AB InBev Reports Second Quarter 2023 Results 

Continued global momentum, partially offset by US performance, delivered high-single digit revenue growth

BRUSSELS -- (BUSINESS WIRE) --

AB InBev (Brussel:ABI) (BMV:ANB) (JSE:ANH) (NYSE:BUD):

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20230802588545/en/

Regulated information¹

“Our business delivered another quarter of profitable growth. Revenue increased by 7.2% with an EBITDA increase of 5.0%. We continue to invest in our strategic priorities for the long-term.” – Michel Doukeris, CEO, AB InBev

Management comments

Continued global momentum, partially offset by US performance, delivered high-single digit revenue growth

We delivered a top-line increase of 7.2%, with revenue growth in more than 85% of our markets, driven by a revenue per hl increase of 9.0% as a result of pricing actions, ongoing premiumization and other revenue management initiatives. Volumes declined by 1.4%, as growth in the majority of our markets was offset by performance in the US. EBITDA increased by 5.0% with margin compression of 69bps, driven by anticipated commodity cost headwinds and increased sales and marketing investments. Underlying EPS was 0.72 USD.

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.

Lead and grow the category:

This quarter we delivered volume growth in the majority of our markets and revenue growth in more than 85%.

Digitize and monetize our ecosystem:

BEES captured approximately 9.2 billion USD of gross merchandise value (GMV), a 30% increase versus 2Q22 with 64% of our revenue through B2B digital channels. BEES Marketplace is live in 15 markets and generated an annualized GMV of approximately 1.3 billion USD with 63% of BEES customers now also Marketplace buyers.

Optimize our business:

In HY23, disciplined overhead management and efficient resource allocation enabled us to invest approximately 2.1 billion USD in capex and 3.5 billion USD in sales and marketing to drive the organic growth of our business. We continue to focus on deleveraging with net debt to EBITDA reaching 3.70x versus 3.86x as of 30 June 2022.

Lead and grow the category

In HY23, we invested approximately 3.5 billion USD in sales and marketing, a 12.8% increase versus HY22, driving an increase of our portfolio brand power in approximately 60% of our key markets. We are executing on our five proven and scalable levers to drive category expansion:

• Inclusive Category:      In 2Q23, the percentage of consumers purchasing our portfolio of brands increased      across key markets in Latin America and Africa, according to our      estimates. This increase in participation was led by female and lower      income consumer groups, driven by continued brand and pack innovation.

• Core Superiority:      In 2Q23, our mainstream portfolio delivered a mid-single digit revenue      increase as double-digit growth in South Africa and Colombia was partially      offset by the revenue decline of Bud Light in the US. Our mainstream      brands gained or maintained share of segment in two thirds of our key      markets, according to our estimates.

• Occasions Development: Our      global no-alcohol beer portfolio delivered approximately 30% revenue      growth this quarter, with our performance driven by Budweiser Zero in      Brazil and growth of Corona Cero in Canada and Europe. Leveraging our      digital direct-to-consumer products we are investing in and developing new      consumption occasions. For example, in Brazil, Zé Delivery enabled the      launch of Corona Sunset Hours, an everyday activation encouraging consumers      to disconnect from work and reconnect with friends in the early evening.

• Premiumization:      Our above core beer portfolio grew revenue by more than 10% in      2Q23, led by our global brands and double-digit growth of Modelo in Mexico      and Spaten in Brazil. Our global brands grew revenue by 18.4% outside of      their home markets, led by Corona, which was recently recognized by Kantar      BrandZ as the #1 fastest growing global beer brand by value, which grew by      23.7%. Budweiser delivered a revenue increase of 16.9%, with broad-based      growth in 25 markets, and Stella Artois grew by 14.5%.

• Beyond Beer:      Our global Beyond Beer business contributed over 385 million USD of      revenue in the quarter and grew by mid-single digits as growth globally      was partially offset by a soft malt-based seltzer industry in the US.      Global growth was primarily driven by the expansion of Brutal Fruit in      Africa and the Vicky portfolio in Mexico.

Digitize and monetize our ecosystem

• Digitizing our      relationships with more than 6 million customers globally: As of      30 June 2023, BEES is live in 23 markets with approximately 64% of our      2Q23 revenues captured through B2B digital platforms. In 2Q23, BEES      had 3.3 million monthly active users and captured approximately 9.2      billion USD in gross merchandise value (GMV), growth of 15% and 30% versus      2Q22 respectively. BEES Marketplace is live in 15 markets with 63% of BEES      customers also marketplace buyers. Marketplace captured approximately 340      million USD in GMV from sales of third-party products this quarter, growth      of 41% versus 2Q22.

• Leading the way in DTC      solutions: Our omnichannel direct-to-consumer (DTC) ecosystem of      digital and physical products generated revenue of more than 385 million      USD in 2Q23. Our digital DTC products, Zé Delivery, TaDa and PerfectDraft      are available in 20 markets, generated 16.5 million ecommerce orders and      delivered over 115 million USD in revenue this quarter, representing 18%      growth versus 2Q22.

Optimize our business

In HY23, disciplined overhead management and efficient allocation of resources across our operations enabled us to invest approximately 2.1 billion USD in capex and 3.5 billion USD in sales and marketing to drive the organic growth of our business, while managing the continued elevated cost environment. Our net debt to EBITDA ratio reached 3.70x versus 3.86x as of 30 June 2022, an increase versus 3.51x as of 31 December 2022 due to the seasonality of our cashflow generation. Underlying EPS was 0.72 USD, a decrease of 0.01 USD per share versus 2Q22, cycling a 0.04 USD per share net benefit from tax credits in Brazil year-over-year.

Advancing our sustainability priorities

We continued to innovate and make progress towards our 2025 Sustainability Goals through key local initiatives with the potential to scale globally. For Climate Action, we invested in a biomass processor in our Jupille brewery in Belgium to produce thermal energy from malt husks, which is expected to reduce our gas consumption by more than 15% and lower our carbon emissions. In Sustainable Agriculture, to strengthen local supply chains we provided technical and financial training to over 900 smallholder barley farmers in Uganda. In Water Stewardship, we installed new vacuum pump technology in breweries across several markets to reduce water usage in bottle fillers by approximately 50%. For Circular Packaging, our business in Brazil launched a nationwide returnable bottle campaign to help increase the use of returnable packaging by promoting affordability and sustainability.

Creating a future with more cheers

In HY23, we delivered 10.0% revenue growth and 9.1% EBITDA growth while continuing to invest for the long-term in our brands, facilities and digital transformation. We remain focused on brewing high quality beer, providing best-in-class service to our customers, generating value for our stakeholders and delivering on our purpose to create a future with more cheers.

2023 Outlook

Key Market Performances

United States: Revenue declined by 10.5% impacted by volume performance

• Operating performance:

• 2Q23: Revenue       declined by 10.5% with revenue per hl growing by 5.2% driven by revenue       management initiatives. Sales-to-wholesalers (STWs) were down by 15.0%.       Sales-to-retailers (STRs) declined by 14.0%, underperforming the       industry, primarily due to the volume decline of Bud Light. EBITDA       declined by 28.2%, with approximately two thirds of this decrease       attributable to market share performance and the remainder from       productivity loss, increased sales and marketing investments and support       measures for our wholesaler partners.

• HY23: Revenue       declined by 3.6% with revenue per hl growth of 5.4%. Our STWs declined by       8.6% and STRs were down by 9.2%. EBITDA declined by 14.8%.

• Commercial highlights:      The beer industry continued to demonstrate resilience in 2Q23, delivering      revenue growth of 2.3% while volumes declined by 2.5%, according to Circana.      Our total beer industry share declined this quarter but has been stable      since the last week of April through the end of June. Since April, we      actively engaged with over 170 000 consumers across the country through a      third-party research firm and the data shows that most consumers surveyed      are favorable towards the Bud Light brand and approximately 80% are      favorable or neutral. As part of our long-term plan, we increased      investments in our key brands, invested in measures to support our      wholesalers and continued key initiatives such as partnerships with NFL,      NBA, Folds of Honor and Farm Rescue.

Mexico: Double-digit top- and bottom-line growth with continued market share gain

• Operating performance:

• 2Q23: Revenue       grew by low-teens with revenue per hl growth of low-teens driven by       pricing actions and other revenue management initiatives. Volumes       declined by low-single digits, outperforming the industry which was       impacted by an earlier Easter. EBITDA grew by mid-teens with margin       expansion of over 175bps.

