SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

July 31, 2020

Commission File No.: 001-37911

Anheuser-Busch InBev SA/NV

(Translation of registrant’s name into English)

Belgium

(Jurisdiction of Incorporation )

Brouwerijplein 1

3000 Leuven, Belgium

(Address of principal executive offices )

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F      ✓               Form 40-F             

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule
101(b)(1):         

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule
101(b)(7):         

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes                                   No      ✓      


EXHIBIT INDEX

 

Exhibit

Number

  

Description

99.1    Press release issued 30 July 2020 regarding second quarter and half year results.
99.2    Unaudited Interim Report for the six-month period ended 30 June 2020.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

      ANHEUSER-BUSCH INBEV SA/NV
(Registrant)
Dated: July 31, 2020       By: /s/ Jan Vandermeersch
       Name:  Jan Vandermeersch
       Title:    Global Legal Director Corporate
EX-99.1

Exhibit 99.1

 

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Press release

 

Brussels / 30 July 2020 / 7.00am CET

The enclosed information constitutes regulated information as defined in the Belgian Royal Decree of 14 November 2007 regarding the duties of issuers of financial instruments which have been admitted for trading on a regulated market.

Except where otherwise stated, the comments below are based on organic growth figures and refer to 2Q20 versus the same period of last year. For important disclaimers and more information on 2019 Restated, please refer to page 21.

Anheuser-Busch InBev reports Second Quarter and Half Year 2020 Results

 

  BUSINESS UPDATE IN LIGHT OF THE GLOBAL COVID-19 PANDEMIC

 

   

The COVID-19 pandemic continues to present unprecedented challenges for societies, governments and businesses across the world. The health and safety of our colleagues is our first priority, and we are finding new ways to do our part globally to help our communities, support our partners and connect with our consumers.

 

 

   

Our performance in the second quarter was materially impacted by the COVID-19 pandemic, as expected. As the quarter progressed, however, we saw considerable improvement. April volumes declined by 32.4%, May volumes declined by 21.4% and June volumes grew by 0.7%, demonstrating the resilience of the global beer category.

 

 

   

In view of the economic uncertainties caused by the COVID-19 pandemic, we performed an impairment review considering different scenarios: a base case, a best case and a worst case. No impairment was warranted under the base and best case scenarios. However, we were exposed to a risk of impairment for the South Africa and Rest of Africa cash generating units under the worst case scenario and concluded that it was prudent to recognize a 2.5 billion USD non-cash goodwill impairment charge applying a 30% probability of occurrence of the worst case scenario. This charge is partially offset by a 1.9 billion USD gain on the disposal of the Australian operations. Please refer to page 12 for additional disclosure.

 

 

   

We have been investing behind capabilities such as B2B platforms, e-commerce channels and digital marketing for several years. These trends have accelerated over the past few months, positioning us well to capture growth.

 

 

   

We have taken significant actions to maintain strong liquidity in a more volatile and uncertain environment, while proactively managing our debt profile. We also implemented several initiatives that drove a meaningful reduction in SG&A, while we continue to invest effectively behind our brands and commercial strategy, preparing for a strong recovery.

 

 

   

The fundamental strengths of our company remain unchanged. We have a clear commercial strategy, diverse geographic footprint, the world’s most valuable portfolio of beer brands, industry-leading profitability, a strong team and an incredibly deep talent pool.

 

 

  KEY FIGURES

 

   

Revenue: Revenue declined by 17.7% in 2Q20 with a revenue per hl decline of 0.6%, driven by restrictions related to the COVID-19 pandemic. In HY20, revenue declined by 12.0% with revenue per hl growth of 1.6%.

 

 

   

Volume: Total volumes declined by 17.1% in 2Q20, with own beer volumes down by 17.2% and non-beer volumes down by 15.5%. In HY20, total volumes declined by 13.4%, with own beer volumes down by 14.0% and non-beer volumes down by 7.6%. The decline was primarily driven by impact of the COVID-19 pandemic.

 

 

   

Global Brands: Combined revenues of our global brands, Budweiser, Stella Artois and Corona, declined by 16.6% globally and by 12.6% outside of their respective home markets. In HY20, the combined revenues of our global brands declined by 14.1% globally and by 14.9% outside of their respective home markets.

 

 

   

Cost of Sales (CoS): CoS decreased by 4.9% in 2Q20 and increased by 15.2% on a per hl basis, driven primarily by operational deleverage resulting from the impact of COVID-19 on our volumes, particularly in markets where our beer operations were shut down within the quarter. In HY20, CoS decreased by 2.5% and increased by 12.9% on a per hl basis.

 

 

   

EBITDA: EBITDA of 3 414 million USD represents a decrease of 34.1% in the quarter, with EBITDA margin contraction of 825 bps to 33.2%. In HY20, EBITDA declined by 24.7% to 7 363 million USD and

 

 

 

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EBITDA margin contracted by 585 bps to 34.6%.

 

 

   

Net finance results: Net finance costs (excluding non-recurring net finance results) were 1 044 million USD in 2Q20 compared to 1 004 million USD in 2Q19. Net finance costs were 4 204 million USD in HY20 compared to 1 370 million USD in HY19. The increase in HY20 was primarily driven by a mark-to-market loss of 1 724 million USD linked to the hedging of our share-based payment programs compared to a gain of 1 124 million USD in HY19, resulting in a swing of 2 848 million USD.

 

 

   

Income taxes: Normalized effective tax rate (ETR) decreased from 26.0% in 2Q19 to 16.8% in 2Q20. Excluding the impact of gains relating to the hedging of our share-based payment programs, our normalized ETR was 18.8% in 2Q20 as compared to 27.4% in 2Q19. The decrease in our normalized ETR excluding mark-to-market gains and losses linked to the hedging of our share-based payment programs is primarily driven by country mix and the positive impact of tax attributes, with taxes applied on a lower base as a result of the COVID-19 pandemic. Normalized ETR increased from 22.9% in HY19 to 66.6% in HY20 and, excluding the impact of losses relating to the hedging of our share-based payment programs, normalized ETR decreased from 27.4% in HY19 to 22.8% in HY20.

 

 

   

Non-recurring items: Normalized EBIT excludes negative non-recurring items of 832 million USD in 2Q20 and 877 million USD in HY20, mainly related to a 2.5 billion USD non-cash goodwill impairment charge that was partially offset by a 1.9 billion USD gain on the disposal of our Australia operations.

 

 

   

Profit: Normalized profit attributable to equity holders of AB InBev was 921 million USD in 2Q20 compared to 2 319 million USD in 2Q19 and was 76 million USD in HY20 versus 4 714 million USD in HY19. Underlying profit (normalized profit attributable to equity holders of AB InBev excluding mark-to-market gains linked to the hedging of our share-based payment programs and the impact of hyperinflation) was 790 million USD in 2Q20 compared to 2 143 million USD in 2Q19, and was 1 805 million USD in HY20 compared to 3 593 million USD in HY19.

 

 

   

Earnings per share (EPS): Normalized EPS in 2Q20 was 0.46 USD, a decrease from 1.17 USD in 2Q19. Normalized EPS in HY20 was 0.04 USD, a decrease from 2.38 USD in HY19. Underlying EPS (normalized EPS excluding mark-to-market gains linked to the hedging of our share-based payment programs and the impact of hyperinflation) was 0.40 USD in 2Q20, a decrease from 1.08 USD in 2Q19, and was 0.90 USD in HY20, a decrease from 1.81 USD in HY19.

 

 

   

Deleveraging: Net debt to normalized EBITDA was 4.86x at 30 June 2020.

 

 

   

2020 Half Year Financial Report: The report is available on our website at www.ab-inbev.com.

 

 

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Figure 1. Consolidated performance (million USD)                     
     2Q19
        Restated
                 2Q20                  Organic
growth
 

Total Volumes (thousand hls)

     144 316        119 895        -17.1%  

AB InBev own beer

     128 761        106 858        -17.2%  

Non-beer volumes

     14 460        12 194        -15.5%  

Third party products

     1 096        842        -30.3%  

Revenue

     13 599        10 294        -17.7%  

Gross profit

     8 422        5 770        -25.6%  

Gross margin

     61.9%        56.1%        -588 bps  

Normalized EBITDA

     5 644        3 414        -34.1%  

Normalized EBITDA margin

     41.5%        33.2%        -825 bps  

Normalized EBIT

     4 513        2 297        -45.0%  

Normalized EBIT margin

     33.2%        22.3%        -1096 bps  

Profit from continuing operations attributable to equity holders of AB InBev

     2 369        -1 580     

Profit attributable to equity holders of AB InBev

     2 484        351     

Normalized profit attributable to equity holders of AB InBev

     2 319        921     

Underlying profit attributable to equity holders of AB InBev

     2 143        790     

Earnings per share (USD)

     1.25        0.18     

Normalized earnings per share (USD)

     1.17        0.46     

Underlying earnings per share (USD)

     1.08        0.40     
     HY19
Restated
     HY20      Organic
growth
 

Total Volumes (thousand hls)

     276 031        239 577        -13.4%  

AB InBev own beer

     244 144        210 294        -14.0%  

Non-beer volumes

     29 900        27 577        -7.6%  

Third party products

     1 988        1 706        -21.0%  

Revenue

     25 823        21 298        -12.0%  

Gross profit

     15 869        12 201        -18.0%  

Gross margin

     61.5%        57.3%        -419 bps  

Normalized EBITDA

     10 446        7 363        -24.7%  

Normalized EBITDA margin

     40.5%        34.6%        -585 bps  

Normalized EBIT

     8 180        5 102        -33.6%  

Normalized EBIT margin

     31.7%        24.0%        -779 bps  

Profit from continuing operations attributable to equity holders of AB InBev

     5 819        -3 955     

Profit attributable to equity holders of AB InBev

     6 055        -1 900     

Normalized profit attributable to equity holders of AB InBev

     4 714        76     

Underlying profit attributable to equity holders of AB InBev

     3 593        1 805     

Earnings per share (USD)

     3.06        -0.95     

Normalized earnings per share (USD)

     2.38        0.04     

Underlying earnings per share (USD)

     1.81        0.90     

 

Figure 2. Volumes (thousand hls)                                          
     2Q19              Scope              Organic                    2Q20      Organic growth  
           Restated             growth                 Total Volume      Own beer volume  

North America

     29 113        83        -1 602        27 594        -5.5%        -5.5%  

Middle Americas

     34 208        343        -12 630        21 921        -36.6%        -40.6%  

South America

     30 588        15        -2 080        28 523        -6.8%        -4.3%  

EMEA

     22 067        -30        -6 573        15 464        -29.8%        -29.5%  

Asia Pacific

     28 085        -50        -1 771        26 264        -6.3%        -6.4%  

Global Export and Holding Companies

     255        -11        -116        128        -48.4%        -43.7%  

AB InBev Worldwide

     144 316        350        -24 772        119 895        -17.1%        -17.2%  
                 
     HY19      Scope      Organic      HY20      Organic growth  
     Restated             growth             Total Volume      Own beer volume  

North America

     53 635        127        -1 785        51 977        -3.3%        -3.3%  

Middle Americas

     64 722        578        -13 442        51 858        -20.6%        -23.2%  

South America

     66 856        15        -4 088        62 782        -6.1%        -6.0%  

EMEA

     40 214        -72        -6 591        33 551        -16.4%        -16.1%  

Asia Pacific

     50 189        -22        -11 122        39 045        -22.2%        -22.3%  

Global Export and Holding Companies

     416        -11        -41        364        -10.3%        -12.2%  

AB InBev Worldwide

     276 031        615        -37 069        239 577        -13.4%        -14.0%  

 

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MANAGEMENT COMMENTS

Our purpose at AB InBev is to bring people together for a better world. As the world continues to face an extraordinary and unprecedented crisis, our purpose drives us today as much as ever, even if it means finding new ways to be together. We once again extend our immense gratitude to those on the frontlines, especially healthcare workers around the world, for their commitment to keeping us, our families and our communities safe.

Supporting our People

The health and safety of our people continues to be our top priority. We thank all our colleagues for their resilience, dedication and agility, especially those on the ground to ensure business continuity. As more of our colleagues return to the workplace in markets where restrictions are being lifted, we have implemented stringent safety measures, such as strict sanitation practices, workplace capacity and social distancing guidelines, health tracking and personal protective equipment.

Helping our Communities

Our products are almost entirely sourced and brewed locally, making us deeply connected to the communities in our markets around the world. We have not experienced any material disruption to our supply chain and continue to monitor and adapt our operations to prioritize continuity.

We are working closely with local governments and other stakeholders to leverage our scale, capabilities and resources to support the fight against the pandemic and to do our part in the economic recovery. We have leveraged our facilities to produce and donate millions of units of hand sanitizer, face shields and packaged water. To support and empower the 20 000 direct farmers in our global supply chain, we fulfilled commitments to purchase crops in markets such as Mexico and India, even when our production was shut down. We are also providing farmers with personal protective equipment and critical information on health, hygiene and safe cultivation of their crops.

Our customers also have been severely impacted by the pandemic, particularly our on-premise partners, and we are working closely with them to support business continuity and a healthy recovery. For example, we created voucher programs in several markets to “buy a beer now, enjoy later” and initiatives to ensure the availability of fresh beer, such as Bud Light’s “Certified Fresh” platform in the US.

Leveraging our Global Footprint

When the COVID-19 pandemic began spreading across the globe, we grouped our markets into four clusters, enabling us to facilitate best practice sharing across similar markets. The four clusters were defined as: (1) Recovering Markets, (2) Less Restrictive Developed Markets, (3) Less Restrictive Developing Markets, and (4) More Restrictive Developing Markets.

As the pandemic evolved throughout the second quarter, we reclassified some of our markets between clusters. For example, many European countries became “Recovering Markets” as restrictions began to ease in May and June, inspiring our colleagues in Europe to replicate best practices from our teams in China and South Korea to support our customers in the on-premise channel for a successful re-opening. “Welcome Kits” were provided with personal protective equipment, such as branded masks and hand sanitizer produced with our surplus alcohol, and manuals with guidelines to help prevent the spread of COVID-19. In addition, we offered digital solutions to our customers that supported increased efficiency while reassuring consumers in the new environment.

Our global footprint is truly an asset as we leveraged learnings from across our business to position our markets for a strong and swift recovery.

