Anheuser-Busch InBev SA/NV

Welcome to AB InBev's full year 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 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, followed 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 in reliance upon such information. It is now my pleasure to turn the floor over to Mr. Michel Doukeres. Sir, you may begin.

Thank you and welcome everyone to our full year 2024 earnings call. It is a great pleasure to be speaking with you all today. Today, Fernando and I will take you through our operating highlights for the year 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 the key highlights for the year. We made consistent progress across the three pillars of our strategy in 2024. Our global momentum continues delivering all-time high US dollar revenues, with growth in 75% of our markets. Our business in the US is building momentum. Our portfolio is reaching an inflection point, and we are increasing investments in our brands to fuel growth. B's marketplace continues to accelerate and deliver $2.5 billion in GMV this year. a 57% increase versus last year. EBITDA grew at the top end of our outlook for the year, reaching nearly $21 billion, with margin expansion across all five of our operating regions. The ongoing optimization of our business drove a 15% increase in underlying US dollar EPS, as well as a step change in our free cash flow generation, which increased by $2.5 billion versus last year. We also delivered an important milestone in our deleveraging journey, with our net debt to EBITDA ratio reaching 2.89 times, below three times for the first time since 2015. With this progress, We have increased flexibility in our capital location choices. The Board has proposed a full-year dividend of €1 per share, a 22% increase versus last year. Now turning to our operating performance. Total revenue grew by 2.7% this year. With our revenue management choices and ongoing premiumization, driving revenue per hectolitre growth of 4.3%. EBITDA increased by 10.1% in the fourth quarter and by 8.2% in the full year, increasing by $1 billion versus 2023. Our overall volume performance in 2024 was, however, constrained by the unusually soft consumer environments in both China and Argentina. which drove a total volume decline of 1.4%. While the performance in these two markets this year does not reflect our full potential, we remain confident in the long-term growth opportunity and are investing to rebuild momentum. Outside of these two countries, the beer category globally remains vibrant, and we are winning with consumers across our footprint. Volumes grew in the majority of our markets. We estimate we gained or maintained market share in 2 thirds of them. And our volumes increased by 0.9% in all other markets. Turning to our top line performance, our revenues reach a new all time high of $59.8 billion. with organic growth more than offsetting translational effects headwinds. Net revenue per hectolitre growth improved sequentially throughout the year. Our financial performance was broad-based, with revenue increase in 75% of our markets and EBITDA growth in four of our five operating regions. Now I'll take a few minutes to walk you through the operational highlights for the year from our key regions, starting with North America. In the U.S., our business is building momentum. Our portfolio is reaching an inflection point, and we are increasing investments in our brands to fuel growth. Our FTR volumes grew in the fourth quarter, and we gained volume share in the industry. driven by Michelob Ultra and Bush Light, which were the top two volume share gainers in the industry. The beer industry overall remained resilient in 2024, improving in both volume and revenue trends sequentially since the second quarter, and gained share of total alcohol by volume. Now, moving to Middle Americas. In Mexico, our momentum continued, as we gained share of industry and delivered record high volumes for the year. In Colombia, we delivered record high volumes with our portfolio continuing to gain share of total alcohol. In South America, our business in Brazil delivered total volume growth of 1.5% with double digit bottom line growth. Our beer portfolio is estimated to have outperformed the industry. with market share gains driven by our premium and super premium brands. In Europe, EBITDA increased by mid-teens through a combination of top-line growth and continued margin recovery. Our volumes grew slightly, outperforming the industry in five of our six key markets, led by Corona and StellarPoix. In South Africa, our momentum continued, with volumes growing by mid-single digits, gaining share of both beer and beyond beer. In APAC, in China, the soft consumer environment impacted the overall beer industry, and particularly the on-premise channel, which disproportionately impacted our business. We underperformed the industry. And we know our business in China has far more potential than we delivered in 2024. We remain confident in the growth opportunities for beer and continue to invest for the long term. The close of 2024 also marks three years