ANHEUSER-BUSCH-INBEVNV Earningcall Transcript Of Q2 of 2024

Tennenbaum, 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's  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.  [Operator  instructions]  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

20-F filed with the Securities and Exchange Commission on the 11th of March 2024. The 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 Doukeris. Sir, you may begin.

Michel Doukeris -- Chief Executive Officer

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 will 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. This 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  increased  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  6.  You  can  see  that  total  revenue  grew  by  2.7%  this  quarter  with  revenue  per

hectoliter 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 EPS was $0.90, a 25% increase versus last year.

Net  leverage  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  continued  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  will  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  remained  resilient,  gaining  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

continued  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 basis 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 teens. 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 core beer brands, which grew volumes by double

digits, led by Corona and Stella Artois. In APAC, in China, our performance was impacted by a soft

industry, which cycled channel reopening in the second quarter of last year and a diverse 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,

focus  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 1 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 KANTAR BrandZ, we own eight of the top 10 most valuable beer brands in the world.

With Corona, the No. 1, and Budweiser, the No. 2.

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  core  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 positions, 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. This 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.  This  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. 

Fernando Tennenbaum -- Chief Financial Officer

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 half of 2024.

In  climate  action,  we  reduced  Scopes  1  and  2  emissions  per  hectoliter  of  production  by  4%  year

over  year.  In  water  stewardship,  our  water  use  efficiency  ratio  improved  to  2.5  hectoliters  per

hectoliter versus 2.54 in the first half of 2023, progressing toward 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  to  deleveraging,  optimizing  our  net  working  capital

through  more  efficient  inventory  management,  and  improving  the  efficiency  of  our  capex  through

disciplined resource allocation. With improved free cash flow generation, we made progress on our

deleveraging  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 buyback 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 maturities remain well distributed with no relevant medium-term refinancing

needs. To date, we have approximately $3 billion worth of bonds maturing through 2026, a weighted

average maturity of 14 years and no financial covenants. Ninety-nine percent 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 $0.90 per share, a 25% increase versus last year. Nominal EBITDA growth accounted for a $0.21

per share increase. Gross debt reduction, combined with proactive cash flow management, resulted

in lower net interest expenses, which contributed a $0.03 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?

Michel Doukeris -- Chief Executive Officer

Thanks, Fernando. Before opening for Q&A, I would like to take a moment to recap on the quarter

and  look  ahead  at  the  unique  opportunities  that  our  mega  brands  have  to  activate  the  category  in

the  second  half.  We  continue  to  make  progress  in  executing  across  each  of  our  three  strategic

pillars.  Driven  by  the  continued  momentum  of  our  mega  brands,  we  delivered  revenue  growth  in

65% of our markets.

We  progressed  our  digital  transformation,  generating  approximately  $11.7  billion  of  GMV  through

BEES with $530 million in GMV of third-party products through BEES marketplace. EBITDA grew by

10.2%  with  236  basis  points  of  margin  expansion.  As  we  continue  to  optimize  our  business,

underlying EPS increased by 25% in the second quarter, and free cash flow improved by $1.4 billion

versus  the  first  half  of  2023.  Looking  ahead  to  the  rest  of  the  year,  we  are  uniquely  positioned  to

activate the category.

The combination of our mega brands with key global platforms that consumers love and that bring

people together is a powerful opportunity to lead and grow the category. From the Olympics, to NFL

and UFC, we will be focused on doing what we do best, connecting with our consumers and bringing

to  life  our  purpose  of  creating  a  future  with  more  cheers.  We  have  a  resilient  strategy,  which,  like

beer,  works  for  all  occasions.  The  beer  category  is  large  and  growing,  and  our  unique  global

leadership advantage, implementation of our replicable growth tool kits, and our superior profitability

position  us  well  to  take  advantage  of  the  opportunities  ahead  of  us  and  to  generate  value  for  our

stakeholders.

With that, I'll hand it back to the operator for the Q&A.

Operator

Questions & Answers: