Anheuser-Busch InBev SA/NV

Welcome to Anheuser-Busch InBev's full year and fourth 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 are 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 Ducaris. Sir, you may begin.

Thank you, Jessie, and welcome, everyone. to our full year 2023 earnings call. It is a great pleasure to be speaking with you all today. Today, Fernando and I will take you through our full year and fourth 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 in 2023. Revenue reached approximately 59.4 billion US dollars, an all-time high for our company. Although our full growth potential was constrained by the performance of our US business, our revenue grew by 7.8%. Net revenue per hectolitre increased by 9.9% as a result of pricing actions ongoing premiumization, and other revenue management initiatives. Total volumes declined by 1.7%, as growth in Middle Americas, Africa, and Asia-Pacific was primarily offset by performance in the U.S. and a software industry in Europe. EBITDA increased by 7%, in line with our medium-term growth ambition and 2023 outlook. reaching nearly 20 billion U.S. dollars. Underlying EPS was $3.05, a two cents per share increase versus last year. As a result of our strong cash flow generation, we reached a net debt to EBITDA ratio of 3.38 times. Following our deleveraging progress, we have additional flexibility in our capital allocation choices. The Board has proposed a full-year dividend of 82 euro cents per share, a 9% increase versus 2022. In addition, we have now completed almost 90% of our US$1 billion share-by-back program. In the fourth quarter, we delivered top-line growth of 6.2%, with our net revenue per hectolitre increasing by 9.3%. Total volume declined by 2.6%, and EBITDA increased by 6.2%. We delivered broad-based growth this year with both top and bottom line increases in four of our five operating regions, and with net revenue growth in more than 85% of our markets. Our scale and diverse footprint, with leading positions in the largest profit and growth pools, has us well-placed to deliver superior long-term value creation. Now, I'll 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, with volumes improving sequentially throughout the year and with beer gaining share of total alcohol by value in the off-premise. Our revenues declined by 9.5% this year, with STW volumes down by 12.7%, primarily due to the volume decline of Bud Light. Our market share continued to improve gradually from May through the most recent weeks in February. In 2023, our market share was 38.3%. 2023 was a challenging year for our business in the US. I would like to take a moment to reflect on how we adapted, the choices we made, and how we are taking the learnings and moving forward. Our teams showed remarkable resilience. and agility, and I'm proud of the many actions we took to support our people, our wholesaler partners, and our brands. We stepped it up to support our frontline employees and provided financial assistance to our wholesaler partners. We increased the media investment behind our brands. We expanded our long-standing partnership with Folds of Honor. including bringing the NFL and Bud Light together to also support first responders. We continue to invest in our mega brands and mega platforms, such as sports and music, that all consumers love, including the NFL, NBA, Lollapalooza, as well as new investments with the VMAs, UFC, Copa America, and Team USA for the Olympic and Paralympic Games. We continue to support the communities in which we operate. We purchase annually more than $700 million in quality ingredients from U.S. farmers. We produced, packaged, and delivered clean drinking water when disasters struck. More than 93 million cans to date. We create jobs. Together with our wholesaler partners, we employ 65,000 hardworking people across the U.S. 99% of what we sell in the U.S., we make in the U.S. And we built on our more than $1 billion total investment in responsible drinking programs in partnership with our wholesalers. And we do this because that's who we are. As we move forward, we continue to focus on what we do best, brewing great beer for everyone, actively engaging with our consumers, supporting our partners, and impacting the communities we serve. Now, moving to our largest region, Middle America. In Mexico, we delivered high single-digit top and bottom line growth with margin expansion. Our above-court portfolio continued to outperform, led by the strong performance of Model Especial. In Colombia, our business delivered record high volumes with double-digit top line and high single-digit bottom line growth, driven by the consistent execution of our strategy. the beer category continues to grow, gaining 70 basis points share of total alcohol this year. Our core portfolio led our performance, with a particularly strong performance from poker, which grew volumes by high single digits. In South America, our business in Brazil delivered high single-digit top-line and double-digit bottom-line growth. with margin expansion of 462 base points. Our performance this year was led by our premium and super premium brands, which delivered volume growth in the mid-20s and gained its share of premium segments. Now, let's talk about EMEA. In Europe, we grew top line by high single digits and bottom line by low single digits. Our portfolio continues to premiumize with our premium and super premium brands delivering high single-digit revenue growth, led by Corona, Lash, and Stella Artois. In South Africa, we delivered record high volumes with double-digit top-line and high single-digit bottom-line growth. Our portfolio continues to gain share of both beer and total alcohol. led by our global brands, which grew volumes by more than 30%. And finally, APAC. In China, our business delivered double-digit top and bottom-line growth, with margin expansion of 125 basis points. Our premium and super-premium brands continued to outperform, growing revenue by double digits and driving overall market share gains. Now let's move on to our strategic pillars. Let's start with pillar one of our strategy, lead and grow the category. The beer category is big, profitable, and growing. In 2023, according to Euromonitor, the beer and beyond beer category continue to gain share of total alcohol by volume globally, gaining 260 base points over the last five years. And looking ahead, beer is projected to continue this trend. Led by the strong performance of our global mega brands, our revenues continue to grow this year, reaching a new all-time high for a company of $59.4 billion. We continue to invest in our category expansion levers and mega brands. building meaningful connections with our consumers. In 2023, we invested $7.2 billion in sales and marketing and have averaged more than $7 billion over the last five years. These