes refer to comparisons with Q3 2014 results.

Normalized figures refer to the performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of AmBev’s normal activities. As normalized figures are non-GAAP measures, the company discloses the consolidated profit, EPS, EBIT and EBITDA on a fully reported basis in the earnings release.

Now I'll turn the conference over to Mr. Nelson Jamel, CFO and Investor Relations Officer. Mr. Jamel, you may begin your conference..

Okay, thank you, Gary. Hello, everyone, and thank you for joining our 2015 third quarter earnings call. Today I’ll walk you through our results and Bernardo will give his remarks at the end before moving to Q&A. Starting with our consolidated results.

Out in the previous two quarters this year, in the third quarter, we grew both top line and EBITDA double digits. In Q3, our net revenue was up 13.2% with a top line growth in all of our regions, while EBITDA was up 11.8% with an EBITDA margin of 46.5%.

Year-to-date, net revenue is up 12.7% and EBITDA 16.7% with an EBITDA margin expansion of 110 basis points to 45.2%. In Brazil, while we’re still facing adverse macroeconomic environment, we continue to focus on what we can control.

And the volumes recovered in this quarter, which coupled with a solid revenue management strategy, will add to a 10.5% top line and 9.8% EBITDA growth, maintaining the solid performance of previous quarters in the country. Year-to-date, top line is up 8.8% while EBITDA is up 12.5%, with the margins up 180 basis points to 49.8%.

Indeed Brazil, after a very difficult 2014 FIFA World Cup comparable base experienced in the second quarter this year, volume growth returned to positive territory, growing 3.5%, driven by, first, a favorable weather as temperatures in Brazil hit a five-year record for the period between July and September.

Two, easier comps as in the third quarter last year we had our weakest quarterly volume performance. And three, the strong and successful implementations of our commercial initiatives, about which Bernardo will get into more details later. Net revenue per hectoliter for [ph] beer was up by a strong 10%.

As we continue to implement our revenue management strategy, focus on our sustainable top line growth and also benefiting from positive product mix has bring the group [ph] double digits in the quarter as well as increased the weight of direct distribution.

Moving to CSD and alcohol with our non-carbonated beverages, the overall challenging macroeconomic environment continue to pressure the CSD industry even more than beer.

Nonetheless, in the third quarter, we maintained the all-time high CSD market share of 19.6% recorded last quarter, with both Pepsi and Guarana Antarctica brands outperforming this year. Within energy drinks, Fusion continue to grow ahead of the industry, become the third largest energy drink brand in Brazil and second in some important regions.

Net revenue per hectoliter in CSD and NANC increased only by 1%, mainly due to a hard comparable base, plus the timing of revenue management initiatives last year. Brazil COGS was up 10% while cash COGS grew 7.6%.

On a productivity base, our cash COGS for activity [ph] increased 6.6% below inflation, benefiting from significant gains in procurement savings and productivity gains, along with better commodity hedges, while negatively impacted by higher inflation, FX and product mix, mainly driven by the increased weight of premium products in beer.

Gross margin was up 20 basis points to 66.9%. Year-to-date, our cash COGS is up 4.6%.

Cash SG&A was up 11.1% in the quarter due to high logistics [ph] cost mainly driven by inflation and the increasing weight of direct distribution in Brazil, the timing of our variable compensation accruals in admin expenses, and a flattish sales in marketing expenses as we continue to invest behind our brands.

But it still benefits from an easy [ph] comparable base, given the investments then during the 2014 FIFA World Cup. Year-to-date, our cash SG&A Brazil is up 8%.

Turning now to Central America and the Caribbean, we delivered another very strong quarter with EBITDA up 31.9% to BRL353 million mainly driven by double-digit volume growth in the main countries operated in the region and solid EBITDA margin expansion of 210 basis points.

In Dominican Republic, we launched Verano Presidente, our proprietary summer season platform with more than 400 events nationwide, further enhancing the equity of the beloved President brand and helping us to drive a double-digit volume increase in the country.

In Guatemala, volumes are up also by double digits with good performance of Brahva in the mainstream and another quarter of strong volume growth of Modelo brands. Along with a robust top line growth, EBITDA performance also benefit from our solid cost management discipline, expanding our EBITDA margins for another quarter.

Year-to-date EBITDA margin is up 580 basis points with an EBITDA growth of 44.3% in local curve. In reais, our EBITDA is up more than 80%. Our plan for the medium does not change.

We remain excited with the top line opportunities [ph] for organic as well as non-organic, while committed to improve our operational excellence in the region to drive EBITDA margin expansion. Latin-America South, our EBITDA grew 24.9%, mainly driven by a net revenue growth of 28% with an EBITDA margin of 43.6%.

