Ambev S.A. (ABEV) Project Proposal

Ambev S.A. (ABEV) shares soared 12% Tuesday, a day after the beverage manufacturer released a blockbuster quarterly report. Despite raising prices, customers are still lining up for more. The Brazlian based company said it earned $.30 per share in the second quarter. It was expected to have made $.25 per share, according to estimates from Fact Set. That's "hot, hot, hot" on Wall Street. The stock is now at a yearly high, trading above $3.50 a share. The results come after Ambev S.A. (ABEV) announced plans in April to hike prices for the first time in three years. Like many companies in the beverage industry, Ambev S.A. (ABEV) has been paying higher prices for key ingredients. Specifically, prices for grains which has risen sharply this year due to bad weather in many parts of the country. Yet Ambev S.A. (ABEV) lovers digested the price hikes without missing a bite. Revenue rose 28% to $1.05 billion, surpassing analysts' estimates, as higher prices boosted the top line. The price hikes also haven't taken a toll on store traffic. Same-store sales, a key measure of growth, increased 17% in the second quarter.

That was one of the strongest quarterly sales rates in Ambev S.A. (ABEV) history as a public company, according to CEO Jean Jereissati Neto. Looking ahead, Ambev S.A. (ABEV) expects "mid-teen" sales growth for the full year. In other words, expect the lines to get even longer. Ambev S.A. (ABEV) has been expanding rapidly since it launched a new ad campaign in 2020. With $3.2 billion in sales last year, it ranks as the nation's biggest beverage seller, according to Morningstar.

Ambev S.A. (ABEV) is now experimenting with other drink "concepts," such as Clear Beer and Corona Plus. The project being proposed is for the next full year, Ambev S.A. (ABEV) will open up to 50 new distribution centers for these products. Based on a recent appraisal, the company feels it would need $80.5 million to purchase the land, $105,000,000 make the necessary infrastructure improvements. In addition to the land, Coke will need to purchase additional equipment, which will cost $218 million. The equipment will be depreciated on a seven-year MACRS schedule. The expansion is estimated to increase company revenue by 2% over 2020 revenue in year one and increase by 2.25% in year 2, 2.75% in year 3 and by 3% in years 4-6. It Variable costs amount to 2% of sales per year and fixed costs are $5.9 million per year. The expansion will require a net working capital investment of 4 percent of sales. The NWC will be built up in the year prior to the sales.

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