Ambev S.A. Q2 FY2023 Earnings Call

Good morning, good afternoon, and thank you for waiting. We would like to welcome everyone to Ambev's Second Quarter 2023 Results Conference Call. Today with us, we have Mr. Jean Jereissati, CEO for Ambev; and Mr. Lucas Lira, CFO and Investor Relations Officer. As a reminder, a slide presentation is available for downloading on our website, 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 all participants will be in a listen-only mode during the Company's presentation. 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 the second quarter 2022 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, operating profit and EBITDA on a fully reported basis in the earnings release. Now I'll turn the conference over to Mr. Jean Jereissati. Mr. Jereissati, you may now begin your conference.

Hello, everyone. Thank you for joining our Q2 earnings call. Q2 was all about consistency. Top line momentum persisted with net revenue up 20%. EBITDA grew 34% at a consolidated level and 20% excluding Argentina, with Brazil growing 29%. International operations continued to recover with CAC and Canada delivering EBITDA growth and LAS with steady momentum. Operational leverage continued to come back with gross margin expanding 170 basis points and EBITDA margin expanding 300 basis points. Although net income declined, given last year's one-off tax credit, cash flow from operating activities increased BRL1.2 billion. So we end H1 having delivered over 23% net revenue growth, 37% EBITDA growth and 310 basis points of EBITDA margin expansion and are well positioned for H2. Let's take a closer look at performance by geography, starting with Brazil, which continued to lead the way. In Brazil Beer, commercial momentum remained resilient. Top line grew 10% with volumes declining 2.5% due mainly to a soft industry. However, despite the decline in industry, premiumization trends continued. Our premium brands grew volumes in the mid-30s, and we gained market share in the segment according to our estimates. To put things into perspective, year-to-date volumes of our premium brands grew 180% versus the same period of 2019. In addition, the disciplined execution of our revenue management initiatives, combined with a positive brand mix led to net revenue per hectoliter growing nearly 13%. Our brand building efforts continued to pay off. Brand health indicators of focused brands improved again, both sequentially and versus last year. Our brands also added 4 million fans since the pre-pandemic period, according to our estimates. We were awarded 13 Lions at the Cannes Festival this year. Brahma brought home five awards, Budweiser four, and Ze Delivery was recognized at the event for the first time with one award. Finally, EBITDA growth accelerated to almost 30% this quarter. In addition to the sustained commercial momentum, EBITDA performance was positively impacted by two factors. First, lower growth in costs, as cash COGS per hectoliter, excluding non-Ambev marketplace products, grew only 4.6%, thanks to a combination of tailwinds from FX and commodities hedges, lower-than-expected inflation and unhedged commodity prices as well as a more efficient supply chain, given a better production and distribution footprint. Second, by lower distribution and administrative expenses. In Q2, we began to cycle last year's increase in diesel, and our efforts to optimize our business by streamlining and integrating our B2B, DTC and fintech with the rest of the organization continued to make great progress. During 2022, we developed a comprehensive plan to establish a new operating model better suited for Ambev to work as a platform. The results are starting to show not only in terms of collaboration across the Company but also in terms of having a leaner and more agile organization. Turning to Brazil NAB, I would highlight three points. First, top line grew 7.5%, thanks to net revenue per hectoliter growing 10%, given our revenue management initiatives and positive brand mix contribution. This offset the 2.2% decline in volumes, mainly due to a soft drink industry. Second, our brands continued to perform well in the premium, health and wellness, and energy beverages with Pepsi Black outperforming once again, growing about 170% and now representing about 