Brazil: AmBev releases its results for the first quarter 2006

AmBev the world's fifth largest brewer and the leading brewer in Latin America, announced on May 11 its results for the first quarter 2006 (1Q06).

AmBev's consolidated results are the sum of the three following business units:

Brazil: comprised of (i) Beer Brazil; (ii) CSD & Nanc (Carbonated Soft Drinks and Nanc - Non-Alcoholic, Non-Carbonated beverages); and (iii) Malt and By-Products Sales;

Hispanic Latin America (HILA): comprising (i) AmBev's average 59.8% economic stake in Quinsa; and (ii) HILA-ex (which corresponds to AmBev's controlled franchises in Northern Latin America);

North America: representing the operations of Labatt Brewing Company Limited ("Labatt").

AmBev presented solid results in 1Q06. EBITDA grew 17.7%, while EPS (before goodwill amortization and adjusted for the share bonus implemented on May 31, 2005) grew 52.5%, comparisons, unless otherwise stated, refer to the first quarter 2005(1Q05).
The performance was led by the Brazilian operation, reaching an EBITDA margin of 50.8%, by Labatt, with an EBITDA growth of 12.1% (in Canadian dollars), and by Quinsa, with an EBITDA growth of 17.2% (in US dollars).

Brazilian Beer operations showed a 8.1% volume growth, boosted by the high-temperature summer season, higher disposable income and market share gains. The CSD & Nanc segment also exhibited significant volume growth, 12.5% higher than the first quarter of 2005. Commenting on Ambev's performance in Brazil, Luiz Fernando Edmond, Latin America General Officer, affirmed: "We had an encouraging first quarter. We will keep focusing to assure we capture the opportunities, such as the World Cup and elections, while keeping the threats under control, such as the commodities hike that will affect us in the next quarters."

Quinsa continues to deliver meaningful results, highlight for 32.6% increase in soft drinks volume. On the other hand, HILA-ex continues showing results below our expectations, driven by increased competition in most of these markets. "The year has been tough for our HILA-ex operations. Although moving forward, we are not satisfied and will continue to pursue growth in these markets. Once again, Quinsa delivered excellent results," said Luiz Fernando Edmond.

In Canada, Ambev obtained volume growth, boosted by a mild winter season. Cost reduction initiatives once again contributed to an excellent 12.1% EBITDA growth in Canadian dollars. "The market continues showing an extremely competitive scenario in 2006; however, we continue to maintain our strategy and focus on costs, which has been ensuring such high profitability levels," says Miguel Patricio, North America General Officer.

The performance in all business units was reflected by the excellent cash generation. "Our operating cash generation reached R$ 1,438.3 million, resulting from an excellent business performance and financial discipline," says Joao Castro Neves, AmBev's CFO.

The Company's total debt decreased R$489.6 million when compared to 4Q05, while its cash and cash & equivalents went up by R$253.8 million. As a consequence, a R$743.4 million decrease in AmBev's net debt was recorded.

The net result from non-operating income and expenses posted a R$4.8 million gain. The major reason for this result was a R$5.5 million gain of participation in investments.

Provision for income tax and social contribution stood at R$276.7 million. AmBev has provisioned R$14.6 million for the payment of employee profit sharing. The payment of bonus, however, will only occur should the Company achieve its corporate goals in 2006. Minority interests in AmBev's subsidiaries summed up a R$10.2 million loss.

AmBev posted net income of R$655.9 million (+354.7%). Net earnings per share stood at R$10.10, up by 281.7%. Considering the net earnings per share of 1Q05 adjusted for share bonus occurred on 5/31/05 and excluding the goodwill amortization, such increase is 52.5%. AmBev's operating income significantly grew, a fact reflected in an increase of 18.6% of EBITDA per share adjusted by share bonus as of 5/31/05, which reached R$26.33.

AmBev announced on April 13, 2006 that it has entered into an agreement with Beverages Associates Corp. ("BAC") pursuant to which BAC has agreed to sell all its remaining shares in Quinsa to AmBev for a total purchase price of approximately US$1.2 billion, subject to certain adjustments, including dividends and interest. Upon the closing of the transaction, AmBev's equity interest in Quinsa will increase from 56.72% to 91.18% of its total share capital.

This agreement represents the final step of a transaction initiated in May 2002, whereby AmBev acquired an initial stake in Quinsa. The respective agreements provided that BAC had a put option in connection with its remaining shares in Quinsa, in exchange for AmBev's shares. AmBev had a corresponding call option after 2009. Pursuant to the transaction announced, which supersedes these put and call options, the parties agreed that the purchase price will be paid in cash.

The transaction will be submitted to the ratification of AmBev´s shareholders in accordance with article 256 of Brazilian Corporate Law.

Quinsa is the largest brewer in Argentina, Bolivia, Paraguay and Uruguay, having a share of the Chilean market as well. It also is the main Pepsi bottler in Argentina and Uruguay.

AmBev is updating its estimates for Beer Brazil volume growth for the full year of 2006 from 2.5%-3% to 4%.

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