Good morning and thank you for waiting. We would like to welcome everyone to Ambev's Second Quarter 2019 Results Conference Call. Today with us we have Mr. Bernardo Paiva, CEO for Ambev; and Mr. Fernando Tennenbaum, CFO and Investor Relations Officer. As a reminder, a slide presentation is available for downloading on our website at ri.ambev.com.br, as well as through the webcast link of this call. We would like to inform you that this event is being recorded and that 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 instructions will be given. [Operator Instructions] Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Ambev's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and, therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Ambev and could cause results to differ materially from those expressed in such forward-looking statements. I would also like to remind everyone as usual that the percentage changes that will be discussed during today's call are both organic and normalized in nature and unless otherwise stated percentages changes refer to comparisons with 2Q 2018 results. Normalized figures refer to performance measures before exceptional 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 will turn the conference over to Mr. Fernando Tennenbaum, CFO and Investor Relations Officer. Mr. Tennenbaum, you may begin your conference.

Thank you. Hello everyone, thank you for joining our 2019 second quarter earnings call. I’ll guide you through the financial highlights of our operations, including our below the line items and cash flow, as well as commercial initiatives, CAC, LAS and Canada. After that, Bernardo will give more details about our operations in Brazil. Beginning with the main highlights of our consolidated results. In the second quarter, top-line grew 7.2%, a combination of volume increasing 0.8% and net revenue per hectoliter up 6.3%. EBITDA reached BRL4.7 billion, an organic growth of 0.3%. While EBITDA margin decreased to 160 basis points to 38.6%. Normalized net profit for the quarter was up 16.1% delivering BRL2.7 billion. Similar to the last three quarters, we continue to report the results of our operations in Argentina applying hyperinflation accounting. Having said that, I’ll now move to our divisional results and start with Brazil. In the quarter, Brazil EBITDA reached BRL2.4 billion, a decline of 5.1% versus Q2 2018, while margins contracted 520 basis points to 38.1%. Beer Brazil had a very solid top-line performance, with volumes growing 2.9%, while the industry was flattish according to new Nielsen. Net revenue per hectoliter grew 3.7% and revenues 6.7% higher than Q2 2018. Net revenues per hectoliter ended up being in line with inflation, a combination of slightly up last year’s price increase, higher premium mix and somewhat offset by regional mix as North and Northeast regions grew faster than the county average. EBITDA for Brazil Beer was down by 8.5% in the quarter, with margin contraction of 620 basis points to 37.5%. This contraction was explained by the cost pressures we already had anticipated in the full year 2018 earnings release. Cash COGS per hectoliter grew by 24.7% impacted by aluminum, barley and FX. Cash SG&A declined…

Thank you, Fernando. Hello everyone. As mentioned by Leonardo, during the second quarter we saw success for many of our initiative, including innovation and continued premiumization. Our Beer Brazil volumes increased 2.9% in the second quarter, with the flattish industry according to Nielsen. Year-to-date volume grew 7.2% in relation to the first half of last year, while the industry grew low single-digit. I'm very excited about the consistent implementation of our strategic platforms, which allowed us to deliver a very healthy top-line both in volumes and in net revenues per hectoliter despite an improving, but few challenging markets. We remain confident that Brazil presents a great potential for the future as half of the population above 18 years old is not drinking beer yet. The legal drink age population grows on average 1.5% per year. The penetration of beer among women is lower than in more mature markets and premiumization is still in early stage. So now let’s talk about our first strategic platform, which is premiumize at scale. Premiumization is a continuous trend and is always important to reinforce that our strength in the segment is a great portfolio combining global and domestic brands. This quarter with official launches Beck’s in Brazil Beck’s is a legit pure malt that follows the purity law since 1873. It has a unique bitter flavor and is the biggest selling German lager in the world. As we highlighted last quarter brand building goes through an investment experience, which allow consumers to leave the values of each brand in a deeper way. Such approach continues to deliver tangible results. This quarter our global brands, comprised of Budweiser, Stella Artois and Corona grew together double-digits. Stella grew more than 50% and Corona once again more than doubled its volume. Budweiser stands for authenticity, explore nightlife,…

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Luca Cipiccia with Goldman Sachs. Please go ahead.

