WEDNESDAY, MAY 7, 2014
SAO PAULO–Companhia de Bebidas das Americas (ABEV, ABEV3.BR), or AmBev, will reduce its investment plans in Brazil, after the government announced a tax increase for beverages.
The beverage company–whose brands include Skol and Brahma beer–however, didn’t unveil a new target for its total investment this year.
“We are revising downwards our capex [capital expenditure] guidance in Brazil as a result of the expected negative volume impact from the recent tax increase announcement. Capex in Brazil is now foreseen to be below last year’s level of 2.8 billion Brazilian reais ($1.25 billion),” the company said in a statement Wednesday.
The government announced two tax increases on beer and some types of soft drinks in recent weeks, just in time for the soccer World Cup in June and July, amid the government’s effort to improve its fiscal standing.
These increases are likely to represent a boost of tax collections of BRL1.5 billion, according to the government estimates. The tax increases will be gradual, depending on products, and they are expected to be fully implemented in June.
AmBev will need to raise its beer prices by about 5% to offset the rising taxes, which translate to around a 3% decrease in sales volume, J.P. Morgan said in a recent research report for its clients.