Ambev SA (ABEV) 2014 Q3 法說會逐字稿

Good morning, and thank you for waiting. We would like to welcome everyone to Ambev's third quarter 2014 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 listen only mode during the Company's presentation. After Ambev's remarks are completed, there will be a question and answer section. At that time, further instruction 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.

I would also like to remind everyone that, as usual, the percentage changes that will be discussed during today's call are both organic and normalized in nature, and unless otherwise stated, percentage changes refer to comparisons with Q3 2013 results. Normalized figures refer to the performance measures before special items, which are either income or expenses, that do not occur regularly as part of Ambev's normal activities.

As normalized figures are non-GAAP measures, the Company discloses the consolidated profit, EPS, EBIT and EBITDA on a fully-reported basis in the earnings release.

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

Okay. Thank you, Gary. Good afternoon and welcome to our 2014 third quarter earning call. I'll begin by sharing a few performance highlights. Joao will then give us some color of what went on in Brazil during the quarter and what to expect going forward. And I'll come back to give an overview of our international divisions and financial performance before moving to Q&A. So let's get started.

In the third quarter, net revenues were up 6% and EBITDA grew 2.5%, reaching BRL4.1 billion with normalized EBITDA margin contracting 160 basis points, to 47.5%, mainly due to (inaudible) driven by a one-time gain related to the positive outcome of certain legal proceedings recorded in the third quarter of 2013, as well as a result of a gross margin contraction of 70 basis points (sic - see press release "50 basis points") to 65.7% and a double digit cash SG&A growth. Year to date, our net sales are up 10.6% while our EBITDA increased 7.2%.

Looking at our divisional performance, Brazil net revenues grew 1.4% and EBITDA decreased 5% with an EBITDA margin of 50.4% in the period. In the first nine months, our top line grew 10.7% and our EBITDA 5.3%.

Latin America South had a strong performance this quarter with a 22% decrease in net revenues with EBITDA rising 28% and EBITDA margin expanded to 120 basis points to 44.2%. Year to date, net revenue was up 17.4% and EBITDA 19.4%.

Canada's net sales declined by 0.3% and EBITDA was up 2.2%. EBITDA margin expanded 100 basis points. From January to September, our net sales are down 0.5% while our EBITDA declined 2.1%. And HILA-Ex delivered 10.6% of net revenue growth or BRL181.9 million of EBITDA and EBITDA margin of 37.1%. Year to date our net revenues are up 13% (inaudible) and our EBITDA 20.9%.

Joao, over to you.

Thanks, Nelson, and good afternoon, everyone. After delivering double digit top line in EBITDA growth in Brazil the first half of the year, we have just reported a softer result in the third quarter, primarily driven by a negative performance in Brazil Beer.

So I'd like to start talking about first the strategy we designed for Brazil 2014. Second, how we actually read this quarter's performance. And third, what we expect going forward.

So first, how did we plan for 2014? We started this year with a strategy in Brazil to build momentum through number one, growing our top line in 2014 in a solid way, looking this time for a better balance between price and volume as since 2012 when the industry faced a significant tax increase, beer inflation has been running at double digits. That along with an increasing overall inflation had been putting some pressure on volumes.

In this context, affordability became an important priority for us in 2014. Through different initiatives, such as the summer without price increase and expansion of our pack price strategy.

Two, through the acceleration of the investments behind our brands, leveraging as well as much as we could on the 2014 FIFA World Cup platform to support not just this year, but also future growth. We came with a robust sales and marketing plan, mainly focused on enhancing the equity of our mainstream and premium brands, always to keep leading the growth in both segments, executing specific plans at target geographies where we see bigger volume and market share opportunities.

Expanding consumer occasion through packaging and liquid innovation, improving the consumer experience through investments in points of sale and our franchises. This is the plan and it was not designed by chance. To put in perspective, we have grown our top line in the last three years mainly thanks to the pricing lever, protecting our profitability in a scenario of not only rising federal taxes, but also a tax [devaluation] and other headwinds, while at the same time investing behind our key commercial platforms.

In 2014, we decided it was the perfect time to take advantage of the positive industry momentum, including the FIFA World Cup event, to take the most out of it to fuel our top line growth, pursuing an optimal balance between volume and net sales per hectoliter and aiming at prices to consumer back to general inflation levels.

So we get to the second point of my initial list. How do you read this quarter's performance and how does it fit with our strategy? After growing our top line by 15.3% in the first half of the year, we were at expected deceleration in the third quarter. Beer and soft drinks industry volume were indeed negative, primarily impacted by a further deceleration of real income growth that was almost flat this quarter, the continuous increase of general inflation and a lower consumer confidence.

As a result, despite top line still growing double digits year to date, our net revenues grew only 2.3%. In EBITDA Beer Brazil was down 5%, mainly driven by a decline in Brazil beer EBITDA, partially offset by a strong performance of soft drinks and nonalcoholic, noncarbonated.

We're definitely not satisfied with these quarter results, but we never plan for one specific quarter. We are indeed sticking to our plan and despite the poor financial performance results for Beer Brazil during this quarter, we're very confident it's working.

So why do I say that? Number one, we had another quarter of strong market share growth. We have been out growing the industry during the full year, gaining 150 basis points of market share since the first quarter and reach an average of 69% in the third. More important, we did that by maintaining the relative prices to our competitors.

Number two, beer inflation continued to trend down towards general inflation. The summer without price increase and the World Cup without price increase campaigns have been successfully driving a deceleration of beer inflation from the double digit levels since the end of 2012 to a single digit level in Q3. Our unique back price platform remains a key strategy in the scenario. 300 milliliter returnable glass bottle has grown steadily but really remains underpenetrated in Brazil with significant room to expand.

Particular emphasis will continue to be given to our pack price strategy in order to improve our top line performance by delivering to consumers more affordable products. Beer inflation acceleration was also enabled by the government decision to postpone the expected tax increase for this year. Along with that, and even more important, the sector continues to dialogue with the tax authorities with the intent of showing once again that tax revenue can grow the same way but based on a lower tax burden on the industry, enabling a greater volume growth and further investment with no pressure on inflation.

Number three, we have significantly improved the connection with our consumers this year. While continuously growing our market share, consumer preference remained above this level, reflecting the strong equity of our brands and healthy growth prospects.

