Ambev SA (ABEV) 2009 Q3 法說會逐字稿

Good afternoon and thank you for waiting. We would like to welcome everyone to AmBev's 3Q '09 Results Conference Call.

Today, with us, we have Mr. Joao Castro Neves, CEO for AmBev, and Mr. Nelson Jamel, CFO and Investor Relations Officer.

We would like to inform you that this event is being recorded, and all participants will be in a 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.

Now, I'll turn the conference over to Mr. Nelson Jamel, CFO and Investor Relations Officer.

Mr. Jamel, you may begin your conference.

Thank you, Vijay, and good morning, everyone. (Inaudible) to discuss our third quarter 2009 results. Before I start, I would just like to remind that as usual, the [proximity] change discussed during this call are both organic and normalizing nature. Normalized figures exclude relevant items that are not recurring nature. Our normalized figures, our non-GAAP measures, we disclose our consolidated net income, EPS, EBIT and EBITDA on a full reported basis in our earnings release.

As usual, I will start the call by sharing a brief overview of the quarter, and then you all will be provided with an overview of our results in Brazil, Hila-Ex, Quinsa and Canada. I will close by providing more specifics regarding the third quarter financials.

Turning to the results, during the third quarter, our consolidated EBITDA rated close to BRL2.4 billion, which represents an 11% organic increase when compared to the third quarter of 2008. Year-to-date, our EBITDA has rated close to BRL7.3 billion on an organic increase of 13.7% versus last year, while our margins expanded on 180 basis points to 44.7%.

Our Brazilian EBITDA increased by 12.6%, supported by a 9.5% volume growth before EBITDA margin in Brazil increasing on 110 basis points to 48.8%. Driven by good revenue and cost management, partially offset by sales tax increase, marketing investments to support our innovations, and high accrual for variable compensation in the period. Year-to-date, our Brazil EBITDA has increased 12.8% in organic terms, and our EBITDA margin is 49.3%. Joao will provide you with more details of the key drivers in a few minutes.

In Hila-Ex, we delivered a positive EBITDA of BRL12 million, compared to a loss of BRL10.8 million in the third quarter of 2008 as a result of a gain arising from the sale of a Real Estate property in the Dominican Republic. This good impact of this sale, Hila's EBITDA would remain negative at BRL4.4 million, which is too less than half of our Q3 2008 losses.

Our Quinsa operations have once again delivered strong results with EBITDA growing 25% despite negative volume growth across the region in the period. In Canada, volumes were flattish due to domestic industry decline and market share loss, partially offset by our sales of Labatt [brand] Beer to the United States.

Our EBITDA declined by 7.5% in organic terms, mainly due to sales and market investments, which had been postponed for the second quarter, as well as due to our -- an asset disposal in 2008. Normalized net income totaled BRL1.32 billion in the quarter, which was 5.6% higher than last year. Normalized (inaudible) per share increased by 5.2% in the quarter. Year-to-date September, our normalized net income is up 16.5% year-over-year, while our normalized EPS is up16%. I'll comment further on net income at the end of this call.

I will now hand it over to Joao, as we start to look a little deeper into the results of each of our operations. Joao?

Thank you, Nelson, and good morning and good afternoon to everyone.

Let me start by discussing briefly our consolidated performance. During the third quarter, our normalized consolidated EBITDA totaled BRL2.3 billion, an 11% organic increase, with our margins expanding by 70 basis points, reaching 43.9%.

Industry performance across the market remained unchanged from first half trend, and consolidated volumes delivered solid growth driven by Brazil once again, and were 4.7% higher in the third quarter 2009. We have once again been able to deliver on our goals of growing EBITDA, and operating cash flow generation.

Year-to-date, our EBITDA has totaled $7.3 billion, which represents an organic growth of 13.7% year over year, while delivering a cash flow from operations, totaling BRL5.4 billion, a 30% increase versus 2008. This result has been driven by innovation and productivity, which I have said, since the beginning of the year, would be our areas of focus in the very challenging year for the industry in several markets.

Now, talking specifically about Brazil, the positive macro economic environment continues to support the good performance of the industry, and our focus and innovation has allowed us to deliver outstanding results in market share. Our normalized Brazil EBITDA increased organically by 12.6%, with margins expanding by 110 basis points, despite higher accruals for variable compensation once again negatively impacting our year-over-year quarterly growth.

Excluding our incremental bonus provision, our Brazil cash SG&A would have increased by 16.6% and 12% in the three and nine months period ending September respectively, while our Brazil EBITDA for the same period would have increased 16.7% and 16.5% respectively.

Moving to Beer Brazil, real disposable income growth continues to positively impact the industry volumes. At the same time, the success of our innovations allow us to outgrow the industry, and as a result, deliver 12.3% beer volume growth in the period. As of September, our market share reached 70% for only the fourth time since the creation of AmBev in 1989, and the first time we achieved it since 2003.

During the third quarter, our market share was 69.4%, which is 218 basis points higher than last year. These market share gains has been delivered the right way, as our ability to understand and connect with our consumers together with our focus on innovation have allowed us to improve not only our market share, but more importantly every single brand helps key performance indicator during this process.

The consideration and preference of our brands are all seeing very good levels, which we believe is key to guarantee our profitability in the future. As we have stated in previous calls, our commitment -- our commitment is to optimize profitability, while improving our market share. We are very pleased with the performance of our 2008 and 2009 innovations to-date, but more important, we are working hard to find new ways of connecting with our consumers and continue to enhance our brand's preference.

As we are looking forward to the summer season, we expect our innovations to continue to play a key role in supporting our growth for both 2009 and 2010. During the third quarter, we launched Antarctica Sub Zero, and rolled out our one liter returnable glass bottle nationwide. Both innovations together with our 269 ml slim can, Brahma Fresh and Bohemia Oaken, and to a less extent, our 300 returnable glass bottle, continued to contribute positively to our result as of today.

Our beer net revenues per hectoliter in Brazil slightly declined by 0.1%, when compared to last year. As we have mentioned in our previous conference calls, this is a result of tax increase at rates well above inflation, and to a lesser extent our packaging mix. We have already started to implement our price increase for the summer, but it's too early to say how competitors have or will react in relation to this increase.

Now, talking about our COGS, Brazil Beer continues to deliver a good performance giving benefit to (inaudible) due to currency and commodity hedges, lower current prices, and our private equity initiatives in the period, which were partially offset by general inflation. In that sense, our cost of goods sold per hectoliter declined 1.2% and 6.2% year-to-date.