Our beer volumes were up 5.6% in the region with solid growth in Argentina, Chile and Paraguay. Along with industry expansion in all three countries; in Argentina, Mixxtail continue to drive incremental volumes, coupled with a great performance from our premium brands, mainly Corona, Stella Artois and Patagonia.

In Chile, Corona is driving a mid single-digit market share gain in a very profitable way, along with a good performance of Dacquer [ph].

And in Paraguay, the 340 milliliter returnable glass bottle Brahma launched last year continue to grow double digits, providing affordability within a profitable way, while premium volumes more than doubled year-to-date. Expanding the beer platform to other countries, we are launching Mixxtail beer 2 [ph] in Bolivia, Paraguay and Uruguay.

Latin-America South CSD and NANC volumes were down 23.7%, mainly driven by our strategic alliance with CBC in Peru announced in July, pursuant to which AmBev Peru will focus on its beer business in the country while CBC will be responsible for the soft drinks business.

As a result, we are no longer reporting CSD volumes in Peru, with no material impact at EBITDA level. Adjusted for Peru CSD, our volume would be down low double digits, reflecting the challenging trading conditions in the region.

In both beer and CSD and NANC, net revenue per hectoliter grow driven by a strong execution of our revenue management initiatives as we continue to face a high inflationary pressure mainly in Argentina.

In beer, we also benefit from the growth of premium near beer, while CSD and NANC benefit from a positive geographic mix, mainly driven by the change in Peru. COGS per hectoliter growth in LAS was driven by unfavorable currency hedges and higher inflation mainly in Argentina, along with product mix.

Cash SG&A was also impacted by inflationary pressures in distribution and labor-related expenses and the timing of our sales and market expansion mainly in beer. Year-to-date, our EBITDA is up 32.9% in local currency or 62.1% in reais, with an EBITDA margin expense of 300 basis points.

Going forward, we remain confident in our ability to deliver a solid top line growth in LAS, while protecting our [ph] stability. Moving now to Canada.

Volumes increased 1.2% driven by another quarter of industry expansion in the country in the seventh quarter in a row of market share gains, mainly driven by Bud Light and Bud Light Apple, along with a solid performance of Corona, Stella Artois and Goose Island.

Year-to-date, Corona Extra and Stella Artois are both delivering double-digit volume growth, leaving the high-end segment growth in Canada. We maintained our commitment for an improved balance between price and volume with our revenue management initiatives and the benefit of premium mix, driving a 1.8% net revenue per hectoliter growth.

Top line was up 3% in the third quarter and in the first nine months of the year, 12% above last year. Because of financial discipline, cash COGS per hectoliter was up 0.9%, slightly below inflation, driven by procurement savings and productivity gains.

Our EBITDA performance was negatively impacted by higher cash SG&A, primarily explained by higher admin expense given the timing of variable compensation accruals in the quarter. EBITDA declined 1% in the quarter while flat year-to-date.

As we move forward, we remain excited with the volume performance [ph] of our focus brands and committed to balance net revenue per hectoliter and market share to drive profitable growth in Canada. Now moving below EBITDA.

Our net financial results were BRL96 million worse than last year, with our performance mainly impacted by a higher non-cash accretion expense in connection with the put associated with our investment in the Dominican Republic, as higher loss on non-derivative instruments were more than offset by gains on non-derivative instruments.

Our effective tax rate for the quarter increased from 11.7% to 21.4%, driven by timing of interest on capital benefits, which were BRL145 million lower in the quarter, and a higher withholding tax provision due to FX variation associated with unremitted earnings from international subsidiaries, primarily Canada. Year-to-date, our ETR is 18.6%.

As a result, our normalized profit increased 6.3% in the quarter to BRL3,087 million. Year-to-date, our normalized profit is up 15%. So it goes to BRL8.9 billion [ph]. We generated a total of BRL6.2 billion of cash from operations, a 49% increase versus last year as a result of stronger operational performance and better working capital management.

In the first nine months of the year, we had already generated BRL14.3 billion of cash from operations, a 47% increase year-over-year. As for CapEx, we invested a total of BRL3.2 billion year-to-date, of which BRL2.2 billion in Brazil was in line with last year figures. During the quarter, we paid BRL2.5 billion in dividends and repurchase.

BRL385 million are from last year with the year-to-date total payout figure close to BRL9.9 billion or a 16% increase versus the same period last year. I’ll now turn it to Bernardo before going to Q&A.

So, Bernardo?.

Thanks, Jamel. Hello, everyone. You guys know that we have a big dream at AmBev. We want to be the best beverage company, bringing people for a better world. To be the best means subsequently [ph] more challenging operational growth.

