Yahoo Finance Anheuser-Busch InBev SA/NV (NYSE:BUD) Q4 2023 Earnings Call Transcript
Anheuser-Busch InBev SA/NV (NYSE:BUD) Q4 2023 Earnings Call Transcript February 29, 2024
Anheuser-Busch InBev SA/NV beats earnings expectations. Reported EPS is $0.82, expectations were $0.76. Anheuser-Busch InBev SA/NV isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Welcome to Anheuser-Busch InBev's Full Year and Fourth Quarter 2023 Earnings Conference Call and Webcast. Hosting the call today from AB InBev are Mr. Michel Doukeris, Chief Executive Officer; and Mr. Fernando Tennenbaum, Chief Financial Officer. To access the slides accompanying today's call, please visit AB Inbev's website at www.ab-inbev.com and click on the Investors tab and the Reports and Results Center page. Today's webcast will be available for on-demand playback later today. [Operator Instructions]. Some of the information provided during the conference call may contain statements of future expectations and other forward-looking statements. These expectations are based on management's current views and assumptions and involve known and unknown risks and uncertainties.
It is possible that AB InBev's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect AB InBev's future results, see risk factors in the company's latest annual report on Form 20-F filed with the Securities and Exchange Commission on the 17th of March 2023. AB InBev assumes no obligation to update or revise any forward-looking information provided during the conference call and shall not be liable for any action taken in reliance upon such information. It is now my pleasure to turn the floor over to Mr. Michel Doukeris. Sir, you may begin.
Michel Doukeris: Thank you, Jessie, and welcome, everyone, to our full year 2023 earnings call. It is a great pleasure to be speaking with you all today. Today, Fernando and I will take you through our full year and fourth quarter operating highlights, and provide you with an update on the progress we have made in executing our strategic priorities. After that, we'll be happy to answer your questions. Let's start with our operating performance. Our global momentum continued in 2023. Revenue reached approximately USD 59.4 billion, an all-time high for our company. Although our full growth potential was constrained by the performance of our U.S. business, our revenue grew by 7.8%. Net revenue per hectoliter increased by 9.9% as a result of pricing actions, ongoing premiumization and other revenue management initiatives.
Total volumes declined by 1.7% as growth in Middle Americas, Africa and Asia Pacific was primarily offset by performance in the U.S. in a soft industry in Europe. EBITDA increased by 7%, in line with our medium-term growth ambition and 2023 outlook, reaching nearly USD 20 billion. Underlying EPS was $3.05, a $0.02 per share increase versus last year. As a result of our strong cash flow generation, we reached a net debt-to-EBITDA ratio of 3.38x. Following our deleveraging progress, we have additional flexibility in our capital allocation choices. The Board has proposed a full year dividend of EUR 0.82 per share, a 9% increase versus 2022. In addition, we have now completed almost 90% of our USD 1 billion share buyback program. In the fourth quarter, we delivered top line growth of 6.2% with our net revenue per hectoliter increasing by 9.3%.
Total volume declined by 2.6% and EBITDA increased by 6.2%. We delivered broad-based growth this year with both top and bottom line increases in 4 of our 5 operating regions and with net revenue growth in more than 85% of our markets. Our scale and diverse footprint with leading positions in the largest profit and growth pools has us well placed to deliver superior long-term value creation. Now I will take a few minutes to walk you through the operational highlights for the quarter from our key regions, starting with North America. In the U.S., the beer industry remained resilient with volumes improving sequentially throughout the year and with beer gaining share of total alcohol by value in the off-premise. Our revenues declined by 9.5% this year with STW volumes down by 12.7%, primarily due to the volume decline of Bud Light.
Our market share continued to improve gradually from May through the most recent weeks in February. In 2023, our market share was 38.3%. 2023 was a challenging year for our business in the U.S. I would like to take a moment to reflect on how we adapted, the choices we made and how we are taking the learnings and moving forward. Our teams showed remarkable resilience and agility, and I'm proud of the many actions we took to support our people, our wholesaler partners and our brands. We stepped that up to support our frontline employees and provided financial assistance to our wholesaler partners. We increased the media investment behind our brands. We expanded our long-stand partnership with Folds of Honor, including bringing the NFL and Bud Light together to also support first responders.
We continue to invest in our mega brands and mega platforms, such as sports and music that all consumers love including the NFL, NBA, Lollapalooza as well as new investments with the VMAs, UFC, Copa America and Team USA for the Olympic and Paralympic Games. We continue to support the communities in which we operate. We purchase annually more than $700 million in quality ingredients from U.S. farmers. We produced packets and delivered clean drinking water when disasters struck, more than 93 million cans to date. We create jobs. Together with our wholesaler partners, we employ 65,000 hard-working people across the U.S. 99% of what we sell in the U.S., we make in the U.S. And we built on our more than $1 billion total investment in responsible drinking programs in partnership with our wholesalers.