Brahma is definitely a big highlight as the official sponsor of the 2014 FIFA World Cup. Its preference is up 130 basis points year to date, maintained a strong performance after the event.

We have also significantly enhanced the consumer experience in the out of home occasion, investing new coolers in points of sale and by further expanding our franchises. Like the (inaudible) that is present, not only in Sao Paulo, but also in Rio de Janeiro, (inaudible) and (inaudible) to name a few.

While also improving the experience with the in home occasion, we have just launched in connection with Whirlpool the first below zero beer cooler designed for house consumption. Now our consumers are able to have a perfect experience with the brands they buy now through imported as (inaudible), our website, with just one click. (Inaudible) revenues grew more than 150% this year.

Number four, we continue to lead the fast growing premium segment in Brazil. Our premium brands have grown more than 20% year to date, mainly driven by double digit growth of Budweiser, Stella Artois in addition now year to date. Budweiser is now the leading brand in the international premium segment while Original continues to lead the domestic market.

Further enhance our high-end portfolio, we will launch Guarana this quarter in the fourth quarter on selected on premise accounts.

Number five, in the last years we have allotted breakthrough innovations that continue to outperform the market. Brahma 0.0 more than doubled the non-alcoholic beer segment in Brazil in the 18 months since its launch and has now more than 65% of market share within this segment.

Following the successful rollout of Skol Beats Extreme, we have just launched Skol Beats Senses, an innovator ready-to-drink liquid with 8% alcohol content that can be mixed with ice. Different than anything we have ever launched. Our pipeline of innovation remains strong and will definitely play an even more important role in our top line growth strategy.

And finally number six, our CSD and loan portfolio continues to outperform the industry after reaching an all-time high of 19.3 market share in the second quarter, we lost only 10 basis points, sequentially outperforming the industry by 80 basis points year over year. This performance was primarily driven by Pepsi and [Guarana] (inaudible) through our returnable glass bottle strategy. But all of our brands actually gained share.

We have also launched the Fusion 1 liter pack PET bottle, further enhancing our presence and share in the fast growing energy drink segment. With that in mind, we get to our third topic, what we expect going forward.

As I already mentioned, we are anything but satisfied with this quarter results. We do not see the third quarter results as an indicator of our future like performance, much the other way. So when we refer into our guidance, we are not making any change. We expect to deliver on both our top line and cost guidance for the year in Brazil by reaccelerating net revenue growth and improving our SG&A performance in the fourth quarter 2014.

As important as the next quarter, we firmly believe we are now even better positioned to face the challenges that lie ahead of us, not only the fourth quarter, but also in 2015 onwards.

With that, I would like to quickly run through the performance highlights of our Brazil business.

During the quarter, beer volumes grew 0.2% as our market share gains more than offset the industry decline and we saw the first sequential increase, 3% in our net revenue per hectoliter, as we led the intensified promotional environment of the (inaudible) FIFA World Cup behind.

Net revenue per hectoliter grew 1.2% growth versus last year, impacted by the earlier timing of our revenue management initiatives in the third quarter 2013, resulting in a top line growth of 1.4% in this period.

In terms of cost and expenses, cost per hectoliter grew 10.8% as our industrial depreciation was up 22.7%, reflecting the increase in investments in Brazil in recent years. Our cash cost grew 8.5%, driven by negative currency hedge impact and a remaining but smaller negative impact from packaging mix related to the 2014 FIFA World Cup, which was partially offset by the benefit from our commodities hedge impact.

In terms of expenses, cash SG&A in the quarter was 15.9%, higher than third quarter as a result of one, double digit sales and marketing growth driven by strong investments behind our mainstream and premium brands, acceleration of innovations and remaining 2014 FIFA World Cup related expenses.

Second, increased weight of direct distribution and third, a tough comparable base as our SG&A was down low single digits in third quarter 2013.

Order operating income was down 3.2% as the higher government incentives were fully offset by the tough comparable base due to a one-time gain in third quarter 2013 related to a legal claim. As a result, our EBITDA in Beer Brazil was down 10.1% with an EBITDA margin of 48.2%.

Turning to Brazil soft drinks, overall we had a strong performance in the third quarter with 20.3% EBITDA growth and EBITDA margin expanding 690 basis points to 60.8%. We continue to outperform the industry, increasing our market share gain by 80 basis points year over year and averaging 19.2% in the quarter. Our nonalcoholic noncarbonated segment continued to grow, partially offsetting the CSD industry decline, leading us to a negative 2.1% of volume growth.

Net revenue per hectoliter grew a solid 9.1%, driven by our revenue management strategy. We ended the quarter with 6.8% top line growth.

As for costs and expenses, costs per hectoliter grew 0.3%, driven by unfavorable currency hedges offsetting by lower commodity costs, mainly sugar and PET and better mix.

SG&A was up 1.7% as higher logistic expenses, driven by increased weight of our own distribution, were almost totally offset by lower sales and marketing expense.

Before turning it back to Nelson, I would like to wrap up with somewhat of a final message. As you know, I am moving to a new challenge now with ABI, starting January 1st next year. It's really been six amazing years at this position, working together with an amazing team. Each year, a different year, a different challenge, a different lesson learned.

In order to deliver better results year after year, besides living our dream people culture platform, we had to be quick to adapt to the changing environment and I believe this ability has made a difference and also became another of our biggest strengths. And it would not have been possible without our great people. Thank you, guys, for this amazing journey.

During this period, a lot has been done, but there's still a lot to be done. As part of our culture, we are always looking for people that are better than ourselves. So I'm fully confident Bernardo will deliver even more than that. Bernardo is listening to us from the US. Bernardo, welcome and all the best, partner.

With that said, we still have the most important quarter of the year ahead of us. I'm fully committed, as everyone at AmBev, to deliver another strong finish and great result at year end. And who knows, maybe Nelson and Bernardo invite me for a final message as a special guest on the first quarter earnings result.

Guys, we have a strong plan, big opportunity to capture. Let's go for it. Thank you. Nelson, over to you.

Thank you, Joao. And I'll now you through the main (inaudible) for international operations. Starting with HILA-Ex, our EBITDA grew 28% to BRL182 million with 500 basis points of margin expansion to 37.1%. In Dominican Republic, we continued to expand EBITDA margins while growing our top line through volume growth and revenue management initiatives. Through the quarter, we also got ready for the Festival Presidente, one of the biggest music festivals in the Caribbean, held during the first weekend of October and further consolidating Presidente as a leading brand in the region.

