Anheuser-Busch InBev SA/NV (BUD) Q2 2011 Earnings Report, Transcript and Summary

Welcome to the Anheuser-Busch InBev second quarter 2011 earnings conference call and webcast. Hosting the call today from Anheuser-Busch InBev is Mr. Carlos Brito, Chief Executive Officer. To access the slides accompanying today’s call, please visit Anheuser-Busch InBev’s website now at www.ab-inbev.com and click on the Investors tab. Today's webcast will be available for on-demand playback later today. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. (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 the management's current views and assumptions and involve known and unknown risks and uncertainties. It is possible that the company'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 the firm's future results see Risk Factors in the company's latest Annual Report on Form-20F filled with Securities and Exchange Commission on April 12th, 2011. Anheuser-Busch InBev assumes no obligation to update any forward-looking information provided during the conference call. It is now my pleasure to turn the floor over to Mr. Carlos Brito. Sir, you may begin.

Well, thank you, Jackie. Good morning, good afternoon, everyone and thank you for joining our second quarter 2011 conference call and webcast. As usual, I'm joined here today by our CFO, Felipe Dutra. So let’s get started. Today, we have reported solid results in the three-months ending June 2011, delivering EBITDA margin expansion and earnings growth. In fact, we have now reported 11 consecutive quarters of year-over-year normalized EBITDA margin expansion since the combination Anheuser-Busch at the end of 2008. We also continued to deliver strong cash flow results with cash flow from operating activities in the six months to June 2011 reaching more than $4.5 billion, a growth of almost 10% on a reported basis. Our own beer volumes drove momentum after a slow first quarter, growing by 0.6%. As confirmed in our outlook, we expect this momentum to continue in the second half, especially the first quarter. Our Focus Brands grew at even faster rates of 2.3%, with particularly strong performances from Budweiser, Harbin and Sedrin in China. The performance of global Budweiser, U.S. volumes, plus international volumes was particularly impressive with grow of 2.5% in the quarter. We also announced a brand partnership of the FA Cup [ph] for the next three years, a property we will be able to leverage to support our soccer platforms in multiple countries. Total revenue grew by 3.7% and by 3.4% on a per hectoliter basis, helped by disciplined field sales execution and the revenue management best practices. Revenue per hectoliter grew by 4.4% on a constant geographic basis. The focus on revenue management coupled with continuous investment behind our brands should allow us to deliver revenue per hectoliter growth ahead of inflation on constant a geographic basis for the full year? In United States, we estimate our market share decline…

Thank you, Brito and hello, everyone. Let me start with North America. As Brito mentioned, shipment volumes in the US in the quarter declined 1.7%, while sale to retailers, STRs decreased 3.4%. As you know, there will always be variations between shipments and STRs from quarter to quarter, but take it a year as a whole, absolute shipments and the STRs should be closely aligned. In Canada, beer volumes fell 1% on the back of our soft industry. We saw flat share in the quarter and the share has been stable at around 41% level for the last 15 months. Balancing volume and profitability is the priority in North America. And in the second quarter, we grew the EBITDA margin in the zone by 66 basis points to 43.3%. Our performance, well ahead of our main competitors. In doing so, we delivered $70 million of (inaudible) integration and synergies of $145 million in the half year and remain track to deliver at least our committed quarter billion dollars on a cumulative basis this year. Latin America North, beer volumes were down 2% and soft drinks grew 1.9%. Brito has already commented on our volume performance in Brazil and that on prior year comps. So that did – that grew 10.3% in the quarter and margin expanded by 234 basis points to 46.2%, with revenue growth and lower admin expenses more than offsetting higher input costs and distribution expenses. In Latin America South, saw our total volumes decline by 0.2% in the quarter with beer volumes up 2.9%. Argentina grew volumes by 4.5%, and we gained market share with Stella Artois growing double digits. EBITDA in the zone grew over 20% in the quarter. In Western Europe, own beer volumes declined 1.6% in the quarter, with all countries in the zone…

(Operator instructions) Thank you. Our first question is coming from Mark Swartzberg with Stifel Nicolaus. Mark Swartzberg – Stifel Nicolaus: Yes. Thanks, operator. Morning, gentlemen.

