Welcome to the Anheuser-Busch InBev Third Quarter 2013 Earnings Conference Call and Webcast. Hosting the call today from AB InBev is Mr. Carlos Brito, Chief Executive Officer. To access the slides accompanying today's call, please visit AB 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. (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 20-F filed with the Securities and Exchange Commission on March 25, 2013. 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. Carlos Brito. Sir, you may begin.

Thank you, Jackie. And good morning, good afternoon, everyone, and welcome to our 2013 full year results conference call. Let's start with the highlights. We had solid revenue per hectoliter growth. We experienced strong global volume growth from Budweiser and Corona. Integration of Grupo Modelo is going very well with cost synergies ahead of schedule. We had EBITDA margin expansion in most of our markets. The normalized profit growth of more than 10% despite macroeconomic headwinds. The Board proposes a final dividend of €1.45, leading a total dividend of €2.05 in fiscal 2013, a 21% increase over 2012. And recently, we announced a reacquisition of Oriental Breweries in South Korea, a transaction which we expect to close in the first half of this year. Let's now turn to the detail of these results. Total revenue for the year grew by 3.3%, driven by strong revenue per hectoliter growth of 5.8% on the basis of the same geographic mix. As you can see from the slide, there were solid performances in all of our four key markets. Total and own beer volumes were down 2% and our Focus brands were down 0.9%, driven by the challenging macroeconomic conditions in a number of our markets. However, our three global brands, Budweiser, Corona and Stella Artois performed very well, growing collectively by 4.7%. EBITDA for the year grew by 8.1% with our EBITDA margin up 179 basis points, finishing the year at almost 40%. Finally, earnings per share for the year was up 9.1% to $4.91 despite significant macro and currency headwinds. Slide 4 shows the contribution of each of our zones to the total EBITDA performance in 2013. The majority of our EBITDA growth last year came from our developing market footprint, driven by Brazil, Mexico and Latin American South. China also…

Thank you, Brito. And as Brito has covered our four key markets in some detail and you will find additional information about the other relevant markets in the appendix, I would like to quickly review our 2013 financials to save more time for the Q&A. Starting with our earnings per share performance, normalized earnings per share in the full year 2013 grew by 9.1% to $4.91 per share. The increase is due to the profit growth in the underlying business and the combination with Grupo Modelo including the capture of cost synergies. Our net finance cost decreased by approximately $138 million for the full year. Our net interest expense included within net finance cost declined year-over-year by $83 million mainly due to our lower average coupon on net debt of 4.6%. Moving to 2014, we expect the average coupon on net debt to be in the range of 4% to 4.5%. Other financial results also included within net finance cost were negative $251 million in 2013. It includes $186 million of net gains linked to the hedging of our share-based payment program in the year offset by negative currency results and the payment of bank fees and taxes in the normal course of business. Our normalized effective tax rate for the fourth quarter declined to 13.3% from 17.4% in 2014. The normalized effective tax rate for the year was reasonably stable at 16.6%. The full year and the fourth quarter results were better than our expectations for two main reasons: first, incremental interest in our capital payments in Brazil after the successful completion of the corporate reorganization; and second, as we cannot forecast gains and losses in respect of the hedging of our share-based payment programs, which resulted in a non-taxable gain of $451 million in the fourth quarter. Our…

(Operator Instructions) Our first question comes from the line of Chris Pitcher with Redburn.

The first one is on the core brands in the United States. You gave us the market share losses of both the Budweiser and the Bud Light family and Ritas and the Crown. From that, we can see that, I think, Budweiser is down 30 basis points to 40 basis points and Bud Light is actually losing more market share. Could you give us a quick update on where you see the outlook particularly for Bud Light? Do you think the Super Bowl execution is enough to stabilize Bud Light share this year? And then secondly on the cash returns, you talk about a buyback. Would that be both at the ABI and AmBev level? And it looks like in the period AmBev saw a good tax benefit from interest on own capital. Are you able to give us some sort of guidance on interest on own capital distribution going forward now that capital structure has changed?