In the first nine months of the year, our teams have [indiscernible] on our growth was once again put to the test as we faced tough comps and a challenging macro environment. Nevertheless, our people continued to deliver strong results, driving solid 12.%7 top line and 16.7% EBITDA growth year-to-date.

But the year is not over and we are not here only for 2015. While pleased with the year in the year-to-date, we expect external environment to remain a challenge in the short term, particularly in Brazil.

That’s why I will concentrate my closing remarks on what we are doing in Brazil and why we feel confident and continue to deliver in Brazil and AmBev level. Regarding top line, you know we have decided to focus on five commercial big initiatives to take us to where we want to be in, let’s say, five years from now.

But we have also been keen to drive a sustainable top line in the short term even in the current adverse environment. First, starting to leverage the core [ph]. We have been stepping up our season marketing abilities, activating demand and strengthen the equity for our brands for a completely 360 approach with great above the line campaign.

On and off trade activation, coupled with experiential events, we have a strong application to digital platforms. End results are coming. The preference of our core brands continue to trend higher among target groups, driving volume growth in a profitable way. Antarctica hit the all-time high preference in Rio de Janeiro, its most important region.

And Skol was considered the most valuable brand in Latin-America in 2015 by Millward Brown/BrandZ, the great results. Innovation is also key to elevate our core brands. We have just launched Brahma Extra Lager , Brahma Extra Red Lager and Brahma Extra Weiss, core plus line extensions of Brahma targeting the food and savor needstate.

These line extensions not only bring the food pairing experience to mainstream, which is very important, but they also enhance the equity of the Brahma brand. Second, we have accelerated premium. Our premium volumes expanded double digits in the quarter. We repeat, double digits. Great, great, really [ph], results.

And Budweiser, Stella Artois, Corona, Original, all of those premium brands now accounts for 90% [ph] of our volumes. Our goal is to accelerate these and continue to lead this segment, driving volume growth and a quality price mix.

In the fastest growing international drink segment, we have been not only expanding the portfolio but improving our sleeves in marketing execution through deep experiential activations, such as Budweiser Mansion and Corona Sunsets.

In the domestic premium, we re-launched Adriatica, a centenary super premium beer brewed in the same city it was brewed 80 years ago and where Original was first brewed.

Adriatica is a beer with a great history and identity and should join Original and Serramalte in the leadership of the domestic premium, super premium segment in Brazil that’s a very relevant one. Third, we are pleased with the performance of Skol Beats Senses in the near beer platform, rising up on incremental volumes with much better margins.

There is a huge opportunity for near beer in the long term as we expand our portfolio and capture a bigger shelf through [ph]. But with only one year since its launch, Skol Beats Senses already can upbeat [ph] some of the main premium brands such as Stella Artois and Bohemia. Amazing.

With that, on behalf of our staff, we will have a new flavor of Skol Beast in the shelves already next month - this month. Talk to you now maybe in advice [ph] from our marketing guys, but the new Skol Beats [indiscernible] green, and for sure we will like it. Fourth, in-home occasion.

We have been improving the shopper experience in the off trade by working with the retailers. By working with the retailers in a win-win model, we continue to step up the off trade format, increasing the space of beer category in the stores and improving the assortment of our products.

It’s good for the retailers, good for the beer category and even better for shoppers. Also, the opportunity to expand returnables in the channel has become even more relevant in the current environment. Returnables account for almost 20% of our supermarkets’ volume this quarter and continues to grow.

We are leveraging our national footprint and strong activation to lead this initiative in all regions in Brazil, providing more affordable products when people most need that in a profitable way. And fifth, out of home.

Meeting friends in our bars, going out at night clubs, partying in restaurants, watching soccer games in sports bars, the out of home occasion is a strong part of the Brazilian culture. The bar is probably the most [indiscernible] and affordable leisure activity one can have in Brazil.

It’s our responsibility, along with the bar owners, to make sure this experience continues to be great. And not only that, we know that the out of home is the best occasion to really build a lot of brands in a real way.

We have a strong set of initiatives, ranging from franchise business such as Nosso Bar, from micro-events platform and innovations such as Skol Draft to boost the out of home experience. After one year, Skol Draft has increased by more than 50% the number of bars [indiscernible] in Brazil, bringing this amazing experience to mainstream.

And it has been only six months. The opportunity is much, much bigger.

Along with our five top line initiatives that I mentioned before, we have also been stepping up the efforts in operation maintenance and cost management by not only renewing the entrants in the usual tools like ZBB, zero-based budget, but also leveraging technology to maximize efficiency in our sales markets, logistics and supply process.

