Anheuser Busch InBev : HY Financial Report 2019

Unaudited Interim Report

for the six-month period ended

30 June 2019

Table of contents
Management Report......................................................................................................	3
Selected financial figures ................................................................................................................................	3
Financial performance ....................................................................................................................................	5
Liquidity position and capital resources .........................................................................................................	11
Risks and uncertainties.................................................................................................................................	12
Events after the balance sheet date .............................................................................................................	17
Statement of the Board of Directors ..........................................................................	18
Independent auditors' report......................................................................................	19
Unaudited condensed consolidated interim financial statements ..........................	20
Unaudited condensed consolidated interim income statement .....................................................................	20
Unaudited condensed consolidated interim statement of comprehensive income........................................	21
Unaudited condensed consolidated interim statement of financial position ..................................................	22
Unaudited condensed consolidated interim statement of changes in equity.................................................	23
Unaudited condensed consolidated interim statement of cash flows ............................................................	24
Notes to the unaudited condensed consolidated interim financial statements ..............................................	25

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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®, Castle®, Castle Lite®, Hoegaarden® and Leffe®; and local champions such as Aguila®, Antarctica®, Bud Light®, Brahma®, Cass®, Cristal®, Harbin®, Jupiler®, Michelob Ultra®, 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 175 000 employees based in nearly 50 countries worldwide. For 2018, AB InBev's reported revenue was 54.6 billion US dollar (excluding joint ventures and associates).

The following management report should be read in conjunction with Anheuser-Busch InBev's 2018 audited consolidated financial statements and with the unaudited condensed consolidated interim financial statements as at 30 June 2019.

In the rest of this document we refer to Anheuser-Busch InBev as "AB InBev" or "the company".

Selected financial figures

To facilitate the understanding of AB InBev's 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.

AB InBev has restated its 2018 results considering the new IFRS rules on lease accounting (IFRS 16 Leases) as if the company had applied the new standard as of 1 January 2018 and the new company organizational structure effective 1 January 2019 in line with IFRS rules. Accordingly, the profit, cash flow and balance sheet are presented as reported in 2018, adjusted to reflect (i) the new company organizational structure and (ii) the impact of adoption of IFRS 16 under the full retrospective application. This presentation is referred to as "2018 restated".

The company is presenting in this management report the 2018 consolidated volumes and results up to Normalized EBIT on a 2018 Reference Base and as such these financials are included in the organic growth calculation. The 2018 Reference Base includes, for comparative purposes, (i) the new company organizational structure that is effective as of 1 January 2019, (ii) the impact of hyperinflation accounting for the Argentinean operations as if the company had applied hyperinflation accounting as of 1 January 2018 and (iii) restated results considering the new IFRS rules on lease accounting as if the company had applied the new standard as of 1 January 2018.

The tables in this management report provide the segment information per region for the period ended 30 June 2019 and 2018 in the format up to Normalized EBIT level that is used by management to monitor performance. On 30 March 2018, AB InBev completed the 50:50 merger of AB InBev's and Anadolu Efes' existing Russia and Ukraine businesses. Following the closing of the transaction, the operations of AB InBev and Anadolu Efes in Russia and Ukraine are combined under AB InBev Efes. The combined business is fully consolidated in the Anadolu Efes financial accounts. As a result of the transaction, AB InBev stopped consolidating its Russia and Ukraine businesses and accounts for its investment in AB InBev Efes as results of associates as of that date.

Whenever used in this report, the term "normalized" refers to performance measures (EBITDA, EBIT, Profit, EPS, effective tax rate) before non-recurring items. 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.

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

						2018
For the six-month period ended 30 June				2018		Reference
Million US dollar		2019	%	restated	%	base	%
Revenue1 ......................................................................................		26 552	100%	27 087	100%	26 854	100%
Cost of sales ..................................................................................		(10 138)	38%	(10 165)	38%	(10 096)	38%
Gross profit ..................................................................................		16 414	62%	16 922	62%	16 758	62%
SG&A ............................................................................................		(8 258)	31%	(8 839)	33%	(8 774)	33%
Other operating income/(expenses) ...............................................		393	1%	402	1%	397	1%
Normalized profit from operations (Normalized EBIT)...............		8 549	32%	8 485	31%	8 383	31%
Non-recurring items .......................................................................		(104)	-	(196)	-
Profit from operations (EBIT) ......................................................		8 445	32%	8 289	31%
Depreciation, amortization and impairment ....................................		2 300	9%	2 335	9%	2 319	9%
Normalized EBITDA .....................................................................		10 849	41%	10 820	40%	10 702	40%
EBITDA .........................................................................................		10 745	40%	10 624	39%
Normalized profit attributable to equity holders of AB InBev ...		4 986	19%	3 602	13%
Profit attributable to equity holders of AB InBev .......................		6 055	23%	2 954	11%
For the six-month period ended 30 June						2018
Million US dollar					2019	restated
Operating activities
Profit of the period........................................................................................................................................					6 642	3 590
Interest, taxes and non-cash items included in profit ....................................................................................					4 147	7 022
Cash flow from operating activities before changes in working capital and use of provisions	...........	10 789	10 612
Change in working capital ............................................................................................................................					(1 593)	(2 298)
Pension contributions and use of provisions.................................................................................................					(279)	(282)
Interest and taxes (paid)/received ................................................................................................................					(4 158)	(4 645)
Dividends received.......................................................................................................................................					137	38
Cash flow from operating activities ..........................................................................................................				4 896	3 425
Investing activities
Net capex ....................................................................................................................................................					(1 499)	(1 972)
Net of tax proceeds from SAB transaction-related divestitures .....................................................................					-	(430)
Acquisition and sale of subsidiaries, net of cash acquired/disposed of	.........................................................				(250)	(72)
Proceeds from the sale/(acquisition) of investment in short-term debt securities	..........................................			(1)	1 299
Other ...........................................................................................................................................................					(5)	(75)
Cash flow from investing activities...........................................................................................................				(1 755)	(1 250)
Financing activities
Dividends paid .............................................................................................................................................					(2 389)	(5 132)
Net (payments on)/proceeds from borrowings ..............................................................................................					1 411	1 703
..............................Other (including purchase of non-controlling interests and payments of lease liabilities)		(1 019)	(1 414)
Cash flow from financing activities ..........................................................................................................				(1 997)	(4 843)
Net increase/(decrease) in cash and cash equivalents ...........................................................................					1 144	(2 668)