In Guatemala, our performance further improved in the quarter, mainly due to market share gains, helped by Guarana and other Mexican brands.

Latin America South, EBITDA grew a strong 28.5% with 220 basis points of EBITDA margin expansion. This performance is most explained by top line growing 22% as a result of a 2.3% volume growth and 19.3% net revenue per hectoliter growth.

Volumes were positive in most of the countries we operate, including Argentina, where volumes grew, mainly driven by favorable weather and our pack price initiatives. Our (inaudible) which (inaudible) to grow ahead of the market with an important contribution of (inaudible) Light.

As far as costs and expenses, cost per hectoliter realized grew 10.1%, mostly impacted by high labor related costs, whereas cash SG&A increased by 15.7%, mainly the result of higher distribution expense in Argentina giving inflationary pressures.

Overall, we are pleased with our performance in Latin America South for the quarter. But remain caution about Argentina macroeconomic scenario and we see volumes remain volatile, but we continue to execute according to our strategy. We're seeing a solid top line growth while protecting our profitability through our cost management initiatives.

Turning now to Canada. We had our strongest quarter for the year in Q3, driven by continued market share momentum and net revenue per hectoliter growth as a result of our revenue management strategy. Reported volumes in the third quarter grew 5%, benefiting from the Modelo brands. Organically, volumes declined 1.1% in light of the industry, impacted by the poor weather and by an acceleration of (inaudible) inflation, which pressured consumer disposable income.

Our (inaudible) in liquid, packaging and trade solutions continued to support our top line, delivering approximately 1 full share point of growth versus prior year. Continuing our success for the first half, in the third quarter we launched our new 25 ounce Biggie cans and released a new seasonal for the Shock Top Family.

Our net revenue per hectoliter grew 0.9% as our revenue (inaudible) initiative started to positively impact our results while SG&A savings were achieved in the third quarter as we leveraged our cost discipline to partially offset a tougher than expected beer industry. As a result, our normalized EBITDA grew 2.2%. As a clear market share leader in Canada, we continue to focus on supporting the overall health of the category, bring innovations to consumers and new trade solutions to our customers. And manage our net revenue to offset rising input costs without putting undue pressure on industry volume.

Now I would like to cover the main items below EBITDA. Our normalized profits increased by 23.2% to BRL2.9 billion in the quarter. Net financial results were a net of BRL220 million, an improvement versus last year, mainly driven by better performance from all derivative instruments. The effective tax rate reached 11.7%, thanks mainly to a higher interest on capital benefit during the quarter.

And last but not least, in terms of financial discipline, we continue to deliver strong performance. We have generated during the quarter BRL4.1 billion of cash from operations, which brought the year to date figure to BRL9.8 billion, an 8% increase versus the same period last year. As a result of both a strong operational performance, as well as better working capital management.

Finally, given these solid financial metrics and (inaudible) that maximizes the return to our shareholders, on October 15th we announced a dividend distribution totaling BRL3.4 billion that will be paid as from November 13th. Year to date we have already announced close to BRL12 billion in cash payout, a 67% increase over the same period of last year and already our biggest cash payout in any given year.

Gary, can you please remind your folks the procedure for Q&A?

(Operator Instructions) Fernando Ferreira; Merrill Lynch.

First question on your Brazil guidance for revenues and SG&A, I mean the question here is how concerned are you with the ability to put pricing amid this weak consumer environment and also the need to reduce SG&A during Q4? That's the first question.

I think as we said, we are very confident about this change from, let's say more price lever than a volume lever, so we really want to get to this balance. So I think the main priority this year was to find our way back to affordability. Right? I mean we used the price lever for more intensively than the volume was for three years after two years of volume. And once you find the balance, and that's what you see on the year to date, and that's what we are working on for the year. And that's exactly to face what you said, this was let's say weaker consumer environment.

If we continue to be able to bring beer inflation down to more general inflation levels, I actually think we'll be in a very good place because I mean even after three years of intense price increase, given the tax, volumes for the greater majority remained stable or growing. I think if we bring that price down, as we're doing this year, and hope to continue to do so, this sort of revenue management initiatives that may happen will allow us to reach our guidance as we said, in a more balanced manner. And actually I think prepare us for the 2015.

So I think we're doing everything to land, let's say, the plane on the right place. We're doing so. And actually by landing where we wanted and we are doing what we planned to do, I think we start off 2015 in a very good place.

Regarding the SG&A, Jamel.

Yes, regarding SG&A, the same way of course we have a plan. We have intensified some of the marketing and sales invested of course around the World Cup, but we are fully confident we will be able to deliver on our guidance, especially because SG&A is something totally under our control, right? So I would say that we are ready to deliver on this and we clearly -- we stated that guidance, so both on top line, as well as on costs for 2014.

And then on your dividend payout, I mean we heard on the ABI call, right, the targets for the capital structure for the Group and for AmBev. But on the dividend subject, does it make sense for us to start assuming that the dividend payout may be above 100% going forward?

Yes, the way we look in to our payouts, I mean the other (inaudible) way, the rationale to address the cash flow generation we have I mean has always been first to reinvest in the business, right? We think we have plenty of organic growth opportunity in our business at very attractive returns. Of course, we always look into some new organic growth opportunities for our business. I think the best that's happened in recent years is CND deal in the Dominican Republic.

But then of course with the strong generation we have, we have been increasing our payouts and we don't have a specific target follow our percentage of profits like maybe you have implied in your question. But once we have this strong cash flow, naturally we always try to maximize better to shareholders and the payouts have been constantly growing. Don't see a reason for that to change.

Antonio Gonzalez, Credit Suisse.

I have two quick questions. First, going back to the consumer weakness that you made reference the prepared remarks and in the previous question, I wanted to see if you can give us a little bit more color of how do you feel with respect to the rollout of the new brands that you are launching in Brazil, Guarana and Skol Beats Senses. I wanted to see your big picture results. Obviously this is probably for the very long term, but how concerned are you that you're rolling out a kind of high-end brand in the middle of a weak consumer environment?

And I wanted to see if you can give us a little bit of a sense of what is happening across channels. Specifically in the on premise channel are you seeing where I would presume the launch of these brands would be particularly intense? Are you seeing more of a weakness than in the rest of the channels?