19% of our Pepsi Cola volumes. Guarana Antarctica was also recognized at Cannes for its women's World Cup campaign. Third, EBITDA grew nearly 25% with gross margin expanding 490 basis points and EBITDA margins expanding 310 basis points. Now let's cover our international operations, which, as I mentioned before, continued to recover. Starting with CAC. Despite the 2.8% volume contraction, top line grew almost 5%, led by the Dominican Republic, which is the most important country in the region, representing around 80% of our EBITDA results on average. Not only did macro conditions improve, but we also continued to get our operations back on track. For instance, volumes of the Presidente family rose 3% in the quarter, while inventory at the wholesale level normalized and price execution remained consistent. After four consecutive quarters of decline, EBITDA grew almost 8% year-over-year, and both gross and EBITDA margins expanded 100 basis points. Year-to-date organic EBITDA growth is above 2021 levels, which was our best performing year in CAC. We still have work to do here, but we are happy to see CAC recovering sustainably. In LAS, top line grew roughly 82%. Volumes were slightly positive, growing 0.6%, led by Chile and Paraguay, but it's also worth noting that our beer volumes in Argentina grew low single digits despite the short-term volatility and challenges in the country. Speaking of Argentina, beer gained market share as a category. Our above-core brands continued to gain weight in our volumes. We were awarded with 8 Lions at the Cannes Festival this year with Quilmes and Stella Artois campaigns. But LAS is not just about Argentina. The rest of the region delivered a solid quarter with double-digit top and bottom line growth, along with gross margin and EBITDA margin expansion. Paraguay and Chile were the highlights with great performance across the board. All in all, LAS EBITDA grew 110%, with gross margin expanding 160 basis points and EBITDA margins expanding 380 basis points. Finally, in Canada, top line performance was flat, with 6.6% net revenue per hectoliter growth and a 6.2% volume decline as we underperformed a softer industry and faced a tough comp in Quebec. Having said that, our above-core brand health indicators continued to improve in the country, especially for our premium brands. Corona and Michelob Ultra continued to grow volumes, supporting estimated market share gains in premium and core plus, respectively. EBITDA grew a little over 4%, with gross margins contracting 70 basis points, but EBITDA margins expanding 120 basis points. With H1 behind us, a few words on H2, starting with what's clearer to us. In Brazil, our commercial strategy is in good shape, given the health of our brands, the better mix, and the execution in BEES, both in terms of client NPS and the expansion of the marketplace and in Ze Delivery. Our cost outlook for the year has improved. We are updating our guidance and currently expect Brazil Beer cash COGS per hectoliter, excluding non-Ambev marketplace products, to grow between 2.5% and 5.5% for the full year. We should continue to benefit from less pressure on distribution and administrative expenses during the second half of the year for the reasons I previously mentioned. Outside Brazil, CAC year-over-year performance should continue to improve, given our sequential recovery and as we lap last year's soft H2. In terms of where we have less visibility, the two main points are industry volumes in Brazil, where we will continue to closely monitor disposable income drivers, and the overall operating environment in Argentina, which has been and will continue to be a point of attention. Overall, although we may still face some degree of volatility and short-term challenges varying market by market, it’s fair to say that our strategy has been working for a while now and I am confident in our team's ability to continue executing it going forward. Finally, we will continue to work towards delivering growth and profitability in H2, as well as better organic EBITDA growth in 2023 than the 17.1% that we delivered in 2022. We closed H1 with over 37% EBITDA growth, so we are well on track to deliver another year of continuous and consistent improvement. Thank you very much. Let me hand it over to Lucas.