Good morning. Mark Swartzberg – Stifel Nicolaus: Brito or Felipe, on Asia-Pac it was really an area strength in the quarter from a top-line and from an EBITDA perspective. Could you talk a little bit about how sustainable that volume strength and margin strength is going forward?

Well, I think, Mark, I think what we see in APAC and China is that our Focus Brands namely Budweiser, Harbin, Sedrin are performing very well. They represent 70% of our volume. We still have some volume that we are replacing by this Focus Brand, so that’s why our share hasn’t progressed at the same phase of the Focus Brand. But we’re doing the right thing for the future because these three brands are the ones we’re investing heavily behind and they are growing double digits. So they grew by 21% in the second quarter versus our total volume of around 12% for the quarter. So, we’re very happy. We have two quasi, one national brand Budweiser and quasi national Harbin. And the uptrade of consumers in China is a reality. So people are trading up, and that’s good for us, because we have our strengths on the premium segment. So we’re the leaders in the premium segment. So we think we own solid brands. Our team is very motivated. We are now expanding our operations. We have Greenfields. We have some small M&As that will complement our footprint and that’s our plan in China. We are not looking back. Mark Swartzberg – Stifel Nicolaus: Okay. Great. And if I could switch over to the U.S, I mean, I think from an observer stand point, a perception that there is a lot of turnover in St. Lewis [ph], there has been obviously tension with your distributors. And yet, the performance in the quarter was pretty good and you’re seeing some good things for brand Budweiser. It sounds like your optimism generally from a share perspective is growing. So could you talk a little bit about from, you have been on record publicly saying you are really focused on organic growth now. Can you talk a little bit from where you sit, what you’re seeing within the organization here in the U.S that folks in the investment community or larger community may be missing from a kind of organizational capabilities standpoint?

I think I am very confident about our U.S organizational capabilities. I think what you’ve seen is that some people had some retirement arrangements and stuff and they left the company, some others left for some other reasons. But you should think about the number of people we have in the U.S. and then the number of people leaving and then the – I would say, I don’t see that as a problem. We are very happy with the innovations on the other hand that we’re bringing to the marketplace and that they think speaks to the fact that people are doing the stuff, they are doing behind Budweiser for example. I think our system was really well when you bring good ideas to them to execute. So I mean, you look Bud Light line some two years ago. You look now what’s happening with Budweiser, what continues to happen with Bud Light, Shock Top, Stella. So I think our system is a very strong system. Our wholesaler network is a big strength to our company. And remember, people get a good idea, they get them to the market in a very efficient way. So I think what we have in the U.S is that we’ve decided when we got here two or three years ago, we decided to correct some pricing tree or pricing structure issues that were legacy issues. And we’re feeling a little bit of the price in terms of the sub-premium ready brand segments. But again we’ve always said our business is to sell core and core above and premium brands, not value brands. So that’s what we’re committed and that’s what we’re doing in the U.S. So we are very excited about the growth in our Focus brands because those are the brands that will a part of our future.

Great. Thank you, Brito

Thanks, Mark.

Your next question comes from the line of Chris Pitcher with Redburn. Chris Pitcher – Redburn: Good afternoon. A couple of questions on Brazil please, obviously you regained market share in Brazil, during the period in Brazil, but are they slightly absorbed more of the XIDT [ph] increase, maybe otherwise bought, I wonder if you could talk briefly about how competitive price actions have been through the period in Brazil? And then, specifically on the soft drink side, whether there is scope to recoup some of the lost revenue per hectoliter that we saw in the second quarter? And then following on from the guidance on distribution for the full year, that implies quite a significant step-down in growth in distribution expenses in the second half, is it really extreme now in Brazil you’ve got capacity in the north, just reason expense to be flat or even down year on year in H2, just want to try and understand that development? Thanks.

