Q1 2023 Anheuser-Busch Inbev SA Earnings Call

May 4, 2023

Welcome to Anheuser Busch Inbev first quarter 2023 earnings conference call and webcast.

The call today from a B Inbev are Mr. Michel do Caris, Chief Executive Officer, and Mr. Fernando Tennenbaum, Chief Financial Officer.

To access the slides accompanying today's call. Please visit AB Inbev website at Www Dot <unk> dash Inbev dot com and click on the investors tab and the reports and results Center page.

Today's webcast will be available for on demand playback later today.

At this time, all participants have been placed in a listen only mode and the floor will be opened for your questions. Following the presentation.

Fernando Tennenbaum: There are gonna be better quarters, worse quarters, and there will be puts and takes in different regions of the world performing different ways. With regard to this year specifically, we just had Q1. It's too early. We had a good quarter. Of course, there are always puts and takes.

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Michel Doukeris: That's why for the moment, we are maintaining because the main objective of the guidance is to give certainty of the medium-term potential performance of the business. In terms of commodities, the question that you asked, we said about 2023 that we would have some commodity pressures.

Fernando Tennenbaum: That's why for the moment, we are maintaining because the main objective of the guidance is to give certainty of the medium-term potential performance of the business. In terms of commodities, the question that you asked, we said about 2023 that we would have some commodity pressures.

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Some of the information provided during the conference call may contain statements of future expectations and other forward looking statements. These expectations are based on management's current views and assumptions and involve known and unknown risks and uncertainties.

It is possible that AB inbev actual results and financial condition may differ possibly materially from the anticipated results and financial condition indicated in these forward looking statements.

Fernando Tennenbaum: Of course, to a lesser extent than 2022, we have most of our commodities hedged, but there is always a portion of your cost of goods sold that is not hedged. A good example is cost of freight. To some extent, this is moving in our favor. It's somewhat helping. You also have the different geographies component. We said that before that you have some regions like Brazil, where the cost of goods sold should be in a better place. You could actually see the Brazilian operation having gross margin expansion already this quarter, and this is their commodity scenario.

For a discussion of some of the risks and important factors that could affect <unk> future results see risk factors in the Companys latest annual report on form 20-F filed with the Securities and Exchange Commission on the 17th of March 2023.

A b Inbev assumes no obligation to update or revise any forward looking information provided during the conference call and shall not be liable for any action taken in reliance upon such information. It is now my pleasure to turn the floor over to Mr. Michel do terrorists, Sir you may begin.

Fernando Tennenbaum: On the other hand, you have regions like Europe, which is still somewhat under pressure on the commodity front, and it continues to be for this year because energy prices, although they are improving, are still very high compared to previous levels. So a lot of puts and takes. We just had Q1. We continue to be confident on the business, but I think it's too early for us to talk about changing the guidance, the outlook one way or another. The second question I will pass to Michel.

Thank you Jessie and welcome everyone to our first quarter 2023 earnings call.

Great pleasure to be speaking with you all today.

To date.

I will take you through our first quarter operating highlights and provide you with an update on the progress we've made in executing our strategic priorities.

We'd be happy to answer your questions.

Michel Doukeris: Hey, Mitch, good morning. Thanks for the question. I think that when we talk about Colombia, if you allow me just to step back for a second, I think that we need to look at this developing markets and how inflation, cost of goods sold, and consumer purchasing power is playing a different role in each of these countries. The fact that, as I said before, and I keep repeating, we've been balancing our revenue management strategy, aligned with category, consumer purchasing power, and the inflation and cost of goods sold. Colombia is coming from a very good performance for the industry. The last year was a great year for the industry. This year in Q1, we saw volumes declining by low single digits. We have good share. Beer is gaining share of throat.

Let's just start with forward operations are farmers.

Our business momentum continued this quarter and we are very pleased we've had a strong performance to start the year.

We delivered revenue growth of 13, 2% with volume is up by <unk>, 9%.

Revenue per hectoliter, increasing by 12, 5%.

And by price actions.

Michel Doukeris: The fact that, as I said before, and I keep repeating, we've been balancing our revenue management strategy, aligned with category, consumer purchasing power, and the inflation and cost of goods sold. Colombia is coming from a very good performance for the industry. The last year was a great year for the industry. This year in Q1, we saw volumes declining by low single digits. We have good share. Beer is gaining share of throat.

As our markets.

Our revenue management initiatives and ongoing premium innovation with.

We grew EBITDA by 15, 6%, we saw margin expansion of 13 basis points. Despite continued commodity cost headwinds and why are you increasing sales and marketing investments in our brands.

Underlying EPS was $65 eight.

Eight seven increase versus last year.

Our focus on disciplined resource allocation and everyday efficiency continues to enable us to invest for the long term, while delivering consistent profitable growth.

Michel Doukeris: What we saw in the industry overall was an impact from a softer macroeconomic. We need to remember that Colombia imports a lot of goods, and you have two impacts there. One is the inflation itself, the other one is effects. The country is moving, so you see that salary is already moving up as well, and the demand for our brands remain strong. We grew well gaining share of total alcohol. Our brands, core brands performing well, premium brands performing well as well. Under this macro background, we need to keep watching how the industry will behave while we continue to invest in our brands, and they have good underlying demand. The business is great.

We delivered broad based growth this quarter with both top and bottom line increases in all five of our regions.

Revenue, increasing 80% of our markets with volume growth and over 60%.

Our diverse geographic footprint provides a unique combination of growth and reliable cash flow generation positioning us well to deliver superior long term value creation.

Michel Doukeris: We grew well gaining share of total alcohol. Our brands, core brands performing well, premium brands performing well as well. Under this macro background, we need to keep watching how the industry will behave while we continue to invest in our brands, and they have good underlying demand. The business is great.

Now I'll take a few minutes to walk you through the operational highlights for the quarter.

Our key regions, starting with North America.

In the U S. The beer industry remains resilient with industry volume trends improving sequentially in U S dollar sales up 3%.

Michel Doukeris: The macro environment was a little bit soft, but we continue to watch this across the globe very carefully as we continue to push forward on our both category strategy but also revenue management strategy. Thank you for the question.

Our business delivered another quarter of topline growth and a stable EBITDA, despite the elevated cost environment.

Our fourth quarter via portfolio continued to gain share of segment growing volumes by mid single digits.

Fernando Tennenbaum: Thank you.

Mitch Collett: Thank you.

Operator: Thank you. Our next question is coming from Trevor Stirling with Bernstein. Please proceed with your question.

Since we are talking about the U S. Let me share some thoughts on the Bud light situation and put it in the context of our global company.

Trevor Stirling: Hi, Michel. Just one question from me, and following up. Thank you very much for your perspectives on the Bud Light feeding frenzy. We're looking, I suppose, trying to judge things based on the scanner data, which is one channel, and several weeks in advance. I know you have more closer to real-time data across many channels. Is there any sign that the pressure is starting to ease or it's still way too early to say?

Let me start by clarifying a few facts.

This was the result of one camp.

It was not made for production or sales to general public.

It was one post not a formal campaign on advertisements.

Bud Light campaign is vision to drink easy to enjoy.

Michel Doukeris: Hey, Trevor. Morning. I think that's still too early for us to understand the duration and the total impact. We look at the same public data that you look at and we see the data. There's a lot of information on a weekly basis, but we also see day after day. We can see on the days that there is some stabilization in this Bud Light volume in the first 3 weeks. As I said, they would account for, like, 1% of our global volume in this period. Because there is still a lot of confusion there and misinformation, as I was telling Robert. We need to continue to clarify this information as we move forward.

We should address the situation through the last of three areas that are very important.

Our people our consumers.

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Let's just start with four people.

This situation has impacted our people and especially our frontline workers.

The delivery drivers.

Sales representatives, our wholesalers by the owners and servers.

These people at the fabric of our business.

They are our neighbors.

Members in France.