We continue to expect COGS per hectoliter performance for the second half of beer in Brazil not as positive as in the first half, due to phasing of our FX hedges. Beer SG&A excluding depreciation amortization, grew by 27.3% in the period, as a result of volume growth, general inflation, channel mix, and higher accruals for variable compensation.

Year-to-date, our cash SG&A increased 20.6% versus last year. Normalized beer EBITDA finished the quarter with growth of 12.8% versus last year, with EBITDA margin expanding 70 basis points in the period. Year-to-date margins are 90 basis points higher than last year, with EBITDA growing double digits at 10.7% in the period.

Our soft drinks and (inaudible) business in Brazil also performed well, and delivered a 2.2% volume growth in the period, despite very challenged comparables. Our market share in the quarter was 17.6% for the quarter, 20 basis points lower than last year, but year-to-date our market share is 30 basis points higher than 2008 at 17.9%.

Net revenues per hectoliter grew 2.7% organically in the period, driven by selective price increases in certain regions, partly offset by higher tax on sales. COGS decreased organically once again, -1.9% on a per hectoliter basis as a result of our currency hedges, lower PT prices year-over-year, and further 50 gains. They were partly offset by general inflation, higher sugar hedges in the period.

As stated in our best goal, we continue to see COGS per hectoliter for the second half of the year at rates not as good as the first half due to phasing of our hedges, but without [pressuring] gross margins. SG&A excluding depreciation and amortization increased 12.2% in the period as a result of general inflation in volume growth and higher accruals for variable compensation, partly offset by the timing of certain investments towards the summer. Our EBITDA continues delivering double digit growth, increasing 11.6% and reaching BRL290.5 million in the quarter, with year-to-date organic growth reaching 23.8% and margin expansion of 540 basis points.

Turning to Hila-Ex, despite challenging industry volumes in the region, we continued to show improvements in our gross profit, which increased by 52.9% in the quarter, and is up 23.1% year-to-date. In the quarter, we posted a positive EBITDA of BRL12 million, which is the result of the one-off sale of a real estate property in the Dominican Republic.

Excluding this gain, our EBIT in the region remains negative, but at a much better level than last year. Our team in Hila-Ex continue to make important progress towards our long-term goals in each country across the region.

Moving on now to Quinsa, and our operations in the South of Latin America; we are pleased, very pleased with our outstanding performance in spite of the industry contraction observed throughout the region. We haven't been able to overcome the severe slowdown in the industry and gaining market share, and introducing the specific actions to boost revenues and optimize our cost structure.

Our volumes declined mainly in soft drinks, which were offset by higher margins achieved through trade spend, other revenue management initiatives and cost efficiencies. We achieved an EBITDA growth of 25% and a margin expansion of 170 basis points. Both our quarter and year-to-date figures represent all time records in terms of EBITDA and EBITDA margin.

We expect tough scenarios throughout the region and prepared for them. This quarter, our volumes were down 5.6% with the soft drinks operations suffering most of the industry contraction in Argentina. We have been able to keep higher market shares in the beer business through the support of our mainstream brands, the solid performance of the premium segment, and focused execution in the point of connection.

Net revenues per hectoliter grew organically both in beer and soft drinks, as a result of price increase introducing [line with] inflation and focused initiatives in terms of trade spend and revenue management. We aimed our efforts at capitalizing opportunities in the value chain, while enforcing our premium brand's performance. At the same time, we are supporting and reinforcing our mainstream brands to maintain customers loyalty and avoid migration to value brands in terms of economic downturn.

Our efforts at reducing costs and expense were successful despite the negative impact of higher labor and transportation costs. We are benefiting from lower prices in some commodities, such as PET pre-forms, plastic caps and [corn], effective courtesy hedges, and the continued search for savings through ZBB.

We are also in the process of capitalizing synergies in Bolivia and Paraguay through different acquisitions performed in the first quarter. Even though the recession within the region have hit our volumes in this quarter, our team proactively put in place the necessary actions to maximize our performance and results. The challenge is too difficult, but we remain confident on the strength of our team and brands.

Turning now to Canada, the third quarter proved a tough competitive environment, characterized by a change in the pricing dynamic and continuing industry softness. Overall, Canada posted an EBITDA decline of -7.5% versus last year. This result from a significant increase in brand investment, and the cycling of our property savings in September 2008, which together account for 10.2% EBITDA decline.

The third quarter was tough on market share with Labatt losing 50 basis points versus last year during [my] segment mix. The core segment where Labatt is the strongest, declined by roughly 4%, whereas imported and domestic specialty segments posted a combined 10% gain. It is this exact market trend that has [got] our actions in recent quarters.

This year, we have launched Bud Light Lime, it's an imported segment and (inaudible) premium white into the domestic specialty segments in order to ensure we have the right weapons to win in this evolving market. To date, this has been one of the most successful launches in Labatt history, and have both been outperforming our initial expectations.

During the quarter, we have seen a worsening in the competitive landscape, as competitors have focused more on volume and share than profitability, which has impacted our ability to accelerate value creation in the industry. Despite this, top lines continue to be a bright spot for Labatt with net revenues per hectoliter increasing ahead of inflation for the seventh quarter in a row at 3.7% versus last quarter.

This performance was driven by selective price increases in certain regions and the successful launch of Bud Light Lime. Although the Canadian beer industry posted a volume decline of -0.5%, we were able to offset the domestic volume drop through our export operation and posted a 0.3% gain in total volumes.

COGS per hectoliter growth in the quarter was 7.4% versus last year. The increase is driven by higher aluminum and currency [headers] versus last year, as well as our import mix, as imported volumes have doubled in the quarter versus last year. We have been able to partly offset these costs through significant improvements in both energy usage in [plant] for the 50s as we strive to deliver again our company's best better world commitments.

Cash SG&A increased by 5.8% in the quarter due to the timing of certain sales and marketing investments. We stabilized the supply of Bud Light Lime earlier in the quarter, and launched major brand initiatives to ensure continued growth in consumer awareness and trial, while also executing major events for our flagship brands, Bud, Bud Light, (inaudible) and Stella.

These initiatives are critical to the half of our brands and our ability to charge premium prices. We are pleased that these brands, which represent over 20% of the Canadian market, have steadily grown in brand health throughout 2009. Excluding a significant one time gain of the sale of our brewery in 2008, Labatt's year-to-date EBITDA is 5.4% versus last year, as a result of our course strategy, focusing investments in our key brands, discipline and revenue management, smart (inaudible) programs and obsessive sales execution.