Okay, Chris. This is Brito here. I’ll try to tackle all three of them. In terms of Brazil, prices are very stronger, just saw 8% for the quarter, 10% for the half. We said this year Brazil would be year of revenue management, correcting some things as opposed to volume growth, given the fact that the government is trying to cool down the economy a little bit. So against that would be not the wisest thing to do. So, we’ve decided to take advantage that we ended the last year at record market share which gave us a lot of options to do things in terms of price pack as a strategy. We decided to increase more the price on the one way segment. We like returnables more than one way. And that’s what we did. So, we are very glad with it. We lost some market share, as we always do and I would like to do it, but it is always the case, because as you increase prices, competitors in the markets take some months to settle, but you should look at our market share on the sequential basis; it has grown since February. And it is now June, it’s 69.3% and then after a huge, maybe a record increase price implemented in the fourth quarter of last year, plus another price increase in April, given that the exercised price increase. So I think the brand that was span [ph] very well. Our market execution is spanning very well. What you see in Brazil was that there was a decline in net revenues per hectoliter in the second quarter compared to the first quarter, but if you look at the last two years, that has always been the case mainly for two reasons. First, because we sell more…

So, we are committed to what we said we would do in our outlook for the logistics, the cost, distribution expenses. Chris Pitcher – Redburn: Thank you very much.

Welcome, Chris.

Your next question comes from the line of Lauren Torres with HSBC. Lauren Torres – HSBC: Good morning, everyone.

Good morning. Lauren Torres – HSBC: Brito, my questions regarding the US and obviously it’s tough market and I think you are sending yourself upper beginning to take next round pricing actions and I understand you can’t be too specific at this point, but just curious about how you are thinking about pricing in light of how the consumer is behaving, do you think there is room for pricing as we look into next year? And I guess also with respect to market share losses, when should we expect to see a reverse on and maybe being able to regain some of that lost market share?

Yes, Lauren, thanks for the question. I mean, what we can say is that we are committed to reverse this market share losses, but doing it the right way. It could be very easy to reverse it during the wrong way, but we want to do it in the valued added sustainable way and that we are willing to live with some time with that in the short term. We generally take price increases at this time of the year in the US, so there is nothing new. Other consumer goods products are doing the same. So, we are not alone there in that domain. Beer prices, if you look at the – in six years have been below CPI and the food category, so beer has been behind CPI and food category. And then our view remains I think beer tends to being elastic in the US. I am not saying you don’t lose some value as you increase prices, but there are other things like demographics that should play in our favor and also the things like excellent investments that we are putting to support our brands. So, our strategy continue to be a one of among many things of narrowing the price gap between sub-premium and premium. And you also need to remember the prices increases necessary to offset commodity price increases that we are facing even with all the ups and downs of commodities, even when they are down, they are still up versus last year, most of them. So, of course, we recognize that any price increase poses uncertainty and risk for some share loss in the short term, but increases will be different by geography, brand, package in order to remain competitive. So, we are going to be competitive in the marketplace, but we have to do it – strive for the long term. And we think price is something that we need to correct, the lightest suite, the baggage the we inherited. Lauren Torres – HSBC: And also you mentioned commodity costs that, I am not sure if you are ready to talk about that for next year, but any guidance or any idea of how you’re looking into next year?

No, I mean I am not ready to give a guidance for next year, but you know, is that we do – we have hedging policy, our hedging policy, the role of it is not to the beat the market, it’s just to give us some constants that we have – that we know our cost when we construct budgets and when we do price strategies. So, we are the beer business, not into commodity business, but given that it’s an important part of our business, we use hedging as the way to give us time to react. That’s the name of the game time to react, not beat the market in any shape or form. Lauren Torres – HSBC: Okay, thank you.

Thanks, Lauren.

Your next question comes from the line of Jon Fell with Deutsche Bank. Jon Fell – Deutsche Bank: : :

Well, for the full year, we are expecting to be below the 25%, but in the longer-run between 25%, 27%, so it’s too early to provide guidance for next year, but the long run range is 25% to 27%, but this year, specifically full year should be below 25%. Jon Fell – Deutsche Bank: But you are expecting to be below 25% for the second half as well, or will you be back into that territory you think?