In terms of Budweiser and then we have seen the best results in the last decade. Of course, it's still not stable as we would like. But I should take Bud Light as family or as a mother brand, those results are very good compared to the trends that we've observed in the last 10 years or so. So job is not done yet. I think it's in the right direction. Budweiser has been very consistent in its messaging. This campaign is working when you look at brand health especially among LDA [2/27] [ph] the metrics are all up. So that for us it’s a predictor of what's to come. And part of it's beginning to materialize. So very happy. And we have a full program for Budweiser and the response to the Super Bowl ads and everything has been amazing. Our guys learned how to deal with social media more effectively this time in terms of not only using the Super Bowl day or event, but leading to the Super Bowl. And that generated 60 million views, breaking many records in social media. And between Bud and Bud Light, we dominated half-half of all brands in the US in terms of social conversation in the days prior and during the Super Bowl. In terms of Bud Light, our new campaign that talks to the DNA of the brand, spontaneity, fun, young, so that's very genuine. Reception was good. It also generated a lot of traffic with the campaign that was done much more to social media than the traditional commercial TV ads. I think it's a beginning of a journey. Again very good when you look at Bud Light and then family, the results you know. When you look at Bud Light as a brand, it capped share within the light segment, which is better than previous years. The problem is that the light segment for the first time this year 2013 wasn’t the freshest So there's not a long-term trend or anything. It's just in 2013 the premium light segment was grounded. The Bud Light held ground within that segment. So I think good news for both Bud Light and Budweiser, not yet where it should be, but getting there in our view.

Well, the 2 times debt to EBITDA optimal capital structure is the ABI one. And I was specifically referring to ABI when I said taking dividends and buybacks when we get around that number. The optimal capital structure for AmBev is much lower than that, given the fact that there is a tax benefit of paying interest on own capital in replacement of dividend and therefore leading to a much lower leverage level. And again, the payout decision at AmBev level is independent from ABI. And AmBev Board should be considering all alternatives among them being their buyback as well.

Our next question comes from the line of Andrea Pistacchi with Citi.

My first question is on your marketing spend. You're guiding to a huge increase in spend this year of about $800 million, I think. Part of this will be the World Cup in Brazil, but you're also saying there'll be a big step-up in other markets. So the question is what is different this year to drive such a material increase in spend? Have you got some innovation? But you've also done a lot of innovation in the past couple of years, particularly in the US. So why have you decided this year to really back it with heavier spend? And then if I could just also add a quick question on the Modelo brands on Corona in particular internationally, where are you in terms of taking back distribution of the brand? I believe now you're taking back Canada possibly France, Italy, if you could give us an update on that please?

In terms of marketing spend, I mean you have to understand that sales and marketing investments are going up because of many reasons. First, they go out every year in dollar terms, because they tend to go up with topline. And because topline has been growing, it grows. Second, every four years you have the World Cup. And being big sponsors of the World Cup and being the World Cup a beer-centric event, especially this time in Brazil, last time was in 1950, so we decided to make this really a huge event, especially based on the learnings and great results we had last year in the Confederations Cup in Brazil. So the World Cup is also part of this [delta] [ph] investment, not only because of Brazil, around the world, but also mainly in Brazil. Third, we have a pipeline of innovation that gets better every year and that gets supported. So that's the third. And the fourth is we're just scaling up some proven initiatives in terms of trade programs that worked and that's also part of that. So we have lots of things happening. And it should be seen in that context. In terms of Corona transition, I mean again we inherited contracts. Of course, we respect those contracts. It's a case-by-case situation. As you've well said, Canada is the first major market where the transition will be done on March 1st and that will be great for our Canadian business that will change a lot our share of segment within the high end in Canada. And that is going to give us great inroads in the on-trade - high-end on trade globally where Corona really has a lot of its footprint. So that's going to benefit a lot of our other brands having Corona as a…

Our next question comes from the line of Anthony Bucalo with Santander.

A competitor in the US has been talking about placing some new effort behind its value brand as a defensive maneuver against encroaching spirits here. Do you have any thoughts what you may do with your value brand portfolio in terms of protecting from a competitor or maybe helping guard beer a little bit from the encroachment of spirits?