And then just finally, Joao, congratulations obviously on your new role. I just wanted to see if you can share with us any comments on the big mandates you think will be for Bernardo upon his arrival? If you have to look in hindsight, what do you think were the cornerstones that were achieved in the last six years? And what are still the important areas of opportunity?

I think starting more from the overall background. Of course consumers are (inaudible) somewhat more selective, right? Whether high-end, whether mainstream, whether value. But we're still looking for the brands that they prefer, right? I mean we have the brands. I think the good thing is that the best we made in the past few years enable us now to play in an intense way and really whether that is in the high value, in the premium segment, right, in the mainstream, or with pack price and other brands we have, even in the value.

So I mean I think we have a much wider and stronger portfolio today than we had five or six years ago to either enjoy, let's say a tailwind, or face a headwind. I think the way to look at that in the short term is the continued share gain every quarter this year. The fact that preference continues to go up and much above the market share.

But to face the consumer environment, whether it is this quarter, this year or next year, if we cannot do it at the right price, then we will be missing part of the equation. Right? So we have to do it with the pack price for the ones that are looking more at the right price. We have to be able to give the more premium brands when they want, and Budweiser it's a huge brand compared to where we launched just two and a half years ago. And a lot more to do.

So I think sometimes we cannot forget. I think the launch of Guarana and the launch of Skol Beats Sense and Skol Beats Extreme, and actually other things that we have in store for next year, we're building up the future. So we built options around Budweiser, we built options around Stella, we built options around Original that now we're seeing growing 20% or more, for example. And now we're going to build options with Guarana, we built options with Senses and Extreme.

And I think another great example of our ability to become better marketers and better at reading consumer desire is the launch of Brahma 0.0. So Brahma 0.0 is premium price product that actually doubled the size of the segment in a little bit more than a year. And actually went from nothing to 65% market share in a very quick period.

So it was not just about the single execution (inaudible), so I think we'll continue to give a lot of emphasis on our ability to really have a great execution at the point of sale. But really becoming better at what we are calling now our growth driven platforms that's reading better consumers and get to them what they want. And I think that certainly helps us and that's why we believe that even in a more challenging environment, again as I said, headwinds or tailwinds, we have the right commercial platforms from a sales perspective, from a marketing perspective, which are now calling let's say the more commercial oriented will pave the way for this top line growth.

We, I think have been working very diligently on the different strategies for the channel. Right. So I think we have also raised the bar a lot in off trade execution in the past 12 to 18 months. And I think the World Cup was a great opportunity to sort of show off that and we feel comfortable that we can take that to the order. We did that a lot on the key accounts.

We have upped the game also in the one to four kick out. And we're just bringing out cartons to the marketplace, so next time you come to Brazil, I mean if you go to Rio or Sao Paulo, you're going to see something very different, which other things, once again on that, stepping up that game, learning from what consumers want, learn from what we're doing well in other markets so we can do that better.

For the (inaudible), I think the franchise has been a great way for us initially to pilot, going from zero to 500, 600 (inaudible) in Sao Paolo. And now we're starting to rollout across the country, which makes the on trading environment a better place to be. The old trade, the bar, continues to be the living room of the Brazilian family, so we need to continue to have that place a great place to go, a great place to be. We hope we can increase that to the thousands. I think we learned a lot in the last two, three years how to do that. Have to enhance -- (inaudible) enhance and (inaudible) up the rollout of this.

So I feel very good in terms of where we're standing brand wise, commercial wise, as well as from the channel.

As I said, I think Bernardo has a lot of challenge, but he's probably the right guy, the right time and the right place. Great partner. As we said in the speech, someone better than myself that can take it to the next level with a lot of strong commercial backgrounds. We'll place the right emphasis in the right batch, discerning the base and pursuing the right (inaudible).

I think the opportunities are the ones that I just mentioned. I think we will continue building a stronger base, but placing the right (inaudible) in the right thing. We believe in the same things, different styles in the sense of different people have different styles, but we do believe in the same core and I think it will take to the next level without getting too much details or not giving too much competition.

Alan Alanis, UBS.

Before framing my two questions, I just want to put a bit things in context. I mean Joao, since you became CEO I think that the performance of the AmBev shares have been massive. I mean if I'm running my numbers here correctly, basically it's been 7 times performance, more like 250% return on the stock on AmBev during that period. And on top of that, AmBev has paid almost $40 billion of dividends. So congratulations. I mean I really, really wish you the best when you move here to New York and take over the North American operations of ABI.

Regarding the questions that I have, basically two. One of them is resolving this idea of the fourth quarter EBITDA in order to reach guidance. Again, if I'm doing the numbers correct, you need to deliver around 12% to 18% EBITDA growth in the fourth quarter to reach the SG&A and cost guidance on Brazil Beer.

The question that I have specifically is what leverage are you going to use to reach that which -- and if you could explain how come we're seeing a 20% increase in super premium beer and only 5% in the total volumes? Yet we're not seeing any kind of margin expansion year to date.

In other words, are we going to see in the fourth quarter, is there something going on with the way you pay the licenses to ABI during the fourth quarter that it's embedded in that SG&A that we might see a deep decline in the fourth quarter that might help on that boost of the SG&A? That's my first question. And then I have a quick follow-up on CapEx.

It's a very true question. We are very confident, I mean or just restaging the guidance. It will be a combination of different things. I mean license at the Brazilian level, they are basically nonexistent. I mean it's between nothing and very little, so that's not be an explanation for anything.

I think there are different phasings of in terms of SG&A investments and Jamel can give a little bit more color. But at the end what we tried to mention very strongly which I know it's sometimes hard to understand. We made a different plan for 2014. Right? I mean to change things, you cannot do things in the same manner.

So we actually -- I said it also in the early part of my speech that I think the last four or five years we were very quickly to react when we thought it was the right thing to do so for a changing environment. Sometimes that meant spending more inside the market, sometimes that meant was reducing SG&A strongly. This year we're sticking to the plan. We did the plan that we think it's working despite this poor performance of the third quarter that looked like the mix. Hard to look at the fourth in details.

But at the end I think first there's the different phasing of the revenue management initiatives. There will be therefore a different component between price and volume for the net revenue that we feel good about it.

