Anheuser-Busch InBev SA/NV

are Mr. Carlos Brito, Chief Executive Officer, and Mr. Fernando Tenenbaum, Chief Financial Officer. To access the slides accompanying today's call, please visit AB InBev's website at www.ab-inbev.com and click on the Investors tab and the Reports and Results Center page. Today's webcast will be available for on-demand playback later today. At this time, all participants have been placed in listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. If you should require operator assistance, please press star 0. Some of the information provided during the conference call may contain statements of future expectations and other forward-looking statements. These expectations are based on management's current views and assumptions and involve known and unknown risks and uncertainties. It is possible that AB InBev's actual results and financial condition may differ possibly materially from the anticipated results and financial condition indicated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect AB InBev's future results, see risk factors in the company's latest annual report on Form 20F filed with the Securities and Exchange Commission on the 23rd of March, 2020. AB InBev assumes no obligation to update or revise any forward-looking information provided during the conference call and shall not be liable for any action taken in reliance upon such information. It is now my pleasure to turn the floor over to Mr. Carlos Brito. Sir, you may begin.

Thank you, Maria, and good morning, good afternoon, everyone. Welcome to our first quarter 2020 earnings call. I hope you and your families are all safe and well in these unprecedented times. First and foremost, I'd like to extend our deepest sympathies to everyone who has been affected by the COVID-19 virus. I want to express our sincere gratitude to those on the front lines for their commitment to keeping us safe, particularly to the healthcare workers around the world. I'd also like to personally thank our colleagues for the work they're doing to ensure business continuity during these volatile times. The global COVID-19 pandemic has altered life as we know it. However, it has not changed our purpose at AB InBev to bring people together for a better world, even it means together looks much different now. Today, I'll briefly discuss the results of the first quarter, but I'll spend more time providing an update on our business in light of the COVID-19 pandemic. I'll then hand it over to our new CFO, Felipe Fernando Tenenbaum, who will address our financial results and the measures we have taken to exercise financial discipline in a time of significant uncertainty and volatility. We'll then be happy to answer your questions. Our business started the year with good momentum. We delivered volume growth of 1.9% in the first two months of the year, excluding our business in China, where the COVID-19 outbreak began in late January. The impact of the pandemic on our global results increased significantly toward the end of the quarter, leading to a volume decline of 3.6%, excluding China, and a total volume decline of 9.3%. Beer volumes declined by 10.5%, while known beer volumes declined by 0.2%. Revenue declined by 5.8% in the first quarter, as the volume decline was partially offset by revenue per capita growth of 3.9%. Our global brands grew revenue across the majority of our markets, but their total performance was significantly impacted by declines in China, which is the largest market for both Budweiser and Corona outside of their home markets. EBITDA declined by 13.7% with margin contraction of 331 bps to 35.9%, primarily due to the top-line decline and higher cost of sales per hectolitre, resulting from operational deleverage and transactional currency headwinds. Our normalized EPS decreased to negative 42 cents, while underlying EPS decreased to 51 cents. Let me take you now through the key takeaways for some of our main markets in the first quarter. In the U.S., the continued implementation of our commercial strategy led to top and bottom line growth. Our above-court portfolio continued to outperform the industry, supported by the successful launch of Bud Light Seltzer, the Michelob Ultra family, and our regional craft portfolio. Our business in Mexico had a very strong first quarter, as it had not yet been meaningfully impacted by the restrictions to contain the COVID-19 pandemic. Revenue grew by double digits, and EBITDA grew by more than 20%, with margin expansion of more than 500 basis points. We saw healthy growth across the portfolio and continued our expansion into OXO, the largest seed store chain in Mexico. We're now present in more than 6,000 OXO stores. Following a strong 2019 performance in Colombia, we entered this year with continued momentum. In the first two months, we grew volumes by high single digits, and we gained share of total alcohol in the quarter, while continuing to expand the premium segment, where we are the market leader. However, our business was significantly impacted by the COVID-19 pandemic in March, leading to a quarterly volume decline of mid-single digits. In Brazil, we had a challenging quarter. Our top-line performance was impacted by a soft industry and unfavorable next shift, as the previous segment, where we under-indexed, considerably outperformed the industry. We're taking a portfolio approach in this segment with a strong base of our global brands and regional craft brands, further enhanced through initiatives in the pure malt space, such as the recent launches of DAX and Brahma Duplo Malte. South