AB InBev Reports Full Year and Fourth Quarter 2023 Results

Continued global momentum, partially offset by US performance, delivered all-time high revenue in FY23

BRUSSELS -- (BUSINESS WIRE) --

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

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Regulated and inside information¹

“Our business delivered another year of consistent profitable growth with a revenue increase of 7.8% and EBITDA growth of 7.0%. Strong free cash flow generation enabled us to progress on our deleveraging, propose an increased dividend to our shareholders and execute on a 1 billion USD share buyback. Our results are a testament to the strength of the beer category, resilience of our business and people, consistent execution of our replicable growth drivers and our unwavering commitment to invest for long-term growth and value creation.” – Michel Doukeris, CEO, AB InBev

The 2023 Full Year Financial Report is available on our website at www.ab-inbev.com.

Management comments

Creating a future with more cheers

Our business delivered another year of consistent profitable growth, with an EBITDA increase of 7.0%, in-line with our medium-term growth ambition and outlook for the year. While our full growth potential was constrained by the performance of our US business, we remained true to our purpose and laser focused on the execution of our strategy.

We made disciplined revenue management and resource allocation choices, delivering broad-based growth with top- and bottom-line increases in four of our five operating regions. Our results are a testament to the strength of the beer category, resilience of our business and people, consistent execution of our replicable growth drivers and our unwavering commitment to invest for long-term growth and value creation.

As with any year, there was success to celebrate and challenges from which to learn. We are taking the learnings and moving forward in a stronger position to realize our full growth potential.

Delivering consistent profitable growth

Our top-line increased by 7.8% in FY23, with revenue growth in more than 85% of our markets, driven by a revenue per hl increase of 9.9% as a result of pricing actions, ongoing premiumization and other revenue management initiatives. Volumes declined by 1.7% as growth in many of our emerging and developing markets was primarily offset by performance in the US and a soft industry in Europe.

EBITDA increased by 7.0%, with our top-line growth partially offset by anticipated transactional FX and commodity cost headwinds and increased sales and marketing investments. Underlying EPS was 3.05 USD, an increase of 0.02 USD per share versus FY22.

Progressing our strategic priorities

• Lead and grow the category      
       
       We remain focused on the consistent execution of our five proven and      replicable category expansion levers. In FY23, the beer and beyond beer      category continued to gain share of alcohol by volume globally, led by      gains in South America and China, according to Euromonitor.
       
       We focused our investments behind the megabrands in our portfolio that are      driving the majority of our growth and the global mega platforms that      consumers love and that bring people together. Our portfolio of brands is      unparalleled, with 7 out of the top 10 most valuable beer brands in the      world, according to Kantar BrandZ, and 20 iconic billion-dollar revenue      beer brands. The combination of our iconic brands with mega platforms such      as the Olympics, FIFA World Cup^TM, Copa America, NFL, UFC, NBA,      Lollapalooza and Tomorrowland has us uniquely positioned to lead and grow      the category.
       
       The relevance, authenticity and effective creativity of our marketing work      continues to be recognized. At the 2023 Cannes Lions International      Festival of Creativity, campaigns and brands from all 5 of our operating      regions were awarded and we were honored to be named as the Creative      Marketer of the Year for the second year in a row.

• Category       Participation: In FY23, the percentage of consumers       purchasing our portfolio of brands increased or remained stable in the       majority of our markets, according to our estimates. Our brand, pack and       liquid innovations drove increased participation with female consumers across       key markets in Africa, Latin America and Europe, and new legal drinking       age consumers in the US and Canada.

• Core       Superiority: Our mainstream portfolio delivered       high-single digit revenue growth in FY23 with double-digit growth in       markets such as South Africa, Colombia and Dominican Republic. Our       mainstream brands gained or maintained share of segment in the majority       of our key markets, according to our estimates.

• Occasions       Development: Our global no-alcohol beer portfolio continued to       outperform, delivering high-teens revenue growth in FY23, with our       performance driven by Budweiser Zero and Corona Cero. Our digital       direct-to-consumer products enabled us to develop deep consumer insights       and new consumption occasions, such as Corona Sunset Hours, Brahma Soccer       Wednesdays and increased in-home consumption of returnable glass bottle       packs.