2Q20 Results

Our performance in the second quarter was materially impacted by the COVID-19 pandemic, as expected. As the quarter progressed, however, we saw considerable improvement in performance from month to month. We came out of the quarter with reinforced confidence in the resilience of our business and the global beer category.

 

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In April, our volumes declined by 32.4%, as we faced a shutdown of our beer operations in key markets such as Mexico, South Africa and Peru, and the closure of the on-premise channel in most of our markets.

We saw a sequential improvement in May, with a volume decline of 21.1%. While we continued to face a shutdown of our beer operations in markets such as Mexico and South Africa, this improvement was driven by a return to positive volume growth in China, a healthy performance from our beer business in Brazil, the gradual reopening of the on-premise channel in certain markets, particularly in Europe, and the strength of the off-premise channel in both developed and developing markets.

In June, we delivered volume growth of 0.7%, despite cycling a strong performance from the prior year. We saw a significant recovery in June in Mexico and South Africa, where the resumption of operations was met with robust consumer demand. Brazil accelerated its healthy performance with meaningful beer volume growth as we leveraged our best-in-class distribution network, innovations and digital capabilities to reach consumers in new ways. In the US, we delivered top and bottom-line growth through the success of our premium brands, known and trusted mainstream brands and the strength of the off-premise channel. China delivered exceptional results, with its highest ever monthly volume.

In total, our volumes in 2Q20 declined by 17.1% with own beer volumes declining 17.2%. Revenue per hl declined by 0.6%, leading to a total revenue decline of 17.7%. EBITDA declined by 34.1% to 3 414 million USD, with margin contraction of 825 bps to 33.2%, due to the top-line decline and lower operational leverage, especially in the beginning of the quarter when we faced significantly reduced volume. These headwinds were partially offset by successful resource allocation initiatives that drove a meaningful reduction in SG&A.

The trajectory of the business throughout the second quarter reinforced our confidence in the resilience of the beer category, particularly in the off-premise channel, where we saw healthy growth in both developed and developing markets. The continued reopening of the on-premise channel around the world also contributed to an improved performance, especially in May and June. We are excited about the return of these consumption occasions, while remaining cautious as we are now seeing renewed on-premise restrictions in certain markets. South Africa implemented a second ban on alcohol sales in mid-July, which will impact our results in 3Q20.

In view of the economic uncertainties caused by the COVID-19 pandemic, we performed an impairment review considering different scenarios for recovery of sales for our cash generating units: a base case, which we deem to be the most likely case, a best case and a worst case to which we applied different probabilities of occurrence. Based on the information available, we concluded that no impairment was warranted under the base and best case scenarios. However, we were exposed to a risk of impairment for the South Africa and Rest of Africa cash generating units under the worst case scenario and concluded that it was prudent to recognize a 2.5 billion USD non-cash goodwill impairment charge applying a 30% probability of occurrence of the worst case scenario. This charge is partially offset by a 1.9 billion USD gain on the disposal of the Australian operations. Please refer to page 12 for additional disclosure.

Connecting with our Customers and Consumers

Growing trends such as online B2B platforms, e-commerce and digital marketing have accelerated dramatically in recent months. We have been investing in these capabilities that we believe will transform our business into a truly customer- and consumer-centric organization, putting us in an advantaged position to capture growth from these evolving trends.

BEES, our proprietary B2B digital ordering platform, empowers our customers and propels us to be even more customer-centric. It combines our best-in-class logistics and sales systems with new digital capabilities, including artificial intelligence-based algorithms. The ability to maintain a consistent dialogue without the use of in-person interactions has proven exceptionally valuable during this volatile time, further strengthening our relationships with our customers.

We continue to see strong growth in the e-commerce channel, both through our direct-to-consumer platforms and our partnerships with major global online retailers. Consistent investments in owned and third-party                e-commerce, including 20+ direct-to-consumer ventures globally, are positioning us to lead online sales. For example, in the second quarter, our owned e-commerce beer store portfolio in Europe more than doubled compared to the prior year and Zé Delivery has significantly accelerated the growth of the beer e-commerce

 

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segment in Brazil.

We have also developed new proprietary platforms in response to the crisis, such as Tienda Cerca, a free online delivery service that is now used by approximately 400 000 neighborhood shops in eight markets in Latin America.

We have also developed innovative ways to connect with consumers at a distance over the past few months. In the UK, Budweiser celebrated the return of the English Premier League by giving fans the opportunity to cheer for their favorite teams from our billboards. In Brazil, we launched “lives,” a series of livestreamed online concerts to support our portfolio of brands, including our recent innovation Brahma Duplo Malte, which generated over 675 million views and considerable earned media.

Exercising Financial Discipline

Our commitment to financial discipline is unwavering. We continue to proactively manage the factors that are within our influence to preserve our liquidity while supporting the long-term growth of our business.

Efficiently utilizing our resources remains a core competency. In the second quarter, we delivered meaningful savings from several initiatives while continuing to invest effectively behind our brands and commercial strategy.

We have taken significant actions to maintain strong liquidity in a more volatile and uncertain environment, while proactively managing our debt profile. Earlier this year, we drew down our nine billion USD revolving credit facility (RCF) in full and successfully completed bond issuances of 4.5 billion EUR and 6.0 billion USD. Subsequently, we received approximately 10.8 billion USD from the sale of our Australian subsidiary. We also had improved cash flow generation from our continuing operations over the course of the quarter.

As a result, we repaid our RCF in full in June. In July, we executed a tender offer for certain USD and EUR bonds and announced a redemption of certain USD, AUD and CAD bonds, resulting in a gross debt paydown of more than 4.7 billion USD. These proactive measures significantly reduced our upcoming liabilities while maintaining strong liquidity.

Net debt to normalized EBITDA was 4.86x for the 12-month period ending 30 June 2020, impacted by the COVID-19 pandemic on our results and the seasonality of our cash flows, which are typically weighted toward the second half of the year. Deleveraging to around 2x remains our commitment and we will prioritize debt repayment in order to meet this objective.

Positioned for a Strong Recovery

The first half of this year has tested all of us in many ways. We are inspired by the resilience of our people, our business and the global beer category.

Our company is well-positioned for a strong recovery. We have a diverse geographic footprint with exposure to high-growth regions. A clear commercial strategy gives us the tools to lead and grow the global beer category and scale best practices across markets. Our portfolio of the world’s most valuable beer brands enables us to reach more consumers on more occasions. Our profitability is industry-leading, allowing us to weather even extreme volatility. Investments in capabilities such as B2B sales, e-commerce and digital marketing put us in an advantaged position to capture growth from these accelerating trends.

Most importantly, we have a culture of ownership and a long-term mindset. Our people are rising to the challenge each day, demonstrating ingenuity, passion and strength to keep us moving forward. We are privileged to lead the global beer category, a category that has existed for centuries through many crises and will continue to thrive long after the current crisis is behind us.

 

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BUSINESS REVIEW

United States

Our US business performed well in the second quarter even in the face of continued industry pressure and volatility caused by the COVID-19 pandemic, primarily due to the continued implementation of our commercial strategy. We leveraged the learnings from our global colleagues, as well as data and analytics, to quickly and efficiently adapt our operations to continue supplying the market and effectively address changing consumer needs.

Our estimated market share was stable this quarter, as our sales-to-retailers (STRs) were flattish along with the industry. In light of the strong consumer demand, depletions of inventory accelerated while sales-to-wholesalers (STWs) declined by 6.1%. As a result, revenue declined by 5.9%. Revenue per hl grew by 0.2%, as revenue management initiatives were offset by government-mandated on-premise closures which impacted our brewpubs and the facilitation of the return of kegs from the on-premise channel, in partnership with our wholesalers. Throughout the second quarter, we observed a gradual reopening of the on-premise channel, though many states have since reinstated restrictions. EBITDA declined by 5.1%, with margin expansion of 32 bps to 41.0% driven by cost efficiencies and the timing of variable compensation accruals.

Our above core portfolio once again led the way and delivered an estimated market share gain of 90 bps in 2Q20. This was led by the successful launch of Bud Light Seltzer earlier this year, which remains the top innovation in the category by volume in 2020. Michelob Ultra continued its strong momentum as a top share gainer in the category, finding new ways to connect with consumers digitally to support an active lifestyle.

In the mainstream segment, our core, core light and value brands delivered an estimated loss of 90 bps of market share. This improvement versus recent trends is largely due to the uplift of beer sales in the off-premise channel, which disproportionately benefits established brands and larger packs. Within the mainstream segment, we estimate our portfolio lost approximately 15 bps of market share.

In HY20, our STRs declined by 0.4% in an industry that we estimate was flattish, resulting in a market share decline of 20 bps. Our STWs declined by 3.7% and revenue declined by 2.3% with revenue per hl growth of 1.5%. EBITDA declined by 1.6% with margin expansion of 28 bps to 40.4%.

Mexico

In 2Q20, our volumes in Mexico declined by 38%, outperforming the industry. Revenue declined by 36% with revenue per hl growth of mid-single digits, above inflation, driven by revenue management initiatives and positive brand mix from the growth of our above core portfolio. EBITDA declined by 47% in the quarter, with margin contraction resulting from operational deleverage and adverse packaging mix, partially offset by cost-savings initiatives.

Our beer business was shut down during the nationwide lockdown in the first two months of the quarter. We quickly pivoted to produce low-alcohol beer products, Victoria 1.8 and Corona Ligera, which addressed new in-home consumption occasions. We also leveraged our direct-to-consumer and B2B capabilities, which saw significant acceleration throughout the crisis. Additionally, we launched a platform called “#PorNuestroMexico” to support a strong recovery through humanitarian initiatives, such as face mask and hand sanitizer donations, and customer support initiatives, such as providing safety equipment and credit support.

In June, the restrictions on our operations were lifted and we rapidly returned to full operational status with increased safety measures to protect our people. Our beer volumes grew by high teens in June, due to the replenishment of inventory levels in the trade and strong consumer demand. Our above core portfolio saw strong growth in the month, with double-digit growth of our global brands, Michelob Ultra and the Modelo Especial family.

In HY20, volumes declined by high teens, with revenue per hl growth of mid-single digits, above inflation,

 

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resulting in a revenue decline of mid-teens and an EBITDA decline of high teens.

Our portfolio became available in an additional 1 600 OXXO stores in July, as we completed the fourth wave of our expansion into the country’s largest convenience store channel. We remain excited about the long-term growth potential and incrementality of this opportunity.

Colombia

In Colombia, despite the shutdown of the on-premise channel which represents more than half of our volume, total volume declined by 31%, with beer volumes down 32% and non-beer volumes down about 20%. In June, our volume performance improved versus the first two months of the quarter, as the gradual re-opening of certain sectors of the economy led to improving consumer confidence and disposable income. Total revenue declined by 35% in the quarter, with revenue per hl declining by mid-single digits, negatively impacted by the shutdown of the on-premise channel and growth of our affordable packaging formats. EBITDA declined by approximately 46% with margin contraction of over 800 bps, driven by transactional currency and commodity headwinds, operational deleverage and negative channel and packaging mix, partially offset by cost efficiencies.

Our performance in the quarter was significantly impacted by the nationwide lockdown of the on-premise channel and stay-at-home restrictions, though these began to ease throughout the quarter. Additionally, while on-premise alcohol consumption remains restricted, many on-premise outlets are now offering take-out, supporting improving volume trends. We continued to expand the premium segment in the quarter while further enhancing our smart affordability strategy. We are supporting the recovery of our customers with initiatives such as Tienda Cerca, an online delivery platform, and our recently-launched proprietary B2B online platform, BEES.

In HY20, total volumes declined by high teens, with beer volumes down high teens and non-beer volumes down low teens. Revenue declined by low double-digits, with a mid-single digit decline in revenue per hl. EBITDA declined by double-digits with over 400 bps of margin contraction.

Brazil

In Brazil, revenue declined by 6.2% in 2Q20, with total volumes down by 4.1%. Our beer business delivered a healthy performance in the context of a volatile external environment, with a volume decline of 1.3%, outperforming the industry according to our estimates. We saw an improving trend throughout the quarter driven by the success of our innovation strategy, reliability of our supply chain and customer relationships, the strengths of our distribution footprint and a shift in off-premise consumption to traditional outlets, where our portfolio over-indexes. Furthermore, these benefits were amplified by the positive impact of government subsidies on consumer disposable income. Our non-beer business declined by 12.6%, impacted by COVID-19 restrictions and the consequent change in consumption occasions. Revenue per hl declined by 2.2% in 2Q20, primarily driven by the channel mix shift to the off-premise.

EBITDA declined by 28.6% in 2Q20, with margin contraction of 927 bps to 29.1%, impacted by operational deleverage and packaging mix resulting from the channel mix shift. These headwinds were partially offset by meaningful cost efficiencies in SG&A.

Although the COVID-19 pandemic has created significant challenges for our business, it has also accelerated consumer trends that we have been investing behind, primarily reinforcing the need for an innovative, consumer-centric mindset and advancing our business transformation enabled by technology. We have been enhancing our portfolio across a variety of segments. In the mainstream segment, Skol Puro Malte grew by strong double-digits from a meaningful base. In the core plus segment, Bohemia more than doubled in the quarter supported by its repositioning and new visual brand identity, and we are further elevating our presence in the segment through the successful launch of Brahma Duplo Malte. In the premium segment, our global brands grew by double-digits, led by Budweiser, though our domestic premium brands declined given their over-exposure to the on-premise channel.

 

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Our digital transformation continues to gain traction. Our customers are increasingly relying on our B2B digital solutions, and our direct-to-consumer e-commerce platform, Zé Delivery, has been rapidly increasing geographic coverage, reaching 2.2 million orders in June versus 1.5 million orders in FY19. We continue to connect with consumers in new ways with initiatives such as “lives,” a series of livestreamed online concerts, which reached more than 675 million views in the quarter.

In HY20, our volumes declined by 6.9%, with beer volumes down 6.9% and non-beer volumes down 6.8%. Revenue declined by 8.3%, with a revenue per hl decline of 1.5%. EBITDA declined by 27.2% with margin compression of 820 bps to 31.7%.

South Africa

Our business in South Africa was significantly impacted by the nationwide lockdown that began in late March and lasted until the end of May, which included a complete ban on the sale of alcohol beverages. Revenue and volume declined by more than 60%. EBITDA was slightly ahead of break-even for the quarter, with significant margin contraction driven by operational deleverage from the complete lack of volume in the first two months of the quarter, partially offset by cost-savings initiatives. In HY20, volumes, revenue and EBITDA declined by double-digits, with significant margin contraction.