Africa had a strong start of the year and delivered balanced top-line growth supported by continued share gains in the premium segment. Restrictions on the sale of alcohol in all channels and social distancing measures were implemented in mid-March, with a complete shutdown beginning on March 27th, significantly impacting our volumes. Our business in China was severely impacted by the outbreak of COVID-19 in late January, with most provinces implementing significant lockdown measures through at least the end of February. We observed virtually no activity in the nightlife channel, very limited activity in the restaurant channel, and a meaningful decline in the in-home channel. However, the e-commerce channel accelerated significantly where we are in the market period and grew by strong double digits. Since the beginning of March, we have observed a steady recovery in the in-home and restaurant channels, though the nightlife channel is recovering at a slower pace. In Europe, our top line declined by mid-single digits as our business was impacted by COVID-19-restricted measures throughout March. We continue to gain market share across all of our markets, supported by our global brands. We expect that the impact on our second quarter results would be materially worse than in the first quarter, as evidenced by a total volume decline in April of approximately 32%. This decline was driven by two main factors. First, during the month of April, the on-premise channel was closed across the vast majority of our markets. In 2019, this channel accounted for approximately one-third of our global volume. In some of our very relevant markets, such as Mexico, South Africa, and Peru, we face a complete shutdown of our beer operations in April. I'd now like to discuss how we're living our purpose in new ways, coming together with a shared determination to prioritize each other's health and safety, build resiliency in our local communities, and find innovative ways to connect with our customers and consumers. Our teams in China and South Korea were the first to be impacted by this crisis. Their experiences and insights have provided best practices that are benefiting our operations around the world, helping position us for a strong recovery. The health and safety of our people is our top priority. We pay close attention to the guidelines of the World Health Organization and comply with local government requirements. Moreover, We have implemented additional safety measures to protect our colleagues. We continue to build upon the resources available to support the physical and mental well-being of our colleagues around the world. The strength of our global business comes from our local presence. Because the vast majority of our products are sourced, brewed, distributed, and enjoyed locally, we're deeply connected to our communities. Together with local governments and our partners, We're leveraging our scale, capabilities, and resources to support the fight against the pandemic through initiatives such as producing and donating more than 3 million bottles of hand sanitizer in over 25 countries. Packaging and donating water. Mobilizing our trucks to deliver food, water, and medical supplies. Donating medical supplies, including more than 3 million face shields that we are manufacturing. building public health care facilities in Mexico, Colombia, Brazil, and Peru, and collaborating with our sports partners and the American Red Cross in the U.S. to convert stadiums and our own tour facilities into temporary blood drive centers. We also launched a series of tailored initiatives across 20 countries to support our on-premise partners, including local pubs, bars, and restaurants. such as subsidizing consumer purchases of vouchers for future use and creating platforms to advertise local delivery options. We continue to look for new ways to support our partners so they can weather this crisis and prepare for a strong recovery. Prior to the pandemic, the on-premise channel represented approximately one-third of our global volume. But as you can see on slide 11, all markets vary widely by our exposure to the on-premise and by market and by maturity level. The impact of the COVID-19 pandemic on our business in each market is highly correlated to our exposure to the on-premise, as this channel is heavily impacted by social distancing restrictions. In mature markets with higher disposable income levels, we have seen an initial uplift in off-premise sales, which I'll now discuss in more detail. Our diverse geographic footprint is a major advantage as it allows for best practice sharing across our markets as they move through different stages of the crisis and into eventual recovery. In order to understand the impact to our business of the COVID-19 pandemic and take proactive measures to adapt our operations, we have grouped our markets into four clusters based on three factors. The stage of the pandemic, the maturity level of the market, including the exposure to the on- and off-premise channels, and thirdly, the extent of the social distancing restrictions. The first cluster includes markets like China and South Korea that are in early stages of recovery, where we're seeing customers begin to reopen and volume trends improving sequentially. To put this into context, volumes in China declined by 17 percent in April, as compared to 46.5% in the first quarter. Our priority in this cluster is to support our partners as their recovery progresses. The next cluster is less restrictive developed markets, such as the US, Canada, and Western Europe, where the