Good morning, and thank you for waiting. We would like to welcome everyone to Ambev’s third quarter of 2017 Results Conference Call. Today with us, we have Mr. Bernardo Paiva, CEO for Ambev and Mr. Ricardo Rittes, 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 completed, 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 the comparisons with the Q3 2016 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 Ricardo Rittes, CFO and Investor Relations Officer. Mr Rittes, you may begin your conference..

first, interest income of BRL $870 million driven by our cash balance, essential in Brazilian reals, U.S. dollars and Canadian dollars. Second, interest expenses of BRL 362 million that includes a non-cash accrual of BRL 145 million related to the put option associated with our investment in the Dominican Republic.

BRL 32 million of losses on derivatives instrument mainly driven by the carry cost of our FX hedges primarily linked to our COGS exposure in Brazil and Argentina.

Losses on derivatives instruments declined by almost 90% when compared to the same period of 2016 as low interest rates in Brazil and positive results from equity swaps are contributing for the reduction of carry cost. Fourth, losses on non-derivative instrument of BRL 51 million mainly related to FX translation.

Fifth, tax on financial transactions in the amount of BRL 42 million. Sixth, BRL 162 million of other financial expenses mainly driven by interest on contingencies. The weighted nominal tax rate in the quarter was 27.1% while reported effective tax rate was 95.2%.

Such increase results from the fact that as announced on September 29, we joined the Brazilian Federal Tax Regularization Program committing to pay some tax contingencies that were under dispute including contingencies related to corporate income tax and social contribution in profit.

The amount of BRL 958 million will be paid in 2017 and the remaining amount in 145 monthly installments starting January 2018 plus interest. Adjusted by the impact of the regularization program, the effective tax rate was minus 6% driven by higher interest on shareholders' equity benefit.

CapEx total BRL 128 million, 19.3% lower than that in the same period of 2016 while year-to-date CapEx declined by 86.2% reaching BRL 2 billion. Finally, during this year, we announced approximately BRL 3.6 billion to equity holders in dividends. Thank you very much. I will now move to Bernardo before going to Q&A..

Budweiser, Stella and Corona continue to ramp up and combined increased by double digits in the quarter. Budweiser kept on reinforcing its values of freedom and authenticity. After the successful campaign with Oscar Schmidt, Budweiser had another meaningful campaign featuring Rodrigo Santoro, a well-known actor and Rincon Sapiencia, a famous singer.

Stella Artois continued to further consolidate its position as the most certificated lager beer connecting with the right platform while Corona kept on growing volumes and exploring the lifestyle that define it as the coolest premium beer brand.

Turning to Near Beer, Skol Beats Senses continued to enhance the equity of its mother brand and to bond with its core target consumers delivering breakthrough experiences such as the Skol Beats Tower, an unique festival that took place in a building with four floors and eight different parties. Moving to occasions, and it starts usually in home.

An important initiative to shape in home consumption has been the steady evolution of our market programs designed to all size of stores in the off-trade channel. Such initiative has the purpose to elevate the beer category in the off-trade, improving consumers shopping experience.

Further, with continued implementation of our 300 ml returnable glass bottle strategy, our minis are growing year-to-date with an increasing popularity. This is an important step to bring affordability to consumers with a higher profitability. Out of home, going out with friends to enjoy beer is part of the Brazilian culture.

So we continue to step up our service level across the country through different initiatives. The use of new technology is playing an important role. We’ve been developing sales algorithms and our B2B platform to improve our sales process, strengthen our relationship with the customers and as a consequence, enhance consumers experience at the bar.

Now I’d like to move to CSD&NANC. As you know, the CSD industry is even more challenged than the beer industry when hit by pressure on disposable income and discretionary spending as consumers tend to trade down to powder juices and tap water. In this environment, we delivered slightly positive volumes while the industry declined mid single digit.

Nevertheless, our results were temporarily impacted by increased costs and investments ahead of the curve. We are not pleased with our CSD operational results this quarter, but we are confident that we are taking the right measures to deliver stronger performance and we will push ourselves even further to resume growth.

Finally, this quarter also was marked by an important event. We are very, very proud that for the first time Ambev was the brewery that received the highest number of medals in the World Beer Awards, a competition with the participation of the best breweries in the world.

