Anheuser-Busch InBev SA/NV

Welcome to Anheuser-Busch InBev's third quarter 2022 earnings conference call and webcast. Hosting the call today from AB InBev are Mr. Michelle Dutraeris, 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 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 touchtone 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 the 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. Michel Dukaris. Sir, you may begin.

Thank you, Jessie, and welcome, everyone, to our third quarter 2022 earnings call. It is a great pleasure to be speaking with you all today. Today, Fernando and I will take you through our third quarter operating highlights and provide you with an update on the progress we've made in the execution of our strategic priorities. After that, we'll be happy to answer your questions. Let's start with our third quarter operating performance. We are very pleased with the continued momentum of our business and the strength of the beer category across our footprint, even in the context of the ongoing dynamic operating environment. Our volume momentum accelerated this quarter, driven by strong consumer demand for our brand portfolio, ongoing digital transformation, and increased investment in our brands. We delivered our best quarterly volume performance this year, with 3.7% volume growth. Revenue per hectolitre increased by 8%, driven by revenue management initiatives and premiumization across the majority of our markets, resulting in top-line growth of 12.1%. EBITDA increased by 6.5%, as our top-line growth was partially offset by anticipated transactional effects and commodity headwinds, and increased sales and marketing investments in our brands. Normalized EPS was $0.81 and underlying EPS was $0.84. As a result of our performance and continued momentum, we are raising the bottom end of our 2022 EBITDA growth outlook from 4% to 8% to 6% to 8%. Our medium-term outlook remains unchanged. This quarter, we once again deliver broad-based growth with a top-line increase in all five of our regions and volume growth in over 60% of our markets. Our diverse geographic footprint provides a unique combination of growth and reliable cash flow generation, positioning us well to deliver superior value creation. Now, let me share some highlights from our key markets. In the U.S., The beer industry remains resilient, with volume trends improving throughout the year in all major beer segments, even in the current inflationary environment. Our business delivered another quarter of top-line growth and strong cash flow generation. Our above-court beer portfolio outperformed the industry, gaining share within the segment for the third quarter in a row. led by Nicola Boutra, which grew volumes by double digits. Our FTR volumes declined by 1.7%, estimated to be below the industry. Within the spirits-based ready-to-drink segment, our portfolio continued to outperform the industry, with both cut-water and neutral growing strong double digits. We continue to make progress in our commercial strategy, with over 40% of our revenues now coming from above-core beer and beyond beer brands. In Mexico, we accelerated our market share gains and delivered a third consecutive quarter of double-digit top and bottom line growth. Our volumes grew by more than 10%, with growth across all segments of our portfolio, led by above-core, which delivered volume growth in the high trainings. In Colombia, We delivered double-digit top and high single-digit bottom-line growth and continue to expand the beer category, again reaching all-time high per capita consumption. We delivered volume growth across all segments of our portfolio, with our premium and super-premium brands growing volumes in the high teams, reaching all-time high volume and share of our total revenue. Our business in Brazil delivered double-digit top and bottom line growth with EBITDA margin expansion. Our premium and super premium brands continued to outperform this quarter, delivering high single-digit volume growth. Total BF volumes were flat as we cycled a strong performance year over year. Digital transformation continued to make progress. with over 70% of our BIS customers now also BIS marketplace buyers, and our digital Z-delivery product reaching 4.3 million monthly active users. In Europe, we grew top line by double digits, driven by volume growth, revenue management initiatives, and on-premise recovery. Our portfolio continues to premiumize, with growth this quarter led by our premium and super premium brands. EBITDA declined by mid-single digits, as top-line growth was offset by elevated cost pressures and increased sales and market investments to support our premium strategy and FIFA World Cup activations. Our business in South Africa grew both top and bottom line by double digits this quarter, We deliver growth across all segments of our portfolio, led by over 30% revenue growth in our leading core brand, Carlin Black Label. Our premium, super premium, and beyond beer portfolios all deliver a double-digit increase in volumes. We are investing in capacity expansion to support our growth in South Africa. In China, COVID-19 restrictions continue to disproportionately impact our key regions and sales channels. Underlying consumer demand remains consistent, with volumes growing by 3.6%. We continue to invest in our strategy, geographic expansion, premiumization, and digital transformation. In our priority expansion cities, excluding those impacted by restrictions, Budweiser and our super premium portfolio grew volume by double digits. Premiumization of the beer industry in China remains an exciting long-term value creation opportunity. We continue to make progress across our ESG priorities. We highlight this quarter, including in recognition of our global water stewardship, Initiatives we are proud to recently be included on Fortune's Change the World list. We have achieved carbon neutrality at eight facilities to date and continue to drive deep decarbonization across our value chain. We brought together key packaging and raw material suppliers that account for over 50% of our scope three emissions to share best practice and take collective climate action. through our global supplier collaboration initiative called Eclipse. Now, let's move on to our strategic pillars. Let's start with pillar one of our strategy, lead and grow the category. Our creative marketing capabilities continue to be recognized. Following our best-ever performance at this year's Cannes Lions International Festival of Creativity, we were recently named as the world's most effective marketer in the Global S Effectiveness Index for the first time. This combination of best-in-class creativity, brand-building capabilities, and effective marketing are driving strong consumer connections with our brands and enabling our accelerated top-line growth. A big congratulations to our teams and partners for this extraordinary achievement. We continue to execute on our five levers to drive category expansion. And by making the category more inclusive, offering superior corporate positions, developing consumption occasions, and expanding our premium and beyond beer portfolios, we delivered another quarter of consistent and profitable top line growth. Our global brands continue to drive premiumization across our markets. The combined revenues of Corona, Stella Artois, and Budweiser grew by 12.7% outside of the brands' home markets, led by Corona, with 23.5% growth. To illustrate how our portfolio development and execution are driving growth, I would like to take you through three examples from our market expansion model. Let me start with an emerging market example, Zambia. In emerging markets like Zambia, our primary objective is to make the category more inclusive. By developing superior core propositions, introducing premium and beyond beer brands, Over the last five years, we have expanded our portfolio with a broader range of offerings, expanding price in different segments and consumption occasions. Per capita consumption of the formal beer category has increased by approximately two liters, with significant headroom for growth. While still in the early stages of renumeration journey, Our above-court portfolio has increased its share of our revenue by over 300 base points to reach approximately 23% today. Category expansion and market share gains have resulted in the consistent growth of our business, increasing volumes at an 8.7% CAGR since 2018. Now let's take a look in one of the key developing markets in our portfolio, Mexico. By consistently investing in our portfolio development, we are unlocking the full potential of the beer category. We are now offering a more complete range of brands and packs across core to reach more consumers in more occasions and leading the development of premium and beyond beer segments. The development of the business in Mexico is truly remarkable. Beer per capita consumption continues to grow, and our volumes have consistently outperformed the industry, growing at 5.6% CAGR since 2017. Our core brands continue to lead the industry, while our above-court portfolio is leading premiumization. And now, moving on to an example from one of our developed markets, the U.S. In the U.S., we are at half time of our 10-year plan to rebalance the portfolio towards the growing segments of the market. Five years ago, the portfolio was over-indexed to declining segments in the industry. Today, as we continue to rebalance and enhance our portfolio, we are better positioned across all segments of the market. To accelerate growth, we are focused on our priority mega brands. We've been mainstream over the last five years. We stabilized our share. Bush Light is one of the top five share gamers in beer industry since 2019 and has gained share of beer for the last 15 quarters in a row. Bud Light remains the number one brand in volume and brand power. Our above-court portfolio continues to improve performance and is gaining share in the last three quarters. MediaLogo Ultra doubled volume in the last five years, becoming the second-largest brand in the industry and continues to grow double-digits. In the premium segment, Stella Artois, Kona Big Wave and Estrella Jalisco are growing volumes in the high single digits. Within BeyondBeer, we now have two of the strongest propositions in the fastest growing spaces of the category, with Cutwater and Neutral. In 2017, 27% of our revenues came from the above-quarter and BeyondBeer segments. Today, these segments make up over 40% and have been keen contributors to approximately $800 million in revenue growth over the last five years. As a result of this portfolio rebalancing, our business has now delivered revenue growth in eight of the last nine quarters. As we enter the second half of our 10-year plan, we have a healthier portfolio, position for growth, and expect to engage in a multi-year increase in commercial investments to accelerate our portfolio rebalancing. Now, let's turn to our second strategic pillar, digitize and monetize our ecosystem. This continues to accelerate usage and reach, capturing $7.7 billion in GMV this quarter, a 40% increase year over year. Biz is now available in 19 markets, reaching 3.1 million monthly active users and generating over 1.8 million orders per week. In 14 of the 19 markets, our customers are also able to purchase third-party products through Biz Marketplace. Customer adoption is increasing and 44% of BIS customers in these markets are now also BIS marketplace buyers. Today, we have over 200 partners providing more than 500 brands through the platform, generating September annualized run rate revenue of approximately $850 million U.S. dollars. 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 road to market and highly engaged business user base. Now, let's talk about direct-to-consumer. Our digital direct-to-consumer products, Zed Delivery, TADA, and Perfect Draft are now available in 17 markets. and generated over 100 million US dollars in revenue in 17 million orders this quarter. With that, I would like to hand it over to Fernando to discuss the third pillar of our strategy, optimizing our business. Fernando.

