Anheuser-Busch InBev SA/NV

Welcome to Anheuser-Busch InBev's second quarter 2022 earnings conference call and webcast. Hosting the call today from AB InBev are Mr. Michelle Dukaris, 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 in 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 a 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 touch-tone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. 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 18th of March, 2022. 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. Michelle Dukaris. Sir, you may begin.

Thank you, Jesse, and welcome everyone to our second quarter 2022 earnings call. It is a pleasure to be speaking with you all today. Today, Fernando and I will take you through our second quarter operating highlights and provide you with an update on the progress we have made in the execution of our strategic pillars. We will then be happy to answer your questions. So let's start with our operating performance. Our momentum continued this quarter, and we are very pleased with the ongoing strength of our business. We delivered top-line growth of 11.3%, with 3.4% volume and 7.5% revenue per hectolitre growth, driven by the expansion of the beer category, ongoing premiumization, supported by increased investments in our brands, and revenue management initiatives across our markets. Despite the dynamic operating environment, we continue to meet the moment, growing EBITDA by 7.2%. Normalized EPS was $0.75, and underlying EPS was $0.73. Gross debt decreased by $5.5 billion in the first half of this year, and our net debt to normalized EBITDA decreased to 3.86 times. Our performance this quarter was broad-based, and we delivered top-line growth across all five of our regions, with volume growth in over 60% of our markets. Our diverse geographic footprint and balanced EBITDA contribution provide a unique combination of growth and strong cash generation. Now, I would like to share some highlights from our key markets. In the US, I would like to start by highlighting the resilience of the beer industry. Even in the current dynamic operating environment, we have seen gradual improvement throughout the quarter and an increase in value from pre-pandemic levels. While our volumes underperformed the industry, our business delivered another quarter of top-line growth. We remain confident in our long-term strategy, focused on rebalancing the portfolio. Our above-court portfolio continues to outperform, led by Michelob Ultra, which grew volumes by double digits. Within the spirits-based ready-to-drink segment, our portfolio once again outperformed the industry, with both cut-water and neutral vodka seltzer growing in strong double digits. In Mexico, we outperformed the industry, delivering double-digit top and bottom line growth. Our core brands delivered high single-digit volume growth, and our above-court portfolio once again grew by double digits, led by Modelo and Michelob Ultra. Over 60% of our BIS customers are now also BIS marketplace buyers. In Colombia, we delivered double-digit top and high single-digit bottom line growth. and continued to expand the beer category, again reaching all-time high per capita consumption. Our premium and super premium portfolio reached a record high volume, delivering over 40% growth, led by our global brands and local premium brand, Club Columbia. Our business in Brazil delivered 26.8% top-line growth, and a strong 34.3% increase in EBITDA. Brazil is a great example of our evolution towards becoming a tech-first FMCG. Our advanced digital transformation allows us to capture both growth and operating efficiencies. Our beer volumes once again outperformed the industry, growing by 8.5%, led by our core brands, and over 20% volume growth of our premium and super premium brands. In a nutshell, our business in Brazil delivered across all five levers of our category expansion framework. In Europe, we delivered high single-digit top and double-digit bottom line growth, driven by on-premise reopening, ongoing premiumization, and implementation of revenue management initiatives. Our portfolio continues to premiumize, with growth this quarter led by our global and super premium brands. Our business in South Africa delivered high single-digit top and double-digit bottom-line growth, despite significant production constraints in April and May due to floods impacting our prospectum brewery. Underlying demand for our portfolio remains strong. Our leading core brands delivered continued revenue growth, and our premium and super premium Beyond Beer portfolio outperformed this quarter, delivering a double-digit increase in revenues. In China, the implementation of COVID-19 restrictions led to a total industry decline of mid-single digits in the quarter, according to our estimates. These restrictions disproportionately impacted our key regions and channels, leading to revenue decline of 5.1%. Underlying consumer demand for our brands remained strong. As restrictions eased in June, both our premium and super premium portfolios returned to volume growth, increasing by double digits. to now turn your attention to a few ESG highlights. In the second quarter, we made progress across our ESG priorities with select highlights including advancing circularity in our operations. We opened the first full-scale evergreen production facility in St. Louis to upcycle barley used in our brewing process into high-quality, sustainable protein ingredients. Building a resilient value chain. We brought together more than 250 supply chain partners with the launch of our global collaboration initiative, Eclipse, to drive climate action and decarbonization. Fostering entrepreneurship and innovation. We hosted the third annual demo day of our 100 plus accelerator program with our CPG partners. 34 startups showcased pilots to progress our sustainability goals across water stewardship, climate action, smart agriculture, circular packing, and upcycling. Now let's move on to our strategic pillars. And let's start with pillar one, lead and grow the category. and the creative work that brings them to light and connects them with our consumers is a true passion point of mine. At this year's Cannes Lions International Festival of Creativity, our marketing teams achieved their best performance ever, winning 50 Lions, a record high for our company. These 50 awards were distributed across six of our key countries and nine brands. We were especially honored for being awarded the Creative Marketer of the Year and the Creative Effectiveness Grand Prix for Michelob Ultra Contract for Change Campaign. Big congratulations to our teams and partners for this extraordinary achievement and recognition of the progress in our creative marketing capabilities. Now let me take you through our category expansion levers. First, we continue to focus on making the beer category more inclusive for all consumers. This quarter, consumers' participation within our portfolio increased in the majority of our key markets, driven by brand, tech, and liquid innovations. Second, we are offering superior core propositions. Our mainstream portfolio delivered high single-digit revenue growth this quarter. led by strong performances of our core brands in Brazil, Mexico, and Colombia. Third, occasions development. Our global brand Stella Artois grew revenues by 7.7% outside of its home market, led by the focus on the new occasions in key markets such as Brazil and Colombia. Fourth, we are advancing premiumization. This quarter, our above-court portfolio grew revenue by approximately 12%, led by continued double-digit growth of Michelob Ultra in the U.S. and Mexico, and the expansion of Spaten in Brazil. Our global brands continue to drive premiumization across all markets. The combined revenues of Budweiser, Stellar Toi, and Corona grew by 9.7% outside of the brand's home markets. led by Corona with 18.2%, and Estelle Artois with 7.7% growth. Budweiser grew by 6.1%, despite the impact of COVID-19 restrictions in China, the brand's largest market. Finally, we continue to expand the category with our Beyond Beer offerings. Our global Beyond Beer business contributed over $425 million of revenue in this quarter. In the U.S., our spirits-based ready-to-drink portfolio continued to grow ahead of the industry, led by cut water and neutral vodka seltzer. And in South Africa, brutal fruit and flying fish delivered continued double-digit growth. Innovation this quarter supported the expansion across each of the five levers of our framework, contributing approximately 8% of our total revenue this year. Now let's turn to our second strategic pillar, digitize and monetize our ecosystem. As we invest to become a tech-first FMCG company, BIS continues to see a remarkable acceleration in usage and reach, capturing 7.4 billion U.S. dollars in Gen Z this quarter, a 64% increase year-over-year. We have now 2.9 million monthly active users, generating over 1.9 million orders per week. In 12 of the 18 countries, our customers are also able to purchase third-party products through this marketplace. Biz Marketplace offers a consolidated order and deliver management platform, solving pain points and empowering our customers to grow. We continue to increase adoption and expansion of product availability, as 40% of Biz customers in this market are also buyers from Biz Marketplace. Today, we have over 100 partners providing more than 500 brands through the platform, generating annualized revenues of $800 million. This winning partnership empowers our customers to grow via the benefits of digital inclusion and enables our partners to benefit from our world-class platform and highly engaged business user base. Now, let's talk about direct-to-consumer businesses. This quarter, our DTC products generated US$385 million in revenues. The number of online orders surpassed 16 million transactions this quarter, driven by Zed delivery in Brazil and the continued expansion of our on-demand platform in 10 additional markets in Latin America. With that, I would like to hand it over to Fernando to discuss the third pillar of our strategy, optimizing our business.