We received in total 87 medals, an important recognition that we have the greatest beers in the world as we continue to brew with passion and expertise from seed to seed, taking care of all the stages to deliver high quality beers to our consumers. Beer knowledge and love for beer is part of our DNA.

In summary, we had an important turn this quarter and the worst is behind us. For the rest of the year, we expect to continue benefiting from the healthy top line and reduced costs in Brazil, posing EBITDA growth and margin recovery.

Further, beer volumes will also benefit to the early timing of implementation of our annual price adjustment, along with the consolidation of our commercial platforms in an improved industry perspective should also support us to deliver strong operational results. We can now move to the Q&A. Thank you very much..

We will now begin the question and answer session. [Operator Instructions] The first question comes from Isabella Simonato with Bank of America Merrill Lynch. Please go ahead..

Hi good afternoon. My question is on beer volumes. I think the decline that we saw was a little bit stronger than what we thought. If you could give us more details on per channel or segment or even package.

How did you see volumes declining accordingly? And also, talking about industry volumes, did you see any gradual evolution throughout the quarter when we look on a monthly performance? Is there any sign that or any month that we already saw positive volume for the industry or this is still not happening? Thank you..

Thanks Isabella. Thanks for the question. I think the beer industry has not reached its inflection point. Just a quicker recall for the year, in the first half of the year, the industry fell around 2.4% according to industry in the third quarter, the industry continued to fall, later in the first half of the year, that’s good news.

So, it’s evolving, but still negative. However [indiscernible] industry would explain the minus 5.4% Basically, you have two things [indiscernible] it’s normal to increase price in the second half of the year, normally in the third quarter. But let’s deal with this in the fourth quarter. This year price was taken again.

As we always do in the third quarter, we have a hard comp in this quarter. The second, there is a lag between our implementation of price initiatives and those of the industry, impacting volumes in the short term.

So, volumes declining in the third quarter is strongly related with the early timing of implementation of the price rise initiatives under the hand [indiscernible] will actually benefit us in the next quarter, the current one, the fourth one as it resulted in a shift in volumes from September to October.

But all in all, that we are very confident about our future and our top line initiatives. Even after the price increase in the third quarter, year-to-date volume are declining 1.1%, while the industry is declining around 1.2%. So, we are outperforming that industry.

Basically, Isabella, I would say it’s fair to think the recovery of the industry, given the disposable income is in the right path, we are confident that we’ll [indiscernible] quarter by quarter, but the most important thing is that we are working in the platforms and that you know that we really have been investing in a consistent way, executing FX in a consistent way, to assure that we will continue to outperform the industry to the remainder of the year – remaining part of the year..

Thank you..

Thank you..

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

Hi, good morning thanks for taking my question. Two quick ones. One, again on Beer Brazil and on the discussion about pricing.

How early in the – If you can share, how early in the quarter was the price increase in a sense that we understand it was different last year, but if you were to compare it to what you would have normally done before 2016, did it come towards the end of the quarter or is it more fully representative an entire quarter and that’s to contextualize a little bit the gap between your pricing and competitors’.

It seems that from the volume divergence, the third quarter may have incorporated fully that price difference. And also, just to understand how much of an incremental impact we will see in the fourth quarter. So that would be the first question.

And then secondly, quickly on the soft drinks side of things, Bernardo you mentioned you’re not happy with the performance.

And I think if we look at the numbers, especially the EBITDA, I think is understandable statement but then, if I was to look at volumes and even pricing, it seems that you’ve done better than the industry when Coca-Cola yesterday, I think, commented on high single- digit volume decline.

So, I’m just trying to maybe understand a little better your comment, is it anything to do with your execution or it’s rather a comment more about the industry overall and the headwinds that you’re seeing on the COGS front, in particular? That would be the two questions..

So, Luca thanks for the question again. I link it to the price adjustment that we’ve done in the third quarter. I think we’ve done that during the third quarter. So yes, I would expect some additional benefit in the fourth quarter that you’ll take the full price increase for the three months.

Specifically, in the CSD part that we’ve been doing this quarter, yes our volumes are slightly up while the industry declined 5.5%. In the year- to-date, our volumes are declining 4.5%, while the industry is around 8%. So yes, we are gaining share and we are very pleased about that.

But as you saw, and specifically in this quarter, our EBITDA was not good. We know that the reasons are one, first and it’s basically the most important one, is the cash cost that increased 26.3%. I mean, almost fully – that almost fully explains the EBITDA that we have, the decline.

