Anheuser-Busch InBev SA/NV

Welcome to AB InBev's second 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 and the Reports and Results Centers 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 financial condition indicated in these forward-looking statements. For 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 fought with the Securities and Exchange Commission on the 11th of March, 2024. AP 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. and welcome everyone to our second 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 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 and the key highlights for the quarter. We are encouraged by the continued global momentum of our business and our performance in the first half of the year. Our mega brands continue to lead our growth this quarter and drove market share gains in the majority of our markets in the first half of the year. B's marketplace continues to expand, delivering $530 million in gross merchandising value of non-ABI products, a 55% increase versus last year. By increasing our total addressable market, this marketplace is driving incremental profitable revenue streams to our business. And we are just getting started on the potential opportunities for growth. EBITDA increases by 10.2% with margin expansion in all five operating regions. As we continue to optimize our business, underlying dollar EPS grew by 25%. We remain focused on the execution of our strategy, leveraging our unique opportunities this summer to activate the category. Turning to slide six, you can see that total revenue grew by 2.7% this quarter, with revenue per hectolitre increasing by 3.6%. Volume growth in our Middle Americas, South America, Europe, and Africa regions was primarily offset by performance in Argentina and China, resulting in an overall volume decline of 0.8%. Underlying PS was $0.98, a 25% increase versus last year. Net leveraged improved year over year to 3.42 times. 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 continues this quarter, with revenue growth in more than 65% of our markets. Bottom line increases in four of our five operating regions. and margin expansion in all five regions. Our scale and diverse geographic footprint has been driving consistent results and 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. gained share of total alcohol by value in the off-premise. Our beer market share was flattish, as we cycled a challenge comparable in April, while we gained volume share of the industry in May and June. Our improved market share trend, ongoing premiumization, and productivity initiatives drove EBITDA growth of 17.5%. with a margin improvement of approximately 500 bps. The rebalancing of our portfolio for growth continued, with 45% of our revenues now coming from our above-core beer and beyond beer portfolio. Now, moving to Middle Americas. In Mexico, we outperformed the industry, with our volumes growing by mid-single digits driven by the continued strong performance of our core portfolio. We grew revenue by mid-single digits and EBITDA by double digits with margin expansion. In Colombia, our business delivered double-digit top and bottom line growth with margin expansion. Volumes grew by low single digits to reach a new record high for the quarter, with our portfolio continuing to gain share of total alcohol. Our premium and super premium brands led our performance, delivering high 20s volume growth. In South America, our business in Brazil delivered high single-digit top line and double-digit bottom line growth, with margin expansion of 469 base points. Volumes increased by 4.1% to reach a new record high for the second quarter. Our performance was led by our premium and super premium brands, which delivered volume growth in the low teams. Now, let's talk about EMEA. In Europe, we grew bottom line by high single digits with further margin recovery. Volumes grew by low single digits, outperforming the industry according to our estimates. Our portfolio continues to premiumize, with our premium and super premium portfolio now making up approximately 57% of our revenue. In South Africa, we again delivered record high second quarter volumes, double digit top and bottom line growth with margin expansion. Volumes increased by mid single digits continue to outperform the industry in both beer and total alcohol. Our performance was driven by our above-court beer brands, which grew volumes by double digits, led by Corona and Stella Artois. And APAC. In China, our performance was impacted by a soft industry, which cycled channel reopening in the second quarter of last year, and adverse weather in key regions of our footprint. As a result, Revenue declined by 15.2% this quarter. While the industry has had a challenging start to the year, we continue to invest behind our strategy, focused on premiumization, geographic expansion, and digital transformation. We remain confident that we are well positioned to capture the future growth opportunities, given the consumer demand for our premium and super premium brands, and our unwavering commitment to invest for the long term. Now let's discuss our strategic pillars. Let's start with pillar one of our strategy, lead and grow the category. We continue to invest in our mega brands, mega platforms, and brand building capabilities. In the first half of the year, we invested approximately $3.5 billion in sales and marketing and have averaged more than $7 billion on an annualized basis over the last five years. Our marketing effectiveness and creativity were recognized by being named the most effective marketer in the world and being the most awarded beverage company at Cannes. These consistent investments in our brands are reinforcing the strength of our portfolio. According to Cantar Brand Z, we own eight of the top 10 most valuable beer brands in the world, with Corona the number one and Budweiser the number two. I would like to express my appreciation to our consumers, thank our partners, and congratulate our teams for these remarkable achievements. This focused portfolio of mega brands, which are the top three to five brands in each market, make up the majority of our volume today and are expected to drive our growth going forward. While the overall performance of our above-court portfolio was constrained by performance in China, our mega-brands continue to lead our growth this quarter, increasing net revenue by 3.3%, led by Corona, which grew revenue by 5.6% outside of Mexico. 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 portfolios. Now, let's turn to our second strategic pillar, digitize and monetize our ecosystem. Biz continued to expand usage and reach, capturing approximately $11.7 billion in gross merchandising value, a 20% increase year-over-year, and reaching 3.8 million monthly active users. Customer satisfaction improved, with our net promoter score improving to plus 64. Biz marketplace continued to accelerate, generating 8.3 million orders of non-ABI products and delivering $530 million in GMV this quarter, an increase of 55% versus last year. Now let's talk about our direct relationship with our consumers. Through our digital direct-to-consumer platforms, we generated approximately 19 million unique orders and 10% revenue growth this quarter. That's 19 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. Let me share how we have progressed on some of our 2025 sustainability goals in the first half of 2024. In climate action, we reduced scopes one and two emissions per hectolitre of production by 4% year over year. In water stewardship, Our water use efficiency ratio improved to 2.5 hectoliters per hectolitre versus 2.54 in the first half of 2023, progressing towards our ambition to reach 2.5 on an annualized basis by 2025. Moving to our financial performance, our EBITDA margin improved by 236 basis points this quarter, with margin expansion in all five of our operating regions. Our leadership advantages, disciplined revenue management, continued premiumization, and efficient operating model create an opportunity for further margin expansion over time. As we continue to focus on optimizing our business, In the first six months of this year, we improved our free cash flow versus the first half of last year by $1.4 billion. Driving revenue growth and margin expansion. Reducing our net finance costs through the leveraging. Optimizing our net working capital through more efficient inventory management. and improving the efficiency of our CAPEX through discipline resource allocation. With improved free cash flow generation, we made progress on our debt leveraging journey through both net debt reduction and dollar EBITDA growth. Our net debt to EBITDA ratio reached 3.42 times, an improvement from 3.7 times year-over-year. even with an increased dividend and completion of our $1 billion share-buy-back program. As you can see on the next page, in the first half of the year, we continue to actively manage our bond portfolio. Our debt maturity remains well distributed, with no relevant medium-term refinancing needs. Today, we have approximately $3 billion worth of bonds, maturing through 2026, a weighted average maturity of 14 years and no financial covenants. 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 deliver EPS of $0.90 per share, a 25% increase versus last year. Nominal EBITDA growth accounted for a 21 cents per share increase. Gross debt reduction, combined with proactive cash flow management, resulted in lower net interest expenses, which contributed a 3 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?