Welcome to the Anheuser-Busch InBev's First Quarter 2019 Earnings Conference Call and Webcast. Hosting the call today from AB InBev are Mr. Carlos Brito, CEO and Mr. Felipe Dutra, Chief Financial and Solutions 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 and the Results Center page. 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 management's current views and assumptions and involve known and unknown risks and uncertainties. It is possible that AB InBev's actual results and financial condition may differ, possibly materially from the anticipated results and financial condition indicated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect AB InBev's future results, see Risk Factors in the Company's latest 20-F filed with the Securities and Exchange Commission on 22nd of March, 2019. 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, Maria and good morning, good afternoon everyone. Welcome to our first quarter 2019 earnings call. Today, I'll be taking you through the highlights of the first quarter, especially those of our two largest markets, the US and Brazil. I'll then discuss exploration of the potential listing of our minority stake of our Asia-Pacific business before handing over to Felipe, who'll discuss our financials. We'll then be happy to take your questions. Let's start with the highlights. 2019 is off to a strong start as we accelerate our momentum from the fourth quarter last year into a solid first quarter performance. We delivered healthy, broad-based top and bottom line growth with particularly good results from Brazil, Colombia, Europe, Nigeria and the US. These results were delivered despite the unfavorable turn of a late Easter holiday, which is an important consumption occasion in markets such as the US, Mexico, Colombia, South Africa and Australia. The benefits of this holiday will fall in the second quarter of this year and as such, we expect this effect to normalize on a half year basis. Additionally, some of our main markets, especially Argentina and South Africa, continued to suffer from difficult macroeconomic conditions that subdued consumers' confidence and spending patterns. We also faced some commodity and currency headwinds as expected mainly due to higher aluminum and barley prices. With that being said, we have a lot to be proud of this quarter. We're very pleased with our results from Brazil, both in beer and non-beer. We have outperformed the market with double-digit volume growth. We also grew volume across all segments of our beer portfolio. This strong performance was supported by the later timing of Carnival resulting in a favorable comparable. In the US, our topline performance continues to improve as a result…

Thank you, Brito. Let's start with an update on our synergies. In the first quarter of the year, we delivered $100 million of synergies, bringing the total synergies captured from the SAB combination to more than $3 billion. Our total synergy guidance remains at $3.2 billion, which will be delivered by the end of 2019. As a reminder, these synergies do not include any topline or working capital synergies. Net finance costs in the quarter were $363 million compared to nearly $1.6 billion in the first quarter 2018. This increase was primarily due to mark-to-market gains linked to the hedging of our share-based payment programs of more than $950 million, compared to a loss of $242 million last year. Excluding the impact of the gains and losses related to the hedging of our share-based payment programs, our effective tax rate this quarter was 27.7%. This increase is primarily driven by capital mix in the quarter and we remain fully committed to deliver our 2019 guidance of ETR between 25% to 27%, excluding any gains and losses relating to the hedging of our share-based payment programs. Our underlying EPS, defined as our normalized EPS, excluding the impact of mark-to-market related to our share-based programs and hyperinflation adjustments in Argentina, decreased by $0.06 from $0.85 to $0.79, as our strong organic performance was more than offset by the negative impact of unfavorable currency translations in the quarter. On the Slide 21, you will see that our debt maturity profile is well distributed across the several years and we maintained roughly $16 billion of liquidity at the end of 2018. In the first quarter, we completed both the US and euro notes offering and subsequent tender offer for notes maturing between 2020 and 2026, allowing us to significantly extend our debt maturity profile…

Thank you. The floor is now open for questions. In the interest of time, we will limit participants to one question and one follow-up question [Operator Instructions]. Thank you. Our first question is coming from Olivier Nicolai of Morgan Stanley.

Just one question and one follow-up. First on the US, you were almost in line with the market this quarter and you flagged that it was your best performance since end of 2012. Now, could you please give us an update on your portfolio strategy and why this time it is different and that this improvement is more sustainable than to one we've last seen at the end of 2012? And just follow-up on Mexico, I think your margin increased strongly in Q1. Just wondering if there was any one-off here or is it going to be the new run rate since you have new capacity coming up online? Thank you.