You raised an interesting question, because if you look vodka, for example, in the US, I mean it portrays a very up image, but most of the volume is sold, when you look at per serving, at what we would call in value brand type price points. So there is an opportunity there on our focus. But you're right, there is something to be said about at least keeping your fair share in that segment. This year we had a stronger share performance, 2013, than the previous year. We're committed to that segment in the sense of we want to gain share within this segment. We don't want this segment to grow, because we want the other segments to grow, because that's where the margins are. So we have our fair share and who knows even a bigger share within a segment that does exist and it comprises 20% to 30% of total beer in the US.

But you're not thinking about maybe stepping up any sort of investment in those brands?

No, I'm not going to give you details in terms of what we intend to do by brand or by segment. But it's a segment that we want to have our fair share.

One quick question on the extra stores, Brito, just with selling them to Circle K, I would imagine you keep the exclusive distribution for the Modelo brands in those community stores?

Yeah.

Our next question comes from the line of Caroline Levy with CLSA.

I'd like to just ask about margins in Latin America North and even in the South. You seem to have an amazing ability to be able to get price and deliver strong margin growth even in the toughest consumer environment. So just to understand the kind of improvement we saw in both North and South of Latin America in the fourth quarter, were there any one-time items there? I understand that you're not going to have that in Latin America North because of World Cup. But is there anything that we should know that stands out or is that something you think can continue to go up over time?

No, I think you should look at the full year, not at the fourth quarter, because in the fourth quarter, as we said in the press release, especially in Latin America North, we had some one-off organic items that of course impacted margins. Also there was the effective taxes did not increase in October, which was very good for margins as well. But I think you should look at the full year, not at any quarter specifically.

The 47% for the full year was incredibly impressive. But do you see upside to that level in Latin America North at the time?

I mean as we say, margin expansion is something that is part of our DNA. Of course, we would like to have margin expansion together with topline growth. But yeah, we'd like to be every year more efficient as long as the business is being well supported and toplines following and growing as well. So our objective is really to have topline growing and that includes of between shares, brand health, everything that pertains to topline and of course margin expansion. So it's both.

I just have a follow-up on the state of the consumer in Latin America. If you could just update us, I mean do you feel like things are getting any worse in Argentina, for example, any better in Brazil? Just an update would be very valuable.

Well, in Brazil in 2013, as we said a couple of times, I mean food inflation was a problem, because that was in double-digits that put pressure on disposable income for consumers. And disposable income therefore didn't grow as in years before. So that was a problem. We also had some poor weather conditions that also impacted. So affordability and some tough weathers were problematic. That's one of the reasons why we say that we see industry going back to resuming growth in Brazil, because we see those conditions of course changing. confident that the Brazilian industry will resume growth, because we see a lot of headwinds from last year dissipating. For example, the poor weather in the first quarter last year, 2013, if you look at the weather this year, it's much better. Food inflation, which was a problem last year, has decelerated throughout last year, so better this year. And the fact that October the government with a very good understanding of the industry and the potential that the beverage industry has in terms of [ph] drug creation and CapEx and investments in general and in the economy decided to forego the tax increase. And that of course will benefit again this year. So because of all this, we're able to have for the first time in all the years I remember, I've been in the company now for 25 years, some result price increase. So if you put all those elements together, that's why we say we're very confident that the industry should resume growth in Brazil, different than the headwinds we had in 2013 that were against the industry. In Argentina, it's a very confusing place. Readings are still tough, because things are changing everyday. But again, we're focused on what we can control. And we have a very strong management team in place. And I was there a couple of weeks ago and we already have a plan that takes into account the new macroeconomic situation in 2014 with the constant evaluation and the higher inflation potential. And we have shifted gears in order to be able to deal with that. It's also right to say that our guys in Brazil and Argentina are used to this kind of situations from time to time. So the team is used to shift gears and to focus on what we can control and have a plan B ready to go.

Our next question comes from the line of Trevor Stirling with Sanford C. Bernstein.

