Brazil: Companhia de Bebidas das Américas (AmBev), the leading brewer in Latin America, announces on March 2 its results for the fourth quarter 2004 (4Q04). Companhia de Bebidas das Americas, which is owned by Belgium brewer InBev said FY2004 consolidated EBITDA reached R$4,537.3 milion (+47.7%), representing 22.2% organic growth and 25.5% growth through new investments. 4Q04 consolidated EBITDA achieved R$1,772.8 million; on a per share basis, 4Q04 EBITDA increased 15.4% to R$32.5.

Consolidated net revenues reached R$4,503.6 million in the quarter, 60.3% higher than 4Q03 Brazilian operations contributed R$2,744.1 million, approximately 61% of total consolidated revenues, increasing by 15.1%. HILA’s net revenues increased by 43.2%, reaching R$608.5 million and contributing 13% to consolidated net revenues. The North America business unit contributed R$1,151.0 million, or 26% of consolidated net revenues.

The beer market share in Brazil achieved 68.1% in December, highlighting the merits of all AmBev people for the fantastic recovery carried out through 2004. EBITDA margin for the Brazilian Beer operation improved by 240 basis points, fulfilling the company’s commitment towards preserving profitability while recovering market share. In addition to beer results, CSD & Nanc operation improved margins beyond the record levels achieved in 3Q04, reaching 32.4%. Consequently, AmBev’s Brazil business unit delivered robust 25.3% EBITDA growth in 4Q04.

Net Revenues for Beer Brazil reached R$2,261.9 million, an increase of 16.7%. This improvement was the result of a 14.3% volume increase and a 2.1% change in revenues per hectoliter, which increased to R$122.8. Continued market share recovery contributed to the increase in sales volumes: AmBev’s market share reached 68.1% as of December 2004, compared to 63.2% in December 2003 (according to ACNielsen). This consistent recovery, achieved in a short period and at no expense to the company’s profitability, confirms the merits of AmBev’s core values and the quality and dedication of our employees and distributors. On top of the share increase, Brazil’s beer market volumes recovered by 9.8% in Q404, also according to ACNielsen data. Net revenues per hectoliter increased to R$122.8 (up 2.1% versus Q403 and 2.1% compared to 3Q04). On a sequential basis, the increase was achieved through the successful implementation of a 5% average price repositioning at the end of December 2004 and an increased proportion of the sales mix attributed to higher margin direct distribution (4Q04: 44.3% X 3Q04: 40.7% X 4Q03: 38.1%). AmBev highlights that the magnitude of the previous mentioned price adjustment is absolutely in line with current inflation rates, confirming the company’s commitment to keep prices to consumers stable at real terms. It is also important to mention that AmBev’s market share in January 2005 decreased by only 30 basis points, to 67.8%. The company does not expect any significant decrease in the coming months.

“Nevertheless, accomplishments were not limited to Brazil. HILA and North America also contributed substantially to AmBev results. In the case of HILA, Quinsa continues to exceed budget targets and to come through with significant EBITDA growth; moreover, Northern Latin American operations rovided important outcomes last quarter, namely the well executed launch of Brahma in Ecuador, which reached high teen levels of market share in a short period of time, Embodom results in the Dominican Republic ahead of AmBev business plan, and the positive EBITDA generated by CACN in Venezuela after sequential quarters of losses.

Finally, this was the first full quarter of Labatt results consolidated into AmBev. The integration process between the two companies is moving as expected, and the first results achieved are in line with AmBev’s previous guidance. We are enthusiastic about the opportunities and challenges brought by the Canadian beer market, and confident that Labatt will deliver the revenue targets and cost reduction initiatives disclosed in the Canadian business plan related to the Interbrew – AmBev deal. 2004 results reinforce our conviction on the merits of AmBev’s culture and strategy. Once again our company demonstrated the strength of its operations, laying solid ground to pursue further growth in 2005.”

Sales of malt and by-products generated revenues of R$27.3 million, down 40.5%. The resulting EBIT and EBITDA were R$19.41 million (no depreciation is allocated to this operation), representing a decrease of 9.6%.

EBITDA for AmBev’s Hispanic Latin America business unit amounted to R$182.3 million, up 33.7% from the fourth quarter one year ago. Organic growth accounted for the 10.4% portion of the increase, while the 23.3% portion of the growth was due to new investments, including AmBev’s stake in Embodom in the Dominican Republic.

Overall, HILA contributed 10.3% to AmBev’s consolidated EBITDA in 4Q04. AmBev’s 54.8% stake in Quinsa contributed R$150.3 (US$55.1 million); representing an increase of 16.2% from the same quarter one year ago. HILA-ex operations contributed R$32.0 million (US$11.9 million) to 4Q04 consolidated EBITDA; this substantial increase represents organic growth of 125.6% from the same quarter last year, plus the investment in the Dominican Republic.

Quinsa Beer net sales totaled US$195.0 million for the quarter. Volumes during the same period were up 3.6% due to strong volume performance in Bolivia and Paraguay, offsetting softer volume performance in Argentina. Net sales per hectoliter were US$39.4, up 9.9%, partially explained by the successful implementation of price increases in Argentina and Paraguay. Gross profit for Quinsa Beer operations amounted to US$125.0 million for the quarter, allowing for a gross margin expansion of 80 basis points to 64.1%. EBIT totaled US$78.7 million, driving the EBIT margin up 240 basis points to 40.3%, due in part to lower depreciation expenses in the quarter. EBITDA totaled US$93.2 million and EBITDA margin remained at 47.8%. EBITDA contribution to AmBev’s results totaled US$51.1 million.

HILA-ex Beer net sales increased 39.2%, totaling R$216.2 million (US$46.2 million). Beer volumes were up 47.2%, largely due to the successful launch of Brahma in Nicaragua and Ecuador. Substantial growth in Venezuela contributed an outstanding volume performance resulting in market gains thus achieving nearly 14% of total market share. Net sales per hectoliter were down 0.3% in dollar terms to US$56.4.

For the fourth quarter, net sales in AmBev’s North American operations decreased by 4.6% to CAD$504.9 million (R$1,151.0 million). Consolidated volumes were down by 4.5% and domestic volumes were down by 3.4%. Labatt’s December 2004 market share decreased to 41.9% compared to 43.1% in the same period in the prior year, but increased by 90 basis points from the September 2004 level of 41.0%. Labatt Blue and Budweiser, the company’s core mainstream brands, represented stable market share during the quarter. Another reason for the lower volumes in 4Q04 was the fact that, during 3Q03, the Montreal strike caused points-of-sale to have a product shortage. Stocks were replenished during 4Q03, therefore, volumes were abnormally high during that quarter.

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