Q4 2020 Anheuser Busch Inbev NV Earnings Call
Yeah.
Welcome to the Anheuser Busch Inbev fourth quarter, and full year 2020 earnings conference call and webcast.
Well, the a b and <unk> actual results and financial condition may differ possibly materially from the anticipated results and financial condition indicated and these forward looking statements.
For a discussion of some of the risks and important factors that could affect AB inbev future results see risk factors and the company's latest annual report on form 20-F filed with the Securities and Exchange Commission on the 23rd and March 2020.
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. Carlos Brito, Sir you may begin.
Thank you Maria and good morning, good afternoon, everyone.
Welcome to <unk> fourth quarter, and full year 2020 earnings call.
I Hope you and your families are staying safe and well.
First and foremost I would like to Bruce and reflect all of our colleagues.
There are ongoing upward from commitment to ensure business continuity and a strong recovery through this challenging from.
Before I go into detail about the results of 2020.
Most importantly, we have a culture of ownership and a long term mindset our colleagues across the world are rising to the challenge each day, demonstrating ingenuity passion and resilience.
One of the things and most proud of was how quickly our team's stepped up to help our communities and creative and impactful ways.
Our beers are almost entirely force brute Android locally.
Deeply connecting us to the communities and which we live and work.
This means we must lead the way and supporting the fight against the pandemic and doing a report and the economic recovery.
And 2020, we produced and donated millions of units of hand Sanitizers and.
20 countries and emergency drinking water and over 10 countries, we mobilize our fleets of trucks, and Colombia, Peru, and Ecuador to deliver essential food and medical supplies.
We helped to enhance critical healthcare infrastructure, including four new hospitals, and Mexico, Brazil, Colombia, and Peru, and and vaccine factory and Brazil.
To support and empower more than 20000 direct farmers and our global supply chain were fulfilled commitments to purchase crops and market, such as Mexico, and India. Even when are brutal operations were shut down.
And the U S. We've collaborated with our sports partners and the American Red Cross to convert stadiums and hour on tour facilities and for temporary blood drive centers.
We will continue to partner closely with our stakeholders across our value chain to support the recovery as we believe and sustainable recovery can only be achieved when we work together.
Now let me take you through the results of the fourth quarter and full year, including highlights from our key markets and I'll also elaborate on our commercial strategy, including our digital commerce platforms and provide you with an update and are a better world agenda and.
And will then headed over to find out.
They go through our financials will then be happy to answer your questions.
Let's start with the results and key takeaways from the fourth quarter.
With another day of strong fourth quarter, and the context of and ongoing complex environment.
Will deliver total volume growth of 1.6%.
And beer volume grew by 1.8%, while our non beer business grew by 1.7%.
Ah revenue grew by four 5% revenue per headquarter grew by two 7% supported by revenue management initiatives and premeditation, partially offset by averse channel and packaging mix related to the impact of COVID-19 restrictions.
Top line growth was offset by higher costs as rapid adjusted our supply chain to meet evolving demand and as we increase investments in line with improving volumes, resulting and and EBITA decline of 2.4%.
While our EBITDA margin contracted by 261 basis points. This do resulted and a healthy margin of 39, 7%.
Let me and I'll tell you about the results of the four years.
While was part of the year with good momentum overall results and 2020 were significantly impacted by the disruption caused by the COVID-19 pandemic.
While the first half of the year was extremely challenging we're able to pivot quickly to deliver volume growth and the second half of the year and you'll see on the right side of slide nine.
And a four year basis revenue declined by three 7% as the volume decline of five 7% was partially offset by revenue Baxter growth of 2.1%.
Our own beer volumes were down by five 8% and non beer volumes are down by three 8%.
Our EBITDA declined by 12.9% with EBITDA margin compression of 382 basis points to 36, 9%.
Our underlying EPS decreased to $2 and 51.
We ended the year with a net debt to normalize EBITA ratio of four eight times as our results were substantially impacted by the COVID-19 pandemic.
We remain committed to deleveraging as this constitutes a powerful lever for value creation.
The board has proposed a full year dividend of 50 euro cents per share for fiscal year 2020.
Let me and I'll take you through the highlights from our key markets.
And the U S top and bottom line growth.
Was driven by the consistent execution of our consumer first strategy focus on primitive nation health and wellness and innovation.
We also delivered continue and market share trend improvements with a slight decline of approximately five basis points and 2020.
Are above core portfolio outperformed once again led by the continued momentum of Michelob ultra and the success of innovations such as Bud light Seltzer.
We're committed to winning and the fast growing Selsor segment with a portfolio approach enhanced by recent innovations such as Michelob Ultra organic seltzer and Bud light Selsor eliminate.
In addition, we delivered flat market share within the mainstream segment and 2020 as we continue to successfully execute our commercial priorities.
In Mexico, our business recovered quickly from a two month government mandated shutdown of our operations to deliver a strong results and the second half of the year.
With significantly outperformed the industry once again, and 2020 and delivered healthy revenue per quarter growth ahead of inflation.
We'll continue to enhance our commercial footprint with more than 600, new locations of our own retail store.
Dilemma.
And our continued expansion into the country's largest convenience store oxygen and they can all brands available and more than 7700 stores by the end of the year.
In addition, our proprietary <unk> platform beef more than doubled in size throughout the year.
And Columbia Ah results, and 2020, where heavily impacted by stringent COVID-19 restrictions, though refinished day here with good momentum across our portfolio.
Each month and the fourth quarter was marked by our highest ever mostly beer volume in the country.
Our premium portfolio proved incredibly resilient led by our global brand portfolio, which grew by high teams and 2020.
Our beer business and Brazil deliver a strong topline performance this year and a challenging environment.
Regroup beer volumes and both the year and the fourth quarter gaining market share in both periods. According to our estimates.
Our premium portfolio outperformed industry with stabilize the performance of our core brands and and delivered highly successful innovations such as Brahma do promotion.
