Anheuser-Busch InBev SA/NV

Welcome to AB InBev's second quarter 2025 earnings conference call and webcast. Hosting the call today from AB InBev are Mr. Michelle DeCarris, 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 1 on your touch-tone 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 InVet'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 20F filed with the Securities and Exchange Commission on March 12, 2025. 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 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 2025 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 and provide you with an update on the progress we have made in executing our strategic priorities this quarter. After that, we'll be happy to answer your questions. Let's start with the key highlights. The consistent execution of our strategy delivered another quarter of solid results, with EBITDA increasing by 6.5% and continued margin expansion. The performance of our premium brands and the strategic choices we made in revenue management drove an acceleration in our revenue product leader growth, increasing by 4.9% versus last year. In the U.S., Our portfolio is continuing to build momentum and gain share of the industry. We are continuing to increase our investments in our brands to fuel growth. Our non-alcohol beer portfolio continues to outperform globally, increasing revenues by 33%. The growth of beer's marketplace accelerated this quarter, increasing GMV by 63% versus last year, to reach $785 million. And the ongoing optimization of our business drove an 8.7% increase in underlying US dollar EPS and a half billion dollar increase in free cash flow. Turning to our operating performance, volumes declined by 1.9%, impacted by soft industries and performance in China and Brazil. While overall volumes were below potential, the underlying momentum in markets representing the remaining two-thirds of our business continued, with volume growth of 0.7%. Double-clicking on these two markets. First, Brazil. The majority of our volume decline was driven by a soft industry, which was impacted by adverse weather conditions. During the second quarter, we made strategic revenue management choices to position the business well for the second half of the year. Second, in China, the quarter two industry volume trends were in line with the first quarter, declining by low single digits versus last year, but our volumes underperformed with continued weakness in our regions and channels. Moving back to the global results, Topline growth accelerated, with revenue increasing by 3% this quarter versus last year. EBITDA increased by 6.5%. And the continued optimization of our business drove operating leverage through the P&L, resulting in EPS growth of 17.4% in constant currency and 8.7% in U.S. dollar terms. Our diversified geographic footprint enables us to deliver consistent results. Revenue increases in 70% of our markets, and we deliver top and bottom line growth across four of our five operating regions. 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 momentum of our portfolio continued, and we are increasing investments in our brands to fuel growth. Led by Nickelob Ultra and Bush Light, the number one and number two volume share gainers in the industry, our market share momentum accelerated, and we delivered both top and bottom line growth. And in the spirits-based art this, our portfolio grew volumes by low things, led by Cutwater and Neutral. Now, moving to Middle Americas. In Mexico, our volumes grew by low single digits, slightly ahead of the industry, which benefited from Easter shipment phasing, but was negatively impacted by adverse weather in June. Revenue increased by mid single digits, with growth led by our above-core beer portfolio. In Colombia, record high volumes drove high single-digit top and bottom line growth, with our portfolio estimated to have gained share of total alcohol. In Brazil, our revenue declined by 1.9%, impacted by volume performance. EBITDA increased by 5.3%, with margin expansion of 216 base points, as productivity initiatives more than offset the top-line decline in transactional effects at WINS. In South Africa, the underlying momentum of our business continued, gaining share of both BEER and BEYONDBEER. Revenue and EBITDA grew by mid-single digits, with our performance driven by premium and super-premium brands, which grew volumes by mid-teens. In Europe, An improved industry, continued premiumization of our portfolio, and further margin recovery drove top and bottom line growth. Our volumes were flat, outperforming the industry in five of our six key markets, led by our mega brands and our non-alcohol beer portfolio. While we are talking about Europe, I spent a lot of time with our team in the market over the last few months. And looking at the industry performance this quarter, we can see an interesting example of the resilience, momentum, and relevance of the beer category. With more normalized weather, the industry delivered flash volumes and revenue growth with beer gaining share of total alcohol. In our developed markets, we have the opportunity to innovate, prioritize, increase category participation, and be present in more occasions. to deliver profitable growth. To mention just a few examples from Europe, consumers are enjoying the taste of lavish meals in France and Italy, the perfect serve of Stella Artois during Roland Garros and Wimbledon, celebrating 100 years of the refreshing taste of Corona during the summer, the perfect draft experience at home in the UK, and our non-alcohol beer portfolio in more occasions. With the right portfolio, innovation, and focus on consumers and occasions, the category has attractive growth opportunities across our footprint. Now, moving to APEC. In China, revenue declined by 6.2%, with our volumes underperforming the industry. We are committed to our strategy and are taking action to strengthen our execution by increasing discipline and excellence in our role to market, increasing investments in our mega brands, accelerating