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A. Operating Results
Introduction
The following management’s
discussion and analysis of financial condition and results of operations should be read in conjunction with our audited consolidated financial
statements included elsewhere in this annual report on Form 20-F. This annual report contains forward-looking statements that involve
risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of
various factors including, without limitation, those set forth in “Cautionary Statement Regarding Forward-Looking Information”
and the matters set forth in this annual report generally.
We have prepared our audited
consolidated financial statements as of December 31, 2025, and 2024, and for the three years ended December 31, 2025, in Brazilian
reais and in accordance with IFRS as issued by the IASB.
The financial information
and related discussion and analysis contained in this item are in accordance with IFRS as issued by the IASB. The amounts are in millions
of Brazilian reais, unless otherwise stated.
Brazilian Economic
Environment and Inflation Impacts
A relevant part of our operations
and assets is located in Brazil. Accordingly, our results of operations are affected by macroeconomic conditions in Brazil, including
inflation rates, interest rates, Brazilian GDP growth, employment rates, wage levels, consumer confidence and credit availability.
The economic
environment remained challenging for our operations throughout the last three years. The Brazilian GDP, as published by the
Brazilian Institute of Geography and Statistics (“IBGE”), increased by 3.4% and 3.2% in 2024 and 2023, respectively. In
the nine months ended September 30, 2025, the Brazilian GDP increased by 2.4% compared to the same period in 2024. The rate of
growth of Brazilian GDP has a direct effect on consumer demand, which we believe affects demand for our products and services and,
consequently, our net operating revenue.
In addition, consumption
of beer, other alcoholic beverages and soft drinks in many of the jurisdictions in which we operate, including Brazil, is closely linked
to general economic conditions, such that levels of consumption tend to rise during periods of rising per capita income and to fall during
periods of declining per capita income. Consumption of beer and other alcoholic and non-alcoholic beverages also varies in accordance with
changes in disposable income, e.g., as a result of the level of Brazilian unemployment. As of December 31, 2025, Brazilian unemployment,
as measured by the monthly National Household Sample Survey (Pesquisa Nacional por Amostra de Domicílios Contínua),
published by the IBGE, was 5.1%, compared to 6.8% as of December 31, 2024, and 7.8% as of December 31, 2023. As with GDP, the level of
Brazilian unemployment has a direct effect on consumer demand, which we believe affects demand for our products and services and, consequently,
our net operating revenue.
The following table sets
forth data on real GDP growth, unemployment, inflation and interest rates, and the U.S. dollar exchange rate for the indicated periods:
As of and for the year ended December 31,
2025 2024 2023
GDP growth (%) (1) 2.4* 3.4 3.2
Unemployment (%) (2) 5.1 6.8 7.8
Inflation (IGP-M) (%) (3) (1.1) 6.5 (3.2)
Inflation (IPCA) (%) (4) 4.3 4.8 4.6
CDI (%) (5) 14.3 10.8 13.0
(Depreciation) appreciation of the real against the U.S. dollar (%) 11.1 (27.9) 7.2
Exchange rate (closing) of the real to the U.S. dollar (6) 5.5024 6.1923 4.8413
Average exchange rate the real to the U.S. dollars (6) *For the nine months ended September 30, 2025. 5.5879 5.3895 4.9950
(1) Source: IBGE
(2) Source: IBGE
(3) Source: Fundação Getulio Vargas - FGV.
(4) Source: IBGE.
(5) Source: Brazilian Central Bank.
(6) Source: Brazilian Central Bank.
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Inflation Impacts
In 2025, Brazilian inflation,
as measured by the General Market Price Index (Índice Geral de Preços - Mercado, or “IGP-M”), published
by Fundação Getulio Vargas (“FGV”), a private organization, was a deflation of 1.1%, compared to an inflation
of 6.5% during 2024 and a deflation of 3.2% during 2023. In 2025, Brazilian inflation, as measured by the Broad Consumer Price Index (Índice
Nacional de Preços ao Consumidor Ampliado, or “IPCA”), published by the IBGE, was 4.3%, compared to 4.8% during
2024 and 4.6% during 2023.
Inflation impacts our operations
in several ways. Mainly, inflation can increase the cost of raw materials, labor, and operational expenses, causing us to encounter pressure
on our gross and profit margins. Furthermore, elevated inflation diminishes consumers’ purchasing power and alters their spending
patterns. As prices escalate, consumers may exhibit greater sensitivity to pricing, sometimes prioritizing essential goods over discretionary
items such as beverages. This change in consumer behavior not only can impact our sales volumes and revenue, but also necessitates cautious
pricing strategies amidst rising costs. Addressing these intertwined challenges demands us to adopt a vigilant approach to cost and expenses
management and pricing strategies. Over the years we have consistently evaluated and enhanced our supply chain efficiency, explored alternative
sourcing arrangements, and implemented targeted cost-containment measures to mitigate the effects of inflation on our cost structure.
Concurrently, we closely monitor shifts in consumer preferences and market dynamics to tailor our product offerings and marketing strategies
accordingly. By proactively managing these factors, we endeavor to navigate the uncertainties associated with inflation and sustain our
business performance in the Brazilian market. Considering the existing inflationary pressures, our Brazilian operations may be impacted
by one or a combination of the following factors arising from, or related to, inflation and our efforts to combat inflation:
• Price adjustment: in an effort to sustain our profitability margins, we may pass on to consumers higher production costs driven by inflation, including higher costs for beverage production, packaging materials, transportation, and other operational expenses, via price increase to our consumers.
• Inflation-linked contracts: we may enter into inflation-linked contracts where prices are adjusted periodically based on an inflation index, such as the IPCA or IGP-M indexes used in Brazil, and PPI (Producer Price Index) for United States such as our contracts for packaging materials and malt.
• Increased labor costs: Inflation can also lead to higher labor costs for us, both for the wages of our employees as well as third-party service providers. Our employees may negotiate higher wages or demand cost-of-living adjustments to cope with rising prices. Additionally, third-party service providers, such as logistics companies and maintenance contractors, may increase their rates to offset inflationary pressures.
For further quantification
and other information regarding inflation impacts on our results of operations, see our discussions below under “Item 5. Operating
and Financial Review and Prospects—A. Operating Results—Selected Financial Data by Business Segment—Cost of Sales”
and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Selected Financial Data by Business
Segment—Commercial, Distribution and Administrative Expenses” for the year ended December 31, 2025 compared to the year ended
December 31, 2024 and for the year ended December 31, 2024 compared to the year ended December 31, 2023. Our results of operations are
affected by changes in the exchange rates of the real against the U.S. dollar. During 2025, the real appreciated against
the U.S. dollar by 11.1%, following a depreciation of 27.9% in 2024 and an appreciation of 7.2% during 2023. The depreciation of the real
against the U.S. dollar may create inflationary pressures in Brazil, particularly in the category of food products. In periods of significant
inflation, we may not be able to pass through our increased cost of goods to our customers to our customers and demand for our products
may contract.
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Argentine Economic
Environment and Inflation Impacts
A relevant part of our operations
is located in Argentina, which is considered a hyperinflationary. Therefore, our financial condition and the results of our operations
are significantly dependent upon economic conditions prevailing in such country.
The table below shows Argentina’s
GDP, inflation rates, dollar exchange rates, the appreciation (depreciation) of the peso against the U.S. dollar for the indicated
periods (inter-annual information-which is the 12-month period preceding the dates presented-is presented to conform to our fiscal year
periods).
Fiscal year ended December 31,
2025 2024 2023
(inter-annual data)
GDP (%) (1) 5.2* (1.7) (2.5)
Unemployment (%)(2) 6.6* 8.2 7.4
Inflation (IPIM) (%) (3) 26.2 67.1 276.4
Inflation (CPI) (%)(4) 31.5 117.8 211.4
Depreciation of the Peso against the U.S. dollar (%) 41 28 351
Average exchange rate per USD 1.00 (5) ARS 1455 ARS 916.75 ARS 808.25
*As of and for the nine months ended September 30, 2025.