Such increase is driven by the negative mix – light negative mix due to the higher weight of cans and mainly to the sugar price that grow around 6% year-over-year. I think in the second, SG&A expenses for the sales and marketing expenditures.

And third, the reduction of the net operating – net other operating income line given the expirations [indiscernible] in the fourth quarter in 2016. So, I think that our – I mean our job of what we’re doing in the market, we are happy, evolving even more.

I think that Pepsi brands are performing well, but we like – I mean you know us, we know the gaps and we would like to outperform the industry and grow EBITDA. So that’s why going forward we are confident that we’ll be able to resume growth in the CSD&NANC business.

And as among other factors, we have visibility that the COGS impact is temporary in the distillery. So, we when we to continue to gain share and deliver the profitability, that’s really working for every day..

And just a quick one.

On the SG&A front on the marketing investment, was there an element of you having anticipated something – some of the – what you had budgeted for the year meaning that in the fourth quarter, that variable will be less of a drag or is that the right way to think about it?.

Hi, Luca, this is Ricardo, thank you for your question. Yes, you’re right, I mean there some phasing off in the SG&A on the soft drinks business, yes. But when you look at the comparable base for the fourth quarter last year – not last year, a very small number.

So again, there is some phasing and we brought some expenses from the fourth quarter to the third quarter in the soft drink business, specifically, yes..

Okay, thank you..

Thank you, Luca..

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

Hi, good morning. Thanks for taking my question. I wanted to ask about margins in beer in Brazil. You mentioned, Ricardo in your prepared remarks that you still expect cash COGS per hectoliter to comply with the guidance that you’ve originally shared for the second semester. Yet obviously in this quarter, COGS per hectoliter was up 5%.

So, I was just wondering if you can help us understand what are the elements that help lower that figure in the fourth quarter so that you can get to the guidance, if its FX hedges or is there any other element that helps sequentially from the third to the fourth quarter.

And then just secondly, when I figure SG&A expenses in Beer Brazil or in Brazil overall, obviously you guys are doing a great job in Brazil overall with that 2% growth or so year-on-year.

I wanted to ask as you see some sequential improvement in market share, given the anticipated pricing that you just disclosed, can you maintain these low levels of SG&A growth going forward, I know there’s no specific guidance for this number, but I just wanted to understand qualitatively how do you think about operating leverage on the way as you – as you recover margins – volumes? Thank you..

Antonio, thank you very much for your question. So let me start with the margins one. The Brazil cash COGS, correct, that was impacted by this CSD& NANC business as Bernardo was just explaining. And as we have a hedging policy, we also have visibility over this number going forward.

Given the volatility of these specific line over the quarters this year, that’s the reason why we decided to provide our guidance on the cash COGS per hectoliter for the year.

But the main fact, bringing a little bit higher to 5% the cash COGS per hectoliter was the CSD&NANC in cash COGS records had increased 26.3%, as Bernardo just mentioned, as we have like a decline on that, and on top of that, as we have already visibility over the effects of evolution, given the hedging policy.

Like we said in the beginning of the year, we separate the year into semester, but we saw the first semester much tougher than the second – the first quarter much tougher than the second quarter, and now the third quarter, an improvement and we can continue to see that so that we remain very confident and committed to the guidance that we provided in the beginning of the year.

Now going to the SG&A qualitatively, I think what we can say is that essentially that the business model of the company is translating. Non-working money to working money and being more efficient every day and to making sure that the money that we spend is money that the consumers can see, they should be willing to pay for it.

So overall, we are happy with the performance of the sales and marketing and we cannot forget that the investments that we are making on package renovation that impact our COGS, they also represent an investment behind our brands. So, liquids and packages are the main touch points for consumers..

Thank you, so much..

The next question comes from Pedro Leduc with JP Morgan. Please go ahead..

Thank you and good morning, everybody.

For the question on Brazil beer still, could you, Bernardo, elaborate a little more what you meant behind the phasing of the price increases of this industry? And also the earlier comment that you had about dislocation of volumes, correct me if I’m wrong, it would be meaning that then you’re already growing more or less with industry so far in October and the fourth quarter, that’ll be the first one..

Thanks, Pedro for the question. I think that in terms of the phasing of the volumes that I said and every time that we increase prices, it’s a natural load. So, if you increase prices and I mean like last year, in the beginning of October, the previous months, you sell more, sell much more.