And we do this because that's who we are. As we move forward, we continue to focus on what we do best, brewing great beer for everyone, actively engaging with our consumers, supporting our partners and impacting the communities we serve. Now moving to our largest region, Middle Americas. In Mexico, we delivered high single-digit top and bottom line growth with margin expansion. Our above core portfolio continued to outperform, led by the strong performance of Modelo Especial. In Colombia, our business delivered record high volumes with double-digit top line and high single-digit bottom line growth. Driven by the consistent execution of our strategy. The beer category continues to grow, gaining 70 basis points share of total alcohol this year.
Our core portfolio led our performance with a particularly strong performance from Poker, which grew volumes by high-single digits. In South America, our business in Brazil delivered high single-digit top line and double-digit bottom line growth with margin expansion of 462 basis points. Our performance this year was led by our premium and super premium brands, which delivered volume growth in the mid-20s and gained share of premium segment. Now let's talk about EMEA. In Europe, we grew top line by high-single digits and bottom line by low-single digits. Our portfolio continues to premiumize with our premium and super premium brands delivering high single-digit revenue growth, led by Corona, Leffe and Stella Artois. In South Africa, we delivered record high volumes with double-digit top line and high single-digit bottom line growth.
Our portfolio continued to gain share of both beer and total alcohol, led by our global brands, which grew volumes by more than 30%. And finally, APAC, in China, our business delivered double-digit top and bottom line growth, with margin expansion of 125 basis points. Our premium and super premium brands continued to outperform, growing revenue by double digits and driving overall market share gains. Now let's move on to our strategic pillars. Let's start with pillar 1 of our strategy, lead and grow the category. The beer category is big, profitable and growing. In 2023, according to our monitor, the beer and beyond beer category continued to gain share of total alcohol by volume globally, gaining 260 basis points over the last 5 years. And looking ahead, beer is projected to continue this strength.
Led by the strong performance of our global mega brands, our revenues continue to grow this year, reaching a new all-time high for a company of $59.4 billion. We continue to invest in our category expansion levers and mega brands, building meaningful connections with our consumers. In 2023, we invested $7.2 billion in sales and marketing and have averaged more than $7 billion over the last 5 years. These consistent investments, combined with increased effectiveness and creativity is driving the brand power of our portfolio. Our total volumes remained resilient delivering near all-time highs. And with our revenue management choices driving continued strong net revenue per hectoliter growth. Through the consistent execution of our replicable growth drivers and our 5 category expansion levers, we are leading and growing the category by offering superior core propositions, developing new consumption occasions and expanding our premium and beyond beer portfolio.
Our global brands continue to scale and are driving premiumization across our markets. In 2023, the combined revenues of Corona, Budweiser, Stella Artois and Michelob Ultra grew by 18.2% outside of the brand's home markets. Scalable innovations continue to support category expansion across each of the 5 levers, contributing approximately $6 billion in net revenue in 2023. From expanding our non-alcohol beer portfolio, to innovating with pure and double malt offerings, to growing our Beyond Beer portfolio by scaling Brutal Fruit and Flying Fish across Africa; innovation is a key focus of leading and growing the category. Now let's turn to our second strategic pillar, digitize and monetize our ecosystem. BEES continues to accelerate usage and reach, capturing approximately USD 40 billion in gross merchandising value this year, a 27% increase year-over-year and reaching 3.7 million monthly active users.
Customer satisfaction continued to improve with our weighted average Net Promoter Score improving to plus 60, up 10 points since last year. In 15 of 26 markets where business live, our customers are also able to purchase third-party products through this marketplace. Customer adoption is increasing. And today, 67% of BEES customers are also BEES Marketplace buyers. In 2023, BEES Marketplace generated approximately USD 1.5 billion in GMV. Now let's talk about how we are strengthening our direct relationship with our consumers. Our DTC mega brand, Ze Delivery, TaDa and PerfectDraft are now available in 21 markets, generating approximately 69 million orders and over USD 550 million in revenue this year. We are developing deep consumer insights and new consumption occasions, such as Corona Sunset Hours, Brahma Soccer Wednesdays, and increasing in-home consumption of returnable glass bottle packs by expanding availability and simplifying logistics.
With that, I would like to hand it over to Fernando to discuss the third pillar of our strategy, optimize our business. Fernando, over to you.
Fernando Tennenbaum: Thank you, Michel. Good morning, good afternoon, everyone. We aim to maximize value by focusing on 3 areas: optimize resource allocation, robust risk management and efficient capital structure. First, let me share how we have progressed on our 2025 sustainability goals. All data points are with reference to our 2017 baseline. In Climate Action, we reduced Scopes 1 and 2, absolute emissions, by 44%. In Water Stewardship, we improved our water efficiency by 18%. In Smart Agriculture, we are working with nearly 24,000 farmers in our direct sourcing programs to research, technology and hands-on support to help upskill, connect and financially empower them. And we made progress in our Circular Packaging goal with 77.5% of our products now in packaging that is returnable or made from majority recycled content.