• Premiumization:       Our above core beer portfolio grew revenue by low-teens in FY23, with       our premium and super premium brands gaining share of segment in a number       of key markets, including South Africa, Mexico and Brazil, according to       our estimates. Our global megabrands grew revenue by 18.2% outside of       their home markets led by Corona which grew by 22.1%. Budweiser delivered       a revenue increase of 17.1%, with broad-based growth in more than 25       markets, Stella Artois grew by 18.8% and Michelob Ultra by 7.5%.

• Beyond Beer:       In FY23, our Beyond Beer business contributed approximately       1.5 billion USD of revenue and grew by mid-single digits, as growth       globally was partially offset by the performance of malt-based seltzer in       the US. Growth was primarily driven by Brutal Fruit and Flying Fish in       Africa, our spirits based ready-to-drink portfolio in the US and Beats in       Brazil, all of which grew revenue by double-digits.

• Digitize and monetize our      ecosystem
       
       The digital transformation of our route to consumer is a fundamental      evolution in how we do business and serve our customers. Our digital      platforms are enabling us to increase the distribution of our brands,      reduce our cost to serve and improve our relationship with customers and      consumers. It is a key competitive advantage, and we continue to explore      new ways to monetize our digital and physical assets to create additional      profitable revenue streams.

• Digitizing our       relationships with our more than six million customers globally: As       of 31 December 2023, BEES was live in 26 markets, with approximately 70%       of our 4Q23 revenues captured through B2B digital platforms. In FY23,       BEES reached 3.7 million monthly active users and captured 39.8 billion       USD in gross merchandise value (GMV), growth of 27% versus FY22.
       
        BEES Marketplace was live in 15 markets with 67% of BEES customers also       Marketplace buyers. Marketplace captured approximately 1.5 billion USD in       GMV from sales of third-party products this year, growth of 52% versus       FY22.

• Leading the way       in DTC solutions: Our omnichannel direct-to-consumer (DTC)       ecosystem of digital and physical products generated revenue of       approximately 1.5 billion USD this year. Our DTC megabrands, Zé Delivery,       TaDa and PerfectDraft are available in 21 markets, fulfilled over 69       million e-commerce orders and generated revenue of more than 550 million       USD in FY23, growth of 15% versus FY22.

• Unlocking value       from our ecosystem: We continue to explore opportunities to       generate scalable incremental revenue streams for our business through       EverGrain, our upcycled barley ingredients company, and Biobrew, our       precision fermentation venture.

• Optimize our business

• Maximizing value       creation: Our objective to maximize long-term value creation is       driven by our focus on three areas: optimized resource allocation, robust       risk management and an efficient capital structure. Our culture of       everyday financial discipline enables us to optimize resource allocation       and invest for growth. In FY23, we invested 11.6 billion USD in capex and       sales and marketing while delivering free cash flow of approximately 8.8       billion USD, a 0.3 billion USD increase versus FY22.
       
        We continued to deleverage, reducing gross debt by 1.8 billion USD to       reach 78.1 billion USD, resulting in a net debt to EBITDA ratio of 3.38x       as of 31 December 2023. Our robust risk management was recognized earlier       this year with a credit rating upgrade from Baa1 to A3 by Moody’s and       from BBB+ to A- by S&P.
       
        As a result, we have additional flexibility in our capital allocation       choices. The AB InBev Board of Directors has proposed a full year       dividend of 0.82 EUR per share, a 9% increase versus FY22. In addition,       as of 23^rd February 2024 we have completed nearly 90% of our 1       billion USD share buyback program announced on 31 October 2023.

• Advancing our       sustainability priorities: In FY23, we continued to make progress       towards our ambitious 2025 Sustainability Goals. We contracted the       equivalent of 100% of our global purchased electricity volume from       renewable sources with 73.6% operational. Since 2017, we reduced our       absolute GHG emissions across Scopes 1 and 2 by 44% and GHG emissions       intensity across Scopes 1, 2 and 3 by 24.2%. In Sustainable Agriculture,       95% of our direct farmers met our criteria for skilled, 92% for connected       and 86% for financially empowered. In Water Stewardship, we are investing       in restoration and conservation efforts across 100% of our sites in high       stress areas, with 56% of sites in scope for our 2025 goal already seeing       measurable improvement in watershed health. For Circular Packaging, 77.5%       of our products were in packaging that was returnable or made from       majority recycled content. We are also progressing on our ambition to       achieve net zero by 2040, with 36 lighthouse projects implemented       worldwide in 2023.
       