There is a big drop in cost of goods sold for the soft drinks business in Latin America. Can you give some color on sugar or [ph] PT or concentrate?

Yeah, that is driven by sugar, Trevor.

And could you give us a little color on the R300 million gain on the recovery of restricted funds? What actually lies behind that and how does it split between beer and soft drinks?

Well, this is essentially the following. We have a defined benefit plan in Brazil that is closed for new entrants at this stage. And contributions made over years have proven to be excessive, leading to a surplus. And a recent legislation allowed that surplus to be returned back to the sponsored if shared with the participants. And at the end of last year, we got the final sign-off from the local authorities to split on a 90%-10% basis. And they reflected the amount here is the one that accounts for the company. So this has no immediate cash impact. Cash impact is going to come in 36 monthly installments. But we are pleased to get that asset being returned to the company.

Our next question comes from the line of Melissa Earlam with UBS.

The annual step-up in CapEx, is that largely driven by Asia or are you expecting CapEx in the US to increase again year-on-year? And then my follow-up would be on Mexico. You mentioned a one-time benefit which supported the revenue per hectoliter growth. Can you give us an idea what revenue per hectoliter would have been without that one-off benefit?

Full year, that was like 3.6 and we are guiding to around 4.

Yeah. So I mean we're looking at 10%.

There is a lot of consumer-driven investments in there.

So there is a 10% difference. But there is China capacity, there is Brazil capacity and there is consumer in our investments like rough lines and things of that sort that will not only be able to expand the beer occasions, but our share in the industry. Those are proven initiatives that we're going to be placing in the marketplace.

And just to follow up on the US CapEx, which did step up year-on-year, was that a peak that we should view 2013 as?

We normally do not disclose CapEx per zone.

Our next question comes from the line of Sanjeet Aujla with Credit Suisse.

First on working capital from savings, you delivered $400 million, your target is $500 million. As you're going through that process, are you identifying potentially more savings there? And secondly, on the tax rate, the normalized effective tax rate was 400 basis points lower in Q4. Looking now, you're guiding to an increase on whether, I would imagine you should be able to capture some benefits from the interest on capital following the AmBev restructuring. So can you just reconcile that tax rate guidance for us please as well?

On the working capital piece, it's a journey for us. We got to the 10% negative core working capital level on average for the company. Modelo is coming from a positive territory. We are committed to deliver the $500 million as announced as part of the synergies. But there is no cap in there. And after that, it's business as usual and we should continue to improve as we benchmark across the different zones. On the tax piece, last year, we had a big impact for the gains in our hedging activities related to the equity payments. Just in the fourth quarter, it was $180 million-plus. But for the full year, that amount was $456 million, which is non-taxable gain that helped to bring the effective tax rate down on the full year basis as well as the fourth quarter. In the fourth quarter specifically, we had the benefit of incremental interest on own capital being paid out of Brazil. So that should go or should continue going forward. But on the other hand, we are losing significant benefits as goodwill or amortization as this is coming to an end. And that is why we are flagging the expected increase for 2014. Again, taking into account that we cannot forecast potential gains or losses in the hedging of the equity-related instruments, we had a gain in 2013, which was not taxable. When and if we have a loss, that will not be deductible as well.

And just follow-up on the Corona launch in Canada. Are you able to tell us what sort of price point that would be relative to mainstream segment?

No, Sanjeet, not at this point. It's competitive information. First, let's get the brand and then we'll move on.

Our next question comes from the line of Lauren Torres with HSBC.

I'm not sure if you want to talk about that $1 billion synergy target, but it seems like being well ahead of expectations or ahead of schedule with respect to realization. I was just curious now that you've been running the business for a bit now if you feel there is upside on the cost side. And also, we've seen notable margin improvement in Mexico. So also curious what you think the expectations for margins in Mexico could be, maybe thinking if it could be comparable to what we see in Brazil?