(1) Represents annual growth of the year end GDP at constant prices (2004). Source: INDEC
(2) Source: INDEC.
(3) IPIM (Índice de Precios Internos al por Mayor) is the wholesale price index as measured by the Argentine Ministry of Treasury. Source: INDEC
(4) Source: INDEC
(5) Represents average of the selling and buying exchange rate quoted by Banco de la Nación Argentina as of December 31.
Argentine GDP increased by
5.2% in 2025, compared to a decrease of 1.7% in 2024, and a decrease of 2.5% in 2023. As of September 30, 2025, the unemployment rate
was at 6.6% of the country’s economically active population, compared to 8.2% as of December 31, 2024, and 7.4% as of December 31,
2023.
Changes in short- and long-term
interest rates, unemployment and inflation rates may reduce the purchasing power of our consumers. These factors, combined with low GDP
growth, may reduce general consumption rates.
Effects of inflation in Argentina
The following are annual
inflation rates during the fiscal years indicated, based on information published by the INDEC, an entity dependent of the Argentine Ministry
of Treasury.
Consumer price index Wholesale price index
Fiscal year ended December 31, (inter-annual data)
2023 211.4 % 276.4 %
2024 117.8 % 67.1 %
2025 31.5 % 26.2 %
Increases in the rate of
inflation are likely to have an adverse effect on our operations. Higher inflation may lead to an increase in the prices we charge our
consumers for our products and services, which may ultimately reduce our sales volume. See “Item 3. Key Information—D. Risk
Factors—Risks Relating to Other Countries in Which We Operate—Continuing high rates of inflation in Argentina may have an
adverse effect on the economy and our business, financial condition and results of operations.”
Inflation in Argentine and
our efforts to combat such inflation mainly impact our operations through:
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• Price adjustments: in an effort to sustain our profitability margins, we may pass on to consumers higher production costs driven by inflation, including higher costs for beverage production, packaging materials, transportation, and other operational expenses, via price increase to our consumers.
• Inflation-linked contracts: we may enter into inflation-linked contracts where prices are adjusted periodically based on an inflation index, such as the Consumer Price Index (mostly CPI or PIM indexes are used in Argentina), such as our contracts for packaging materials and malt.
• Increased labor costs: inflation can also lead to higher labor costs for us, both for the wages of our employees as well as third-party service providers. Our employees may negotiate higher wages or demand cost-of-living adjustments to cope with rising prices. Additionally, third-party service providers, such as logistics companies and maintenance contractors, may increase their rates to offset inflationary pressures.
In accordance with IAS 29 and
IAS 21, we make certain accounting adjustments to reflect the hyperinflationary environment in Argentina, mainly requiring us to restate
the non-monetary assets and liabilities, the equity and the income statement of subsidiaries operating in Argentina for the change in
the general purchasing power of the local currency, using official indices before converting the local amounts at the closing rate of
the period. In 2025, one of the main effects of the hyperinflation accounting for our Argentine operations was a negative impact of R$420.7
million in net revenue.
Impact of Tax Credits
Corporate Income Taxes
Recovery–SELIC interest upon the recovery of taxes
On September 24, 2021,
the STF ruled, with binding effects, that the levy of IRPJ and CSLL (Brazilian income taxes) on amounts received by taxpayers due to the
application of the SELIC rate on the refund of overpaid taxes is unconstitutional.
We have ongoing judicial
proceedings on this subject. Based on the binding decision issued by STF and on the analysis of our external counsels, we assessed as
probable the chances of such tax treatment being granted with regards to the recognition of the Company’s right to recover/offset
the amount of IRPJ and CSLL calculated and paid over the SELIC interest earned upon the refund of taxes accounted in the period between
2006 and 2023, as well as the exclusion of amounts of this nature in the calculation of IRPJ/CSLL taxable basis. As of December 2025,
we have R$601.8 million in tax credits corresponding to IRPJ and CSLL taxes unduly paid over SELIC interest earned on tax refunds
that were recorded in 2021 and 2022, which cannot be used for offsetting until judicial proceedings are concluded on this matter.
Business Segments
We conduct our direct operations
through four business segments as follows:
• Brazil: Beer sales division and NAB sales division.
• Central America and the Caribbean (CAC): Dominican Republic, Cuba, Guatemala and Panama.
• Latin America South (LAS): Argentina, Bolivia, Paraguay, Uruguay and Chile.
• Canada: Labatt’s operations in Canada.
Our chief operating decision
maker uses income from operations as the main measure of segment profitability.
Year Ended December 31, 2025 Compared
to Year Ended December 31, 2024
The table below sets forth
certain of our operating highlights for the years presented:
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Consolidated Financial Highlights
2025 2024 % Change
(in R$ million, except volume amounts, percentages and per share amounts)
Sales volume—’000 hectoliters 175,829.2 181,920.5 (3.3)%
Net sales 88,242.5 89,452.7 (1.4)%
Net revenue per hectoliter—R$/hl 501.9 491.7 2.1%
Cost of sales (42,864.1) (43,615.1) (1.7)%
Gross profit 45,378.3 45,837.6 (1.0)%
Gross margin (%) 51.4% 51.2% 20bps
Commercial and distribution expenses (19,277.0) (20,191.3) (4.5)%
Administrative expenses (5,862.9) (6,201.1) (5.5)%
Other operating income/(expenses) 2,435.9 2,457.3 (0.9)%
Exceptional items 643.3 (100.8) (738.2)%
Income from operations 23,317.6 21,801.7 7.0%
Operating margin (%) 26.4% 24.4% 200bps
Net income 15,988.4 14,847.0 7.7%
Net margin (%) 18.1% 16.6% 150bps
Margin Analysis
The following table sets
forth certain line items of our income statement expressed as percentages of net sales for the years ended December 31, 2025 and
2024:
Year Ended December 31,
2025 2024
(%) (%)
Net sales 100 100.0
Cost of sales (48.6) (48.8)
Gross profit 51.4 51.2
Commercial and distribution expenses (21.8) (22.6)
Administrative expenses (6.6) (6.9)
Other operating income/(expenses) 2.8 2.7
Exceptional items 0.7 (0.1)
Income from operations 26.4 24.4
Selected Financial
Data by Business Segment
The following table sets
forth selected financial data by business segment for the years ended December 31, 2025 and 2024:
Year Ended December 31,
2025 2024
Brazil CAC LAS Canada Total Brazil CAC LAS Canada Total
(in R$ million)
Net sales 49,030.8 10,963.9 17,988.3 10,259.5 88,242.5 48,605.3 11,023.7 19,829.7 9,993.9 89,452.7
Cost of sales (24,254.9) (5,022.2) (9,263.8) (4,323.3) (42,864.1) (23,809.3) (5,076.2) (10,460.4) (4,269.2) (43,615.1)
Gross profit 24,775.9 5,941.7 8,724.5 5,936.3 45,378.3 24,796.0 5,947.5 9,369.3 5,724.7 45,837.6
Commercial, distribution and administrative expenses (14,661.7) (2.070,2) (4,772.9) (3,635.1) (25,139.9) (15,160.4) (2,209.9) (5,416.0) (3,606.2) (26,392.4)
Other operating income/ (expenses) 2.370,8 (22.2) 94.4 (7.1) 2,435.9 2,415.8 (13.5) 45.8 9.2 2,457.3
Exceptional items (36.1) 824.7 (120.2) (25.2) 643.3 (16.2) (9.8) (51.6) (23.2) (100.8)
Income from operations 12,448.9 4,674.0 3,925.9 2,268.9 23,317.6 12,035.2 3,714.3 3,947.6 2,104.5 21,801.7
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Net Sales
Net sales decreased by
1.4% in 2025, to R$88,242.5 million from R$89,452.7 million in 2024, as a consequence of a 3.3% decrease in volumes sold, partially offset
by a 2.1% growth in net revenue per hectoliter, as shown in the tables set forth below.