We'll continue to advance the digital transformation of our business with accelerated expansion of bees indirect consumer initiatives, such as that delivery, which fulfilled more than 27 million orders and 2020.
And Europe outperformance was impacted by ongoing COVID-19 related restrictions, particularly and second and fourth quarters.
Nevertheless, we gain like it's showing the majority of our markets and 2020 with a strong performance from our premium brand portfolio.
And South Africa, our business was significantly impacted by three outright ban on the sale of alcohol over the course of 2020, which resulted in double digit volume revenue and EBITDA, the clients and significant EBITDA margin contraction.
Outside of these bands, we saw solid underlying consumer demand for our portfolio throughout the year.
And China, our business was heavily impacted by COVID-19 and related restrictions from February through April then recovered swiftly throughout the remainder of the year.
Criminalization continues to be a key driver of growth.
Additionally, we estimate that we maintained our leadership of the beer category and the E Commerce channel with an estimated market share more than twice that of the next brewery.
Our global brand portfolio return to growth and outperformed and the second half of 2020 with revenue up by four 7% outside of their home markets, where they commence a premium.
But otherwise it grew by five 8% outside of its home market of the U S and the second half led by China, Brazil, and the UK.
Stellar too I grew by six 4% outside of Belgium, and the second half as it promoted the and home new occasion, and achieved show results and several key markets, including Brazil and Argentina.
Corona increased by one 2% outside of Mexico, and the second half with growth and the majority of its markets.
And summary, we finished the year with good momentum through consistent execution of our commercial strategy.
Consumers at the centre of everything we do.
Our diverse geographic footprint Spence markets very maturities.
I'll, Mark and maturity model gives us a roadmap to understand how occasions and consumers evolve.
Location to become more fragmented and diverse as markets mature day mania portfolio approach to effectively meet consumer needs.
For example, the number of brands required to reach 80% of beer volume and a late stage and maturity market is more than 10 times that of and early stage of maturity market.
Additionally, the memo brands within a consumer's consideration set in the late stage of maturity market is more than double that of and early stage and maturity market.
Since the combination with ICB and 2016, we have used the category expansion framework to build a robust portfolio of core lyvers.
Premium beers craft and specialties smart affordability offerings and beyond beauty Adjacencies.
2020 validated the importance of having a superior portfolios, leading brands, enabling us to deliver market share gains and the majority of our key markets.
We continue to lead the larger space with our unmatched portfolio and successful innovations such as Brahma the promotion.
It is dabbs salute leader of the corporate segment, and Brazil, and we are expanding the double malt offering to seven new markets and 2021.
We are a leader of the corporate segment globally with brands like Global true Mobiler Special club Columbia and harmonize.
And the US Michelob ultra grew by more than 20% and holds the number two position by value and the beer category.
We are the leading premium brewer in the world and have and gaining market share in this segment for three consecutive years.
Budweiser stellar Corona three.
Three of the top five most valuable beer brands and the world and reached more than $10 billion of revenue and 2020, representing and more than 20% of our total.
We also began scaling craft and specialty breads around the world several years ago through a combination of organic and inorganic initiatives.
Today, we have the world's largest portfolio craft and specialty brands. We have gained consistent market share on a global basis and crap since 2015, and we will continue to enhance our portfolio of the category evolves.
And the other end of the price spectrum are smaller portability initiatives, such as our local crop beers and markets include and Brazil, Peru, Ecuador, and Uganda are drawing new consumers into the beer category, while also serving our communities by supporting local farmers.
Are beyond via portfolio continues to drive growth with our total adjacencies, reaching well over $1 billion and revenue and growing strong double digits and 2020.
And the U S. The largest beyond pier market in the world, Our Hearts Seltzer, Kenwyne and canned RTD Costco offerings grew on average double their respective segments and the fourth quarter.
And so highly mature market B U S provides us with valuable learn is that we can scale across our global footprint.
We have been strengthening our beyond via positioning and other markets with offerings, such as Colby and Brazil, and recently Michelob Ultra Sulcer in Mexico.
Our portfolio today has a significant presence and spaces, where consumers are going such as premium health and wellness convenience and authenticity.
We have developed and are continuously enhancing our portfolio to meet evolving consumer needs positioning as well to capture long term growth.
To drive long term growth, we have to go our customers and consumers go.
To walk the full potential of our brand portfolio and truly excel and service level and execution, we have been making investments for several years and digital commerce platforms.
Our proprietary BTB platform beef combines our best and class logistics and sales systems with new digital capabilities and connectivity, allowing us to provide customers with convenience seamless communication and enhanced business performance.
These and powers our customers through offerings tailored to their particular needs user friendly communications and visibility of logistics and delivery.
This propels us to be truly customer centric.
The more and our customers to better partners, we can be and driving mutually beneficial growth.
The results are powerful.
Gross merchandise value from bees reached well over $3 billion and 2020 with.
With revenue growth accelerating throughout the year.
And December 2020 be head over 900000 monthly active users across nine markets and we intend to scale the platform across several more markets and 2021.
Most importantly, our customers love the platform, giving us and NPS 18 points higher than those who are not yet transacting with us digitally.
We are optimistic about the potential for bees to truly transform our customer relationships and our business.
Or direct to consumer DTC e-commerce platforms across the world and this was the ability to reach consumers and new more convenient ways, while providing us with valuable data on evolving consumer trends.
And 2020, we saw significant step change and adoption of our DDC platforms as consumers turned three commerce and and environment of social distancing.
Orders through our more than 20 proprietary data C. e-commerce platforms increased nearly tenfold and 2020, and we're leading commerce and the beer category and key markets, such as China through strategic partnerships with global retailers.
2020, and also pushed us to find innovative ways for our branch to connect with consumers when traditional channels, such as concerts and sporting events work unavailable.
Our in House, Marty Agency, Dropline and step up to the challenge by creating consumer first experiences such as our lives online concert series and Brazil lie.
Lives successfully activated our top brands innovations in the country, such as Brahmo diploma delivering over 350 concerts, and attracting 678 million views and only 12 weeks.