We fully resumed operations at the beginning of June, and we saw a strong recovery in the month with volume growth of high single digits. However, a second ban on the sale of alcohol beverages was implemented in mid-July. Our priority is and continues to be the safety and well-being of our people and our communities. We remain focused on working with the South African government on measures that will meaningfully combat the public health crisis, while supporting the country’s much-needed economic recovery.

China

Our business in China continued its recovery throughout the second quarter, delivering a slight volume decline of 0.4%. While we faced a 17% decline in April, we achieved mid-single digit growth in May and June. Our June performance represented our highest ever monthly volumes in China, while still maintaining healthy levels of inventory in the trade. Our revenue declined by 4.7% with a revenue per hl decline of 4.3% in the quarter due to a challenging comparable and adverse brand and channel mix, given the slower recovery of the nightlife channel. EBITDA declined by 12.6% with an EBITDA margin of 38.3%, driven by the top-line decline, partially offset by cost efficiencies.

In 2Q20, our Super Premium portfolio continued its momentum with volume growth in the quarter. Nonetheless, our revenue per hl was negatively impacted by the slower recovery of the nightlife channel, where Budweiser is the leading brand. Additionally, our mainstream brands outperformed in the quarter, especially our local brands. We believe that the long-term premiumization trend in China remains intact, given the continued healthy performance of the Super Premium segment, strong indications of economic recovery and encouraging stimulus policies.

We launched several new brands across a variety of price segments and styles ahead of the summer season. Leveraging our global portfolio of brands and the category expansion framework, we have launched Bud Light as a premium lager and Beck’s as an international pure malt offering. Additionally, we expanded Sedrin Lychee nationally in the flavored beer segment.

Throughout the quarter, we saw improving trends across channels. The in-home channel is effectively fully open and our business performed very well, with volume growth of high single digits. In the on-premise channel, more than 90% of restaurants were open by the end of June with comparable rates of sale to last year. The nightlife channel improved significantly month-over-month, with more than 80% of venues open at the end of June. The e-commerce channel, where we have grown our market share to more than twice that of the next brewer, continued to accelerate its growth.

In HY20, revenue declined by 23.3%, driven by a volume decline of 20.6% and revenue per hl decline of 3.4%.

 

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EBITDA declined by 37.0% with an EBITDA margin of 33.3%.

Highlights from our other markets

Our business in Canada demonstrated resilience in a challenging environment, delivering a flattish volume performance well ahead of the industry. Our beyond beer business considerably outperformed, led by successful innovation launches and the growth of our seltzer portfolio, driven by Nutrl. The COVID-19 pandemic resulted in a shift from the on-premise channel, which has a higher revenue per hl, to the off-premise channel, impacting our top-line, though this was more than offset by cost efficiencies to deliver bottom-line growth.

In Peru, our volumes and revenue declined significantly as a result of government lockdown restrictions implemented in March. At the end of April, we resumed sales and distribution of existing inventory, and in June we resumed full brewing operations, resulting in improved volume trends throughout the quarter. We are transforming our business to better reach consumers through an enhanced portfolio of new brands, such as our smart affordability brand Golden.

In Ecuador, our volumes and revenue declined significantly due to the COVID-19 pandemic and associated government restrictions. In June, we saw a gradual easing of restrictions, leading to improved volume trends in the month. Despite the challenging environment, our premium and super premium brands gained share in the quarter. We also expanded our smart affordability strategy to brew beers with local crops through a program called Siembra por Contrato, supporting farmers in the country.

In Argentina, our business was impacted by the ongoing challenging environment. Volumes declined by low teens in the quarter, with revenue and revenue per hl growing by double-digits as a result of revenue management initiatives in the highly inflationary environment. Our above core portfolio remained resilient and performed well, led by the growth of our global and local brands. Corona and our local champion in the core plus segment, Andes Origen, delivered high double-digit growth in the quarter. We continue to focus on the digital transformation of our business and have observed strong results from our direct-to-consumer initiatives and our e-retail platforms, aimed at supporting local businesses.

Europe volumes and revenue declined by mid-teens in the quarter. Revenue per hl declined by mid-single digits, primarily driven by channel mix due to the widespread shut-down of the on-premise channel, partially offset by positive brand mix from the continued outperformance of our premium brands. We have seen an uplift in the off-premise channel since the outbreak of the COVID-19 pandemic, with accelerated growth of premium brands and larger packs. In June, we saw the gradual re-opening of the on-premise channel in most of our markets, resulting in improved volume trends. We continued to gain market share across the majority of our markets in the second quarter, supported by the strong growth of Budweiser following its successful launch in France and the Netherlands last year.

In Africa excluding South Africa, our breweries remained operational throughout the quarter in most of our key markets. In Nigeria, we saw a rapid recovery following the easing of restrictions in May, leading to volume growth in the month of June. We saw a similar trajectory in the rest of our markets in Africa, with April the most impacted month of the quarter, followed by improving volume trends in May and growth in many markets in June.

In South Korea, our revenue and volumes declined in 2Q20 driven by a softer industry resulting from the COVID-19 pandemic. We also faced a challenging comparable for revenue per hl, as we took a price increase in April 2019 that was subsequently rolled back in October 2019 to revitalize the domestic beer industry. We continue to leverage our full portfolio of brands to connect with consumers across price segments and channels. In the premium segment, our strong portfolio of established brands and recent innovations outperformed the industry. In total, we estimate that our market share grew quarter-over-quarter once again. We are encouraged by our full portfolio’s momentum in the market.

 

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CONSOLIDATED INCOME STATEMENT

 

 Figure 3. Consolidated income statement (million USD)                     
    

2Q19

Restated

 

    

2Q20

    

Organic

growth

 

 

Revenue

     13 599        10 294        -17.7%  

Cost of sales

     -5 176        -4 524        4.9%  

Gross profit

     8 422        5 770        -25.6%  

SG&A

     -4 139        -3 536        6.8%  

Other operating income/(expenses)

     229        63        -70.9%  

Normalized profit from operations (normalized EBIT)

     4 513        2 297        -45.0%  

Non-recurring items above EBIT

     -58        -2 751     

Net finance income/(cost)

     -1 004        -1 044     

Non-recurring net finance income/(cost)

     79        174     

Share of results of associates

     9        20     

Income tax expense

     -894        -174     

Profit from continuing operations

     2 645        -1 478     

Discontinued operations results (recurring and non-recurring)

     115        1 930     

Profit

     2 760        452     

Profit attributable to non-controlling interest

     276        102     

Profit attributable to equity holders of AB InBev

     2 484        351     

Normalized EBITDA

     5 644        3 414        -34.1%  

Normalized profit attributable to equity holders of AB InBev

     2 319        921     
        
     HY19      HY20      Organic  
     Restated             growth  

Revenue

     25 823        21 298        -12.0%  

Cost of sales

     -9 953        -9 097        2.5%  

Gross profit

     15 869        12 201        -18.0%  

SG&A

     -8 077        -7 257        4.0%  

Other operating income/(expenses)

     388        158        -56.3%  

Normalized profit from operations (normalized EBIT)

     8 180        5 102        -33.6%  

Non-recurring items above EBIT

     -103        -2 796     

Net finance income/(cost)

     -1 370        -4 204     

Non-recurring net finance income/(cost)

     1 201        -1 388     

Share of results of associates

     62        33     

Income tax expense

     -1 565        -492     

Profit from continuing operations

     6 406        -3 744     

Discontinued operations results (recurring and non-recurring)

     236        2 055     

Profit

     6 642        -1 688     

Profit attributable to non-controlling interest

     587        211     

Profit attributable to equity holders of AB InBev

     6 055        -1 900     

Normalized EBITDA

     10 446        7 363        -24.7%  

Normalized profit attributable to equity holders of AB InBev

     4 714        76     

 

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Non-recurring items above EBIT

 

 Figure 4. Non-recurring items above EBIT from continuing and discontinued operations (million USD)

        
    

2Q19

Restated

   2Q20    HY19
Restated
   HY20  

 Impairment of Goodwill

   -    -2 500    -    -2 500

  COVID-19 costs

   -    -66    -    -78

 Restructuring

   -30    -35    -58    -60

 Business and asset disposal (including impairment losses)

   -14    -149    -24    -154

 Acquisition costs / Business combinations

   -16    -2    -21    -4

 Non-recurring in profit from operations

   -58    -2 751    -103    -2 796

 Gain on disposal of Australia (in discontinued operations results)

   -    1 919    -    1 919

 Total non-recurring items in EBIT

   -58    -832    -103    - 877

EBIT excludes negative non-recurring items of 832 million USD in 2Q20 and 877 million USD in HY20.

During 2Q20 we reported a 2.5 billion USD non-cash goodwill impairment charge. The COVID-19 pandemic resulted in a sharp contraction of sales during 2Q20 in many countries in which we operate. We concluded that a triggering event occurred which required us to perform an impairment test. The impairment test considered three scenarios for recovery of sales for the tested cash-generating units: a base case, which we deem to be the most likely case, a best case and a worst case. Based on the results of the impairment test, we concluded that no impairment was warranted under the base and best case scenarios.

Nevertheless, under the worst case scenario ran with higher discounts rates to factor the heightened business risk, we concluded that the estimated recoverable amounts of the South Africa and Rest of Africa cash generating units were below their carrying value. Accordingly, we determined that it was prudent, in view of the uncertainties, to record an impairment charge of 2.5 billion USD applying a 30% probability of occurrence of the worst case scenario. The goodwill impairment charge was partially offset by a 1.9 billion USD gain on the disposal of the Australia operations reported in “Discontinued operations results”.

In addition, normalized profit from operations excludes negative non-recurring items of 66 million USD in 2Q20 and 78 million USD in HY20 related to costs associated with COVID-19. These costs are mainly related to personal protection equipment for our colleagues and charitable donations.

Net finance income/(cost)

 

Figure 5. Net finance income/(cost) (million USD)

           
     2Q19    2Q20    HY19    HY20
     Restated         Restated     

Net interest expense

   -973    -1 004    -1 946    -1 898

Net interest on net defined benefit liabilities

   -23    -20    -48    -41

Accretion expense

   -145    -133    -287    -291

Mark-to-market

   174    131    1 124    -1 724

Other financial results

   -37    -18    -213    -250

Net finance income/(cost)

   -1 004    -1 044    -1 370    -4 204

Net finance cost in HY20 was negatively impacted by the mark-to-market losses on the hedging of our share-based payment programs. The number of shares covered by the hedging of our share-based payment programs, and the opening and closing share prices, are shown in figure 6 below.

 

Figure 6. Share-based payment hedge

           
     2Q19    2Q20    HY19    HY20

Share price at the start of the period (Euro)

   74.76    40.47    57.70    72.71

Share price at the end of the period (Euro)

   77.84    43.87    77.84    43.87

Number of equity derivative instruments at the end of the period (millions)

   46.9    55.0    46.9    55.0

 

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Non-recurring net finance income/(cost)

 

Figure 7. Non-recurring net finance income/(cost) (million USD)

        
     2Q19    2Q20    HY19    HY20
     Restated               

 Mark-to-market (Grupo Modelo deferred share instrument)

   88    62    556    - 729

 Other mark-to-market

   87    61    542    - 709

 Early termination fee of Bonds and Other

   - 96    50    103    50

 Non-recurring net finance income/(cost)

   79    173    1 201    -1 388

Non-recurring net finance income includes mark-to-market gains on derivative instruments entered into to hedge the shares issued in relation to the Grupo Modelo and SAB combinations.

The number of shares covered by the hedging of the deferred share instrument and the restricted shares are shown in figure 8, together with the opening and closing share prices.

 

Figure 8. Non-recurring equity derivative instruments                            
                 2Q19                  2Q20                  HY19                  HY20  

 Share price at the start of the period (Euro)

     74.76        40.47        57.70        72.71  

 Share price at the end of the period (Euro)

     77.84        43.87        77.84        43.87  

 Number of equity derivative instruments at the end of the period (millions)

     45.5        45.5        45.5        45.5  

Income tax expense

 

Figure 9. Income tax expense (million USD)                            
                 2Q19                  2Q20                  HY19                  HY20  
     Restated             Restated         

Income tax expense

     894        174        1 565        492  

Effective tax rate

     25.3%        -13.1%        19.8%        -15.0%  

Normalized effective tax rate

     26.0%        16.8%        22.9%        66.6%  

Normalized effective tax rate before MTM

     27.4%        18.8%        27.4%        22.8%  

The decrease in our normalized ETR excluding mark-to-market gains and losses linked to the hedging of our share-based payment programs in both 2Q20 and HY20 is primarily driven by country mix and the positive impact of tax attributes, with taxes applied on a lower base as a result of the COVID-19 pandemic.

Profit, Normalized Profit and Underlying Profit

 

Figure 10. Normalized Profit attributable to equity holders of AB InBev (million USD)  
                 2Q19                  2Q20                  HY19                  HY20  
     Restated             Restated         

Profit attributable to equity holders of AB InBev

     2 484        351        6 055        -1 900  

Non-recurring items, before taxes

     58        2 751        103        2 796  

Non-recurring finance (income)/cost, before taxes

     - 79        - 174        -1 201        1 388  

Non-recurring taxes

     - 19        -37        5        - 107  

Non-recurring non-controlling interest

     - 10        -41        - 12        -46  

Profit from discontinued operations (recurring and non-recurring)

     - 115        -1 930        - 236        -2 055  
  

 

 

 

Normalized profit attributable to equity holders of AB InBev

     2 319        921        4 714        76  

Underlying profit attributable to equity holders of AB InBev

     2 143        790        3 593        1 805  

 

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Basic, Normalized and Underlying EPS

 

Figure 11. Earnings per share (USD)  
                 2Q19                  2Q20                  HY19                    HY20  
     Restated             Restated         

Basic earnings per share

     1.25        0.18        3.06        - 0.95  

Non-recurring items, before taxes

     0.03        1.38        0.05        1.40  

Non-recurring finance (income)/cost, before taxes

     - 0.04        - 0.09        - 0.61        0.70  

Non-recurring taxes

     - 0.01        - 0.02        -        - 0.05  

Non-recurring non-controlling interest

     - 0.01        - 0.02        - 0.01        - 0.02  

Profit from discontinued operations (recurring and non-recurring)

     - 0.06        - 0.97        - 0.12        - 1.03  
  

 

 

 
           

Normalized earnings per share

     1.17        0.46        2.38        0.04  

Underlying earnings per share

     1.08        0.40        1.81        0.90  
Figure 12. Key components-Normalized Earnings per share in USD  
     2Q19      2Q20      HY19      HY20  
     Restated             Restated         

Normalized EBIT before hyperinflation

     2.28        1.16        4.15        2.58  

Hyperinflation impacts in normalized EBIT

     -        - 0.01        - 0.02        - 0.02  
  

 

 

 

Normalized EBIT

     2.28        1.15        4.13        2.56  

Mark-to-market (share-based payment programs)

     0.09        0.07        0.57        - 0.86  

Net finance cost

     - 0.59        - 0.59        - 1.26        - 1.24  

Income tax expense

     - 0.46        - 0.11        - 0.79        - 0.30  

Associates & non-controlling interest

     - 0.14        - 0.06        - 0.27        - 0.11  
  

 

 

 

Normalized EPS

     1.17        0.46        2.38        0.04  

Mark-to-market (share-based payment programs)

     - 0.09        - 0.07        - 0.57        0.86  

Hyperinflation impacts in EPS

     -        -        -        -  

Normalized EPS before MTM and hyperinflation

     1.08        0.40        1.81        0.90  

Adoption of hyperinflation accounting in Argentina

After reaching a three-year cumulative inflation rate greater than 100%, we are reporting the results from Argentina applying hyperinflation accounting, starting from the 3Q18 results release in which we accounted for the hyperinflation impact for the first nine months of 2018.