Going back to the overall AmBev business, I wanted to wrap up by saying I'm very pleased with our performance for these first nine months. Our year-to-date normalized EBITDA continues to grow in double digit at 13.7%. In a year, we have taken a significant increase in taxes in Brazil, and most countries have faced volume decline versus last year.

In the beginning of the year, we as a team prepared ourselves for what we anticipated to be a very challenging year, and set two clear priorities to reach our goals of growing EBITDA and profitability, innovation and productivity, while maintaining the high levels of engagement in our teams. The quality of our people, together with the ownership quality and sense of urgency demonstrated by our teams across the countries we operate were key in delivering these results in all regions, even with the challenging industry volume in countries other than Brazil.

In Brazil, we took full advantage of a better than anticipated industry to invest even more than initially planned in our innovation, and even anticipated some of the launches in the marketplace. This has helped us grow market share, and even more importantly grow brand preference with all of our three main brands.

Now, our focus is on working hard to support our innovation initiatives as we prepare for the upcoming summer season. Looking into 2010, innovation for the (inaudible) remains two important areas of focus, together with production capacity increase in order to meet demand after much better than anticipated 2009.

We want to replicate what we did in 2009 in saving non-working dollars to invest behind our brands, connect our consumers and win at the marketplace, all of this while growing our profitability. That is we work to accomplish next year.

Now, I would like to go back to Nelson.

Thank you Joao. In this final session, I would like to guide you through the main lines between the normalized EBIT of BRL2 billion and BRL65 million and net income of BRL1.261 million as disclosed on page three of our release. Our net financial expense reached BRL243 million in this quarter, which is largely better than our Q3 2008 results.

This is explained by losses on derivatives and non derivative instruments, which are offset by a lower net interest expenses, as a result of the retirement of certain debt which matured during the period, and that was not renewed.

Our effective tax rate in the period was 32.7% compared to 23.3% last year. The main reason for this increase in this quarter is the timing of certain tax adjustments recorded in the periods. Our each date effective tax rate of 26% is a much better indicative of our full year results.

Our cash generated from operations in the third quarter was BRL1.1 billion, which is around 3.3% better than last year. Year-to-date, we have generated BRL5.4 billion in cash from operations, a 30% increase versus last year. All of this, while growing our profitability and invest in our brands and innovations as evidenced by our market share and brand health indicators in our key markets. Our net debt position decreased to BRL3.9 billion at the end of September compared to BRL7.4 billion at the end of December, and we decided not to refinance that, given market conditions earlier this year.

During the third quarter, we have been able to have a more clear view on the outlook for the second half of the year in Brazil, and also paid our last significant matured earlier July, all of which have allowed us to pick up our payout rate since debt. We paid dividends and interest on capital, around BRL700 million in July, and another BRL1 billion in October 2, while also having just recently announced a new distribution of dividends, an IOC of a total of BRL1.3 billion to be paid beginning December 18.

That said, our total payout for 2009 will amount to almost BRL3.5 billion, which is about 10% higher than 2008 levels. As we look in 2010, we remain committed to improve our cash flow generation, while we increase the level of our investments and capacity in Brazil by around $300 million, to $500 million, as well as to proactively manage our capital structure.

I will now hand back to the operator and open up for questions. Please, [Vijay].

(Operator Instructions)

Our first question will come from Robert Ford from Bank of America - Merrill Lynch.

Hey, good day everybody, and congratulations on the quarter. I had a question, and it has to do really with the Brazilian business. I saw this in some of the news and the press with respect to the price increases, and I was looking at your comments, and I was curious as to whether or not you think you have the levers to maybe offset the adverse impact from higher taxes, and maybe additionally offset some of the impact on average price per hectoliter with some of the lower priced innovation, so that you can not just get inflation in 2010, but maybe a little bit more than that.

And then when you budget for some of the impact of innovation and this outstanding volume that you're posting in the current quarter, which seems to have quite a bit of momentum. Could you outline your CAPEX investments for 2010, where and how much your plan to add next year?

Hi Bob. Well, if I understand correct, your question on the pricing front, the biggest impact on our net sales per hectoliter, as we just said in the opening speech is more taxes, let's say then in the packaging mix. For 2009, in a way we made a bet on the innovation both on the liquid side, and both on the packaging side, that of course had an impact, as I just said on the packaging mix.

I think I would start saying that we continue to have the same strategy, as moving prices to the consumer inline with the inflation, okay. And every time we can -- I mean if we can pass [it on] some of the tax if we think it's the right thing to do, we may do so. I think the difference that we have going forward, from what we had in the past -- now we have, let's say, well, we have the ability of having a [packed] price strategy, as we do have in soft drinks.

So, by having different packages, we can probably play around more in terms of revenue management. That combined with a different sort of share level that I have now, that I had in the beginning of the year, I think we start 2010 in a better shape to take advantage of those two things when we look at the things, and maybe potentially have the same impact that we had in net sales per hectoliter in 2009.

In 2010, it's very early to build a lot more on top of that, because we have no idea what will be the behavior of the federal taxes for 2010. So, if we have, let's say, less than what we had this year, this is automatically a benefit from us. If we have an average of inflation, this will also be beneficial for us, because that's one third of [what] to us this year. And if it's zero like to us, let's say during the four, five years, then it would be an important benefit, okay.

And last but not least, I think also we have competitors now for next year. The pressure in 2009 was slightly different. I had a much more important tax increase than my competitors had, and going on for next year, everybody will be pressured by the tax increase. And I think on top of that, the new SICOPI or the new beverage control system introduced by the government, has now clearly had an impact on the players that maybe are not as serious or do evade some taxes from what we have seen.

So, I think also this pressure will also have a benefit from us. So, the combination of this SICOPI, the potential more tax increase, we having a packed price mix, and the share levels that we adopted, that we got to given everything that's worked in our favor in Brazil, put us in a much better position for the beginning of 2010, than we were in 2009. Regarding capital -- yeah.

Just one other thing on the pricing. Is there any indication right now that the States are preparing to use SICOPI for the enforcement of ICMS, because it seems to collect the detail of data that's necessary to ensure better enforcement of the bigger [lobby], which is ICMS, no?

