Good morning, and thank you for waiting. We would like to welcome everyone to Ambev's Second Quarter 2012 Results Conference Call. Today with us, we have Mr. João 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. [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 Q2 2011 results. Normalized figures refer to 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. Nelson José Jamel: Thank you, Maureen. Good afternoon, everyone, and thank you for joining our 2012 second quarter results conference call. As usual, I'll begin by sharing…

[Operator Instructions] Our first question is from Lore Serra, Morgan Stanley.

Can I ask, just to clarify, the guidance you've given of price, at least above, or at least with inflation, as well as volumes better than last year, is the underlying assumption there that the excise tax for October goes through? I understand you're still fighting it but, or discussing it, but is the assumption in that guidance that it goes through in October? João Castro Neves: Yes, definitely.

Okay. And can you give us a sense of how you see -- I mean, I guess the improvement in revenue per hectoliter this year had to do with the fact that taxation was a bit less or earlier front-end loaded this year, and the pricing stock? And your market share looked solid but down a little bit. Can you talk about any market dynamics that you need to think about as you think about that second-half pricing environment and that guidance? I guess I'm a little bit surprised that you're taking the guidance up in terms of the pricing outlook given the trends we're seeing in terms of volumes and share. João Castro Neves: Sure. Lore, this is João. We continue to feel very confident about the commercial strategy. I think first, I mean, as I mentioned in the opening statement, I think the combination of liquid innovation with the Sub Zero and 360, give us -- continue to give us tooth to fight in different regions of the country. Then of course the packed pricing strategy with more returnable bottles, now being able to grow from 3 plants by the end of the year. We have 7 plants able to produce 300 ml, so that combination of liquid and packed price strategy being more widely available continues to give us a lot of confidence in the commercial strategy from that standpoint. On top of that, we now have newly and enhanced trade programs such as the -- also the sucker platform that I also mentioned in the opening statement, which has proved to be, together with the digital strategy, a great way to connect with our consumers. That combination of commercial flexibility from liquid and packaging, as well as in trade as our marketing strategy, also connecting consumers,…

Great. Well, I mean, that's really helpful color. But I guess what I'm not understanding is, since the second quarter, I mean I'm sorry, the first quarter was released, you had the excise tax announced. So that's changed -- I mean, a lot of what you talked about was there already. So what's changed that your pricing outlook is more favorable now than it was when you announced the first quarter. Is it that the market environment is more favorable than you thought? I'm just not understanding why the guidance changed in light of the fact that taxation went up? João Castro Neves: Okay. I think the -- in line to the at least, let's say, the subtle change, was really to show our confidence. The reason I started really to highlight it once again, the commercial strategy, that we should have a combination of sales execution strategy, the marketing strategy, together with the premiumization of the portfolio, with direct distribution, that whole combination make us feel that we can now, not just at least, not just in line, but to be at least above right inflation. So really, it's really the comp. It's not the one silver bullet that made the difference, but the whole combination as we see what's coming in terms of tax increase, but also how the market has also reacted for the pricing environment of whatever happened this year so far. That combination of internal, commercial, strategy, as well as how the market has responded so far this year. We feel we can make that subtle change.

The next question is Robert Ford from Bank of America Merrill Lynch.

I had a question with respect to just your existing business today. What percent of the business in the last 12 months is only cans for you? And that's just Brazil in terms of volume. Nelson José Jamel: Some are soft. Cans are the same, Bob.

Yes, what percentage of Brazilian beers is going out in cans today? João Castro Neves: We don't open that in detail. But mainly, I mean it has been, for the past 2 years, we're talking about 1/3, 2/3 on average, okay? From the early 2000 until let's say, late 2009, every year can grow a little bit. That's a little bit of talking, 20 bps, 30 bps. In 2009, when we launched it, the strong returnable strategy, that has -- the growth has first diminished. Actually, the participation decreased, okay? So I think that's the detail. So 1/3, 2/3 on average, we had from 2000, 2008 growing and then 2009, starting to flattish and 2010, 2011, starting to decrease.