The impact of hyperinflation in 2Q19 and 2Q20, as well as HY19 and HY20, on our Revenue and Normalized EBITDA were as follows:

 

Figure 13. Impact of hyperinflation  
Revenue                2Q19                  2Q20                  HY19                   HY20  

Indexation(1)

     45        20        59        27  

Currency(2)

     13        -44        -38        -80  
  

 

 

 

Total impact

     59        -24        21        -53  
           
Normalized EBITDA    2Q19      2Q20      HY19      HY20  

Indexation(1)

     20        8        24        8  

Currency(2)

     12        -12        -16        -21  
  

 

 

 

Total impact

     33        -4        9        -13  
           

USDARS average rate

           40.2779        62.6012  

USDARS closing rate

           42.4489        70.4550  

(1) Indexation calculated at closing rate

(2) Currency impact from hyperinflation calculated as the difference between converting the Argentinean peso (ARS) reported amounts at the closing exchange rate compared to the average exchange rate of each period

 

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The IFRS rules (IAS 29) require us to restate the year-to-date results for the change in the general purchasing power of the local currency, using official indices before converting the local amounts at the closing rate of the period (i.e., HY20 and HY19 results at the closing rate on 30 June 2020 and 2019, respectively).

The 2Q results are calculated by deducting from the HY results the 3M results as published. As a consequence, the South America 2Q20 results are negatively impacted by the restatement of the 3M results as follows:

 

South America 1Q20

as reported (1)

   1Q19      Scope      Currency
Translation
     Organic
Growth
     1Q20  

Revenue

     2 618        -        -392        -41        2 185  

Cost of sales

     -1 039        -        173        -101        -967  

Gross profit

     1 579        -        -219        -142        1 218  

SG&A

     - 734        -        121        -80        -693  

Other operating income/(expenses)

     61        -        -6        -17        38  

Normalized EBIT

     907        -        -104        -239        563  

Normalized EBITDA

     1 137        -        -142        -215        780  
              

South America 1Q20

restated at HY20 rates (2)

   1Q19      Scope      Currency
Translation
     Organic
Growth
     1Q20  

Revenue

     2 661        -        -444        -44        2 173  

Cost of sales

     -1 047        -        194        -108        -962  

Gross profit

     1 614        -        -250        -152        1 212  

SG&A

     -745        -        134        -79        -690  

Other operating income/(expenses)

     59        -        -5        -16        37  

Normalized EBIT

     927        -        -121        -247        559  

Normalized EBITDA

     1 160        -        -163        -223        774  
              

Impact of 1Q restatement in 2Q

results (3)

   1Q19      Scope      Currency
Translation
     Organic
Growth
     1Q20  

Revenue

     43        -        -52        -3        -12  

Cost of sales

     -8        -        21        -7        5  

Gross profit

     35        -        -31        -10        -6  

SG&A

     -11        -        13        1        3  

Other operating income/(expenses)

     - 2        -        1        1        -1  

Normalized EBIT

     20        -        -17        -8        -4  

Normalized EBITDA

     23        -        -21        -8        -6  

(1) South America 1Q results with Argentina results reported in Argentinean peso (ARS) restated for year to date March purchasing power converted at 1Q closing rates of 43.3528 for 1Q19 and 64.4683 for 1Q20 results (as reported on 07 May 2020)

(2) South America 1Q results with Argentina results reported in ARS restated for year to date June purchasing power converted at HY closing rates of 42.4489 for HY19 and 70.4549 for HY20 results.

(3) Impact of restating the 1Q results under hyperinflation in the 2Q results is calculated as difference between (2) and (1) above

The restatement of 1Q results at the June purchasing power and HY closing rate had a negative impact of 3 million USD on revenue and 8 million USD on Normalized EBITDA on the HY20 reported organic growth and on the 2Q20 reported results. For the 2Q20 performance reporting, these impacts are excluded from organic calculations and are identified separately in the 2Q20 annexes within the column labeled “Hyperinflation restatement”. Organic growth percentages for 2Q20 are calculated by considering the “Organic growth” reported in the annexes over the 2Q19 Restated base adjusted for the 1Q19 restatement.

Furthermore, IAS 29 requires us to restate the non-monetary assets and liabilities stated at historical cost on the balance sheet of our operations in hyperinflation economies using inflation indices and to report the

 

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resulting hyperinflation through the income statement on a dedicated account for hyperinflation monetary adjustments in the finance line and report deferred taxes on such adjustments, when applicable.

In HY20, we reported 30 million USD monetary adjustment in the finance line, a negative impact on the profit attributable to equity holders of AB InBev of 5 million USD. This had no impact on normalized EPS in 2Q20 or HY20.

Reconciliation between profit attributable to equity holders and normalized EBITDA

 

Figure 14. Reconciliation of normalized EBITDA to profit attributable to equity holders of AB InBev (million USD)  
             2Q19                  2Q20                  HY19                  HY20  
     Restated             Restated         

Profit attributable to equity holders of AB InBev

     2 484        351        6 055        -1 900  

Non-controlling interests

     276        102        587        211  

Profit

     2 760        452        6 642        -1 688  

Discontinued operations results (recurring and non-recurring)

     -115        -1 930        -236        -2 055  

Profit from continuing operations

     2 645        -1 478        6 406        -3 744  

Income tax expense

     894        174        1 565        492  

Share of result of associates

     -9        -20        -62        -33  

Net finance (income)/cost

     1 004        1 044        1 370        4 204  

Non-recurring net finance (income)/cost

     -79        -174        -1 201        1 388  

Non-recurring items above profit from operations (incl. non-recurring impairment)

     58        2 751        103        2 796  

Normalized EBIT

     4 513        2 297        8 180        5 102  

Depreciation, amortization and impairment

     1 132        1 117        2 265        2 261  

Normalized EBITDA

     5 644        3 414        10 446        7 363  

Normalized EBITDA and normalized EBIT are measures utilized by AB InBev to demonstrate the company’s underlying performance.

Normalized EBITDA is calculated excluding the following effects from profit attributable to equity holders of AB InBev: (i) non-controlling interest; (ii) discontinued operations results; (iii) income tax expense; (iv) share of results of associates; (v) net finance cost; (vi) non-recurring net finance cost; (vii) non-recurring items above EBIT (including non-recurring impairment); and (viii) depreciation, amortization and impairment.

Normalized EBITDA and normalized EBIT are not accounting measures under IFRS accounting and should not be considered as an alternative to profit attributable to equity holders as a measure of operational performance, or an alternative to cash flow as a measure of liquidity. Normalized EBITDA and normalized EBIT do not have a standard calculation method and AB InBev’s definition of normalized EBITDA and normalized EBIT may not be comparable to that of other companies.

 

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FINANCIAL POSITION

 

Figure 15. Cash Flow Statement (million USD)  
     HY19          HY20  
         Restated         

Operating activities

     

Profit from continuing operations

     6 406        -3 744  

Interest, taxes and non-cash items included in profit

     3 979        11 164  
                 

Cash flow from operating activities before changes in working capital and use of provisions

     10 385        7 420  

Change in working capital

     -1 531        -2 700  

Pension contributions and use of provisions

     -279        -327  

Interest and taxes (paid)/received

     -4 129        -3 388  

Dividends received

     137        30  

Cash flow from operating activities on Australia discontinued operations

     314        84  
                 

Cash flow from operating activities

     4 897        1 119  

Investing activities

     

Net capex

     -1 488        -1 524  

Acquisition and sale of subsidiaries, net of cash acquired/disposed of

     -245        -204  

Net proceeds from sale/(acquisition) of other assets

     -6        -30  

Proceeds from Australia divestiture (discontinued operations)

     -          10 838  

Cash flow from investing activities on Australia discontinued operations

     -16        -13  
                 

Cash flow from investing activities

     -1 755        9 067  

Dividends paid

     -2 389        -1 219  

Net (payments on)/proceeds from borrowings

     1 410        10 194  

Payment of lease liabilities

     -225        -280  

Other (including purchase of non-controlling interest)

     -781        -457  

Cash flow from financing activities on Australia discontinued operations

     -13        -6  
                 

Cash flow from financing activities

     -1 998        8 231  

Net increase/(decrease) in cash and cash equivalents

     1 144        18 416  

HY20 recorded an increase in cash and cash equivalents of 18 416 million USD compared to an increase of 1 144 million USD in HY19, with the following movements:

 

Our cash flow from operating activities reached 1 119 million USD in the first six months of 2020 compared to 4 897 million USD in the first six months of 2019. The decrease mainly results from the negative impact on our results and reduced payable levels by the end of June 2020 compared to prior year, as a result of the COVID-19 pandemic.

 

Net cash inflow from investing activities was 9 067 million USD in the first six months of 2020 compared to a cash outflow of 1 755 million USD in the first six months of 2019. The increase in the cash flow from investing activities was mainly due to 10 838 million USD proceeds from the divestiture of the Australian business.

 

Our cash inflow from financing activities amounted to 8 231 million USD in the first six months of 2020, as compared to a cash outflow of 1 998 million USD in the first six months of 2019. In March 2020, the company drew the full 9.0 billion USD commitment under the 2010 Senior Facilities Agreement and as of 30 June 2020, the amount has been repaid in full. In addition, on 2 April 2020 and 3 April 2020, Anheuser-Busch InBev NV/SA and Anheuser-Busch InBev Worldwide Inc. completed the issuance of a series of EUR and USD bonds for a total amount of approximately 11.0 billion USD.

 

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We will continue to proactively manage our debt portfolio, of which 95% holds a fixed-interest rate, 36% is denominated in currencies other than USD, and maturities are well-distributed across the next several years.

Our net debt amounted to 87.4 billion USD as of 30 June 2020. Our net debt to normalized EBITDA ratio was 4.86x as of 30 June 2020. Our optimal capital structure is a net debt to normalized EBITDA ratio of around 2x. Deleveraging to around this level remains our commitment and we will prioritize debt repayment in order to meet this objective.

In addition to a very comfortable debt maturity profile and strong cash flow generation, as of 30 June 2020 we had total liquidity of 34.1 billion USD, which consisted of 9.0 billion USD available under committed long-term credit facilities and 25.1 billion USD of cash, cash equivalents and short-term investments in debt securities less bank overdrafts. Although we may borrow such amounts to meet our liquidity needs, we principally rely on cash flows from operating activities to fund our continuing operations.

In July 2020, we completed the tender offers of seven series of notes and repurchased approximately 3.0 billion USD aggregate principal amount of these notes. In addition, we notified holders that we were exercising our options to redeem the outstanding principal amount of five series of notes amounting to approximately 1.7 billion USD in July and August 2020.

 

Figure 16. Pro forma* bond repayment schedule as of 30 June 2020 (million USD)

 

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*Pro forma for announced bond redemption transactions that settle after 30 June 2020

 

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RECENT EVENTS

Tender Offers

On 7 July 2020, we completed the tender offers of seven series of notes issued by Anheuser-Busch InBev NV/SA (ABISA), and Anheuser-Busch InBev Finance Inc. (ABIFI) and repurchased approximately 3.0 billion USD aggregate principal amount of these notes. The total principal amount accepted in the tender offers is as follows:

 

Date of

redemption

   Issuer
(abbreviated)
  

Title of series of notes

issued exchanged

   Currency   

Original
principal
amount
outstanding

(in million)

  

Principal
amount
redeemed

(in million)

  

Principal
amount not
redeemed

(in million)

7 July 2020

   ABISA    4.000% Notes due 2021    EUR    750    231    519

7 July 2020

   ABISA    1.950% Notes due 2021    EUR    650    123    527

7 July 2020

   ABISA    0.875% Notes due 2022    EUR    2 000    356    1 644

7 July 2020

   ABISA    0.800% Notes due 2023    EUR    1 000    356    644

7 July 2020

   ABIFI    Floating Rate Notes due 2021    USD    311    129    182

7 July 2020

   ABIFI    2.625% Notes due 2023    USD    643    167    476

7 July 2020

   ABIFI    3.300% Notes due 2023    USD    2 799    1 467    1 332

Note Redemptions

On 13 July 2020, we announced that our wholly-owned subsidiaries Anheuser-Busch InBev Worldwide Inc (ABIWW), Anheuser-Busch InBev Finance Inc. (ABIFI) and Anheuser-Busch North American Holding Corporation (ABNA) were exercising their options to redeem the outstanding principal amount indicated in the table below of the following series of notes.

 

Date of

redemption

   Issuer
(abbreviated)
  

Title of series of notes

issued exchanged

   Currency   

Original principal
amount outstanding

(in million)

  

Principal amount
redeemed

(in million)

12 August 2020

   ABIWW    2.500% Notes due 2022    USD    454    454

12 August 2020

   ABIWW    4.375% Notes due 2021    USD    285    285

29 July

2020

   ABIWW    3.250% Notes due 2022    AUD    550    550

12 August 2020

   ABIFI    3.375% Notes due 2023    CAD    600    600

12 August 2020

   ABNA    3.750% Notes due 2022    USD    150    150

 

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COVID-19 RISK FACTORS

 

The following risk factors are provided to supplement the risk factors previously disclosed in periodic reports, including our 2019 Annual Report on Form 20-F (“Form 20-F”) filed with the US Securities and Exchange Commission (“SEC”) on 24 March 2020.

