Anheuser Busch InBev : Reports Fourth Quarter and Full Year 2020 Results

Anheuser-Busch InBev Reports

Fourth Quarter and Full Year 2020 Results

"In an extremely challenging year, our teams rose to the occasion. We finished the year with momentum in our key markets by leveraging our fundamental strengths as a company and capturing the benefits of investments we have been making for several years in our portfolio and rapidly growing platforms, such as BEES and Zé Delivery. We are now more closely connected than ever to the 6 million+ customers and 2 billion+ consumers we serve worldwide through our clear commercial strategy, revamped innovation process, digital platforms and ongoing operational excellence." - Carlos Brito, CEO

KEY FIGURES

• • Revenue: In 4Q20, revenue grew by 4.5%, positively impacted by a continued volume recovery and revenue per hl growth of 2.7%. In FY20, revenue declined by 3.7% with revenue per hl growth of 2.1%.

• • Volume: In 4Q20, total volumes grew by 1.6%, with own beer volumes up by 1.8% and non-beer volumes up by 1.7%. In FY20, total volumes declined by 5.7%, with own beer volumes down by 5.8% and non-beer volumes down by 3.8%. The decline was primarily driven by impact of the COVID-19 pandemic.

• • Global Brands: In 4Q20, combined revenues of our global brands increased by 1.5% globally and by 1.3% outside of their respective home markets. In FY20, the combined revenues of our global brands Budweiser, Stella Artois and Corona decreased by 5.0% globally and by 5.3% outside of their respective home markets.

• • Cost of Sales (CoS): In 4Q20, CoS increased by 7.9% and increased by 6.4% on a per hl basis. In FY20, CoS increased by 3.1% and increased by 9.8% on a per hl basis, driven primarily by operational deleveraging resulting from the impact of COVID-19 on our volumes and by supply chain adjustments implemented to meet evolving demand.

• • EBITDA: In 4Q20, EBITDA of 5 066 million USD represents a decrease of 2.4% with EBITDA margin contraction of 261 bps to 39.7%. In FY20, EBITDA declined by 12.9% to 17 321 million USD and EBITDA margin contracted by 382 bps to 36.9%.

• • Net finance results: Net finance costs (excluding non-recurring net finance results) were 422 million USD in 4Q20, compared to 2 309 million USD in 4Q19. Net finance costs (excluding non-recurring net finance results) were 5 959 million USD in FY20 compared to 4 355 million USD in FY19. The increase in FY20 was primarily driven by a mark-to-market loss of 1 211 million USD linked to the hedging of our share-based payment programs compared to a gain of 898 million USD in FY19, resulting in a swing of 2 109 million USD.

• • Income taxes: In 4Q20, our normalized effective tax rate (ETR) increased from 24.5% in 4Q19 to 24.8%. Excluding the impact of gains and losses relating to the hedging of our share-based payment programs, our normalized ETR was 29.4% in 4Q20, compared to 17.2% in 4Q19. Normalized ETR increased from 23.0% in FY19 to 30.9% in FY20 and, excluding the impact of gains and losses relating to the hedging of our share-based payment programs, normalized ETR increased from 24.9% in FY19 to 26.2% in FY20.

1The enclosed information constitutes inside information as defined in Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse, and 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 4Q20 and FY20 versus the same period of last year.

For important disclaimers please refer to pages 23 and 24.

• • Non-recurring items: Normalized EBIT excludes negative non-recurring items of 215 million USD in 4Q20, and 1 184 million USD in FY20.

• • Profit: Normalized profit attributable to equity holders of AB InBev was 2 154 million USD in 4Q20, compared to 962 million USD in 4Q19 and 3 807 million USD in FY20 versus 8 086 million USD in FY19. Underlying profit (normalized profit attributable to equity holders of AB InBev excluding mark-to-market gains and losses linked to the hedging of our share-based payment programs and the impact of hyperinflation) was 1 616 million USD in 4Q20, compared to 1 729 million USD in 4Q19 and was 5 022 million USD in FY20 compared to 7 196 million USD in FY19.