        In recognition of our leadership in corporate transparency and       performance on climate change and water security, we were awarded a       double A score by CDP.
       
        We are committed to Smart Drinking and improving moderation habits all       over the world. Since 2016, we have invested 900 million USD in social       norms marketing and are on track to deliver our 1 billion USD goal by       2025. We have also undertaken the largest voluntary guidance labeling       initiative, with 100% of our labels now featuring Smart Drinking icons       and moderation actionable messages in 26 markets.
       
        Please refer to our Sustainability Statements in our 2023 annual report here       for further details.

Looking forward

As we reflect on 2023, while our full potential was constrained, the fundamental strengths of our business drove another year of consistent profitable growth. Beer is a large, profitable and growing category, gaining share of alcohol globally and with significant headroom for premiumization. Our diversified footprint, global scale and unparalleled ecosystem uniquely position us to lead and grow the category. We have replicable growth drivers such as our portfolio of megabrands that consumers love, digital products that unlock value and a category expansion model that drives organic growth. Our business generates superior profitability and cash generation, and our dynamic capital allocation framework provides us flexibility to maximize value creation. The resilience, relentless commitment and deep ownership culture of our people is truly unwavering, and we thank all our colleagues globally for their hard work and dedication.

Looking ahead to 2024, our purpose as a company remains as relevant as ever. Guided by our strategy and our focus on customer and consumer centricity, we are energized about the opportunities ahead to activate the category through our megabrands and platforms. We believe in the potential of the beer category, the fundamentals of our company and our people, and our ability to generate superior long-term value and create a future with more cheers.

2024 Outlook

(i) Overall Performance: We expect our EBITDA to grow in line with our medium-term outlook of between 4-8%¹. The outlook for FY24 reflects our current assessment of inflation and other macroeconomic conditions.

(ii) 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%.

(iii) 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.

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

Key Market Performances

United States: Revenue declined by 9.5% impacted by volume performance

• Operating performance:

• 4Q23: Revenue       declined by 17.3% with sales-to-retailers (STRs) down by 12.1%, primarily       due to the volume decline of Bud Light. Sales-to-wholesalers (STWs)       declined by 16.1% as shipments lagged stronger depletions in December.       Revenue per hl decreased by 1.4% due to negative mix and cycling the       October price increase in 4Q22. EBITDA declined by 34.2%, 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.

• FY23: Revenue       declined by 9.5% with revenue per hl growth of 3.7%. STWs declined by       12.7% and STRs were down by 11.9%. EBITDA decreased by 23.4%.

• Commercial highlights: The      beer industry remained resilient in FY23, with volumes improving      sequentially throughout the year and with beer gaining share of total      alcohol by value in the off-premise, according to Circana. Our beer market      share has seen continued gradual improvement since May through the end of      December. While our mainstream beer revenues declined this year, our above      core beer megabrands continued to grow. In Beyond Beer, our spirits-based      ready-to-drink portfolio delivered strong double-digit volume growth, outperforming      the industry. To support our long-term strategy, we continue to invest in      our megabrands, wholesaler support measures and key mega platforms      including the NFL, MLB, PGA and the NBA as well as new partnerships with      the UFC, Copa America and Team USA for the Olympic and Paralympic Games.

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

• Operating performance:

• 4Q23: Revenue       was flat with low-single digit revenue per hl growth driven by revenue       management initiatives in an environment of moderating inflation. Volumes       declined by low-single digits, underperforming the industry, primarily       impacted by adverse weather in the Acapulco region. EBITDA grew by       mid-single digits with margin expansion of over 150bps.

• FY23: Revenue       and revenue per hl grew by high-single digits with volumes declining       slightly, in-line with the industry. EBITDA grew by high-single digits       with margin expansion of approximately 60bps.