And also, partly is the supply in [indiscernible] the whole supply chain, finding ways to minimize the impact of the highest inflation in the short term. As a result, we now expect cash COGS in Brazil to grow mid-single digits in the full year as opposed to the mid high single digits as previously indicated.

So our updated guidance in Brazil is top line to grow mid to high single digits in the full year, cash COGS to grow mid-single digits in the full year, cash SG&A to grow below inflation in the full year, CapEx up to the 2014 levels. In summary, guys, the same focus on - the slight [ph] focus can make the difference.

We continue to feel 100% confident that by acting on the things, on the leverage, on the initiatives that we have under our control, we will continue to deliver strong results in beer CSD, not only in Brazil but in the full AmBev level.

And all of those things will be good for the short term and will position AmBev in great shape for the long term as well. So thank you and now we can move for the Q&A..

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Andrea Teixeira with JP Morgan. Please go ahead..

Hi, thanks. Good afternoon, everyone, and congrats on the results. Just on the price pack, you got obviously the 10% net price in hectoliter and we all understand the premium efforts that you’ve been doing.

But if you can separate those factors, I mean, inflation pack and premium mix so that we feel more comfortable how you’re going to be able to pass on higher FX as you roll off the hedge in 2016. And then the second question is regarding what triggered your revision down in COGS for Brazil.

Is that something that we - with the [indiscernible] it’s been so much more difficult now, what was the main trigger for that? Is that the question? Is it the pricing that is leading you to believe that you can mitigate some of these effects with the price pack [ph] or is there additional kind of like plant shutdowns or additional savings that we are not aware of? Thank you..

So hi, Andrea. Thanks for the question.

I mean [indiscernible] about the breakdown, I mean the effects of the [indiscernible] to performance, I mean what is pricing, mix and [indiscernible] talk about the cost guidance review, what is behind it, right?.

Yes, correct. Thank you..

Well, basically, our pricing and [indiscernible] really first raw pricing [indiscernible] in the beginning of the year, the inflation is 5, 6, so now it’s running 9, 8 and more than that in Brazil. So clearing mix, it’s important because last year, we had kind of below 7% in terms of mix of payment, and I’ll have 9, so that helps a lot.

And the third one is a direct distribution operation as I go on. So with that, we’ll continue to follow that the [indiscernible] that we always use [indiscernible]. And that’s basically the same thing that you continue to do in the future..

Okay. And regarding the COGS guidance review. I mean, of course, we already have nine months of the year behind us. And they’ve given us the performance and they have stepping up our force behind procurement savings which actually are higher than what we anticipated as well as productivity gains and then more efficient breweries.

And adjusting also our structure to the volumes [indiscernible] we are going through. And there is no silver bullet or single elements. There’s a combination of factors that we have been working behind. And as you know, this focus on cost management as part of our DNA. We also have [indiscernible] in the quarter guidance, a positive impact.

At the start you see the mix of RCB [ph] with [indiscernible] in fact, particularly in the off premise channel, as Bernardo indicated in his speech.

So all that give us, I mean, a lot of confidence as opposed to what we’ve said before, it gives us COGS guidance or cash COGS guidance for this year instead of being between mid and high single, it was [indiscernible] at mid-single of let’s say 4% to 6% cash COGS growth this year.

All the other guidance, they remain the same like on top line, SG&A and CapEx..

Okay. Thank you both..

Thank you, Andrea..

The next question comes from Fernando Ferreira with Bank of America Merrill Lynch. Please go ahead..

Thank you. Good afternoon. One thing for the questions. I just have two questions related to your volume performance in Rio, Brazil. Is it possible for you to give us an indication how much the different categories performed in the mainstream, innovation and premium. We know that premium continues to grow well.

But I was wanted to get really a sense of how the different categories perform. And then another related question, I just wanted to get your perspective on why the beer category is doing so much better than other categories in Brazil.

What do you think is key behind that? Is it all weather or you think your strong activation of the category is a key factor. So I just wanted to get an answer. Thank you..

Thanks, Fernando. [Indiscernible] for the last one, I think that as leaders in the market, we have the responsibility to activate demand and drive the industry as well. So we have been doing that, not only at the premium, but elevating the core for all the things that I mentioned before. And you said, the weather helped with us.

I mean these are comps in the sense help with us. But the implementation of those initiatives, they are financially helping us all, not only to the industry but to the share according to internal information, we grew share in the quarter and in the full year.

So having said that, in terms of the volume, premium is growing and then we are leading premium segment here in Brazil, great brands. And the portfolio, it’s really, really good one. And [indiscernible] put forth in the right way. I mean really, building brands for the future.

Some of those brands, they can really boost the volume even more in the short term [indiscernible] pricing realm. There are some people do in other countries and including here. But we don’t do because I think it was a long-term. So please [indiscernible] are going as well in the quarter.