And basically, not having these exactly in the fourth quarter, but in the third quarter it is kind of this shift of the volume that always happen.

And then leading to the question in terms of the price increase, we always know and it’s always like that in every quarter that increased price for volumes tends to be below the industry, because I mean there are other companies, they tend to lag the implementation of this price increase in the market.

So, it’s expected, but the good news is that for the full year, we are above the industry, so our share is doing well and we’re very confident in the things and all the platforms that we have been implementing in the market [indiscernible] are strong, the packaging [indiscernible] questions before using important touch point, I mean with people, I mean having the databases of our brands, so we’re confident to end the year in the right path in terms of volume, brand, margin expansion and EBITDA..

And if you can comment, how’s the catch-up already happen towards the end of the quarter, meaning 4Q maybe more aligned with the industry?.

I could not comment about that, but I would say that again, we are confident that in the fourth quarter we’ll be – we end the year in the right path, I would say that..

And one quick one for Ricardo, the tax settlement regularization program there, BRL 1 billion will be paid in 2017, will that by any chance be moved from what you had planned as a dividend or you’re seeing good enough cash flow to keep the dividend plan despite this disbursement?.

Well, thank you for your question, Pedro. Just as a recap, we distribute dividends and interest around capital pretty much in the amount of the cash flow of the year.

As we announced and as I just said in my speech, cash flow year-to-date for the year is more than 100% higher than that of the previous year, so that what’s that [indiscernible] in there is that there is no constraint in terms of the dividend that the company would be able to pay by the tax regularization program..

Thank very much..

Thank you.

The next question comes from Lauren Torres with UBS..

Hi and good afternoon. Totally understand that the industry trends are still negative, but the rate of decline is lessening.

But curious to get your perspective if you’re seeing any changes with respect to packages or channels to show you that directionally the confidence is coming back, the spending levels are improving, just to get a better sense going into 2018 that directionally there are the beginnings, I guess movements of better consumption trends..

Lauren, thanks for the question. We have, I mean our plans are linked to grow in both channels, and more than narrow to a question of consumer-centric and service oriented approach.

Actually, the focus is on the consumer and we see the channel was a way to reach in – so the in-home [Ph] just specifically, so we understand that in-home as a new frontier for us while really making important steps in bringing better shopper experience in off-trade channel, in the off-trade channel, in many types, it was not only the big ones that [Indiscernible] important, but the smaller formats that links to the sales excellence that you are I mean working in a daily basis to step up our service level in all chains.

So, think that the focus in the off-trade will continue to be in the big chains, but it is a really, really strong push as well to serve better every customer in Brazil and knowing that people are buying more, it is more accounts, and there’s more point of sale. So, we are improving our experience in those many, many types of off-trade.

And in the out-of-home, it’s a big fortress for us, we still think that will have opportunity to increase, I mean to reach more point of sales in a better way so we can continue to expand our volume in this channel.

So sometimes despite of the off-trade, the prices are lower, but have to always bear in mind that the logistics cost are lower as well, we have the higher weight of premium brands, a smaller CapEx, in the end, both channels are very, very profitable..

And with that, are you seeing RGB penetration into the market changing, I guess I’m just thinking on a quarter- over-quarter basis, or relevant or less or the same on a quarter-over-quarter basis?.

The RGB and then is not new for you, Lauren you know that, it has been implementing in the off- trade channel and not only the big chains, but the smaller chains as well. And those continue to evolve and so basically year-to-date the 100ml returnable glass bottle volumes are growing double digit.

So ahead of the industry and specifically the third quarter, it has presented an expected deceleration due to the early time of price increase that was done, but it’s growing and people laugh because I mean, it’s great brands, it’s a treasured liquid including, it’s good for the environment, it’s good for their pockets as well with very good margins for us.

So we continue to be bullish in our RGB strategy..

Great, thank you..

Thank you.

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

Thank you very much.

2 questions, when you talk about confidence and sustainable growth now going forward in Brazil, is that volume growth or top line growth, please? And what gives you, if it is volume growth what would – talk about a little bit more in terms of what gives you that confidence?.

Hi Robert, thank you very much for your questions. This is Ricardo. So I mean, it’s a combination of both. If you look at the Brazilian industry, I mean the Brazilian industry hasn’t grown since 2014. That was the last time to Brazilian beer industry has grown.