 

Our business, financial condition, cash flows and operating results have been and may continue to be negatively impacted by the COVID-19 pandemic. The public health crisis caused by the COVID-19 pandemic, as well as measures taken in response to contain or mitigate the pandemic, have had, and we expect will continue to have, certain negative impacts on our business including, without limitation, the following:

 

•  We have experienced disruptions to our ability to operate our production facilities in some countries, and in the future, we may experience further disruption to our ability to operate our production facilities or distribution operations as a result of regulatory restrictions, safety protocols, social distancing requirements and heightened sanitation measures. In addition, although at this time we have not experienced any material disruption to our supply chain, we may experience delays in deliveries of key supplies or disruptions to our distribution operations. Any sustained interruption in our operations or our business partners’ operations, distribution network or supply chain, or any significant continuous shortage of raw materials or other supplies could impact our ability to make, manufacture, distribute or sell our products or may result in an increase in our costs of production and distribution.

•  Sales of our products in the on-premise channel have been significantly impacted by the implementation of social distancing and lockdown measures in most of our markets, including the closure of bars, clubs and restaurants and restrictions on sporting events, music festivals and similar events. Although sales in the on-premise channel have begun to improve as a result of the easing of social distancing and lock down measures in many of these markets, such improvements may be impacted by the re-implementation of restrictions in certain markets, such as the restrictions imposed in South Africa in July. Any future outbreak or recurrence of COVID-19 cases in other markets that are currently in the process of easing social distancing and lock down measures may similarly result in the re-implementation of such measures and a further negative impact on our sales. Furthermore, if the COVID-19 pandemic intensifies and expands geographically or in duration, its negative impacts on our sales could be more prolonged and may become more severe. While we have experienced increased sales in the off-premise channel in certain markets since the outbreak, such increased volumes may not continue in the longer term and may not offset the pressure we are experiencing in the on-premise channel.

•  Consumption of beer and other alcohol and non-alcohol beverages in many of the jurisdictions in which we operate is closely linked to general economic conditions, with levels of consumption tending to rise during periods of rising per capita income and fall during periods of declining per capita income. Deteriorating economic and political conditions in many of our major markets affected by the COVID-19 pandemic, such as increased unemployment, decreases in disposable income, declines in consumer confidence, or economic slowdowns or recessions, could cause a further decrease in demand for our products. Furthermore, even as governmental restrictions are lifted and economies gradually reopen in many of our major markets, the ongoing economic impacts and health concerns associated with the COVID-19 pandemic may continue to affect consumer behavior, spending levels and consumption preferences

•  The impact of the COVID-19 pandemic on global economic conditions has impacted and may continue to impact the proper functioning of financial and capital markets, as well as foreign currency exchange rates, commodity and energy prices and interest rates. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access, or costs of, capital or borrowings, our business, our liquidity, our net debt to EBITDA ratio, credit ratings, results of operations and financial condition.

•  Compliance with governmental measures imposed in response to the COVID-19 pandemic has caused and may continue to cause us to incur additional costs, and any inability to comply with such measures can subject us to restrictions on our business activities, fines and other penalties, any of which can adversely affect our business. In addition, responses to the COVID-19 pandemic may result in both

 

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short-term and long-term changes to fiscal and tax policies in impacted jurisdictions, including increases in tax rates.

 

Any of the negative impacts of the COVID-19 pandemic, including those described above, alone or in combination with others, may have a material adverse effect on our results of operations, financial condition and cash flows. The full extent to which the COVID-19 pandemic will negatively affect our business, financial condition, cash flows and operating results will depend on future developments that are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.

 

 NOTES

 

To facilitate the understanding of AB InBev’s underlying performance, the analyses of growth, including all comments in this press release, unless otherwise indicated, are based on organic growth and normalized numbers. In other words, financials are analyzed eliminating the impact of changes in currencies on translation of foreign operations, and scope changes. Scope changes represent the impact of acquisitions and divestitures, the start or termination of activities or the transfer of activities between segments, curtailment gains and losses and year over year changes in accounting estimates and other assumptions that management does not consider as part of the underlying performance of the business. AB InBev has restated its 2019 results following the announcement of the agreement to divest Carlton & United Breweries (“the Australian operations”), its Australian subsidiary, to Asahi Group Holdings, Ltd. AB InBev is presenting the Australian operations as discontinued operations in a separate line of the consolidated income statement “profit from discontinued operations” in line with IFRS rules. This presentation is referred to as “2Q19 Restated” and “HY19 Restated”. As a result, all the presentations of AB InBev’s underlying performance and organic growth figures do not reflect the results of the Australian operations. All references per hectoliter (per hl) exclude US non-beer activities. To eliminate the effect of geography mix, i.e. the impact of stronger volume growth coming from countries with lower revenue per hl, and lower Cost of Sales per hl, we are also presenting, where specified, organic growth per hectoliter figures on a constant geographic basis. When we make estimations on a constant geographic basis, we assume each country in which we operate accounts for the same percentage of our global volume as in the same period of the previous year. References to the High End Company refer to a business unit made up of a portfolio of global, specialty and craft brands across more than 30 countries. Whenever presented in this document, all performance measures (EBITDA, EBIT, profit, tax rate, EPS) are presented on a “normalized” basis, which means they are presented before non-recurring items and discontinued operations. Non-recurring items are either income or expenses which do not occur regularly as part of the normal activities of the Company. They are presented separately because they are important for the understanding of the underlying sustainable performance of the Company due to their size or nature. Normalized measures are additional measures used by management and should not replace the measures determined in accordance with IFRS as an indicator of the Company’s performance. Values in the figures and annexes may not add up, due to rounding. 2Q20 and HY20 EPS is based upon a weighted average of 1 995 million shares compared to a weighted average of 1 980 million shares for 2Q19 and HY19.

 

Legal Disclaimer

This release contains “forward-looking statements”. These statements are based on the current expectations and views of future events and developments of the management of AB InBev and are naturally subject to uncertainty and changes in circumstances. The forward-looking statements contained in this release include, statements other than historical facts and include statements typically containing words such as “will”, “may”, “should”, “believe”, “intends”, “expects”, “anticipates”, “targets”, “estimates”, “likely”, “foresees” and words of similar import. All statements other than statements of historical facts are forward-looking statements. You should not place undue reliance on these forward-looking statements, which reflect the current views of the management of AB InBev, are subject to numerous risks and uncertainties about AB InBev and are dependent on many factors, some of which are outside of AB InBev’s control. There are important factors, risks and uncertainties that could cause actual outcomes and results to be materially different, including, but not limited to, the effects of the COVID-19 pandemic and uncertainties about its impact and duration and the risks and uncertainties relating to AB InBev described under Item 3.D of AB InBev’s Annual Report on Form 20-F filed with the SEC on 24 March 2020. Many of these risks and uncertainties are, and will be, exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements. The forward-looking statements should be read in conjunction with the other cautionary statements that are included elsewhere, including AB InBev’s most recent Form 20-F and other reports furnished on Form 6-K, and any other documents that AB InBev has made public. Any forward-looking statements made in this communication are qualified in their entirety by these cautionary statements and there can be no assurance that the actual results or developments anticipated by AB InBev will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, AB InBev or its business or operations. Except as required by law, AB InBev undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The second quarter 2020 (2Q20) and half year 2020 (HY20) financial data set out in Figure 1 (except for the volume information), Figures 3 to 5, 7, 9, 10 and 14 of this press release have been extracted from the group’s unaudited condensed consolidated interim financial statements as of and for the six months ended 30 June 2020, which have been reviewed by our statutory auditors PwC Réviseurs d’Entreprises SRL / PwC Bedrijfsrevisoren BV in accordance with the standards of the Public Company Accounting Oversight Board (United States). Financial data included in Figures 6, 8 and 11 to 13 have been extracted from the underlying accounting records as of and for the six months ended 30 June 2020 (except for the volume information).

 

 

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  CONFERENCE CALL AND WEBCAST

Investor Conference call and webcast on Thursday, July 30, 2020:

3.00pm Brussels / 2.00pm London / 9.00am New York

Registration details

Webcast (listen-only mode):

AB InBev 2Q20 Results Webcast

Conference call (with interactive Q&A):

AB InBev 2Q20 Conference Call (with interactive Q&A)

 

  ANHEUSER-BUSCH INBEV CONTACTS

  

Investors

  

Media

Lauren Abbott

  

Pablo Jimenez

Tel: +1 212 573 9287

  

Tel: +1 212 573 9289

E-mail: lauren.abbott@ab-inbev.com

  

E-mail: pablo.jimenez@ab-inbev.com

Maria Glukhova

  

Ingvild Van Lysebetten

Tel: +32 16 276 888

  

Tel: +32 16 276 608

E-mail : maria.glukhova@ab-inbev.com

  

E-mail: ingvild.vanlysebetten@ab-inbev.com

Jency John

  

Fallon Buckelew

Tel: +1 646 746 9673

  

Tel: +1 310 592 6319

E-mail: jency.john@ab-inbev.com

  

E-mail: fallon.buckelew@ab-inbev.com

 

About Anheuser-Busch InBev

Anheuser-Busch InBev is a publicly traded company (Euronext: ABI) based in Leuven, Belgium, with secondary listings on the Mexico (MEXBOL: ANB) and South Africa (JSE: ANH) stock exchanges and with American Depositary Receipts on the New York Stock Exchange (NYSE: BUD). Our Dream is to bring people together for a better world. Beer, the original social network, has been bringing people together for thousands of years. We are committed to building great brands that stand the test of time and to brewing the best beers using the finest natural ingredients. Our diverse portfolio of well over 500 beer brands includes global brands Budweiser®, Corona® and Stella Artois®; multi-country brands Beck’s®, Hoegaarden®, Leffe® and Michelob Ultra®; and local champions such as Aguila®, Antarctica®, Bud Light®, Brahma®, Cass®, Castle®, Castle Lite®, Cristal®, Harbin®, Jupiler®, Modelo Especial®, Quilmes®, Victoria®, Sedrin®, and Skol®. Our brewing heritage dates back more than 600 years, spanning continents and generations. From our European roots at the Den Hoorn brewery in Leuven, Belgium. To the pioneering spirit of the Anheuser & Co brewery in St. Louis, US. To the creation of the Castle Brewery in South Africa during the Johannesburg gold rush. To Bohemia, the first brewery in Brazil. Geographically diversified with a balanced exposure to developed and developing markets, we leverage the collective strengths of approximately 170,000 employees based in nearly 50 countries worldwide. For 2019, AB InBev’s reported revenue was 52.3 billion USD (excluding JVs and associates).

 

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Annex 1                                                 
AB InBev Worldwide    2Q19             Currency      Hyperinflation      Organic             Organic  
     Scope      2Q20  
     Restated             Translation      restatement      Growth             Growth  

Total volumes (thousand hls)

     144 316        350        -        -        - 24 772        119 895        - 17.1%  

                         of which AB InBev own beer

     128 761        261        -        -        - 22 163        106 858        - 17.2%  

Revenue

     13 599        36        - 938        - 3        - 2 399        10 294        - 17.7%  

Cost of sales

     - 5 176        - 37        440        - 7        256        - 4 524        4.9%  

Gross profit

     8 422        - 1        - 499        - 10        - 2 143        5 770        - 25.6%  

SG&A

     - 4 139        - 5        326        1        280        - 3 536        6.8%  

Other operating income/(expenses)

     229        - 1        - 3        1        - 163        63        - 70.9%  

Normalized EBIT

     4 513        - 7        - 176        - 8        - 2 026        2 297        - 45.0%  

Normalized EBITDA

     5 644        - 3        - 298        - 8        - 1 921        3 414        - 34.1%  

Normalized EBITDA margin

     41.5%                    33.2%        - 825 bps  
North America                                                 
    

2Q19

Restated

     Scope     

Currency

Translation

    

Hyperinflation

restatement

    

Organic

Growth

     2Q20     

Organic

Growth

 

Total volumes (thousand hls)

     29 113        83        -        -        - 1 602        27 594        - 5.5%  

Revenue

     4 224        10        - 16        -        - 239        3 979        - 5.7%  

Cost of sales

     - 1 543        - 7        5        -        57        - 1 488        3.7%  

Gross profit

     2 681        4        - 11        -        - 182        2 491        - 6.8%  

SG&A

     - 1 186        - 5        6        -        113        - 1 072        9.6%  

Other operating income/(expenses)

     8        -        -        -        - 11        - 3        - 146.5%  

Normalized EBIT

     1 503        - 1        - 5        -        - 80        1 416        - 5.3%  

Normalized EBITDA

     1 698        - 1        - 6        -        - 75        1 616        - 4.4%  

Normalized EBITDA margin

     40.2%                    40.6%        52 bps  

Middle Americas

     2Q19           Currency        Hyperinflation        Organic           Organic  
            Scope                           2Q20         
     Restated             Translation      restatement      Growth             Growth  

Total volumes (thousand hls)

     34 208        343        -        -        - 12 630        21 921        - 36.6%  

Revenue

     3 024        8        - 197        -        - 1 171        1 664        - 38.6%  

Cost of sales

     - 887        - 7        65        -        197        - 632        22.0%  

Gross profit

     2 137        1        - 132        -        - 974        1 032        - 45.6%  

SG&A

     - 736        3        59        -        118        - 557        16.1%  

Other operating income/(expenses)

     47        - 4        1        -        - 46        - 2        - 106.7%  

Normalized EBIT

     1 448        -        - 72        -        - 903        472        - 62.4%  

Normalized EBITDA

     1 670        -        - 97        -        - 862        712        - 51.6%  

Normalized EBITDA margin

     55.2%                    42.8%        - 1163 bps  

South America

     2Q19           Currency        Hyperinflation        Organic           Organic  
            Scope                           2Q20         
     Restated             Translation      restatement      Growth             Growth  

Total volumes (thousand hls)