Net Sales Year Ended December 31,
2025 2024
Sales % of Total Sales % of Total % Change
(in R$ million, except percentages)
Brazil 49,030.8 55.6% 48,605.3 54.3% 0.9%
Beer Brazil 40,230.6 45.6% 40,220.2 45.0% 0.0%
NAB 8,800.1 10.0% 8,385.2 9.4% 4.9%
CAC 10,963.9 12.4% 11,023.7 12.3% (0.5)%
Latin America South 17,988.3 20.4% 19,829.7 22.2% (9.3)%
Canada 10,259.5 11.6% 9,993.9 11.2% 2.7%
Total 88,242.5 100.0% 89,452.7 100.0% (1.4)%
Sales Volumes Year Ended December 31,
2025 2024
Volume % of Total Volume % of Total % Change
(in thousands of hectoliters, except percentages)
Brazil 123,008.9 70.0% 128,320.2 70.5% (4.1)%
Beer Brazil 89,394.5 50.8% 93,634.6 51.5% (4.5)%
NAB 33,614.4 19.1% 34,685.6 19.1% (3.1)%
CAC 12,035.8 6.8% 12,408.6 6.8% (3.0)%
Latin America South 32,162.3 18.3% 32,447.6 17.8% (0.9)%
Canada 8,622.2 4.9% 8,744.1 4.8% (1.4)%
Total 175,829.2 100.0% 181,920.5 100.0% (3.3)%
Net Revenue per Hectoliter Year Ended December 31,
2025 2024 % Change
(in R$, except percentages)
Brazil 398.6 378.8 5.2%
Beer Brazil 450.0 429.5 4.8%
NAB 261.8 241.7 8.3%
CAC 910.9 888.4 2.5%
Latin America South 559.3 611.1 (8.5)%
Canada 1,189.9 1,142.9 4.1%
Total 501.9 491.7 2.1%
Brazilian Operations
Total net sales from our
Brazilian operations increased by 0.9% in 2025, to R$49,030.8 million from R$48,605.3 million in 2024.
Net sales of beer in Brazil
remained broadly stable in 2025, to R$40,230.6 million from R$40,220.2 million in 2024. This was primarily driven by 4.8% increase in
net revenue per hectoliter, reflecting the implementation of strategic revenue management initiatives, being offset by a 4.5% decrease
in volume sold given a softer industry environment, mainly impacted by adverse weather conditions and pressure on consumer purchasing
power.
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Net sales of NAB in Brazil
increased by 4.9% in 2025, to R$8,800.1 million from R$8,385.2 million in 2024. This variation reflects a 3.1% decrease in volume sold,
coupled with an 8.3% increase in net revenue per hectoliter in 2025. Volume declines reflected contraction in regular CSDs amid a softer
consumption environment, while net revenue per hectoliter increased due to disciplined revenue management and a favorable mix, including
continued growth in no-sugar products.
CAC Operations
Net sales from our CAC operations
decreased by 0.5% in 2025, to R$10,963.9 million from R$11,023.7 million in 2024. This variation reflects a 3.0% decrease in volume sold,
partially offset by a 2.5% increase in net revenue per hectoliter in 2025. Volume softness was driven mainly by weaker trends in Dominican
Republic beer (including weather disruptions during the year) and Panama beer industry contraction, while net revenue per hectoliter benefited
from revenue management and mix initiatives, partly offset by country mix headwinds.
Latin America South Operations
Net sales from our Latin
America South operations decreased by 9.3% in 2025, to R$17,988.3 million from R$19,829.7 million in 2024. This variation is a consequence
of a 0.9% decrease in volume sold, coupled with an 8.5% decrease in net revenue per hectoliter in 2025. The topline decline primarily
reflects continued challenging consumer environment in Argentina as well as adverse currency translation effects on reported results.
Canada Operations
Net sales from our Canadian
operations increased by 2.7% in 2025, to R$10,259.5 million from R$9,993.9 million in 2024. This variation reflects a 1.4% decrease in
volume sold, coupled with a 4.1% increase in net revenue per hectoliter in 2025. The increase in net revenue per hectoliter was primarily
driven by revenue management initiatives and favorable channel mix (including benefits from Ontario expansion), as well as improved brand
mix led by premium and RTDs.
Cost of Sales
Cost of sales decreased by
1.7% in 2025, to R$42,864.1 million from R$43,615.1 million in 2024. As a percentage of our net sales, total cost of sales decreased
to 48.6% in 2025 from 48.8% in 2024.
The table below sets forth
information on cost of sales per hectoliter for the periods presented:
Cost of Sales per Hectoliter Year Ended December 31,
2025 2024 % Change
(in R$, except percentages)
Brazil 197.2 185.5 6.3%
Beer Brazil 216.8 205.9 5.3%
NAB 145.0 130.5 11.1%
CAC 417.3 409.1 2.0%
Latin America South 288.0 322.4 (10.7)%
Canada 501.4 488.2 2.7%
Total 243.8 239.7 1.7%
Brazilian Operations
Total cost of sales for our
Brazilian operations increased by 1.9% in 2025, to R$24,254.9 million from R$23,809.3 million in 2024. On a per hectoliter basis, our
Brazilian operations’ cost of sales increased by 6.3% in 2025, to R$197.2 per hectoliter from R$185.5 per hectoliter in 2024.
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Cost of sales for our Brazilian
beer operations increased by 0.5% in 2025, to R$19,380.5 million from R$19,282.3 million in 2024, with cost of sales per hectoliter growing
by 5.3% (R$216.8 in 2025 versus R$205.9 in 2024), mainly explained by higher foreign exchange and commodity costs, particularly packaging
inputs such as aluminum, as well as unfavorable brand mix and higher unitary costs from lower volumes, partially offset by cost efficiencies
and our hedging strategy timing throughout the year.
Cost of sales for our Brazilian
NAB segment increased by 7.7% in 2025, to R$4,874.4 million from R$4,526.9 million in 2024, with the cost of sales per hectoliter growing
by 11.1% (R$145.0 in 2025 versus R$130.5 in 2024), mainly as result of foreign exchange impacts and higher packaging and input costs,
including PET, as well as higher costs associated with single serve mix and operational deleverage due to lower volumes.
CAC Operations
Cost of sales for our CAC
operations decreased by 1.1% in 2025, to R$5,022.2 million from R$5,076.2 million in 2024, with the cost of sales per hectoliter growing
by 2.0% (R$417.3 in 2025 versus R$409.1 in 2024), mainly driven by input cost inflation pressures across the region, partially offset
by operating efficiencies that helped mitigate the cost pressures.
Latin America South Operations
Cost of sales for our Latin
America South operations decreased by 11.4% in 2025, to R$9,263.8 million from R$10,460.4 million in 2024, with the cost of sales per
hectoliter decreasing by 10.7% (R$288.0 in 2025 versus R$322.4 in 2024), mainly due to lower volumes and foreign exchange impacts.
Canada Operations
Cost of sales for our Canadian
operations increased by 1.3% in 2025, to R$4,323.3 million from R$4,269.2 million in 2024, with the cost of sales per hectoliter increasing
by 2.7% (R$501.4 in 2025 versus R$488.2 in 2024), due to commodity and foreign exchange headwinds as well as general inflation.