since we introduced our three-pillar strategy and our medium-term growth outlook. And I would like to take a few minutes to reflect on the progress we have made in executing our strategy. Let's start with our perspective on the overall beer category. The category and our brands are a passion point for consumers. We believe beer has a long runway for future volume growth and premiumization across our footprint, supported by favorable demographics, economic growth, and significant opportunities to increase category participation. In 2024, according to IWSR, the beer and beyond beer category continue to gain share of total alcohol by volume globally and has now gained more than 200 basis points since 2021. And looking ahead, beer is expected to grow volumes globally and continue to gain share of total alcohol. Our diversified geographic footprint and leadership positions across developing, emerging, and developing markets has us best positioned to capture this growth. Developing markets represent 55% of our volume, are mostly comprised of countries where we have strong leadership positions, and are expected to account for 34% of the category volume growth over the next five years. This cluster has been a key growth engine for our business over the last three years, with record high volumes in key markets, such as Brazil, Mexico, Colombia, and South Africa, and double digit top and bottom line growth in US dollars. Emerging markets represent only 10% of our volumes, but are expected to drive nearly 50% of the category volume growth. We have leadership positions across Africa and lead the fast-growing premium and super premium segments in India. Our volumes across this cluster have grown by 10% over the last three years, with significant opportunities to increase category participation as these economies develop. Developed markets represent 24% of our volume, with leadership positions across key markets in Europe, the US, Canada, and South Korea, and are expected to account for 14% of the category volume growth. In the US, our portfolio is at an inflection point. In Europe, our premium and super premium portfolio now make up 57% of our revenue. and EBITDA increased by double digits in 2024. And in South Korea, our revenue increased by low teens in 2024, with our market share reaching the highest level in the last 10 years. And in China, while 2024 has been a challenging year for both the industry and our business, we remain confident that the long-term premiumization trend in the industry is a compelling profitable growth opportunity. We are the leaders in the premium and super premium segments and are investing in our portfolio, innovation, and geographic expansion to regain our momentum. We have evolved our portfolio management approach to focus our investments in our mega brands and drive efficient, profitable growth. Our mega brands have increased revenue by nearly 40% since 2021, and now represent 57% of our total business. In 2024, we invested $7.2 billion in sales and marketing, and averaged more than $7 billion per year since 2021. Our investments are more effective than ever, as we have concentrated behind mega brands and mega platforms. and have leveraged the data and our digital platforms to drive efficiency. Led by our global brands, we are the leader in the premium beer segment globally and see a long runway for the category to continue to premiumize. The premium beer segment is forecast to grow volumes across all geographic clusters and at more than double the rate of the category overall. Within premium, The Corona brand continues to grow from strength to strength in leading the growth of our portfolio globally. In 2025, we'll be celebrating 100 years since its original launch. Since 2018, the volumes of Corona have nearly doubled, and in 2024, volumes increased by 9.4% in markets outside of Mexico. In its home market of Mexico, Corona is the number one brand in the industry and volumes grew by mid-single digits. The quality, brand power, and consumer preference for Corona has earned the right for a premium price point. Corona sells on average at 20% premium to the nearest competitor. In recognition of this past performance and its future potential, Corona was named the most valuable beer brand in the world in 2024. We continue to focus on innovating to develop the category and expand occasions to meet consumer needs. Our balanced choice portfolio includes options for consumers seeking low-carb, low-calories, sugar-free, gluten-free, and non-alcohol alternatives. Our brands across these consumer trends are growing ahead of the overall beer category and are becoming a meaningful part of our overall business, now representing approximately 10% of our beer revenue. Looking specifically at no-alcohol beer, our portfolio momentum continues to accelerate. Led by the triple-digit growth of Corona Cero, we estimate we gain its share globally in 2024. While no alcohol beer is currently a relatively small portion of our global beer volume, we believe it is a key opportunity to develop new beer consumption occasions, increase category participation, and