Thank you, Jean. Good morning, good afternoon. Since Jean already covered the main performance indicators, and because Q2's performance was consistent in terms of what should not change and what should change this year versus 2022, I will focus on net income, cash flow generation, and taxes. Starting with taxes, we have two relevant updates here. First, in early July, Brazil's House of Representatives approved the tax reform on indirect taxes. The aim is to simplify the various federal, state, and municipal taxes currently levied on consumption without increasing the overall tax burden, thereby creating conditions for Brazil to achieve better economic growth. The legislative debate now moves to the Senate, which will analyze the proposed changes in the course of H2. Since the legislative process is ongoing and since the draft legislation approved by the House is still subject to change, it's premature to comment in more detail on what to expect going forward and the potential impact on the industry and our business. Having said that, we welcome any tax reform that reduces the complexity of the Brazilian tax system without increasing the total tax burden, which is already among the highest in the world. Regarding direct taxes, including potential changes to the deductibility of the IOC, despite continued speculation, there have not been any material concrete developments on the legislative front. We will keep the market informed accordingly. Second, in terms of tax litigation in Brazil, as of June 30, 2023, our tax disputes classified as having a possible but not probable chance of loss reduced by almost BRL5 billion compared to December 31, 2022, thanks to favorable decisions we obtained in several disputes. We expect the administrative and judicial courts to continue ruling on certain tax positions during H2, such as tax assessments connected to the deductibility of the IOC, goodwill amortization expense, and the ICMS substitute in the taxable basis of the PIS and the COFINS. For further details, please refer to Item 26 in the notes to our financial statements. We will keep the market updated on any material developments. As mentioned before, we believe the merits of our legal positions will ultimately prevail. Now, turning to our Q2 financial performance, starting with net income. Normalized profit totaled nearly BRL2.7 billion in Q2, a 13% decrease versus last year. Two points worth noting here: first, last year's figure was positively impacted by approximately BRL1.2 billion in one-off tax credits recognized in Brazil. Without such one-off and related effects, our net income would have grown 18% year-over-year. Second, while net finance results totaled an expense of about BRL1 billion, around BRL500 million worse than last year, losses from derivative instruments used pursuant to our hedging policy, which has historically been a pain point, actually declined by close to BRL400 million. This reduction is a result of lower USD exposure and lower carry costs in Brazil and Argentina. As you may recall, since Q3 2022, we've been reducing financial hedges in Argentina, and our net finance results have improved since then. This trend should continue in Q3 and to a lesser extent in Q4 as we lap the reduction in exposure and hedging. Regarding cash flows, good news here. Cash flow from operating activity totaled approximately BRL3.4 billion in the quarter, which is BRL1.2 billion above last year. As a reminder, our cash flow from operating activities is highly impacted by the seasonality of our business and heavily skewed towards the second half of the year. For instance, in the last seven years, over 80% of our cash flow from operating activities was generated in H2. Similarly, working capital tends to be stronger in H2 but can be more volatile on a quarterly basis. Q1 is typically the weakest performance of the year, and working capital improved sequentially throughout the year. In terms of Q2, the biggest year-over-year improvement came from Brazil, followed by LAS, Argentina, and Chile, and CAC. As for working capital, receivables improved by about BRL900 million compared to last year, driven by lower tax credit recognition in Brazil versus Q2 2022 as well as volume performance in CAC, Argentina, and Canada. Inventories improved by BRL1.3 billion compared to last year, mainly due to a reduction in days of inventories year-over-year, not only in finished goods but also in packaging and raw materials across Brazil, Argentina, and Canada. Payables were flat relative to last year, mostly driven by Brazil and Canada. In Brazil, non-income tax payables, which had a negative year-over-year impact in Q1, positively affected Q2, thanks to our end-of-quarter sales performance. This improvement was offset by lower payables in Brazil, primarily due to reduced inventories and lower CapEx spend. In Canada, we faced a tough comparison regarding non-income tax payables as H1 2022 taxes were deferred to H2 due to COVID. This adverse impact should subside by year's end. Overall, cash flow from operating activities in the first half of the year ended ahead of H1 2022. Taking a broader view on longer-term trends, it is essential to highlight three points. First, our receivables, presented in days of sales, have been declining over time, especially in Brazil due to the channel mix. Second, our inventories, expressed in days of COGS, have been increasing due to the higher level of safety stock required to navigate supply chain disruptions caused by COVID-19 while maintaining service levels alongside more vertical operations and a greater SKU assortment. Third, when we look at our payables as days of COGS, CapEx, and SG&A, although the current figure is below the peak in 2020, it sits at over 130 days on average. Major suppliers typically have payment terms longer than 90 days, representing more than 55% of our spend, while smaller suppliers account for around 30% and have payment terms of approximately 30 days. Before moving to Q&A, I would like to invite everyone to join our ESG update, which we plan to host virtually in November. Stay tuned for more details. With that, let me turn it back to the operator.

