AB InBev Reports Third Q

Diversified global footprint and consistent execution of our strategy delivered an EBITDA increase of 7.1% and Underlying EPS growth of 14%

Anheuser-Busch InBev (Brussel:ABI) (BMV:ANB) (JSE:ANH) (NYSE:BUD):

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Regulated and inside information¹

“Beer is a passion point for consumers. Consumer demand for our megabrands and the execution of our mega platforms delivered another quarter of top- and bottom-line growth with margin expansion. Our teams and partners continue to execute our strategy and we are confident in our ability to deliver on our raised FY24 EBITDA growth outlook of 6-8%.”
– Michel Doukeris, CEO, AB InBev

Management comments

Diversified global footprint and consistent execution of our strategy delivered an EBITDA increase of 7.1% and Underlying EPS growth of 14%

Top-line increased by 2.1%, with revenue growth in more than 60% of our markets, driven by a revenue per hl increase of 4.6% as a result of revenue management initiatives and ongoing premiumization. We estimate we gained or maintained market share in 60% of our markets with volumes increasing in 50% of them. Overall volume performance was however impacted by a soft consumer environment in China and Argentina, resulting in an overall decline of 2.4%. EBITDA increased by 7.1% with production cost efficiencies and disciplined overhead management driving EBITDA margin expansion of 169bps. Underlying EPS was 0.98 USD, a 14% increase versus 3Q23, driven by nominal EBIT growth and continued optimization of our net finance costs.

Progressing our strategic priorities

We continue to execute on and invest in three key strategic pillars to deliver consistent growth and long-term value creation.

(1) Lead and grow the category:

We estimate we gained or maintained market share in 60% of our markets this quarter, with continued investment in our brands driving an increase in overall portfolio brand power.

(2) Digitize and monetize our ecosystem:

BEES captured 12.1 billion USD of gross merchandise value (GMV), a 14% increase versus 3Q23 with 72% of our revenue through B2B digital channels. BEES Marketplace captured 630 million USD in GMV from sales of third-party products, a 51% increase versus 3Q23.

(3) Optimize our business:

Underlying EPS increased by 14% to reach 0.98 USD, driven by nominal EBIT growth, continued margin expansion and optimization of our net finance costs. With increased flexibility in our capital allocation choices, the AB InBev Board of Directors has approved a 2 billion USD share buyback program to be executed within the next 12 months.

(1) Lead and grow the category

We are executing on our five replicable levers to drive category expansion. Our performance across each of the levers was led by our megabrands which delivered a 3.1% revenue increase in 3Q24.

• Category Participation:      Through our focus on brand, pack and liquid innovations, the percentage of      beer consumers purchasing our brands increased in a majority of our      markets in 3Q24, according to our estimates. Participation increases were      led by improvements with all consumer groups in the US.

• Core Superiority:      Our mainstream portfolio delivered a low-single digit revenue increase      in 3Q24, driven by double-digit growth in South Korea and the Dominican      Republic.

• Occasions Development: Our      global no-alcohol beer portfolio delivered mid-thirties revenue growth      this quarter. Corona Cero, the official beer partner of the Olympic Games,      delivered triple-digit volume growth and Budweiser Zero grew volume in the      low twenties.

• Premiumization:      In 3Q24, the Corona brand grew revenue by 10.2% globally, outside of      Mexico. Our overall above core beer portfolio delivered a low-single digit      revenue increase, with growth constrained by a soft industry in China.

• Beyond Beer:      Our global Beyond Beer business contributed approximately 365 million      USD of revenue in 3Q24, a low-single digit decrease versus 3Q23, as growth      in key brands such as Brutal Fruit, Cutwater, Nutrl and Beats was      primarily offset by soft malt-based seltzer performance in North America.

(2) Digitize and monetize our ecosystem

• Digitizing our      relationships with more than 6 million customers globally: As of      30 September 2024, BEES is now live in 28 markets with 72% of our revenues      captured through B2B digital platforms. In 3Q24, BEES had      3.9 million monthly active users and captured 12.1 billion USD in gross      merchandise value (GMV), both growing 14% versus 3Q23.
       
