AB InBev Q2 2024 Results Released

Consistent execution of our strategy delivered double-digit EBITDA growth with margin expansion of 236bps and a 25% increase in Underlying EPS

BRUSSELS--BUSINESS WIRE--

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

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AB InBev Strategic Priorities (Graphic: Business Wire)

Regulated information¹

"Our global momentum continued this quarter. The strength of our diversified footprint and consumer demand for our megabrands delivered another quarter of broad-based top- and bottom-line growth. EBITDA grew by double-digits and the continued optimization of our business drove a 25% increase in Underlying EPS. We are encouraged with our performance in the first half of the year and remain focused on consistent execution of our strategy." - Michel Doukeris, CEO, AB InBev

The 2024 Half Year Financial Report is available on our website at www.ab-inbev.com

Management comments

Consistent execution of our strategy delivered double-digit EBITDA growth with margin expansion of 236bps and a 25% increase in Underlying EPS

Top-line increased by 2.7%, with revenue growth in approximately 65% of our markets, driven by a revenue per hl increase of 3.6% as a result of revenue management initiatives. Volume growth in our Middle Americas, South America, Europe and Africa regions was primarily offset by performance in China and Argentina, resulting in an overall volume decline of 0.8%. EBITDA increased by 10.2% with production cost efficiencies and disciplined overhead management driving EBITDA margin expansion of 236bps. Underlying EPS was 0.90 USD, a 25% increase versus 2Q23, driven primarily by nominal EBITDA growth.

Progressing our strategic priorities

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

(1) Lead and grow the category:

We delivered volume growth in 50% of our markets in 2Q24 and gained market share in the majority in HY24, according to our estimates.

(2) Digitize and monetize our ecosystem:

BEES captured 11.7 billion USD of gross merchandise value (GMV), a 20% increase versus 2Q23 with approximately 70% of our revenue through B2B digital channels. BEES Marketplace captured 530 million USD in GMV from sales of third-party products, a 55% increase versus 2Q23.

(3) Optimize our business:

We continue to make progress on deleveraging with net debt to EBITDA reaching 3.42x as of 30 June 2024 versus 3.70x as of 30 June 2023. In HY24, we invested 5.3 billion USD in capex and sales and marketing while delivering free cash flow of approximately 0.9 billion USD, a 1.4 billion USD improvement versus HY23.

(1) Lead and grow the category

We continued to invest in our megabrands, mega platforms and brand building capabilities this quarter. According to the Kantar BrandZ 2024 report, our portfolio now holds 8 of the top 10 most valuable beer brands in the world, with Corona and Budweiser #1 and #2 respectively. Our marketing effectiveness and creativity were recognized by again being named the most effective marketer in the world by both Effies and the World Advertising Research Center and being the most awarded beverage company at the 2024 Cannes Lions International Festival of Creativity. Our performance across each of our 5 category expansion levers was led by our megabrands which delivered continued volume growth and a 3.3% revenue increase in 2Q24.

• Category Participation: Through our focus on brand, pack and liquid innovations, the percentage of consumers purchasing our portfolio of brands increased in approximately 40% of our markets in 2Q24, according to our estimates. Participation increases were led by improvements with all consumer groups in the US.
• Core Superiority:Our mainstream portfolio delivered a mid-single digit revenue increase in 2Q24, driven by double-digit growth in Colombia, South Korea and the Dominican Republic.
• Occasions Development: Our global no-alcohol beer portfolio delivered high-teens revenue growth this quarter. Corona Cero, the official partner of the Olympic Games, is now available in approximately 40 markets and delivered triple-digit volume growth in 2Q24. The combination of our digital direct-to-consumer (DTC) products and our megabrands is developing new consumption occasions. For example, across markets in Latin America, Zé Delivery and TaDa Delivery significantly increased soccer game-time beer orders versus 2Q23 by engaging consumers with Copa America and other key event related activations.
• Premiumization:In 2Q24, the Corona brand grew revenue by mid-single digits globally, outside of Mexico. Our overall above core beer portfolio growth wasconstrained by a soft industry in China. The combined revenue of our global brands declined by 1.7% outside of their home markets, while our overall above core beer portfolio delivered slight revenue growth, driven by Corona, our global brands in South Africa, and the double-digit growth of Modelo in Mexico and Spaten in Brazil.
• Beyond Beer:Our global Beyond Beer business contributed approximately 375 million USD of revenue in 2Q24, a low-single digit decrease versus 2Q23, as growth in key brands such as Brutal Fruit, Cutwater, Nutrl and Beats was primarily offset by a soft malt-based seltzer industry in North America.

(2) Digitize and monetize our ecosystem

• Digitizing our relationships with more than 6 million customers globally: As of 30 June 2024, BEES is live in 27 markets with approximately 70% of our 2Q24 revenues captured through B2B digital platforms. In 2Q24,BEES had 3.8 million monthly active users and captured 11.7 billion USD in gross merchandise value (GMV), growth of 18% and 20% versus 2Q23 respectively. BEES Marketplace generated 8.3 million orders and captured 530 million USD in GMV from sales of third-party products in 2Q24, growth of 33% and 55% versus 2Q23 respectively.

• Leading the way in DTC solutions: Our omnichannel DTC ecosystem of digital and physical products generated revenue of approximately 400 million USD in 2Q24. Our DTC megabrands, Zé Delivery, TaDa Delivery and PerfectDraft, are available in 21 markets, generated 18.6 million ecommerce orders and delivered 140 million USD in revenue, representing approximately 10% growth versus 2Q23.

(3) Optimize our business

• Maximizing value creation:Our Underlying EPS was 0.90 USD this quarter, a 25% increase versus 2Q23, driven primarily by nominal EBITDA growth. Our net debt to EBITDA ratio reached 3.42x versus 3.70x as of 30 June 2023, a slight increase versus 3.38x as of 31 December 2023 due to the seasonality of our cash flow generation. The combination of EBITDA growth, our relentless focus on optimization of our net finance costs and net working capital, and improved capex efficiency delivered free cash flow of approximately 0.9 billion USD in HY24, a 1.4 billion USD improvement versus HY23.
• Advancing our sustainability priorities: In Climate Action, our Scopes 1 and 2 emissions per hectoliter of production was 4.32 kgCO2e/hl in HY24, a reduction of approximately 4% from HY23. In Water Stewardship, our water use efficiency ratio improved to 2.50 hl per hl in HY24 versus 2.54 hl per hl in HY23, progressing towards our ambition to reach 2.50 hl per hl on an annual basis by 2025.

Creating a future with more cheers

In the first half of this year, our business delivered EBITDA growth of 7.8% with margin expansion of 165bps, while we continued to invest for the long-term in our brands, facilities and digital initiatives. Our nominal EBITDA growth and the continued optimization of our business drove strong operating leverage, resulting in an Underlying EPS increase of 21% in HY24. Our performance is made possible by the dedication and hard work of our people and we take this opportunity to thank all our colleagues globally for their passion and commitment. The beer category is large and growing, and our unique global leadership advantages, replicable growth drivers and superior profitability position us well to deliver on our purpose to create a future with more cheers.

2024 Outlook

1. Overall Performance: We expect our EBITDA to grow in line with our medium-term outlook of between 4-8%. The outlook for FY24 reflects our current assessment of inflation and other macroeconomic conditions.
2. Net Finance Costs: Net pension interest expenses and accretion expenses are expected to be in the range of 220 to 250 million USD per quarter, depending on currency and interest rate fluctuations. We expect the average gross debt coupon in FY24 to be approximately 4%.
3. Effective Tax Rates (ETR): We expect the normalized ETR in FY24 to be in the range of 27% to 29%. The ETR outlook does not consider the impact of potential future changes in legislation.
4. Net Capital Expenditure: We expect net capital expenditure of between 4.0 and 4.5 billion USD in FY24.

Key Market Performances

United States: Improved market share trend, ongoing premiumization and productivity initiatives deliver double-digit bottom-line growth

• Operating performance:
  • 2Q24: Revenue declined by 0.6% with revenue per hl increasing by 2.2% driven by revenue management initiatives and premiumization. Sales-to-wholesalers (STWs) declined by 2.7% and sales-to-retailers (STRs) were down by 4.1%, estimated to be in-line with the industry as we cycled a challenging comparable in April but gained volume share of the industry in May and June. EBITDA grew by 17.5% with a margin improvement of approximately 500bps, driven by productivity initiatives and SG&A efficiencies.
  • HY24: Revenue declined by 5.0%, with revenue per hl increasing by 1.6%. Our STWs declined by 6.5% and STRs were down by 8.6%. EBITDA declined by 2.3%.
• Commercial highlights: The beer industry remained resilient this quarter, gaining share of total alcohol by value in the off-premise, according to Circana, although the alcohol category was negatively impacted by the phasing of key holidays and adverse weather. Our beer market share was estimated to be flattish in 2Q24, with our improved trend driven by Michelob Ultra and Busch Light, which were two of the top three volume share gainers in the industry. In Beyond Beer, our spirits-based ready-to-drink portfolio delivered volume growth in the high-teens, outperforming the industry. We continue to invest in and make progress on our commercial strategy to rebalance our portfolio with our above core beer and Beyond Beer brands generating approximately 45% of our revenue in 2Q24.

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

• Operating performance:
  • 2Q24: Revenue increased by mid-single digits, with low-single digit revenue per hl growth driven by revenue management initiatives.Volumes grew by mid-single digits, outperforming the industry. EBITDA grew by low-teens with continued margin expansion.
  • HY24: Revenue grew by mid-single digits with revenue per hl growth of low-single digits. Volumes increased by mid-single digits, outperforming the industry. EBITDA grew by high-single digits with margin expansion.
• Commercial highlights: Our core portfolio continued to outperform this quarter, delivering mid-single digit volume growth. Our above core portfolio delivered mid-single digit revenue growth, led by the strong performance of Modelo and Pacifico. We continued to progress our digital initiatives, with BEES Marketplace growing GMV by 15% versus 2Q23, and our digital DTC platform, TaDa Delivery, generating over 1.1 million orders, a 20% increase versus 2Q23.

Colombia: Record high volumes delivered double-digit top- and bottom-line growth with margin expansion

• Operating performance:
  • 2Q24: Revenue grew by mid-teens, with low-teens revenue per hl growth, driven by pricing actions and revenue management initiatives. Volumes grew by low-single digits, with our portfolio continuing to gain share of total alcohol. EBITDA grew by low-twenties with margin expansion.
  • HY24: Revenue grew by mid-teens with revenue per hl growth of low-teens. Volumes increased by mid-single digits. EBITDA grew by high-teens with margin expansion.
• Commercial highlights: Our premium and super premium brands led our performance in 2Q24, delivering high-twenties volume growth and driving record high second quarter volumes. Our mainstream beer portfolio delivered low-single digit volume growth with a strong performance from Aguila.

Brazil: Record high volumes delivered high-single digit top-line and double-digit bottom-line growth with margin expansion

• Operating performance:
  • 2Q24: Revenue grew by 8.0% with revenue per hl growth of 3.7% driven by revenue management initiatives. Total volumes grew by 4.1%, with beer volumes increasing by 2.9%. Non-beer volumes increased by 7.7%. EBITDA increased by 28.0% with margin expansion of 469bps.
  • HY24: Total volumes grew by 4.2%with beer volumes up by 3.2% and non-beer volumes up by 7.1%. Revenue grew by 6.9% with a revenue per hl increase of 2.5%. EBITDA grew by 21.9% with 387bps of margin expansion.
• Commercial highlights: Our premium and super premium brands continued to outperform the industry, delivering low-teens volume growth led by Corona and Spaten, and driving record high second quarter total volumes. Our core beer portfolio continued to grow, delivering a low-single digit volume increase. Non-beer performance was led by our low- and no-sugar portfolio, which grew volumes in the mid-teens. We continued to progress our digital initiatives, with BEES Marketplace growing GMV by 32% versus 2Q23, and our digital DTC platform, Zé Delivery, generating over 16 million orders in 2Q24, a 13% increase versus 2Q23.