• HY23: Revenue       grew by low-teens with revenue per hl growing by low-teens and volumes       flat. EBITDA grew by mid-teens.

• Commercial highlights:      Our performance this quarter was driven by ongoing portfolio development      and digital transformation. Our above core portfolio continued to      outperform, growing revenue by mid-teens, led by the strong performance of      Modelo, Michelob Ultra and Pacifico. We continued to progress our digital      and physical DTC initiatives this quarter with our digital DTC platform,      TaDa, now operating in over 60 major cities and fulfilling on average over      300 000 orders per month and the opening of a further 150 Modelorama      stores.

Colombia: High-single digit top- and double-digit bottom-line growth

• Operating performance:

• 2Q23: Revenue       grew by high-single digits with high-single digit revenue per hl growth,       driven by pricing actions and other revenue management initiatives.       Volumes grew by low-single digits, continuing to gain share of total       alcohol in an improving consumer environment. EBITDA grew by       low-twenties, driven by top-line growth and supported by cycling a loss       from the disposal of non-core assets in 2Q22.
        HY23: Revenue grew by high-single digits with revenue per hl       growth of high-single digits. Volumes declined by low-single digits.       EBITDA grew by high-single digits.

• Commercial highlights: Our      leading mainstream portfolio drove our performance this quarter, with a      particularly strong performance from Poker which grew volumes by      mid-teens.

Brazil: High-single digit top-line and double-digit bottom-line growth with margin expansion

• Operating performance:

• 2Q23: Revenue       grew by 9.4% with revenue per hl growth of 12.2% driven by revenue       management initiatives and continued premiumization. Beer volumes       declined by 2.6%, underperforming the industry according to our       estimates, as we cycled a strong performance in 2Q22 which was supported       by post-COVID recovery. Non-beer volumes declined by 2.2% resulting in a       total volume decrease of 2.5%. EBITDA increased by 29.0% with margin expansion       of approximately 400bps.

• HY23: Total       volumes were flat with beer volumes down 0.9% and non-beer volumes up       2.5%. Both revenue and revenue per hl increased by 12.4%. EBITDA grew by       27.7%.

• Commercial highlights:      Our premium and super premium brands continued to outperform this quarter,      delivering volume growth in the mid-thirties, led by Original, Spaten and      Corona. BEES Marketplace continued to expand, reaching over 700 thousand      customers, a 29% increase versus 2Q22, and growing GMV by 64%. Our digital      DTC platform, Zé Delivery, reached 4.6 million monthly active users this      quarter, a 12% increase versus 2Q22, and increased GMV by 12%.

Europe: High single digit top- and bottom-line growth

• Operating performance:

• 2Q23: Revenue       grew by high-single digits with mid-teens revenue per hl growth, driven       by pricing actions and the continued momentum of our premium and super       premium brands. Volumes declined by mid-single digits, outperforming a       soft industry in the majority of our key markets according to our       estimates. EBITDA grew by high-single digits.

• HY23: Revenue       grew by double-digits, driven by mid-teens revenue per hl growth. Volumes       declined by low-single digits. EBITDA increased by high-single digits.

• Commercial highlights:      We continue to drive premiumization across Europe. Our premium and super      premium brands delivered double-digit revenue growth this quarter, led by      Corona and Budweiser.

South Africa: Double digit top-line growth with continued market share gain

• Operating performance:

• 2Q23: Revenue       grew by high-teens, with revenue per hl growth of more than 10%, driven       by pricing actions and other revenue management initiatives. Our volumes       grew by high-single digits, ahead of the industry according to our estimates,       driven by strong consumer demand for our brands and supported by a       favorable comparable due to production constraints in 2Q22. EBITDA was       flattish as top-line growth was offset primarily by anticipated commodity       cost headwinds.

• HY23: Revenue       grew by low-teens with high-single digit revenue per hl growth and a       mid-single digit increase in volume. EBITDA declined by low-single       digits.

• Commercial highlights:      We continue to see strong consumer demand for our portfolio, gaining share      of beer and total alcohol according to our estimates. Carling Black Label,      the #1 beer brand in the country, led our performance this quarter with      high-teens volume growth and our global brands grew volumes by more than      50%, driven by Corona.