• • Earnings per share (EPS): Normalized EPS in 4Q20, was 1.08 USD, an increase from 0.48 USD in 4Q19. Normalized EPS in FY20 was 1.91 USD, a decrease from 4.08 USD in FY19. Underlying EPS (normalized EPS excluding mark-to-market gains and losses linked to the hedging of our share-based payment programs and the impact of hyperinflation) was 0.81 USD in 4Q20, a decrease from 0.87 USD in 4Q19 and was 2.51 USD in FY20, a decrease from 3.63 USD in FY19 .

• • Impact of tax credits in Brazil: In 4Q20, Ambev, our subsidiary, concluded the calculation of its tax credits on a judicial decision related to the exclusion of the Value-Added Tax (ICMS) from the taxable basis of the social contribution on gross revenues (PIS and COFINS). The decision refers to the period between November 2009 and April 2015. As a result of this judicial decision and other tax credit adjustments, Ambev recognized 481 million USD income in Other operating income for the year ended 31 December 2020. The impact is presented as a scope change. Additionally, Ambev recognized 315 million USD of interest income in Finance income for the year ended 31 December 2020. Ambev's tax credits and interest receivables are expected to be collected over a period exceeding 12 months after the balance sheet date. As of 31 December 2020, the total amount of such credits and interest receivables represented 997 million USD. Underlying profit attributable to equity holders and underlying EPS are positively impacted by 325 million USD after tax and non-controlling interest.

• • Dividend: The AB InBev Board proposes a full year 2020 dividend of 0.50 EUR per share, subject to shareholder approval at the AGM on 28 April 2021. A timeline showing the ex-coupon dates, the record dates and the payment dates can be found on page 21.

• • Deleveraging: Net debt to normalized EBITDA was 4.8x for the 12-month period ending 31 December 2020, as our results were substantially impacted by the COVID-19 pandemic.

• • 2020 Full Year Financial Report and 2020 ESG Report are available on our website atwww.ab-inbev.com.

MANAGEMENT COMMENTS

To our shareholders:

The past year presented extraordinary circumstances for our business, colleagues and communities.

We extend our immense gratitude to those on the frontlines, particularly healthcare workers, for their commitment to keeping all of us safe, and to our teams who have been demonstrating tremendous resilience and agility as we continue to navigate the ongoing uncertain environment. We believe that a healthy and sustainable recovery can only be achieved when we work together with our partners, communities and consumers.

The challenges we faced over the last year have shown us that it is important to step back and acknowledge the lives around us, as well as those whom the pandemic has taken from us. Sadly, we lost family members, friends and colleagues. We will continue doing what we can to support our colleagues during this difficult time.

Our purpose of Bringing People Together for a Better World is as relevant as ever

Our purpose has never been more relevant than it is today, even if "together" looks different right now. In the context of the COVID-19 pandemic, that means doing what we can to protect the health and safety of our people and communities and putting the power of our value chain at the center of the socio-economic recovery. In normal times, beer is a formidable engine of economic growth; in a post-COVID world, it can be a critical driver of the recovery.

Our beers are almost entirely sourced, brewed and enjoyed locally, deeply connecting us to the communities in which we live and work. This means we must lead the way in supporting the fight against the pandemic and doing our part in the economic recovery. In 2020, we produced and donated millions of units of hand sanitizer in over 20 countries and emergency drinking water in over 10 countries. We mobilized our fleets of trucks in Colombia, Peru and Ecuador to deliver essential food and medical supplies. We helped enhance critical healthcare infrastructure, including four new hospitals in Mexico, Brazil, Colombia and Peru, and a vaccine factory in Brazil. To support and empower the livelihoods of more than 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 brewery operations were shut down.

Successfully navigating a complex environment with a customer and consumer-centric approach

Following a strong start to the year, our overall results in 2020 were significantly impacted by the disruption caused by the COVID-19 pandemic. In FY20, volumes declined by 5.7%, revenue declined by 3.7% and EBITDA declined by 12.9% with EBITDA margin compression of 382 bps to 36.9%.