       BEES Marketplace generated 9.5 million orders and captured 630 million USD      in GMV from sales of third-party products in 3Q24, growth of 31% and 51%      versus 3Q23 respectively.

• Leading the way in DTC      solutions: Our omnichannel DTC ecosystem of digital and physical      products generated revenue of approximately 350 million USD in 3Q24. Our      DTC megabrands, Zé Delivery, TaDa Delivery and PerfectDraft, are available      in 21 markets, generated 18.6 million e-commerce orders and delivered      approximately 140 million USD in revenue this quarter, representing 11%      growth versus 3Q23.

(3) Optimize our business

• Maximizing value      creation: Our Underlying EPS was 0.98 USD this quarter, a      14% increase versus 3Q23, driven primarily by nominal EBIT growth and      optimization of our net finance costs. As a result of our continued global      momentum and strong free cash flow generation, the AB InBev Board of      Directors has approved a 2 billion USD share buyback program to be      executed within the next 12 months.

• Advancing our      sustainability priorities: In Climate Action, our Scopes 1 and 2      emissions per hectoliter of production were 4.48 kgCO2e/hl in 9M24, an      improvement of 46% versus our 2017 baseline. In Water Stewardship, our      water use efficiency ratio improved to 2.47 hl per hl in 9M24 versus 2.53      hl per hl in 9M23, as we continue working towards our ambition to reach      2.50 hl per hl on an annual basis by 2025.

Creating a future with more cheers

Our business delivered another quarter of profitable growth with an EBITDA increase of 7.1%. Net revenue per hl growth, an increase in nominal EBIT and the continued optimization of our business resulted in double-digit growth in Underlying EPS in both 3Q24 and 9M24. Our performance is a testament to the strength of the beer category, our diversified global footprint and the continued dedication and hard work of our people. The beer category is large and growing, and our unique global leadership advantages, replicable growth drivers and superior profitability position us well to deliver on our purpose to create a future with more cheers.

2024 Outlook

1. Overall Performance: We      expect our FY24 EBITDA to grow between 6-8%. The outlook for FY24 reflects      our current assessment of inflation and other macroeconomic conditions.

2. Net Finance Costs: Net      pension interest expenses and accretion expenses are expected to be in the      range of 220 to 250 million USD per quarter, depending on currency and      interest rate fluctuations. We expect the average gross debt coupon in      FY24 to be approximately 4%.

3. Effective Tax Rates (ETR):      We expect the normalized ETR in FY24 to be in the range of 27% to 29%.      The ETR outlook does not consider the impact of potential future changes      in legislation.

4. Net Capital Expenditure:      We expect net capital expenditure of between 4.0 and 4.5 billion USD in      FY24.

United States: Improved market share trend and productivity initiatives delivered low-single digit top-line and double-digit bottom-line growth

• Operating performance:

• 3Q24: Revenue       increased by 1.8% with revenue per hl increasing by 2.0% driven by       revenue management initiatives. Sales-to-wholesalers (STWs) declined by       0.2%, supported by one additional selling-day in the quarter.       Sales-to-retailers (STRs) were down by 3.0% on a selling-day adjusted       basis, outperforming the industry according to our estimates. EBITDA grew       by 13.7% with a margin improvement of approximately 375bps, driven by       productivity initiatives and SG&A efficiencies.

• 9M24: Revenue       declined by 2.8%, with revenue per hl increasing by 1.8%. Our STWs       declined by 4.5% and STRs were down by 6.8%. EBITDA increased by 2.9%.

• Commercial highlights: The      beer industry remained resilient in 3Q24, improving in both volume and      revenue trends quarter over quarter according to Circana, supported by the      phasing of key holidays. Our beer portfolio is estimated to have gained      market share this quarter, driven by Michelob Ultra and Busch Light, which      were two of the top three volume share gainers in the industry. In Beyond      Beer, our spirits-based ready-to-drink portfolio delivered volume growth      in the mid-teens, outperforming the industry.