The first question comes from Lucas Ferreira with JPMorgan.

My question is, I just wanted to understand a little bit more what drove the reduction in the COGS guidance, if it was mix-driven or maybe you're just too conservative before. Just I'm asking because I just wanted to understand if there's any reading into this for next year, if the Company is becoming leaner, more efficient, or if the mix is improving in a way that gives you a cost advantage.

Okay, Lucas, thank you very much for the question. Yes. So Brazil Beer cash COGS excluding the marketplace in Q2 grew 5.1% versus last year, better than what we anticipated, right? It was mostly driven by inflation in brewery performance, partially offset by FX and commodities. In H1, we are at 10.1% versus last year. Moving forward for the year, we reduced the guidance to 2.5% to have the full year in between 2.5% and 5.5%. Part of it was mix that was better than expected. Yes, so some of it was about non-hedged commodities, such as malt, barley, and energy being in a place better than we expected. We're really seeing that we're becoming more efficient in our footprint faster than expected. We have some projects unlocking innovation capabilities in our suppliers to produce, locally, bottles that in the previous year we were importing. Our breweries are larger and better suited to roll out the innovations we made in previous years. So there’s a piece of it that is efficiencies in supply and distribution footprint that will stay.

Lucas here. Just to add a few more points. Since you talked about potential implications for 2024, I think there are two points worth noting. Number one, as you know, inflation has been declining across markets. To the extent that this continues, it should be supportive going forward. And number two, regarding our hedging policy, granted, there’s still a lot of hedging to be done this year through the end of the year. But if you take the picture up to date, we’re seeing the BRLFX equation as a tailwind again, alongside aluminum and barley hedges, which have not been the case in 2023. So I think that’s different, and that’s improving so far. What’s still a headwind is the devaluation of the Argentine peso, which as we mentioned in our prepared remarks, is a point of attention. But net-net, we're seeing less cost pressure going into 2024 compared to where we were at this time last year.

The next question comes with Rob Ottenstein with Evercore. The next question comes with Thiago Duarte with BTG Pactual.

Yes, my first question actually relates to the industry in Brazil, Brazil Beer. You mentioned in the release and Jean made a comment about it being one of the points to watch as we go into the second half of the year. So if you could elaborate a little bit more on what you're seeing at the margin, particularly on two things. Number one, how you expect this to affect the seasonality of volumes throughout the year? Since the pandemic started, we saw Q3 volumes looking particularly strong for you guys and the industry in general. So just if you could discuss this a little bit in terms of what this implies for volumes in the second half of the year? Secondly, how does that affect the Company's pricing decision? I mean, when you took over as CEO, one key aspect you emphasized was how you have been paying a lot of attention to maintaining pricing without impacting the category and industry volumes in general. With the industry seeming to be a little bit weaker now, how does that factor into your guys' behavior? I think this is an important discussion. Lastly, I would like a follow-up on the comment, I think Jean made on mix with regards to how that affected the guidance, the reduction in the cost guidance for the year. Regarding how that change in the mix was, was the understanding that we had that you saw a much bigger impact from RGB in the quarter that could have been a reason for the lower cost. So I just wanted to see if we are reading things correctly here. If it was really an increase in RGB penetration relative to one-way presentations, that would be great to understand as well.

Okay. Thank you very much, Duarte. Let me try to address the industry first, then we'll talk about price and then go to mix overall regarding cost and prices. So Duarte, overall, this year has been a more stable year on a month-by-month basis compared to previous years due to the pandemic. Long-term, we are very confident about the industry. In Brazil, the industry is structurally better, with trading up and consumers evolving in the right direction. The category remains relevant for younger generations. However, when we look back at what happened during the pandemic, now that we are past it, we note that frequency increased. Consumers have been looking to enjoy beer more frequently at home, even on weekdays. The frequency that was normal in a mature market has now accelerated. We're seeing a residual effect on frequency that remains today. What we notice in the industry is a bit softer intensity. It's less about disposable income and more about the euphoric moments we experienced last year and the challenges with meeting this greater demand. This effect related to the euphoric post-pandemic moments is something to monitor as we have tough comparisons with the euphoria we saw in March last year, when restrictions lifted. This is a concern for us, but overall, the structural levers of the market are still strong. As for pricing, we are monitoring the market closely and remain flexible to make pricing adjustments based on disposable income and consumer elasticity. All our decisions are geared towards maximizing overall volume and price equations and generating better bottom line outcomes. Regarding mix, RGB did indeed have a significant impact. We are executing a major campaign promoting RGB's sustainability and affordability aspects for in-home occasions. We're pleased with this strategy; it is yielding positive results. A portion of the benefits did arise from overall supply chain efficiencies. Due to the pandemic, we had supply chain constraints and now with operations stabilizing, we're seeing better planning, better negotiations, and focusing on long-term initiatives with suppliers to improve efficiency.

The next question comes with Carlos Laboy with HSBC.

Given all the growth that you've had in BEES and the emphasis on refillable bottles, might you be able to give us some insight on how this might be shifting your channel mix and how those other channels are growing relative to modern trade? Also, is there any insight you can give us or anything you can share with us in terms of share volume versus share value and whether that has been behaving as expected?