Hi. Good morning, Bernardo, Tennenbaum. Thanks for the question and congratulations on the results. I wanted to ask a couple of things. Maybe first, I think you make a comment in the release about stronger performance in the North and the Northeast, which partly explain the mix and the revenue per hecto. Can you maybe expand on whether that is coming from stronger industry growth overall, market share gains, some of the initiatives in the portfolio that you had, over the last few months including in value and I would assume it's still a pretty low contribution, but anything that you can share there in terms of regional performance, that would be helpful. And then secondly, which is related to this, maybe an update on the sort of value of the mainstream segment, relative growth performance. I think earlier in Q1, you mentioned that you saw that inflection already. I think it was interesting that earlier today, Coca Cola FEMSA made similar comment in saying that the lower income consumers are coming back to some of those segments in their categories, which in itself would be a sign of sort of the trading down, maybe abating or inverting. So anything else that you can add on that discussion also would be very interesting to hear. Thank you.

Hi, Luca, Thanks for the questions. Maybe to the volume, so just perhaps talking about the overall volume numbers that we had it was there to the 2.9% above last year, while the industry was flattish. So good news that we grew volume ahead of the industry. And again, the performance that we have is a consequence of the investments, consistent investments behind our strategic performance I've been doing all of those things. And it’s important to point out that we have not seen disposal coming yet resuming growth, which would likely to provide a meaningful positive impact. When we go to the premium segment, I mean, we have been saying this I mean for many, many quarters that our strength is superior portfolio of brands, global brands, domestic brands, and we continue to gain share in this segment, led by mainly for the soft and soft drinks because the industry of premium segment, it's bigger in the focus of Brazil and the focus of Brazil and given the disposal income that's higher here. When you look to the core, I think that have been doing a very good job and differentiating the families know the brands Skol and Brahma creating the fence. We started with Brahma three four years ago and then we have these two Skol that I mean it's performing pretty well. Now have Skol Puro, Skol Hops and Skol Puro Malte. And then I think that the group in the core in the Northeast, it's really above the average of the country because our market share there was lower. Because all those innovations that are bringing in the core was really helping us there, not only the core, but core plus. We're growing Skol Puro Malte there a lot and Berlin as well. So the growth…

Very clear. Thank you. Thank you, Bernardo. Thank you very much.

Thanks, Luca.

The next question comes from Antonio Barreto with Itau. Please go ahead.

Hi, guys, good afternoon. Thank you for your question. First of all, when we think about -- when we talk to our pricing checks and our channel checks, we see prices of a couple of brands in the premium segment like Stella Artois and Budweiser for example, being gradually decreased. First of all -- but my first question, do you agree with that? And the second one, is it fair to say that you were pushing a little bit to the lower end of the pricing point in the premium segment? And as a commentary on that, there was one slide in your presentation for this quarter talking about expanding the premium with scale. And I understand that that mostly means small brands in the premium segment. But could I interpret that as well as increasing the reach of the consumers unit premium segment with lower prices as well, maybe even transitioning some of these brands to the mainstream plus segment? And if that is the case, wouldn’t you run the risk of cannibalizing some brands in the core segment, can you comment on that?

Thanks for the question. Firstly, get to the price. It's very important to highlight that each brand has a different role and some price point. And given the premium is a portfolio gains is very, very important. So in the premium segment for example, Budweiser is our largest premium global brand in Brazil. And it plays a key role as a bridge from people who are trading up towards the premium segment. So this is the role of Budweiser. Stella Artois its prices above Budweiser and Corona above Stella and we just launched that in Brazil that will be priced between Stella and Corona. So basically this is our pricing strategy didn't change. Linking to the channel specifically like you said, what you see is in Brazil, in mainly premium that are the big, big volume in the off trade are usually done via promo based on part of the retailer strategy to attract consumers to the stores. There wasn’t any difference in pricing policy of the off-brands in relation to the first quarter. By the way as you see our performance in the [indiscernible] was above inflation even with our very strong growth in the North and Northeast of the country that we have lower price given the price of the industry there is lower as you know. So having said no change in the pricing policy. Linked to the innovation so this is what the insight that you had is many other markets is ago. So we had all the numbers we studied other markets we leave it there and we knew that it would be a portfolio gain. We don’t find that mature market any brand that has more than 67% of market share. So we knew that Brazil would grow and the urban centers in the…