our expansion in the in-home channel, and scaling up key innovations such as harbing zero sugar. Now, let's look at the key highlights of our three strategic pillars, starting with leading and growing the category. We continue to invest in our mega brands and mega platforms. In the first half of the year, we invested $3.6 billion in sales and marketing and have averaged more than $7 billion on an annualized basis over the last six years. Focused portfolio management, increasing market investments, and improved effectiveness drove an increase in brand power of our portfolio, led by our mega-brands. These consistent investments in our brands are reinforcing the strength of our portfolio. According to Kantar Brand Z, we own eight of the top ten most valuable beer brands in the world. Michel Aboultra and Stella Artois Two of our global mega brands moved up in the rankings by one position to reach number five and number nine, respectively. And Corona Budweiser continued to lead at the top two brands globally. We have evolved our portfolio management approach to focus our investments in our mega brands to drive efficient, profitable growth. We have around 50 mega brands globally. Typically, five per market. And these brands continue to lead our growth, with net revenue increasing by 5.6%. Our global mega brand, Corona, continued to drive premiumization across our markets, growing revenue by 7.7% outside of Mexico and growing volumes by double digits in more than 30 markets. Through the consistent execution of our category expansion levers, we are increasing category participation across our markets by offering superior core brands, innovating in balanced choices to provide consumers with no and low alcohol, low carb, zero sugar, and gluten-free options. And we are expanding our premium and beyond beer portfolios. As a result, on a rolling 12-month basis, Participation of legal drinking age consumers with our portfolio increased across our markets. In non-alcohol beer, our portfolio momentum continued, with net revenue growing by 33%, led by the growth of Corona Cero. We are now leaders in seven of our top 13 non-alcohol beer markets and estimate to have gained share in 70% of them. With 65% of the volume coming from new consumers and new occasions, we believe non-alcohol beer is a key opportunity to develop the category and drive incremental volume growth. Innovation is a key component of our ambition to drive increased participation and develop new occasions. Two good examples of our innovation capabilities this year are both from our U.S. business. where we are leading the industry in innovation year-to-date. Bush Light Apple is a seasonal offering that provides consumers with a crisp, refreshing taste and was brought back to the market by popular demand after a three-year absence. Since launch in May, the brand is now the number one innovation in the industry. driven primarily by 21 to 24-year-old consumers who had a six times higher rate of purchase for Bush Light Apple versus the industry average. Michelob UltraZero, with only 29 calories, is brewed for those consumers looking for a great tasting, zero alcohol, low calorie beer. Since launch early this year, the brand is the number two innovation in the industry and is the number six volume share gainer in the overall beer category year to date. Let's turn to our second strategic pillar, digitize and monetize our ecosystem. In the second quarter, this captured $12.2 billion in gross merchandising value, a 10% increase versus last year. The growth of Biz Marketplace accelerated, with GMV increasing by 63% versus last year to reach $785 million. And in DTC, our digital platforms continue to enable a one-to-one connection with our consumers and help us in developing new consumption occasions. Our digital platforms generated $134 million in revenue, an increase of 6%. 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. I will take a few minutes to discuss the progress we have made in optimizing our business. Our EBITDA margins improved by 116 basis points this quarter, with expansion in four of our five operating regions. We know that each quarter will be different, but we 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. We deliver underlying EPS of 98 cents per share, an 8.7% increase in US dollars and a 17.4% increase in constant currency versus last year. EBITDA growth accounted for a 16 cents per share increase with translational effects and 8 cents per share headwind. Lower net interest expense and the optimization of other below EBITDA line items drove the balance of our EPS growth. As we continue to focus on optimizing our business, in the first six months of this year, we increased our free cash flow by half a billion dollars versus last year through a combination of driving organic EBITDA growth, reducing our net interest expense through deleveraging, optimizing our net working capital, and improving the efficiency of our CAPEX through disciplined resource allocation. With this increase in cash generation, we continue to make progress on our deleveraging journey. Our net debt to EBITDA ratio reached 3.27 times, an improvement from 3.42 times year-over-year. As is typical, the ratio increased versus the full year given the seasonality of our cash generation and increased cash outflow from our full-year dividend and completion of our share-by-debt program. In the first half, we continued to strengthen our debt maturity profile by executing a bond redemption and issuance. allowing us to extend our average maturity while maintaining our weighted average coupon. Our bond portfolio remains well distributed with no relevant near and medium term refinancing needs. We have approximately US$3 billion worth of bonds maturing through 2026 and no financial covenants. Our results in the first half of the year The resilience of our strategy and the strength of our mega brands all reinforce our confidence in our ability to deliver on our 2025 outlook of 48% EBITDA growth. With that, I would like to hand it back to Michel for some final comments.