Okay. Laboy, thank you very much for the questions. As you know, we consider BEES a vital piece of our strategy. It opens up our Company to all customers in Brazil. We ended the pandemic with over 1 million customers in the platform, a significant increase from 750,000. This helped engage small retailers who previously had limited access to our products, and we continue to strengthen this strategy with returnability in mind. We've seen resilience in small retailers performing well, while bigger retailers are adjusting their cash management and inventory. We're actually seeing significant growth in smaller formats and on-premise channels. Additionally, our third-party systems connected to BEES in the northeast and Midwest show great growth aligned with Brazil's agricultural development. Share of value versus share of volume has remained stable. In previous years, both metrics moved in the same direction. We expect the performance of our premium brands, with a notable 35% growth trend, will begin to enhance our share of value compared to share of volume. Overall, there’s a strong correlation between better brand performance and the sustainability of value growth.

So is it fair to say that modern trade has become a smaller component of your channel mix?

We can say that.

The next question comes with Isabella Simonato with Bank of America.

I have two questions. One quickly follows up on the beer market in Brazil and especially the pricing side. Are you guys witnessing any movement from competition or even at a more granular level, pricing deceleration as costs improve for most players? Is there any irrational or aggressive behavior on that side? That's the first question. The second question is on the LAS business. We also observed some price deceleration on LAS. I was wondering if you could provide us with more details on that front, what you expect going forward. If you could also provide details on the new approach toward Argentina in terms of cost management and having more local sourcing overall. How has this been impacting working capital in a measurable way? That's it for my side.

Okay. Thank you, Isabella. Coming back to the industry, what we are seeing is that the industry is structurally better now. I mentioned consumer confidence and engagement trends, as well as frequency dynamics, later impacted by tough historical comparables from the pandemic. Our competitive landscape is rational. The industry suffered from a lot of pressures in the previous two years due to currency devaluation and rising commodity prices, resulting in compressed margins. However, what we’ve seen is overall more rationality in the competitive landscape. Regarding LAS pricing, Lucas can provide details.

Isabella, Lucas here. To break it down into two segments: Argentina, and the other three markets, Bolivia, Paraguay, and Chile which together are relevant. Starting with Argentina, our approach aims to create sustainable value in this volatile environment, and we’re pleased with the results. The net effect of LAS hedging positively impacted our bottom line and cash flow generation. We find ourselves generating better cash flows in Argentina from operation sales compared to the past. For Bolivia, we are finally witnessing significant recovery after facing substantial challenges during COVID, while Paraguay maintains positive momentum. Chile has witnessed a major operational improvement with our investment strategies and local partnerships, leading to remarkable EBITDA and cash flow contribution so far this year. Overall, we are optimistic about the progress being made across these segments.

The next question comes with Alan Alanis with Santander.

I would like to explore the stable market share trends and the competitive landscape. In the Brazilian beer market, it seems that the second-largest player is performing well, having reported positive volumes in the second quarter. Can you help clarify these trends? Is the market share you are gaining primarily from the third-largest player? Additionally, congratulations on all the awards. Can you elaborate on the indicators that demonstrate the success of your branding strategy compared to that of the second-largest player?

Thank you for the question, Alan. Our sales volumes were strong compared to our competitors. In terms of selling volumes, we observed that our sellout market share remained steady in the first quarter and then improved in the second quarter, gaining 200 basis points. It's worth noting that during the peak of the pandemic years, we experienced a larger gain. However, we are seeing consistent growth this year, and we anticipate entering the third quarter with a favorable position for market share. I'm thrilled about our brands' performance! We are seeing continuous growth in the high-end segment, and our leading brands like Corona and Spaten are doing exceptionally well. Metrics regarding brand health show that four million new consumers have developed a positive view of our brands since before the pandemic. This figure, along with our brand portfolio and active engagement through direct-to-consumer channels, is a key performance indicator that illustrates our increasing brand equity.

The next question comes from Thiago Bortoluci with Goldman Sachs.

I'd also like to double-click and discuss more on your top line dynamics in Brazil Beer. You mentioned premium and super premium portfolio growing at 30%, while your consolidated volumes in Brazil fell by 2.5%. Could you clarify how this portfolio mix contributed to the overall decline? Secondly, we understand there is seasonality, but I noticed a slight contraction in your average price per hectoliter in Brazil excluding BEES, a 3% decline quarter-on-quarter. With an improving mix, how do you reconcile these sequentially lower prices with your trade strategy?