consistent investments, combined with increased effectiveness and creativity, is driving the brand power of our portfolio. Our total volumes remained resilient. delivering near all-time highs, and with our revenue management choices driving continued strong net revenue per hectolitre growth. Through the consistent execution of our replicable growth drivers and our five category expansion levers, we are leading and growing the category by offering superior core propositions, developing new consumption occasions, and expanding our premium and beyond beer portfolio. Our global brands continue to scale and are driving premiumization across our markets. In 2023, the combined revenues of Corona, Budweiser, Stella Artois, and Michelob Ultra grew by 18.2% outside of the brand's home markets. Scalable innovation continue to support category expansion across each of the five levers, contributing approximately $6 billion in net revenue in 2023. From expanding our non-alcohol beer portfolio to innovating with pure and double malt offerings, to growing our Beyond Beer portfolio by scaling Brutal Fruit and Flying Fish across Africa, innovation is a key focus of leading and growing the category. Now let's turn to our second strategic pillar, digitize and monetize our ecosystem. This continues to accelerate usage and reach, capturing approximately 40 billion US dollars in gross merchandising value this year, a 27% increase year over year, and reaching 3.7 million monthly active users. Customer satisfaction continued to improve, with our weighted average net promoter score improving to plus 60, up 10 points since last year. In 15 of 26 markets where Biz is live, our customers are also able to purchase third-party products through Biz Marketplace. Customer adoption is increasing. And today, 67% of Biz customers are also Biz Marketplace buyers. In 2023, Biz Marketplace generated approximately 1.5 billion US dollars in GMV. Now let's talk about how we are strengthening our direct relationship with our consumers. Our D2C mega brands, Zed Delivery, TADA, and Perfect Draft are now available in 21 markets, generating approximately 69 million orders and over $550 million in revenue this year. We are developing deep consumer insights in new consumption occasions, such as Corona Sunset Hours, Brahma Soccer Wednesdays, and increasing in-home consumption of returnable glass bottle packs by expanding availability and simplifying logistics. 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. optimize resource allocation, robust risk management, and efficient capital structure. First, let me share how we have progressed on our 2025 sustainability goals. All data points are with reference to our 2017 baseline. In climate action, we reduced scopes 1 and 2 absolute emissions by 44%. In water stewardship, we improved our water efficiency by 18%. In smart agriculture, we are working with nearly 24,000 farmers in our direct sourcing programs through research, technology, and hands-on support to help upskill, connect, and financially empower them. And we made progress in our circular packaging goal with 77.5% of our products now in packaging that is returnable or made from majority recycled content. In recognition of our leadership in corporate transparency and performance on climate change and water security, we were awarded a AA score by CDP. As we continue to optimize our business, investing in organic growth is our number one priority, and we have no shortage of investment opportunities. In addition to investing $7.2 billion in sales and marketing, we invested $4.5 billion in net capex in our facilities and capabilities. Over the last five years, we have invested almost $59 billion to execute our strategy and drive organic growth. While input costs remain elevated, our everyday financial discipline and revenue management choices enabled us to manage margin pressure this year. Although our margins are still below 2019 levels, the decline has been driven by unprecedented commodity and transactional effects headwinds, and it is not structural. These headwinds impacted different regions at different times, and middle America and South America are already good examples of EBITDA margin improvement in 2023. Our fundamental strengths, disciplined pricing, continued premiumization, and efficient operating model create an opportunity for margin expansion over time. In 2023, we continue to deliver strong free cash flow, generating approximately $8.8 billion a $300 million increase from 2022. 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. The excess cash generated by our business is then dynamically allocated across 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. In 2023, gross debt reduced to $78.1 billion resulting in further progress on our debt leveraging, with our net debt to EBITDA ratio reaching 3.38 times. Our debt maturity profile remains well distributed, with approximately $2.5 billion in bond maturity in 2024 and no relevant medium-term refinancing needs. We have $6.5 billion worth of bonds maturing through 2026. 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 it is comprised of a variety of currencies diversifying our FX risk. 98% of our bonds have a fixed rate. insulated from interest rate volatility and inflation. We will continue to dynamically balance our capital allocation priorities to maximize value creation. In 2023, we invested $11.6 billion in sales and marketing and CapEx to execute our strategy and drive organic growth. We will purchase $3 billion of bonds and reached a net leverage of 3.38 times. With our leverage in progress, we have additional flexibility in our capital allocation choices. The board has proposed a dividend of 82 euro cents per share, a 9% increase versus 2022. And we have now completed almost 90% of our $1 billion share-by-back program. And now, let me take you through the drivers of our underlying EPS this year. We delivered EPS of $3.05 per share, a $0.02 per share increase versus last year. Nominal EBITDA growth accounted for a $0.05 per share increase. We continue to optimize our business, reducing net interest and income tax expenses, which mostly offset headwinds in other line items. As we look ahead to 2024, we expect EBITDA to grow between 4% and 8% on an organic basis, in line with our medium-term outlook. Given a continued hyperinflationary environment in Argentina, for 2024, we are amending the definition of organic growth to cap the price growth in Argentina to a maximum of 2% per month. As we continue to invest to execute our strategy and optimize resource allocation, we expect net capex to be between $4 and $4.5 billion in 2024. And we expect our normalized effective tax rate to be between 27% and 29%. With that, I would like to hand it back to Michel for some final comments before we start our Q&A session. Michel?