Okay, thank you, Bernardo. Very clear. Just and I got another question, if we think about the other revenues in this time around, we saw a little bit of a lower gain and it’d be a segment in the we’ve seen volatility in the past in the line, but you mentioned that you loss some benefits in Santa Catarina for example. So my question is how much of this loss can you attribute Santa Catarina and how much is just normal volatility on the mix as you mentioned as well? And if you have any other benefit inside to expire in the upcoming years?

Hi, Antonio this is Fernando here. Most of the volatility was due to the regional mix and to where you are being producing because different states have different incentives. The one that expire in the Santa Catherina but it was a smaller portion of that and there is no other I think at least in the short-term there is no other meaningful one expiring.

Thank you, Fernando.

The next question comes from Thiago Duarte with BTG. Please go ahead.

Hi, hello everybody. I have a question circling back a little bit to the discussion about pricing in Brazil Beer. You guys made it pretty clear that the geographic mix somewhat offsets the premiumization even though you still managed to grow roughly in line with inflation. So I just wanted to get a little bit more detail two things that you didn’t comment on and I just wanted to make sure if there was an impact or not on the pricing side? The number one is regarding packaging or presentation, what we heard in our channel checks is that there was a -- if you look on a year-over-year basis, the industry's much heavier on cans as opposed to returnable bottles. So we just want to see and to hear from you guys, whether you saw something like that affecting the mix, especially the presentation mix in the quarter? And secondly, in terms of discounts, right, when we look at your financials, and of course, you don't break it down for the Brazil Beer division, but you do offer the parent company and the consolidated perspectives there. I mean, we continue to see discounts as a percentage of gross revenues going down. And I remember I think, Fernando, we discussed that a few quarters ago and your point was that you continue to see room for reducing discounts from the levels that we had a year or two years ago. So just wanted to see if you really had lower discounts this quarter, versus the last few quarters, and whether of course, you see more room for reduction because we are really at a very lower, much lower level compared to what we were some time ago? Thank you.

Hi, Duarte. Thanks for the question. I think at first, I'm linking it to the -- I mean you talk about the initially talk on what bev revenues and then how the mix of regions can affect that. So the fact that the portfolio in the North and Northeast, it's stronger now. It's more on core market and value market there less than premium. And I think that we've over there a lot in both segments the portfolio approach not only in the fact that I've been talking a lot in terms of the regional brands, Magnifica, et cetera, but as well in terms of core. So core, core plus is we're gaining volume way ahead of the industry in those regions and I ahead of the average of the full country. And the portfolio of core is healthy not only Brahma is doing well, but Skol family is doing well Skol Puro Malte and Bohemia. And because of the price of those markets was always below the parts of the [indiscernible] you have this regional mix impact, because really the growth there is really significant. That's good news, because we have been working hard in terms of the go-to-market there with the portfolio approach. You have to really be able to grow that was the -- always was the reason that our market share was not as we expected and below average of the full country. So opportunity there in the packages with the portfolio approach in the main segments there that’s core and value in those markets, like I said before. We get to the camps and RGBs, we continue to push the RGBs in the right way so that in a mere one year [ph] so that's very, very important and continue to see opportunity of growth…

Thiago, on our cash on discounts. At the end of the day, you are always find ways to be more efficient, be through the age impact, be the through to how we price it because you know that there is some inefficiencies specially in the off trade and overtime, as process improves, as you get more efficient you try to find ways to be more efficient on that line. And that's why you'll be seeing the difference between gross and net revenues diminishing overtime. Of course, the bulk of that has already been done. But there is always room to be a little bit better on that. But I wouldn't say there is a huge space to improve a lot.

Just to another -- I mean, just to add on that in terms of the mix. And the biggest, the biggest, by far effect in our cost of goods sold this quarter was FX and aluminum that is typical. That's why the performance in top-line so important, because you know that’s cyclical including the last numbers that we saw for aluminum, I mean are good numbers and including the currency went down against U.S. dollars kind of 4, 3.75 to 3.76. So if you continue and our plan to continue to perform well in top-line and this cost effect is cyclical, it's very good news for the future.

Yes. Thank you very much. Just a little follow-up here. Just to make sure I understood the maths, especially on the first part. So you described Bernardo the increase in the one way presentations, the big part of that mostly as a -- let's say innovation and introduction of several liquids and extensions that you guys introduced in the in the recent past. So would you say that, if you exclude that effect, you could see more room for growth in returnables or a more favorable mix. Just for me to understand how you guys see this packaging and presentation mix evolving in the future? Just want to follow up here.

It's not, I mean, I gave a guidance on that, because the markets can move. But just so, if the core labels, because innovation and profitable innovation in core with new brands and because the planning, the premium segment is growing with higher margins, innovation, higher margin is coming. We are gaining share in premium is not bad, it's good for the business. Because we did have a day, I mean, we are explaining the industry and we are gaining share in each specifically segment. That’s the aim and that's why that’s our plan for the premium segment. So that's good news. So can going full premium, it's very good margins are better and expanded the industry, and I am gaining share in the segment that's growing. But having said that, I see it's not in the numbers the opportunity of the RGB to help us and this trade up from value to core, when disposable income start to resume growth in our country here in Brazil is happening with the core brands, the innovation that we have the Skol family, the Brahma family I think yes one leader represents a great opportunity of trade up from value. And to core and including from people that not even drink today, because of money restrictions. So it's both, actually both opportunities, RGB in core, trade up in premium innovation with better margin even sold in one way package. Does that help?

Yes. Very clear, thank you very much.

Thank you, Duarte.

The next question comes from Antonio Gonzalez with Credit Suisse. Please go ahead.

Good morning, Bernardo and Fernando. Thank you for taking my question. Just two quick ones. The first one on Skol. Last quarter, you mentioned that the entire family was growing, right? And this quarter, you made some very positive comments on the pure malt line extension. But you didn't comment on the family overall. Can you comment on whether that growth for the family continued into 2Q? And I don't know if you can mention any trends, as you do the rollout of pure malt is cannibalization on Skol Pilsen increasing is it in line with your expectations? And also perhaps the upgrading from value to mainstream remain flattish, right quarter-on-quarter. So I don't know if that has an impact on the mother brand Skol? So that's number one. And then number two very quickly, you've been talking about these tech enabled solutions right over the last few quarters, Ambev and so forth. And this is enhancing your ability to serve the point of sale. I presume, this is also explaining part of the growth in the Northern and the Northeast you can increased frequency of visits in remote places and so forth. So I wanted to ask at this stage what is the bottleneck to accelerate these better services, is it the macro environment itself you're waiting for the macro to recover even further to accelerate these investments or really it is just the pace of execution that you can sustain at the moment in order to increase the frequency of visits and the quality of service in these particularly in the North, Northeast in the more difficult to access areas? Thank you.