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.

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Financial performance

The tables in this management report provide the segment information per region for the period ended 30 June 2019 and 2018 in the format down to Normalized EBIT level that is used by management to monitor performance. To facilitate the understanding of AB InBev's underlying performance, the company is presenting in this management report the 2018 consolidated volumes and results up to Normalized EBIT on a 2018 Reference Base. As such, these financials are included in the organic growth calculation. For further information on the basis under which the 2018 Reference Base was prepared, please refer to section Adjusted segment information presented in the 2018 Management Report. The profit, cash flow and balance sheet are presented as reported in 2018, adjusted to reflect (i) the new company organizational structure that is effective as of 1 January 2019 and (ii) the impact of adoption of IFRS 16 under the full retrospective application.

AB InBev is presenting its results under five regions: North America, Middle Americas, South America, EMEA and Asia Pacific.

The tables below provide a summary of the performance of AB InBev for the period ended 30 June 2019 and 2018 (in million US dollars, except volumes which are in thousand hectoliters) and the related comments are based on organic numbers.

	2018
	Reference		Currency	Organic		Organic
AB INBEV WORLDWIDE	base	Scope	translation	growth	2019	growth %
Volumes...................................................	278 515	(3 645)	-	4 711	279 581	1.7%
Revenue..................................................	26 854	(180)	(1 724)	1 603	26 552	6.0%
Cost of sales ............................................	(10 096)	(30)	653	(666)	(10 138)	(6.6)%
Gross profit ............................................	16 758	(210)	(1 071)	936	16 414	5.7%
SG&A ......................................................	(8 774)	64	544	(92)	(8 258)	(1.1)%
.........Other operating income/(expenses)	397	(4)	(27)	28	393	7.0%
Normalized EBIT......................................	8 383	(150)	(554)	872	8 549	10.6%
Normalized EBITDA ...............................	10 702	(55)	(731)	935	10 849	8.8%
Normalized EBITDA margin .....................	39.9%				40.9%	104 bps

In the first six months of 2019, AB InBev delivered normalized EBITDA growth of 8.8%, while its normalized EBITDA margin expanded by 104 bps to 40.9%.

Consolidated volumes grew 1.7%, with own beer volumes growing 1.7% and non-beer volumes increasing 3.4%. This growth was delivered despite a difficult comparable, as we were lapping the impact of the 2018 FIFA World Cup RussiaTM sponsorship, AB InBev's largest commercial activation in history.

Consolidated revenue grew 6.0% to 26 552m US dollar, with revenue per hectoliter increasing 4.2%. Combined revenues of the three global brands, Budweiser, Stella Artois and Corona grew 8.2% globally and 12.4% outside of their respective home markets.

Consolidated Cost of Sales (CoS) increased by 6.6% and by 4.5% on a per hectoliter basis.

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 AB InBev owns or licenses, but also third-party brands that the company brews as a subcontractor and third party products that it sells through AB InBev's distribution network, particularly in Europe. Volumes sold by the Global Export business, which includes the company's global headquarters and the export businesses which have not been allocated to the company's regions, are shown separately.

	2018		Organic		Organic
Thousand hectoliters	Reference base	Scope	growth	2019	growth %
North America...............................................	54 627	15	(1 007)	53 635	(1.8)%
Middle Americas ...........................................	62 950	(109)	1 881	64 722	3.0%
South America ..............................................	64 471	188	2 198	66 856	3.4%
EMEA ...........................................................	41 889	(3 228)	1 574	40 235	4.1%
Asia Pacific ...................................................	54 100	(32)	23	54 092	-
Global Export and Holding Companies..........	478	(478)	42	42	-
AB InBev Worldwide...................................	278 515	(3 645)	4 711	279 581	1.7%

North America total volumes decreased by 1.8% in the six-month period ended 30 June 2019, compared to the six- month period ended 30 June 2018. The company estimates that the United States beer industry sales-to-retailers declined by 2.2% in the six-month period ended 30 June 2019 compared to the same period last year. AB InBev estimates that its shipment volumes in the United States and its beer sales-to-retailers declined by 1.7% and 3.0%, respectively. The above core portfolio outperformed the industry, gaining 90 bps of market share as per the company's estimates. This gain was led by Michelob Ultra, which accelerated its share performance, enabling the brand family to maintain its position as the top share gainer in the US. The company also gained share in the segment from brands such as Bon & Viv Spiked Seltzer as well as several innovations in the segment, including Michelob Ultra Infusions and Bud Light Lemon Tea. The mainstream segment remained under pressure, contracting by an estimated 125 bps in the first six months of 2019, as consumers trade up to higher price tiers. Within the mainstream segment, AB InBev's portfolio lost 10 bps of share in the first six months of 2019.

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