We have seen that this innovative activations meaningfully contribute to increased awareness and trial of our products, helping us to outperform the market.
Moving on and I'd like to spend a few minutes discussing the advancements we have made and a better world agenda, starting with an update on our smart drinking initiatives.
We're committed to meaningfully reducing the harmful consumption of alcohol or commitment to apply smut drinking guidance labels on the primary packaging of all of our beers is the largest such efforts ever undertaken in the world by any single beer wine or spirits company.
The day, 81% of our beer volume across the 28 countries and scope already includes a smart drinking guidance label and we plan to reach 100% this year.
Additionally, we share the United Nations sustainable development goals, Pseg's ambition to reduce road traffic injuries and deaths by 50% by 23rd.
Together with the United Nations Institute for training and research units are we launched the management practice for safer roads toolkit and 2019 with.
The developer's toolkit based on the data driven approach and piloted it and some pole.
Bringing road fatalities and the city down by 16% from 2015 to 2019.
And 2020, we renewed our partnership with units are for two more years.
And 2018, we launched our 2025 sustainability goals are most ambitious goals yet they aimed for holistic environmental and social impact to drive transformational change across our value chain.
Our goals are closely aligned to the United Nations Stg's as we believe private sector companies have responsibility to contribute to solutions for some of the world's most pressing issues.
And 2020 will continue to make progress toward our goal that 100% of our direct farmers will be skilled connected and financially empowered.
We have been featured and fortunate to change the World list for the second consecutive year for our work with farmers and the development of agricultural technology to build strong global supply chain.
We're also measurably, improving water availability and quality for highest stress communities and 2020, we achieved and industry, leading water use efficiency ratio of two seven and <unk> of water for heckler of beer across all of our Brutus sites and retained or a place and cdp's water a list as a <unk>.
Leader and corporate water stewardship.
Even though our progress and circle of packaging was affected by COVID-19, and will continue to champion a circular economy.
By developing partnerships with our suppliers and to the 100, plus accelerator, we're building and strengthening the rope local recycling ecosystems.
Today more than 74% of our volume globally is in majority recycled content or returnable packaging.
Climate change has far reaching impacts on our business and the communities, where we live and work.
And have committed to transitioning to 100% purchase electricity from renewable sources by 2025, and we have already contracted 70%.
To help us achieve our ambitious sustainability gross.
We launched the 100, plus accelerator and 2018 to fight partners, who can deliver breakthrough advancements and water stewardship form of productivity circular packaging and more.
Since then the accelerator has worked with 36 of start ups and 16 countries to innovate for sustainable impact and to achieve or 2025 sustainability gross.
And 2020, we launched our second cohort and concluded the pilots with a virtual demo day that attracted nearly 400 participants.
And I'm also happy to share that today, we released our in our rural ESG report now available on our website. The report provides our stakeholders with greater visibility on how we have been working to fulfill our commitment to building a better world.
With that I would like now too and it over to fan and then.
Thanks, you brittle.
Good morning, and good afternoon, everyone. I Hope you are all safe and well.
To continue west restart left off I would like to highlight how we are bringing the sustainability and corporate finance wards closer together.
Let me share you and achievement of free time personally proud as a CFO and is a founding member of the United Nations Global Compact CFO Task Force.
Last week, we announced that this successful signing off and you $10 and 20 billion dollar sustainable negate revolving credit facility.
We are excited by the further integration of sustainable finance principles, and she'll capital markets and and welcomed the opportunity and bad this practice deeper and to both our financial organization and the brother company.
As the awards, leading printer and we felt fast global reach it is important that we set example, and play a leadership role and addressing the increasing traps of climate change.
Now, let me update you on the financials.
Our underlying EPS choosier define it as our Normalised EPS, excluding the impact of Mark to market related to the hedging of our shed basic payment programs and the hyperinflation accounting and Argentina.
That created by one dollar and 12 cents from $3.63 to two.
$2 51.
The decrease was mainly driven by lowered normalized EBIT.
Due to the fact of COVID-19 on our performance.
Even though.
And and planet brought unexpected challenges, we continue to proactively manage the factors, we've seen our and flashed from I think prudence liquidity during and a certain time.
And I was supporting the long term growth of our business.
We started 2020 with a strong liquidity position that you did a healthy risk profile.
Throughout the year, we undertook a series of liability management initiatives that further there is kip our balance sheet, while creating failure.
We're moving to serve our grass that we smacked toilets over the next five years by approximately $18 billion and extended out and waited a rash from authority by more than two years.
Our liquidity position remains higher than usual and light of day ongoing uncertainty.
At the end of the year, our photo liquidity position was approximately 24 $3 billion, consisting of the $90 million and drawn revolving credit facility, Rcs and $15 $3 billion of cash.
And sufficient to cover our hallmark storage through 2026.
As you see on is like 30.
Our own matrix Ah well distributed across the next several years and recent redemptions considerably and reduce it our obligations for the next five years.
As a reminder, we do not have any financial covenants on our and decided that portfolio.
Including our new sustainability and Lincoln revolving credit faucet.
Our pro forma bond portfolio as of February 2021 remains largely insulated from interest rate volatility.
Approximately 96% holds a fix it right.
Furthermore.
And the portfolio is comprised it off a diverse mix of currencies with 56% they dominated and U S dollars and 33% in Europe.
Would have further extended our weighted us a rash and maturity from modern 16 years.
Finally, we continue to have a very manageable weighted average coupon rate of approximately 4%.
I will now take you through our capital location priorities.
The first priority for the use of cash is transverse behind our brands and to take for advantage of the organic growth opportunities and our business.
Second deleveraging to around they took times net detrick interracial remains our commitment and when you purely ties better repayment in order to meet this objective.
Kurt with respect to him and he will always be ready to look at opportunities when and if they are rice subject chihuahuas, chief financial discipline and day leveraging commitments.
Our first priority is returning extra cash to shareholders and the form of dividends and all share buybacks.