Sure. We don't have any indication in that sense. What we have, Bob -- and I can tell you that we are spending a lot of time on that giving the importance tax [has] and we are meeting on a personal basis with governors and everything to show them, and I am sure that the IRS is also doing that, but we are showing them the positive impact that the SICOPI is having on a national level.

We are at least doing our part to make sure that they know, and that we are ready to work together with them as AmBev, as the industry also has most of the important players, the one that are serious, we'd be more than willing to work together with them, because it helps beer as well as it helps the soft drinks. What we have already heard from some states, is that they will be more serious than ever, and are also adopting a system to try to make it very difficult.

There is a lot of tax evasion possibilities when products go from one stage to the next. They have been investing technology that will be able to automate this evasion, when people are crossing on trucks are crossing from one state to the next. So, there is the willingness to invest, and we are going to push to make sure that people have that awareness and also we can -- we'll do as much as we can, but we don't really have any strong indication to say this state will go on January 1, 2010 with us.

Okay, regarding CAPEX, I think Nelson just mentioned the BRL300 to BRL500 million. The way we see 2010, Bob, I mean we started 2009 with a, let's say, a very cautious outlook. I think we said we changed that to a more moderate or cautious optimistic outlook and we remain in debt, but let's say in the upper side of the range.

We see this good momentum of the industry, of the share, that combination of also our consumers having more income or disposable income, given that they have income and the food inflation is not as important, and as well as the market indicators in Brazil. And together with also the World Cup, we see a potential good 2010, and we are working very hard to be able also to supply this 12% growth that we saw in the third quarter.

So, we will not be doing our job if we don't prepare for at least a moderate growth in 2010. So, I think the levels of CAPEX that Nelson just mentioned, BRL300 to BRL500 million, they will make us ready to the sort of growth that we can potentially count on for 2010.

And I was just trying to get a sense of how much volume you were planning to add, where you're planning to add it, and how you were planning to add it in terms of the de-bottlenecking, is it just a...

We cannot give you any specific guidance for 2010. What we can say is that the growth we are foreseeing, it's pretty even across the board. It's not just one region that is growing, okay. So, we have returnables and non-returnables growing. We have the south and the north growing, so the investments will be throughout the regions, and throughout the different package that we are playing.

So, that's as much as I can give you, Bob, in terms of details, but what I can tell you is very consistent across the boards in terms of regions and packaging.

Great, fair enough, thank you very much and congratulations.

Thank you, thanks a lot.

Our next question comes from Lore Serra from Morgan Stanley. Please go ahead.

Yes, good afternoon. I wondered if you could talk a little bit about the one liter launch. And we saw your revenue per hectoliter decline 2% in the quarter. Can you help us understand how important a -- sequentially, how important a factor the one liter launch is. It would be helpful to understand some parameters around the size of that relative to your mix, and also kind of what's the per ounce pricing versus the 600 ml please? Thanks.

Yes, hi Lore, this is Joao. Basically what we said last quarter, continued to be true in the third quarter, which I believe we said somewhere between 60% to 80% or 75% to 85% of the decline is a combination. First in the beginning of the year was more of the federal taxes, and now we also had the usual delay that you see impacting more in the second and the third quarter from the state taxes, so that let's say that at least those two third of the impact that you are seeing is related to that.

But you do have the one third of the mix, which is not just the liter, okay, but of course the liter plays a key role. What I think we can say going forward is, and it relates to in a way to the answer, to the question and answer that Bob asked and I answered, is that now we have a much better "portfolio" to play with as I move on, okay.

Of course, there is still annualization of the things that we are doing, but I think the challenge, but at the same time the opportunity we have going on for 2010. You have seen how the different SKUs that we have in soft drinks, both us and Coke, allow us to play different prices per pack. So, I think 2010 will be the first time we will have a chance of working in different manners with the different packages.

Okay, when you say that you enter 2010 with a much stronger competitive position, which is obviously the case with the market share gains, should we read into that statement that it would be acceptable to think about having some of that market share decline during the course of 2010 from the current level?

Lore, I mean you've seen in the very many last years -- I mean I think every year, since the AmBev creation, and every year since you saw it, you have been phoning us. We always -- I mean we have been consistent at least in the past eight or nine years to move price during the summer.

And two things happened, once you have that delay in which competitors follow you. I mean we have had times where the competitors took three, four, five months delay. Sometimes of course they were helped by the cost of good sold, sometimes because they were not as much pressured by the tax collectors, and also because there is a shift from channel mix towards the supermarkets, where we have a slightly lower market share.

That combinations are still there. I don't think competitors will follow us necessarily as quickly as last year. I think last year was probably one of the years where they followed us in a very short period of time, because they were really pressured by the higher dollar, but now we know, they also are pressured by tax collectors.

So, probably guessing that, it will be between last year and between the average of the last few years, which means that we will lose some share. I mean it's expectable that we'll lose some share. I think the difference from the past, we have a little bit more room to maneuver given the higher market share that we have, and given that we have different packaging mix, but also have different brand extensions in different areas of Brazil. So, you should expect the market share loss, but at least we are better prepared in terms of liquid and packaging, as well as at the higher base.

Terrific, thanks very much Joao.

Thank you Lore.

Our next question comes from Alex Robarts from Santander, please go ahead.

Hi everybody, thanks. I just wanted to start off with one quick detail, could you just give us the Canadian domestic beer volume number, the degree that it was down. And I guess just kind of the first question is on Brazil Beer. You mentioned this idea of channel shift to the supermarkets. We've been seeing obviously this in beer markets around the world, and it's obviously this channel growing faster than the on-premise.

I know you, Joao, have discussed this in front of Abras and some of these other big associations, and it seems like the beer category is losing some shelf space in supermarkets in Brazil, I guess, which are almost about 30% of the sales, but I mean what kind of -- I mean how strong is this shelf space or the category loss within this point of sale that you've seen this year, and to the extent that you can check it, the initiatives that perhaps you're putting in place and thinking about.

And it would be great to see if that -- in the end, it's that something that you can finance in other parts of the business, or do we see the stepped up cash, the SG&A kind of continue at these levels. And on that cash SG&A item, just wanted to clarify, you said X, the variable compensation, that it was the Brazil Beer cash, SG&A was up 16% in the third quarter and 12% year-to-date?

Okay, Alex, thank you. I will tackle the supermarket portion, and then I'll ask Nelson to help me with the SG&A details, and he will give you the Canada industry number. We talked a little bit about this last quarter, Alex. Let me give you a few facts to try to put a little bit more color on that issue. I think first that there are different trends actually going on in the supermarkets.

