Anheuser-Busch InBev SA/NV

Welcome to Anheuser-Busch InBev's third 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 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 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 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 third quarter 2023 earnings call. It is a great pleasure to be speaking with you all today. Just a heads up, I'm slightly under the weather and I'm taking the call remotely. Apologies in advance if my voice is a little rusty. 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 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 U.S. business. We delivered revenue growth of 5%, with our net revenue per hectolitre increasing by 9% as a result of pricing actions, ongoing premiumization, and other revenue management initiatives. Total volumes declined by 3.4%. as growth in our Middle Americas, Africa, and APEC regions was primarily offset by performance in the U.S. and a soft industry in Europe. EBITDA increased by 4.1% and reached 5.4 billion U.S. dollars. Underlying EPS was 86 U.S. dollar cents, a two cents per share increase versus last year. In line with our capital allocation priorities, we have announced a US$3 billion bond tender. And we have also announced today that we will be proceeding with a US$1 billion share-by-back program to be executed within the next 12 months. Fernando will provide some additional detail on these capital allocation choices later in the presentation. While the operating environment remains dynamic in some of our markets, the strength of our global footprint, brand portfolio, and our continued focus on disciplined resource allocation are enabling us to invest for the long term while delivering efficient, profitable growth. We delivered broad-based growth this quarter, with both top and bottom line increases in four of our five operating regions, and with revenue growth in more than 80% of our markets. Our scale and diverse geographic footprint, with leading positions in the largest profit and growth pools, has us well-placed 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 U.S., the beer industry remained resilient, delivering revenue growth of 3.3% this quarter, and with beers gaining share of value of total alcohol in the off-premise. Our revenues declined by 13.5% and XTR volumes by 16.6%, primarily due to volume decline of Bud Light and impacted by shipment phasing ahead of our October price increase last year. With respect to Bud Light brand performance, we have actively engaged with over 260,000 consumers since April. and their common points of feedback remain consistent. One, consumers continue to want the Bud Light brand to concentrate on the platforms that all consumers love. And we are doing just that through investing in partnerships with the NFL, Folds of Honor, news platforms, college football, and our recently announced return to partnering with the UFC. Two, they want Bud Light to focus on beer. The Bud Light East to Summer, East to Sunday campaigns are all about bringing people together over a beer for the moments that matter. Notably, a recent survey found that over 40% of lapsed Bud Light drinkers said that they are now more open to come back to drinking Bud Light. Third, They want their beer without a debate. 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 515 dips this quarter to 36.6%, it has been stable since the last week of April through mid-October. U.S. EBITDA declined by 29.3% this quarter. Similar to last quarter, approximately two-thirds of the decline was driven by market share performance, and one-third driven by productivity loss and the strategic choices we made to increase sales and market investment 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 on to our largest region, Middle America, which delivers margin extension and another quarter of growth. In Mexico, we delivered mid-single-digit top and bottom-line growth. Our above-court portfolio continued to outperform, led by the strong performance of Modelo Especial and Pacifico. We continued to progress on our digital initiatives, with our Vendo platform in BIS now enabling digital utility payments. and mobile data purchases in more than 9,000 points of sale and generating over 170,000 transactions in the third quarter. As we highlighted at our recent capital markets day, Mexico is an example of the performance that can be delivered with effective execution across all three pillars of our strategy and implementation of our replicable toolkits. In Colombia, our business delivered double-digit stock and bottom-line growth. Our core portfolio led our performance this quarter, with a particularly strong performance from poker, which grew volumes by high single digits. In South America, our business in Brazil delivered mid-single-digit top line and double-digit bottom line growth, with margin expansion of 628 basis points. Our beer volumes declined by 1.1% as we cycled all-time high quarterly volumes in third quarter 2022. Our premium and super premium brands led our performance, delivering a volume increase in the low teens. Now, let's talk about EMEA. In Europe, we grew top and bottom line by no single digits. volumes declined by high single digits, outperforming a soft industry in more than 80% of our key markets, according to our estimates. We continue to drive premiumization across Europe. Our premium and super-premium brands deliver mid-single-digit revenue growth this quarter, led by less and stellar plot. In South Africa, we deliver double-digit top-line growth, with our portfolio continuing to gain both share of beer and total alcohol. EBITDA grew by mid-single digits, as top-line growth was partially offset by anticipated transactional effects and commodities headwinds. Our core portfolio continued to outperform, delivering high single-digit volume growth, and our global brands, led by Corona, grew volumes by more than 35%. And finally, APAC. In China, our business delivered high single-digit top and bottom line growth, driven by continued premiumization and on-premise recovery across our key regions. Our premium and super premium brands continued to outperform, growing volumes by more than 10%. The rollout and adoption of this platform continued, with these now present in over 230 cities and over 65% of our revenue generated through digital channels in September. 