Yes, Antonio, thanks for the question. Maybe the first question makes it to Skol, very happy with the Skol family, we don't disclose the growth per brand. And we could say that Skol Puro Malte is a major success launch we have created and changes this whole family volume trend, big time. That help the full business a lot. Always to bear in mind that the second quarter with Copa America and with the country music platform was heavy more on Brahma. But that -- and reactivate Skol, not as we activated Brahma in the second quarter. So -- but it's clear that the trend for the Skol family is a big, big change and Skol Puro Malte is not even I mean 100% launched because as I said before, here in the Q&A, people -- I mean when we launch a product like that, it’s a huge success, because start to trial the product and then you start to front back and then move to other pack to other channels. So we're still launching Skol Puro Malte, it’s healthy, the brand equity of the Skol mother brand and the full family. So very happy with the results of Skol overall. We have a major trend shift in terms of volume of that brands and Skol Puro Malte is really doing amazingly well. This is your first question. The second question, I have been working this digital transformation in the company for some years and just bought [indiscernible] to help us grow even faster. I think that it’s helping us in many, many fronts not only the -- when I talk about the point of sale, but I discuss about the direct line, we can discuss about the processes internally how we can optimize the process using technology to assure…

That's very helpful. Thank you, Bernardo.

Thank you, Antonio.

The next question is from Robert Ottenstein with Evercore ISI. Please go ahead.

Great. A couple of questions. I think you were asked this, but I'm not sure I heard the answer. Net revenue per hectoliter up 3.7%. Did you give us a number of what that would have been on a constant geographic basis?

Hi, Robert. We don't disclose that, but you can bet it to be better than that on a constant geographic basis.

Okay, and then in terms of pricing this year, will it be the normal timeframe or perhaps in August like you've done in other years?

It's not going to be much different than in past years. Some of the pricing is already in the market like some of that we already started in July for some SKUs.

It’s a little bit earlier.

It's more or less similar to last year, you don't increase all the packages exactly the same day. So for some SKUs, you already started, but it's going to be -- it's happened in the third quarter like it happened last year.

Great. And then my last question, you now have a very strong portfolio of global international brands bringing Beck’s in, Bud, Stella, Beck’s, Corona. And you gave us a little bit of sense of kind of the pricing ladder. Would your expectations also be that the volume will be kind of the correlated such that the lower price ones would have the most volume so that Bud would be the largest volume Corona the least? And tied to that, have you had any surprises in terms of the customer acceptance of these brands, like a lot of these brands are new to the customers in Brazil. Any thoughts in terms of how they've been accepted and surprises along those lines?

I think, as you already said, the portfolio approach will be the win approach. And that’s by the way what's happening the last many questions have been gaining share in the premium segment. And the beauty of that that you have entry brands in that specific segment like Budweiser. It’s amazing brand it’s very good, it is a bigger brand and you build a portfolio from there. And I'm not even talking about some brands here. We have a local craft that we just launched. A lager like a little bit beer in terms of the liquid, but you launched it Colorado Ribeirão Lager that's growing a lot. So I really, I am not the stages of that specific brands and business start to scale up in the prices weak. Last year. I mean, we have been moving a lot in the way that we innovate. So we do more pilots, we understand in small cities, in regions. So let's see we launched it brands are not specifically, many important brands in the portfolio in the South of the country. And was an amazing result, it was an amazing result that's will scale up for the future. Not give 100% cover to say the name of the brand, but just saying that when I talk about the expansion of a portfolio of premium, it's not only the expansion, but the way that we do it the way that we innovate, doing small pilots. And then I mean, make success case there and then go I mean new things to big things and bigger to bigger things. So I mean, we adjusted in the last years the innovation process. That helps us we have a healthy pipeline in not only the premium but in the core as well, but specifically in premium, bringing brands with different price levels that we are assure towards the profitability of the overall portfolio is pretty good and we have one brand for specific occasion for specific price points. For each specific occasion, each specific price point.

Thank you.

Thanks Robert.

Excuse me, this concludes our question and answer session, I would like to turn the conference back over to Mr. Bernardo Paiva for any closing remarks.

So, thanks for the attention. I think that we continue to be very excited about the implementation of our strategic platforms, not only Brazil, but in the other countries. I think that consistency is the name of the game to win in a market that demands a connection. And even more with people that we were going to use every day. We are really truly consumer centric company and really very excited about the prospects of the portfolio of the brands of the way that we operate. Thanks a lot. Have a nice day.

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