When we look at supermarkets, we actually -- at least we will split those in three buckets. The very small supermarkets want you for checkout, five to 19 checkouts and 20 plus, just to give you a better sense on one way to look at this. The one to four checkouts, it's usually where we have a slightly higher margin when we look at the channel. It's actually growing at a faster pace than the 20 plus.

With the very big, big wholesaler "supermarkets" are actually declining in Brazil. One of the reasons that people are going to supermarkets three to four times a week to do their shopping, okay, they are looking for convenience in terms of a trend, because they are not asked -- of course, money is still very important, but they can go to the supermarkets nearby instead of maybe going 20 miles, and there is also the car situation, to go for that extra dime. So, that's one trend that's going on.

It's true that when you look at total off premise to total on premise, you probably move -- although it's not the fast pace. We are talking about 0.5 percentage points maybe in the last two, three years, so maybe if we towards that 10% five years ago, it would be at 13% now, to give an idea.

One good thing is that we are the number one supplier to those guys in beer, and we have a very good relationship. There is always the threat that the category could be losing space. You're right, there could be a threat. Our job, as the leader, and we've been doing that, is making that shop experience a much better one either to gain space ourselves or to stop potential threats from other beverages or other consumer goods that could be trying to tackle that.

I think one example that we've used in the past, the ones who have visited Argentina. There was a big task, a big challenge we had was to grow the beer category against the wine category, that in Argentina was very strong. And we did that by making the beer shopping experience a much better one. We have been copying this a lot and implementing this in Brazil. We already have done many stores, and we'll probably do much more also for next year.

So, AmBev and the industry I think is moving, playing its role to actually not just maintain, but actually trying to increase a category that actually is very important to them. It is a profitable and generates traffic to those guys, and if it was not the case, we will not be gaining that 0.5 percentage points against the on-trade, that slow shift I would say compared to other place.

So, I think it's manageable, what we think, what we -- not the thing we have to do, but actually we are doing is not just protecting the space, but actually trying to grow that space, work in the relationship, work in the occasion. Those are very important points of sale before holidays, so we've been activating those channels during holidays a lot, and we have had a lot of holidays and still have a few in front of us.

It will be very important during the World Cup. So, I think also we've been learning a lot, and also by traveling, by being on the country, I think we're taking full benefit and becoming a much better operator in that channel. Now, I'll pass onto Nelson to give you more detail on the SG&A.

Okay, so, hi Alex, just starting first with the date on Canada. Our domestic volume in Canada, we had a decline of 0.5%, but the total volume, including exports, we had a small growth, a 0.3% growth in the total volume then including the export. So, -0.5% domestic, and +0.3% in total.

Regarding SG&A in Brazil, what we said is when you look at our -- for instance, our year to date growth of our cash SG&A is 19.5% in Brazil, but when this excludes the impact of the accrual for variable compensation, because we didn't have it in Brazil last year, so that's why this is a tough comp. The growth, by excluding this, goes down from 19.5% to 12%.

So, for the nine months, actually we had so far the 12% growth excluding verbal compensation impact. For you to have an idea, if you think of that older equation or algorithm that we used to mention for our SG&A evolution, which is pretty much inflation plus roughly 30% of the volume growth, and then one to two percentage points depending on the evolution of the direct distribution and the channel mix. Again, if you apply the algorithm, you should find something between 10% and 11% as a theoretical growth.

One could expect, just by following the algorithm given inflation in the period, the growth we had, and then again the (inaudible) distribution and the channel mix impact. Now, we are slightly above that. We are at 12% versus the 10% to 11% that I mentioned, and these let's say extra points or so, has to do with the investments we are doing to support the innovation rollout, and all the new initiatives that we have this year, which are paying off with the extra volume, extra share, extra profit we take out of it.

So again, the 12% growth excluding the bonus impact is something that is slightly above the algorithm that we have as a reference. And as we stated many times, I think this year is clearly -- we are not being bound by any type of equation or algorithm in the sense that we view and we are pursuing, and giving -- I mean [follow through] all the great ideas that we have, that can increase our overall profitability. So, that while we see, and there is this -- and then it' implementing investments that of course is paying off given the top line evolution.

Very helpful, thank you. Just to clarify on the volume on Canada, I'm sorry. The domestic industry fell 0.5%, and you're saying that your domestic volumes fell 0.5% too?

Sorry, can you repeat the question?

Sorry. In Canada, you have stated that the overall Canadian beer industry fell 0.5% in the quarter year-on-year, and if I understood you, did you also say that your Labatt domestic volumes also fell 0.5%?

No, our loss was 0.7%, as we lost a little bit of share in the periods as we mentioned, so the industry was 0.5%, we were 0.7%. Our total is 0.3% for our positive, for our volumes.

Got it, okay, very helpful, thank you.

Welcome, thank you.

Our next question comes from Celso Sanchez from Citigroup, please go ahead.

Hi, good morning, or actually good afternoon. I just have a tactical question with respect to the one liter, following up a little bit on some of the discussions from before both on this call, and I think on the InBev call. Did I understand correctly that the goal as always is to raise the portfolio of revenue per hectoliter roughly inline with inflation?

But it sounded like the one liter having been rolled out so successfully, and given the strength of the [ways] gains and so forth, that there might be room to narrow the gap between the one liter on a per ounce basis, and the overall portfolio is such that the increase we might see in the one liter would be above inflation, and that might be the bulk of the increase that we see. Is that the right way to think about that?

Hi Celso. I think the question is slightly tactical, but also strategically -- in a sense there is a long term view on this. I think the long term view, and when we look at the SG&A and we only look at the net sales per hectoliter, I think we had the franchise a little bit under pressure. I mean we are losing share for two years in a row, and we thought we had a chance to play on the attack.

I mean it was a crisis year, a difficult year, we wanted to make out of this crisis year an opportunity, and we wanted to move -- if we saw opportunities to move really fast, we would do so. So, an example, we started by launching Antartica Sub Zero in Sao Paulo. We saw a good result, we took it to [Munich], we are now taking to Santa Catarina. So, we are moving fast instead of waiting, six months, 12 months, a budgeting cycle to do things.