• Commercial highlights:      Our performance this year was driven by consistent execution across all      three pillars of our strategy. Our above core portfolio continued to      outperform in FY23, delivering low-single digit volume growth, while our      core brands remained healthy, increasing revenues by high-single digits.      We continued to progress our digital initiatives with our digital DTC      platform, TaDa, operating in over 60 major cities with more than 90 000      monthly active users. We continue to explore and scale value added      services through the BEES platform, such as Vendo, which enabled more than      650 000 transactions for digital utilities payments and mobile data      purchases in FY23, and BEES Marketplace.

Colombia: Record high volumes delivered double-digit top-line and high-single digit bottom-line growth

• Operating performance:

• 4Q23: Revenue       grew by low-teens with mid-single digit volume and high-single digit       revenue per hl growth, driven by revenue management initiatives. EBITDA       grew by mid-single digits as top-line growth was partially offset by       anticipated transactional FX and commodity cost headwinds.

• FY23: Revenue       grew by low-teens with revenue per hl growth of high-single digits.       Volumes grew low-single digits. EBITDA grew by high-single digits.

• Commercial highlights: Driven      by the consistent execution of our category expansion levers, the beer      category continues to grow, gaining 70bps share of total alcohol this year      and with our volumes reaching a new record high. Our core portfolio led      our performance in FY23, delivering low-teens revenue growth with a      particularly strong performance from Poker which grew volumes by      high-single digits.

Brazil: High-single digit top-line and double-digit bottom-line growth with margin expansion of 462bps

• Operating performance:

• 4Q23: Revenue       grew by 5.8% with revenue per hl growth of 5.0% driven by revenue       management initiatives. Total volumes grew by 0.8%, with beer volumes       declining by 1.1% as we cycled FIFA World Cup^TM activations in       4Q22. Non-beer volumes increased by 5.3%. EBITDA increased by 26.3% with       margin expansion of 537bps.

• FY23: Revenue       increased by 8.7% with revenue per hl growth of 8.5%. Total volumes grew       by 0.2% with beer volumes down by 1.0%, slightly underperforming the       industry according to our estimates, and non-beer volumes up by 3.6%.       EBITDA increased by 28.0% with margin expansion of 462bps.

• Commercial highlights:      Our performance this year was led by our premium and super premium brands,      which delivered volume growth in the mid-twenties and gained share of the      premium beer segment, according to our estimates. Our core beer portfolio      remained healthy, increasing revenues by high-single digits. Non-beer      performance was led by our low- and no-sugar portfolio, which grew volumes      by over 25%. BEES Marketplace continued to expand, reaching over 835 000      customers, a 17% increase versus 4Q22, and grew GMV by over 35% in FY23.      Our digital DTC platform, Zé Delivery, reached 5.7 million monthly active      users in 4Q23, a 19% increase versus 4Q22, and increased GMV by 8% in      FY23.

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

• Operating performance:

• 4Q23: Revenue       grew by mid-single digits with high-single digit revenue per hl growth,       driven by pricing actions and continued premiumization. Volumes declined       by low-single digits, outperforming a soft industry in the majority of       our key markets according to our estimates. EBITDA declined by       approximately 10%, as top-line growth was offset by anticipated commodity       cost headwinds.

• FY23: Revenue       increased by high-single digits, driven by low-teens revenue per hl       growth. Volumes declined by mid-single digits, driven by a soft industry.       EBITDA increased by low-single digits.

• Commercial highlights: We      continued to premiumize our portfolio this year with our premium and super      premium brands delivering high-single digit revenue growth, led by Corona,      Leffe and Stella Artois. Through the consistent execution of our strategy      and investment in our brands, we gained or maintained market share in the      majority of our key markets in FY23, according to our estimates. Our      digital transformation in Europe is progressing, with BEES now live in the      UK, Germany, Belgium, the Netherlands, and the Canary Islands.

South Africa: Record high volumes delivered double digit top- and high-single digit bottom-line growth

• Operating performance:

• 4Q23: Revenue       grew by high-teens, with revenue per hl growth of mid-teens, driven by       pricing actions and continued premiumization. Our volumes increased by       low-single digits, outperforming the industry according to our estimates.       EBITDA grew by mid-twenties.

