Anheuser-Busch InBev SA/NV

Welcome to Anheuser-Busch InBev's first quarter 2024 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 one on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. If you should require operator assistance, please press star zero. 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 discussion of some of the risks and important factors that can 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 11th of March, 2024. 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 reliant upon such information. It is now my pleasure to turn the floor over to Mr. Michel Doukaris. Sir, you may begin.

Thank you and welcome everyone to our first quarter 2024 earnings call. It is a great pleasure to be speaking with you all today. Today, Fernando and I will take you through our first 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 and the key highlights for the quarter. We are encouraged by our continued momentum and results to start the year. We delivered broad-based top line and bottom line growth with market share gains and volume increases in the majority of our markets. Our mega brands led our growth. with 6.7% net revenue increase. EBITDA increased by 5.4%, in line with our medium-term growth ambition and 2024 outlook, with operational efficiencies driving margin expansion of 90 basis points this quarter. As we continue to optimize our business, underlying U.S. dollar EPS grew by 16%, driven by nominal EBITDA growth and improved net finance costs. The digital transformation of our business provides opportunities to generate additional profitability and revenue streams. This quarter, this marketplace continues to expand, delivering $465 million in gross merchandising value of non-ABI products, a 47% increase versus last year. While it is only the first quarter of the year, we are pleased with our start and are uniquely positioned to activate the category in 2024 through our mega brands and mega platforms. Turning to slide six, you can see that total revenue grew by 2.6%, with revenue per hectolitre increasing by 3.3% as a result of revenue management initiatives and ongoing premiumization. Total volumes declined by 0.6%, as growth in the majority of our markets was offset by our volume performance in the US, Argentina, and China. Underlying PS was $0.75, a 16% increase versus last year. As we noted at our full year 23 results, for 2024, The definition of organic growth in Argentina has been amended to cap the price growth to a maximum of 26.8% year-over-year. Our global momentum continued this quarter, with revenue growth in more than 75% of our markets and with bottom-line increases in margin expansion in four of our five operating regions. Our scale and diverse geographic footprint 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 U.S., the beer industry remains resilient. with beer volumes improving sequentially through the quarter, and dollar sales continued to grow versus last year. Our revenues declined by high single digits, with STW volumes down by 10.1%. While our mainstream beer volumes declined, our above-court beer mega brands and spirit-based ready-to-drink portfolio continued to grow, Our market share trend has continued to improve gradually from May 2023, with total market share now flat versus last year. Our portfolio is regaining momentum, with growth in key brands such as Michelob Ultra, Bush Light, Kona, Neutral, and Cutwater. Together with our wholesaler partners, we remain laser-focused on executing our long-term strategy. Now, moving to Middle Americas. In Mexico, we delivered mid-single digit top and bottom line growth with margin expansion. Volumes grew by mid-single digits, driven by the continued strong performance of our core portfolio. In Colombia, our business delivered double digit top line and high single digit bottom line growth. Volumes grew by mid-single digits, to reach a new record high for the first quarter, with our portfolio continuing to gain share of total alcohol. Our premium and super premium brands grew volumes by more than 20%, led by Corona. In South America, our business in Brazil delivered mid-single-digit top line and double-digit bottom line growth, with margin expansion of 311 basis points. Volumes increased by 4.4% to reach a new record high for the first quarter. Our performance was led by our premium and super premium brands, which delivered volume growth in the low teens. Now let's talk about EMEA. In Europe, we grew top line by high single digits and bottom line by strong double digits with margin recovery. Volumes grew by mid-single digits, outperforming the industry, according to our estimates. Our portfolio continues to premiumize, led by our mega-brands, which delivered double-digit revenue growth. In South Africa, we again delivered record-high first-quarter volumes, with double-digit top and bottom-line growth and margin expansion. Volumes increased by mid-single digits continuing to outperform the industry in both beer and total alcohol. Our performance was driven by our super premium portfolio, which grew volumes by double digits, led by Corona and Stella Artois. And finally, Asia Pacific. In China, our portfolio continued to premiumize and grow bottom line despite a soft industry. While our total volumes declined by mid-single digits, in line with the industry, according to our mates, our premium portfolio remained resilient, with continued volume growth, led by Budweiser. Now, let's discuss our strategic pillars. Let's start with pillar one of our strategy, lead and grow the category. We aim to lead and grow the category with an efficient and focused portfolio of mega brands. Our mega brands are the top brands in each market that make up the majority of our volume today and are expected to drive the majority of our growth going forward. We are disproportionately allocating sales and marketing investments behind these brands to accelerate brand power build deep consumer connections, and drive efficient, profitable growth. And we are seeing the results. Our mega brands are driving our growth, increasing net revenue by 6.7% in the quarter, led by Corona, which grew revenue by 15.5% outside of Mexico. With 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 portfolios. Now, let's turn to our second strategic pillar, digitize and monetize our ecosystems. These continue to expand usage and reach, capturing approximately $11 billion in gross merchandising value, a 23% increase year-over-year, and reaching 3.6 million monthly active users. Customer satisfaction improved, with our net promoter score improving to plus 61. These marketplaces continue to accelerate, generating 7.3 million orders of non-ABI products and delivering $465 million in January this quarter, an increase of 47% versus last year. Now let's talk about how we are strengthening our direct relationship with our consumers. Through our digital direct-to-consumer platforms, We generated approximately 18 million unique orders this quarter. That's 18 million data points to generate deep consumer insights, develop new consumption occasions, and drive incremental revenue for our business. 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. First, let me share how we have progressed on some of our 2025 sustainability goals in the first quarter. In climate action, we reduced scopes one and two emissions per hectolitre of production by 6% year over year. We are also recognized by CDP as a 2023 supplier engagement leader for our work to drive decarbonization across our supply chain. In water stewardship, we continue to progress towards our 2025 goal to reach a water use efficiency ratio of 2.5 hectoliters per hectolitre, achieving 2.55 this quarter. Our EBITDA margin improved by 90 basis points this quarter, with margin expansion in four of our five regions. Our fundamental strengths, discipline pricing, continued premiumization, and efficient operating model create an opportunity for further margin expansion over time. As you can see on the next page, in the first quarter, we continued to actively manage our bond portfolio. In March, we issued longer-term bonds and used part of the proceeds to reduce near- and medium-term maturity towers through a tender offer. These transactions improved our debt maturity profile while maintaining our weighted average gross debt coupon at approximately 4%. our debt maturities remain well distributed with no relevant medium-term refinancing needs. We have approximately US$4 billion worth of bonds maturing through 2026 and awaited 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. 99% 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 75 US cents per share. a 10 cents per share increase versus last year. Nominal EBITDA growth accounted for a 12 cents per share increase. Gross debt reduction, combined with proactive cash flow management, resulted in lower net interest expenses, which contributed a 5 cents per share increase. 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. While the leveraging remains a priority, With additional flexibility in our capital allocation choices, this quarter we completed our US$1 billion share-by-back program that was announced in October last year and executed an additional US$200 million direct share-by-back from Altria. We remain disciplined in our capital allocation decisions to maximize value creation. With that, I would like to hand it back to Michel for some final comments before we start our Q&A session. Michel? Thanks, Fernando.