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 another quarter of profitable top-line growth. We are leading and growing the category by offering superior core propositions, developing new consumption locations, and expanding our premium and beyond beer portfolios. As we shared at our recent Capital Market Day, premiumization is one of our biggest growth opportunities. Corona, Budweiser, and Estelle Artois have all been intentionally built to address one of the key consumption occasions for premium beer. And with the elevation of Michelob Ultra as our fourth global brand, our focus portfolio is well positioned across all demand landscapes to lead the premiumization of the beer category. And our global brands are continuing to lead our growth. The combined revenues of Corona, Budweiser, Stella Artois, and Michelob Ultra grew by 15.1% this quarter outside of the brand's home markets. Now, let's turn to our second strategic pillar, digitize and monetize our ecosystem. This continues to accelerate usage and reach, capturing $10.4 billion in gross merchandising value this quarter, a 27% increase year-over-year, and reaching 3.4 million monthly active users. Customer satisfaction continues to improve, with our weighted average net promoter score improving to plus 60, up 7 points since last year. In 15 of the 25 markets where Biz is live, our customers are also able to purchase third-party products through Biz Marketplace. Customer adoption is increasing, with 65% of Biz customers now also these marketplace buyers. In the third quarter, this marketplace generated approximately 420 million US dollars in GMV, representing approximately 1.7 billion US dollars on an annualized basis. Now let's talk about how we are strengthening our direct relationship with our consumers. Our D2C mega brands, Z Delivery, Tada, and Perfect Draft are now available in 21 markets, generating over 16.9 million orders and 125 million US dollars in revenue this quarter. We continue to leverage our digital D2C products to generate meaningful consumer insights and drive category growth by developing occasions. For example, across Latin America, Zé Deliver and Tadá are enabling increasing in-home consumption of returnable glass bottles. Packs that increase availability and solve consumers' pain points of carrying these bulk products to and from their homes. 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. First, Let me share with you a few sustainability highlights, as sustainability is key to both risk management and optimizing resource allocation. It allows us to ensure supply security, manage our costs, and protect our license to operate and grow for the next 100 plus years. Here are a few examples of local initiatives with the potential to scale globally that are driving progress on our 2025 sustainability priorities. In climate action, to support our Scope 3 efforts, we organized supplier collaboration and training events across our key markets, including Mexico, Colombia, and China. In smart agriculture, we hosted more than 200 farmers at our annual US Grower Day to share results from barley, variety, and crop management research trials. In water stewardship, we launched a partnership with WaterAid in Ghana for a solar-powered water system to deliver clean, safe water to communities in need. For circular packaging, We scaled our program in Mexico to recover bottles destined for landfill, recovering more than 145 million bottles during the third quarter. All of these initiatives serve to optimize our business over the long term. 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. 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 on the next slide, two 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. Our debt maturity profile remains well distributed with no bond maturities in 2023 and no relevant medium-term refinancing needs. To look at our debt maturity profile, we have $3 billion worth of bonds maturing through 2025. 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 FX risk. 97% of our bonds have a fixed rate, insulated from interest rate volatility and inflation. As part of our value-creating agenda, we have announced two capital allocation initiatives. First, To further reduce our debt quantum and progress on our deleveraging path, we have announced a $3 billion cash tender offer for certain outstanding bonds. Second, we announced today that we will be proceeding with a $1 billion share-by-debt program to be executed within the next 12 months. We will continue to dynamically balance our capital allocation priorities to maximize value creation. And as we move towards three times the debt rebate, we believe there will be continued flexibility. And now, let me take you through the drivers of our underlying EPS this quarter. We delivered EPS of 86 US cents per share versus 84 US cents per share last year. Organic EBITDA growth, accounting for 11 cents per share, was partially offset by translational effects and higher non-controlling interest. Optimizing our net finance costs accounted for a 5 cents per share increase. With that, I would like to hand it back to Michel for some final comments before we start our Q&A session. Michel?