To reiterate our first step forward location and priorities and remains the organic growth of our business.
Our things have shot incredible assured it and this year significantly reducing discretionary expenditures and the first half of the year, but then be working quickly to invest and think environment began to and pills.
We will continue to manage our capital refer long term mindset, managing our resources effectively to drive shooter growth.
And respect I'll head back from area to begin to Q&A session.
Thank you the floor is now open for questions and the interest of time.
We will limit each participant to one question and one follow up question again, if you have a question or comment. Please press star one on your Touchtone phone.
And if at any point. Your question has been answered you may remove yourself from the queue by pressing the pound key.
We do ask that while you pose your question you pick up your handset to provide optimal sound quality.
Our first question comes from the line of Trevor Sterling of Bernstein.
Hi, Brito and Fernando So two questions and my site, but the first one is if I look at the margins and I. Appreciate there's a lot of pressure coming down the pipe in terms of raw materials, and transactional ethics, I guess, particularly and Brazil, but also hopefully there'll be some very easy comps from channel and pack mix and coach for heck teacher from that angle.
So if you look at the match of all that's going on and do you think you can recover some of the margin compression.
In 2020 2021.
2020 and the.
And second question and follow up regarding the effective tax rate for and under you said that they would like you to go up in 2021.
<unk> can you give us any indication of the scale of how far it could go up and I mean, I appreciate and there are many moving parts here, but it is it like a percentage point prostate similar to what we sold and the previous year or could it be significantly more than that and thank you very much.
Thank you serve or I'll take the first one for and I will take the second one in terms of margin, what we said and our outlook is that based on what we know today.
And also based on the fact that this outlook is for the year exclusively for the year 2021.
Okay.
That there's much still a lot of uncertainty Joseph the COVID-19 pandemic, but there are two factors for which will have a high degree of certainty.
The first one is that due to our 12 months forward hedging policy.
We have good visibility of course, and our transactional FX and commodity exposure for the year 2021, and therefore, the expected headwinds and some of our major markets. As you said, mostly Brazil, but also I'd like to say, Mexico, and Columbia as well.
So how'd you How'd you policy of 12 months Rolling period.
Gives us time to react but also means that the pressure we had an FX and Brazil. For example, 2020 will be sales and 2021, so there'll be a delay.
And that's always the case.
And the second factor that.
And that we have a high degree of certainty is that in light of the COVID-19 restrictions, we expect to critique facing adverse channel and packaging mix and some regions.
Of course from this restrictions he's built.
This will be good news for margins just to give you. An example, trevor the cost of sales and queue for for us.
It was $6, 4% of poor heckler basis.
50% of that increase was COVID-19 related in terms of restrictions because of channel brand back and regional dislocations and chimps a mix.
And the other and I'd like to say that our industry, leading margins and gives us flexibility to west.
The short term volatility without having to make and short term decisions that could harm the long term of our business and I say this because we have momentum as we finished the year, let's remember that image to last year 2020.
Our bottoms grew north of 2% and we ended the year with good momentum gaining.
<unk> sure included and many of our key markets. So.
What what's short to access that portfolio, the strength of our portfolio and to gripe.
Is two platforms, where half of our customers and consumers, we're really key during the pandemic and it will continue to Richie.
And finally at the end of the day will look at margins and combination with absolute dollars.
Of course, everything has to be taken into context, bolsa very important margin and absolute dollars, but if I had to choose one of the two I would take dollars.
Because that's what you take from the back to the back so this and mind, it's important to remember that and outlook. We also stated that we expect our top and bottom line results and 2021 to improve meaningfully versus 2020. So yes, we said margin margins would be and the pressure, but we also set the bottom line and topline wood.
And meaningfully ahead of 2020 and again, it's just set it will all depend on how.
Fast restrictions he's.
And high Crawford said and number here on our questions.
In 2020 hour typically chat was heaven effected by country nooks and relative speed off.
Markets.
Moving.
Although this was somewhat partial effect by some favor and a temporary COVID-19 measure used by different governments.
2021.
Two faced and fax from I think such as a couch and mix, while some of the Democratic COVID-19 measures and we will phase out and.
And on top of that we will have some changes to resignations and Texas attributes and some key markets then reach a higher tier 2019 and 2020.
Okay can you put any.
Range on that scale of that that potential increase and taxes Fernando.
Net moment, given that that is true some uncertainties and and depends on how we turn off their markets, which have different effects right. So far.
And it's very hard to be so precise to you on putting a number of that.
You expect it to be higher but but.
That that's that's as much as I Campbell.
Okay. Thank you very much for another.
And could travel.
Our next question comes from the line is Edward Monday of Geoffrey's.
[noise] morning Brito.
Fernando afternoon and everyone.
First question Brito as I appreciate it and have any crystal ball on how quickly restrictions he's but could you perhaps talk about what gives you confidence some meaningful topline recovery and 2021 and what are your areas of course at this early stage and the year and then.
The follow up question is really around margins again, and the journey back to pre Covid March and some sort of a highlighted zone trade. It comes back and you should get benefits to revenue, perhaps Lisa from channel and product mix and eastern Cokes, some of those tailwind or some of the headwinds and packaging and try to mix and also reverse do you think it's realistic to get back to.
Free Covid margins as we get through the pandemic.
Well a couple of things you're at thanks for your question in terms of top line recovery. What gives me confidence is that of course, we're going to have a shortage too are going to be.
B.
Different H, one will be and easier carpet too.
More of a cough cough.
But.
When you look at.
When you look at.
Yeah. So when you look at the Q1 and the way we finished last year. When you put the two together refinished slash less serious momentum and of course the.
2021 will depend on lots of things like restrictions government incentives to consumers and all that but if you look at the countries like Brazil, we're off to a good start in terms of topline momentum.
By 10% Dear volume growth, so far this year, and Brazil, and a healthy net revenue practically to performance.
And if you look and Mexico, despite the second wave of the pandemic.