Given the different phases for the different projects for the year in terms of share, in terms of balance, in terms of brands, in terms of premium and in terms of innovation, we'll make the (inaudible) work and Jamel can give you a little bit more details. But when we look at the combination of the plan for the year, what happened in the third and what's going to happen in the fourth, the combination of price and volume, plus our very good hand on the SG&A, despite the fact of strong investments behind our commercial initiatives for the year. We feel very good about the fourth quarter. And with the idea of building momentum into 2015.

Nelson here. Just to build on what Joao just said, I think in terms of the guidance, we refer to first of all we don't have exactly a guidance on EBITDA. We have a guidance on different items, so for P&L. So starting with our top line, which we said at the beginning of the year should grow from high single to low double. And then we have reinforced a (inaudible) just now that we expect to be at the upper end of this range so in the end of the day they're saying the low double. Actually it's already (inaudible) as a reference. Our year to date net revenue, it has grown 11% and more important, we always said, I mean we want this to be achieved in a balanced way.

So again, if you look at your 11% growth, it's 6.1% is (inaudible) growth and almost 5% as a result of net revenue per hectoliter. So this is the most balanced top line growth we have had in many years. So what we just said is we should see more of this in Q4 so that the full-year guidance at the end is delivered as we just said, which in a way implies that we're going to have a strong acceleration of top line versus what we just published in Q3.

And what Joao just said, I mean different phasing of revenue management initiatives, volume of course (inaudible) a little bit, given that the tailwinds of the first semester of Modelo, right, so that way in Q3. So a little bit of some moving pieces, but I think the whole base message is this. There's going to be a low double balance.

Now that's the first guidance. When you go to the second, it's about cost per hectoliter, it's already happening. I mean I've seen there was a kind of a -- which about the mid single digits. I mean that's cost of mix (inaudible) in Q2 especially. And now in Q3 a little bit above the full-year guidance, but that's because the mix, now mixes, that's not unusual. I've seen this across the third quarter. There was still remaining back of the World Cup at the beginning of the quarter, but that's not the case anymore as we speak, so we should see also (inaudible) to Q4 vis-a-vis Q3 and definitely Q2, SG&A is kind of expected, because we had a huge increase in concentration in Q2 and Q3 it should also get better.

So it's why the guidance is on different lines and then when you combine them all, we are saying we're going to have a stronger top line and a better performance in SG&A.

Also not to miss -- take the opportunity for questions. Important to remember in Q4 we're going to face a tough comp, vis-a-vis Q4 2013 when it had an important gain, a one-time gain in connection with the pension plans we have here (inaudible).

So with all that together we have more than (inaudible) delivered on our full-year guidance and that's how we should see Q4 and the year end how it's going to look like.

And please on my question also is I guess to put it more clearly, with this massive growth in the super premium, should we assume that the premiumization movement in Brazil will not necessarily bring margin expansion? That would be one question.

And my last question just to wrap it up on my side year to date your CapEx is up 36% versus last year. You're around BRL3.2 billion and last year you were around BRL2.4 billion. If we assume that you're going to maintain a similar level of CapEx as last year, that means your CapEx is going to be slashed by less than half for the fourth quarter of this year versus the fourth quarter of last year. Is this the case? And if you maintain the level of CapEx that you had on a full-year basis, you're going to still be on the level of CapEx that's around 10% of sales. What explains this high level of CapEx at basically 2.5 times the level of depreciation when to the best of my understanding you're not doing anymore capacity expansion? I think your capacity utilization is around 61%. So if you can explain a bit more of where the CapEx is though.

For us, I mean premium products, they mean premium contribution market. Okay? We said a few years back that we thought that we would move premium mix within our total mix from let's say 4% to 5% to 8% to 10%. So we continued that journey, so we continued getting close to the 8%, probably round 7%, 7.5% for the quarter. So that's good. They will always come enhancing margins rather than diluting, so premium price means premium margins. Don't get that wrong. It's important.

But again, I think it's very important that we are not -- here is the and rather than the or. We continue to have a strong strategy, for (inaudible), but we elevated the core of scope (inaudible). So elevating that, making the experience better, Skol Beats Senses, Skol Beats Senses is about debts. Skol Beats Extreme is about debt (technical difficulty) but that's already enhancing the (inaudible) about that, so also not forgetting we're elevated at core and we have the best price for to build the issue for the value issue and all that.

So we want to make sure we have the right portfolio for all occasions and also as we did in the past, building the options for the future.

Regarding CapEx, I think it is a little bit related to that too. We started from 2009, maybe all the way to 2012, I would say 80% plus of CapEx were really related to supply. And from 2012 onwards you start to see some CapEx diminishing from a mix standpoint from supply to commercial. You have seen how much we have enhanced direct distribution, so we have enhanced that significantly. That usually brings share opportunity, sometimes depending on the region that can bring an additional level of execution. The distribution ship that we have, the service continued to be stronger and the one that remaining, the expert, was still so. You have commercial CapEx for that, you have commercial CapEx for new cooler that we also mentioned additional speech. You mentioned the on-premise activation franchises. So there's a different mix.

Remember that all the very strict rules of CapEx, they will be always with the very important IRR. So very interesting returns. So I think when someone asks about the cash flow to Joao, we're always looking for the right returns. So another return now that is (inaudible) in commercial and supply is carton that we're now having for all the mix in Rio, for a good part of the mix in Sao Paulo, that's another new investment that we have. So all of them, very attractive IRR first.

Second as we said, cash back to shareholders and at the end we've been able to have a higher CapEx than we have in the past with a much higher cash flow generation. So I think a good place to be, good problem to have. Okay? That's pretty much it.

Thiago Duarte, BTG.

My question is I think I have to go back to the guidance for top line growth in Brazil. Just trying to get maybe a better sense of where you think that the rebound in the sales growth might come in the fourth quarter. I mean it grew 10.7% so far in Brazil this year. In the third quarter you grew 2.3%. So you really -- what you're trying to say I would say you're really trying to say that there's going to be a rebound in the fourth quarter.

So I'm really trying to get a sense where it's coming from. I mean is it prices, is it you think the industry performance is going to go back to positive territory after a negative performance in Q3? You think there's more market share in the Q4? So really trying to get a sense of its price, mix, industry grow. So that would be the first question.

I think we just talked. I mean our expectations for (inaudible) accelerate top line in Q4. I mean we talked about the balance objective more than the double digit growth. We said we're going to be at a more balanced level, so it's (inaudible) date.