So on your first point, we're very, very excited about the U.S. business, and then we have this evolved commercial strategy and that is not one quarter alone. If you look at the last few quarters, we've seen a trend in market share getting better. It's still negative for sure, but getting better, close to stabilization. So that's very encouraging. And this strategy is based on a portfolio approach as opposed to one or two brand approach. So that's very important to have the core plus with Michelob Ultra, which remains very solid, remains a top share gain in the US now for four years, more than 24 quarters. In super premium, our craft portfolio continues to gain overall share and is also growing double-digits. So this is a big potential for us, great margins there, innovation also doing very well. So, we lapped the industry last year in terms of innovation and again this quarter, the same thing. And also in the mainstream if you consider mainstream core value, then this guy did better, mostly because of the better segment performance. And that altogether has enabled us to get from a minus 70 bps in '17 market share loss -- half last year of our net loss of minus 40 bps and minus 20 bps for the last quarter and then minus 10 bps for this quarter 2019. So you see a trend there and we're able to get some momentum. So let me give you the numbers again. So for '17 minus 70 bps, first half last year, minus 45 bps, second half last year, minus 35 bps and then coming to minus 10 bps this quarter. And your second question what was the second question here?

Mexico. So I wouldn't try to analyze margins on a per-quarter basis, because there are so many moving pieces. But what you said about capacity of course is something that will optimize our logistics and supply chain for sure. But again, I wouldn't take one quarter to get any reference in terms of margins. I think we have to take the full year or at least the half year.

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

Two questions from my side, please. Two contrasting countries, I guess, Colombia up low-single digits despite the timing of Easter. It definitely appears that your new competitor in Colombia is having pretty though significant impact so far. And in contrast, South Africa, where volume is down, revenue per hectoliter flat, margins contracting 600 basis points. Could you talk a little bit about the reasons for the success in Colombia and why South Africa is so weak at the moment?

Well, thank you. So first, I mean, for Colombia, we have a solid position in Colombia for sure with the strong portfolio of core in the premium segment. We continue to invest in Colombia not only for the global brands that are new to that market, but very strong already, but also revamping some of our core propositions like Aguila, for example where new VBI, new packaging on the easy drink side. So, I think Colombia has shown that our brands are very strong. The country is going through also some much better time in terms of macro compared to South Africa. So that of course benefits everybody in the market. And we've been also investing in trade tools like coolers, merchandisers, and sampling for new brands and stuff. So, I mean, we had a very robust program in Colombia. The difference in South Africa, where we also have very strong brands and a very strong market position, is that the macros are much worse in South Africa. If you look at unemployment, inflation, ground outs and then elections tomorrow and then lots of things going on in South Africa. And Eastern South Africa of course played a role, but I think what's happening in South Africa is that consumers are under pressure and given all, there is very strong position in the core segment. The core segment and the core consumer tends to be more elastic and more subject to those pressures on the macro side. So there's also premiumization trend going on in South Africa and the premium segment growing fast. Well, we now have brands to compete, before we didn't. And those brands are doing very well, but we under-index and the share in the high-end compared to the core. So there is a mix effect at this point that's against us in South Africa plus the whole macro. So, I think those two things are very different from the Colombia case.

And Brito, the zero revenue or flat revenue per hectoliter in the quarter presumably had a component of the 600 basis points of margin expansion. Is there no underlying pricing in the mainstream products at the moment?

Which market are you talking about, you're talking about, are you talking about South Africa?

South Africa…

South Africa. So, in South Africa, well, not only you have the price increase that was in the first quarter of last year, so there's a phasing issue there, and you have of course excise tax that went up by 7% plus also in the first quarter this year. So, you put those two together, you have let's say a tough comp right there.

Our next question comes from the line of Fernando Ferreira of Bank of America Merrill Lynch.

Hello? I cannot here you.

I have two, please. First one on M&A. Historically, ABI has been focused on controlling the assets that you invested in but I'm wondering if that's still the case or going forward you could perhaps be more flexible than you were historically like the JV in Russia, for example. And then second question, follow-up on your Brazil presentation. I mean, Brito, can you mention how relevant the value brands were in terms of your growth contribution in Q1? And if you could share some numbers on Nossa and Magnifica, it would be great. Thank you.