drive incremental volume growth. In addition to beer, we have been developing our portfolio of Beyond Beer brands to meet consumer needs and increase our total addressable market. The strength of our brands And our production and route to market capabilities provides us a strong right to win this segment. In South Africa, Brutal Fruit and Flying Fish are two of the leading flavored malt beverages in the country, which have been expanded across Africa over the last couple of years. And in the U.S., Cutwater is the number one canned cocktail brand in the country. And Neutral is the number two vodka seltzer brand. The combined revenue of our focus spirit-based RTD and flavored malt beverage brands have increased by approximately 20% since 2021. And the category is forecast to grow volumes at double the rate of the overall beer category. Now let's turn to our second strategic pillar, digitize and monetize our ecosystem. In 2024, Biz captured $49 billion in gross merchandising value, a 19% increase versus last year, with 124 million orders transacted through the platform. BizGMV has now more than doubled versus 2021, with our percentage of revenue transacted through digital channels increasing from around 50% to 75%. Biz Marketplace. continue to accelerate and deliver $2.5 billion in GMV this year, a 57% increase versus last year. And in D2C, our digital platforms are enabling a one-to-one connection with our consumers and the development of new consumption occasions. We have expanded the availability of our digital platforms to 21 markets with revenue reaching $500 billion. $60 million. With that, I would like to hand it over to Fernando to discuss the third pillar of our strategy, optimize our business.

Thank you, Michel. Good morning, good afternoon, everyone. For the next few minutes, I want to take you through a few tangible examples of what we mean by optimizing our business and the financial results we are driving. In 2024, we made progress on four key areas of focus. Improving margins, compounding US dollar EPS growth, growing our free cash flow, and making disciplined capital allocation choices. Our EBITDA margin improved by 179 basis points this year, with margin expansion across all five of our operating regions. We know that each year will be different, but are confident that the combination of our leadership advantages, disciplined revenue management, continued premiumization, and efficient operating model create an opportunity for further margin expansion over time. Moving on to EPS. This year, we delivered underlying profit growth of $900 million. Underlying EPS was $3.53 per share, a 15.4% increase versus last year, and a 7% CAGR since 2021. Organic EBITDA growth accounted for a $0.81 per share increase this year, with a $0.26 per share headwind from translational effects. As we continue to optimize our businesses, Improvements in below EBITDA items drove the balance of our EPS growth, such as lower net interest expense from active net debt management and continued leveraging, as well as lower costs of hedging and reduced FX losses. Next, let's take a look at free cash flow. Through a combination of revenue growth and margin expansion, reducing our net interest expense through the leveraging, optimizing our net working capital, and improving the efficiency of our CapEx through disciplined resource allocation, we increased our free cash flow by $2.5 billion to reach $11.3 billion in 2024. With this increase in cash generation, We continue to make progress on our deleveraging journey and delivered an important milestone for our business. Net debt to EBITDA reached 2.89 times, below three times for the first time since 2015. In 2024, we continue to strengthen our debt maturity profile while maintaining our weighted average coupon. Our bond portfolio remains well distributed with no relevant medium-term refinancing needs. We have approximately $3 billion worth of bonds maturing through 2026, a weighted average maturity of 13 years, and no financial covenants. As we continue to make progress on our leveraging, we have increased flexibility in our capital allocation choices. The Board has proposed a full-year dividend of €1 per share, a 22% increase versus last year, with the ambition to continue a progressive dividend over time. Additionally, we have completed approximately $750 million of our €2 billion share-by-back program announced last year. As we look ahead to 2025, we expect EBITDA to grow between 4% and 8% on an organic basis, in line with our medium-term outlook. In terms of phasing of growth in the year, it is worthwhile reminding that due to technical factors, such as fewer selling days, the timing of Easter, and shipment phasing comparables in the U.S. and China, the first quarter will have a high comparison base. As we continue to invest to execute our strategy while optimizing our resource allocation, we expect net capex to be between $3.5 and $4 billion. And we expect our normalized effective tax rate to be between 26% to 28%. With that, I would like to hand it back to Michel for some final comments before we start our Q&A session.