In recognition of our leadership in corporate transparency and performance on climate change and water security, we were awarded a AA score by CDP. As we continue to optimize our business, investing in organic growth is our #1 priority, and we have no shortage of investment opportunities. In addition to investing $7.2 billion in sales and marketing, we invested $4.5 billion in net CapEx in our facilities and capabilities. Over the last 5 years, we have invested almost $59 billion to execute our strategy and drive organic growth. While input costs remain elevated, our everyday financial discipline and revenue management choices enabled us to manage margin pressure this year. Although our margins are still below 2019 levels, the decline has been driven by unprecedented commodity and transactional FX headwinds, and it is not structural.
These headwinds impacted different regions at different times, and Middle America and South America are already good examples of EBITDA margin improvement in 2023. Our fundamental strength, disciplined pricing, continued premiumization and efficient operating model creates an opportunity for margin expansion over time. In 2023, we continued to deliver strong free cash flow generating approximately $8.8 billion, a $300 million increase from 2022. With respect to capital allocation, we are focused on maximizing long-term value creation by dynamically balancing our priorities. We continue to invest in organic growth to support our strategy. The excess cash generated by our business is then dynamically allocated across deleveraging, selective M&A and return of capital to shareholders.
As you can see on the next slide, 2x net debt to EBITDA remains the point at which we maximize value, though approximately 90% of the benefits from deleveraging can be captured as we approach 3x. In 2023, gross debt reduced to $78.1 billion, resulting further progress on our deleveraging with our net debt-to-EBITDA ratio reaching 3.38x. Our debt maturity profile remains well distributed with approximately $2.5 billion in bond maturities in 2024 and no relevant medium-term refinancing needs. We have $6.5 billion worth of bonds maturing through 2026. Our bond portfolio has an average pretax coupon of around 4% and a weighted average maturity of 14 years. In addition, our debt portfolio does not have any financial covenants, and it is comprised of a variety of currencies, diversifying our FX risk.
98% of our bonds have a fixed rate, insulated from interest rate volatility and inflation. We continue to dynamically balance our capital allocation priorities to maximize value creation. In 2023, we invested $11.6 billion in sales and marketing and CapEx to execute our strategy and drive organic growth. We purchased $3 billion of bonds and reached a net leverage of 3.38x. Before the leveraging progress, we have additional flexibility in our capital allocation choices. The Board has proposed a dividend of EUR 0.82 per share, a 9% increase versus 2022. And we have now completed almost 90% of our $1 billion share buyback program. And now let me take you through the drivers of our underlying EPS this year. We delivered EPS of $3.05 per share, a $0.02 per share increase versus last year.
Nominal EBITDA growth accounted for a $0.05 per share increase. We continue to optimize our business, reducing net interest and income tax expenses, which mostly offset headwinds in other line items. As we look ahead to 2024, we expect EBITDA to grow between 4% and 8% on an organic basis, in line with our medium-term outlook. Given the continued hyperinflationary environment in Argentina, for 2024, we are amending the definition of organic growth to cap the price growth in Argentina to a maximum of 2% per month. As we continue to invest to execute our strategy, and optimize resource allocation, we expect net CapEx to be between $4 billion and $4.5 billion in 2024. And we expect our normalized effective tax rate to be between 27% and 29%. With that, I would like to hand it back to Michel for some final comments before we start our Q&A session.
Michel?
Michel Doukeris: Thanks, Fernando. Before opening for Q&A, I would like to take a moment to recap on 2023 and look ahead at the exciting opportunities that our brands have to activate the category in 2024. While our full growth potential was constrained in this year, we continue to make progress in executing across each of our 3 strategic pillars. We invested behind our 5 category expansion levers, and the beer and beyond beer category continued to gain share of total alcohol globally. Driven by the strength of our mega brands, we delivered all-time high revenue with growth in approximately 85% of our markets. We progressed our digital transformation, generating approximately USD 40 billion of GMV through BEES, with 67% of BEES customers now also BEES Marketplace buyers.
EBITDA grew by 7%, in line with our medium-term growth ambition and outlook for 2023. We delivered continued strong free cash flow generation of USD 8.8 billion. We progressed on our deleveraging path and have increased flexibility in our capital allocation choices. As we look ahead to 2024, we are uniquely positioned to activate the category. The combination of our mega brands with the key global platforms that consumers love and that brings people together is a powerful opportunity to lead and grow the category. From the NBA, to Copa America, to the Olympics, NFL, the UFC and the VMAs; we will be focused on doing what we do best. Our brands will show up in a big way, connect with consumers and bringing to life our purpose of creating a future with more cheers.
We remain focused on the opportunities ahead of us. The beer category is large and growing, and our unique global leadership advantage, implementation of our replicable growth toolkits and our superior profitability, position us well to generate value for our stakeholders. With that, I'll hand it back to Jessie for the Q&A.
See also 12 Best Remote Jobs That Pay at Least $50 an Hour and 17 Worst Bachelor’s Degrees for Student Loan Debt.
To continue reading the Q&A session, please click here.