Consumers rapidly adjusted to the new reality by shifting to in-home consumption occasions, increasing adoption of the e-commerce channel and finding new ways to connect with others, reinforcing our confidence in the long-term potential of the beer category. Our teams quickly responded to the evolving environment, allowing us to deliver beer volume growth of 2.2% in 2H20, even while external conditions remained extremely unpredictable. This was driven by a customer- and consumer-centric approach that is supported by the long-term fundamental strengths of our business:

• • Clear commercial strategy executed with a best-in-class portfolio of brands across styles and price points:

  • • Drive premiumization: We have created and are continuously enhancing the world's largest portfolio of premium brands, designed to cater to increasingly fragmented consumer needs and occasions. Following a challenging start to the year, our High End Company grew revenue by 4.1% and our global brands grew revenue by 4.7% outside of their respective home markets in 2H20. We are leading the way in expanding the core plus segment in emerging and mature markets, with brands such as

Modelo in Mexico and Michelob ULTRA in the US.

• • Differentiate the core & smart affordability: Our core brands also delivered healthy volume growth in 2H20, demonstrating consumer trust in our unparalleled portfolio. Our smart affordability initiatives, such as our local crop beers in markets including Brazil, Peru, Ecuador and Uganda, are drawing new consumers into the beer category, while also serving our communities by supporting local farmers.

• • Build out adjacencies: Our beyond beer portfolio, which spans categories such as hard seltzer and ready-to-drink (RTD) cocktails, wine and spirits, has now reached well over 1 billion USD in revenue and grew by double-digits in 2020.

• • Innovation strategy rooted in consumer-centricity and agility: Our innovations contributed more than 5 billion USD to our global revenue in 2020, an increase from 2019 even in the face of tremendous disruption. Our innovation pipeline included successful launches such as Brahma Duplo Malte in Brazil, Bud Light Seltzer in the US and Nuestra Siembra in Ecuador. We have been evolving our innovation strategy to deliver superior products to consumers with increased speed and agility, which has proven especially critical in the current environment.

• • Scaling our digital commerce platforms to create value for customers and consumers: We believe that the digitization of customer and consumer relationships is a key driver of future growth - a trend that continues to rapidly accelerate due to the necessity of connecting at a distance. We have been investing in these capabilities for many years and saw an exponential increase in user adoption of our platforms in 2020.

  • • Digitizing our relationships with our 6 million+ global customer base: Our proprietary B2B platform, BEES, combines our best-in-class logistics and sales systems with new digital capabilities (such as AI-based algorithms), allowing us to provide customers with convenience, seamless communication and enhanced business performance. In FY20, BEES captured over 3 billion USD in gross merchandise value (GMV), of which more than 2 billion was delivered in 4Q20, as both usage and adoption accelerated. In December, our growing monthly active user base (MAU) reached approximately 900 000 users across 9 markets, and we have plans to roll out the platform to several new markets in 2021 as we rapidly expand.

  • • Leading the way in e-commerce beer sales: Our 20+ e-commerce direct-to-consumer (DTC) ventures across the world offer convenience for our consumers and provide valuable data that allows us to anticipate emerging trends. In Brazil, Zé Delivery is now present in all 27 Brazilian states and significantly accelerated with more than 27 million orders fulfilled in FY20. In Europe, our owned e-commerce beer store portfolio grew ahead of the market, reaching new consumer households. To complement our owned platforms, we also leverage strategic partnerships with third party retailers which have allowed us to establish e-commerce leadership and grow our global market share. This is highlighted by China, where we hold the leading position among brewers in the world's largest e-commerce market.

  • • Finding new ways for our brands to connect with our 2 billion+ consumers worldwide: With our in-house agency, draftLine, we are creating consumer-first marketing executions with more agility and relevance. Our "lives" online concert series in Brazil, which successfully activated our top brands and innovations, such as Brahma Duplo Malte, delivered over 350 concerts and generated 678 million views in 12 weeks. Our "Save Pub Life" campaign in the UK, a gift card program to support neighborhood pubs and bars, generated 1.2 million GBP in donations when they needed it most, and then became a global program that helped bars and restaurants worldwide.