We are fully operational and we see good underlying demand.
And Columbia, John premise channel has been heavily restricted but as being reopening gradually since the beginning of the second half and.
And there is also some spikes and COVID-19 cases, but now and the better place.
And.
So, but again, good underlie and the man and the us throw some cold weather.
We have some continue to high case becomes come now so we'll see but the USTR trade is very important well South Africa, we had.
Alcohol ban and the first half and the.
January but now since December 2nd.
Solid underlying consumer demand so that's good news.
Western Europe will continue to have impact from our volumes given the on trade restrictions and China. The Chinese new year. This year people couldn't travel as much and that benefited our coastal regions where are mixed tend to be more premium. So I would say the volumes and net revenue packwood and China and very much according to our.
Expectations. So that's what gives us confidence on vest and momentum that was finished last year translating into momentum and to this year.
Sure first question.
And in terms of margins I couldn't recall exactly what the question was at sorry.
Which is really around and look for.
And get module guidance for for 2021, but as you get to the other side of the pandemic is it feasible to get back to pre pandemic margin Heights.
Yes, again on margins I said I mean, some things are control somewhat as you do not control so as the restrictions tend to ease.
We believe that some of this and fax a short term and nature right. So the restrictions.
The channel shift.
All those things are not structural they're short term and nature.
So the good thing is that our high margins gives us the flexibility to be able to react in a way that doesn't harm our business long trend because again, we have momentum and.
And again, we have to look at margins and absolute dollars at the same time and if we have momentum if vitamins growing for gagne sure confused volume leverage and.
Well I mean, we have to be smart on how to recover that margin. So because of Canada day absolute dollars what day would take to the bank and let's remember again and everything was said and outlook for 2021 in terms of margin pressure is exclusively for 2021.
Great. Thank you.
Our next question comes from the line of <unk> of Credit Suisse.
Send you and make sure you're not on mute.
Hi, Hi can you hear me.
Yes.
Oh, Hey, Hey, Hey, breached Fernando.
And my questions. Please can you just talk a little bit about the pricing outlook, particularly across your emerging markets and the context of the.
Transactional currency headwinds that your face.
How you uhm, using perhaps pricing and some LIBA to kind of manage through that.
Particularly and those most impacted markets, such as Brazil, Mexico, and and Columbia.
Well, what we're doing in terms of pricing first of course will look at the context would look at the macro contest look at consumers will look at the whole environment. So it's very regional decision, but it's similar to Brazil. For example, what we had a very strong net revenue growth and the fourth quarter.
Around 8% what happened there is that a couple of things first restarted pricing.
To recover inflation and the late third quarter.
So that impacted the fourth quarter and with phase that price increase per channel Parisian for back. So that was the first thing. The second one is that we with much more efficient and our promotion activity.
Given much not not not only more data we have about the trade given our platforms, but also given strong demand saw promotion activities were more efficient and finally.
And makes self those big time.
Parameter mulch and for example, west.
Biggest innovation or companies history, that's a core plus brands also our premium brands and well and that all helped.
And the mix of net revenue per microliter.
So again those are the factors that will continue to manage.
Two.
True true to balance to to get to Dallas topline.
February 4th.
Got it and.
Just a quick follow up on bees.
You spoke a lot about the sort of quick adoption and the number of markets and ultimately was the biggest opportunity.
<unk> and and your P&L is it is it driving more premium assortment is it helping you sell more beer is it taken help and market share dynamics and how should be few the and parts of that on your business such as we get even further adoption from here.
Although the thing about these is that not only make the life of a retailer better but.
But also because we have way more data.
Can be more efficient and our relationship is our retailers. So we can offer them, what's more of interest to them given the profile.
We can we can have promotions net are more tailored to the kind of portfolios and assortments and customers and consumers and they serve and there and.
Retail outlets.
And we can have a lot of optimization machines.
Optimization engines and algorithms.
Behind the the fees ways of working because of all the day to have access to so from.
Rice symptoms Asian to shorten optimization to the suggested ordered.
So all those things make our customers more efficient more productive and our relationships better.
Thanks.
Our next question comes from and a lot of Oblivion Nicolai of G. S.
Hi returns and Nando just.
Quick follow up first on on the commodity hideaway, and and set and transactional affect him and 21.
And we obviously know impacting Brazil, and you you mentioned needs. So, let's fax day about perhaps can you tell us which although region you see the most significant coke spectator increase or it across the board and for the effect from Brazil to think about some regions like Mexico or countries like Mexico, Colombia.
Can you tell us what's best and take off your Cogs being link to hop currency and then second question for <unk>.
<unk> and the company you have a commitment to type and that should be dots.
Assuming you would get that mostly organic day of course, but how should we think about disposals going forward.
Should we assess a two and that's the type of data about you've done and we have <unk> status was a one off or can we expect to sell more minor interest takes grateful weather's west.
I see.
Hi, Olevia Fernando here. So on your question on the cost of goods sold it shouldn't Brazil, Max from Columbia, It's nearly 50% of our cost of woods soaps and.
Effects nicotine.
So you would expect of course discounters from the most and effected and and as Britain donation day in fact that we're having 2001 is a function of the curse devaluation 2020, so for you too.
And what countries are mostly affected is just to check which companies has the biggest evaluation and just cables, Brazil. When you compare graduate from Mexico longer so all companies effect, but as Yoko much higher extent on commodity.
That are affecting us is mostly call and and body. So these are the commodity that is gonna have a greater effective 2021.
And your second question about.
South leverage.
And we we the average two around two times remains our commitment and we mentioned that several times and we were prototypes debt repayment that to get to these objectives.
2020 was was and each year.
Since we have our performance material and effected by COVID-19, and.
And that that should be to Rachel and going higher and 2020, 2019, which is not something we would expect.
And a normal year.
So to start off to covenant and training, we had a fixed strongly quick position and they begin your fear and that you that are very very healthy risk profile.
And the year, we undertook a series of collaborative from management that issue that we had even further day restart balance sheets.
And we reduce our drop that we from our critics over the next five years by by nearly $18 billion.
And we also extended the average from athletic by more than two years.
Regarding disposals, we are always review and asset base Street and final court assets and that can be diverse it as part of our normal business operations, and and they're always going to be evaluate and opportunities to drive and long term growth and Nevada, creating for our business and this was the context and reach we entered into a partnership.
We felt follow global management, let up on a crowded a 49, 9% minority take and our U S.
Packaging operations.
I believe.
Six year is that our best portfolio is a very manageable maturity profile and the credits and.
And and football and we are and are very strong liquidity position to the point that today, we have enough cash on hand to corporate automatically throughout 2026.
So any any deleveraging decision and in fact disposal decisions I've always been a and make a wish the context of desk that must be something that things have added to the company.
Towards the casing the U S.
Of the day monarchs, taking the us that cash operating.
Because from what liquidity fighter and are very very comfortable position.
Thank you very much.
Our next question comes from the line up and not Oregon of Morgan Stanley.
Hi, Thank you for taking my questions. The first one is how do you expect to Brazil beer markets and competition to evolve following last night's announcements of a redesign distribution partnerships between Heineken and the Coke system.
And the second question is last year trade payables have moved out puppets. Despite sales coming on their pressure could you. Please give us a bit more color on this and how you would expect payables and working capsule in general to evolve and 2021 and thank you.
Hi from the Arctic the first one channel takes.
Second one well, Brazil has always been a very competitive market west.
Many players and that has always been the case.
Yeah, we heard day announcement yesterday.
In a way it doesn't change the number of route to market players and Brazil is still the same number is just a reshuffle a brand in between two systems. So story to say, we're always very respectful a very competitive move but it's good to see that we have momentum and Brazil and the last year, we gained sure for the full.
Here and fourthquarter that we had the biggest innovation and the market was our barometer multure that are high and brands outperformed the overall market and our core brands stabilized and a big way, so very happy with our performance and Brazil were focus and our business and will remain doing so.
So again, Brazil has always been very competitive so and other.
Hi cannot on the one day.
And <unk> capital. There is there is not much interest not much different than and we always been doing especially not in Asia that is more challenging and and that is multiple activity that's Latin normally west.
And the ownership mindset right after the occasion.
But it has to do.
Multiple drivers country nooks and can have some effect on that day, because I have a higher and because of cancer. So this has from tech, but nothing out of the ordinary that.
Thank you.
Our next question comes from the line of neck Oliver UBS.
Hey, Thank you for the question and and two from me Firstly on the North America margins eight and Q4 of the under some pressure despite the strong and revenue Hectolitre and you fly and Tina phasing of sales and marketing and some supply chain precious and it <unk>.
Simple to break this out and just to help us think about how can I quickly modeling and must be go into into the here.
And and then the second one was just in regards of B, Brazil tax credits and clearly a welcome boost to the piano and by no like going into the sea up you know and that was sitting on some quite bake off balance sheet contingencies, and so given the outcome if that situation that resolved or <unk>.
Actually could that be some liabilities that would still be absorbed and and the income statements and good going forward.
Hi, Nick I'll take the first one channel and we'll take the second one and chosen North America. What happened Q4, four first let me say that the U S.
And amazing and your last year and she.
You look at.
Str's.
Almost flattered minus point too and and industry that was flat sure was with loss, but lowly five bps.
And now our net revenue grew net revenue practitioner grew by two 6% so very healthy and there's a margin again for the whole year 40.
4% EBITDA margin, what happened and the fourth quarter.
Is that we have some cost pressures that are not structural and our.
And we'll go through three of them, but first one you said, it's phasing of sales and marketing what happened is that during the year as the year started very volatile we took some money out of sales and marketing special related to the on trade because that was tripped out.
What is the market recovered, we put that money back into the market towards the end of the year. So that's the phasing were referred to the second one is the cam costs.
As the Covid dislocated consumers to more off right and more cans and there was a short supply of cans and the market and we also have to bring cans from other countries like Mexico into the U S and other countries. So there were more.
Logistics costs involved and moving cans around so that can cost also impacted and at the and the whole over the road transportation costs and the U S was up because all consumers who are using heavily e-commerce and that put Ah.
Cost pressure on trucks and lanes, so, let's say that the Kent costs will continue to be on the pressure for 2021, but if you do it should take that can't costs and the OTR cost you over the rose cause those are not the structural costs guilt.
And at some point to get streamlines. So again those are the reasons behind queue for cost and.
Hi, Nick Fernando here now this this tax credits or only related to one specific extrajudicial decision, which is the exclusion of the value added tax, which ICM asking Brazil from the taxable basis of the social contribution and gross revenue suites seasonal things.
And does and doesn't linked to any other legal disputes are legal matters that are strong volume, Brazil. So it's just a specific case.
It was a Supreme Court decision back.
Back in 2017, and as we were able to.
To to to get some and some some legal legal and illegal we have some whenever we get the approval from the illegal court recognizes recognizing and we've done that and the for profit off west here.
Okay, perfect, that's where it really clear and thank thank you guys.
Tennessee.
Our next question comes from a lot of Preah or a group of Barclays.
Hi, Thank you so much for taking my question to you if I may Uhm first I was hoping that you could provide some context and how we should think about your cash balance and when it can be brought down over the course of the year, just get and how elevated it is uhm. So if you could specifically highlight for us what you're <unk>.
Looking for in terms of the external environment to give you a greater confidence to bring that down and particularly given the expanded Rcs availability and then second uhm I was hoping that you could and shed some light for us and how to think about did give it and going forward you know, particularly in light of where the current Latin.
Oranges, and uhm possible timing to get to an interim elaborate objected that's closer to three time. Thank you.
Hi, pretty thanks for your question.
And the cash balance due this.
There's a free decision, we're going to we're going to be managing almost like a day by day Mark by mouth.
If you if we see how we behaved in the back during the peak of Cohiba and there was a lot of uncertainty, we really step and therefore cash balance that's the mom and dad, we did the issuance in the beginning of last year and and we also received the proceeds from Australia.
Once we start seeing the and the light performance of the views and it's getting bad that we started the price. Some of this cash we started doing bring some some some redemptions.
The cash it yet and was actually has like definitely is actually higher than we wanted to as a function of the transaction the packaging transaction and day Razzing minority stake, but as soon as we received the proceeds we're happy to provide them to read them.
More and more towards we and also that in January and where and reviewed and what $3 million a from a Tories and.
And and that's how it is going to be managing but if we start seeing the business.
And if you start seeing all the uncertainty about that COVID-19 going away 'cause from our business then.
Quite strong but towards restarting the external uncertainty and going away the idea terrible back from all normal cash balance competitive and the ones. We had known the priority years.
So that's the first.
First question on the second question about the dividend.
We made the decision for the zero and court determined that have to be food and and and the best interest of the company to pay a four year dividend of 50 Euro cents.
As I mentioned the business delivering improving results, but there is a lot of uncertainty and because of Covid. So we thought and this was the furthest upload and decision and consistent with our financial discipline and prioritize our deleveraging commitments and.
So.
And what I'd have to say, we are not going to give any guidance on on future dividends goal growth because of the floor and golf. The current situation. So so we have and I haven't liked to have more color to provide any for the for the view on that.
Thank you and I guess, it's one follow up any sense of timing you could give us around the trajectory to get closer to three times that bridge and as you make your way towards that ultimate to Tang Oh. Thank you.
No we're not giving.
Given what I, just said that the day.
And how fluid the current situation is and you're not giving any guidance on that as well.
Thank you.
Thank you for Ya.
Our next question comes from the line of Alicia flight of and thus tech.
Hi, Brito, Hi, Fernando Thanks to questions from me actually best.
Cumulated.
The first one is there anything you can tell us that the impact and the new and sustainability linked Rcs on and your overall finance costs going forward and.
And what type of benefit might we expect to see if you're able to and.
Proved as targets and would you.
Consider expanding or green financing beyond Rcs, perhaps to bonds, alright, and fixed term that in the future.
And the second question is on South Africa, and they banned the sales alcohol, Gary and parts of 2020, and essentially and government and.
Saying it considered alcoholic bard and on the health system and now it's raising excise on alcohol. So my question is how are you engaging within your organization with consumers with the healthcare system, there and the government and South Africa to improve the impact of alcohol on society back to avoid these.
And hopefully from from happening again in the future.
Yes.
Hi, Aleisha I'm going to take the first one and then breakfast and I was gonna take a second question, we were actually quite excited and being able to to do such a lot of.
A sustainable and get a loan.
We at the end of the day, we we as a company sustainability is our business we've been talking about that for a long time and nothing more obvious that do you have and how important it is for US we reflect that that in our financing. So these are the first step.
We eat rats.
Course open at and Hunter thing exploding more sustainability finance, but and lost interest shed on this topic and right now we.
We didn't disclose the full that day as of the financing, but by day or even though and our targets. We have a cost benefit of course, and if we don't believe and there is a cost penalty.
But as I said sustainability as our business. So we are very committed to believe it and understand it it's not going to have to wait for this for the second question.
Yeah. So in terms of your second question and.
And our top priority remains during the whole Covid and it's two is the case the safety enrolled view of our people and the communities and which we operate.
And it would be very close to the government and community South Africa tried to collaborate with the government and meaningful lawful measures to combat the pandemic, such as curfews capacity restrictions and restaurants or taverns limiting trading hours for the off tree, which day would that is.
Could have a role to play, but what some groups and South Africa tried to link that's and mobility was totally restricted and people and stay home and nobody could go anywhere.
And alcohol ban on top of that people tried to link the the fact that exited from roads went down to <unk> as opposed to let go and mobility.
And other places and which lack of mobility was the case, but I'll call was to be sold you saw that things went down because my uncle because of lack of mobility. If you don't have cars and the roads you won't have accidents, so and.
And we believe that the complete bans on alcohol sales.
Significantly damage the South African economy and society at large because you have 1 million and livelihoods at stake throughout the alcohol industry supply chain and value chain.
And do what you do whenever you do this uncle Ben's is that you and strange the illicit alcohol trading with risks to consumers and.
And with devastating consequences from both the health and economic perspective, because the government source from our collective taxes and consumers and Ah consuming safe alcohol beverages. So in terms of exercise excise tax was increase this week and.
And it was hard and inflation.
Almost double inflation and this and direct contradiction with the government's current also exercise exercise policy, which is to increase exercise in line with inflation. So we were quite surprised by that but again, we will continue to work closer to the government to help the South African community North.
Consumers to get to a better place, but with measures, but really are connected to root causes.
And not.
Unlawful measures and we will continue to be part of the solution.
Because we're read that community to to get to a better place because we are part of it. Thank.
Thank you.
Thank you ma'am.
Our next question comes from the line of Undraften Stace South Bank of America.
Yeah, Hi, good morning, Brito good morning, Fernando So two questions. Please the first one is on the on the U S. Now one of the main drivers of your bed a volume performance and the U S is dean and growth and beer adjacency. He we we've talked about and lots about hard sell you maybe talk a bit about touch.
What what's around day, which could be important contributors how long the the bronze now and what are the plans to scale up these brands and then put them on the on the on the tax write sort of along the <unk>. So what's on the on the tax rate is quite high and the context of global with.
M C G and your tax rate has gone up quite a bit and the past 510 years.
And you said the question is do you do you see a path to reduce and the tax rate over time longer term and just you deliberate and I mean, not at the moment, obviously, an old benefiting and the U S from the local protect said because of your neighborhood's ZIP code. This change as your day leverage.
Hi, and drab Richard here from the first one in terms of the U S. We had a very good year and.
And this is the third year there are commercial strategy is being implemented and a very consistent way.
And the growth smart older because of Adjacencies. It's also because of the other four four priorities adjacent as being one of the five so it's about michelob ultra growing ahead of 20% so about celsis growing double what the categories growing it's about the high and gaming.
Sure was it a total segment, it's about mainstream stabilizing and.
And it's about beyond beer.
Like Cutwater Cutwater for example, growing twice to growth force RTG cocktails. So in terms of beyond pier strategy and the U S. We have.
Winning with the Celso space is a prime driver and for that we have new news and ultra organic selsor, but like salsa eliminate and cacti for this year.
2021, and we will also want to continue to disrupt can widen and spirit segments.
And that's that's a key driver.
Innovating and F&B white spaces like Kombucha and.
And capture opportunities and also known all coal segment like gross and Super coffee. So and also we have a drink works and <unk>.
<unk> business and and partnerships cured. So again jump here is one of the drivers of the U S and has a very good year, but there are five commercial drivers that all five contributors to that growth. Thank you somehow.
Hi, Andrea So we're not we're not giving guidance on the on the effective tax rate the for the years to come and see.
So we already said that that it's it's going to be higher easier and it was.
Yeah, and the major the major at the and.
Major seeing any to to look at how it affects the the X rated the companies because you mentioned the U S, which has a plenty of 21% the effective tax rates, but it also need to take into account all of the market's like Brazil, as a 34% tax rates, so different markets and a different tax rates and the counter and mix and how the different accounts is grow over time.
Plays a big role on our on our combining detail so but no guidance for the for the for the next few years.
Okay. Thank you.
And our final question comes from on the line from unseen of Evercore.
Great. Thank you very much two questions also so for Brito.
You know clearly one of the the the lingering effects of of Covid has been acceleration of e-commerce and the use of digital technology and most companies consumer companies that we all follow.
Talk about digital technology.
As a way of engaging with consumers as being more targeted.
More customized.
As well as getting to know what is working and what is not working and and a much more efficient way then and traditional media. So the so the question is can you give us maybe a sense of your balance now between traditional media and digital media and.
In terms of marketing.
Suck and do you agree with that assessment and terms of it being more effective and then finally on on that topic.
Does that give you confidence to spend more because it's going to be more effective or because it's more effective can you you know perhaps budget less so that's that's my question for you Brito and and then for Fernando much more simple question.
And if you could talk a little bit about the increase and Capex and where that's going thank you.
Hi, Robert Thank you for the questions in terms of this year of 2020.
We were one one positive and sewer lining.
And which.
Talk to you or was that our digital platforms that would have been investing for now five years have really the rate of adoption has really increased big time, So three things I want to say Robert to your question.
And we've been developing and will be to the platform colby's that really takes the relationship with our 6 million customers that was service on a weekly basis around the world to a different level.
So today, we have more than $3 billion, and gross and gmg and this platform and more than two two bit and was only deliver and the fourth quarter search and see that continue to grow exponentially. We have close to a million users mostly users across nine markets and this continues to grow and business and.
Allows us to use much more data and personalize and customize the relationship to be more relevant to our customers. So this.
And interest from our business and our sales systems.
The second one is the direct to consumer platforms and one of them for example, and Brazil called said delivery that delivered beers to your home and half an hour cold and supermarket prices at your doorstep.
[noise] came from 2019, when they handled 1.5 million orders to 2024, they handle 27 made and orders and the rating of the App and.
Has been four nine out of five by our consumers. Despite the big skill up that we absorbed between 20.
And finally, the third leg is what you are saying this this whole idea of getting closer towards to bid and consumers that with service on a.
Worldwide and.
And Brazil, we did.
Lives.
And that to wear.
It's very important since consumers, where and locked out and we started talking to you directly to them using our music sports and workout people.
<unk> that could provide content and entertainment consumers at home we.
We did.
350 concerts.
And we had 678 and billions using 12 weeks all that activated by our Eternal agency called draft line. So.
So we're trying to be evermore.
Into the one to one conversation with our consumers and dress line is a big role to play and data is a big role to play yes.
Spending more and more of our media media money and digital programmatic media.
But I don't think the numbers are public but you can be sure that we are spending more and more each year, because it's more efficient because more targeted and because what consumers want they don't want to want to many they don't want.
The traditional media or at least a lot of the consumers don't want the traditional media that you should get shouted that they want something they can talk to and something that's relevant to who they are and data allows you to do that so yes oldest platforms that we've been investing this since and <unk> was founded and 2015 and.
Scaled up and a big way and 2020 and.
Becoming very very meaningful force. Thank you.
And hi, Robert on your question on Capex.
At the end of the day.
You should see where we are coming and and when we were growing you you remember that around and we were discussing and the first half of last year ended up.
Suspending your cast and he some noncommittal capex because there was some uncertainty their mom and dad are we done over to the second half and we saw the business performing well, we wanted to for the momentum and.
And we investing reinvested accordingly, and the guidance for this year is I'll continue repulsiveness on the business day or equivalent to continue to for the momentum and investing behind the girls. So that's the rationale behind the four five to five speed net.
Capex guidance one day here.
Thank you.
Thank you.
And that was our final question.
So so so there are no more questions. So let me say thank you Maria.
And and closing and and extremely challenging year, our team's rose to the occasion, we finished the year with good momentum and are key markets.
We are now even more closely connected to the six mil and plus customers and to be and plus consumers or serve worldwide through our clear commercial strategy.
Asked and class bring portfolio revamped innovation process digital platforms and ongoing operational excellence 2020, reinforce our confidence in the future potential to be a category and our business I'd like to and our call by saying. Thank you. Thank you to everyone and we frontline's from their commitment to keeping a safe and.
And thank you for teams around the World you inspired me every day and I am so proud to be your colleague. Thank you for joining the call today and we hope all of you stay safe and well and we hope to celebrate a strong recovery over a beer soon thank.
Thank you.
Thank you. This does conclude today's earnings conference call and webcast. Please disconnect your lines and have a wonderful day.
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