We are doing things faster, ready to be on the attack when we find a good idea, the same thing for the liter. I mean the introduction of liter was probably planned to be done in two years, three years. And we saw a good opportunity to go ahead and be nationwide, I mean almost nationwide, as we have done the changes in the plans as quickly as we could to be again nationwide, because we saw there was an opportunity, there was a demand from consumers stronger than what we had anticipated, potentially because this is a crisis year and value propositions maybe more important in a difficult year than maybe they will be in the next year.

I think that's one point. So, that's the strategic portion of having things to allow you to be at a different strategic position that we think we are, doing at a faster pace, which I think we've traditionally tried to do, and then tactically, which I've tried to say today, and I think you probably heard something similar to that in the InBev call.

I think what people are referring to is the same thing that I am saying when they have a pack price option. So, let's say I have the liter at the x percent discount, let's say it's a 30% discount, because the package by itself is a discount or could be. And if it's not at a certain discount, there is no value proposition, you're just selling more for the same price. This is more for less.

The more for less could be 25%, could be 30%, could be 35%. We have had the advantage so far this year, until let's say mid third quarter to be a loan, okay. During the third quarter, our competitors have started to sell the liter, so there is the liter introduction by the competitors, which shows that the industry is able to have their own bottle. So, there's already 200 bottles out there different from ours.

What we see that now I have the ability to have an umbrella. I can move away, let's say, from a 30% discount on the liter against our own brands to a 25%, to a 20%, to a 15%. We will do that first learning with the consumers to still have a value proposition, and at the same time looking what the competitors are doing. This will be a dynamic tactic if you want.

So, today I'm pretty much alone, although there is some introduction, we're still somewhat alone, because they are just starting. There is a learning curve. We have had the liter for more than a year now, and there was a learning curve for us also finding the right price point. Now, I will have the ability, so I am in a good position to find this new level. So, there is no exact new level, but what we have to remember is there is no value proposition.

There is the same thing as buying a 600, okay, so we think there is different occasions, like barbecue, like parties in the weekends, there are different occasions in which the one liter, it is a good proposition, and it's actually approaching our consumers to our brands and helping the preference of our brands together with a much better marketing mix and the enhancement of our marketing investments to put them in a better shape, not just in the share, which is great, but also in higher preference.

That's very helpful. Just to clarify, the competitors that have launched the one liter, do they also have a gap on the order roughly of 30% with their own comparable 600 ml or was the gap narrower in their case, providing [crosstalk].

Yeah, no, right now it's a -- right now, again, I think it's very early, Celso, I mean it's been out there for a couple of weeks, but they have not come -- I mean I didn't say we were at 30%, I was giving an example of the 30%, but it's a reference. But when we started, we started at the lower, then we increased as we sell at the point in time here. They are probably starting where we started when we started the launch. So, I think they are still finding their price points, okay.

That's great.

But they are not at that discount level that I just mentioned, also because (inaudible) a little bit tougher, because they are already at the discount, at the important discount. If they come with a very hard discount, I mean you'll see whether the pressure of the tax and this and that. So, I think that's something to watch and to learn in the next few months and quarters.

Okay, very helpful. And just like a follow up on Canada, Bud Light Lime, I think you referenced earlier that there were some supply constraints at some point. Do you have a sense for maybe since then how much -- it's unlike those constraints have been addressed since then, but if they haven't or even if they have, how much does that cost in the initial launch, meaning was there a lot more demand than you were able to meet or was it just a marginal issue?

I think it was an important issue in the launch for sure. It was an important issue for probably a couple of months. Now it's okay, we don't have. So, I think the initial impact that you mentioned here at the point in time was the supply issue, as well as the higher marketing (inaudible). When you launch any product, as we do here, as they do there, but things have now stabilized, and stabilized at very good levels in terms of rate of sales.

So, would you say the opportunity for Bud Light Lime in Canada is now more of a coverage issue or is it more of a sell through as in [crosstalk].

No, no, no, I think it's early stages Celso, and it's like if we compare it to Brazil, the leader and Antartica Sub Zero, I think the first 12 months of a brand are the time period for you to give an idea -- to really have an idea where it will stabilize. It's true that the concept is closer to more of a summer season than the winter season, so we'll probably see a little bit of a shift during the winter season, and then we will start the warmer season next year, and we will see how it will continue to perform. And then to its cycle, the full 12 months, I think it will be too early to say that it has reached a plateau.

Right, thank you very much.

Okay, thanks a lot.

Our next question comes from Alan Alanis from JPMorgan. Please go ahead.

Thank you, congratulations on the quarter, hi everyone. My question has to do with the net debt to EBITDA. If I'm reading correctly, I think that this is the lowest level of net debt to EBITDA that AmBev has had since it was created 10 years ago. How should we think about that indicator going into 2010 and what would be the criteria for using the excess cash that you're generating?

Okay, hi Alan, this is Nelson here. Indeed the net debt to EBITDA rate that we have right now, it is one of the lowest we ever had, I think similar to what we had in Q2, and that's when we compare it to the historical ratio, it was more towards 0.8%, or between 0.8% and 1%. Since the beginning of this year, we have been facing this -- we would like to say internally this is kind of a good problem in the sense that the amount of cash regenerating is -- even was specific when compared to what we had as an estimate for the beginning of the year.

Indeed, we're generating much more cash by now, for instance we have 30% higher operational cash flow than what we had last year. So, this extra cash, I mean that's why we have picked up after the debt retirement that we had so far, especially in the first semester. That's why we picked up the payout level or the payout rate, and with everything we announced and (inaudible) to pay until the end of this year, we should be somewhere around BRL3.5 billion for 2009.

And we, as many have been, and we will continue to constantly monitor our capital structure, bringing our recommendation to the board, which originally accepted with regards to the best way to manage this capital structure moving on.

The outlook for 2010 I think is still -- well, first of all it still depends on the performance model or financial environment for next year. And at this point, we think it's too early to give any guidance on 2010 payout levels, right, because we are even concluding our budgeting process, and then again it's too early to give any specific guidance on that, but you can always assume.

I'll repeat that just -- I mean you probably already know that, but you can also assume that you continue to maximize and pay the maximum IOC possible as a primary way of payout given its physical benefit. And that extra dividends are likely to be required to meet the minimum dividend payout defining our bylaws, which is 35% of our net profit in the period.

So, again, probably when you run your model, you have a net profit forecast on next year exactly -- we suddenly have to compliment the IOC with extraordinary dividends to match the minimum dividend required. Any additional use of cash, again, depends on the number we might have for next year. Again, it will be decided by the board in due course, I mean like you saw in 2009, I mean we have been assessing the different alternatives, like we have always done, and the same way this year, we were able to allocate the cash according to the need the way you saw.