Then in 2015 it went down by roughly 1.8%, ‘16 on average or continuously [Ph] 5.5% and what we are seeing in the last couple of quarters that’s 5 quarters more or less is an improvement and that’s the explanation also of the expression we are cautiously optimistic because in spite of being seeing a decline is a lower decline quarter and that’s the story of this year as well.

So in the long-term, we’re super bullish and confident and excited with the Brazilian beer industry and what we’re seeing is that in the short-term, we are somehow getting back to the historical growth that we have seen the last 10, 16 years.

That’s essentially a function of one, the demographics, number two, of the per capita, all the things that we can do and the disposable income and et cetera and innovation of the overall industry as a whole.

So for example, the returnable glass bottles that Bernardo just mentioned is an affordable and an innovation in terms of packing that allows more people into the category.

And in terms of profitability, we see some of the headwinds that we have had in the last couple of quarters dissipating so that we’re excited both in terms of volume and also in terms of Brahma [Ph]..

Think of the plans that have been put in place I mean, in the last years in a consistent way. I mean, the platforms that were explained to you, they have an impact in the industry also, if you think about, let’s say the core, I mean, I talk about stronger brands and they’ve stronger, better campaigns, better packaging.

That makes a huge difference in the tables of the bars in Brazil stronger key selling moments. Just remember this year we’ve done 42 Carnivals, twitch Carnivals [Ph] in Brazil last year was 5, previous year was 1 or 2. So we can activate demand as well depends [indiscernible] so core is very, very important.

That’s why the obsession of this Elevate the Core is the most important part from that.

We have separated premium, mid-state are changing consumers are understanding them even better that I mean with the kind of insights that we have from our marketing team and sales team, we are able to really assure that the portfolio of premium brands are even stronger to get all the need states and the arising ones that is getting there.

And in the end all the long-term initiatives are put in place to really boost our service level in every part, in every place in Brazil from the state of Acre to the state of Rio Grande do Sul even going I mean with trucks, with boats but going there and activating the demand in every bar in every store in the country.

Again, in fact the volume and in fact in the industry also. So for both of the angles the one that Ricardo said, the macro one and the internal one – the thing that we are doing, we are confident that Brazil and the industry will be back on track..

And if I can ask a follow- up question, you now have a competitor that is very different than anything you’ve had before, and the good news is they pay their taxes.

The other side of it though is that they are good patient brand builders, they know how to build international premium, they apparently from what I hear from our contacts, they did a terrific job with Rock in Rio and gained a lot of share from that not just on the delay on the price increase, but they did a great job of Rock in Rio, gaining a significant share at least in September in Rio while at the same time you’re – it looks like you’re backing off a little bit on some of the SG&A.

So perhaps you could kind of frame how maybe you’re shifting your strategic plans to deal with a very different type of a competitor and give us some insurance that you’re able to deal with somebody who has a very different strategy than the kind of competitors that you’ve worked with in the past..

I’m going to start the answer and then of course Bernardo will finish. Just starting by saying that the Brazilian market is and has been an extremely competitive market and respect a lot our competition, but we are also very cognizant of the strength of our portfolio. And we have been building this portfolio over time, not overnight.

And one thing just that I would disagree with, you said like the constriction in terms of SG&A, we never save any money in terms of working money. We just try to be more efficient and get more benefit out of the resource available. That’s what is within the culture of the organization.

So again, when you look to the outside and compare ourselves to our competition in the last 16 years or 20 years, I think the Brazilian market has been extremely competitive.

If you look back in the 90s, we used to have a beer brand, which I’m not going to say the name, which had more than 20% market share, just one brand was leading some of the capitals of Brazil, but again, but our portfolio approach has proved to be over time a winning one and getting close to our customers I think is extremely important in this moment in which is there is shift in the competition, now Bernardo..

I think, Robert. I mean, everyone that come here to play in the marketplace, building brands and not using the leverage, I would say, of only price, it’s good for the industry no because elevate beer. So everything that’s good for in terms of the brands of beer is good for the category and it’s good for our business because elevate beer.

I think we’ve been working a lot in the platforms, I mean that are consumer centric big time in service oriented to the box that we serve in a very consistent way. So the package they’re reporting in the market is differentiation of our easy drinking lager that’s Skol and the classic Lager that’s Brahma the evolution of our social media platform.