China: Double-digit top- and bottom-line growth

• Operating performance:

• 2Q23: Volumes       grew by 11.0%, outperforming the industry according to our estimates.       Revenue per hl increased by 7.6%, driven by on-premise recovery and       continued premiumization, resulting in revenue growth of 19.4%. EBITDA       grew by 21.8%.

• HY23: Volumes       grew by 9.4% and revenue per hl by 5.4%, leading to a total revenue       increase of 15.3%. EBITDA grew by 17.4%.

• Commercial highlights:      We delivered volume growth across all segments of our portfolio this      quarter, led by mid-twenties volume growth in both our premium and super      premium portfolios. The roll out and adoption of the BEES platform      continued, with BEES now present in over 220 cities and over 45% of our      revenue through digital channels in June.

Highlights from our other markets

• Canada: Revenue      increased by low-single digits this quarter with revenue per hl growth of      high-single digits, driven by revenue management initiatives and      premiumization. Volumes declined by mid-single digits, underperforming a      soft industry.

• Peru: Revenue grew by      high-single digits this quarter with revenue per hl growing by low-teens,      driven primarily by revenue management initiatives. Volumes declined by      low-single digits, outperforming a soft industry and gaining share of      total alcohol.

• Ecuador: Revenue grew      by high-single digits in 2Q23 with volumes increasing by low-single      digits, supported by continued share of total alcohol gains. Our above      core brands continued to lead our growth, delivering a double-digit      revenue increase.

• Argentina: Revenue      increased by high-single digits on a reported USD basis and by over 100%      on an organic basis in 2Q23, driven by revenue management initiatives in a      highly inflationary environment. Beer volumes grew by low-single digits      with total volumes declining by low-single digits.

• Africa excluding South      Africa: In Nigeria, our top-line grew by mid-teens this quarter with      total volumes declining by high-single digits, driven by a soft industry      which was impacted by the continued challenging operating environment. In      our other markets, we grew volumes in aggregate by high-single digits in      2Q23, driven primarily by Tanzania, Ghana and Uganda.

• South Korea: Total      revenue declined by high-single digits, driven by a low-single digit      volume decline as we cycled post-COVID recovery in 2Q22. Revenue      per hl decreased by mid-single digits, driven primarily by an excise tax      increase.

Consolidated Income Statement

We are reporting our Argentinean operation applying hyperinflation accounting under IAS 29, following the categorization of Argentina as a country with a three-year cumulative inflation rate greater than 100%, since 2018. Inflation in Argentina has accelerated over the past 12 months, resulting in a more significant impact on the organic revenue growth of AB InBev than historically. For illustrative purposes, fully excluding the Argentinean operation, 2Q23 organic revenue increased for AB InBev would be 4.6% versus the 7.2% reported. For HY23 revenue growth for AB InBev would be 6.7% versus the 10.0% reported.

Consolidated other operating income/(expenses) in 2Q23 increased by 26.2% primarily driven by higher government grants and the impact of disposal of non-core assets year-over-year. In HY22, Ambev recognized 201 million USD income in other operating income related to tax credits. The year-over-year change is presented as a scope change and does not affect the presented organic growth rates.

Non-underlying items above EBIT & Non-underlying share of results of associates

EBIT excludes negative non-underlying items of 60 million USD in 2Q23 and 107 million USD in HY23.

Non-underlying share of results of associates of HY22 includes the non-cash impairment of 1 143 million USD the company recorded on its investment in AB InBev Efes in 1Q22.

Net finance income/(cost)

Non-underlying net finance income/(cost)

Non-underlying net finance cost in HY23 includes mark-to-market losses on derivative instruments entered into to hedge our shared-based payment programs and shares issued in relation to the combination with Grupo Modelo and SAB.

The number of shares covered by the hedging of our share-based payment program, the deferred share instrument and the restricted shares are shown in figure 7, together with the opening and closing share prices.

Income tax expense

The decrease in normalized ETR in 2Q23 compared to 2Q22 and the decrease in HY23 compared to HY22 is driven by country mix.

Underlying profit attributable to equity holders in 2Q22 and HY22 were positively impacted by 115 million USD and 152 million USD respectively, and in 2Q23 and HY23 by 29 million USD and 48 million USD respectively, after tax and non-controlling interest related to tax credits in Brazil.