Gross Profit
As a result of the foregoing,
gross profit decreased by 1.0% in 2025, to R$45,378.3 million from R$45,837.6 million in 2024. The table below sets forth the contribution
of each business segment to our consolidated gross profit:
Gross Profit
2025 2024
Amount % of Total Margin Amount % of Total Margin
(in R$ million, except percentages)
Brazil 24,775.9 54.6% 50.5% 24,796.0 54.1% 51%
Beer Brazil 20,850.2 45.9% 51.8% 20,937.8 45.7% 52%
NAB 3,925.7 8.7% 44.6% 3,858.2 8.4% 46%
CAC 5,941.7 13.1% 54.2% 5,947.5 13.0% 54%
Latin America South 8,724.5 19.2% 48.5% 9,369.3 20.4% 47%
Canada 5,936.3 13.1% 57.9% 5,724.7 12.5% 57%
Total 45,378.3 100.0% 51.4% 45,837.6 100.0% 51%
Commercial, Distribution
and Administrative Expenses
Our commercial, distribution
and administrative expenses decreased by 4.7% in 2025, to R$25,139.9 million from R$26,392.4 million in 2024. An analysis of commercial
and administrative expenses for each business segment is set forth below.
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Brazilian Operations
Total commercial, distribution
and administrative expenses in Brazil decreased by 3.3% in 2025, to R$14,661.7 million from R$15,160.4 million in 2024.
Commercial, distribution
and administrative expenses for our Brazilian beer operations decreased by 3.3% in 2025, to R$12,427.4 million from R$12,849.6 million
in 2024, primarily due to lower distribution expenses (driven by lower volumes and a higher weight of third-party distributors) and lower
administrative expenses (mainly from lower variable compensation accruals), partially offset by continued commercial investments.
Commercial, distribution
and administrative expenses for the NAB segment in Brazil decreased by 3.3% in 2025, to R$2,234.4 million from R$2,310.8 million in 2024,
mainly due to lower distribution expenses (driven by lower volumes) and lower administrative expenses (mainly from lower variable compensation
accruals).
CAC Operations
Commercial, distribution
and administrative expenses for our CAC operations decreased by 6.3% in 2025, to R$2,070.2 million from R$2,209.9 million in 2024, mainly
due to lower distribution expenses (reflecting lower volumes) and administrative savings driven by lower variable compensation accruals.
Latin America South Operations
Commercial, distribution
and administrative expenses for our Latin America South operations decreased by 11.9% in 2025, to R$4,772.9 million from R$5,416.0 million
in 2024, driven mainly by the impact of Argentina’s macro dynamics on our reported figures, partially offset by continued sales
and marketing investments.
Canada Operations
Commercial, distribution
and administrative expenses for our Canadian operations increased by 0.8% in 2025, to R$3,635.1 million from R$3,606.2 million in 2024, driven mainly by higher sales and marketing investments, partially offset by distribution network efficiencies and administrative
savings.
Other Operating
Income (Expense)
Other operating income decreased
by 0.9% in 2025, to R$2,435.9 million from R$2,457.3 million in 2024. This result is mainly explained by lower sales volumes.
Exceptional Items
Exceptional items improved
by R$744.1 million in 2025, to a net income of R$643.3 million from an expense of R$100.8 million in 2024. The exceptional items recorded
in 2025 were mainly due to restructuring expenses related to organizational improvements, resizing initiatives, and digitalization efforts
within the Company, as well as to the results from the sale of a subsidiary in CAC, while in 2024 our exceptional expenses were mainly
due to restructuring expenses primarily related to organizational alignments as a result of operational improvements, sizing and digitalization
efforts in Brazil, LAS, CAC and Canada.
Income from Operations
As a result of the foregoing,
income from operations increased by 7.0% in 2025, to R$23,317.6 million from R$21,801.7 million in 2024.
Net Finance Result
Our net finance result
increased by 72.6% in 2025, to an expense of R$4,001.7 million from an expense of R$2,318.2 million in 2024. This result is mainly explained
by (i) higher losses on non-derivative instruments, largely from USD purchases and foreign exchange variation losses (including Bolivia),
(ii) higher losses on derivative instruments mainly because the cost of holding foreign exchange hedge positions in Brazil increased
(higher foreign exchange carry costs means higher rate differential between Fed Funds and Selic Rate over the year) and (iii) lower
interest income, mainly driven by lower BADLAR and currency devaluation in Argentina.
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Our total debt, including
current and non-current interest-bearing loans and borrowing, decreased by R$65.8 million in 2025, while our cash and cash equivalents
and current investment securities less bank overdrafts decreased by R$9,517.7 million in 2025.
Income Tax Expense
Our consolidated income tax
and social contribution on profits totaled an expense of R$3,433.2 million in 2025 from R$4,640.4 million in 2024. The effective tax rate
in 2025 was 17.7%, compared to 23.8% in the previous year. Such decrease in our effective tax rate in 2025 was primarily due to the
sale of our subsidiary in CAC, partial reversal of a tax liability recognized in connection with the Brazilian 2017 Amnesty Program and
certain income tax incentives.
Net Income
As
a result of the foregoing, net income increased by 7.7% in 2025, to R$15,988.4 million
from R$14,847.0 million in 2024.
Year Ended December 31, 2024 Compared
to Year Ended December 31, 2023
The table below sets forth
certain of our operating highlights for the years presented:
Consolidated Financial Highlights
2024 2023 % Change
(in R$ million, except volume amounts, percentages and per share amounts)
Sales volume—’000 hectoliters 181,920.5 183,659.0 (0.9)%
Net sales 89,452.7 79,736.9 12.2%
Net revenue per hectoliter—R$/hl 491.7 434.2 13.3%
Cost of sales (43,615.1) (39,291.6) 11.0%
Gross profit 45,837.6 40,445.3 13.3%
Gross margin (%) 51.2% 50.7% 50 bps
Commercial and distribution expenses (20,191.3) (18,163.1) 11.2%
Administrative expenses (6,201.1) (5,273.7) 17.6%
Other operating income/(expenses) 2,457.3 2,028.9 21.1%
Exceptional items (100.8) (206.4) (51.2)%
Income from operations 21,801.7 18,831.1 15.8%
Operating margin (%) 24.4% 23.6% 80 bps
Net income 14,847.0 14,960.4 (0.8)%
Net margin (%) 16.6% 18.8% -220 bps
Margin Analysis
The following table sets
forth certain line items of our income statement expressed as percentages of net sales for the years ended December 31, 2024 and
2023:
Year Ended December 31,
2024 2023
(%) (%)
Net sales 100.0 100.0
Cost of sales (48.8) (49.3)
Gross profit 51.2 50.7
Commercial and distribution expenses (22.6) (22.8)
Administrative expenses (6.9) (6.6)
Other operating income/(expenses) 2.7 2.5
Exceptional items (0.1) (0.3)
Income from operations 24.4 23.6
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Selected Financial
Data by Business Segment
The following table sets
forth selected financial data by business segment for the years ended December 31, 2024, and 2023:
Year Ended December 31,
2024 2023
Brazil CAC LAS Canada Total Brazil CAC LAS Canada Total
(in R$ million)
Net sales 48,605.3 11,023.7 19,829.7 9,993.9 89,452.7 46,361.7 10,044.8 13,797.2 9,533.2 79,736.9
Cost of sales (23,809.3) (5,076.2) (10,460.4) (4,269.2) (43,615.1) (23,516.1) (5,035.1) (6,657.3) (4,083.1) (39,291.6)
Gross profit 24,796.0 5,947.5 9,369.3 5,724.7 45,837.6 22,845.6 5,009.7 7,139.9 5,450.1 40,445.3
Sales, marketing, distribution and administrative expenses (15,160.4) (2,209.9) (5,416.0) (3,606.2) (26,392.4) (14,468.8) (1,931.2) (3,463.8) (3,573.0) (23,436.8)
Other operating income/ (expenses) 2,415.8 (13.5) 45.8 9.2 2,457.3 1,892.5 26.3 95.0 15.1 2,028.9
Exceptional items (16.2) (9.8) (51.6) (23.2) (100.8) (137.8) (17.9) (47.6) (3.1) (206.4)
Income from operations 12,035.2 3,714.3 3,947.6 2,104.5 21,801.7 10,131.5 3,086.9 3,723.5 1,889.1 18,831.1
Net Sales
Net sales increased by
12.2% in 2024, to R$89,452.7 million from R$79,736.9 million in 2023, as a consequence of a 13.3% growth in net revenue per hectoliter
and was partially offset by a 0.9% decrease in volumes sold, mainly driven by Latin America South and Canada declines while Brazil and
CAC operations continued to grow, as shown in the tables set forth below.
