Ambev S.A.’s Q1 2025 Earnings: Strong EBITDA Growth Amid Regional Challenges

Ambev S.A., Latin America’s beer and beverage giant, delivered a robust first-quarter performance in 2025, with 12.7% organic growth in Normalized EBITDA and an 180 basis-point expansion in margins to 33.1%. These results, highlighted during its May 8 earnings call, underscore the company’s ability to navigate macroeconomic headwinds while capitalizing on strategic initiatives. However, regional disparities and looming cost pressures suggest investors should remain cautious about sustaining this momentum.

Key Financial Highlights

Ambev’s Q1 2025 results were driven by disciplined cost management and top-line resilience:
- Normalized EBITDA: Rose to R$7.4 billion, a 12.7% organic increase from Q1 2024, with margins improving to 33.1% (up 180 bps).
- Net Revenue per Hectoliter (NR/hl): Jumped 6% organically, reflecting pricing power and premiumization.
- Volume Growth: Stabilized at 0.7%, with Brazil’s beer volumes hitting record levels, while non-alcoholic beverages surged 40% in key segments.

The company’s operating cash flow surged 67.6% to R$1.204 billion, bolstered by lower tax payments in Brazil. However, net income remained flat year-over-year, as gains were offset by higher financial expenses and taxes.

Regional Performance: Strengths and Weaknesses

Ambev’s success in Brazil and Latin America South contrasted with softer performances in other regions:
- Brazil Beer: Volumes grew 0.7%, with premium brands like Corona and Stella Artois expanding low-to-mid-twenties. Non-alcoholic beer volumes soared 40%, signaling shifting consumer preferences.
- Brazil NAB: Volumes rose 3.2%, driven by no-sugar carbonated drinks (e.g., Guaraná Antarctica Zero). However, margins contracted 70 bps due to PET plastic cost pressures.
- Latin America South (LAS): Net revenue jumped 19.5% organically, aided by price increases and strong demand.
- Challenges: Central America/Caribbean volumes fell 4.9%, while Canada’s market declined 4.2%, reflecting regional economic slowdowns.

Strategic Initiatives Paying Dividends

Ambev’s focus on its “three pillars” strategy—leading categories, digitizing operations, and cost optimization—showed tangible results:
1. Digital Ecosystem: The BEES Marketplace (a platform for small retailers) achieved 60% growth in GMV, while Zé Delivery’s average order value rose 10%, enhancing revenue streams and operational efficiency.
2. Premiumization: High-margin brands and no-alcohol products continue to dominate, with premium beer sales up 11.2% globally and non-alcoholic beer revenue surging 34%.
3. Cost Discipline: Cash COGS/hl and SG&A expenses grew below inflation (+2.7% and +3.4%, respectively), thanks to lower commodity prices and process improvements.

Risks on the Horizon

Despite these positives, management flagged foreign exchange (FX) and commodity cost pressures as major risks for 2025:
- FX Volatility: Emerging market currencies, particularly the Argentine peso and Brazilian real, weakened against the USD, pressuring reported figures.
- Commodity Costs: PET prices and agricultural inputs (e.g., barley) remain elevated, squeezing margins in non-alcoholic beverage segments.
- Regulatory Headwinds: Brazil’s tax environment and Argentina’s hyperinflation accounting rules complicate organic growth calculations.

Investment Considerations

Ambev’s R$2 billion intermediary dividend and strong cash flow suggest management’s confidence in liquidity, but investors should monitor:
- to assess valuation alignment.
- Regional recovery trends, particularly in Central America and Canada, which could offset Latin American growth.

Conclusion: A Resilient Engine with Speed Bumps Ahead

Ambev’s Q1 2025 results reflect a company executing its strategy effectively, with EBITDA growth and margin expansions marking the 10th consecutive quarter of profitability improvements. Its digital initiatives and premiumization bets are clear growth levers, while Brazil’s dominance in beer and NAB markets provides a solid base.

However, investors must weigh these positives against external risks: FX volatility could erode near-term earnings, and commodity costs may limit margin expansion. The 12.7% organic EBITDA growth and 67.6% cash flow surge are compelling, but sustaining this pace will require navigating a complex macro landscape.

For now, Ambev remains a defensive play in a challenging market, with a dividend yield of 5.8% (as of Q1 2025) offering some downside protection. Yet, its valuation—currently trading at 14.2x forward EBITDA—suggests investors have already priced in much of this optimism. A wait-and-see approach until Q2’s results, which will better reflect cost pressures, might be prudent.

In short, Ambev’s Q1 performance is a strong start, but its journey toward “building a stronger company” will hinge on its agility in an uncertain global economy.