Great. That's very helpful. And then, when -- we were very impressed with the pricing in CSDs, particularly given the big push in returnables, a lot more multi-serves. Can you comment a little bit about how you're getting the pricing in soft drinks and the outlook that you have, given -- or the bigger tax increases in CSDs particularly for some of your rivals? João Castro Neves: Sure. Well, I think a couple of things are happening in CSD. And to be quite honest, we're really harvesting some of the things we have seeded during the last 2, 3 years. I think we mentioned that while we learned a lot from the packed price in CSD through beer, we also have learned a lot from beer into CSD on flavor innovation and innovation as a whole. So we launched it in the first quarter of last year, 5 important CSDs in terms of the 1 liter returnable, of course, in the pack price. The 237 was a big push in the last 18 to 24 months, now being one of the most important SKUs that we have. So we have a very profitable single-serve packs here, which gives you greater net revenues per hectoliter growth, more than compensating let's say, for the eventual potentially last on the not just pack there under 1 liter, which gives you greater share position. Combined with that, I mentioned the citrus flavor, the energy drink, also a new package for Gatorade, that combo and coupling the CSD programs, many times, working better with the beer programs from an execution standpoint, give us a much better situation at the marketplace against our competitors, be it their main competitor, but I think also the other brands. I think Coke had, had a lot of success in the past taking share over from the big brands. That's also happening now also for Ambev. So this quarter, I think, is the first time we're able to show this great combination of volume and price on a very strong manner now that they had not shown that before. And I think also, the market is feeling the pressure from the tax increase that will come later on the year and I think the whole market is protecting the profitability going forward, either for 2012, but I think this will certainly have an impact on 2013 and beyond, which from a profitability standpoint, I think is good news. Not that I like the tax increase but I think will force the market to adjust in terms of its pricing strategy.

Next question is José Yordán, Deutsche Bank. José J. Yordán - Deutsche Bank AG, Research Division: I wanted to ask about Argentina because you're saying in the release that the soft drink industry was also down. But it's not really borne out by the numbers, because I'm sure as you look at the Coca-Cola, other results out of Argentina have been much better than what's happening in the beer. And so if you can help me understand what's happening there, it sounds like you're gaining share in Argentina soft drinks -- sorry, like you're losing share in Argentina soft drinks and you're also gaining share in beer, because if you saw from the CCU numbers, even when you exclude their lack of shipments of Budweiser to Paraguay, their volumes are -- were still down about 7% and it sounds like, even though we don't have the disclosure, it sounds like your Argentina volumes were not down anywhere near that 7%. So any color on Argentina would help? João Castro Neves: Sure. José, this is João. You are right. I mean, this is -- as you know, let me first tell you a small disclaimer that you know, but I think it's always good to remind people from time to time. The news and coverage numbers that we use for our -- for any country, most of the countries where we are. It's new semi, not in some countries, it's CCR. In the other countries, that are not -- that are -- a few others, providers when using is not in place. Their coverage goes anywhere from 55% to 75%, sometimes increasing, sometimes decreasing. And in the markets where we have our competition numbers open to the manner we have, when we feel there is a big discrepancy, of course, we…

Your next question is from Pedro Leduc, JPMorgan. Pedro Leduc - JP Morgan Chase & Co, Research Division: This is Pedro Leduc representing Alan Alanis, who came from JPMorgan. And our question is specifically regarding the 17% total SG&A rise seen in Beer Brazil, which is basically almost twice as fast at the top line growth base. And you do mention that it's related to bonus payments and increased distribution expenses. But could you please elaborate a little more on each of these 2 drivers and then, as well as provide us some guidance of what we should see here for this line for the remaining of the year? Nelson José Jamel: Sure. Pedro, this is Nelson here. So as we try to let you know in our release, and I'll try to give some more Column B, but the first points, the important point we highlight that we had a very tough comp ice in Q2 2011, our SG&A, actually it was down versus 2010. While for the full year last year, it grew mid-single digits. So it was really a tough comp. And the many facts for this was the timing of bonus accruals and reported also in the release last year that, that was the main reason. But we also had, to start with, we also had some incremental sales in marketing expenses at high-single digit growth in the quarter to support our commercial initiative, and that was particularly the case for CSD in this quarter, and not really for beer. It was just because they also grew double-digit, and that was impacted in first place, by volume growth, a higher rate of direct distribution, some increase of wages, primarily because truck drivers and helpers, our linkage to minimum wage, which grew 14% this year. We also…

The next question is from Lauren Torres, HSBC.