Net Sales Year Ended December 31,
2024 2023
Sales % of Total Sales % of Total % Change
(in R$ million, except percentages)
Brazil 48,605.3 54.3% 46,361.7 58.1% 4.8%
Beer Brazil 40,220.2 45.0% 38,985.9 48.9% 3.2%
NAB 8,385.2 9.4% 7,375.8 9.3% 13.7%
CAC 11,023.7 12.3% 10,044.8 12.6% 9.7%
Latin America South 19,829.7 22.2% 13,797.2 17.3% 43.7%
Canada 9,993.9 11.2% 9,533.2 12.0% 4.8%
Total 89,452.7 100.0% 79,736.9 100.0% 12.2%
Sales Volumes Year Ended December 31,
2024 2023
Volume % of Total Volume % of Total % Change
(in thousands of hectoliters, except percentages)
Brazil 128,320.2 70.5% 126,419.7 68.8% 1.5%
Beer Brazil 93,634.6 51.5% 93,111.6 50.7% 0.6%
NAB 34,685.6 19.1% 33,308.1 18.1% 4.1%
CAC 12,408.6 6.8% 12,174.6 6.6% 1.9%
Latin America South 32,447.6 17.8% 36,039.6 19.6% (10.0)%
Canada 8,744.1 4.8% 9,025.2 4.9% (3.1)%
Total 181,920.5 100.0% 183,659.0 100.0% (0.9)%
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Net Revenue per Hectoliter Year Ended December 31,
2024 2023 % Change
(in R$, except percentages)
Brazil 378.8 366.7 3.3%
Beer Brazil 429.5 418.7 2.6%
NAB 241.7 221.4 9.2%
CAC 888.4 825.1 7.7%
Latin America South 611.1 382.8 59.6%
Canada 1,142.9 1,056.3 8.2%
Total 491.7 434.2 13.3%
Brazilian Operations
Total net sales from our
Brazilian operations increased by 4.8% in 2024, to R$48,605.3 million from R$46,361.7 million in 2023, with volumes growing 1.5% and reaching
its historically highest level at 128 millions of hectoliters.
Net sales of beer in Brazil
increased by 3.2% in 2024, to R$40,220.2 million from R$38,985.9 million in 2023. This variation was driven by a 0.6% increase in volume
sold, coupled with a 2.6% increase in net revenue per hectoliter in 2024, reflecting the implementation of strategic revenue management
initiatives combined with improved brand mix, partially offset by higher VAT taxable base throughout the year. In 2024, the consistent
execution of our strategy led to double-digit volume growth in both premium and core plus products led by Corona, Spaten, Original
and Budweiser.
Net sales of NAB in Brazil
increased by 13.7% in 2024, to R$8,385.2 million from R$7,375.8 million in 2023. This variation was due to a 4.1% increase in volume sold,
coupled with a 9.2% increase in net revenue per hectoliter in 2024. The growth in net sales was driven mostly by the implementation of
strategic revenue management initiatives combined with improved brand mix, particularly within health and wellness brands led by Guaraná
Antarctica Zero, Pepsi Black, H2OH! and Gatorade that were key contributors to the volume increase.
CAC Operations
Net sales from our CAC operations
increased by 9.7% in 2024, to R$11,023.7 million from R$10,044.8 million in 2023. This variation is a consequence of a 1.9% increase in
volume sold, coupled with a 7.7% increase in net revenue per hectoliter in 2024. The increase in net sales in our CAC operations in 2024
was mainly driven by strategic revenue management initiatives and the strong performance in the Dominican Republic, which continued to
lead the region especially with Corona and Presidente brands and contributed significantly to the increase in net revenue
per hectoliter and volume growth.
Latin America South Operations
Net sales from our Latin
America South operations increased by 43.7% in 2024, to R$19,829.7 million from R$13,797.2 million in 2023. This variation was mainly
due to a 59.6% increase in net revenue per hectoliter in 2024 due to strategic revenue management initiatives in response to a highly
inflationary economy in Argentina and was partially offset by a 10.0% decline in volume sold primarily driven by industry contraction
in Argentina deriving from a continuing highly inflationary environment that contributed to pressures on consumers disposable income.
Canada Operations
Net sales from our Canadian
operations increased by 4.8% in 2024, to R$9,993.9 million from R$9,533.2 million in 2023. This variation is a consequence of an 8.2%
increase in net revenue per hectoliter, supported by strategic revenue management initiatives and the depreciation of Brazilian real
(BRL) against the Canadian dollar (CAD), partially offset by a 3.1% decline in volume sold driven by softer beer and beyond beer industries.
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Cost of Sales
Cost of sales increased by
11.0% in 2024, to R$43,615.1 million from R$39,291.6 million in 2023. As a percentage of our net sales, total cost of sales decreased
to 48.8% in 2024 from 49.3% in 2023.
The table below sets forth
information on cost of sales per hectoliter for the periods presented:
Cost of Sales per Hectoliter Year Ended December 31,
2024 2023 % Change
(in R$, except percentages)
Brazil 185.5 186.0 -0.3%
Beer Brazil 205.9 208.1 -1.0%
NAB 130.5 124.2 5.0%
CAC 409.1 413.6 -1.1%
Latin America South 322.4 184.7 74.5%
Canada 488.2 452.4 7.9%
Total 239.7 213.9 12.1%
Brazilian Operations
Total cost of sales for our
Brazilian operations increased by 1.2% in 2024, to R$23,809.3 million from R$23,516.1 million in 2023. On a per hectoliter basis, our
Brazilian operations’ cost of sales decreased by 0.3% in 2024, to R$185.5 per hectoliter from R$186.0 per hectoliter in 2023.
Cost of sales for our Brazilian
beer operations decreased by 0.5% in 2024, to R$19,282.3 million from R$19,377.7 million in 2023, with cost of sales per hectoliter decreasing
by 1.0% (R$205.9 in 2024 versus R$208.1 in 2023), mainly explained by favorable foreign exchange rate considering hedges made during 2023
for the 2024 year with a lower average USD/BRL rate than the previous year and lower commodity prices (mainly barley and aluminum) as
a result of our hedging strategy.
Cost of sales for our Brazilian
NAB segment increased by 9.4% in 2024, to R$4,526.9 million from R$4,138.4 million in 2023, with the cost of sales per hectoliter growing
by 5.0% (R$130.5 in 2024 versus R$124.2 in 2023), mainly as result of higher commodity prices (mainly sugar), which was partially offset
by favorable foreign exchange hedges.
CAC Operations
Cost of sales for our CAC
operations increased by 0.8% in 2024, to R$5,076.2 million from R$5,035.1 million in 2023, with the cost of sales per hectoliter decreasing
by 1.1% (R$409.1 in 2024 versus R$413.6 in 2023), mainly driven by lower aluminum prices and lower import costs.
Latin America South Operations
Cost of sales for our Latin
America South operations increased by 57.1% in 2024, to R$10,460.4 million from R$6,657.3 million in 2023, with the cost of sales per
hectoliter growing by 74.5% (R$322.4 in 2024 versus R$184.7 in 2023), mainly due to a highly inflationary environment in Argentina and
hyperinflation accounting effects.
Canada Operations
Cost of sales for our Canadian
operations increased by 4.6% in 2024, to R$4,269.2 million from R$4,083.1 million in 2023, with the cost of sales per hectoliter increasing
7.9% (R$488.2 in 2024 versus R$452.4 in 2023), due to the depreciation of Brazilian real (BRL) against the Canadian dollar (CAD), partially
offset by lower commodity prices (mainly aluminum).
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Gross Profit
As a result of the foregoing,
gross profit increased by 13.3% in 2024, to R$45,837.6 million from R$40,445.3 million in 2023. The table below sets forth the contribution
of each business segment to our consolidated gross profit:
Gross Profit
2024 2023
Amount % of Total Margin Amount % of Total Margin
(in R$ million, except percentages)
Brazil 24,796.0 54.1% 51% 22,845.6 56.5% 49%
Beer Brazil 20,937.8 45.7% 52% 19,608.2 48.5% 50%
NAB 3,858.2 8.4% 46% 3,237.4 8.0% 44%
CAC 5,947.5 13.0% 54% 5,009.7 12.4% 50%
Latin America South 9,369.3 20.4% 47% 7,139.9 17.7% 52%
Canada 5,724.7 12.5% 57% 5,450.1 13.5% 57%
Total 45,837.6 100.0% 51% 40,445.3 100.0% 51%
Commercial, Distribution
and Administrative Expenses
Our commercial, distribution
and administrative expenses increased by 12.6% in 2024, to R$26,392.4 million from R$23,436.7 in 2023. An analysis of commercial
and administrative expenses for each business segment is set forth below.
Brazilian Operations
Total commercial, distribution
and administrative expenses in Brazil increased by 4.8% in 2024, to R$15,160.4 million from R$14,468.8 million in 2023.
Commercial, distribution
and administrative expenses for our Brazilian beer operations increased by 4.9% in 2024, to R$12,849.6 million from R$12,247.3 million
in 2023, primarily due to higher sales and marketing investments in our brands, which was partially offset by lower distribution expenses
due to efficiencies resulting from a favorable channel mix (higher weight of third-party distributors sales, thus lower distribution expenses
for us given that the distribution expense is a responsibility of the distributor).
Commercial, distribution
and administrative expenses for the NAB segment in Brazil increased by 4.0% in 2024, to R$2,310.8 million from R$2,221.5 million in 2023,
mainly due to higher commercial investments in our brands, which was partially offset by lower distribution expenses due to efficiencies
resulting from a favorable channel mix (higher weight of third-party distributors sales, thus lower distribution expenses for us given
that the distribution expense is a responsibility of the distributor).
CAC Operations
Commercial, distribution
and administrative expenses for our CAC operations increased by 14.4% in 2024, to R$2,209.9 million from R$1,931.2 million in 2023. This
increase was primarily driven by higher investments in sales and marketing to strengthen our brands, as well as rising distribution expenses
due to volume growth and inflation. However, distribution costs grew at a slower pace than net revenue, contributing to margin expansion.
Latin America South Operations
Commercial, distribution
and administrative expenses for our Latin America South operations increased by 56.4% in 2024, to R$5,416.0 million from R$3,463.8 million
in 2023, driven mainly by general inflation over distributions and administrative expenses and higher commercial investments behind our
brands.
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Canada Operations
Commercial, distribution
and administrative expenses for our Canadian operations increased by 0.9% in 2024, to R$3,606.2 million from R$3,573.0 million in 2023,
driven mainly by lower variable expenses due to decline in volumes, inflation and depreciation of Brazilian real (BRL) against the Canadian
dollar (CAD).
Other Operating
Income (Expense)
Otheroperating income increased
by 21.1% in 2024, to R$2,457.3 million from R$2,028.9 million in 2023. This result is mainly explained by higher VAT tax credits resulting
from our footprint and production optimization.
Exceptional Items
Exceptional items expenses
decreased by 51.2% in 2024, to an expense of R$100.8 million from an expense of R$206.4 million in 2023. The exceptional items recorded
in 2024 were mainly due to restructuring expenses primarily related to organizational alignments as a result of operational improvements,
sizing and digitalization efforts in Brazil, LAS, CAC and Canada. In 2023, our exceptional expenses were mainly due to legal fees in connection
with litigation related to warrants issued by Cervejaria Brahma in 2003, in addition to restructuring expenses primarily related to organizational
alignments as a result of operational improvements, sizing and digitalization efforts in Brazil, LAS, CAC and Canada, including expenses
with lay-offs and severance payments. Several lawsuits were filed challenging the criteria used in calculating the exercise price of the
warrants issued by Cervejaria Brahma in 2003. In 2023, as successors of Cervejaria Brahma, we obtained definitive favorable decisions
against certain plaintiffs on the matter, which was already classified as a remote loss.
Income from Operations
As a result of the foregoing,
income from operations increased by 15.8% in 2024, to R$21,801.7 million from R$18,831.1 million in 2023.
Net Finance Result
Our net finance result
decreased by 35.8% in 2024, to an expense of R$2,318.2 million from an expense of R$3,609.8 million in 2023. This improvement was mainly
driven by gains on non-derivative instruments due to favorable foreign exchange variation from our cash positions throughout the year,
lower losses on derivative instruments resulting from reduced expenses with carrying cost in Brazil and Argentina, and higher financial
income supported by a higher cash position in Argentina during the year.
Our total debt, including
current and non-current interest-bearing loans and borrowing, decreased by R$48.3 million in 2024, while our cash and cash equivalents
and current investment securities less bank overdrafts increased by R$13,501.5 million in 2024.
Income Tax Expense
Our consolidated income tax
and social contribution on profits totaled an expense of R$4,640.4 million in 2024 from R$75.5 million in 2023. The effective tax rate
in 2024 was 23.8%, compared to a 0.5% in the previous year. Such increase in our effective tax rate in 2024 was primarily due to
reduced deductibility of Interest on Capital (IOC) and State VAT government grants. Legislative changes enacted in December 2023 eliminated
the deductibility of State VAT government grants and reduced the calculation basis for IOC deductibility for corporate income tax purposes,
significantly impacting our tax expense (For more info please refer to the Item 9 in our consolidated financial statements).
Net Income
As a result of the foregoing,
net income decreased by 0.8% in 2024, to R$14,847.0 million from R$14,960.4 million in 2023.
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B.
Liquidity and Capital Resources
Sources and Uses
The information in this section
refers to 2025 and 2024. Our primary sources of liquidity have historically been cash flows from operating activities and borrowings. Our
material cash requirements include the following:
• opex expenses, such as raw and packaging material, sales & marketing investments and overheads.
• debt service.
• capital expenditures.
• payments of dividends and interest on shareholders’ equity.
• increases in ownership of our consolidated subsidiaries or companies in which we have equity investments.
• investments in businesses participating in the brewing, NAB and malting industries.
• investments in businesses that address emerging consumer’s needs, such as Beyond Beer and technology platforms.
Our cash requirements
from known contractual obligations within the next twelve months include:
• Short-term debts and the current portion of long-term debts in the amount of R$174.1 million.
• Lease liabilities in the amount of R$1,229.4 million.
• Trade and other payables in the amount of R$37,499.8 million, which include amounts related to suppliers, taxes, fees and contributions payables, dividends and interest on equity payable, salaries and charges, put options related to our participation in subsidiaries and other liabilities, except for related parties, with payment term of less than one year.
For more information
see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Borrowings” and Note
28 to our audited consolidated financial statements.
Our long-term cash
requirements under our various contractual obligations and commitments include:
• Long-term debt in the amount of R$357.8 million.
• Lease liabilities in the amount of R$2,608.4 million.
• Trade and other payables in the amount of R$3,158.2 million, which include amounts related to suppliers, taxes, fees and contributions payables, dividends and interest on equity payable, salaries and charges, put options related to our participation in subsidiaries and other liabilities, except for related parties, with payment term of more than one year.
For more information
see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Borrowings” and Note
28 to our audited consolidated financial statements.
Our cash and cash equivalents
and current investment securities on December 31, 2025, and 2024, were R$20,319.9 million and R$29,837.7 million.
We believe that cash flows
from operating activities, available cash and cash equivalents and current investment securities, along with our derivative instruments
and our access to borrowing facilities, will be sufficient to fund our capital expenditures, debt service and dividend payments going
forward.
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Cash Flows
Our
financial guidelines focus on maximizing shareholders’ value while keeping financial flexibility to execute strategic projects,
key enablers of our future growth. Therefore, our cash management policy pursues constant protection of our short and long-term liquidity
while minimizing financials risks and volatility. The continuous search for our optimal capital structure enables us to quickly react
to market distress and ensures our solid financial position while working together with our suppliers, wholesalers, customers and credit
market.
Year Ended December 31,
2025 Compared to Year Ended December 31, 2024
Operating Activities
Cash flows generated in our
operating activities decreased by 6.3% in 2025, to R$24,450.3 million from R$26,099.0 million in 2024, mainly as a result of losses in
net working capital.
Cash flow generated in our
operating activities before changes in working capital and provisions increased by 2.7% in 2025 as compared to 2024, bringing additional
R$779.1 million, and the less efficient net working capital management resulted in a cash outflow of approximately R$1,616.0 million compared
with last year, mostly driven by lower payables and higher receivables.
Investing Activities
Cash flows used in our investing
activities decreased by 9.4% in 2025, to R$4,950.2 million from R$5,463.5 million in 2024, mainly explained by lower net acquisition of
debt securities (less R$459.9 million when compared to 2024).
Financing Activities
Cash
flows used in our financing activities increased by 158.6% in 2025, to R$26,771.5 million from R$10,352.0 million in 2024, mainly driven
by higher payment of dividends to subsidiaries and associates (more R$16,407.1 million when compared to 2024)
Year Ended December 31,
2024 Compared to Year Ended December 31, 2023
Operating Activities
Cash flows generated in our
operating activities increased by 5.6% in 2024, to R$26,099.0 million from R$24,711.4 million in 2023, mainly as a result of higher operational
cashflow generation reflecting efficient net working capital management. Cash flow generated in our operating activities before changes
in working capital and provisions increased by 11.2% in 2024 as compared to 2023, bringing additional R$2,928.2 million, and the more
efficient net working capital management brought an additional R$131.3 million compared with last year, mostly driven by higher payables
and lower receivables, despite higher inventories level.
Investing Activities
Cash flows used in our investing
activities decreased by 5.2% in 2024, to R$5,463.5 million from R$5,766.0 million in 2023, mainly explained by lower acquisition of property,
plant, equipment and intangible assets (R$1,255.0 million) being partially offset by higher net acquisition of debt securities (more R$1,025.1
million when compared to 2024).
Financing Activities
Cash flows used in our financing
activities decreased by 35.8% in 2024, to R$10,352.0 million from R$16,115.2 million in 2023, mainly driven by lower distribution of dividends
and interest on own capital paid partially offset by a higher purchase and sale of non-controlling interests.
The table below shows the
profile of our debt instruments:
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Maturity Schedule of Debt Portfolio as of December 31, 2025
Debt Instrument 2026 2027 2028 2029 2030 Thereafter Total
(in R$ million, except percentages)
International Debt:
Other Latin America Currency Floating Rate 150.9 153.2 73.1 51.5 199.9 628.5
Average Pay Rate 11.73% 11.73% 11.73% 11.73% 11.73% % %
Other Latin America Currency Fixed Rate
Average Pay Rate
US$ Fixed Rate 3.26 6.49
Average Pay Rate 2.39% 2.39% 9.7
US$ Floating Rate
Average Pay Rate
CAD Fixed Rate 127.7 80.1 52.8 42.3 11.9 314.8
Average Pay Rate 5.43% 5.43% 5.43% 5.43% 5.43% % %
CAD Floating Rate
Average Pay Rate
Reais Denominated Debt Floating Rate –TR:
Notional Amount 16.1 17.6 19.2 21.0 23.0 96.9
TR + Average Pay Rate 9.56% 9.56% 9.56% 9.56% 9.56%
Reais Debt – ICMS Fixed Rate:
Notional Amount 135.5 104.8 54.5 5.6 11.2 311.6
Average Pay Rate 2.87% 2.87% 2.87% 2.87% 2.87%
Reais Debt –Fixed Rate:
Notional Amount 734.0 510.1 399.7 132.8 78.6 170.2 2,025.4
Average Pay Rate 11.73% 11.73% 11.73% 11.73% 11.73% 11.73%
Reais Debt – Floating Rate:
Notional Amount
Average Pay Rate
Total Debt 1,167.3 872.2 599.3 253.2 313.5 181.4 3,386.9
Borrowings
Most of our borrowings are
for general use, based upon strategic capital structure considerations. Although seasonal factors affect the business, they have
little effect on our borrowing requirements. We accrue interest based on different interest rates, the most significant of which
are: (1) the Taxa Referencial (“TR”), for Brazilian real estate receivables certificates (certificado de recebíveis
imobiliários) and (2) fixed for international loans. For further information, see Note 23 of our audited consolidated
financial statements.
The following table sets
forth our net cash consolidated position as of December 31, 2025, and 2024:
Net Cash Consolidated Position As of December 31
2025 2024
LC(1) FC(2) Total LC(1) FC(2) Total
(in R$ million)
Short-term debt (885.5) (281.8) (1,167.3) (932.3) (344.1) (1,276.4)
Long-term debt (1,548.3) (671.3) (2,219.6) (1,567.1) (609.3) (2,176.3)
Total (2,433.8) (953.1) (3,386.9) (2,499.4) (953.4) (3,452.7)
Cash and cash equivalents (net of bank overdrafts) 18,638.2 28,595.7
Current Investment securities 1,681.7 1,242.0
Net cash position 16,933.0 26,385.0
(1) LC refers to our local currency indebtedness.
(2) FC refers to our foreign currency indebtedness.
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Short-term
Debt
As of December 31, 2025,
our short-term debt totaled R$1,167.3 million, 24.1% of which was denominated in foreign currencies. As of December 31, 2024, our short-term
debt totaled R$1,276.4 million, 27.0% of which was denominated in foreign currencies.
Long-term Debt
As of December 31, 2025,
our long-term debt totaled R$2,219.6 million, 30.2% of which was denominated in foreign currencies. As of December 31, 2024, our long-term
debt totaled R$2,176.3 million, of which 28.0% was denominated in foreign currencies.
The table below shows a breakdown
of our long-term debt by year:
As of December 31, 2025
Long-term Debt Maturity in: (in R$ million)
2027 865.7
2028 599.3
2029 and Later 754.6
Total 2,219.6
In accordance with our foreign
currency risk management policy, we have entered into forward and cross-currency interest rate swap contracts in order to mitigate currency
and interest rate risks. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk” for our policy with respect
to mitigating foreign currency and interest rate risks through the use of financial instruments and derivatives.
As of December 31, 2025,
our local currency long-term debt borrowings consisted primarily of lease liabilities (in accordance with IFRS 16) and loans from governmental
agencies. Long-term local currency also includes long-term plant expansion and other loans from governmental agencies.
Surety Bonds
In the ordinary course of our
business, we use surety bonds, letters of credit and similar financial instruments (e.g., bank products known as fiança bancária
and/or seguro-garantia) to secure (i) the performance or payment of obligations under certain agreements and (ii) potential losses
in connection with lawsuits. In case we are unable to obtain or renew these financial instruments under favorable conditions, or
at all, we would be required to use our own cash to secure those agreements and lawsuits, which could adversely affect our liquidity position.
For additional information on legal proceedings, see “Item 8. Financial Information—A. Consolidated Financial Statements and
Other Financial Information—Legal Proceedings”.