Mexico: Market share gain with margin expansion

• Operating performance:

• 3Q24: Revenue       was flattish, with low-single digit revenue per hl growth driven by       revenue management initiatives. Volumes declined by low-single       digits, outperforming the industry which was negatively impacted by       adverse weather and a soft consumer environment. EBITDA grew by       mid-single digits with continued margin expansion.

• 9M24: Revenue       grew by mid-single digits with revenue per hl growth of low-single       digits. Volumes increased by low-single digits, outperforming the       industry. EBITDA grew by high-single digits with margin expansion.

• Commercial highlights:      Our above core portfolio outperformed, delivering continued volume growth      this quarter, led by the performance of Modelo and Pacifico. We continued      to progress our digital initiatives, with BEES Marketplace growing GMV by      14% versus 3Q23, and our digital DTC platform, TaDa Delivery, generating      approximately 1.1 million orders, a 36% increase versus 3Q23.

Colombia: Double-digit bottom-line growth with margin expansion

• Operating performance:

• 3Q24: Revenue       increased by high-single digits with high-single digit revenue per hl       growth, driven by pricing actions and other revenue management       initiatives. Beer volumes were flattish while total volumes declined by       low-single digits, as industry service levels were impacted by a       week-long national trucking strike in September. EBITDA grew by low       twenties with margin expansion.

• 9M24: Revenue       grew by low-teens with high-single digit revenue per hl growth. Volumes       increased by low-single digits. EBITDA grew by high-teens with margin       expansion.

• Commercial highlights: The      beer category remained resilient this quarter with our portfolio      continuing to gain share of total alcohol. Our performance was driven by      our premium and super premium brands which delivered high-teens volume      growth, led by Corona and Stella Artois. Our core beer portfolio continued      to grow, delivering a low-single digit revenue increase.

Brazil: Double-digit bottom-line growth with margin expansion

• Operating performance:

• 3Q24: Revenue       grew by 5.2% with revenue per hl growth of 3.8% driven by premiumization       and revenue management initiatives. Total volumes grew by 1.3%, with beer       volumes increasing by 0.6%. Non-beer volumes increased by 3.4%. EBITDA       increased by 10.9% with margin expansion of 174bps.

• 9M24: Total       volumes grew by 3.2% with beer volumes up by 2.3% and non-beer       volumes up by 5.8%. Revenue grew by 6.3% with a revenue per hl increase       of 2.9%. EBITDA grew by 17.6% with 309bps of margin expansion.

• Commercial highlights:      Our premium and super premium beer brands continued to lead our growth      this quarter, delivering low twenties volume growth, led by Corona, Spaten      and Original. Within the core beer segment, Brahma’s momentum continued,      delivering a high-single digit volume increase. Non-beer performance was      led by our low- and no-sugar portfolio, which grew volumes in the low      twenties. We continued to progress our digital initiatives, with BEES      Marketplace growing GMV by 43% versus 3Q23, and our digital DTC platform,      Zé Delivery, generating over 16 million orders in 3Q24, an 8% increase      versus 3Q23.

Europe: Continued premiumization with margin recovery

• Operating performance:

• 3Q24: Revenue       was flattish with slight revenue per hl growth driven by continued       premiumization. Volume declined by low-single digits, outperforming a       soft industry in a majority of our key markets according to our       estimates. EBITDA grew by low-single digits with margin recovery.

• 9M24: Volume       grew by low-single digits, outperforming the industry in a majority of       our key markets according to our estimates. Both revenue and revenue per       hl increased by low-single digits. EBITDA grew by low-teens with margin       recovery driven by top-line growth and cost efficiencies.

• Commercial highlights: We      continued to premiumize our portfolio in Europe, with our premium and      super premium portfolio making up approximately 57% of our revenue in      3Q24. Our performance this quarter was driven by our megabrands, led by      Corona which delivered another quarter of double-digit volume growth. In      the no-alcohol beer segment, Corona Cero, the official beer partner of the      Olympic Games, delivered triple digit volume growth.