You already touched upon this, I think, on several occasions, but the whole idea of getting this more balanced top line growth this year, I was just curious, obviously, you'll hit that target relative to what you did last year, but when you made that comment in earlier this year, and I guess I'm focusing on Brazil, did you expect volume growth to potentially pace faster than it has looking for more of a recovery than we've seen or did you just take more pricing opportunities, which impacted volume because they were there to take? João Castro Neves: Lauren, if I understood correctly your question, you were asking, compared to what we said in the beginning of the year, you were expecting more volume than price, is that what you're -- was that the question?

Well, I was just wondering if you were initially guiding to more balanced volume and pricing growth, as far as getting them more even, rather than more heavily weighted to pricing growth? João Castro Neves: Yes, okay. Well, right now, I mean, more of a coincidence, but if you look at the combination of the Brazil and to Brazilian business, when the year-to-date is like a 4.4% growth in price and a 4.4% growth in volume. So this sounds pretty balanced, right? I think what we are trying to say is that when we said the balance, a more balanced approach than last year in the beginning of the year, we were not considering the sort of tax increase that was announced later in May, right? So with the announcement of the tax increase and our desire to protect our profitability, we have changed it again slightly on the pricing front, right, by saying, in line to at least, this, I think shows somewhat of a balance, which will be still more balanced than last year, but with some more color on the pricing side and on the volume in order to pass on the tax increase to price. I mean, it's a subtle thing, but a very important question and very important to understand what I'm trying to convey. So far, it was very balanced. Tax increase was announced in May from now until the end of the year. Pricing will take a somewhat more important role than it did in the first half.

Sure. So can I infer from that, that the consumer in Brazil, as far as what you were expecting, as far as firming up from what we saw last year, is on track? And those types of growth rates, just coming from the consumer environment, is improving? João Castro Neves: Yes, no doubt. I think when we look at our volumes in both beer and soft drinks, it's true. I think when we look more now in terms of what people expect in terms of consensus of GDP growth, there is an acceleration expected for the third quarter. And especially for the fourth quarter, I think the difference from other consumer goods is that our fourth quarter will be impacted -- will be positively impacted for this GDP growth that will most certainly come in the fourth quarter, but will be negatively impacted by the tax, our price increase given that and therefore, it's somewhat tow in volume.

The next question is from Alex Robarts, Citi.

The question relates really to this focus on the north and northeast and clearly, the volume growth in the region for both beer and soft drinks, having outsized impact on the overall volume growth in the country. You talk about that growth being 3x the national average. I just wanted to get a sense there. I mean, is that a kind of 3x certain pockets of the region? Or is it really for the north and northeast region as a whole? But really, more specifically, are we looking at kind of stable, this level of outsized growth, is it stable? Is it decelerating? João Castro Neves: No, no. It is high, Alex. This is João. Thanks for the question. I mean, when I look today at our decision a few years back to focus on that region of the country, I think it was a very good one because we changed our footprint. We did new launches. We're getting closer to consumer. And when we mean 3x, it's really 3x. I mean, it's -- if the country's growing 3, it's growing 9. I mean, it's as simple as that. It's happening for both beer and soft drinks and it's happening in both the near and in the north, okay? So a good thing, we were there in the market several times this year and we continue to be the market being firm and a lot of potential going forward. We continue to be happy with the decision and happy with the volume results on a quarter-by-quarter basis.