I mean, used different type of campaigns not only above the line campaigns but using the experiential moments that are creating to defense through to defense through the activation of the box and boosting the digital media. All of those 4, we have been we have been working on this for a long time and we started to reap the benefits.

We know the Brazilian market, but we know other markets as well. I’ve been working 8 years outside Brazil, I mean U.S., Canada, LAS, our Head of Marketing, that’s Paula, she was Head of Insights of ABI, so she knows how the market – our head of sales work in U. S. kind as well.

So I think that I would say that Ambev, I mean lots of people move out from Ambev, great people, but people are coming back. When they come back, they come back with the knowledge of other markets.

So we didn’t wait any – the arrival of any other company here to do what should be done and we start to reaping the benefits of this consistent implementation of the top line performance that I mentioned in every call.

Thank you very much..

Thank you Robert..

The next question comes from Tristan van Strien with Redburn Partners..

A 2 questions, I may have missed it on the first one. I just want to get a feeling of your 60% pricing that you had in Brazil, one level there was mix.

Were you able with your premium brand growth be able to offset the higher margin but I guess top line dilutive RGBs like and how should we think about that going forward? And also maybe related to that, have you been able to increase your own distribution in the quarter as well? And then the second question, it’s around Panama, you are very excited about it.

Obviously, you’ve lost the middle portfolio there that – it has come back to [indiscernible] which was a very big driver of the premium side of that country.

Have you been able to offset that, have you been able to gain that premium volume back and which brands are driving the premium side in Panama?.

Well, first of all, thank you for your question, Tristan. I am going to start with the 16.8%, just to as we do every time that you get a question about pricing.

We are very disciplined, consistent in terms pricing strategy, which is the best of pricing and the inflation [indiscernible] and together with that, when you look on a quarter- by-quarter basis, sometimes you have volatility to the downside or to the upside, this quarter, we have more towards the upside as opposed to the downside, but impact this volatility.

For example, the timing of a price increase, immediately after price increase as we have disclosed in our 10-F for example for last year we had out of the gross profit roughly 48% of that is taxes.

When you do a price increase and have timing in terms of the changing of the basis for taxes for some of the states specifically [indiscernible] have also is a benefit in the top line, I think people have seen that before, so we have a little bit of volatility beyond what is the true price increase.

On top of that specifically on soft drinks, and I’m going to highlight just for soft drinks, we had a mix impact that benefited on one side top line towards the upside and on the other hand also impacted COGS negatively.

So, we specifically mentioned that the mix of cans, specifically in soft drinks was higher, cans cost more, but they also cost more to produce and then you have a little bit of an impact there.

But besides that, I think the price adjustment was in line with our strategy and usually, again the price increase translates into higher increase in net revenue for the shorter term. So, I think that’s short term of that.

In terms of the competitors, specifically that you mentioned, we don’t comment on any specific compared to our strategy, anything specific.

Just I’m going to repeat myself a little bit in terms of the answer that we just gave, the Brazil market is extremely competitive, but we believe we have the right portfolio and all of the tools in order compete in this market specifically..

My second was more about Panama, you took over that business. But you – the biggest premium brands there was driving the growth the last three years was Miller Lite, now you’ve lost that we’re very excited about Panama.

So, my question is more around what premium brands are you driving to replace that lost volume in Panama?.

So, Panama, like we said in the, in my speech, Panama is booming, and I think specifically the brand that is growing the fastest is Atlas Golden Light and that brand is a brand that has been gaining market share, we as a company, in spite of losing the Miller family in terms of some brands, we are gaining a lot of market share in the account in the last 12 months, partially because of the great job that our colleagues from [indiscernible] estimate has been doing but also because of the implementation of the full portfolio of [indiscernible] and some of our portfolio approach techniques that we do whenever we get to a specific one.

So, we are very pleased with the results in Panama so far..

And for the premium brands there, Corona is growing a lot, it’s an amazing brand and it’s very cool, as you know everywhere [indiscernible] as well and Stella Artois is in the same phase. So, not only our core brands doing pretty well, the execution in the market that was there kind of [indiscernible] this is the market everywhere.

It’s amazing how we’re stepping up the execution and the portfolio is strong. So the momentum is really good..

We have time for just one more question. And that question will come from Alex Robarts of Citi. Please go ahead..

