SÃO PAULO – Ambev S.A. (BVMF:ABEV3; NYSE:ABEV) reported a sharp improvement in second-quarter cash conversion, but the market response was muted, with shares closing nearly flat. The brewer converted 73.9% of its normalized EBITDA into operating cash flow, up from 49.6% in the same period last year, according to calculations based on the company's earnings release.
Operating cash flow surged 54.5% to R$4.71 billion, far outpacing the 8.9% organic growth in EBITDA. Management attributed the increase to stronger EBITDA and better working capital management, a notable achievement in a quarter that included World Cup-related demand spikes.
Despite the cash flow strength, revenue growth was underwhelming. Net revenue rose only 0.3% as reported to R$20.15 billion, though organic growth was 6.1%. Normalized profit climbed 23.3% to R$3.49 billion. Analysts at Itaú BBA called the results "weak," citing softer-than-expected revenue, particularly in Brazil's beer segment.
The cash conversion improvement was driven largely by working capital. Payables outflow narrowed to R$1.42 billion from R$2.93 billion, while receivables released R$689 million, up from R$209 million a year earlier. This helped boost the cash bridge significantly, with first-half conversion rising to 56.5% from 31.3%.
Brazil beer volumes grew 5.0%, helped by World Cup demand, and organic EBITDA advanced 12.8%. However, revenue per hectolitre rose 4.4% (excluding marketplace sales), while cash cost per hectolitre increased 4.5%, indicating a slight margin squeeze. The unit's share of group EBITDA rose to 51.4% from 46.6%.
Ambev outperformed its parent, Anheuser-Busch InBev (EBR:ABI), across key organic metrics. Total volume growth was +1.4% versus +0.9%, net revenue growth +6.1% versus +5.6%, and normalized EBITDA growth +8.9% versus +5.8%. Ambev's EBITDA margin expanded by 80 basis points, compared to 4 bps for AB InBev.
Digital channels provided a bright spot. Zé Delivery orders more than doubled on Brazil match days, users rose 6%, and gross merchandise value increased 16%. Shareholder returns continued, with about R$5.9 billion returned through Thursday, and an additional R$1.9 billion scheduled for October and R$1.1 billion by December.
Looking ahead, risks include potential normalization of World Cup demand, foreign exchange volatility, commodity price pressures, and weather disruptions. The company maintained its cost guidance of 4.5%-7.5% increase. Investors will watch whether the cash conversion strength persists beyond the World Cup boost and whether cost discipline can offset revenue headwinds.