Anheuser-Busch InBev SA/NV

Welcome to Anheuser-Busch InBev's second quarter 2023 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 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 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 20-F filed with the Securities and Exchange Commission on the 17th of March, 2023. 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 second quarter 2023 earnings call. It is a great 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 executing our strategic priorities. After that, we'll be happy to answer your questions. Let's start with our operating performance. Our global momentum continued this quarter, although was partially offset by the performance of our US business. We delivered revenue growth of 7.2%. Our net revenue per hectolitre increased by 9% as a result of pricing actions, ongoing premiumization, and other revenue management initiatives. Total volumes declined by 1.4% as growth in the majority of our markets was offset by volume decline in the U.S. EBITDA increased by 5% and reached US$4.9 billion. Underlying EPS was US$0.72. While this quarter was not without challenges, the strength of our brand portfolio, global footprint, and our focus on disciplined resource allocation continues to enable us to invest for the long term while delivering profitable growth. We delivered broad-based growth this quarter, with double-digit top-line increases in four of our five operating regions. Revenue increased in more than 85% of our markets, with volume growth in over 50%. Our diverse geographic footprint positions us well to deliver superior long-term value creation. Now, I will take a few minutes to walk you through the operational highlights for the quarter from our key regions, starting with North America. In the US, the beer industry remained resilient, delivering revenue growth of 2.3% this quarter, and with beer gaining share of value of total alcohol in the first half of 2023. Our revenues declined by 10.5%, and STR volumes by 14%, with performance impacted by the decline of the Bud Light brand. With respect to Bud Light brand performance, we have actively engaged with over 170,000 consumers since April, and there are a few clear insights. First, most consumers surveyed are favorable towards the Bud Light brand, and approximately 80% are favorable or neutral. The consumer will always be at the center of everything we do. All of us at ABI deeply care about and respect all our consumers. Second, regardless of favorability, our consumers across all sentiment groups have three points of feedback in common. One, they want to enjoy their beer without a debate. Two, they want Bud Light to focus on beer. Three, they want Bud Light to concentrate on the platforms that all consumers love, such as NFL, Photos of Honor, and music. We are taking the feedback and working hard to earn our consumers' business every day across the world. While our total beer industry share declined by 520 bps this quarter to 36.9%, It has been stable since the last week of April through the end of June. U.S. EBITDA declined by 28.2% this quarter, with approximately two-thirds driven by market share performance and one-third driven by productivity loss and the long-term strategic choices we made to increase sales and market investments in our brands and provide support to our wholesaler partners. As we move forward in the U.S., we are focused on what we do best, brewing great quality beer, actively engaging with our consumers, supporting our partners, and positively impacting the communities that we serve. Now, moving to our largest region, Middle Americas, which delivered margin expansion and another quarter of growth. In Mexico, we continue to outperform the industry. delivering double digit top and bottom line growth our above core portfolio grew revenue by meetings led by the strong performance of model special we continue to progress our digital dtc initiatives with our dtc platform tada now operating in over 60 major cities and fulfilling on average over 300 000 orders per month in short Mexico continues to execute effectively across all three pillars of our strategy to drive consistent performance. In Colombia, our business delivered high single-digit top and double-digit bottom line growth with our beer portfolio continue to gain share of total alcohol. Our mainstream portfolio drove our performance, delivering double-digit revenue growth led by a particularly strong performance from poker, which grew volumes by mid-teens. In South America, our business in Brazil delivered double-digit top and bottom line growth, with approximately 400 base points of margin expansion. Our beer volumes declined by 2.6% as we cycled a strong performance in 2Q 2022, which was supported by post-COVID recovery. Our premium and super premium brands led our performance, delivering a volume increase in the mid-turns. This marketplace continued to expand, reaching over 700,000 customers. a 29% increase versus 2Q 2022, and GMV growing by 64%. Brazil is another example of effective execution across all three pillars of our strategy. Now, let's talk about EMEA. In Europe, we grew top and bottom line by high single digits. volumes declined by mid-single digits, outperforming a soft industry in the majority of our key markets. We continue to drive premiumization across Europe. Our premium and super premium brands delivered double-digit revenue growth this quarter, led by Corona and Budweiser. In South Africa, we delivered double-digit top-line growth with our portfolio continuing to gain both share of beer and total alcohol. EBITDA was flattish as top line growth was offset primarily by anticipated commodity cost headwinds. Our performance was led by Carlin Black Label, the number one beer brand in the country, which grew volumes by high things. Our global brands grew volumes by more than 50%, driven by corona. And finally, APAC. In China, our business delivered double-digit stock and bottom-line growth, driven by continued premiumization and on-premise recovery across our key regions and