For next year, we have some additional capacity needs. So, we should be investing BRL300 million to BRL500 million more than what we invested this year in Brazil. So, the number for Brazil this year should be around BRL1 billion. Next year should be between BRL1.3 billion and BRL1.5 billion. And the other -- I mean theoretically speaking, right, the other alternatives are always the retirement of inefficient debt, which was the case this year, and many projects in the end could always take part of it, and of course additional payouts. So, in other words, there is no change in our policy, but at this stage I'm not giving any guidance on the 2010 payout levels, since we believe it's too early.

Okay, okay, that's useful. If I may ask a question regarding the operations and regarding Canada, I mean if I heard correctly, you saw almost double digit volume growth on the Bud Light family in Canada during the quarter. Could you remind us, could you tell us what percentage of your sales right now in Canada are coming from the Bud Light family, and what would be the vision or the plan in terms of taking that family of brands as a percentage of your total sales in your Canadian operations?

Sure. What we mentioned is that the total import volumes, so it's not only Bud Light Lime, it's also with Stella, but Bud Light Lime is the one that's really boosting and leading the volume evolution there. To-date, it's the double of what we had one year ago. So, out of our total volume, 12% is imported, and then of course 88% is the remaining domestic market (inaudible) to be 6% of our volumes in Canada.

Last quarter, last year for instance 6% was the [waste] of the imported volume, now it's 12%. As Joao mentioned, I think the brand is pretty much new in the market. So, we have -- it's over delivering on our expectations since the beginning, and we have -- I mean I'll say a couple of months ahead -- at least two quarters ahead of us, so that we can have a better view on the full potential of the brand, and again it's not stuff that we steer to the limited -- it's managed by consumers, right? I mean that's the evolution you see in a different -- of the different segments in Canada. We see the import segment, and the specialty beer segment growing, outpacing the core segment, and that's why this [technical difficulty] quarter for us.

Okay, that's very useful. Thank you very much and congratulations again on the quarter. Thank you.

Thank you Alan.

Bye, bye.

Bye, bye.

Our next question comes from Jose Yordan from Deutsche Bank Securities. Please go ahead.

Okay, good morning. My question is on the hedge. I mean I guess we're entering a period here where your FX hedges are going to be at a significantly higher Real, but on the other hand, grain and other commodities prices at this time last year had also collapsed. And I guess what I was looking for is, if you can give us a sense of which one of those two opposing FX actually wins here? I mean what's going to be the direction of COGS per hectoliter, just directionally over the next couple of quarters for the -- not for the entire operation, but any sense on that would be helpful.

Okay, hi Jose, it's Nelson here. Well, we are not giving, of course, specific guidance or specific numbers, but in terms of the trends and the direction that you were talking about, I think we have to split, let's say, 2/4 and 2010, right? For 2/4, we should have different than what we had so far, which was pretty much I mean negative COGS spread -- it was the COGS spread going down in 2009 versus 2008 for many quarters.

In Q4, it's going to be less favorable, so we are going to start facing some tough comps in terms of hedge. You can imagine, I mean you know our policy of rolling -- of hedging on the rolling (inaudible) [month's] base. So, the Q4 2009 number was pretty much fixed in Q4 2008, where we saw in the market an important appreciation of the dollar in Brazil.

So, that's why we are going to probably face the toughest, let's say, COG spread to liter. It's still going to be great for -- we're still going to have margin expansion, so (inaudible) going to put pressure on our margins this year, but for sure COGS, practically it's going to be less of a policy [induced] in comparison with the previous quarter.

As we're looking to 2010, we have pretty much locked our current exposure at this stage, at an average rate of BRL1.99, which if you compare to the BRL1.88 that we had, had it been in 2009, is going to imply an increase slightly below 5%. So, you can even say that it's going to be around inflation, or inflation in Brazil, that's a type of (inaudible) you're going to have in this dollar denominated [port].

In commodities that you said, we are going to face some positive impact or some positive comps in the sense that we didn't fully capture the downturns of the commodity this year, again because of the policy we had. So, all commodity should give a benefit for next year, but sugar, sugar is the one that's going to be a tough comp for this year.

But net impact of, let's say, a higher or negative impact of the dollar, net of the upside -- net upside we're going to have in commodities, there will be an increase in our COGS for next year, which if you think of our long term goal of having COGS to hectoliter growing at (inaudible) low inflation. We are in good shape to get there in the sense that we view, not only looking at these commodities or current (inaudible) but also continue to pursue a higher productivity, a higher efficiency, but of course COGS spread, it is not going to be as positive in 2010 like it was in 2009.

Okay, thanks a lot.

Alright, you're welcome.

Our next question comes from Lauren Torres from HSBC. Please go ahead.

Yes, hi everyone. I just wanted to go back and talk a bit more about your performance with respect to beer volume growth in the quarter. Is there any way of kind of breaking down that 12% growth with respect to initiatives that you've been taking with respect to new products and pricing and packages versus just the health of the consumer environment?

And maybe I'm just reading into something here, but in your press release you noted that the industry has yet to show signs of deceleration versus last year. I don't think this is showing any change in your outlook with respect to the consumer environment, but has anything changed or has any of this momentum slowed in your mind, or are we still kind of status quo with what we've seen over the last couple of quarters?

Hi Lauren, this is Joao, it's an important point. I would say that it -- I mean as you said, it's a combination, okay. If you look at the [NewsEN] numbers, there's always a difference between what [NewsEN] reads as an estimation, it doesn't cover the whole country and the actual industry performance, okay? I don't have the [NewsEN] exactly right in front of me, it's around 4% and 5% year-to-date -- I'm not 4.5% or 4.6%, but between 4% and 5%, okay.

Some people earlier this morning -- I don't know where it came from, but people saying a 9%. I think when you do the -- when you take the -- if you take the share gain in the 4% and 5%, the math doesn't work, okay. So, the math would probably work with the 9%, so I believe the market, the industry is growing between 4.5% and 9%.

We don't have an exact number, because [NewsEN] gives us a 4.5%. We have the share that doesn't really totally works, so it's somewhere in there. So, it's still very strong, whether it's a 5% or 6% or a 7%, and then we have a big impact, or even if it's a 8%, okay. You have a big impact from this share. Within the share, there's really many things working there.