Europe: High-single digit bottom-line growth with margin recovery

• Operating performance:
  • 2Q24: Revenue increased by low-single digits driven by volume growth of low-single digits, outperforming a soft industry according to our estimates. Revenue per hl declined by low-single digits, impacted by negative geographic mix and phasing of promotional activities. EBITDA grew by high-single digits with margin recovery.
  • HY24: Revenue increased by mid-single digits with revenue per hl growth of low-single digits. Volume grew by low-single digits, outperforming the industry according to our estimates. EBITDA grew by low-twenties with margin recovery driven by top-line growth and cost efficiencies.
• Commercial highlights: We continued to premiumize our portfolio in Europe, with our premium and super premium portfolio making up approximately 57% of our revenue in 2Q24. Our megabrands continued to drive our growth this quarter, led by Corona, which grew volume by double-digits, and Stella Artois, which successfully activated the Perfect Serve campaign at the Roland Garros and Wimbledon tennis tournaments.

South Africa: Record high volumes delivered double digit top- and bottom-line growth with margin expansion

• Operating performance:
  • 2Q24: Revenue increased by low-teens, with revenue per hl growth of high-single digits, driven by pricing actions and continued premiumization. Volumes grew by mid-single digits, continuing to outperform the industry in both beer and Beyond Beer according to our estimates. EBITDA grew by low-thirties with margin expansion.
  • HY24: Revenue grew by mid-teens with high-single digit revenue per hl growth and a mid-single digit increase in volume, outperforming the industry in both beer and Beyond Beer according to our estimates. EBITDA increased by high-twenties with margin expansion.
• Commercial highlights: The momentum of our business continued, with our portfolio delivering another quarter of record high volumes and gaining share of both beer and total alcohol, according to our estimates. Our performance this quarter was led by our above core beer brands, which grew volumes by mid-teens driven by Corona and Stella Artois, and the continued volume growth of our core portfolio.

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

• Operating performance:
  • 2Q24: Top-line performance was impacted by a combination of a soft industry, which cycled channel reopening in 2Q23, and adverse weather in key regions of our footprint. Revenue declined by 15.2% with volumes declining by 10.4% and revenue per hl decreasing by 5.4%. EBITDA declined by 17.1% with margin contraction of approximately 80bps.
  • HY24: Revenue declined by 9.4% with revenue per hl declining by 1.0% and volumes decreasing by 8.5%. EBITDA declined by 8.5% with margin expansion of 40bps.
• Commercial highlights: We continued to invest behind our commercial strategy, focused on premiumization, channel and geographic expansion, and digital transformation, even in the context of a soft start to the year for the industry. Our premium and super premium portfolio contributed approximately two-thirds of our revenue in HY24. The brand power of our portfolio combined with the long-term growth potential from further industry premiumization remains a compelling value creation opportunity. The roll out and adoption of the BEES platform continued, with BEES now present in 300 cities, enabling us to optimize our route to consumer and strengthen our customer relationships.

Highlights from our other markets

• Canada: Revenue declined by mid-single digits this quarter with revenue per hl growth of low-single digits, driven by revenue management initiatives and continued premiumization. Volumes declined by high-single digits, impacted by a soft industry.
• Peru: Revenue declined by low-single digits this quarter with revenue per hl growth of mid-single digits, driven by revenue management initiatives. Volumes declined by high-single digits, outperforming a soft industry according to our estimates, which was negatively impacted by adverse weather and Easter shipment phasing.
• Ecuador: Revenue increased slightly in 2Q24 with volumes declining by low-single digits as the industry was negatively impacted by shipment phasing ahead of Easter and an April sales tax increase. Our core beer brands outperformed, growing revenue by mid-single digits.
• Argentina: Volumes declined by low-twenties in 2Q24 as overall consumer demand was impacted by inflationary pressures. For FY24, the definition of organic revenue growth in Argentina has been amended to cap the price growth to a maximum of 2% per month. Revenue was flattish on this basis.
• Africa excluding South Africa: In Nigeria, our total volumes grew by mid-teens this quarter, cycling a soft industry in 2Q23. Revenue grew by strong double-digits, ahead of the industry according to our estimates, driven by revenue management initiatives in a highly inflationary environment. In our other markets in Africa, we grew revenue in aggregate by high-single digits in 2Q24, driven by Zambia, Uganda and Tanzania.
• South Korea: Revenue increased by high-teens in 2Q24 with revenue per hl growth of mid-teens, driven by revenue management initiatives and positive mix. Volumes grew by mid-single digits, outperforming the industry in both the on-premise and in-home channels, with performance led by our megabrands Cass, HANMAC and Stella Artois.

Consolidated Income Statement