Okay. I'll address the first question. I’d ask you to repeat the second one. The standout issue affecting the basket’s overall volumes in Brazil was particularly the value segment; we saw a positive core performance. However, the value brands experienced a 35% decline. We performed well in the core and also exceeded growth on the high-end segment. This contraction was a focal point for our strategies as we aim to uplift the market across our core and premium segments. Repeating your second question?

No, sure. Your mix has been improving throughout the year, quarter-on-quarter as well, but I noticed in Q1, core brands probably performed better. This quarter generated a 3% quarter-on-quarter contraction in average prices per beer ex marketplace despite an improvement in overall mix, perhaps indicating more aggressive discounting?

Let me clarify that. Discounts were not a factor during this quarter. Price adjustments usually reflect natural seasonality as we transition between regions and seasons. We therefore believe the regional distribution variations impacted the sequential numbers. Our revenue management practices remain robust, and we maintain low levels of discounting from pre-pandemic levels. My conclusion would point to seasonal effects related to geography and less about our pricing strategy.

Clear, Jean. If I may, a final question regarding potential price hikes and adjustments, were there anything noteworthy implemented this quarter?

Historically, we've approached pricing with one big adjustment per year followed by a period of digestion. Now we focus more on agile and granular initiatives. BEES enhances our capacity in that regard by allowing us to monitor consumer willingness to pay and adjust our strategy dynamically. Thus, we've continued with our approach and have been mindful of consumer income trends and market elasticities when making our pricing decisions.

The next question comes with Rodrigo Alcantara with UBS.

A lot has been asked about beer. Could you comment on Brazil's NAB and the slight volume decline? You mentioned a soft industry, but I'm having trouble understanding this number compared to what Coca-Cola reported in this segment. You said Pepsi is performing okay, right? Regarding energy drinks, perhaps the brand may be having some issues there. Can you comment on that? Finally, regarding BEES, we've seen great acceleration in sales growth of 30% in beer. I'm curious if you can comment on how much of the customer wallet your NAB represents and how much of this increase has been driven by BEES's success.

On NAB, we're very excited about its progress. We've made significant changes in the previous two years, and our go-to-market strategy is solid. However, we did face a decline in volumes this quarter due to very strong volumes last year. Nevertheless, our efforts to focus on net revenue per hectoliter have been effective. The brands are performing well; for instance, Pepsi Black is thriving and Gatorade is doing well. In summary, we are optimistic about the NAB, even with a slight decline in volumes. Regarding your second question, the customer wallet is still largely untapped. There’s a significant opportunity in enhancing financial access for even more products, and we are taking steps in that direction through our marketplace initiatives.

In addition to what Jean mentioned regarding BEES, it's important to note that we've successfully expanded BEES through our direct distribution and partnerships, which is having a growing effect on our overall business. Upon digging deeper into the number of SKUs offered per partner, we still observe a relatively low average. Thus, increasing our SKU variety with partners will be key in driving further growth in the marketplace and serving customers better.

Ladies and gentlemen, this concludes today's question-and-answer session. I would like to invite Mr. Jean Jereissati to proceed with his closing remarks. Please go ahead, sir.

Thank you all who joined our call for your time and attention. The second quarter results were really about consistency. I mentioned in the beginning of the year that we wanted Brazil to maintain its momentum, and I think when you review the bottom line, it's really accelerated. We've discussed international operations serving as a rebound, and we are indeed witnessing that. For the remainder of the year, our commercial strategy in Brazil is robust, and costs are expected to improve. There’s a lot happening in SG&A aimed at building a leaner organization in H2, which will start to show results. CAC is on a recovery path, with the toughest quarters behind us. Argentina remains challenging, but LAS shows resilience. Overall, we are set to focus on growth and profitability as well as better organic EBITDA growth in 2023 compared to 2022's growth of 17.1%. We're closing H1 with over 37% EBITDA growth, so we are on target to achieve continued improvements. With that, thank you very much. See you in October, and have a great day.

That does conclude Ambev's audio conference for today. Thank you for your participation. You may now disconnect.