Thank you, Michel. Good morning, good afternoon, everyone. We aim to maximize value by focusing on three areas. One, optimized resource allocation. Two, robust risk management. And three, 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. Our debt maturity profile remains well distributed with no bond maturities in 2022 and 2023 and no relevant medium-term refinancing needs. If you look at our debt maturity profile, we have 2.8 billion U.S. dollars of bonds maturing through 2025 and more than sufficient liquidity today to redeem all of these bonds. Our bond portfolio has an average pre-tax coupon of around 4% and a weighted average maturity of approximately 16 years. Moreover, our debt portfolio does not have any financial covenants and is comprised of a variety of currencies diversifying our effects risk. 94% of our bonds have a fixed rate. insulated from interest rate volatility and inflation. Now let me take you through the drivers of our underlying EPS for the quarter. Underlying EPS was stable at $0.84 per share, $0.01 lower than the third quarter last year. Organic EBITDA growth accounted for a $0.17 per share increase, but was partially offset by $0.12 primarily from translational effects. Higher depreciation and amortization accounted for 3 cents. As we continue to deliver, our net interest expense has reduced, contributing a 4 cents improvement. Other financial results reduced EPS by 8 cents, largely due to higher cost of hedging driven by a higher interest rate environment. I'll now hand it back to Michel for some final comments. Michel?