Thank you, Michel. Good morning. Good afternoon, everyone. We aim to maximize value by focusing on three areas, optimized resource allocation, robust risk management, and efficient capital structure. With respect to capital allocation, we aim to maximize long-term value creation by dynamically balancing our priorities. We continue to invest in organic growth and support our strategy to lead and grow the category and digitize and monetize our ecosystem. The excess cash generated by our business is then dynamically allocated to our other three capital allocation priorities. The leveraging, selective M&A, and return of capital to shareholders. In line with our capital allocation priorities, we continue to make progress on the leveraging. Our gross debt reduced by $5.5 billion in the first half of 2022, and our net debt to EBITDA ratio decreased to 3.86 times. As you can see on the next slide, Our debt maturity profile remains well distributed with no near and medium term refinancing needs. We have 3.2 billion US dollars of bonds maturing through 2025 and more than sufficient cash on hand today to redeem all of these bonds. Our bond portfolio has an average pre-tax coupon of 4% and a weighted average maturity greater than 16 years. Moreover, Our debt portfolio does not have any financial covenants and is comprised of a variety of currencies diversifying our effect risk. In addition, 94% of our bonds have a fixed rate, insulated from interest rate volatility and inflation. Now let me walk you through the drivers of our underlying EPS for the quarter. Underlying EPS was 73 cents per share. $0.02 lower than the second quarter last year. This was driven by an increase in net finance costs and higher income tax expense. Net finance costs increased largely due to foreign exchange losses, which accounted for $0.04. These losses were a result of FX translation of cash held in foreign subsidiaries. I'll now hand it back to Michel for some final comments. Michel.