Well, below 25% for the full year taking into account what happened during the first half. So, second half will be the natural consequence of that, but it’s 25%, below 25% for the full year. Jon Fell – Deutsche Bank: Okay, thank you.

You are welcome.

Your next question comes from the line of Nico Lambrechts with Bank of America Merrill Lynch. Nico Lambrechts – Bank of America Merrill Lynch: Thank you very much. Good afternoon, gentlemen. Just with respect increases in the US, could you give sense how far you have moved between the premium and price caps and if you take any price increases in October, should there still be disproportionate price increase on the sub-premium versus premium? And then – the outlook –

Yes, okay. Go ahead, Nico. Nico Lambrechts – Bank of America Merrill Lynch: And just checking on the outlook, the first two quarter volumes that we saw for the US, we’re facing one year of pretty easy comps, as we go into the second half for the US, that you got two years of easier comps, could you give us any sense looking forward? Do you see any improvement in the consumer, any senses of what you feel how the beer market might react in the second half, or do you sense any inflections points? Thank you. Nico Lambrechts – Bank of America Merrill Lynch: Hi, Nico. In terms of the second question, no, we are not going to give any guidance in terms of the second half, but we will continue what we to – our strategies, things we can’t control. Your first question about the US price, the gap closure between sub-premium and premium is a multi-year project. So I am not going to comment specific about the next price in October, but it is a multi-year project, that’s where we had it, but, of course, we are flexible on how to get there depending on many other things we learned along the way, but that’s where we had it. Nico Lambrechts – Bank of America Merrill Lynch: : : :

No. Nico Lambrechts – Bank of America Merrill Lynch: Okay. And you – I think you’ve mentioned that the gap was around 25%, I presume that is in aggregate across your total portfolio, can you give us a sense of at what level it is approximately at the moment?

I mean, those are profit numbers, but I think the gap was, I think, depending on package, region, channel. And I think if you look at the IRI, you would say that we contracted that, the gap by 2% or 3% – by 2 points or 3 points, but those – again, those are public numbers we can check. Nico Lambrechts – Bank of America Merrill Lynch: Excellent. Okay, so it’s quite a way to go. Thank you very much.

Thank you.

Your next question comes from the line of Dirk van Vlaanderen with Jefferies. Dirk van Vlaanderen – Jefferies: Hi, thanks very much, Carlos. Just a question going to central Eastern Europe, if you can maybe give a sense for how much of the volume decline was market versus ABI performance? And then Felipe made a comment about the performance in the first half lumping approximately for the full year, is that just because you are rolling through food the comps, etcetera, was it going to be coming off of maybe should we know about in that region?

Well, starting from the second part of the question, there are facts behind it. The first one as – pointed out, there is a significant increase or there was a significant increase in the third quarter of last year in terms of distribution expenses, and now, we will be cycling that one. So we are going to get easier comps. And secondly in terms of cost of sales per hectoliter, in the second quarter of this year, we saw a big spike in terms of our cost of sales per hectoliter growth year over year, significantly higher on more than twice the increase of the first quarter. And we see the cost of sales per hectoliter increase year over year for the second quarter as a kind of one-off and not a proxy for the remaining of the year.

In terms of, Dirk, your first question, and then, of course, what happened in terms of volume industry or most of the industry, some of it is volume share, where we gain value share. So, yes, there was some volume share slippage on our side, but most of it was industry negative territory. Dirk van Vlaanderen – Jefferies: Okay, thanks very much.

: Ian Shackleton – Nomura: Yes, good afternoon, gentlemen. Thinking about how you use free cash flow and I appreciate at the moment the focus on deleveraging, but I suspect you look at your stock at the moment, $34, maybe it becomes all the more cheap where do you think free clash will be used wise going forward, if you are going to think about dividend and also buybacks over the next 12 months?