channels. We outperformed the industry, delivering volume growth across all segments of our portfolio this quarter, led by mid-20s volume growth in both our premium and super premium portfolios. Now, I would like to share with you a few sustainability highlights. We continue to innovate and progress towards our 2025 sustainability goals. Here are a few examples of local initiatives with the potential to scale globally that are driving progress on our sustainability priorities. In climate action, we invested in a biomass processor in our Jupil brewery in Belgium. to produce thermal energy from malt husks, which we expect to reduce our gas consumption by 15% and reduce our carbon emissions. In smart agriculture, we provided technical and financial training to over 900 smallholder barley farmers in Uganda to strengthen local supply chains. In water stewardship, we are installing new vacuum pump technology in brewers across several markets to reduce water usage in bottle fillers by approximately 50%. For circular packaging, our business in Brazil launched a nationwide returnable bottle campaign to help increase the use of returnable packaging by promoting affordability and sustainability. Now let's move on to our strategic pillars. Let's start with pillar one of our strategy, lead and grow the category. We continue to execute on our five levers to drive category expansion and deliver a strong quarter of profitable top line growth. We are leading and growing the category by offering superior core propositions, developing new consumption occasions and expanding our premium and beyond beer portfolios. Our global brands continue to scale and drive premiumization across our markets. The combined revenues of Corona, Stella Artois, and Budweiser grew by 18.4% outside of brands' home markets, led by Corona, which was recently recognized by Kantar Brand Z as the number one fastest growing global brand by value, with 23.7% growth. Budweiser delivered a revenue increase of 16.9%, with broad-based growth in 25 markets. And Stellar 2A grew by 14.5%. Now let's turn to our second strategic pillar, digitize and monetize our ecosystem. This continues to accelerate usage and reach capturing 9.2 billion us dollars in gross merchandising value squarted a 30 increase year over year and reaching 3.3 million monthly active users customer satisfaction continue to improve with our weighted average net promoter score improving to plus 60 up 10 points since last year in 15 of the training markets where business life our customers are also able to purchase third-party products through Biz Marketplace. Customer adoption is increasing, with 63% of Biz customers now also Biz Marketplace users. In the second quarter, Biz Marketplace generated approximately US$340 million in GMV. representing approximately 1.3 billion us dollars on annualized basis now let's talk about how we are strengthening our direct relationship with our consumers our digital d2c products zed delivery tada and perfect draft are now available in 20 markets and generated over 16.5 million orders and $115 million in revenue this quarter. We continue to leverage our digital DTC products to further develop new consumption occasions. For example, in Brazil, ZDeliver enabled the launch of Corona Sunset Hours, an everyday activation encouraging consumers to disconnect from work and reconnect with friends in the early evening. With that, I would like to hand it over to Fernando to discuss the third pillar of our strategy, optimize our business. Fernando, over to you. 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 are focused on maximizing long-term value creation by dynamically balancing our priorities. We continue to invest in organic growth to support our strategy to lead and grow the category and digitize and monetize our ecosystem. In the first half of 2023, Discipline overhead management and efficient allocation of resources enable us to invest approximately 5.6 billion US dollars combined in sales and marketing and CapEx. The excess cash generated by our business is then dynamically allocated to our three capital allocation priorities. The leveraging, selective M&A, and return of capital to shareholders. As you can see in the next slide, two point times net debt to EBITDA remains the point at which we maximize value, though approximately 90% of the benefits from the leveraging can be captured as we approach three times. As of June 30, our net debt to EBITDA ratio reached 3.7 times, down from 3.86 times year over year. with net debt reaching 73.8 billion US dollars. As a reminder, we typically generate the vast majority of our cash flow in the second half of the year. Net debt was also impacted by the increased dividend paid in the first half of 2023, as well as the translational FX headwinds. Our debt maturity profile remains well distributed with no bond maturity in 2023 and no relevant medium-term refinancing needs. If you look at our debt maturity profile, we have 3 billion US dollars worth of bonds maturing through 2025. As of June 30, we had total liquidity of 16.9 billion US dollars which consisted of US$10.1 billion available under committed long-term credit facilities and US$6.8 billion of cash equivalents. Our bond portfolio has an average pre-tax coupon of around 4% and a weighted average maturity of 14 years. In addition, our debt portfolio does not have any financial covenants and is comprised of a variety of currencies diversifying our effects risk. 96% of our bonds have a fixed rate insulated from interest rate volatility and inflation. And now, let me take you through the drivers of our underlying EPS this quarter. We delivered EPS of 72 cents per share versus 73 US cents per share last year, as we cycle a 4 cents per share net benefit from tax credits in Brazil year over year. Organic EBITDA growth, accounting for 12 cents per share, was offset primarily by translational effects. Lower income tax increased EPS by 4 cents. With that, I would like to hand it back to Michel for some final comments before we start our Q&A session. Michel?