So it’s a mix of our share gains and our responsibility as a leader in the market to activate demand and put the industry in the right stop. I think for the full, year, I mean we are back to the guidance of top line, mid high single digit..

Great. Thank you, Bernardo..

Thank you, Fernando..

The next question comes from Antonio Gonzalez of Credit Suisse. Please go ahead..

Hi, good morning, Jamel and Bernardo. Thanks for taking my questions. Just two quick ones. The first one, I guess, on the strategic side. I don’t know if you will be able to comment. I understand if you cannot comment at all. But what are your plans for Peru and Ecuador in light of the ABI and SABMiller transaction.

Is there anything that you can comment already? Do you think you will be required to sell that asset or those assets? And also, in that same line, I guess, would you be able to comment at all on whether you would be willing to sell kind of that to ABI especially if your main competitor in Canada will probably also be ABI’s main competitor in the US now with full ownership of that asset.

So that’s the first question. And secondly, very quickly, on revenue particularly in soft drinks, you increased 1% on year. Jamel mentioned some timing differences explaining that.

Also just wondering for the next few quarters, do you see the competitive environment of being conducive to increasing prices closer to inflation maybe? Or do you think you will remain below inflation given how the category has been performing recently. Thank you..

Okay. Hi, Antonio. Thanks for your questions. Of course, as you alluded to the discussions going on between ABI and SAB, of course, the proposal is being made direct by - made by ABI without any participation [indiscernible] than before. We have no further information to share at this stage.

So I will very much go to your question regarding the [indiscernible] on soft drinks. As you’ve said, [indiscernible] an impact of timing right [indiscernible] quarter over quarter of different timings of our [indiscernible] but as we do it in beer, our revenue management strategy is to pursue any tax [indiscernible] to manage inflation.

And even in our press release, what we mentioned about the whole performance of the [indiscernible] in Brazil, one, should not take this quarter as a proxy of what to expect about this business.

Actually, this business, despite the soft and [indiscernible] industry that we know is even more affected than with beer industry in Brazil [indiscernible] economic scenario.

We have been on the other hand, the same way with beer, focused on deliveries that we can’t control, so have been gaining share, gaining preference, work on affordability with [indiscernible] packages and innovation in [indiscernible] for us is crucial. Our [indiscernible] glass bottle, for instance, has really doubled gain in 2015.

And we have more to come soon in this area. So [indiscernible] huge sector since the beginning of the year. We also lack extension [indiscernible] zero. The same with [indiscernible] so innovation in the [indiscernible] brand, accelerating, let’s say, the fast growing more [indiscernible] energy drink segments also big in our agenda.

So we have a full brand of soft drinks. Important to highlight, first quarter, there was some - well, more often times, [indiscernible] you know, some of our initiatives vis-à-vis last year with no doubt, we expect to deliver more in the following quarters despite [indiscernible]. That’s how we see the soft drink business evolving..

Thank you very much, Jamel..

You’re welcome..

Please excuse any mispronunciations. The next question comes from Luca Cipiccia with Goldman Sachs. Please go ahead..

Good morning. Thanks for taking my question. I wanted to follow up on the returnable mix in Brazil. I think, Bernardo, you said, it’s now 20% of total. Could you remind us what it was the beginning of the year? And also, I think the previous meeting, you highlighted how it varies quite significantly depending on the region.

And just to get an understanding on how much higher can it go, if you could give us some degree or range or where you desire and where it is not and whether it’s just a question of rollout and coverage or it’s more structure depending on your operation. Maybe some direction on that would be useful. Thank you..

Luca, thanks for the question. I think that’s a good example about how we work [indiscernible] instead of being complaining about the, I mean, the crisis and this like that, how we can really operate in the leverage that we control and try to change the market environment in the favor of the industry in our favor.

So I mean last year, totally, would be around 4% in the beginning of the year and around 6% and 20% in the off street channel. I mean back in time, it was kind of 9.96, 9.95 on the work [indiscernible] at that time, we saw a lot of returnables in the off trade. It’s great because it’s great for the change as well because they have a better margin.

It’s great for the people in general because it’s affordable and the brands that they love. And so it’s good for us because it can bring affordability [indiscernible] making the proper step we need. So I think that we can grow more than that. [Indiscernible] that they are more [indiscernible] precise number to you. But the opportunity roll.

It’s [indiscernible] kinds of opportunities that the crises gives to us. And then we have to put the plans in place, believe and go for it. And we have done that and I think that’s good. And it’s good because [indiscernible] people say about their [indiscernible] that we always, I mean, having this year and have something next year as well.

This is the kind of package that should not be affected. So the mix will help us, this kind of mix and help us in the share, in the industry and in the cost as well. So valuable return to us..

Bernardo, just a follow up. If you were to take, let’s say, a region where you’re doing this at your best, just to get an idea, you know, how would it be? I don’t know if you have any indication of that in a relevant, you know, in a relevant benchmark. Would it be in the 30s, in the - you know, how -.

I’d say that it’s average, 20. So we have reasons that we are I mean the late - in the early stage of implementation that [indiscernible] 5%, that’s the trip portion of agenda. But we have regional headquarter [ph] for instance. So that’s the kind of range that will have [indiscernible] average.

Clear?.

Thanks. Very clear. Thank you..

The next question comes from Alex Robart with Citi. Please go ahead..

Hi, everybody. Thanks for taking my question. So it’s really a non-Brazil question. You got the double digit growth EBITDA in the quarter in Brazil. But what was interesting is over half of the operating profit coming from CAC and LAS, very heavy growth rates, 65% I guess if you had, together the growth rate with CAC and LAS.

And there’s currency in there, but what we were anticipating is seeing the very strong price growth you got in LAS and then a double-digit volume in CAC. And so as we think about these two regions going forward, I guess the comps get a little easier.

But if you kind of strip off the currency element, could you tell us a little bit about where you think this business - or particularly CAC, what kind of margin level we could expect? I know at one point, you gave us a market share of 42% I think is what you have in the CAC region.

Are we still there? Is it higher? And if you could talk then in the comments that you can give us on LAS, what are you contemplating in your budget for the Argentine peso next year and how should we think about a potential devaluation in that market? So that’s the first question. And I just had kind of a cost question as much as I could want.

Thanks very much..

Okay. Hi, Alex. Thanks for the questions. I’ll start by talking on Central American and the Caribbean. As you mentioned, as referred on your question, of course, we had the gain, due to currency translation, right? But even in organic terms, I mean we had a strong performance which actually was not new.

I mean [indiscernible] has been delivering consistently quarter over quarter. I would just start highlighting the [indiscernible] performance in our key markets. I mean we’ve [indiscernible] currencies, we [indiscernible] market share positions. So at the end of the day, [indiscernible] Bernardo talked about the commercial platforms in Brazil.

We had been really [indiscernible] operations so we [indiscernible] of brands, I mean [indiscernible] first in Dominican Republic major results during the summer season with experiential events. And that’s helped us to drive mid-teens volume [indiscernible]. In the Guatemalas, they have strong performance [indiscernible] as well.

Main distinction [indiscernible] off the Mexican branch [indiscernible] and they are gaining share in a very relevant way. So at the end of the day, we are combining all the strong top line [indiscernible].

As you know, our [indiscernible] on cost management and operational excellence, improving margins in both countries, so we are really pleased with the performance in the region. But moreover, I mean you referred that our share in the region, right, was about 42%. This number is growing but we think there is still a lot to go.

Not to mention for [indiscernible] the industry, it should be further, let’s say, activated and [indiscernible] over there. So I think Nahas has a comment on that..

Hi, Alex. [Indiscernible] the period of having a very consistent, long-term top line initiatives there, strategy, very, very clear for the [indiscernible] on that is that when you have headwinds in terms of [indiscernible] like in Brazil, can overcome that. [Indiscernible] some favor in the terms of the industry, and really can boost that result.

So that’s why we always repeat to you, to everyone, I mean we’ll continue to have a big brain for the long-term and have a consistent strategy to get there. That will help us in the short term. Good industries, bad industries, but we perform anyway..

Yes. And just to complement the answer, I mean regarding Latin America South, we’re not providing any guidance or view for 2016, I think we have about the effects for next year, the budget scenario. I’m not talking about that yet. But of course, then it’s a different scenario in terms of high influence so you’ll have to take that into account.

That’s our focus there at the end of the markets to best price [indiscernible] local currency, you should see double digit top line growth given the high inflationary environment in Argentina.

But more than the distribution or the application of the price policy, you would see a lot of examples of great initiatives as well behind premium brands, behind midyear, it’s very incremental.

So we think Brazil [indiscernible] in Argentina part of the explanation for our strong performance volume-wise has also to do with [indiscernible] we are bringing with this [indiscernible] platform, not to mention the better margins, right? So these successes mix in to expand each [indiscernible] in the region.

So we also feel comfortable and remain committed to drive sustainable and plausible across the line and it is a growth [indiscernible]..

Okay, fair enough. I appreciate that. Sorry, the second and the last one is the cost question. And this is a little bit forward looking. But I mean, as you think about setting your commodity hedge for next year, together with the currency hedge, I mean obviously there was a moment earlier this year in the real, May and June, the real was 3.1.