majority of our sales are in the off-premise channel. In these markets, the on-premise channel is basically closed, but we have seen initial volume uplifts in the off-premise channel as consumers prepare to enjoy our products at home, although it's too early to determine the sustainability of this trend. In those markets, our priority is to ensure we're effectively servicing the off-premise channel while supporting the on-premise using our learnings from recovering markets cluster. The third cluster is less restrictive developing markets, such as Brazil and Colombia. In those markets, the on-premise is effectively shut down, which comprises a larger portion of our volumes. Our priority for this cluster is to develop programs to support both the on-premise channel and traditional trade partners, for example, by providing them with resources and technology to facilitate home delivery services. The fourth cluster is more restrictive developing markets, such as Mexico, South Africa, and Peru. In those markets, our brewery and distribution operations have been severely restricted. We continue to work with governments in this fast-changing environment and are doing our part in the fight against COVID-19. We look forward to resuming our operations when appropriate. For additional context, you can see the current status of our operations in our top 10 markets in the chart on the right side of slide 12. Please keep in mind that the current situation is very fluid, and as a result, the status of our operations can evolve quickly. Our culture is one of ownership and resilience, even in the face of extreme adversity. I'm inspired and humbled by my colleagues around the world who are coming together displaying tremendous agility in working tirelessly to position us for a strong recovery. We're quickly implementing a cross-functional COVID-19 task force that connects every day in order to maintain an open dialogue and act with agility and speed. The key priorities of our task force providing for the safety of our people, supporting our communities and partners, and safeguarding our business continuity. This structure facilitates the efficient sharing of best practice across our markets to amplify the impact of new ideas as quickly as possible. As I mentioned before, our colleagues in the recovery market cluster generated many of the best practices that have been shared and implemented around the world. They immediately took steps to protect the health and safety of our people and leveraged technology to keep our teams connected even from afar. Support to our communities and partners has been and remains paramount. Our local teams, with the help of our global procurement team, quickly facilitated donations of masks, disinfectants, and hand sanitizers to local hospitals. We also focused on providing excellent customer service to our wholesalers and retailers with proactive communication. Our commercial teams also acted quickly to allocate resources where they would be most effective, including to the off-premise and e-commerce channels. Our team in China also led the way in finding innovative ways to connect with consumers who are staying home. They launched the Budweiser e-clubbing program in collaboration with Tmall, where consumers can enjoy performance from local electronic dance music DJs while being able to simultaneously order Budweiser online. This inspired our teams around the world to leverage consumer passion points in creative new ways, such as Circuito Brahma in Brazil, a virtual country music concert series that generated 3 million live views at its first show and has accumulated over 40 million views to date. In the U.S., Michelob Ultra continues to promote an active lifestyle to livestream home workouts that support local fitness studios, which have been impacted by social distancing restrictions. For the past several years, we have been investing in new capabilities to better connect with our customers and consumers. Growing trends such as digital sales, e-commerce, and online marketing are more relevant now than ever before and have rapidly accelerated in recent months. In many of our markets, our customers can place orders online through our B2B and marketplace platforms, which we established and significantly invested in enhancing over the past few years. This offers them the flexibility to order when and where it's more convenient, while providing visibility into our full set of offerings and their past transactions. Additionally, in 2018, we created a function dedicated to our direct-to-consumer business, which includes several e-commerce platforms across our markets. This allows us to better understand and connect with our consumers in a direct way, and these learnings are providing incredibly useful today. We believe the significant progress we have made in areas such as B2B sales and e-commerce put us in an advantaged position to capture growth from these trends. While we're rapidly adapting our business to best meet the needs of our customers and consumers in the current environment, the fundamental strengths of our company remain unchanged. We have a clear commercial strategy, the world's most valuable portfolio of beer brands, diverse geographic footprint, industry-leading profitability, and an incredibly deep talent pool. I'm confident that these invaluable assets position us well for a strong recovery. Now I'd like to hand it over to Fernando, who will take you through our first quarter earnings and elaborate on the steps we have taken consistent with our longstanding financial discipline. Fernando.