They are adding the every community in America.

We've been doing everything we can to support our teams ensured that safe, while continuing to brew message and together the far wholesalers delivered great value to the market.

Michel Doukeris: We need to continue to invest as we have done last week, and together with our wholesalers, continue to drive both the business forward, the focus on beer, which is what we do best, and make sure that the right information is clarified to everybody. Because when we do beer, our brands perform well.

We are providing direct financial support to the frontline teams that work for us and our wholesalers.

As to Bud light, we have significantly increased our investments behind the brand in the U S, including tripling our media spend over this summer.

Now, let's talk about our consumers.

Trevor Stirling: Thank you, Michel.

We continue to be committed to the programs and partnerships that we have for just offered decades, we followed our consumers and we forget mutations that represent a wide range of communities, where we operate.

Michel Doukeris: Thank you.

Operator: Thank you. Our next question is coming from the line of Gen Cross with BNP. Please proceed with your question.

Gen Cross: Can you hear me?

James Cross: Can you hear me?

Michel Doukeris: Yes.

We work every day to delight, our consumers and bring people together.

Gen Cross: Hello? Hello.

James Cross: Hello? Hello.

Michel Doukeris: Hello. Yes. Yes. We can hear you.

Gen Cross: Hi. Hi. Great. Fantastic. Two questions, the first of which, would the 4% to 8% like-for-like EBITDA guidance still hold if Argentina was to be excluded? That's the first one. The second one is, you know, you've talked a lot about Bud Light, but has there been any sort of spillover impact beyond Bud Light? And also, what are you doing to ensure that the

James Cross: Hi. Hi. Great. Fantastic. Two questions, the first of which, would the 4% to 8% like-for-like EBITDA guidance still hold if Argentina was to be excluded? That's the first one. The second one is, you know, you've talked a lot about Bud Light, but has there been any sort of spillover impact beyond Bud Light? And also, what are you doing to ensure that the

When we do this well our brands perform.

Finally, let's talk a bit.

Everything we do should be both beer and should promote beer.

It is an essential part of life meaningful moments, whether any sports music our celebrations.

These are moments that brings people together.

And this is why I last year.

Gen Cross: The marketers don't sort of enter a state of paralysis and, you know, become very fearful of sort of embracing any creativity? Thank you.

James Cross: The marketers don't sort of enter a state of paralysis and, you know, become very fearful of sort of embracing any creativity? Thank you.

While we will always be at the table when important topics are debated the beer itself should not be the focus of the debate.

Fernando Tennenbaum: Hi, Jeff. Fernando Tennenbaum here. Let me take the first one. I'll go back to the reason why we provided an outlook, and we did that, the medium-term outlook at the end of 2021. What is the potential for our business over the medium term now that we move from an inorganic to an organic strategy? That includes our whole portfolio. Of course, there is one very important KPI, but there are other KPIs that we should be looking at. From Q1, for example, we ended up growing more than our outlook. We ended up growing 13.6%, but this is the organic growth. If you look from an EPS standpoint, we grew more on a nominal basis, we grew more than $270 million. It was a very strong growth.

Bud light is about being easy to drink immediately enjoined.

Thats, what consumers want and Thats, what we are focused on delivering.

We stand behind Bud light and we'll continue to invest in the brand to drive it forward.

As CEO I am accountable for our results this company and our shareholders and stakeholders and my team.

Bud light is very important to our U S business.

And no never minimize the situation however, seen the context of our global company provides perspective.

Fernando Tennenbaum: We ended up growing 13.6%, but this is the organic growth. If you look from an EPS standpoint, we grew more on a nominal basis, we grew more than $270 million. It was a very strong growth.

Over the years, our global footprint has enabled us to successfully navigate different types of challenges.

Fernando Tennenbaum: If you look from an EPS standpoint, we grew like 8.5%. At the end of the day, this is our full business, and we need to make sure that we manage all the different variables, all the different KPIs. The goal at the end of the day is to create value, and that's what we are aiming for. The guidance, the outlook is for our full business. The second question, I'll pass to Michel.

So just a temporary ban on beer sales in certain countries in the months long shutdown of bars and restaurants across the globe.

With respect to the current situation and the impact of Bud light sales. It is too early to have a full view.

The Bud light volume decline in the U S. Over the first three weeks of April as publicly reported would represent around 1% of our.

Michel Doukeris: Yes, Jeff, good morning. Thanks for the question. I think that, similarly to what we just discussed, on the Bud Light volume, the publicly available data shows some spillover effect across the other brands, while the majority of the impact is still on Bud Light. This is happening, I think, in the same direction, given the information that's out there, the confusion and the noise, and of course, more localized on Bud Light, and we continue to drive our programs forward for all brands. I think that one of the key points that I was highlighting before is that we continue to be committed to the programs, partnerships, investments that we have in place. Our key programs and campaigns for the brands, they remain in place. One key thing in the US was quickly adjust and streamline our structure.

Our overall global volumes for the period.

With this perspective.

In the context of our global business.

We believe we have the experience the resources.

The partners to manage this.

And our full year EBITDA growth outlook is unchanged.

In summary, we are focused on our people our consumers Nbn.

We want to reiterate our support for our wholesaler partners and everyone, who brings a great ideas to the market.

Michel Doukeris: I think that one of the key points that I was highlighting before is that we continue to be committed to the programs, partnerships, investments that we have in place. Our key programs and campaigns for the brands, they remain in place. One key thing in the US was quickly adjust and streamline our structure.

I can tell you that we have the agility resources and people to support the U S team and move forward.

We'll continue to learn with the moment and came out stronger.

And we work tirelessly to do what we do best bringing people together over a beer and creating a future of more chairs.

Michel Doukeris: In this situation and given the current environment, especially for the social media landscape, that we have senior marketeers running the programs. We have a strong plan for the year. The brands are performing very well in Q1. The programs we know they impact correct consumers, and they move the brands in the right direction. I think that as we do what beer needs to do, focus on sports, focus on music, focus on connecting with our consumers, our brands perform well, this we know, right? We'll continue to invest. We are heading up investments now during the summer across all brands as original part of our plans. We are heading up the investments on Bud Light as we reallocate global resources and invest more on Bud Light.

Now moving onto our largest region middle Americas, which continues to deliver strong results in Mexico. We continued to outperform the industry and grew top line and bottom line by double digits.

Our volume growth was broad base.

Led by our both quite a beer brands, which grew by low teens.

Our digital direct to consumer platform, but that is now operating in over 50 cities and fulfilling on average over 300000 largest per months, enabling us to build closer connections with our consumers.

Michel Doukeris: We are heading up investments now during the summer across all brands as original part of our plans. We are heading up the investments on Bud Light as we reallocate global resources and invest more on Bud Light.

In Colombia, our business delivered topline growth with our <unk> portfolio continued to gain share of total alcohol, despite inflationary pressures impacting consumer demand.

EBITDA declined low single digits, driven by anticipated cost pressures.

Michel Doukeris: I think that we feel good about the plans that we have moving forward. While it's still too early to understand, again, all the numbers and the duration of this impact, we need to keep moving the business forward. As CEO, I think that my role is to really get the learnings, mobilize resources, support the team, and work together with our partners as we move forward.

Our leading mainstream portfolio drove our performance delivering mid single digit revenue growth.

In South America, our business in Brazil delivered double digit top and bottom line growth with 235 basis points of margin expansion.

Our beer volumes grew by 9% with stable market share despite lapping a strong comparable our premium and Super premium brands led our growth delivering a volume increase in the mid thirties.

Gen Cross: Thank you.

James Cross: Thank you.

Operator: Thank you. Our next question is coming from Laurence Whyatt with Barclays. Please proceed with your question.

Laurence Whyatt: Hi, Michel, Fernando. Thanks very much for the questions. Two for me, please. Firstly, on margins, they've come a lot better this quarter than perhaps the Street was expecting. I seem to remember, previously you said that Q1 was probably gonna be the toughest quarter for COGS. Do you see the COGS environment getting a little bit easier from here? How would you split the impact from COGS from both commodities and transactional FX? Then the second question on China. Could you give us any more color on the exit rate or a sort of March number? I think you previously mentioned that Bud APAC was up around 20% in February. Can we assume that March was significantly stronger than that? Thank you.

Now, let's talk about EMEA.

In Europe , we grew top line by double digits with flat volumes, despite a soft industry.

EBITDA grew by high single digits.

We continue to bring a nicer portfolio, we fall our global brands in Super premium portfolio, delivering low teens revenue growth led by Budweiser and Corona.

Laurence Whyatt: How would you split the impact from COGS from both commodities and transactional FX? Then the second question on China. Could you give us any more color on the exit rate or a sort of March number? I think you previously mentioned that Bud APAC was up around 20% in February. Can we assume that March was significantly stronger than that? Thank you.

In South Africa, we delivered record high volumes for the first quarter and grew revenue by high single digits.

EBITDA declined by low single digits impacted by anticipated commodity cost headwinds.

Fernando Tennenbaum: Hi, Laurence. Fernando here. Let me take the first one on margins. Definitely we talked a lot about COGS, and when we talk about COGS, it's two things. COGS probably we still have some pressures this year. Probably the pressure is a little bit higher on the H1, a little bit smaller on the H2. Of course, there are some portions that you cannot hedge, and I mentioned a while ago, freights, and this is something that came in our favor. Every market is different. If you say about transactional effects, it's better in Brazil than it was the year before, and you are seeing that reflect into the Brazilian beer margins already. The gross profit already being positive, increasing year-on-year.

Our performance was led by Carling Black label, the number one beer brand in the country.

Our premium Super premium and build via portfolios all delivered double digit increases in revenue.

And finally APAC.

Fernando Tennenbaum: Of course, there are some portions that you cannot hedge, and I mentioned a while ago, freights, and this is something that came in our favor. Every market is different. If you say about transactional effects, it's better in Brazil than it was the year before, and you are seeing that reflect into the Brazilian beer margins already. The gross profit already being positive, increasing year-on-year.

In China, our business delivered double digit top and bottom line growth as channel traffic continued to normalize and consumer demand for our portfolio accelerates.

We delivered volume growth across all segments of our portfolio led by our premium and Super premium brands, which grew by approximately 10%.

Fernando Tennenbaum: It's a little bit more of a pressure when you think about Europe. Every market different. You have to bear in mind that EBITDA margin is not only about cost of goods sold. It's the main driver of our last year's cost of goods sold, but you also have overhead, and overhead was an important component. Of course, overhead, you have seasonality, so it's gonna be slightly different quarter on quarter. We're still maintaining our outlook, where revenues are growing ahead of costs and continue to manage any opportunity to improve, any opportunity to better, we continue to leverage on that. Probably a number that you should continue to look is how commodity effects evolve. For 2023 is more or less set. A few open items like freight, but more or less set.

Now I would like to share with you a few sustainability highlights.

We continue towards in collaboration with our suppliers to drive decarbonization across our supply chain.

In March of this year, we were recognized by CDP as being a top supplier engagement leader in 2022.

Fernando Tennenbaum: We're still maintaining our outlook, where revenues are growing ahead of costs and continue to manage any opportunity to improve, any opportunity to better, we continue to leverage on that. Probably a number that you should continue to look is how commodity effects evolve. For 2023 is more or less set. A few open items like freight, but more or less set.

In secure packaging our team XOMA awards for our innovations using upcycled bodily straw in majority of recycled marine and waste for Corona expects and credits.

Now, let's move on to our strategic pillars.

Let's start with pillar one of our strategy lead and grow the category.

Fernando Tennenbaum: For 2024, at least, too early to say, but we are not seeing any major swings in commodity costs like we've seen the last couple of years. If that's the case, that should be positive news also going forward. It's too early to have a final view on that.

We continue to execute on our five levers to drive category expansion and delivered strong quarter of consistent and profitable topline growth.

We are leading and growing the category by offering superior court propositions, developing new consumption occasions in expanding our premium and beyond beer portfolios.

Michel Doukeris: Yes. China, I think that the way that we see Q1 is like a transition quarter. You remember all the restrictions being lifted at the end of last year. There was an earlier Chinese New Year, so January was a little bit dislocated, and therefore we see continued recovery that accelerated throughout the quarter. If you look at some of the lead indicators, let me share one. For example, the on-trade, nightlife, Chinese restaurant reopening. Beginning of the year, January, they were around like 75%. As you look at the same indicator in March, we were pretty much like close to 100% of the spots operating, with normalized operating environment in store traffic, and that happened from middle February towards March. We, of course, put our plans in place.

Our global brands continue to scale and drive premium innovation across our markets. The combined net revenues of Corona, Stella Artois and Budweiser grew by 15, 4% outside of the Brands' home markets led by Budweiser, which grew by 17, 8%.

Now, let's turn to our second strategic pillar digitize and monetize our ecosystem.

<unk> continued to accelerate usage and rich gas.

Michel Doukeris: Beginning of the year, January, they were around like 75%. As you look at the same indicator in March, we were pretty much like close to 100% of the spots operating, with normalized operating environment in store traffic, and that happened from middle February towards March. We, of course, put our plans in place.

Actually eight 2 billion U S dollars in gross merchandising value this quarter, a 32% increase year over year in reaching $3 1 million monthly active users.

Customer satisfaction.

To improve with our weighted average net promoter score improving to positive 6% to nine.

Up 11 points since last year.

In 15 of the 20 markets, where business light our customers and also able to purchase third party products through <unk> marketplace.

Michel Doukeris: We are getting our fair share in premium and super premium. As the channels reopen, the long-term trends of premiumization, they continue to impact the industry and our business in China, which benefits from that. We have strong innovation, and we see that the industry is recovering. The premium opportunity continues to be huge in China, and we have disproportionate or asymmetric market share in this segment. As the channel reopens, this is a tailwind for the business. The prospects for the long term do not change. We think that in the short term there is this good opportunity and the industry so far is performing well.

Adoption is increasing with 59% of these customers now also be as marketplace bias.

In the first quarter. This marketplace generated approximately 295 million U S dollars and GMC, representing $1 2 billion U S dollars on an annualized basis.

Michel Doukeris: The premium opportunity continues to be huge in China, and we have disproportionate or asymmetric market share in this segment. As the channel reopens, this is a tailwind for the business. The prospects for the long term do not change. We think that in the short term there is this good opportunity and the industry so far is performing well.

Now, let's talk about how we are strengthening our direct relationship with our consumers our digital D to C products Ze delivery tab App in perfect draft are now available in 20 markets and generated over 16 million artists.

Edward Mundy: Understood. Thank you very much.

Laurence Whyatt: Understood. Thank you very much.

And $100 million in revenues this quarter.

Michel Doukeris: Thank you.

Operator: Thank you. The next question is coming from the line of Edward Mundy with Jefferies. Please proceed with your question.

With that I would like to hand, it over to Fernando to discuss the third pillar of our strategy optimize our business for now over to you.

Edward Mundy: Morning, guys. Thanks for taking the question. Sorry to come back to Bud Light, but I just want to pick up on some of your opening comments, Michel, around having the experience, the resource, and the partners to manage through. If we take experience, could you talk about some of the prior experience ABI has of brand turnarounds of this nature? Stella Artois for many decades in the UK had a pretty bad name, and those previous negative associations have been eliminated. What are the two or three things you've got to get right as you think about, you know, taking things forward from here? And then on resource, I think you mentioned you're gonna mobilize global resource to support the US team. I think Bud Light's about a $5 billion revenue business at supply level.

Thank you Michele good morning.

Afternoon, everyone.

We aim to maximize value by focusing on three areas.

Optimize resource allocation.

<unk> risk management and efficient capital structure.

Edward Mundy: What are the two or three things you've got to get right as you think about, you know, taking things forward from here? And then on resource, I think you mentioned you're gonna mobilize global resource to support the US team. I think Bud Light's about a $5 billion revenue business at supply level.

With respect to capital location.

We are focused on maximizing long term value creation by dynamically balancing our priorities.

We continue to invest in organic growth to support focused strategy to lead and grow the category and digitized and monetize our ecosystem.

Edward Mundy: You probably spend 10% at A&P, maybe a fraction of that, maybe half that is media. Call it $250 million. If you're gonna triple that's about $500 million or worth about 2% to group EBITDA. Are those numbers directionally okay, or have I missed something there?

The excess cash generated by our business is dynamic allocated to our three capital allocation priorities Delever.

Deleveraging.

Selective M&A and return of capital to shareholders.

Our debt maturity profile remains well distributed with no bond maturities in 2023, and no relevant medium term refinancing needs.

Michel Doukeris: Hey, Jeff. Oh, Ed. Sorry. Hey, Ed. Good morning. I think I got all your topics here, and I'll try to cover one by one. The first point around experience and how we deal with different situations globally, and of course, starting from the point that each and every situation is unique in itself. Given the current environment, especially social media landscape and how brands have been pulled into these situations, that is a big learning from this situation that can help the company also on the other way around globally. We have faced, as you know, just to think about COVID, from alcohol ban in some countries, and then we had to adapt to this situation, keep a very agile mindset, rethink the way that we go to market and how we organize our operations.

If you look at our debt maturity profile, we have 3 billion U S dollars worth of bonds maturing through 2025.

Our bond portfolio has an average pre tax coupon of around 4%.

On a weighted average maturity of 14 and a half years.

Michel Doukeris: Given the current environment, especially social media landscape and how brands have been pulled into these situations, that is a big learning from this situation that can help the company also on the other way around globally. We have faced, as you know, just to think about COVID, from alcohol ban in some countries, and then we had to adapt to this situation, keep a very agile mindset, rethink the way that we go to market and how we organize our operations.

In addition.

Our debt portfolio does not have any financial covenants and it is comprised of a variety of currencies diversifying our FX risk.

95% of our bonds have a fixed rates insulated from interest rate volatility and inflation.

Yeah.

As a result of our deleveraging progress strong free cash flow generation and robust risk management practices, both Moody's and S&P recently upgraded our credit rating to a three and a minus respectively.

And now.

Let me take you through the drivers of our underlying EPS this quarter.

Michel Doukeris: To any other geographies in the very big footprint that we have, you remember, for example, the UK for a time was an issue. We had issues before in Korea. We had issues in Brazil and the way that our brands got attacked for some time there. We redesigned the portfolio, rethought the way that we communicate our brands, and we always stay true to what we do best, which is brew high quality products, make sure that we keep connected with our partners, investing in the long term, and keep reading and learning from consumers and see how we adjust our path forward. We know that easy to drink is easy to enjoy. It's a powerful message for Bud Light. We know that the Bud Light lane is around quality beer that's easy to drink, is to enjoy, is about sports.

We grew underlying EPS by eight 7% versus last year, delivering 65 cents per ship.

This increase was primarily driven by nominal EBITDA growth, which accounted for a <unk> 13 per.

Sure inquiries.

As we continue to deleverage our net interest expense has reduced contributing a <unk> <unk> improvement.

Higher income tax reduced EPS by <unk>, <unk> driven by country mix.

With that I would like to hand, it back to Michele for some final comments before we start our Q&A session Michelle.

Michel Doukeris: We know that easy to drink is easy to enjoy. It's a powerful message for Bud Light. We know that the Bud Light lane is around quality beer that's easy to drink, is to enjoy, is about sports.

Michelle.

Thanks Fernando.

Before opening for Q&A I would like to take a moment to recap my key takeaways for the quarter.

We continue to make progress in executing across each of our three strategic pillars.

Michel Doukeris: That's why we came back strong with the NFL Draft. It's about music and it's about everyday enjoyment. When we do that, our brand performs very well. As we mobilize resources, so there is people resources, time, there is knowledge resources, there is partners that we have, and there is money. Our plan for the summer in the US was already a very strong plan, and tripling the media idea is versus what we had last year. Traditionally, Bud Light invests very heavily in the shoulder season because of football, NFL. This year, we built a plan to be more connected with the summer season because this is very important for mainstream brands, therefore very important for Bud Light. There was already a heavy investment there.

Our business momentum continued this quarter.

Driven by the strength of our leading brand portfolio, we grew volumes in 60% of our markets.

We made important strategic choices and pricing and other revenue management initiatives, which drove continued strong net revenue per hectoliter growth of 12, 4%.

We progressed, our digital transformation generating $8 2 billion U S dollars in Jamie <unk> with 59% of this customers now also be as marketplace buyers.

Michel Doukeris: Traditionally, Bud Light invests very heavily in the shoulder season because of football, NFL. This year, we built a plan to be more connected with the summer season because this is very important for mainstream brands, therefore very important for Bud Light. There was already a heavy investment there.

EBITDA grew organically by 13, 6% and our margins.

Margins expanded even in the context of continued elevated cost environment.

And as a result of our deleveraging progress and strong free cash flow generation, our credit rating was upgraded one notch by both Moody's and S&P.

Michel Doukeris: Now we are using resources that we have, that we are using for other brands and other priorities to further increase the investments that we have in the US. Because we have many lines in the P&L, right? Not only sales and marketing, we are mobilizing lines across the P&L as well, and media does not make 100% of the sales and marketing investments of any of our brands anywhere globally. The match is not really like as you triple media, you triple the entire marketing budget. There are other lines within the sales and marketing package as there are other lines on the P&L that we can work as we always do in a very agile way. Because of that, we reiterated our EBITDA growth.

We are investing to drive long term value creation and our results. This quarter are another proof point of the tech business of our strategy.

With that.

I will hand, it back to Jeff for Q&A.

Thank you the floor is now open for questions and the interest of time, we will limit participants to one question and one follow up question.

Michel Doukeris: The match is not really like as you triple media, you triple the entire marketing budget. There are other lines within the sales and marketing package as there are other lines on the P&L that we can work as we always do in a very agile way. Because of that, we reiterated our EBITDA growth.

Again, if you have a question or comment please press star one on your Touchtone phone.

If at any point. Your question has been answered you may remove yourself from the queue by pressing star too we do ask that while you pose your question you pick up your handset to provide optimal sound quality.

Our first question is coming from the line of Priya <unk> Gupta with Barclays. Please proceed with your question.

Michel Doukeris: As we did during COVID, we are scrambling, moving very fast, getting this agile mindset to work as we support and increase the investments in leading the US. We are working the other muscles that we have from the global company, the size and the scale that we have, while the EBITDA outlook isn't changing.

Good morning, and thank you so much for taking the question firstly congratulations on the upgrades from both Moody's and S&P.

Fernando I'd love to start with you now that you've achieved those low single a ratings how should we think about your focus on getting two three times net leverage in the near term target.

And is there any potential desire to move towards mid single a ratings over time given that that could lift.

Edward Mundy: Thank you. I could just perhaps follow up. I appreciate you don't run your business on a 4 to 8. That's really a framework for us essentially, and some years ahead, some years below. I guess you know, you're faced with a choice of either you know, looking to protect your bottom line in the US or perhaps you could use a windfall from the rest of the group, you know, from a COGS rollover or trying to bounce back to double down in the US. Is the message that, look, you're running a business for long term, and you're gonna really double down on the US, and you can you know, allocate global resources to really go behind Bud Light?

<unk> tier one commercial paper access thank you.

Hello, Good morning, Thanks for the question.

The best way to frame to frame. It is to go back to our resource allocation priorities.

The objective at the end of the day is to maximize value creation.

Edward Mundy: Is the message that, look, you're running a business for long term, and you're gonna really double down on the US, and you can you know, allocate global resources to really go behind Bud Light?

We always invest behind that of any growth portfolio business.

The remaining cash we balance deleveraging.

Shareholder payouts and selective M&A.

Do you think about deleveraging.

Michel Doukeris: All markets are important for us. We do not minimize the situation in the US. Fully committed to get our plans, our brands, and our portfolio to rebalance in the US, and we are investing to make it happen. This all falls into our outlook. We always have an issue to deal with every quarter, every year, in every geography. It's very important that at global level, we keep this agile mindset to use the resources. Definitely, urgency creates opportunities as well. As we invest, focus, and mobilize in the US, we think that this situation is manageable globally. We never minimize any issue for our brands or consumers, but we are confident that we have the team and the resources to continue to invest, to move forward in the US, and to support our team there to get out of this stronger.

We said we would.

Set of two times debt that we maximize the value of our venture guidance with 90% of these benefits will be capturing around three times. So our our goal is to do the right thing for the business and by doing the right things for the business the rating will be of consequence.

In a nutshell.

For the time, we still see a meaningful amount of value on deleveraging, we increased the dividend less quite a bit but in the grand scheme of things most of the cash is it still going towards deleveraging, but as we start moving closer to two times the passenger.

Michel Doukeris: Definitely, urgency creates opportunities as well. As we invest, focus, and mobilize in the US, we think that this situation is manageable globally. We never minimize any issue for our brands or consumers, but we are confident that we have the team and the resources to continue to invest, to move forward in the US, and to support our team there to get out of this stronger.

Passenger tags moving closer to two times.

More and more.

We could have other priorities, but always with the mindset of getting the right thing for the business and rates will be a consequence.

Great. Thank you and just as a follow up.

You highlighted that.

You have only about 3 billion of maturities coming due through 'twenty five.

So as you think about further debt reduction would you prioritize looking at those or maximizing deleveraging by perhaps looking further out the curve given.

Edward Mundy: Thanks, Michel.

Michel Doukeris: Thank you.

Some of those bonds are still trading below par. Thank you.

Operator: Thank you. Our next question is coming from the line of Sanjeet Aujla with Credit Suisse. Please proceed with your question.

It changes a lot with Daniel and the interest rate environment and we whenever we are in a position to start resuming more debt. We always look at it different tradeoffs if you will.

Sanjeet Aujla: Hey, Michel Doukeris and Fernando Tennenbaum. Two from me, please. Firstly, appreciate your earlier comments on Colombia, but you know, if I look at some of your major emerging markets more broadly, volume seems to have deteriorated as pricing has picked up. You know, love to get your thoughts on any inflections you're seeing in consumer behavior, particularly with regard to frequency of consumption, pack formats, et cetera. My follow-up is really around Brazil. One of your competitors there recently filed for bankruptcy. I think you called out stable market share in the quarter, but love to get your perspective on how you see the competitive landscape evolving in Brazil in recent weeks and months. Thank you.

Core correctly in early 2000 to any given order surfaces, we focus a lot on the on the short term and because interest rates were low it made more sense for it to reduce short term debt as interest rates rising it made more sense for us remaining long term debt because it was much more mature <unk>.

Sanjeet Aujla: My follow-up is really around Brazil. One of your competitors there recently filed for bankruptcy. I think you called out stable market share in the quarter, but love to get your perspective on how you see the competitive landscape evolving in Brazil in recent weeks and months. Thank you.

<unk>.

And we are in a position given all the risk.

Management initiatives that it means it doesn't do any then we don't have any near term maturities. So we can really make sure that we focus on whatever is maximizing value because the risk profile with in a very good place.

Great. Thank you so much.

Michel Doukeris: Sanjeet, good morning. Thanks for the question. Two pieces there. I'll try to address both to you. The first one, I think that there is this inflationary scenario which is common across the globe, and we see that, as I've been saying, different clusters, three type of clusters, where we see the industry and the whole, consumer purchase power and consumer goods moving is slightly different, and they all dealing with the same issue. The key point there is we see the beer category continues to be resilient, performing well, and gaining share of throat. I just gave the example of Colombia.

Thank you Pierre.

Thank you. Our next question will be coming from the line of Rob <unk> with Evercore ISI. Please proceed with your question.

Great. Thank you very much so Michelle as you clarified in your comments.

In terms of Bud light. This is all about one can.

One social media post one influencer.

And yet somehow it just becomes.

Something a whole lot bigger than that there continues to be a lot of misinformation out there a lot of confusion.

Can you offer any thoughts reflections on on how this happened what you've learned and what now that we're here what are you going to do about it. Thank you.

Michel Doukeris: Of course, when we talk about resilience, doesn't mean growth across the board in all the markets at the same time, especially because when inflation moves fast, you have this timing in which salaries, especially minimum salaries for these developing countries, they get to be approved. Think about Brazil that just announced that the salary increase is now in May, right? January to April, consumers were dealing with high inflation, and they had their salaries from last year. Industry performed well, but now you have an extra injection of cash and purchase power coming to consumers. When inflation goes up, there is some time for prices to catch up, and there is some time for salaries to catch up. I think that we need to look throughout the lenses of the full year before drawing too many conclusions.

Okay.

Morning, Hubbard and thanks for the question.

So I think that.

To start with we need to to understand the current environment.

And especially social media landscape.

And how consumer brands, especially big brands with significant reach can be put into a discussion like this one.

We know that ours Bud light is certainly not the first brand.

That was pulled in a situation like that.

And as I said, while beer will always be at the table win important topics debated the bid itself.

Michel Doukeris: Industry performed well, but now you have an extra injection of cash and purchase power coming to consumers. When inflation goes up, there is some time for prices to catch up, and there is some time for salaries to catch up. I think that we need to look throughout the lenses of the full year before drawing too many conclusions.

Should not be the focus of the debate and to me. This is the key learning.

So moving forward I agree with you one challenge is what you called the misinformation and confusion that still exists.

We will need to continue to clarify the facts.

Michel Doukeris: Among the markets, they have different realities. To use the same example, while you see currency devaluation in Colombia, and Colombia has a high percentage of goods that they import. Brazil is on the other side of that because currencies there are appreciating, and therefore, the import goods will have, like, a different impact on the basket for inflation as well as for consumer purchasing power. I think that we keep an eye on that, an eye on our revenue management. The industry is performing well in most of the countries, especially when we look at in the context of the other beverages. We know that premiumization will be in place, that beer is more resilient, and we are happy so far with our strategy in terms of revenue management, and this is coming.

That this was one Kim.

One to answer.

<unk> cost and not a campaign.

Did this message for some time.

But as we do that we are more focused on leveraging our global experience and mobilizing our global resources to support the U S team as we move forward.

We have adjusted and streamline the dollar marketing structure. So the most senior market peers are more closely connected to every aspect of our brands.

Michel Doukeris: The industry is performing well in most of the countries, especially when we look at in the context of the other beverages. We know that premiumization will be in place, that beer is more resilient, and we are happy so far with our strategy in terms of revenue management, and this is coming.

In addition, we are supporting our frontline teams.

We are investing behind Bud light tripling, our meetings estimates for the summer.

And we are investing more together with wholesalers in our local markets.

Just getting like last week Bud light was on the stage at the NFL draft.

Michel Doukeris: On the other point, on Brazil, what I say is that, I see three things in Brazil that are very interesting and very important. I see the industry structure in Brazil, healthy one, so players focus on premiumization. We see an environment in terms of inflation price that's playing well for the industry. We see that Brazil was hit earlier than other markets on the FX effects, and now you're getting to the other side of this equation, where cost of goods sold is becoming more normalized, and FX is playing more in our direction. You see the company, our portfolio today in Brazil is as healthy as ever before. Spaten is performing very well. Original, which is a premium brand of ours, performing very well. Our core brands performing very well.

We released a new to the commercial that continues our campaign. The current campaign easy to drink is to enjoy.

We had strong presence in the stagecoach country music.

First of all in California, and there is much more to come.

And as I said, it's too early to have a full view on the impact, but I know that we have the people the partners to learn from that to continue to move forward and to come out stronger.

Michel Doukeris: We see that Brazil was hit earlier than other markets on the FX effects, and now you're getting to the other side of this equation, where cost of goods sold is becoming more normalized, and FX is playing more in our direction. You see the company, our portfolio today in Brazil is as healthy as ever before. Spaten is performing very well. Original, which is a premium brand of ours, performing very well. Our core brands performing very well.

Very clear thank you.

Thank you. Our next question is coming from the line of Mitch <unk> with Deutsche Bank. Please proceed with your question.

Thank you.

Two questions. Please the first is given the strong start to the year from an organic EBITDA perspective can you give some color on why you didn't raise or refine the F. 'twenty three guidance and in particular I'd be interested in the puts and takes.

Michel Doukeris: Corona, we had a limitation in terms of supply that we are organized to have more volume. As we supply the brand sales by itself, so very healthy brand in Brazil, growing a lot. Our digital transformation continues to accelerate not only the pace in which we gather more consumers into Zé Delivery, but our capabilities with this and the algorithms into artificial intelligence, helping us to harness the data and to elevate the potential of what we have there. This is a competitive advantage that we built and is helping us to drive the business forward. I'm optimistic with Brazil. I think that the team there is doing a great job. Our market share is in good position.

Volume pricing.

And SG&A perspective as.

As we pass through the quarters, and then secondly, Colombia has been a really strong performer for.

A couple of years now, but it seems to have hit some challenges in Q1 do you expect to be able to take enough price to offset input cost pressures in Colombia and do you think the consumer is in the right place to accept it. Thank you.

Okay.

Thanks, Mitch Fernando here, let me see.

The first question.

In terms of guidance I always refer back to the reason why we started giving guidance.

We give guidance our medium term outlook at the end of 2021, because we are moving from an inorganic strategy to Anoro <unk> and when we look at the middle third that's the growth that our business can sustain.

Michel Doukeris: This is a competitive advantage that we built and is helping us to drive the business forward. I'm optimistic with Brazil. I think that the team there is doing a great job. Our market share is in good position.

Michel Doukeris: Our revenue strategy is well organized, in place, our portfolio very healthy, and our digital transformation is accelerating our opportunities and potential in Brazil. I see Brazil in a place that's as good as it has been for many, many years.

<unk> sustained can deliver.

Bear in mind.

Plastics is going to be different and better.

The quarter was flattish and there'll be puts and takes a different regions of the world performing differently.

With regarding to this very specifically, we just hazard classes historically, we had a good quarter and and of course, there are always puts and takes that's why for the moment, we are maintaining because the main objective of the guidance is to give surface of the medium term financial performance of the business.

Sanjeet Aujla: Thanks, Michel. Just one quick follow-up on that. Has there been any noticeable change in the competitive landscape since one of your competitors filed for bankruptcy there in recent weeks?

Michel Doukeris: Not meaningful for us to talk about here, and I think that while they deal there with that situation, our focus is on our consumers. Our focus is improving our service level that's very high in Brazil now, in getting our portfolio to perform, the portfolio of the physical brands that we have and the digital assets. We remain a steady focus on our strategy.

In terms of.

Commodities the question that you're asking we said about 2023 that we had some commodity pressures.

To a lesser extent 2022, we have most of our commodity hedges, but there is always a portion of their cost of goods sold that is not hedged.

The example is across the fragrance.

And to some extent that this is moving this is moving in our favor this moving favorably somewhat healthy.

Sanjeet Aujla: Great. Thank you.

You also have the different geographies confidence, we said that before that you have some regions like Brazil, where the cost of goods sold should be in a better place.

Operator: Thank you. Our final question is coming from the line of Brett Cooper with Consumer Edge. Please proceed with your question.

<unk> seen the Brazilian operation, having gross margin expansion already has quite a bit.

Brett Cooper: Thank you. Wanna come back to, I guess, the first question, but more from an operational standpoint. After the SABMiller deal, you guys have been relatively inactive on acquisitions. At the same time, the beverage and alcohol markets have changed and evolved and are evolving. Can you continue to maximize the growth potential of your business via organic activity or acquisitions in higher growth parts of the industry necessary to maximize that growth in returns?

And given where commodity scenario on the other hand, you had regions like Europe , where it has to be somewhat under pressure on the commodity front and you continue to report as yet because energy prices. Although they are improving that it's still very high compared to previous levels. So a lot of puts and takes we just had the first quarter we continue.

To the confidence on the business, but I think it's too early for us to talk about changing the guidance, Doug look one way or another.

Michel Doukeris: Hi, Brett. Fernando Tennenbaum here. At the end of the day, this is a resource allocation discussion and about the value creation discussion. If you look at our business. When we did the investor day, we said that the outlook for the business is to be able to deliver 4% to 8%. If we deliver that, there is minimum amount of value to be created. We can enhance this value creation by making re-resource allocation decisions, and that's the triangle. Which means that the priority to invest behind our business because we believe it can grow at a decent pace and can create a lot of value. With the excess cash and our business generates a meaningful amount of excess cash.

Fernando Tennenbaum: Hi, Brett. Fernando Tennenbaum here. At the end of the day, this is a resource allocation discussion and about the value creation discussion. If you look at our business. When we did the investor day, we said that the outlook for the business is to be able to deliver 4% to 8%. If we deliver that, there is minimum amount of value to be created.

And the second question ill pass to Michelle.

Hey, Mitch good morning, Thanks for the question.

I think thats when we talk about Colombia, if you'll allow me just to step back for a second I think that we need to look at this developing market and how inflation cost of goods sold.

Fernando Tennenbaum: We can enhance this value creation by making re-resource allocation decisions, and that's the triangle. Which means that the priority to invest behind our business because we believe it can grow at a decent pace and can create a lot of value. With the excess cash and our business generates a meaningful amount of excess cash.

Consumer purchase power displaying a different role in each of these countries and the fact that as I said before and I keep repeating we've been balancing our revenue management strategy aligned with category consumer purchase power.

The inflation in cost of goods sold.

Michel Doukeris: How we use that excess cash can also create value on a standalone basis. Over the last two or three years, there was a strong focus on deleveraging because as we said, deleveraging creates a meaningful amount of value, most of that when you get to our 3x. We made meaningful progress, but we are not at 3x yet, which means that we can still benefit from value creation by deleveraging a little bit further. As we keep making progress, other options open up for us. Other options like we increase dividend is likely. As a percentage, it was a meaningful increase. In absolute basis, it was not that much of an increase, but increase dividends, we are improving on that. M&A is definitely an option as well. We can have selective M&A. We know how to do M&A.

Fernando Tennenbaum: How we use that excess cash can also create value on a standalone basis. Over the last two or three years, there was a strong focus on deleveraging because as we said, deleveraging creates a meaningful amount of value, most of that when you get to our 3x. We made meaningful progress, but we are not at 3x yet, which means that we can still benefit from value creation by deleveraging a little bit further. As we keep making progress, other options open up for us.

So Colombia is coming from a very good performance for the industry. The last year was a great year for the industry and this year in quarter, one we saw volumes declining.

By low single digits, and we have good share be it is gaining share of growth. What we saw in the industry. Overall was an impact from a softer macroeconomic we need to remember that Columbia imports a lot of goods and you have to impact their one.

Fernando Tennenbaum: Other options like we increase dividend is likely. As a percentage, it was a meaningful increase. In absolute basis, it was not that much of an increase, but increase dividends, we are improving on that. M&A is definitely an option as well. We can have selective M&A. We know how to do M&A.

As inflation itself. The other one is FX.

The country is moving so youll see that solar is already moving up as well and their demand for our brands remain strong.

<unk> grew well gaining share of total alcohol, our brands core brands, performing well premium brands performing well as well and then there this macro background, we need to keep watching how the industry will behave while we continue to invest in our brands.

Michel Doukeris: We did M&A in the past. We know how to create value out of M&A. If the right deal at the right moment shows up, of course, we'll entertain that if it can bring another avenue of growth. We don't need M&A to deliver a meaningful value creation and to continue growth.

Fernando Tennenbaum: We did M&A in the past. We know how to create value out of M&A. If the right deal at the right moment shows up, of course, we'll entertain that if it can bring another avenue of growth. We don't need M&A to deliver a meaningful value creation and to continue growth.

Brett Cooper: If I can bother you with one follow-up. One component of your business is different than it was when you've done M&A in the past, is all the digital infrastructure that you've built. How do you think that extracts value from transactions or creates or I guess improves your ability to create value from organic activity? Does that weigh your view one way or the other over the medium to long term?

And they have good underlying demand. So the business is great the marketing environment towards a little bit soft, but we continue to watch deals across the globe very carefully as we continue to push forward on our both categories strategy, but also revenue management strategy. Thanks for the question.

Thank you.

Thank you. Our next question is coming from Trevor Stirling with Bernstein. Please proceed with your question.

Michel Doukeris: Yeah, I can take this one. I think that, in a short answer, these digital products that we created both, on the B2B side and on the B2C side, they help us to get better, and they are the second pillar of our strategy. They get us better because we have more information. With more information, we can make better decisions. As we standardize our ways of operating with these products, we have efficiencies that we can extract from this scale, from these revised processes, and our ability to act faster with the data that we have. A second part of that, as I keep saying, another advantage of the digital products is that once you build them, the scalability is very fast, and you don't need more resources.

Hi, Michelle just one question from me following up thank you very much for your perspectives on the the Bud light feeding frenzy were looking as far as trying to judge things based on scanner data, which is one channel. Several weeks I know you have more closer to real time data across many channels is there any sign that the pressure is starting to ease.

Or it's still too early to say.

Okay.

Morning.

Michel Doukeris: As we standardize our ways of operating with these products, we have efficiencies that we can extract from this scale, from these revised processes, and our ability to act faster with the data that we have. A second part of that, as I keep saying, another advantage of the digital products is that once you build them, the scalability is very fast, and you don't need more resources.

I think Thats Q2, worley for us to understand the duration and the total impact we look at the same public data that you look and we see the data.

Theres a lot of information on that.

Week basis, but we also see day after day.

We can see on the day that there is some stabilization in these bud light volume in the first three weeks as I said, they would account for like 1% of our global volume in this period.

Michel Doukeris: Different from the physical products, if you grow Corona, the example that I just gave here in Brazil, we need more bottles, more production capacity. We need to invest in physical assets so we can grow our physical brands, which we are doing. On the digital space, the scalability, once the product is ready and available, is much faster, and the resources that you need to invest for the scalability are much smaller in proportion to the physical products. We can continue to grow, and we are doing that, for example, with BEES. We are getting to geographies where we do not operate. We are getting there with the digital product by using partners. Then you can continue to monetize the digital product even if you are not present in that market.

That is still a lot of.

Infusion debt and misinformation as our styling Robert So we need to continue to qualify this information as we move forward, we need to continue to invest as we have done last week and together with our wholesalers continue to drive both.

The business forward the focus on <unk>, which is what we do best and make sure that the right information is clarified to everybody because when we do be it our brands performed well.

Michel Doukeris: We can continue to grow, and we are doing that, for example, with BEES. We are getting to geographies where we do not operate. We are getting there with the digital product by using partners. Then you can continue to monetize the digital product even if you are not present in that market.

Thank you Michelle.

Thank you.

Thank you. Our next question is coming from the line of Jeff Stent with BNP. Please proceed with your question.

Michel Doukeris: Now that we are becoming present in that market, you might have opportunities to go to market differently than what we had before. You are right in the intuition that the digital products are add on to our M&A toolkit, but they can also become an important vehicle as we grow organically, including geographies that we are not present today, because the digital route to market becomes an enabler for our expansion strategy. Thank you.

Can you hear me.

Yes Hello.

Hello Rich.

Yes, we can hear you hi, alright, great fantastic.

Two questions, the first of which with the 4% to 8% like for like EBIT guidance still hold if Argentina was to be excluded.

The first one on the second one.

Yes.

You've talked a lot about Bud light, but has there been any sort of spillover impact beyond Bud light and also what are you doing to ensure that the.

Brett Cooper: Great. Thank you.

The market for us.

And Terry speak of paralysis.

Operator: Thank you. This was our final question. If your question has not been answered, please feel free to contact the investor relations team. I will now turn the floor back over to Mr. Michel Doukeris for closing remarks.

Very fearful of sort of embracing any creativity.

Okay.

Hi, Jeff.

Remember here, let me take the first one.

Michel Doukeris: Thank you, Jesse, and thank you all for your time today and for your ongoing partnership and support of our business. Stay safe and well.

I'll go back to the reason why we provided an outlook and we did that with medium term outlook at the end of 2021, what is the potential for our business over the medium term in order to move through inorganic and organic strategy and that includes our whole portfolio, but of course there is.

Operator: Ladies and gentlemen, thank you. This does conclude our earnings conference call and webcast. Please disconnect your lines at this time and have a wonderful day.

Operator: Ladies and gentlemen, thank you. This does conclude our earnings conference call and webcast. Please disconnect your lines at this time and have a wonderful day

One very important PCI, but there are other kpis that we should be look here.

First quarter for example, first quarter, we ended up growing more than our outlook. We ended up growing 13, six but this is the organic growth as you look forward a difficult endpoints, we grow more on a nominal basis, we grew more than $270 million with a very strong growth. If you look from an EPS.

Inventory, we grew like eight 5% so at the end of the day. This is our business and we need to make sure that we manage all the different variables or the different kpis and they go at the end of the day is to create value.

Thats, what we are aiming for so.

The guidance is for the outlook is for our <unk> business.

And the second question I'll pass to Michelle Yes.

Yes, Jeff Good morning, Thanks for the question I think that similarly to what we just discussed.

The Bud Light's volume.

Publicly available data shows some spillover effect across the other brands, while the majority of the impact of steel on Bud light and this is happening I think that on the same direction given the information that's out there the confusion and the noise.

And of course more localize them.

Bud light and we've continued to drive our programs forward for all brands.

And I think Thats one of the key points that I was highlighting before is that we continue to be committed to the programs partnerships investments that we have in place our key programs and campaigns for the brands they remain in place.

And one key thing in the U S was quickly adjust and streamline our structure. So in this situation and given the current environment, especially for the social media landscape that we have senior market tears running the programs we have a strong plan for the year the brands.

We're performing very well in the quarter one the programs, we know the impact correct consumers.

Consumers and they move the brands in the right direction and I think that as we do what beer needs to do focus on sports folks own music focus on connecting with our consumers our brands performed well as we know right. So we will continue to invest.

First we have had any up investments now during the summer across all brands as additional part of our plans, but also we are heading up the investments on Bud light as we relocate global resources and we invest more on Bud light. So I think that we feel good about.

The plants that we have moving forward and while it's still too early to understand again, all the numbers and the duration of this impact we need to keep moving the business forward and thus Seo I think thats my role is to really get the learnings mobilized resources support the team.

And work together with our partners as we move forward.

Thank you.

Thank you. Our next question is coming from Laurence <unk> with Barclays. Please proceed with your question.

Hi, Michelle Fernando Thanks, very much for the questions. Two from me. Please firstly on margins they are coming out a lot better this quarter than perhaps the street was expecting and I seem to remember.

Obviously, you said that Q1 was probably going to be the toughest quarter for Cogs do you see the coax environment getting a little bit easier from here and how would you split the impact from Cogs from both commodities and transactional FX and then the second question on China could you give us any more color on the exit rate or sort of March number I think you'd previously mentioned.

Sources to continue to invest to move forward in the U S and to support our team to get out of this stronger.

Thanks Michelle.

Okay.

Thank you. Our next question is coming from the line of Sanjay <unk> with Credit Suisse. Please proceed with your question.

Hey, Michelle and Fernando two for me please firstly.

Appreciate your earlier comments on Colombia.

If I look at some of your major emerging markets.

More broadly.

Volume seems to have deteriorated quite a bit.

Picked up so.

Love to get your thoughts on any inflections youll see in consumer behavior.

Particularly with regard to frequency of consumption pack formats et cetera.

And then my follow up is really around Brazil, one of your competitors that recently filed for bankruptcy I think you called out stable market share in the quarter, but.

So Jeff good morning. Thanks for the question two pieces that I will try to address both to you the first one.

I think that there is this inflationary scenario, which is common across the globe and we see that as I've been saying different clusters, three type of clusters, where do we see the industry and the whole.

Consumer purchase power and consumer goods, moving is slightly different and they all dealing with the same issue.

The.

Key point that as we see the beer category continues to be resilient.

And performing well and gaining share of growth I just gave the example of Colombia.

Of course, when they talk about resilience does that mean.

Growth across the board in all the markets at the same time, especially because when inflation moves fast you have this timing in each salaries, especially minimal solids for these developing countries they get to be approved so think about.

Brazil that just announced said the solid increases now in May right. So January to April consumers, we're dealing with high inflation and they have their salaries strong less clear industry performed well, but now you have a next re injection.

<unk> of cash and purchase power coming to consumers. So inflation goes up there is some time for prices to catch up and there is some time for solid to catch up I think that we need to look through all the lenses of the full year before drawing two main conclusions and.

Amongst the markets they have different realities.

To use the same example, why you seek currency devaluation in Colombia, and Colombia has a high percentage of goods that import Brazil is in the other side of that because currencies that are appreciating and therefore, they import goods will have like a different impact.

On the baskets for inflation as well as for consumer purchasing power. So I think that we keep an eye on that and <unk> revenue management. The industry is performing well in most of the countries, especially when we look out.

In the context of the broader beverage, we know that premium amortization being place that beer is more resilient resilient and we are happy so far with our.

Our strategy in terms of of revenue management and this is coming on the other point or Brazil.

What I say is that that I see.

Three things in Brazil that are very interesting and very important I see the industry structure in Brazil.

Help one sold players.

Focus on premium amortization.

We see an environment in terms of inflation price, that's playing well.

For the industry, we see that Brazil was hit earlier than other markets on the cost effects and now you are getting to the other side of this equation where cost of goods sold is becoming more.

Normalize it NSX display more in our direction.

You see the company our portfolio today in Brazil is as healthy as never before so its pattern is performing very well origin, now, which the premium brands of ours, performing very well our quarter brands performing very well Corona.

We had a limitation in terms of supply that we are organize it to have more volume and as we supply the brand sales by itself. So very helpful brand in Brazil growing a lot in our digital transformation continues.

To accelerate not only the pace in which we gather more consumers into that delivery, but our capability with beef and our grids algorithms.

Tissue intelligence, helping us to harness that data to illustrate the potential of what we have there and this is a competitive advantage that we built and is helping us in drive the business forward some optimistic with Brazil, I think that the key.

That is doing a great job our market share is in good position. Our revenue strategy is well organized in place our portfolio very healthy and our digital transformation is accelerating our opportunity simple dish in Brazil. So.

I see Brazil in a place that's as good as it has been for many many years.

Thank you Michelle and just one quick follow up from that Hasnt been any.

Notable change in the competitive landscape since one of your competitors file for bankruptcy.

Some weeks.

Not meaningful for us to talk about here and I think thats why they deal.

With that situation our focus is on our consumers.

In a place that's as good as it has been for many many years.

Our focus is improving our service level, that's very high in Brazil, now in getting our portfolio to perform the portfolio of the physical brands that we have introduced a lawsuits. So we remain instead focus on our strategy.

Great. Thank you.

Thank you. Our final question is coming from the line of Brett Cooper with consumer edge. Please proceed with your question.

Thank you.

So wanted to come back to I guess, the first question, but more from an operational standpoint. After the F&B deal you guys have been relatively inactive on acquisitions.

At the same time, the beverage alcohol market to change and evolve and are evolving. So can you continue to maximize the growth potential of your business via organic activity or acquisitions and higher growth parts of the industry necessary to maximize that growth and returns.

Hi, Brett Fernando here.

At the end of the day as a.

Resource allocation discussion.

About the value creation discussion if you look at our business. We when we when we did the Investor day, we said that the outlook for the business is to be able to deliver 4% to 8% and deliver that at a minimum amount of that it would be great.

We can we're getting has this value creation by making.

Resource allocation decisions and Thats, the triangles, so which means that the priority to invest behind our business because we believe it can grow and grow at a decent pace and can create a lot of value.

With the excess cash and our business there is a meaningful amount of cash how you use the excess cash can also create value on a standalone basis.

Over the last two or three years, there was a strong focus on deleveraging because as I said deleveraging creates a meaningful amount the value most of that is going to get to wall Street types.

We made meaningful progress, but we are not at three times, yet which means that we can still we can still benefit from a value creation by delevering a little bit further.

But as we keep making progress other options open up for us.

Other options like we.

Is the dividend.

As likelihood.

<unk> was a meaningful increase in absolute basis. It was not that much of an increase but increased dividends. We are improving on that and M&A is definitely an option as well we can have selective M&A, we know how to do M&A, we determining the best we know how to create value out of M&A. So if the right view at the right moment.

<unk> of course, we entertain that significantly bring another avenue of growth, but we don't need M&A to deliver meaningful value creation into prohibited.

And if I can bond you with one follow up.

One component of your business is different than it was when you have done M&A in the past.

Is all of the digital infrastructure that you've built so how do you think that extract value from transactions or creates.

Or I guess improves your ability to create value from organic activity and does that wait your view, one way or the other over the medium to long term.

Yes, I can take this one I think that.

In a short answer.

This.

Digital projects that we created both.

On the <unk> side and on the DTC side.

Help us.

To get better.

They are the second pillar of our strategy they gather bundle because it has more information with more information, we can make better decisions.

As we standardized our ways of operating with these products, we have efficiencies that we can extract from this scale.

These revised processes and our ability to act faster with the data that we have.

Second part of that as I keep saying.

Another advantage of the digital products is that once you build them. The scalability is very fast.

And you don't need more resources, so different from the physical products if you grow.

<unk>. The example that I just gave here in Brazil, we need more bottles more production capacity, we need to invest in physical assets. So we can grow our physical brands, which we are doing on the digital space. The scalability once the product is ready in <unk>.

<unk> is much faster and resources that you need to invest for the scalability are much smaller in proportion to the physical products. So we can continue to grow and we are doing that for example, with beef we are getting two geographies, while we do not operate we are getting damaged.

Digital product by using partners and then if can continue to monetize the digital product. Even if you are not present in the market, but them now that we are becoming present in that market. So you might have opportunities to go to market differently than what we had before so you are right in the increase.

<unk> that the digital products side.

Two our M&A toolkit, but they can also become an important vehicle as we grow organically, including geographies that were not present to date, because the digital route to market becomes.

Enabler for our expansion strategy. Thank you.

Great. Thanks.

Thank you. This was our final question is your question has not been answered please feel free to contact the Investor Relations team I will now turn the floor back over to Mr. Michel to Paris for closing remarks.

Thank you Jessie and thank you all for your time today and for your ongoing partnership and support of Florida business is stay safe and well.

Okay.

Ladies and gentlemen, thank you. This does conclude our earnings conference call and webcast. Please disconnect. Your lines at this time and have a wonderful day.

Q1 2023 Anheuser-Busch Inbev SA Earnings Call

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