Hi, Ian. Felipe here. This is somehow a good problem to have, I believe many – we have been deleveraging in line with the plan. We are still not there yet, but while going to the target of we have reviewing dividend payment upwards and we remain targeting a kind of dividend yield in line with other FMCG companies, recognizing that we work below that level this year. I don’t think it’s appropriate for me to express an opinion on the current share price while respecting your comments, but we will be monitoring the situation. And we understand the market has been very volatile, and volatility may stay, who knows for how long, but we will be managing that accordingly. Ian Shackleton – Nomura: Fair. But I guess my question really was, you have set these targets, I know given the target for this year, 2.5 times of your EBITDA, 2 by the end of next year, and see, you don’t need to meet those targets from a point of view of the debt covenants any more, I mean, how much flexibility is there if there is value to be added through using cash in other ways?

Yes, we understand and recognize that flexibility. And together with our Board, we will be monitoring the situation and we will be acting accordingly, but we do have that flexibility. Ian Shackleton – Nomura: Okay, thanks so much.

You’re welcome.

Your next question comes from the line Simon Hales with Barclays Capital. Simon Hales – Barclays Capital: Good morning, guys. Just a couple of questions going back to the whole issue of volume, if I can, just firstly on Brazil, I wondered you’ve done work just strip out if you can, in the Q2 what you think the impact of the World Cup was on the complexities to give us a feel for – actually underlying was at – how that for the last quarter? And then just building on from that, Brito, in terms of your comment on H2 for Brazil, am I right to read what you are saying is that you generally expect volumes in Brazil in negative territory for the remainder of the year? And then shift to the US, obviously you flagged the improving IRI data through early July, is there anything we should be aware of that’s driving that from a technical point of view? Interesting your general comments on why think you’ve seen the pickup there?

: And you put on top of that the minimum wage increase that had a real increase in Brazil this year, but we will have a very big increase next year in January. So, because of all that, we saw that this year was the year for us to correct some revenue and price increase initiatives in Brazil, given that we ended last year in the record share. And doing all that was to have the 69.3% share at June. So, we are very happy with that performance and with our going for next year in terms of supply chain, product offering, innovations, because we think January next year with the minimum wage coming could be interesting for the beer industry. And your second point was? Simon Hales – Barclays Capital: Just on recent US IRI data, what you think just given the uptick there and any technical facts, you should aware of?

I mean we don’t comment on the third quarter, the only thing we said, because it’s public, is that IRI said that the four weeks leading to July 10, including the 4th of July was, the industry was in positive territory, 1.5%. So, that’s what we said, but we don’t comment on July and because that’s third quarter. Simon Hales – Barclays Capital: Okay, thank you.

You’re welcome.

Thank you.

Your next question comes from the line of Caroline Levy with CLSA. Caroline Levy – CLSA: Good morning, everyone. I wonder if you could talk a little bit about the metrics on brand health in North America, because it’s something you’ve stretched the law that you watched for your ability to grow volume over time and if you could just tell us a little bit more about that? And then also, when does NFL advertising begin to hit the airwaves and what can you expect from that?

: In terms of brand health, we believe that brand health today is market share and topline growth tomorrow. So, that’s why we have a very strict way of measuring and tracking brand health of our Focus Brands across all of our markets. And we are very excited because Bud Light continues to show increasing brand health; Budweiser, same thing; Ultra and Stella, our high-end portfolio. So that’s something that gives us encouragement, because for us that’s brewing for the future. Caroline Levy – CLSA: Thank you. Can I also just ask, inventory levels going into the quarter were a sign, is that what you are indicating by saying that if 2010 end shipment to match by midyear?

Hi, this is Felipe here. Let me address the second question. The impact here, you’ve seen in terms of net revenues per hectoliter in Europe is very much driven the termination of legacy contracts in UK, also had an effect in our volume as I referred to. Legacy contracts have had very high net revenues per hectoliter, also very high costs. That’s why we said on the EBITDA line, the impact isn’t [ph] immaterial and not having to deal with it will allow us to focus completely on our brand and developing our portfolio. So, we are pleased about that outcome. However, that has an impact on our net revenues per hectoliter which is not price related.

: Caroline Levy – CLSA: Thank you so much.

Welcome.

