July 30, 2020 / 6:12 PM / 5 days ago

UPDATE 2-Brazil's Ambev sees volumes rise, with slower margin recovery

(Adds executives and analysts’ comments, shares)

By Gabriela Mello

SAO PAULO, July 30 (Reuters) - Brazilian brewer Ambev SA’s sales have rebounded from an April low, executives said on Thursday, forecasting further gains after the coronavirus crisis halved its quarterly income.

The pandemic began to hurt operations in March as government quarantines limited distribution of alcoholic beverages, including its Budweiser, Corona and Stella Artois brands.

“We quickly adapted to changes brought by COVID-19 in terms of consumption and volumes are sequentially improving since April,” Chief Executive Jean Jereissati told analysts on an earnings call.

The Latin American unit of Anheuser Busch InBev reported second-quarter net income of 1.27 billion reais ($245.65 million), down 51.4% from the year-ago period. Adjusted earnings before taxes, interest, depreciation and amortization (EBITDA) margin slid to 28.8% from 38.6%.

Jereissati said Ambev expected a “V-shaped” recovery in volumes and revenues, with a slower recovery in margins as market conditions are likely to remain tough in the second half.

“One of our biggest challenges going forward will be how to improve profitability and this won’t happen overnight as the future remains uncertain and consumption is still volatile,” Chief Financial Officer Lucas Lira said.

The company is stepping up efforts to cut discretionary expenses while focusing more on customers, Lira added.

With the closure of bars and restaurants, Ambev shifted resources to other sales channels such as mom-and-pop stores and e-commerce, including its Ze Delivery app.

“In a short period of time, Ambev has reinvented itself using digital sales initiatives, keeping stakeholders close and facilities at full operation,” analysts at Credit Suisse wrote in a report, upgrading its shares to ‘outperform.’

Shares in Ambev fell 3% at mid-afternoon to 14.68 reais after rising as much as 5% at the opening.

The Brazilian subsidiary AmBev, of which AB InBev owns 61.9%, operates in 16 countries in the Americas, including Argentina and Canada.

$1 = 5.1700 reais Reporting by Gabriela Mello; editing by Jason Neely

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