Thank you, Brito. Good morning, good afternoon, everyone. It is a pleasure to be with you in my first 18-bag earnings call at CFO. I hope you are all safe and well. Let's start with an update on our net finance costs. Net finance costs in the quarter were $3.16 billion, compared to $366 million in the first quarter of 2019. This increase was predominantly driven by market-to-market losses, linked to the hedging of our share-based payment programs of nearly $1.9 billion, compared to a gain of nearly $1 billion in the first quarter of 2019. interest expenses were lowered by nearly $80 million. Our normalized effective tax rate, or ETR, was minus 109.3% this quarter, as it was heavily impacted by the non-deductible market-to-market losses linked to the hedging of our share-based payment programs. Excluding the impact of the gains and losses linked to the hedging of our share-based payment programs. Our ETR in the first quarter was 25.9%, as compared to 27.5% in the first quarter of 2019. The decrease is primarily driven by lower property and country mix. Moving on to earnings per share. Our underlying EPS decreased to 51 cents per share in the quarter, as the decline in normalized EBIT was only partially offset by lower tax expense and lower profit attributable to non-controlling interests. Let me now spend a few minutes on the measures we are taking to exercise our financial discipline. Our commitment to financial discipline is unwavering. especially in the context of the current volatility. We are proactively managing those factors upon which we can have impact and influence. Efficient utilization of our resources is part of our DNA and an important driver of our industry-leading profitability. We have implemented several measures to reduce or eliminate discretionary spending that may not prove effective in the current environment. This includes non-committed capital expenditures, variable administrative expenses such as travel and events, and sales and marketing investments, including sponsorships. Additionally, our senior leadership team has volunteered to reduce their base salaries by 20% for the remainder of the year. We also revised our proposal to pay a final 2019 dividend from €1 per share to €0.50 per share. We determined that this decision was prudent and in the best interest of the company, as it was consistent with our financial discipline, the leveraging commitments, and other actions taken to navigate this environment. We have also taken proactive measures to maintain our strong liquidity position. including drawing down our $9 billion revolving credit facility in full and successfully issuing approximately $11 billion of bonds. In addition, the Australian Foreign Investment Review Board has granted regulatory clearance in relation to the sale of our Australian operations. The transaction will close on June 1st. As I mentioned, in April, we successfully completed two investment grade bond issuance to further strengthen our liquidity position. One of 4.5 billion euros and one of 6 billion US dollars. As you see on slide 24, our bond maturity profile is well distributed across the next several years and these issuance further extended our weighted average maturity by approximately five months. As a reminder, We do not have any financial covenants on our entire debt portfolio, including our revolving credit facility. Our bond portfolio remains largely insulated from interest rate volatility, as approximately 95% holds a fixed rate. Furthermore, the portfolio is comprised of a diverse mix of currencies, with around 60% denominated in US dollars and 33% in euros. Our weighted average maturity is now roughly 15 years. Finally, we have a weighted average coupon rate of approximately 4%. I will now take you through our capital allocation priorities. The first priority for the use of cash is to invest behind our brands and to take full advantage of the organic growth opportunities in our business. The leverage to around a two times net debt to EBITDA ratio remains our commitment, and we will prioritize debt repayment in order to meet this objective. Third, with respect to M&A, we will always be ready to look at opportunities when and if they arise, subject to our strict financial discipline and the leveraging commitment. Our first priority is returning excess cash to shareholders in the form of dividends and or share by debts. With this being said, we must exercise prudent measures during times of uncertainty and volatility, including efficient management of discretionary expenses, especially those which may not prove effective in the current environment. And with that, I'll hand back to Maria to begin the Q&A session.