Your next question comes from the line of Andrea Pistacchi with Citi. Andrea Pistacchi – Citi: Hi, guys. I had two questions, please. One on, with the Budweiser launch in Brazil imminent, if you could just tell us a bit about maybe the ambition, whether the scale of this loan, is it national? And the second one on your Europe, on pricing, your revenue per hectoliter slipped a bit in the second quarter, I was wondering whether is some geographic mix in that, possibly Germany growing fast, or is it a sign of deterioration of it and the pricing environment in Europe and Western Europe? Thanks.

: Budweiser is a brand that has already Brazil, given all the sponsorships that Budweiser carries from the World Cup, all inaugural sports and music and celebrities’ association. And so, people know the brand, but they can’t buy the brand. And we think given the brand profile and the positioning in terms of celebrating good times, we think that will be something that will add to our portfolio in Brazil. Just to complement, Stella, grew 200% in the first half of Brazil. It was the fastest growing brand in the super premium segment And Budweiser will be launched in the next three weeks, (inaudible) and that’s something that we are very excited. Andrea Pistacchi – Citi: And is this – can I just follow-up, is this launch going to be sort of at the same time national or is it going to be a sort of a gradual rollout?

It’s going to be more focused in the 70% of Brazil which is the south and southeast, it will be national in terms of availability and trade mark activities, but most of the campaign in the first months will be concentrated in the south and southeast. Andrea Pistacchi – Citi: Great. Thank you.

Thank you.

Your next question comes from the line of Alice Longley with Buckingham Research. Alice Longley – Buckingham Research: Hi, good morning. And my question is about your volume comments, I think in your press release you said you expect this momentum of volume improving from the second quarter – first quarter into the second quarter to continue into the second half, especially the fourth quarter, does that mean you expect volume to continue to accelerate so to be stronger in the third quarter than the second quarter? Or in the second half in the second quarter?

No, we didn’t split third quarter and fourth quarter. In that fashion, what was said is that we expect volume to continue to gain momentum in the second half, especially in the fourth quarter. Alice Longley – Buckingham Research: So, second half volume should be up more than the second quarter volume?

Again, we said momentum would be building, so it build from first quarter to second quarter. We said it will continue to build for the second half, especially in the fourth quarter. Alice Longley – Buckingham Research: And what are the reasons for that? Is that most Latin America and North America, what are the reasons that volumes becomes stronger in the second half than the second quarter?

Well, the reasons for that is some comps that we had for last year, okay. And especially in Brazil and that is something that as you lap those easier comps in the fourth quarter especially in Brazil that will be the benefit for this year. Alice Longley – Buckingham Research: And then if we look at price mix on some of the comments you made about Brazil indicated that maybe price mix also could be better half versus the second quarter, is that –?

No, what I said is that there was a question about net revenue in Brazil, that fluctuated from first quarter to second quarter and what we said is that that’s normally the case, if you look at last three years, has been the case and that’s because we sell more one ways in the first and fourth quarter of the year. So that is right, net revenue. Plus, we have our price increase in Brazil normally in the fourth quarter, so the fourth quarter and first quarter tends to be stronger in terms of net revenue year on year vis-a-vis – versus the second and third quarter, that’s pretty much solves the case. Alice Longley – Buckingham Research: :

: Alice Longley – Buckingham Research: Okay. And then my another question is about Bud Light versus your two leading competitors in that segment, looking at all the data, you look at on – did Bud Light gained more share than the others, or less share than the others?

Well, Bud Light gained share in this quarter and in the half and that’s something that we intend to continue to accelerate. When I talk about our priorities for the US, there were a couple. First one was to accelerate even further the Bud Light, because it’s a brand that has 21% of the market in the US, tremendous loyalty with the consumers. We think now we can still do even better job, because NFL is not in the base of Bud Light and it’s going despite not having the NFL. Our second priority is Budweiser stabilization. And this first half was the best in 11 years. The third priority is the high end, the high end brands and the fourth priority is to continue to be very disciplined and that is given the market growth that we have and the strategy that we have for the second half. Alice Longley – Buckingham Research: Do you think Bud Light gained share within the premium light segment?