Hi, everybody thanks for taking the question appreciated. I was keen really just to go back to the cash COGS trend, it seem to be cropping up in several areas, including Canada. So, the first part of the COGS question is on Canada. We see on an organic basis that they were up, cash COGS per hectoliter about by 5%, the year-to-date trend flat.

So just the first question is, was there a step-up in one part or several parts of your COGS structure there in Canada that perhaps you can comment on in the seasonally strong quarter up there? And the second part of the COGS question is more generally at the Ambev level, group level.

Aluminum has hit five- year high recently 25% I guess year-to-date, year-on-year. What percentage of your aluminum costs today represent this uptick and how are you looking at this important input cost, as you set your commodity hedge into next year? That would be the question with two parts. Thanks a lot..

Thank you very much for your question Alex. And starting specifically with Canada. Again, Canada I think most of the COGS [indiscernible] impact that you have is [indiscernible].

When you look specifically, when you look like the full-year again, taking out the volatility of a week summer season like we had recently, Canada was flattish in terms of top line year-to-date, while EBITDA increased by 1.8% with margin expansion of 7 basis points to 33.3%.

So, this year we had margin expansion in Canada and top line flattish, so we had operational leverage there.

And again, Canadian market is a very sophisticated one, we just had a Board meeting there like a couple weeks ago, visit not only things like – visit even the West Coast of Canada, very well-developed market and what we do being a consumer- centric organization, we provide consumers what they want even if that represented more expensive products and products that provide us with a better margin, that’s somehow reflected in our EBITDA increase year-to-date.

When you look at the comps more in general and now go into the main countries and let’s potentially even talk about Brazil specifically, I think Brazil, very important. You are absolutely right, I mean when you look at the aluminum prices today, they are much higher than the aluminum prices that we had one year ago.

And this will impact us sometime, for now, typically, what tend to say, the time to react for the company is between 10 months to 14 months.

The good news is that on the other side and Brazil being exporter of commodity, typically when commodities goes up, Brazil real goes down, I mean Brazilian real appreciates the number, Brazilian real per dollar goes down, which is great news.

So, what you’re comparing, aluminum being an extremely important commodity in terms of exposure for us, going up Brazilian real going down, and the way we look at this is specifically input cost is – aluminum reals.

So, one somehow can compensate the other and also when we have one specific commodity moving out, I think our hedging policy works really well, because that’s exactly when you can get the benefit of, for example shifting mix so we can incentivize people through like a price differentiation.

So, if you want an aluminum can, you’re going to have to pay a bit more, because aluminum can is more expensive going forward and et cetera. Incentivize the returnable glass bottles likely we discussed. So, there are more things that we can do in comparison to when we have an FX shock, when FX move too fast.

So again, given the export that we have to [indiscernible] of commodities, some are going to go up like the aluminum, some are going to down, like to sugar and most important, when you look at the FX that we have had, the FX movement that we have had recently, I think that’s a tailwind that’s much bigger than the headwind that we have for one – or any specific commodity and aluminum is specifically being a very important one, but the tailwind come from the currency is much bigger than the headwind coming from the aluminum..

Okay. And just a clarification, the 6% increase that you said was sugar in Brazil, is that 6% increase based on what your hedging is or is that you were talking about the market price of sugar up 6%? Thanks a lot..

It’s actually 60%. So the price of the sugar impact in this quarter is more than 60% higher than the price of sugar specifically 1 year ago. Sugar is very important for the soft drinks. So there is a concentrated impact on the third quarter.

Also what I said in my speech is that you expect that to decelerate much faster than the impact that you have seen the effects, they lasted more quarters, if you will. So yes there is an impact this quarter specifically for the soft drinks profitability. With the sugar, which is a 60% impact on our cost..

Okay. Alright thanks a lot..

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

So, thank you now all can go. So before we finish our call, I would like to highlight that we are very pleased that this quarter as expected will return to growth especially in Beer Brazil.

Our beer volumes were impacted by phasing due to the early implementation of our annual price adjustment what will actually be a positive driver for volumes performance in the next quarter. Along with that, a gradual recovery of the beer industry and the steady evolution of our commercial platform should also serve EBITDA growth and margin recovery.

As I always say, we will continue to be extremely consistent about the implementation of our commercial platforms and our obsession of quality in our beers because at the end of the day, the love for beer is in our DNA. So have a great day and enjoy the rest of the day. Thank you..

Thank you.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect..