Moody’s Detects AmBev Strains

Moody’s has cut its outlook for AmBev to stable from positive, reflecting increased pressure on margins, increased dividend payments and lower free cash flow, and an environment of restricted or more expensive financing. AmBev’s cash flow from operations minus capex amounts to BRL4.5bn on an last-12-months basis, which, when combined with cash and cash equivalents of BRL2bn, would be sufficient to cover AmBev’s current portion of long term debt of BRL2.43bn and could also cover other short term debt maturities of BRL1.61bn, which are composed of revolving credit lines that are normally renewed. However, AmBev has historically maintained a high level of payout to investors, which amounted to BRL4.6bn – including share buybacks and dividends – for the 12 months ending September 30, Moody’s says. The agency also affirms the Baa3 foreign currency issuer rating.