We said at the point in time, it was in the press, the Antartica Sub Zero, for example, had achieved a 1.1 share, okay. Okay, you can say, is there cannibalization, that is a different -- again, difficult [map] to say how much the cannibalization, with for example Antartica, but I would say that the 269 ml can helped us. Antartica Sub Zero helped us, Brahma Fresh helped us, the liter helped us, and still some of the things that we had last year, as the 18 pack, the 24 pack, as well as the 300 returnable glass bottle.

That combination really gave to us the difference, okay, so it's really the two liquids, the two new liquids, Brahma Fresh and Antartica Sub Zero, of course to a much lesser extent, Bohemia Oaken, because of a very super premium, and then all the new packages, especially the 269 ml, and the one liter bottle. And also the industry, not just us, but we and the industry also have more 473 cans also in the marketplace, okay. So, that's not an introduction, but the amount of availability that's in the marketplace has also increased.

That whole combination and our participation in those presentations explain the bulk, but not all of our market share, because we also did a lot of work in productivity, sales productivity, which refers a lot to distribution, that has also helped us on this year.

So, it's fair to say that maybe at least half of that growth that you achieved in that quarter was more just industry related rather than initiative, once again, the environment is still being quite healthy?

Yeah.

Okay, and I think too this morning, you threw out to the press that gross next year, looking at domestic volumes up 5% to 10%, is that something you said?

No, no, no, it's what we said. It was about the BRL300 million to BRL500 million more, okay, and then there was a question whether this BRL300 million to BRL500 million more, which we will confirm in the next few months as we are finishing the budgeting process, and we'll finish our analysis of macro economic indicators.

What we said is if you do increase the BRL300 million to BRL500 million, how much more volume could you be selling more than this year? So, if we invest between BRL300 million and BRL500 million more, we could be selling between 5% and 10% more, not that we expect 5% to 10%. There's a slightly difference, but it makes a difference.

Yes, it's a difference, okay. And if I could ask just lastly, we talked about Brazil and Canada to some extent. If you could just talk about your other markets, we are seeing still volume declines there. Any hint of those markets stabilizing a bit, or trends are just still as poor as we've seen in the last couple of quarters?

Well, I think it's still a very difficult market. I mean most of them are still very difficult. In a way, what we are seeing is that we all saw in most places, financial markets crashing and coming back much sooner, and then real life coming down slow, and with a slow recovery.

So, the view today, again not a guidance, but the view today is that it will pick up starting some time next year, but I think the difference potentially from other times is that it's a slow recovery. So, right now we probably we'll (inaudible) some sort of a slow recovery some time next year. Very difficult to say whether the slow recovery will start in the first quarter, second quarter. I think we are still in the mid of a downturn in the most markets in Latin America at least, with the exception of Brazil with the slow recovery coming back at some point next year, not this year.

Okay, and no new update with respect to breakeven at Hila-Ex?

Yeah, just to finish on this, what I think what was important, at least for example, for Latin America in south, the fact that the team there, Bernard and the team really prepared for the situation. Although we have the decline, it means results are still very good and very consistent, so we prepare for that. And I think in Hila-Ex, the thing about breakeven is a direction, okay. The fact that we had almost breakeven this quarter at -4%, especially when you compare it to, minus a lot next year, I think it's a good improvement.

But I think more importantly than that, I think -- but when we look at this definition, I would like to do that, and we'll get there at the point in time, but I think most important is the role of each country we operate. I think there are countries there that we still can play the M&A game. So, if I want to play the M&A game, it's about really pressuring my competitor. So, to pressure my competitor and have a zero cash flow, it's a difficult game. So, I'd rather have some flexibility in the market where I think I have a M&A possibility, and then maybe not as much in other markets, okay.

So, I think what we have done is we did the right thing, and we were focusing different strategies for different countries, and also we -- once again as we've done every year with sizing, right-sizing ZBB, I think we were able to find the right scale for most of the countries. In some countries, you save those dollars and you take directly to the bottom line. And in some countries, you take those savings and you put back in the marketplace to work towards share gains.

Okay, great, that's helpful, thank you.

Our next question comes from Lore Serra from Morgan Stanley, please go ahead.

Yes, thanks for taking the follow up. I just want to ask a little bit more about the environment in Canada. From the comments that your main competitor has made, it sounds like the industry pressure is coming from some of the smaller players, and that there is a chance that the bigger players are going to get sort of pulled into that. Can you comment on whether that's an accurate way to think about what's happening, and whether that implies a more difficult environment into the fourth quarter of the year, please?

Yes, Lore, thanks for the follow up question. It's a point that I actually think is important to go over. I think it's partially correct what you said Lore, I think the portion that is partially correct is of course I mean the -- together Labatt and Molson probably represent 85% of the market, okay, so of course there is pressure from this other 15%, that's the part that is correct. But I don't think necessarily the pressure is really coming from that, okay.

I think we have been trying to put some price increase in the last few months in the marketplace, and we're really not seeing the market. Not just the small players, we're not seeing the market following it up, so we put it to stay some time and we come back, I mean. You've seen us do that also in Brazil, we put a price and then if it doesn't work, we come back some times this and that, in Canada sometimes, but that's what's going on in Canada, we're putting the price in the marketplace, competitors are not really following, going more for the volume and shares as we said in the speech.

We are going for share and profitability, as well as if we see the market is moving, it will be different. So, I think the market, the price pressure is really coming from the market and not just the small brewers.

Molson also talked about a lot of volume weakness into the fourth quarter, I guess based on whether -- is that something that you think the industry is seeing, and is just a temporary phenomenon?

No Lore, we will not give you any specifics on the October and November and December volumes, so not a lot really can tell about the fourth quarter.

Okay, thank you.

Okay, thank you very much.

Ladies and gentlemen, this concludes the question and answer session for today. I'll now turn the floor back over to Mr. Nelson Jamel for any final remarks.

Okay, thank you Vijay.

Before we wrap up this conference, I would like to make an announcement. Michael Findlay, our current Investor Relations Manager was promoted to a new position within our finance team, and effective today, [Eduard Salis], who is also here before us, will replace Michael as Investor Relations Manager. [Eduard] is a [partner] here at AmBev, and has a financial and banking background, and has been with us for four years as a member of [forward] Treasury Department.

I would like to take this opportunity to thank and congratulate Michael for the great job done so far, and welcome Eduardo to the team. So, thank you everyone and good afternoon.

Thank you. The conference is now concluding. Thank you for attending today's presentation, you may now disconnect.