And I guess it would have been a great time to think about buying the forward hedges at that point. And I just wonder if there’s any color you can give us as to where you think that next year’s FX dollar COGS hedge in Brazil could end up.

Is it fair to assume that you’ve gone a fair amount of that already if you can’t give us more color on that? And second, on the commodity, in the dollar pricing, when you look at your input, are you finding that there’s room to get and secure some of these hedges at equal to lower rates? Or is it still a mixed bag? So any thoughts around those two hedges for next year would be helpful.

Thanks..

Sure. I’m going to provide you some thoughts, as you said, because at this stage, I’m not providing any specific guidance for 2016. But our hedging policy, right? And then we have a [indiscernible] every month a kind of hedging or exposure for the following year for both FX and commodities. On average, you have all [indiscernible] months lock it.

So I demand at the beginning of the year that currency [indiscernible] doing that with building our hedge fund next year, the same way, of course, as of the moment, we started to see the - especially the BNO [ph] devaluation. This started to impact our outlook for 2016.

But as I said, given the market price year-to-date, [indiscernible] prices, once you’d assume a negative impact for next year versus what we had in 2015, oh, that would be definitely positive [indiscernible].

Actually, we believe that the biggest of the hedge is record which is to give us their [indiscernible] to mitigate some action to cope with this change, right? These effects, this [indiscernible] that’s exactly what we are doing now as [indiscernible] for 2016. I mean it gives us some mitigating actions.

It was a question to both top line as well as cost initiatives that should deliver the most appropriate tool to protect our profitability in the short term, but also paving the way for sustainable growth. It’s not different from margin locations when they had to view it relevant and [indiscernible] effects and commods and price changes.

But since we are still [indiscernible] talking about Q3, you know that as usual, we’re going to provide a specific guidance for next year by the time we announce the full year results. And that’s what we can see for the time being..

Okay. Very helpful. Thank you..

The next question comes from Robert Ottenstein with Evercore. Please go ahead..

Great. Thank you very much. Guys, just kinds of stepping back a little bit. There seems to be a real tremendous evolution in how you’re doing business from a model a few years ago that was very simple, straightforward in the sense of your brands. And it’s primarily in three main brands with not a lot of different line extensions.

And in the last couple of years and increasingly now, there’s a tremendous amount of complexity that’s being introduced, obviously, for a lot of good reasons.

And what I’m asking is how you’re dealing with that increased complexity in terms of the sales force, how they’re dealing with that as their additions to the sales force, new training, different ways of segmenting the sales force and also how that’s being reflected in your supply chain and your manufacturing. Thank you..

Thanks for the question, Robert. It’s a very good one. And we have been - I mean as we dream big and you know us a lot. We’re not to be really structured to deal with this more brands activations. All of the things that are going to drive a top line growth and be more efficient. That’s the dream, that’s what we are doing.

So revising the full process, assuring that we are doing this every year to simplify things, putting all our IT technology to help us on that, it’s very, very important. And we are doing this, not only [indiscernible] for many, many years working the supply as well.

And I mean going to the next level, all of those things, of this application of [indiscernible] our tech groups, the tech sales group, tech supply groups and so on. So it’s evolving big time. It is. And the third one, engaging our team even more. So people make the difference. And we know, we always talk about the dream people culture, a big dream.

And people make the difference. I mean all the internals, remember, that you have [indiscernible] evolving big time. For instance, this year, you can [indiscernible] that we’re getting there. So it’s possible really to deal with all of those new brands activation so on, more efficient in driving the top line with that.

That’s why in the basis of our strategy and that’s an always focus - I mean rich goal here, like [indiscernible] there is operational excellence. I mean [indiscernible] is very important, I think, not only to assure the things that you have nowadays, our base, but to assure the new things that went through in the business.

We really answer in the right way. Another example, a clear example. We’re allowed to [indiscernible] one year ago. We could launch [indiscernible] six months ago. We did not grow that. We go end to end with [indiscernible] activating in both their line, create experience [indiscernible] own trade.

And now, okay, at the end of the year, we go to the next one. And for sure, you’ll be a huge success as well. So it’s possible to do both. And we’re doing both. Again, bringing the people, engaging the people and bringing their cooperation excellence to the next level. The challenge for the team here, okay, we operate with the excellence.

We are separate, but you need to step up even more to get our dream for the long-term and for doing that..

Have you further segmented the sales force and how it’s managed in Brazil? And can you talk about additions to the sales force, how many - how much has the sales force grown over the last couple of years?.

I mean, actually, the sales force, they didn’t grow. Basically, I mean [indiscernible] in terms of FTEs. We’re able to optimize and get, I mean, some [indiscernible] reinvest in the business. So we are segmenting the market much more.