Sales Tax Deferrals
and Other Tax Credits
Many states in Brazil offer
tax benefits programs to attract investments to their regions. We participate in ICMS Tax benefit programs granted by various Brazilian
states which may be in the form of presumed credits, tax rate reduction, calculation basis reduction, financing or subsidized loans, tax
payment deferrals or partial reductions of tax payables. In return, we may be required to comply with certain conditions that vary by
state and may include minimum tax collection, capital expenditures, production volumes, employment, among others. All of these conditions
are included in specific agreements between Ambev and the state governments. If we fail to comply with the applicable conditions, the
corresponding tax benefits may be reduced or withdrawn. The total amount deferred (financing) as of December 31, 2025, was R$312.0
million with a current portion of R$136.0 million, and R$176.0 million as non-current. In the years ended December 31,
2025, and 2024, we recorded R$3,485.2 million and R$3,243.1 million, respectively, of tax credits as gains on tax incentive programs.
Under the approved tax reform,
the ICMS tax benefits currently applicable to us will generally be maintained until 2032, after which they will no longer apply. Between
2029 and 2032, such benefits will be proportionally reduced in line with the gradual reduction of ICMS rates as part of the transition
to the IBS. In the case of ICMS tax benefits granted to foster industrial activities for a fixed term and subject to conditions, the tax
reform provides for a compensation mechanism during the transition period. Under this mechanism, the reduction of such benefits between
2029 and 2032 may be reimbursed to taxpayers through a compensation fund (Fundo de Compensação de Benefícios Fiscais),
provided that certain legal and regulatory conditions are met. Detailed rules governing this compensation mechanism and the fulfillment
of the applicable conditions are still subject to further regulation.
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Capital Investment
Program
In 2025, consolidated capital
expenditures on property, plant and equipment and intangible assets totaled R$4,590.5 million, consisting of R$3,045.2 million for our
Brazil business segment, R$603.7 million for our CAC business segment, R$651.3 million related to investments in our Latin America South
operations and R$290.2 million related to investments in Canada. These expenditures primarily included investments in capacity expansion,
quality controls, automation, modernization and replacement of packaging lines, innovations, warehousing for direct distribution, coolers,
expenditures for the replacement of bottles and crates, and continued investments in information technology, and investments related to
the construction of a new glass manufacturing facility in the State of Paraná, Brazil. In 2024, consolidated capital expenditures
on property, plant and equipment and intangible assets totaled R$4,749.1 million, consisting of R$2,838.0 million for our Brazil business
segment, R$558.8 million for our CAC business segment, R$982.8 million related to investments in our Latin America South operations
and R$369.5 million related to investments in Canada. These expenditures primarily included investments in capacity expansion, quality
controls, automation, modernization and replacement of packaging lines, innovations, warehousing for direct distribution, coolers,
expenditures for the replacement of bottles and crates, and continued investments in information technology.
In 2023, consolidated capital
expenditures on property, plant and equipment and intangible assets totaled R$6,004.1 million, consisting of R$3,365.5 million for our
Brazil business segment, R$593.4 million for our CAC business segment, R$782.2 million related to investments in our Latin America
South operations and R$1,263.0 million related to investments in Canada. These expenditures primarily included investments in capacity
expansion, quality controls, automation, modernization and replacement of packaging lines, innovations, warehousing for direct distribution,
coolers, expenditures for the replacement of bottles and crates, and continued investments in information technology.
C. Research and Development
Innovation has become one
of the main pillars of our business and front and center to our commercial strategy and despite a detailed revision of our discretionary
expenses in order to ensure our liquidity, research and development is and continues to be seen as fundamental for us to continue providing
our consumers with innovations.
Since 2017, we maintain an
innovation, research and development center called Zone Innovation and Technology Center (“ZITEC”) in the city of Rio de Janeiro,
at the Universidade Federal do Rio de Janeiro (“UFRJ”). One of the main features of the development center is the prototype
laboratory, which enables the creation of complete prototypes, supporting the process of creating new products. Another objective of the
development center is to carry out studies of consumers’ perception and behavior, in order to capture future trends. ZITEC made
it possible for Ambev to reduce the time to launch innovations, from eight to four months.
In
2023, we launched a new version within our Beats, the Beats Tropical, which has demonstrated strong results since its launch
and continued as a popular choice during the 2024 carnival holiday in Brazil. In the non-alcoholic category, we reformulated Guaraná
Antarctica Zero and launched the first non-alcoholic beer with added vitamin D in the world, Corona Cero. We also introduced
Stella Pure Gold in 2023, our low-calorie gluten-free beer, which performed strongly. Our investment in innovation, research and
development contributed to our brands winning 140 medals in various beer competitions around the world, including gold medals for Brahma
Duplo Malte at the World Beer Awards and Antarctica Original at the Brussels Beer Challenge competition.
In
2024, we kept evolving our Balanced Choices portfolio, developing both non-alcoholic beer and low calories beer categories. Corona
Cero was nationally expanded and became the first beer brand to sponsor the Olympic Games. Stella Pure Gold expanded participation
both with the long neck expansion and the cans launch, already reaching 20% of parent brand volume. We also expanded packs for Corona,
launching the cans and the 600 RGB bottle, which strengths the brand presence in On Trade POCs.
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In
2025, we launched Baré Zero, Beats Green Mix, Beats Tomorrowland, Flying Fish, Guaraná Antarctica
Zero com Fibras, Sukita Zero, full renovations of some of the prior products (i.e. Brahma 0,0%). We also increased
the SKU diversity of our existing beverages and expanded the production of our premium beverages.
The
investment made in the development center in the last three years was approximately R$130
million, including R$40.5 million in 2025, R$43.4 million in
2024 and R$44.8 million in 2023.
D. Trend Information
Consistent with 2025, our
strategy for 2026 will continue to be built around our brands, innovation, technology and collaboration with our ecosystem.
We are in the final stages
of implementing a long-term project which consists of a new version of our main ERP system—S4 Hana, a SAP platform—which will
enable us to book all transactional data used in our Brazilian operations, which, if not successful, may subject us to adverse effects,
increased costs associated with diminished productivity and operating inefficiencies. For further information on risks related to modifications
and upgrades to our systems, see “Item 3. Key Information—D. Risk Factors— Information technology failures, including
failures to implement upgrades and new technologies effectively or those that affect the privacy and security of customers and business
information, could disrupt our operations.”
Input cost pressures remained
a headwind in 2025. Our average BRL/USD hedge rate for 2025 was 5.37, and aluminum hedged prices also represented a headwind compared
to 2024. Although disciplined productivity initiatives partially mitigated these pressures.
Looking ahead to 2026, and
assuming current FX and commodity hedge prices, we expect costs to increase relative to 2025, with an average BRL/USD hedge rate for 2026
of 5.50, and continued exposure to commodity volatility, particularly aluminum.
For detailed information
regarding the latest trends in our business, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Year
Ended December 31, 2025 Compared to Year Ended December 31, 2024” and “Item 4. Information on the Company—B.
Business Overview—Description of the Markets Where We Operate.”
E. Critical Accounting
Estimates
Our
audited consolidated financial statements are presented in accordance with IFRS, as issued by the IASB. The preparation of financial statements
in conformity with IFRS requires our management to make judgments, estimates and assumptions that affect both the application of accounting
practices and the reported amounts of assets and liabilities, income and expenses. The estimates and significant judgments are based on
past experience and on other factors that are believed to be reasonable under the circumstances, the results of which form the basis for
making judgments regarding the carrying amounts of assets and liabilities that cannot readily be determined based on other sources. The
actual results achieved may differ from these estimates. Note 4 to our audited consolidated financial statements include a summary of
the critical accounting policies and estimates applied in the preparation of these financial statements. The estimates and assumptions
are reviewed on a regular basis. Changes in accounting estimates may affect the period in which they are realized, or future periods.
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