If you look at IRI, no. Alice Longley – Buckingham Research: Okay. And then with the NFL deal kicking in, how – what will the average consumer see as effective bet? I mean, I am assuming that your competitors will be advertising on TV too, so the TV exposure doesn’t necessarily, right. So what is the difference that the consumer really sees with your NFL sponsorship?

Well, it is the same thing as any property. I mean just look at what they did with FIFA and then with the FIFA World Cup, everybody could announce around the FIFA World Cup games and activities, but we were the only ones in terms of beer that had the property, the footage, the prime time and so on and so forth. So, that makes a huge difference, because today, what get consumers to hook up with you is really content. And if you can provide content as opposed to – today consumers don’t like to speak at them, they like you to speak with them and for you to speak with them and interact with them, you need content. And when you become the exclusive sponsor of something as huge as the NFL, the big sports in our franchise in the US, you have tons of content and that’s what consumers are looking for. They are not just looking for nice ads before and after games. They are looking for content providing companies and we can provide those contents.

Your next question comes from the line of Chris Skippers [ph] with Peter Cam [ph] Chris Skippers – Peter Cam: Yes, good afternoon. Thank you for taking my call. I’ve remaining questions on the US. Firstly, regarding your pricing, pricing at the high end, could you get some more color on that, how much that influenced the pricing in Q2 and perhaps, linked to that going forward also was a question previously from what to do with your cash flow, could you consider doing transactions such Goose Island transaction a couple of quarters ago, just to get more across beers into your category? Thank you.

:

I would say that the cash flow generation was not a constraint for the Goose Island transaction. The same way [ph] is not going to be a constraint going forward. We are being active on M&A in China in line with our strategy, more looking for capacity rather than brands. And as we rollout Budweiser and Hardin as mentioned, and so we have been active in China as well. Chris Skippers – Peter Cam: But there is no linkage towards, for example, the current situation in the market in US that you could say, for example, your cash flow to indeed make more acquisitions in that high end markets to make yourself vulnerable, and certainly Budweiser, Bud Light brand of course, that’s not something you are considering a shift in your strategy for example, now you are focusing on China, but you could also focus on the US market, I would say?

I mean we are focusing in the US market as well as China. We are investing in the US, not only in terms of brands, but also in terms of CapEx, in terms of M&A. So US is, given the size of the business and relevance of the business, is a bigger priority for us together with Brazil, together with China.

Your final question comes from the line of Jason DeRise of UBS. Jason DeRise – UBS: Hi, it’s Jason DeRise at UBS. A lot of questions, but very near term and focus, I wonder if we can look a bit longer term, in the US, you’ve come a long way on the margins, but do you think that you’ve done everything that you can on the margins there? Do you think that there is more room to go compared to some of the other markets that you run big beer businesses in? And kind of a follow-up, just the global business, I mean what do you imagine the organic growth profile looking like on let’s say a five year view, other companies that are big FMCG companies give this type of thought, I am wondering if you do want to share some ideas of where you see the company growing organically?

Well, hi, Jason. I think in terms of margin growth, the one I can tell you is we kept opening [ph] our and challenging our colleagues for them to look at margins and learn, Latin America north and south gets an inspiration. So that’s how we are working our company with positive competition and trying to get people to be competitive. So that’s how I would say about margins. Our company has been a story of – a history of margin growth, margin expansion. So, that’s something we firmly believe in in general. In terms of global business, no, we are not going to give you a five-year view and then but we remain very focused on the organic business and because we believe with the footprint we have, the scale, the people and the brands we have, we still have lots and lots to do and that’s what keeps us excited day in and day out. Jason DeRise – UBS: Can I just follow up on the margin, is there any reason why the US beer market couldn’t match Brazil’s EBITDA margin, hypothetical long-term scenario, not like next quarter obviously?

:

Thank you. I would now like to turn the floor back over to Mr. Carlos Brito for any additional or closing remarks.

Well, thank you very much for your time. Have a nice day and we will see you next quarter. Bye-bye.