     30 588        15        -        -        - 2 080        28 523        - 6.8%  

Revenue

     2 152        1        - 570        - 3        - 151        1 428        - 7.2%  

Cost of sales

     - 890        -        283        - 7        - 146        - 760        - 16.5%  

Gross profit

     1 262        1        - 287        - 10        - 297        669        - 24.2%  

SG&A

     - 693        - 2        196        1        - 15        - 512        - 2.2%  

Other operating income/(expenses)

     38        -        - 3        1        - 21        16        - 50.1%  

Normalized EBIT

     607        -        - 93        - 8        - 333        172        - 56.8%  

Normalized EBITDA

     839        -        - 165        - 8        - 299        366        - 36.7%  

Normalized EBITDA margin

     39.0%                    25.6%        - 1199 bps  

 

   23     

 

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Press release

 

Brussels / 30 July 2020 / 7.00am CET

 

EMEA                                                 
     2Q19
Restated
     Scope      Currency
Translation
     Hyperinflation
restatement
     Organic
Growth
     2Q20      Organic
Growth
 

Total volumes (thousand hls)

     22 067        - 30        -        -        - 6 573        15 464        - 29.8%  

Revenue

     2 112        - 2        - 77        -        - 603        1 429        - 28.6%  

Cost of sales

     - 909        1        50        -        70        - 788        7.7%  

Gross profit

     1 202        - 1        - 27        -        - 533        641        - 44.4%  

SG&A

     - 711        -        39        -        30        - 642        4.2%  

Other operating income/(expenses)

     55        -        -        -        - 44        11        - 80.1%  

Normalized EBIT

     547        -        11        -        - 548        10        - 100.2%  

Normalized EBITDA

     803        -        - 6        -        - 546        251        - 68.0%  

Normalized EBITDA margin

     38.0%                    17.5%        -2100 bps  
                    
Asia Pacific                                                 
     2Q19
Restated
     Scope      Currency
Translation
     Hyperinflation
restatement
     Organic
Growth
     2Q20      Organic
Growth
 

Total volumes (thousand hls)

     28 085        -50        -        -        - 1 771        26 264        - 6.3%  

Revenue

     1 903        15        - 74        -        - 192        1 653        - 10.0%  

Cost of sales

     - 795        4        33        -        54        -704        6.9%  

Gross profit

     1 109        19        - 41        -        - 138        949        - 12.2%  

SG&A

     - 555        -14        24        -        1        -544        0.2%  

Other operating income/(expenses)

     60        -        - 1        -        - 35        23        - 58.9%  

Normalized EBIT

     613        5        - 18        -        - 172        429        - 27.7%  

Normalized EBITDA

     762        5        - 26        -        - 158        584        - 20.5%  

Normalized EBITDA margin

     40.0%                    35.3%        - 467 bps  
Global Export and Holding Companies                                                 
     2Q19
Restated
     Scope      Currency
Translation
     Hyperinflation
restatement
     Organic
Growth
     2Q20      Organic
Growth
 

Total volumes (thousand hls)

     255        - 11        -        -        -116        128        - 48.4%  

Revenue

     184        3        -4        -        -42        142        - 23.0%  

Cost of sales

     -152        -28        4        -        24        -153        13.9%  

Gross profit

     32        -25        -        -        -18        -11        - 174.8%  

SG&A

     - 258        13        2        -        33        -210        14.1%  

Other operating income/(expenses)

     21        2        -        -        - 5        18        - 22.1%  

Normalized EBIT

     - 205        -10        2        -        10        -203        5.1%  

Normalized EBITDA

     - 127        -7        1        -        19        -114        15.0%  

 

   24     

 

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Press release

 

Brussels / 30 July 2020 / 7.00am CET

 

  Annex 2                                    
  AB InBev Worldwide   HY19
      Restated
              Scope     Currency
      Translation
              Organic
Growth
                HY20             Organic
Growth
 

  Total volumes (thousand hls)

    276 031       615       -       -37 069       239 577       -13.4

                           of which AB InBev own beer

    244 144       491       -       -34 342       210 294       -14.0

  Revenue

    25 823       53       -1 470       -3 108       21 298       -12.0

  Cost of sales

    -9 953       -68       676       249       -9 097       2.5

  Gross profit

    15 869       -15       -794       -2 859       12 201       -18.0

  SG&A

    -8 077       4       498       318       -7 257       4.0

  Other operating income/(expenses)

    388       -2       -11       -216       158       -56.3

  Normalized EBIT

    8 180       -14       -307       -2 757       5 102       -33.6

  Normalized EBITDA

    10 446       -9       -487       -2 587       7 363       -24.7

  Normalized EBITDA margin

    40.5           34.6         -585 bps  
           
  North America   HY19
Restated
    Scope     Currency
Translation
    Organic
Growth
    HY20     Organic
Growth
 

  Total volumes (thousand hls)

    53 635       127       -       -1 785       51 977       -3.3

  Revenue

    7 701       16       -15       -167       7 536       -2.2

  Cost of sales

    -2 868       -11       5       32       -2 842       1.1

  Gross profit

    4 833       5       -10       -135       4 694       -2.8

  SG&A

    -2 197       -14       5       101       -2 104       4.6

  Other operating income/(expenses)

    20       -       -       -31       -10       -150.5

  Normalized EBIT

    2 656       -9       -4       -64       2 579       -2.4

  Normalized EBITDA

    3 045       -7       -5       -47       2 986       -1.5

  Normalized EBITDA margin

    39.5           39.6     26 bps  
           
  Middle Americas   HY19
Restated
    Scope     Currency
Translation
    Organic
Growth
    HY20     Organic
Growth
 

  Total volumes (thousand hls)

    64 722       578       -       -13 442       51 858       -20.6

  Revenue

    5 735       13       -236       -1 267       4 246       -22.0

  Cost of sales

    -1 711       -12       79       192       -1 454       11.1

  Gross profit

    4 024       1       -157       -1 076       2 792       -26.7

  SG&A

    -1 483       5       68       152       -1 258       10.3

  Other operating income/(expenses)

    55       -6       -       -49       -       -100.1

  Normalized EBIT

    2 595       -       -89       -972       1 535       -37.5

  Normalized EBITDA

    3 036       -       -116       -899       2 021       -29.6

  Normalized EBITDA margin

    52.9           47.6     -512 bps 
           
  South America   HY19
Restated
    Scope     Currency
Translation
    Organic
Growth
    HY20     Organic
Growth
 

  Total volumes (thousand hls)

    66 856       15       -       -4 088       62 782       -6.1

  Revenue

    4 769       1       -962       -195       3 613       -4.1

  Cost of sales

    -1 928       -       456       -254       -1 727       -13.2

  Gross profit

    2 841       1       -506       -450       1 886       -15.8

  SG&A

    -1 427       -2       317       -94       -1 205       -6.6

  Other operating income/(expenses)

    100       -       -9       -37       54       -36.8

  Normalized EBIT

    1 514       -       -198       -580       736       -38.3

  Normalized EBITDA

    1 976       -       -307       -522       1 146       -26.4

  Normalized EBITDA margin

    41.4           31.7     -964 bps  

 

   25     

 

LOGO


LOGO   

Press release

 

Brussels / 30 July 2020 / 7.00am CET

 

  EMEA   HY19
      Restated
              Scope     Currency
      Translation
              Organic
Growth
                HY20             Organic
Growth
 

  Total volumes (thousand hls)

    40 214       - 72       -       -6 591       33 551       -16.4

  Revenue

    3 784       - 5       - 142       - 630       3 007       -16.7

  Cost of sales

    -1 636       3       80       - 2       -1 555       -0.1

  Gross profit

    2 148       - 1       - 62       - 632       1 452       -29.5

  SG&A

    -1 358       1       63       30       -1 263       2.2

  Other operating income/(expenses)

    98       -       - 2       - 42       55       -42.6

  Normalized EBIT

    887       -       -       - 644       243       -72.6

  Normalized EBITDA

    1 372       -       - 27       - 631       713       -46.0

  Normalized EBITDA margin

    36.2           23.7     -1277  bps 
           
  Asia Pacific   HY19
Restated
    Scope     Currency
Translation
    Organic
Growth
    HY20     Organic
Growth
 

  Total volumes (thousand hls)

    50 189       - 22       -       -11 122       39 045       -22.2

  Revenue

    3 514       24       - 107       - 821       2 609       -23.2

  Cost of sales

    -1 535       2       49       267       -1 217       17.4

  Gross profit

    1 979       26       - 58       - 554       1 393       -27.6

  SG&A

    -1 048       - 12       38       62       -961       5.8

  Other operating income/(expenses)

    86       -       - 2       - 45       40       -52.0

  Normalized EBIT

    1 017       13       - 22       - 537       472       -51.9

  Normalized EBITDA

    1 352       13       - 34       - 549       783       -40.1

  Normalized EBITDA margin

    38.5           30.0     -849  bps 
           
  Global Export and Holding Companies   HY19
Restated
    Scope     Currency
Translation
    Organic
Growth
    HY20     Organic
Growth
 

  Total volumes (thousand hls)

    416       - 11       -       - 41       364       -10.3

  Revenue

    319       4       - 8       - 28       287       -8.7

  Cost of sales

    -274       - 50       7       15       -302       4.7

  Gross profit

    45       - 46       - 1       - 13       -15       -274.1

  SG&A

    -564       25       6       66       -466       12.7

  Other operating income/(expenses)

    29       3       -       - 14       19       -43.9

  Normalized EBIT

    -490       - 18       5       40       -462       8.2

  Normalized EBITDA

    -335       - 14       3       59       -287       17.8

 

   26     

 

LOGO

EX-99.2

LOGO

Exhibit 99.2

 

 

LOGO

Unaudited Interim Report

for the six-month period ended

30 June 2020


Table of contents

 

Management report

     3  

Recent events

     3  

Selected financial figures

     3  

Financial performance

     5  

Liquidity position and capital resources

     13  

Risks and uncertainties

     14  

Events after the balance sheet date

     18  

Statement of the Board of Directors

     19  

Independent auditors’ report

     20  

Unaudited condensed consolidated interim financial statements

     21  

Unaudited condensed consolidated interim income statement

     21  

Unaudited condensed consolidated interim statement of comprehensive income

     22  

Unaudited condensed consolidated interim statement of financial position

     23  

Unaudited condensed consolidated interim statement of changes in equity

     24  

Unaudited condensed consolidated interim statement of cash flows

     25  

Notes to the consolidated financial statements

     26  

 

2


Management report

Anheuser-Busch InBev is a publicly traded company (Euronext: ABI) based in Leuven, Belgium, with secondary listings on the Mexico (MEXBOL: ANB) and South Africa (JSE: ANH) stock exchanges and with American Depositary Receipts on the New York Stock Exchange (NYSE: BUD). Our Dream is to bring people together for a better world. Beer, the original social network, has been bringing people together for thousands of years. We are committed to building great brands that stand the test of time and to brewing the best beers using the finest natural ingredients. Our diverse portfolio of well over 500 beer brands includes global brands Budweiser®, Corona® and Stella Artois®; multi-country brands Beck’s®, Hoegaarden®, Leffe® and Michelob Ultra®; and local champions such as Aguila®, Antarctica®, Bud Light®, Brahma®, Cass®, Castle®, Castle Lite®, Cristal®, Harbin®, Jupiler®, Modelo Especial®, Quilmes®, Victoria®, Sedrin® and Skol®. Our brewing heritage dates back more than 600 years, spanning continents and generations. From our European roots at the Den Hoorn brewery in Leuven, Belgium. To the pioneering spirit of the Anheuser & Co brewery in St. Louis, US. To the creation of the Castle Brewery in South Africa during the Johannesburg gold rush. To Bohemia, the first brewery in Brazil. Geographically diversified with a balanced exposure to developed and developing markets, we leverage the collective strengths of approximately 170 000 employees based in nearly 50 countries worldwide. For 2019, our reported revenue was 52.3 billion US dollar (excluding joint ventures and associates).

The following management report should be read in conjunction with Anheuser-Busch InBev’s 2019 audited consolidated financial statements and with the unaudited condensed consolidated interim financial statements as at 30 June 2020.

In the rest of this document we refer to Anheuser-Busch InBev as “AB InBev”, “the company”, “we”, “us” or “our”.

Recent events

On 1 June 2020, we completed the previously announced sale of Carlton & United Breweries (“CUB”), our Australian subsidiary, to Asahi Group Holdings, Ltd (“Asahi”). The transaction is valued at 16 billion AUD in enterprise value. As part of this transaction, we granted Asahi Group Holdings, Ltd. rights to commercialize the portfolio of our global and international brands in Australia. Substantially all of the 10.8 billion US dollar net proceeds from the divestiture of the Australian business will be used by the company to pay down debt. The results of the Australian operations were accounted for as discontinued operations (“profit from discontinued operations”) up to 31 May 2020.

Selected financial figures

To facilitate the understanding of our underlying performance, the comments in this management report, unless otherwise indicated, are based on organic and normalized numbers. “Organic” means the financials are analyzed eliminating the impact of changes in currencies on translation of foreign operations, and scopes. Scopes represent the impact of acquisitions and divestitures, the start-up or termination of activities or the transfer of activities between segments, curtailment gains and losses and year-over-year changes in accounting estimates and other assumptions that management does not consider part of the underlying performance of the business.

We have restated our 2019 results considering the classification of our Australian business as discontinued operations. Effective 30 September 2019, following the announcement on 19 July 2019 of the agreement to divest CUB to Asahi, we classified the assets and liabilities associated with the Australian operations as assets held for sale and liabilities associated with assets held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. In addition, since the results of the Australian operations represented a separate major line of business, these were accounted for as discontinued operations as required by IFRS 5 and presented in a separate line in the consolidated income statement (“profit from discontinued operations”) up to 31 May 2020. Consequently, the 2019 consolidated results have been restated as if the classification had been applied as of 1 January 2019 to exclude the results of the Australian operations.

Accordingly, the profit, cash flow and balance sheet are presented as reported in 2019, adjusted to reflect the classification of Carlton & United Breweries as discontinued operations. This presentation is referred to as “2019 restated”. As a result, all the presentations of our underlying performance and organic growth figures do not reflect the results of the Australian operations.

The tables in this management report provide the segment information per region for the period ended 30 June 2020 and 2019 in the format up to Normalized EBIT level that is used by management to monitor performance.

Whenever used in this report, the term “normalized” refers to performance measures (EBITDA, EBIT, Profit, EPS, effective tax rate) before non-recurring items and discontinued operations. Non-recurring items are either income or expenses which do not occur regularly as part of the normal activities of the company. They are presented separately because they are important for the understanding of the underlying sustainable performance of the company due to their size or nature. Normalized measures are additional measures used by management and should not replace the measures determined in accordance with IFRS as an indicator of the company’s performance, but rather should be used in conjunction with the most directly comparable IFRS measures.