Okay, okay. No, I mean, the second part of that question was just, so with this growth outlook, do you feel that the production footprint is right-sized, kind of with the kind of 12-month, 18-month view? And as we think about this region vis-a-vis, the profitability in the country, I guess, is it fair for us to assume that probably because of the low-density population or maybe lower pricing, that the margin from this beverage business in this part of the country is lower than your national average, but that, that gap is narrowing, and at some point, it gets too close to the national level? I mean, how should we think about this region as it becomes more of a meaningful impact on your kind of national profitability level? That would be great to hear your comments on that. João Castro Neves: Sure. Well, I think there's 2 sides to the question. I start with the first one. In the last 2.5 years, the CapEx investment was "disproportional" to the nano. So let's say that nano is -- I'm just going to give numerical examples, they're not exact numbers, okay. But let's say if nano was 18% or 20% of our volumes, the CapEx that we did in the -- the last one I hear was 35, okay so we almost doubled the participation on the CapEx investment in relation to what is the current volume because we didn't have the right footprint, and of course, because this is growing 3x faster than the rest of the region at one point in time, which we're getting closer to as we speak. We will not need to expand 2x the percentage of the CapEx in that region. We're not there yet, so we still have some disproportion, going forward will…

The next question is from Gustavo Oliveira, UBS.

I have 2 questions. The first one, in the India [ph] call, you mentioned that you already have 500 pit stop stores. I'm mentioning the most important supermarket chains and hypermarket chains in the country. Could you please give an idea of -- at what stage of your rollout you are in the stores? And also, what is the incremental contribution that you're seeing in these stores that you're adding the pit stop stores to your total sales in that store? And if you already have a view on the project, why this is -- the returnability is increasing and substantially in these pit stop stores? Or whether you're having a negative impact in the higher inventory that you usually have to carry because of that? That's the first question. João Castro Neves: Okay. Gustavo, a very good question. And of course, you asked a lot of a competitor's sensitive information that we'll be not able to give it out. But I mean, the number of pit stops are increasing every month. We're actually very happy with the results and that's why we keep increasing. I think we are probably 25% of where we can get, in terms of number of stores covered by that. So it's a long way to go, very positive results from volume growth picking up, returnables growing. So I would say very positive overall. That's why we continue to be working very hard. It's a reality already. It's not the pilot anymore because I mean, if you're growing 500 stores. So it's a matter of really implementation and executing, accelerating the speed because I mean, the results are very positive. You mentioned you had a second question?

The second question is related a lot about the bonus accrual and how was the impact that actually, they're having in the quarter. You mentioned that the logistics costs, they went up. There was a double-digit growth in the quarter. I was trying to understand, when we project the numbers for the second half or the bonus accrual, we're actually going to be below average to compensate for the probably above average accrual in the first half that's more -- I think, I did the question then, the magnitude of the impact in the second quarter and whether the normalization would be actually below the average in the second half? Nelson José Jamel: Gustavo, it's Nelson here. I mean, regarding bonus accrual, it's a function of how it performs versus our own targets, our budgets. And so it may have quite a different range in terms of accruals on a quarter-by-quarter basis, even for the full year, depending on how we finish the year. And as you know, a SKU forward is a very important one. So many times it makes a difference in terms of how it performs versus our budget. But I think the key takeaway for you is that if you think of let's say, additive costs, it should grow single digits, right? I mean, there is no reason that you start off inflation environment and all the productivity and efficiency initiatives we had in place. I mean, we shouldn't see a double-digit item in cost growth. So that's more or less say, on controlled expense. And regarding our logistics, that's the one that's really growing double digits but should get better as we get to the second semester based on the CapEx investments we are doing and also will depend on volume multiple. It's like we're the strong correlation, the stronger sort of volume, the struggle will be, it's just a mixed logistics and also some of the commercial expense we have. So at this stage, let's say, bonus, we should have a lower accrual in the second semester, all the rest equal. But again, it also depends on how we achieve, how we perform the solid targets. And logistically, it's not the only important one here that you had to look at and should get better.