Today we are more -- we have the (inaudible) 11% top line growth. I'd say it's roughly 60% or 70% coming from volume. Of course 40% or so coming from price. This should be probably more balanced toward (inaudible). And that's how we expect (inaudible) pricing contribution and the volume contribution in Q4, especially because most of the tailwinds on volume, they are behind us. I mean the World Cup primarily, even if our very high market share we have we are at the upper limit of our historical market share range.

So that put us in a better position to implement our Latin American initiatives. And of course then this time is an important impact. I mean when you look into Q3 refer to the low single digit growth net revenue (inaudible) leader, but that had to do with the timing as a result of the price increase that was taken earlier, that kicked in earlier last year. (Inaudible) they're coming later. And again, being at the sort of market share we are with the rent portfolio, commercial execution, which is very (inaudible) to deliver on the guidance in Q4. Again, more on pricing than volumes because that would be the natural trend for the quarter.

And the second question would be just actually more in a (inaudible) way, what read and what your thoughts are on that over 60% EBITDA margin in the soft drink division in Brazil. I think it's the all-time high I would say. And just wanting to hear a little bit more from you what you guys see going forward for that division. I think it's more during that you gain market share, you think that you can put more pricing. Just what sense you make on such a strong margin in that division?

I think in terms of CSD margin in Q2, actually full resources were exceptional. I mean we had a strong top line growth causing SG&A. And then we always have to (inaudible) a bit when we talk about margin on a quarterly base because of some phasings of expense. So clearly this was the case in soft drinks. We have a different phase of our commercial investment, especially in terms of sales and market that brought SG&A to a much lower level in the quarter.

So I think the best picture to look at in terms of the financial performance of the divisions, look at the year to date numbers. And I think the underlying trend, the real business underlying trend first of all we continue to gain market share consistently in this business through execution of what particular winning commercial initiatives. So when we see the third quarter results cost per hectoliter, (inaudible) average and that has an important contribution of a better mix. So continue to deliver it and perform strongly on our returnables and this time around both with what (inaudible) Pepsi.

Pepsi liter is a great success, (inaudible) brand. We continue to execute strongly in our nonalcoholic and (inaudible) division as well, especially (inaudible) drinks. We achieved the second position in the (inaudible) track in October with the Fusion (inaudible). So a lot of good news and I think that's the trend you should continue to see in the business. And again, regarding margins of course we (inaudible) big this quarter because of some phasings and (inaudible) special SG&A. But it's a high margin business, mainly because of our performance in Brazil. And then continue to see very positive trends in this business.

Andrea Teixeira, JPMorgan.

I just want to be brief here on more exploring on the year on year like comparison in the revenue per hectoliter and some of the changes that packaging has been [inflicted] also by the customers. I mean we understand that there is a lot of growth in more in cans as you go into the (inaudible). Is there a way -- I mean as you said and I appreciate, Joao, your comment about like how you have been balancing more price and volumes. But if you can help us understand giving the tough comp on the revenue per hectoliter and the things that you already did the fourth quarter of last year, how can you kind of offset those effects and get as comfortable with the fact that you'll be able to reignite sales and basically in volumes and pricing in the Brazil side?

I think first some points of your question. I think just to get one point straight, I mean no significant to none mix impact this quarter when you look at the price. For the obvious competitive reasons we don't comment about the timing or specifics of the price initiatives or other management in the short term. So we always prefer to refer to the full-year guidance, which (inaudible) again, I mean I know we said that, but high single to low double. We have reiterated that we expect to reach the upper end of this range.

Regarding the balance, I mean I think the balance makes sense and it takes a little bit of time. And that's why it's a little bit bumpy because in the same way that from 2011 to 2013 we had sometimes, especially in 2012, some surprise in terms of federal tax increase that they could be negative. In the last few years surprised me sometimes much to the positive angle.

That had reflected in some price increases that maybe were not originally tracked. And when that happens, sometimes there are greater price increases at the consumer level, sometimes then you have at the retail level. You want to -- when you want to bring it down you want to have as littlest price movement, scattered then concentrated. So if you'd rather concentrated, you regain some of that, have a lot of knowledge on how to do that. And that helps to bring it down.

By bringing it down, you tackle the affordability and you get to the better balance. We think the biggest effort of that has been done, so now we have to look into the fourth quarter with the phasing of the (inaudible) initiative that we mentioned. The reference is net revenue so far grew 11.7%, volumes higher at 6.1%. Then the net revenue per hectoliter at 4.7%. That balance will change slightly or somewhat for the fourth quarter, so that we reach the desired balance for the year. Which again as I was trying to convey in the beginning that we will want it in this year. More volumes than price, prices to consumer, not just to the retailer coming down, so that by coming down you can start off 2015 whatever the macro condition is with a much better situation, one that we have not seen again for almost four years.

So I think if we can finish the year in that manner, the way we want, the way we're going end, we're going to start with the beer inflation closer to the other inflation that we haven't had for a while. And I think this will help a lot the potential headwinds that may help from the macro standpoint.

If I may ask about Canada. Canada we should be seeing a better margin outlook. I know it's part of the whole overall guidance, but one not only in the quarter, but as you cycle a better comparison for -- as you ruled out the premium beer and Guarana you expect that to be diluted going forward?

I think Canada is, as we expected by the way, I mean the join is a great momentum in terms of top line as well. Of course we started with Guarana only late March so we are kind of in a ramp up situation. But more important than improvement we got in this quarter, we posted a 5% year over year volume growth.

We think the brand has a huge potential. Not only it's a two -- actually a 2.5% market share brand today, but the presence of the brand is much higher than this. And moreover in terms of execution, relative markets, we saw a lot of gaps since we got the brand and I think there is still a long way to go and we are very confident about a benefit from this important (inaudible) portfolio for quite some time still.

I think that's a number one message about Canada, specifically top line in Canada. We had also improved after the initial investment also improved our SG&A performance and we should see more of this, not only in Q4, but as we get into 2015, especially with all the rest we are doing in terms of the innovation. I believe (inaudible) the model behind the focused brands, but also already in terms of liquids, new tax, new trade solutions, trade product solutions. So we continue to be very comfortable about the improvements results in Canada.

Jose Yordan, Deutsche Bank.

Joao, I just wanted to quickly echo what was said before. It feels like the end of an era and we're really going to miss you here.