No, those $1 billion, that's our target, has been from day one. As I said, the integration in Mexico has been better than any other integration we've done. We discuss engagement surveys that we do every year per zone. And it's common in any zone that we integrate that the first two years, the engagement goes down and then comes up. And really in Mexico, for the first time it came way up like it has been integrated forever. So it's amazing to see how well our colleagues in Mexico were and everything. So I think the $1 billion is coming faster because of that. But we remain committed to $1 billion in cost synergies, that's only cost, and $500 million in working capital synergies. In terms of how high the margin is, of course we're not going to give a guidance. But Mexico is the kind of market we like. It's a big market, a big profit pool. You have brands that are national. You have 85% of distribution in your hands, national distribution system. So you have scale. So I'll stop there.

Our next question comes from the line of Simon Hales with Barclays.

Just firstly with regards to Mexico, obviously you've talked with increasing confidence about the return to volume growth this year. I wonder if you could just flesh out the reasons for that. Clearly, you had the tough macro backdrop last year, some weather issues in Q3. But also the tax changes only came in the beginning of this year. So I would imagine that consumer confidence would remain a little bit low through the first half. I'm interested in your thoughts there. And just with regards to the US, you're talking about obviously improving volumes there overall. I mean do you believe that we're going to see an overall full year 2014 volumes in positive territory this year?

We didn't say that. We said about the US that we see an improving industry. That's what we said, compared to 2013, because of the economy being stronger. And so that's what I'm repeating here. In terms of the first question, Mexico, we see that a lot of the reforms have been digested. They're in the base now. We see that Mexico has a lot going for it. The economy will likely be stronger next year. It has a cheap energy coming from Texas and also energy reforms. It's a good market inside the country, has a very competitive labor markets. All of the industries are going back to Mexico. And as a neighbor, the US that's drawing strongly every year and importing more from Mexico. So that's all good for Mexico. In terms of the beer industry, of course, the economy affects the industry. But more than that, we're investing in enhancing shopping experience, especially in our own stores. We're going to be investing a lot in our own businesses. We think it's important. We're going to try to leverage the World Cup by running the biggest ever promotion in Mexico by taking 1,000 Mexican consumers and beer lovers to Brazil to the games. And it also represents a big opportunity in Mexico and Grupo Modelo had no presence in the premium segment, only our competitors. And now we're going to start sharing that opportunity as well, while delivering on the cost commitments that we have in the synergies. So we think it's going to be a much better year, also because some of the comps will get easier as the year goes by. First question is the toughest comp and then it should get easier. And again, towards the World Cup probably better economy and the investments now being there for six months we have a better budget than we had last year in terms of trying to use the levers that we understand can get volume to grow.

Our next question comes from the line of Javier Gonzales Lastra with Exane BNP Paribas.

I've got two quick ones on Brazil. You've reported other operating income in 2013 of almost $1.2 billion. And I think you mentioned the relief that some of that or a great part of that was related to Brazilian government incentives linked to investments. I wonder whether you could give us some indications as to the size of those incentives and also whether we should expect them to continue to go on for long.

The incentives linked to the investments are by far the bigger component in size and it's the kind of usually multi-year incentives long-term and is also linked to the amount of volumes produced and tax collected and so on and so forth. So it's a kind of rolling basis, because we are permanently running investments and that should continue in the long run.

And this should continue roughly on that same size?

Well, in terms of the reality, this is a kind of recurring event. It has been there for quite some time and we continue to expect that to be there. But it's something hard to forecast.

But you mentioned it's linked to the tax collection and the ongoing investments that you make.

It's linked to the investments. And the government is taking for incremental revenues as a result of incremental production. And based on that, the whole system is calculated. However, this is a kind of state-level grants and it's different by states. What's common across all of them is the long-term component of those.

And second question is on Mexico. I just wonder whether you could give us an indication of how material might be the margin boost you might get in the business that's on the disposal of the convenience store extra that you announced early February?

That is not relevant. It's completely immaterial given the size of the company. I mean you should not expect any effect as a result of that.

Our next question comes from the line of Rob Ottenstein with ISI.

You gave us overall guidance for the company on revenue per hectoliter, cost of sales per hectoliter, sales and marketing investments. Can you give us a sense in terms of the US? Would the US be in line on each of those or higher or lower?