The next question is from Gabriel Lima, Barclays.

Just initially, I want to confirm what something John said under opening remarks. Cost per hectoliter going to the second half should increase year-on-year but still below inflation for the full year, is that correct? Nelson José Jamel: Yes, Gabriel. This is Nelson. Yes, that's correct. I mean, we are keeping our guidance that for the full year, we're going to have COGS in Brazil for both beer and soft drinks below inflation. Q2 was our best quarter, for instance, in terms of our currency hedge. When you compare year-over-year. That was the major upsize we will get for most of the commodities. It was also the best quarter, so especially soft drinks, as you may have noticed. So in the end of the day, we should have COGS positive growing above what we saw in Q2, but if you have in the year below inflation as we guided since the beginning of the year.

Okay, okay, that's clear enough. And just a follow-up, you guys talked about government incentives and going to the second half. So I just wanted to better understand how you expect your specific consumer are responding to those incentives, mainly in write-offs, the consumer leverage that your main peers, consumer peers have been recently mentioned? And also, if you could touch a little bit on weather conditions, at least here into the southeast. There has been a very warm weather, so just wanted to understand if you're seeing this sort of country and if you're benefiting to that, in light also the economic conditions in there? João Castro Neves: Okay. The reason for mentioning a good customer environment that it varies, of course, from industry to industry. But if you think that we have pretty much the same pricing conditions of last year, volume is strongly much better. So that's one of the ways we look into to look at distributor. But to answer or how or to say this. Weather, to be quite honest, has been very volatile. I mean, we have had some great weeks that look wetter but down the week after, it's so-so. So I mean pretty much on average in terms of weather. If we look at the second quarter, in particular, temperature was 0.5 degrees higher on average but rain was 3% higher. So almost like compensating the other. But it hasn't been bad, but it hasn't been specifically great. So it's been more on the neutral side. Therefore, not being to talk so much to explain either a spike or a slow down.

Good. Just a quick one, effective tax rate, do you have a guidance for the full year? Nelson José Jamel: Look, I mean I do have a specific guidance right? I mean, what we consistently have is an effective tax rate that is lower in, of course, then the corporate tax rate, given the benefits from which is on capital, gross amortization and all the rest. I mean, the outlook we think is going to be slightly below like last year's rates, which was 2.4. Although again, we may fair enough quarterly base, we had an easy comp in Q1. This one was a little bit tougher. But for the balance of this shall be in line or slightly better than last year, no major surprise there.

Our final question will be from Alexandre Miguel from Itau. Alexandre Miguel - Itaú Corretora de Valores S.A., Research Division: Just 2 quick questions, I just wanted to get more color on your strategy to keep, on soft drinks, to keep the profitability or share heading towards the end of the year, given that you'll probably have a disadvantage in terms of impact on the taxation. So if you plan really to past roll the prices and keep margins or maybe use beer to get back some of the margins lost in the soft drinks, how we think about your strategy for soft drinks in this, given the recurring scenario of potential high taxes? João Castro Neves: Okay. I mean, our idea and approach is straightforward for both beer and soft drinks. Our idea is, once it's certain, the tax increase, I mean, which we're considering certain, but are working to try to revert some of that, showing that we don't think this is the best win-win approach for both the industry and the government. Of course, in any projection, we're assuming what is in there is what's going to happen. Our idea, as we mention is to pass on the tax increase to prices for both beer and soft drinks. Of course in beer, we are the leader and so our decision is taken. In soft drinks, we are not, so our idea is to do that. And we will do that but, of course, as the market leader, if we read somewhat later, if we don't see that happening, we may have to change. But our idea for both business is definitely to pass tax into the prices. Alexandre Miguel - Itaú Corretora de Valores S.A., Research Division: Okay. And just a follow-up on the beer related to…

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Nelson Jamel for any closing remarks. Nelson José Jamel: Okay. Thank you, all, for joining to this call and I look forward to speaking to you guys again on October 31 to talk about our results for the second semester. Thank you very much. Bye-bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.