• FY23: Revenue       grew by mid-teens with low-teens revenue per hl growth and a mid-single       digit increase in volume. EBITDA grew by high-single digits, as top-line       growth was partially offset by anticipated transactional FX and commodity       cost headwinds.

• Commercial highlights:      Driven by focused commercial investment and the consistent execution of      our strategy, the momentum of our business continued in FY23. Our      portfolio delivered all-time high volumes, with increased Brand Power of      our beer and beyond beer portfolios driving market share gains of both      beer and total alcohol according to our estimates. Our core beer portfolio      continued to outperform, and our global brands grew volumes by more than      30%, driven by Corona and Stella Artois. In Beyond Beer, our portfolio      grew volumes by high-single digits led by Flying Fish and Brutal Fruit.

China: Double digit top- and bottom-line growth with margin expansion of 125bps

• Operating performance:

• 4Q23: Revenue       grew by 11.2% with revenue per hl increasing by 14.7%, driven by       continued premiumization and supported by a favorable comparable in 4Q22.       Total volumes declined by 3.1%, driven by a softer mainstream industry,       however our premium and super-premium volumes grew by double-digits.       EBITDA increased by 31.6%.

• FY23: Revenue       grew by 12.3% with a revenue per hl increase of 7.6% and volume growth of       4.3%, outperforming the industry according to our estimates. EBITDA grew       by 16.3% with margin expansion of 125bps.

• Commercial highlights:      We continue to invest behind our commercial strategy, focused on      premiumization, channel and geographic expansion, and digital      transformation. In FY23, our premium and super premium portfolio continued      to outperform, delivering double-digit revenue growth and driving overall      market share expansion, according to our estimates. The roll out and      adoption of the BEES platform continued, with BEES now present in      approximately 260 cities and with 70% of our revenue generated through      digital channels in December.

Highlights from our other markets

• Canada: Revenue      declined by mid-single digits this quarter with revenue per hl growth of      mid-single digits. In FY23, revenue was flat with revenue per hl growth of      high-single digits, driven by revenue management initiatives and the      continued outperformance of our above core beer portfolio. Volumes      declined by high-single digits in 4Q23 and by mid-single digits in FY23,      underperforming a soft industry.

• Peru: Revenue and      revenue per hl increased by mid-single digits this quarter with volumes      declining by low-single digits. In FY23, our portfolio gained share of      total alcohol with revenue growth of high-single digits and revenue per hl      increasing by approximately 10%, driven primarily by revenue management      initiatives. Volumes declined by low-single digits, outperforming a soft      industry.

• Ecuador: Revenue      declined by low-single digits this quarter driven by a volume decline of      mid-single digits as the industry was impacted by four fewer trading days      due to election related dry laws. In FY23, our portfolio gained share of      total alcohol with revenue increasing by mid-single digits led by our      above core beer brands, which delivered a high-single digit revenue      increase. Beer volumes were flattish.

• Argentina: Volumes      declined by mid-single digits in 4Q23 and high-single digits in FY23, as      overall consumer demand was impacted by inflationary pressures. Revenue      increased by over 100% on an organic basis in both the quarter and full      year, driven by revenue management initiatives in a highly inflationary      environment. Reported USD revenues declined in FY23, driven primarily by      the hyperinflation accounting treatment of the currency devaluation in      December 2023. Refer to the note on page 14 for further details.

• Africa excluding South      Africa: In Nigeria, revenue grew by over 30% this quarter driven by      pricing actions and other revenue management initiatives. Beer volumes      declined by high-single digits, driven by a soft industry which was      impacted by the continued challenging operating environment. In FY23,      revenue increased by high-teens with a beer volume decline of low-teens.
       
       In our other markets, we grew revenue in aggregate by high-single digits      in 4Q23 and by low-teens in FY23, driven by Tanzania, Botswana and Zambia.

• South Korea: Total      revenue increased by low-single digits in 4Q23 with mid-single digit      volume decline and high-single digit revenue per hl growth, driven by      revenue management initiatives. In FY23, revenue decreased by low-single      digits with flattish revenue per hl and a low-single digit volume decline,      underperforming the industry.