It's the guidance for total company. We're not giving for a country.

What about just in terms of sales and marketing for the US?

No, we're giving for total company.

In terms of looking at your CapEx spend, the $4 billion, which now has Modelo in it, can you, Felipe, maybe give us a rough breakout of that $4 billion, how much is kind of maintenance capital, how much is increased capacity, how much is commercial programs?

Well, let's see how I can help you to understand. We have production-related and packaging being about $2.5 billion out of the number. And then the next big bucket is consumer commercial en route to market, so that is over $1 billion. And then you have IT and others and you can run the percentages.

And then just out of the $2.5 billion production and packaging, how much of that would be maintenance and how much of that would be growth?

We do not provide that breakdown, Robert.

And then just one last question. Can you give us any sense of how things are going with the teensters?

Well, in terms of labor negotiations in the US, AB and the team has continued to work towards new labor agreement for all 12 US breweries. Both parties have been working diligently and making significant progress. And there is still of course some complex issues to work through which will take some time. In order to resolve those issues, both parties have agreed to an extension of the current contract for another 30 days through March 31st. And both parties will continue to have every expectation and an agreement can be reached in a timely fashion.

Our next question comes from the line of Edward Mundy with Nomura.

First on Brazil, I think in your slides, you said you're trying to make beer more affordable. You mentioned to drive very strong revenue per hectoliter and 9% for the full year. I was wondering whether you're able to break out the contribution from revenue management initiatives and then the increased distribution?

No, we don't provide that breakdown.

Maybe another way of looking at it, what's the step-up in the retail selling price for your products relative to that 9% revenue per hectoliter? What do you think on average the retail selling price feel your products went up by relative to that 9% revenue per hectoliter?

Well, what we did this year, I mentioned that in another question, is that we for the first time in many years, we proposed on our side and we put in the media and everything that we would not increase prices for our products during the summer. And therefore consumers should expect the summer without price increase on our products. So to your question then, there would be no price increase at the consumer level or at the retailer level in the fourth quarter leading to the summer.

I think on your Slide 5 in your introductory slides, you made the point you're pretty happy with your existing portfolio of assets. You've got strong market position in the world's most profitable beer market. As you think about M&A, given this attractive portfolio, can you comment on whether the future M&A is going to be limited solely to the beer space?

We don't comment on M&A. I mean we focus on the organic business. And then that Slide 5 shows that we have an amazing portfolio of markets and brands and that we tons to do and create lots of value with it. Of course, you do have capability in M&A. And if there is an opportunity, we'll look at it, but we don't count on it. 99% of the people in our company work to grow the organic business and more and more looking at occasions within total in terms of how geared can access those pockets of opportunity that are being accessed hard liquor and wine, but with beer and line extensions of beer or cider which we consider near beer.

We do have one final question from the line of Alice Longley with Buckingham.

Could you tell us where this is going to take the EBITDA margin growing in the US? That's my first question. And then sort of a housekeeping question. You told us the marketing will be up more than a lot of the other cost will. Will that be in the first quarter or really just in the second and third quarter when the World Cup is happening?

Alice, we said that a lot of the marketing investments, the delta investments should be seen in the first half of the year because of the World Cup. And the second question on margins, I mean we never give guidance on any specific region. I think we'd just say that as a company, we'll like to grow margins, because that's a measure of efficiency. But it doesn't mean that's going to be every year or it's going to be every quarter, every zone and every country. And we also look at revenue, EBITDA, cash flow and other things. Margins is just a part, a component of the whole equation. We don't just look at margins. All right. Well, thank you very much. I mean we will close our 2013 conference call. We're very excited about 2014, to see a lot of our major markets in a better place in terms of industry and that's so exciting together with the World Cup and the increased marketing investments. So we have a great team in place and ready to go. And we'll see you on May 7th on our next call. Have a great day. Thank you very much. Bye, bye.

Thank you. This does conclude today's teleconference and webcast. Please disconnect your lines at this time and have a wonderful day.