My question is really, I mean I got all the previous comments about the timing of the price increase, et cetera. But just curious as to how this plays into the current tax increase talks. Can this happen independently or will it happen independently of the other tax increase? Because obviously it's been postponed by a little more than a year now, the government that is not going to be a transition in the government, so they in theory should be more prone to move quicker on this issue, especially given the deficit numbers that are continuing to come out, et cetera.

So how is this going to play into the government's perceived need for more funds quickly and their ability to do so since they don't have to -- there's no transition in the administration, et cetera. How should we look into this as it relates to your revenue management initiatives that are going in the fourth quarter?

Thank you for the nice words. I mean I'm excited to deliver as a strong finish for this year, as you can imagine.

Regarding tax, I think that is the one component to talk about for a little bit, just to give some color. We have not changed. Our, let's say, pricing strategy that we always said price is in line with inflation plus taxes, whatever impact. I think the last few years we've been able by developing a strong relationship, whether federal or state government, to show the impact to show that there are many times a better balance also from tax collections and investments in jobs. That has helped us at the federal level, but also at the state level.

So I mean the government already said they will not increase the reference base for this year, which is the time you mentioned. Recognizing, but I think more important than that, they not just said that, but they said that the current system deserves a revision. Should be performed with the sector towards a new tax framework in Brazil for cold beverages in general. That's beer, soft drinks and other beverages.

This announcement followed the one in which the (inaudible) indicated that a potential tax increase would be eventually implemented in a gradual way. But at this point there's no confirmation of what it is will be gradual, how gradual in support and so on.

I think at the end, I mean we of course welcome these decisions. We see them as an opportunity to enhance the current model, keeping some of the key elements, as for example, the (inaudible) control system, while at the same time improving predictability and redefining it so that tax revenues can continue to grow but based on a lower tax burden of the industry enabling a greater volume growth and further investment with no pressure on inflation.

So what we continue to work towards is this also balance with the government. If we can get there great, then not just to have built a great commercial platform, a great commercial momentum, but then finding the sweet spot with the government that we think it can be a win-win. So it's very hard to say anything beyond that. I think just the fact that we're being able to have these discussions and having this being said by the technicians, by the government, by everybody so that we are at the table we will work very hard to find a solution as soon as we can. And if it is towards that balance, I think this will help even further.

If it's not, then we will continue to reiterate the pricing policy. And once again, we have built not just commercial momentum, but also competitors wise. So I think we have also good momentum, given the share, given the preference, given the results that we saw that were published (inaudible). I think that puts enough pressure on that on everybody to continue to find the right place to go.

And a totally unrelated question. Given that you were one of the early fans of Labatt's, et cetera, almost I guess 10 years ago now. Back then obviously the Company didn't own Anheuser-Busch, et cetera, but do you think in your new role as -- you're going to dedicate some time to revisiting whether Labatt should be under AmBev or should it revert back to the North American zone, given the overlaps obviously in brands, et cetera, right? Is that something that might be on the table or is it just a nonstarter?

I think that the two, let's say, somewhat easy straight comments. One, I'm not yet in the position to say anything about what I'll do in my new role. I think just generally speaking. I think second, I think regardless of the ownership structure, I think we've always been able to, let's say, defend any priority from AmBev. I'm just looking as the AmBev CEO. So that I know we did very well.

I think second, the way it is structured is in a way that is always better for the business. So we always understanding the commercial pressures, understanding the commercial opportunities, again whether headwinds or tailwinds. And have been doing what's best for the consumer because 100% of the time whatever's done, whatever is ready for the consumer and also of course talks to our profitability and our strategy. So I think we've been always being able to find the right answer in Canada, whether this is with the AmBev owned brands or with Anheuser-Busch owned brands.

That for sure continued to be in place regardless of who's here. Jamel, Bernardo, we'll always defend AmBev's interest, but at the same time, we will also defend what's best for the consumer and for the business. And that's the part that I can guarantee to you it will continue to be there.

Luca Cipiccia, Goldman Sachs.

I have two quick questions. One is on SG&A, more for next year. I understand you might not want to give any type of guidance yet, but clearly you're coming out of two years of heavier investments with a very strong market share, both on the SG&A and the CapEx so we saw some redeployment.

So when we think about next year, I would like to understand, I hope you could put into frame, how much of a tailwind do you see coming from the World Cup in terms of having to sustain the brand franchise? And how much flexibility could that give you to look at SG&A reduction quite aggressively from the more valuable component? So that would be the first question.

And the second, a follow-up on the taxes. You commented that the relative pricing hasn't changed. Some of your competitors have referred quite clearly at continued price competition, even after the work up. So even if we were to assume the same approach for taxes that was used the last time when the reference table was first announced in April, would anything have changed in terms of the impact for your brands? Or in terms of your relative pricing when you look at competitors, because clearly at the time it was quite evident that the price increase for some of your brands would have been relatively high. So just curious if we can look at it that way even if nothing had to change from the existing framework.

Okay, let me take the second piece and then Jamel can give a little bit more color on the first part. I think with what we just want to make clear when we said same relative price is because of some of the comments that were not there they could be misinterpreted. So we all read the results, we all see some of the tough spots. So just want to make sure there's no aggressiveness, right? There was promotion that was during brands, that was during momentum. And the same price relatively. So great execution by the commercial team whether in sales or whether in marketing, and that was done by that great work that the team did. So any numbers would show that.

I cannot get into too much details of the reference price tables because then would be getting too much strategic internal data. But I think that it was very important for us get out there and say look guys, better share momentum, better brands momentum at the sort of same price relative that we always have, always looked for. Brands about the better discount to ours on average between 20% to 25%. That's still in place, depending on the compactor. So the momentum was earned the hard way, execution, brands, commercial plans, pleasing consumers, clients and all that.

To the SG&A, I think we'll have a good momentum but I'll let Jamel give you the details.

Sure. Well, both the SG&A, in particular about 2015 of course we think it's too early to talk about the details. I mean we still have the most important quarter of the year that's still ahead of us. We're not going to provide any specific guidance for 2015 at this stage, but we will have the chance to share it in more details early next year by the time we will be announcing 2014 full-year results. Probably Joao as a special guest as he asked in the beginning of the call.

But look out and then we think of 2016 we just mentioned like in the same way the World Cup is going to be (inaudible) comp volume wise. It's going to be an easy comp SG&A wise for instance.