South Africa: Continued momentum delivered double digit top- and bottom-line growth with margin expansion

• Operating performance:

• 3Q24: Revenue       increased by low-teens, with low-single digit volume growth and a revenue       per hl increase of high-single digits, driven by revenue management       initiatives and continued premiumization. EBITDA grew by mid-teens with       margin expansion.

• 9M24: Revenue       grew by low-teens with high-single digit revenue per hl growth and a       mid-single digit increase in volume, estimated to have outperformed the       industry in both beer and Beyond Beer. EBITDA increased by low twenties       with margin expansion.

• Commercial highlights: The      momentum of our business continued with both our premium beer and Beyond      Beer portfolios estimated to have gained share of their respective      segments. Our performance was led by our above core beer brands, which      grew volumes by high-teens driven by Corona and Stella Artois. In Beyond      Beer, our portfolio grew volumes by high-single digits driven by Flying      Fish.

China: Revenue declined by double-digits, impacted by soft industry

• Operating performance:

• 3Q24: Top-line       performance was impacted by a soft industry, particularly from continued       weakness in the on-premise channel. Revenue declined by 16.1% with       volumes declining by 14.2% and revenue per hl decreasing by 2.2%. EBITDA       declined by 20.1% with margin contraction of approximately 175bps.

• 9M24: Revenue       declined by 11.7% with revenue per hl declining by 1.2% and volumes       decreasing by 10.6%. EBITDA declined by 12.2% with margin contraction of       26bps.

• Commercial highlights:      We continued to invest behind our commercial strategy, focused on      premiumization, channel and geographic expansion, and digital      transformation, even in the context of a soft industry. We believe we are      well positioned to lead the premiumization of the beer category with our      premium and super premium portfolio contributing approximately two-thirds      of our revenue in 9M24. The brand power of our portfolio combined with the      long-term growth potential from geographic expansion and industry      premiumization remains a compelling value creation opportunity. The roll      out and adoption of the BEES platform continued, as of September 2024,      BEES is present in 306 cities with approximately 70% of our revenue      generated through digital channels.

Highlights from our other markets

• Canada: Revenue was      flattish this quarter with revenue per hl growth of low-single digits,      driven by revenue management initiatives and continued premiumization.      Volumes declined by low-single digits, with beer volumes estimated to be      in-line with the industry. Our portfolio has momentum, with four of our      beer brands in the top five fastest growing in the country this quarter,      led by Michelob Ultra which was number one.

• Peru: Revenue grew      by low-single digits this quarter with revenue per hl growth of      high-single digits, driven by revenue management initiatives. Volumes      declined by mid-single digits, outperforming a soft industry according to      our estimates, which was negatively impacted by adverse weather.

• Ecuador: Revenue      decreased by high-single digits in 3Q24 with volumes declining by      high-single digits, estimated to be in line with a soft industry, which      was negatively impacted by rolling blackouts and lower consumer      confidence.

• Argentina: Volumes      declined by mid-teens in 3Q24 as overall consumer demand was impacted by      inflationary pressures. For FY24, the definition of organic revenue growth      in Argentina has been amended to cap the price growth to a maximum of 2%      per month. Revenue grew by high-single digits on this basis.

• Africa excluding South      Africa: In Nigeria, our total volumes grew by high-single digits this      quarter, cycling a soft industry in 3Q23. Revenue grew by strong      double-digits, driven by revenue management initiatives in a highly      inflationary environment. In our other markets in Africa, we grew volume      in aggregate by high-single digits in 3Q24, driven by Tanzania,      Mozambique, Zambia and Ghana.

South Korea: Revenue increased by high-teens in 3Q24 with revenue per hl growth of low-teens, driven by revenue management initiatives and positive brand and packaging mix. Volumes grew by mid-single digits, outperforming the industry in both the on-premise and in-home channels, with performance led by our megabrand Cass.