 

3


The tables below set out the components of our operating income and operating expenses, as well as the key cash flow figures.

 

  For the six-month period ended 30 June
  Million US dollar
                 2020%                        %      2019
      restated
                       %  

Revenue1

     21 298        100%        25 823        100%  

Cost of sales

     (9 097)        43%        (9 953)        39%  
                                     

Gross profit

     12 201        57%        15 869        61%  

SG&A

     (7 257)        34%        (8 077)        31%  

Other operating income/(expenses)

     158        1%        388        2%  
                                     

Normalized profit from operations (Normalized EBIT)

     5 102        24%        8 180        32%  

Non-recurring items

     (2 796)        13%        (103)        -  
                                     

Profit from operations (EBIT)

     2 306        11%        8 077        31%  
                                     

Depreciation, amortization and impairment

     2 261        11%        2 265        9%  

Non-recurring impairment

     2 650        12%        -        -  

Normalized EBITDA

     7 363        35%        10 446        40%  

EBITDA

     7 217        34%        10 342        40%  
                                     

Normalized profit attributable to equity holders of AB InBev

     76        -        4 714        18%  

Profit from continuing operations attributable to equity holders of AB InBev

     (3 955)        19%        5 819        23%  

Profit from discontinued operations attributable to equity holders of AB InBev

     2 055        10%        236        1%  

Profit attributable to equity holders of AB InBev

     (1 900)        9%        6 055        23%  

 

  For the six-month period ended 30 June
  Million US dollar
                 2020      2019
      restated
 

Operating activities

                 

Profit from continuing operations

     (3 744)        6 406  

Interest, taxes and non-cash items included in profit

     11 164        3 979  

Cash flow from operating activities before changes in working capital and use of provisions

     7 420        10 385  
                   

Change in working capital

     (2 700)        (1 531)  

Pension contributions and use of provisions

     (327)        (279)  

Interest and taxes (paid)/received

     (3 388)        (4 129)  

Dividends received

     30        137  

Cash flow from operating activities on Australia discontinued operations

     84        314  

Cash flow from operating activities

     1 119        4 897  
                   

Investing activities

                 

Net capex

     (1 524)        (1 488)  

Acquisition and sale of subsidiaries, net of cash acquired/disposed of

     (204)        (245)  

Net proceeds from sale/(acquisition) of other assets

     (30)        (6)  

Proceeds from Australia divestiture (discontinued operations)

     10 838        -  

Cash flow from investing activities on Australia discontinued operations

     (13)        (16)  

Cash flow from investing activities

     9 067        (1 755)  
                   

Financing activities

                 

Dividends paid

     (1 219)        (2 389)  

Net (payments on)/proceeds from borrowings

     10 194        1 410  

Payment of lease liabilities

     (280)        (225)  

Other (including purchase of non-controlling interests)

     (457)        (781)  

Cash flow from financing activities on Australia discontinued operations

     (6)        (13)  

Cash flow from financing activities

     8 231        (1 998)  
                   

Net increase/(decrease) in cash and cash equivalents

     18 416        1 144  

 

 

1 

Turnover less excise taxes. In many jurisdictions, excise taxes make up a large proportion of the cost of beer charged to the company’s customers.

 

4


Financial performance

The tables in this management report provide the segment information per region for the period ended 30 June 2020 and 2019 in the format down to Normalized EBIT level that is used by management to monitor performance. To facilitate the understanding of our underlying performance, we are presenting in this management report the 2019 restated consolidated volumes and results up to Normalized EBIT. As such, these financials are included in the organic growth calculation. The profit, cash flow and balance sheet are presented as reported in 2019, adjusted to reflect the classification of the Australian business as discontinued operations.

We are presenting our results under five regions: North America, Middle Americas, South America, EMEA and Asia Pacific.

The tables below provide a summary of our performance for the period ended 30 June 2020 and 2019 (in million US dollar, except volumes in thousand hectoliters) and the related comments are based on organic numbers.

 

  AB INBEV WORLDWIDE    2019
    restated
               Scope      Currency
    translation
           Organic
      growth
               2020      Organic
    growth %
 

Volumes

     276 031        615        -        (37 069)        239 577        (13.4)%  

Revenue

     25 823        53        (1 470)        (3 108)        21 298        (12.0)%  

Cost of sales

     (9 953)        (68)        676        249        (9 097)        2.5%  

Gross profit

     15 869        (15)        (794)        (2 859)        12 201        (18.0)%  

SG&A

     (8 077)        4        498        318        (7 257)        4.0%  

Other operating income/(expenses)

     388        (2)        (11)        (216)        158        (56.3)%  

Normalized EBIT

     8 180        (13)        (307)        (2 757)        5 102        (33.6)%  

Normalized EBITDA

     10 446        (9)        (487)        (2 587)        7 363        (24.7)%  

Normalized EBITDA margin

     40.5%        -        -        -        34.6%        (585)bps  

In the first six months of 2020, our normalized EBITDA declined 24.7%, while our normalized EBITDA margin decreased 585 bps, reaching 34.6%.

Consolidated volumes declined by 13.4%, with own beer volumes down 14.0% and non-beer volumes down 7.6%, driven by impact of the COVID-19 pandemic.

Consolidated revenue declined by 12.0% to 21 298m US dollar, with revenue per hectoliter increasing 1.6%, in the first six months of 2020 and 0.6% revenue per hectoliter decline in the second quarter of 2020, driven by restrictions related to the COVID-19 pandemic. Combined revenues of our global brands, Budweiser, Stella Artois and Corona declined by 14.1% and 14.9% outside of their respective home markets.

Consolidated Cost of Sales (CoS) decreased 2.5%, and increased 12.9% on a per hectoliter basis, driven primarily by operational deleverage resulting from the impact of COVID-19 on our volumes, particularly in markets where our beer operations were shut down within the second quarter of 2020.

BUSINESS UPDATE IN LIGHT OF THE GLOBAL COVID-19 PANDEMIC

The COVID-19 pandemic continues to present unprecedented challenges for societies, governments and businesses across the world. The health and safety of our colleagues is our first priority, and we are finding new ways to do our part globally to help our communities, support our partners and connect with our consumers.

Our performance in the second quarter of 2020 was materially impacted by the COVID-19 pandemic, as expected. As the quarter progressed, however, we saw considerable improvement in performance from month to month. We came out of the quarter with reinforced confidence in the resilience of our business and the global beer category.

In April, our volumes declined by 32.4%, as we faced a shutdown of our beer operations in key markets such as Mexico, South Africa and Peru, and the closure of the on-premise channel in most of our markets.

We saw a sequential improvement in May, with a volume decline of 21.1%.While we continued to face a shutdown of our beer operations in markets such as Mexico and South Africa, this improvement was driven by a return to positive volume growth in China, a healthy performance from our beer business in Brazil, the gradual reopening of the on-premise channel in certain markets, particularly in Europe, and the strength of the off-premise channel in both developed and developing markets.

In June, we delivered volume growth of 0.7%, despite cycling a strong performance from the prior year. We saw a significant recovery in June in Mexico and South Africa, where the resumption of operations was met with robust consumer demand. Brazil accelerated its healthy performance with meaningful beer volume growth as we leveraged our best-in-class distribution network, innovations and digital capabilities to reach consumers in new ways. In the US, we delivered top and bottom-line growth through the success of our premium brands, known and trusted mainstream brands and the strength of the off-premise channel. China delivered exceptional results, with its highest ever monthly volume.

In total, our volumes in the second quarter of 2020 declined by 17.1% with own beer volumes declining 17.2%. Revenue per hl declined by 0.6%, leading to a total revenue decline of 17.7%. EBITDA declined by 34.1% to 3 414m US dollar, with margin contraction of 825 bps to 33.2%, due to the top-line decline and lower operational leverage, especially in the beginning of the quarter when we faced significantly reduced volume. These headwinds were partially offset by successful resource allocation initiatives that drove a meaningful reduction in SG&A.

The trajectory of the business throughout the second quarter of 2020 reinforced our confidence in the resilience of the beer category, particularly in the off-premise channel, where we saw healthy growth in both developed and developing markets. The continued reopening of the on-premise channel around the world also contributed to an improved performance, especially in May and June. We are excited about the return of these consumption occasions, while remaining cautious as we are now seeing renewed on-premise restrictions in certain markets. South Africa implemented a second ban on alcohol sales in the middle of July 2020, which will impact our results in the third quarter of 2020.

In view of the economic uncertainties caused by the COVID-19 pandemic, we performed an impairment review considering different scenarios: a base case, a best case and a worst case. No impairment was warranted under the base and best case scenarios. However, we were exposed to a risk of impairment for the South Africa and Rest of Africa cash-generating units under the worst case scenario and concluded it was prudent to recognize a 2.5 billion USD non-cash goodwill impairment charge applying a 30% probability of occurrence of

 

5


the worst case scenario. This charge is partially offset by a 1.9 billion USD gain on the disposal of the Australian operations. See also Note 11 Goodwill and Note 15 Assets classified as held for sale, liabilities associated with assets held for sale and discontinued operations.

We have been investing behind capabilities such as B2B platforms, e-commerce channels and digital marketing for several years. These trends have accelerated over the past few months, positioning us well to capture growth.

We have taken significant actions to maintain strong liquidity in a more volatile and uncertain environment, while proactively managing our debt profile. We also implemented several initiatives that drove a meaningful reduction in SG&A, while we continue to invest effectively behind our brands and commercial strategy, preparing for a strong recovery.

The fundamental strengths of our company remain unchanged. We have a clear commercial strategy, diverse geographic footprint, the world’s most valuable portfolio of beer brands, industry-leading profitability, a strong team and an incredibly deep talent pool.

VOLUMES

The table below summarizes the volume evolution per region and the related comments are based on organic numbers. Volumes include not only brands that we own or license, but also third-party brands that we brew as a subcontractor and third-party products that we sell through our distribution network, particularly in Europe. Volumes sold by the Global Export business, which includes our global headquarters and the export businesses which have not been allocated to our regions, are shown separately.

 

  Thousand hectoliters    2019
restated
               Scope     

Organic

      growth

               2020     

Organic

    growth %

 

North America

     53 635        127        (1 785)        51 977        (3.3)%  

Middle Americas

     64 722        578        (13 442)        51 858        (20.6)%  

South America

     66 856        15        (4 088)        62 782        (6.1)%  

EMEA

     40 214        (72)        (6 591)        33 551        (16.4)%  

Asia Pacific

     50 189        (22)        (11 122)        39 045        (22.2)%  

Global Export and Holding Companies

     416        (11)        (41)        364        (10.3)%  

AB InBev Worldwide

     276 031        615        (37 069)        239 577        (13.4)%  

North America total volumes decreased by 3.3%. We estimate that our sales-to-retailers (“STRs”) in the United States declined by 0.4% in an industry that we estimate was flattish, resulting in a market share decline of 20 bps in the six-month period ended 30 June 2020 compared to the same period last year. Our sales-to-wholesalers (“STWs”) declined by 3.7%.

In response to the COVID-19 pandemic, “stay-at-home” orders and other social distancing measures were implemented in the United States beginning in the middle of March 2020, at varying levels across states.

Our US business performed well in the second quarter of 2020 even in the face of continued industry pressure and volatility caused by the COVID-19 pandemic, primarily due to the continued implementation of our commercial strategy. We leveraged the learnings from our global colleagues, as well as data and analytics, to quickly and efficiently adapt our operations to continue supplying the market and effectively address changing consumer needs.

Our estimated market share was stable in the second quarter of 2020, as our STRs were flattish along with the industry. In light of the strong consumer demand, depletions of inventory accelerated while STWs declined by 6.1%. Throughout the second quarter of 2020, we observed a gradual reopening of the on-premise channel, though many states have since reinstated restrictions.

Our above core portfolio once again led the way and delivered an estimated market share gain of 90 bps in the second quarter of 2020. This was led by the successful launch of Bud Light Seltzer earlier this year, which remains the top innovation in the category by volume in 2020. Michelob Ultra continued its strong momentum as a top share gainer in the category, finding new ways to connect with consumers digitally to support an active lifestyle.

In the mainstream segment, our core, core light and value brands delivered an estimated loss of 90 bps of market share. This improvement versus recent trends is largely due to the uplift of beer sales in the off-premise channel, which disproportionately benefits established brands and larger packs. Within the mainstream segment, we estimate our portfolio lost approximately 15 bps of market share.

Our business in Canada demonstrated resilience in a challenging environment, delivering a flattish volume performance well ahead of the industry. As government restrictions came into place in the middle of March 2020, the on-premise channel was effectively shutdown. We observed an uplift in the off-premise channel as consumers prepared to enjoy our products at home. Our beyond beer business considerably outperformed, led by successful innovation launches and the growth of our seltzer portfolio, driven by Nutrl. The COVID-19 pandemic resulted in a shift from the on-premise to the off-premise channel.

Middle Americas total volumes decreased by 20.6%. In Mexico, our volumes declined by high teens in the six-month period ended 30 June 2020 compared to the same period last year.

Our beer business was shut down during the nationwide lockdown in the first two months of the second quarter of 2020. We quickly pivoted to produce low-alcohol beer products, Victoria 1.8 and Corona Ligera, which addressed new in-home consumption occasions. We also leveraged our direct-to-consumer and B2B capabilities, which saw significant acceleration throughout the crisis. Additionally, we launched a platform called “#PorNuestroMexico” to support a strong recovery through humanitarian initiatives, such as face mask and hand sanitizer donations, and customer support initiatives, such as providing safety equipment and credit support.

In June 2020, the restrictions on our operations were lifted and we rapidly returned to full operational status with increased safety measures to protect our people. Our beer volumes grew by high teens in June 2020, due to the replenishment of inventory levels in the trade and strong consumer demand. Our above core portfolio saw strong growth in June 2020, with double-digit growth of our global brands, Michelob Ultra and the Modelo Especial family.

Our portfolio became available in an additional 1,600 OXXO stores in July 2020, as we completed the fourth wave of our expansion into the country’s largest convenience store channel. We remain excited about the long-term growth potential and incrementality of this opportunity.