But I would say besides the easy comps we might get at the SG&A side, I think it's very important to (inaudible) to be (inaudible) helped us considerable in the past years. Not only to protect our (inaudible) brand to drive EBITDA margin growth. And we are in the momentum that we think is more than ever time to use the zero base (inaudible), go back to basics. I think (inaudible) especially helpful in the new year or especially we're seeing the year when we saw some deceleration in the industry. I mean you know this has been pure navigating tailwinds, headwinds, I mean good times, tough times and it has had changes in the sense of how we can build or protect our profitability and grow the business.

So the plan is in place actually and so I think that's our (inaudible). Of course there are some easy comps, but we are more than ever ready to squeeze what (inaudible) no working costs for the business to invest behind all the great commercial (inaudible) that Joao we just highlighted during the call. So we're going to be totally on top of this.

Gabriel Lima, Bradesco.

My question relates to beer in Brazil. You have -- it's actually with regard to competition. You have a competitor that has been very active mainly in the Northeast. It's been gaining share recently. And you had an agreement recently announced with SAD. So just wanted to hear your comments on the competitive environment. Is anything of your deceleration in pricing, promotional activities or accelerating marketing, expenses is related to a tougher competition environment or if it's totally related to the World Cup during the third quarter. So that comment on the competitive environment will be very helpful.

Thank you very much for the question. I think it's a very important one and one that we feel very good about it.

I think we stated the plan very clearly in the beginning of the year where we want to build. Great World Cup, affordability, balance between volume and price to be in a better position, to grow our business on a going forward sustainable basis. Clearly momentum.

So that we said at the beginning, prior to knowing anything that I just mentioned. And actually results are very good. I mean we've followed a better balance, we will deliver the balance that we wanted for the year, that I can rest you assure. In a more affordable manner, so that was also very good. Giving the guys, the people that want the balance through PET prices, what they watch, the ones that won that premium, the Stella, the Budweiser Original having also that in a much better share position.

So regardless of whatever happened anywhere or with anyone, the three main competitors in this marketplace, one has been losing for now, I don't know, 18 and 24 months in a tough spot. And now that they're stable, obviously growing a little bit, but also losing in the last four months. Actually everybody losing the last four months.

But we're gaining in any way, shape or form you looked at for the whole year rather than the year to date or whether in the third quarter. So everything that you saw in this year had nothing related to the competition per se, so that's why we said relative price so the consumer has remained stable. That's very important so that we don't mix our strategy with any reaction. There's no reaction to anything actually the fact that the (inaudible) were working is working in any way, shape or form. And (inaudible) what we wanted. To build momentum, to (inaudible), have the (inaudible), have the balance to be affordable. And by coincidence good work that has also served as well from a competition standpoint we are in a very good place.

Carlos Laboy, Brasil Plural.

Joao, can you give us some long range vision on how underserved is the premium brand category in Brazil the way you see it. Maybe some of the list of things that are left to do. Then the same thing at the lower end of the price spectrum, with the 300 milliliter package, which you say is underserved. I guess what I'm looking for is if you can put in context how early stages we are really in Brazilian revenue management. Because I think so many investors think you walk on water, you've conquered every mountain. And maybe your parting vision on all the work that you've left for Bernardo to do in terms of these next frontier areas would be a helpful perspective.

I think that is the one question that gets me really excited about the prospects for Brazil because I mean I think at the both ends, but also in the middle, I think the next years we'll see. We're not talking about next six months or so, but when we look out five years, I mean demographics are great, per capita is great. I mean all growth, both from demographics until 2032 per capita's all the way to do it. Affordability, even when you compare with other markets, still a lot to do.

And Bernardo has a lot of experience in this and on top of the experience he built here in Brazil, in Canada, in Argentina and now in the west, when we look at the high end, having lived in the US for the past two or three years for him, that could be a future here. Which means a lot of different things to happen. It can be near beer, as we're doing now with Skol Beats Senses if you want. Craft as we have with the Guarana craft that was just launched in the last few days also. That was service level to the point of sale, which we actually we already are 2 to 3 times better over where we were two years ago and that's no coincidence that we're gaining share and that we are at a better place at the premium.

So brand building, (inaudible) to the consumer and service level, we are 20%, 30% of what we are going to be. We're going to be for sure. So a lot of opportunities there and Bernardo being the right person to take us from this 20%, 30% to whatever (inaudible), 70%, 80% and building a lot.

At the end it's 6%, 7% (inaudible) this quarter for the industry compared to 13% in Argentina, 22% in Chile, this (inaudible) two close countries (inaudible). So lots to do, have the brands, have the people and now have the mindset to service those (inaudible) in the right manner. But we are 20% of the selling that we're going to get in the next few years.

In terms of the 300 milliliter, you are right. I think some people feel just because we've been selling it and we've been selling close to whatever, 8 million, 9 million hectoliters, I mean there's still a lot to be done, a lot in a smart way, in the different channels, whether that is in the (inaudible) rate or in the on premise, we've made a lot of investments. This is now in, this was in three plants from three to (inaudible) four or five. And we're adding another three this year.

So this is being rolled out to other countries, not just from a selling perspective, but also from a plant location and for logistics better going forward. And once again, I think we will do the right thing. We have increased this 5 times if you want in the past two, three years from 1% of the mix to getting to almost close to two digits.

But still early, early on. A lot to do in a smart way in terms of pack price, profitability on the different channels. And once again Bernardo has all the knowledge in the world to take that once again to the next level. Embedded in the trade programs, okay. Embedded also with the right relative to market.

And then at the middle, the one you didn't mention but I also think we have work to do, and that also gets me excited because the two parts (inaudible) the core. Whilst I think we still can do a lot with Skol, Brahma and Antarctica by extending those brands. Those brands have permission to play in the different areas. As we saw with Brahma 0.0. I mean who would believe that just two years ago this segment was a slow, boring segment which now a great product with a great (inaudible) with the right positioning has doubled. And one brand in 18 months capturing 65%.

There are those opportunities elevating the core that I think will also surprise the market by elevating our execution at the core. (Multiple speakers)

This concludes our question and answer session. I'd like to turn the conference back over to Mr. Nelson Jamel for his final remarks.

Thank you, Gary. Thank you, everybody, for joining us today and I look forward to speaking with you again at the (inaudible) of the year. Thank you very much. Bye-bye.

The conference is now concluded. Thank you for your participation. You may now disconnect.