That’s good because you can apply the process and all the technologies specific for that channel.- [Indiscernible] people for that channel and the training process for that channel. It’s much more efficient, not only in terms of top line but in terms of how the problems of straining and technology threat doing.

And they have to bear in mind, it is much more [indiscernible] their decision also. I mean you have to prospect, you have to close a deal. You have to take the orders [indiscernible]. We understand [indiscernible] much more than the simple order taking.

So we can optimize the order taking and they did talk about investments from - I mean from that part and raise that, that’s the money for us to reach demand in the portfolio, in the bigger portfolio that we have nowadays. One way to do that is to segment sales force. So we have people working 24/7 basically including at night.

So we do not have sales force, that’s activation group that’s working at night. Now, these are having [indiscernible] working to 2, 3 AM. So those kind of things. We are evolving big time. And we learn with a lot of companies to benchmark [indiscernible] including my previous experience at the [indiscernible]..

Thank you very much..

Thank you, Robert..

[Operator Instruction] The next question comes from Carlos Laboy with HSBC. Please go ahead..

Hello, everyone. I had two questions regarding elevating the core.

The first one is whether you could expand on the benefit you’re getting from line extensions, maybe focusing in on umbrella [ph] and then how these extensions are helping you elevate the core and how do you measure that benefit? The second one relates to whether you see any kind of opportunity, if any, from refreshing the refillable mainstream packages that you’ve got in the marketplace.

Thank you..

Hi, Carlos. Thanks for the question. I think that the first one, I mean, elevate the core is [indiscernible] solo line extensions are important. It used to add to main brand, to the model brand, sorry. So we have the key attributes for each brand.

So we only launch things if those new line expansions will really have a good cost benefit on the key attributes of those brands. So one example, [indiscernible] good for Skol because I mean connect, I mean it helps Skol connect much better with young people.

So it’s good for the market brand and good for the whole franchise in terms of performance share because it’s very incremental. Skol Ultra, again, very, very important. I mean it’s something that’s young and connects for a group of people that read specifically this specific message, help us to really grab this additional point.

So that’s the way that we do. We’ll now launch our line expansion that we rehearsed [ph] that will not have a positive effect in the key attributes of the model brand. And it’s helping the Brahma, another example. The Brahma, Extra Lager, Red Lager, and so on.

We know that for Brahma, it’s very important to be the ready taste of the flavor in mainstream view here. I mean that people really like the flavor of Brahma, a little bit of bold flavor. And then Brahma is the Lager, the Extra and Red Lager. [Indiscernible] they help to enforce these key attributes of Brahma to be a very flavor and quality.

So those are the first question.

And the second one, could you remind me, Carlos?.

Yes. The second one relates to when you think of elevating the core, what importance do you see and opportunity do you see for refreshing mainstream beer refillable packages? I know it’s expensive and it can be risky. But it’s something we haven’t heard much of..

I think we have been doing many launch. One year, it’s a new pack and now the 300 ml as well. So we had been investing on this. In similar areas, we are doing put in foil in the 600 ml. I think that’s opportunity. And we have been doing that. There’s a [indiscernible] the core and there’s the [indiscernible] that we are doing.

I mean the last years, if there’s 1 liter, the 300 ml, continues to do - hope to continue to do in the future. On the [indiscernible] point and I think that’s something that’s a fact. It’s not something for the short-term.

But we agree that that’s a good opportunity to really make those brands more young and improve the qualities, perception of the [indiscernible]. I think….

And we are doing this..

As an example, I think this [indiscernible] that Bernardo mentioned during his opening speech is a great innovation in access [ph], right? Is that not only refillable, but moreover, was called [indiscernible] expanding this draft experience which [indiscernible] for consumers to a much broader base given this innovation which has, again, [indiscernible] the mainstream consumer different from the traditional Brahma [indiscernible].

We are now reaching a much broader base with this [indiscernible] I don’t have an example for that..

That’s a very good example. I know. Thank you..

Thank you, Carlos..

This concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Bernardo Paiva for any closing remarks..

Thanks [indiscernible]. Thanks for everyone to be in the call and for the questions. What I’m saying for the final words, I think we have been talking to you, guys, in the last month. We have a big dream, have great people, we had to deliver on that. The long-term plan, it’s very clear, we have been repeating this in every meeting, in every call.

And you it will be consistently the implementation of that. So sometimes, the macro environment will help us, sometimes we’re not. But I’m 100% confident that we’ll deliver anyway. And I think this year, it’s a very good example. And next year will be another one. So that’s the final message. That’s the way that we operate here.

That’s based on our dream and our people..