In Colombia, total volumes declined by high teens, with beer volumes down high teens and non-beer volumes down low teens in the six-month period ended 30 June 2020 compared to the same period last year.

The first quarter of 2020 was significantly impacted by social distancing measures put in place in the middle of March 2020 including a national quarantine, to address the COVID-19 pandemic. The on-premise channel, which comprises slightly more than 50% of our volumes, was closed across the country, although sales were permitted for home delivery.

Our performance in the second quarter of 2020 was significantly impacted by the nationwide lockdown of the on-premise channel and stay-at-home restrictions, though these began to ease throughout the quarter. In June, our volume performance improved versus the first two months of the second quarter of 2020, as the gradual re-opening of certain sectors of the economy led to improving consumer confidence and disposable

 

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income. Additionally, while on-premise alcohol consumption remains restricted, many on-premise outlets are now offering take-out, supporting improving volume trends. We continued to expand the premium segment in the second quarter of 2020 while further enhancing our smart affordability strategy. We are supporting the recovery of our customers with initiatives, such as Tienda Cerca, an online delivery platform, and our recently-launched proprietary B2B online platform, BEES.

In Peru, our volumes declined by high teens in the first quarter of 2020, driven by lockdown measures implemented across the country as of the middle of March 2020 in response to COVID-19. Prior to the lockdown, we saw strong performances from our global brands and our innovations in the first quarter of 2020, including the continued success of Golden, a smart affordability innovation we launched in the fourth quarter of 2019. Our volumes declined significantly in the second quarter of 2020 compared to the same period last year, as a result of government lockdown restrictions implemented in March 2020. At the end of April 2020, we resumed sales and distribution of existing inventory, and in June 2020 we resumed full brewing operations, resulting in improved volume trends throughout the second quarter of 2020. We are transforming our business to better reach consumers through an enhanced portfolio of new brands, such as our smart affordability brand Golden.

In Ecuador, our performance was also significantly impacted by government measures in March 2020 to shutdown the on-premise channel across the country, as well as some local measures to shutdown full regions, which affected approximately half of our total volumes. In the first quarter of 2020, our volumes declined by double-digits. Prior to March 2020, our volumes were growing by double-digits, driven by the strong performance of our brand portfolio across the price spectrum. Our volumes declined significantly in the second quarter of 2020 compared to the same period last year, due to the COVID-19 pandemic and associated government restrictions. In June 2020, we saw a gradual easing of restrictions, leading to improved volume trends in the month. Despite the challenging environment, our premium and super premium brands gained share in the second quarter of 2020. We also expanded our smart affordability strategy to brew beers with local crops through a program called Siembra por Contrato, supporting farmers in the country.

South America total volumes decreased by 6.1%. In Brazil, our volumes declined by 6.9%, with beer volumes down 6.9% and non-beer volumes down 6.8% in the six-month period ended 30 June 2020 compared to the same period last year.

In March 2020, restrictive measures were implemented across Brazilian states in response to the COVID-19 pandemic, including the lockdown of the on-premise channel, which represents more than half of our volume. We were committed to staying close to our consumers and customers throughout that time by leveraging technology. We saw an opportunity to grow the in-home consumption occasion, especially through our unique Direct-to-Consumer platform “Zé Delivery”. Through the platform, we connect our customers, bars, restaurants, consumers and drivers to enable cold beer delivery in less than 60 minutes.

Our beer business delivered a healthy performance in the context of a volatile external environment in the second quarter of 2020, with a volume decline of 1.3%, outperforming the industry according to our estimates. We saw an improving trend throughout the second quarter of 2020 driven by the success of our innovation strategy, reliability of our supply chain and customer relationships, the strengths of our distribution footprint and a shift in off-premise consumption to traditional outlets, where our portfolio over-indexes. Furthermore, these benefits were amplified by the positive impact of government subsidies on consumer disposable income. Our non-beer business declined by 12.6% in the second quarter of 2020, impacted by COVID-19 restrictions and the consequent change in consumption occasions.

Although the COVID-19 pandemic has created significant challenges for our business, it has also accelerated consumer trends that we have been investing behind, primarily reinforcing the need for an innovative, consumer-centric mindset and advancing our business transformation enabled by technology. We have been enhancing our portfolio across a variety of segments. In the mainstream segment, Skol Puro Malte grew by strong double-digits from a meaningful base. In the core plus segment, Bohemia more than doubled in the second quarter of 2020 supported by its repositioning and new visual brand identity, and we are further elevating our presence in the segment through the successful launch of Brahma Duplo Malte. In the premium segment, our global brands grew by double-digits, led by Budweiser, though our domestic premium brands declined given their over-exposure to the on-premise channel.

Our digital transformation continues to gain traction. Our customers are increasingly relying on our B2B digital solutions, and our direct-to-consumer e-commerce platform, Zé Delivery, has been rapidly increasing geographic coverage, reaching 2.2 million orders in June 2020 versus 1.5 million orders in full year ended 31 December 2019. We continue to connect with consumers in new ways with initiatives such as “lives,” a series of livestreamed online concerts, which reached more than 675 million views in the second quarter of 2020.

In Argentina, our business was impacted by the ongoing challenging environment. We delivered high single digit volume growth in the first quarter of 2020, ahead of the industry and supported by a favorable comparable. In response to the COVID-19 pandemic, a full national lockdown was implemented as of the middle of March 2020. The on-premise channel was effectively shut and there were restrictions on hours of operation in the off-premise channel, which represents approximately 90% of our volume. Volumes declined by low teens in the second quarter of 2020. Our above core portfolio remained resilient and performed well, led by the growth of our global and local brands. Corona and our local champion in the core plus segment, Andes Origen, delivered high double-digit growth in the second quarter of 2020. We continue to focus on the digital transformation of our business and have observed strong results from our direct-to-consumer initiatives and our e-retail platforms, aimed at supporting local businesses.

EMEA total volumes decreased by 16.4%. In Europe, our volumes declined by low single-digits in the first quarter of 2020 as a result of COVID-19 restrictive measures. We observed a full shut down of the on-premise channel throughout March 2020, which represented approximately 30% of our business in the region. Europe volumes declined by mid-teens in the second quarter of 2020. We have seen an uplift in the off-premise channel since the outbreak of the COVID-19 pandemic, with accelerated growth of premium brands and larger packs. In June 2020, we saw the gradual re-opening of the on-premise channel in most of our markets, resulting in improved volume trends. We continued to gain market share across the majority of our markets in the first six months of 2020, supported by the strong growth of Budweiser following its successful launch in France and the Netherlands last year.

Our business in South Africa was significantly impacted by the nationwide lockdown that began in late March 2020 and lasted until the end of May 2020, which included a complete ban on the sale of alcohol beverages. Our brewery and distribution operations were severely restricted by government mandates. Our volumes in South Africa declined by double-digits in the six-month period ended 30 June 2020 compared to the same period last year. We fully resumed operations at the beginning of June 2020, and we saw a strong recovery in the month with volume growth of high single digits. However, a second ban on the sale of alcohol beverages was implemented in the middle of July 2020. Our priority is and continues to be the safety and well-being of our people and our communities. We remain focused on working with the South African government on measures that will meaningfully combat the public health crisis, while supporting the country’s much-needed economic recovery.

In Africa excluding South Africa, measures taken to combat the COVID-19 pandemic varied by country, but implementation generally began in late March and early April 2020 to shut down the on-premise channel in most markets. Our breweries mostly remained operational and we were servicing the market, primarily the off-premise channel, in compliance with government regulations. Our breweries remained operational throughout the second quarter of 2020 in most of our key markets. In Nigeria, we saw a rapid recovery following the easing of restrictions in May 2020, leading to volume growth in June 2020. We saw a similar trajectory in the rest of our markets in Africa, with April the most impacted month of the second quarter of 2020, followed by improving volume trends in May and growth in many markets in June 2020.

Asia Pacific total volumes decreased by 22.2%. In China, our volumes declined by 20.6% in the six-month period ended 30 June 2020 compared to the same period last year. COVID-19 struck China in late January 2020, just before the start of the Chinese New Year celebrations, one of the largest consumption occasions of the year. Most provinces implemented significant lockdown measures to combat the virus, lasting from late January through at least the end of February 2020. During this period, we observed virtually no activity in the nightlife channel, very limited activity in the restaurant channel and a meaningful decline in the in-home channel. However, we saw a significant acceleration of the e-commerce channel, where we are the market leader. We grew volumes by strong double-digits in this channel in the first quarter of 2020. We re-allocated

 

7


our resources to take advantage of these trends, particularly in the in-home and e-commerce channels.

In March 2020, we observed a steady recovery in the in-home and restaurant channels, though the nightlife channel recovered at a slower pace due to social distancing measures. By the end of March 2020, almost all our wholesalers had resumed operations though operating at lower demand levels in light of the situation and we had re-opened all our breweries in China.

Our business in China continued its recovery throughout the second quarter of 2020, delivering a slight volume decline of 0.4%. While we faced a 17% decline in April 2020, we achieved mid-single digit growth in May and June 2020. Our June 2020 performance represented our highest ever monthly volumes in China, while still maintaining healthy levels of inventory in the trade.

In the second quarter of 2020, our Super Premium portfolio continued its momentum with volume growth. Additionally, our mainstream brands outperformed in the second quarter of 2020, especially our local brands. We believe that the long-term premiumization trend in China remains intact, given the continued healthy performance of the Super Premium segment, strong indications of economic recovery and encouraging stimulus policies.

We launched several new brands across a variety of price segments and styles ahead of the summer season. Leveraging our global portfolio of brands and the category expansion framework, we have launched Bud Light as a premium lager and Beck’s as an international pure malt offering. Additionally, we expanded Sedrin Lychee nationally in the flavored beer segment.

Throughout the second quarter of 2020, we saw improving trends across channels. The in-home channel is effectively fully open and our business performed very well, with volume growth of high single digits. In the on-premise channel, more than 90% of restaurants were open by the end of June 2020 with comparable rates of sale to last year. The nightlife channel improved significantly month-over-month with more than 80% of venues open at the end of June 2020. The e-commerce channel, where we have grown our market share to more than twice that of the next brewer, continued to accelerate its growth.

In South Korea, our volumes experienced a meaningful decline in the first quarter of 2020 driven by COVID-19 as well as a challenging comparable. South Korea faced a significant outbreak of the virus in late February 2020, though businesses largely remained open across most of the country. Consumers actively practiced social distancing, which led to a meaningful decline in the on-premise channel in the first quarter of 2020. However, since the middle of March 2020, we observed a consistent improvement in consumer sentiment. Our volumes declined in the second quarter of 2020 driven by a softer industry resulting from the COVID-19 pandemic. We continue to leverage our full portfolio of brands to connect with consumers across price segments and channels. In the premium segment, our strong portfolio of established brands and recent innovations outperformed the industry. In total, we estimate that our market share grew quarter-over-quarter once again. We are encouraged by our full portfolio’s momentum in the market.

 

8


OPERATING ACTIVITIES BY REGION

The tables below provide a summary of the performance of each region, for the period ended 30 June 2020 (in million US dollar, except volumes in thousand hectoliters) and the related comments are based on organic numbers.

 

                                                                                                                             
  AB INBEV WORLDWIDE    2019
    restated
         Scope      Currency
    translation
         Organic
growth
         2020      Organic
        growth %
 

Volumes

     276 031        615        -        (37 069)        239 577        (13.4)%  

Revenue

     25 823        53        (1 470)        (3 108)        21 298        (12.0)%  

Cost of sales

     (9 953)        (68)        676        249        (9 097)        2.5%  

Gross profit

     15 869        (15)        (794)        (2 859)        12 201        (18.0)%  

SG&A

     (8 077)        4        498        318        (7 257)        4.0%  

Other operating income/(expenses)

     388        (2)        (11)        (216)        158        (56.3)%  

Normalized EBIT

     8 180        (14)        (307)        (2 757)        5 102        (33.6)%  

Normalized EBITDA

     10 446        (9)        (487)        (2 587)        7 363        (24.7)%  

Normalized EBITDA margin

     40.5%        -        -        -        34.6%        (585)bps  

 

                                                                                                                             
  NORTH AMERICA    2019
    restated
         Scope      Currency
    translation
         Organic
growth
         2020      Organic
        growth %
 

Volumes

     53 635        127        -        (1 785)        51 977        (3.3)%  

Revenue

     7 701        16        (15)        (167)        7 536        (2.2)%  

Cost of sales

     (2 868)        (11)        5        32        (2 842)        1.1%  

Gross profit

     4 833        5        (10)        (135)        4 694        (2.8)%  

SG&A

     (2 197)        (14)        5        101        (2 104)        4.6%  

Other operating income/(expenses)

     20        -        -        (31)        (10)        (150.5)%  

Normalized EBIT

     2 656        (9)        (4)        (64)        2 579        (2.4)%  

Normalized EBITDA

     3 045        (7)        (5)        (47)        2 986        (1.5)%  

Normalized EBITDA margin

     39.5%                                   39.6%        26bps  

 

                                                                                                                             
  MIDDLE AMERICAS    2019
    restated
         Scope      Currency
    translation
         Organic
growth
         2020      Organic
        growth %
 

Volumes

     64 722        578        -        (13 442)        51 858        (20.6)%  

Revenue

     5 735        13        (236)        (1 267)        4 246        (22.0)%  

Cost of sales

     (1 711)        (12)        79        192        (1 454)        11.1%  

Gross profit

     4 024        1        (157)        (1 076)        2 792        (26.7)%  

SG&A

     (1 483)        5        68        152        (1 258)        10.3%  

Other operating income/(expenses)

     55        (6)        -        (49)        -        (100.1)%  

Normalized EBIT

     2 595        -        (89)        (972)        1 535        (37.5)%  

Normalized EBITDA

     3 036        -        (116)        (899)        2 021        (29.6)%  

Normalized EBITDA margin

     52.9%                                   47.6%        (512)bps  

 

                                                                                                                             
  SOUTH AMERICA    2019
    restated
         Scope      Currency
    translation
         Organic
growth
         2020      Organic
        growth %
 

Volumes

     66 856        15        -        (4 088)        62 782        (6.1)%  

Revenue

     4 769        1        (962)        (195)        3 613        (4.1)%  

Cost of sales

     (1 928)        -        456        (254)        (1 727)        (13.2)%  

Gross profit

     2 841        1        (506)        (450)        1 886        (15.8)%  

SG&A

     (1 427)        (2)        317        (94)        (1 205)        (6.6)%