Well, on M&A, I mean, as you know, most of our people in the Company are focusing into organic business. That's what we do every day. 99% of the people in the time are focused into organic business. We do M&A from time to time. We recognize its strength as well as the Company as well with on the organic side is on the inorganic side. Each situation is different. So the joint venture in Russia is different. But normally, of course, we would like to have control, because then we can implement our priorities, our global brands and our strategy. So, that's key element, but again, each situation is different. But again if you're referring to the potential Asia IPO, it's a minority stake that we could at some point went into, and decided to do it, so of course we remain with the control. And in terms of value brands in Brazil, it's interesting that the value segment grew in the last two quarters of last year, but now it's retrenched once again. We think it's because consumers are feeling better and they tend to upgrade. But given that the value segment in Brazil was north of 20% at this point, we decided to participate in a more intense way, but of course, with initiatives that can create the price points we need to compete in that segment, but with the margins, they're close to the core business, which are the margins that we feel, we just tried such investment. That's where Magnifica and Nossa come into play. These are brewed with local cassava. So there is a very strong appeal for the local population. It also supports local farmers and because of all that, we're able to have a lower competitive price point, but with margins that are very close to our core business. So, now we feel we can be more competitive, not only with these two brands but also with some pack price initiatives that we have, mostly on returnable bottles, the 340 returnable bottle, the mini and also the big one liter bottle that provide people more for less or an attractive price point in the case of the minis. So it's a strategy of not only new liquids but also pack price points.

Would you say that this trade-up is sustainable at this point or is it still early to say?

Well, what we can say Fernando is that consumers in terms of confidence, they feel better about the future. If you compare consumer confidence compared to six months ago, for example, it's been going up every month pretty much, especially after the elections. I think the elections were the important turning point in that the last three years that have been very tough in Brazil in the macro, political, so many bad news every day in the paper. I think consumers are willing to leap of faith that this new government will be able to pass the reforms. We are cautiously optimistic that these reforms will be perhaps, but of course, that will be very important so consumers continue with this frame of mind. It's also true to say that this new optimism has not yet translated in more consumer disposable income. So that's also true and is a fact, but confidence is up, normally it's a predictor of good things to come. So again, we're cautiously optimistic and we saw a very strong quarter, helped of course a bit by the Carnival timing, but we outperformed the industry, we grew across all segments. So, it's great to start a year like this.

Our next question comes from the line of Simon Hales of Citi.

Just following on, Brito on Brazil. So, clearly a strong performance in the quarter, obviously, lots of moving parts as you referenced in terms of the timing of Carnival, easy comp, etc. What do you think the underlying run rate is for volume growth that you're seeing at the moment with all those factors taken into account? And then secondly, what if you could just talk a little bit about your No- and Low-Alcohol portfolio and maybe update us as to the trends you're seeing there and where you are now in terms of your 2025 targets as potential revenue from that portfolio?

So, in Brazil, again, very strong volumes, 11.3% growth, and that was both in beer and non-beer. And it's really hard to give guidance at this point, but what we can say again, growth was broad-based, outperforming the industry for us and across all segments. So, these are all very positive news. I think a lot of those growth also came from investments that we did in transformational initiatives in the last three years when the country was in a tough macro situation, when consumers are not feeling that confident about the future because we know Brazil now for 30 years and we know that the fundamentals are very strong. In the last three years, we have invested in transformational things like global brands, new packs. So we have really enlarged the offerings we have in global brands. We have invested in new VBI, so a visual identity for our core brands. Also sleek cans came to market, the Brahma family continued to expand, Skol family expanded with pure malt and Skol hops. They're better brands, we have new liquids that are taking advantage of local grain production to be able to compete better and more effectively in the value segment. We inaugurated a new R&D center in Rio, and we continued to make strides throughout the market, reaching more blocks as we go more and more granular in the western side of the country and the north part of the country. So, all these things are investments that are not new, I mean, they are now for three years, because again, we've always believed Brazil, the potential and the fundamentals have not changed. And now we think we're in the best position of all companies in that market to take advantage of when consumers feel better about life and…

Our next question comes from the line of Chris Pitcher of Redburn.

Firstly, your increased confidence on the United States in terms of market share improvement is happening without any change in your mainstream brands, Budweiser and Bud Light. Given the success you're seeing at the super premium end and core plus and also the value end, is this changing the role of Budweiser and Bud Light is potentially playing within the portfolio? And then secondly, can you give us an update on Zenzele scheme in South Africa, because we believe you're due to deliver shares next year and how that's going to affect your share counts and where they'll be sourced up. Thank you.

So, in terms of the U.S., yes, we are confident that our evolved strategy is working. And this strategy is a strategy of portfolio gaibers as opposed to one or two brands. So, yes, it's true that when we got here 10 years ago, everything was above Bud and Bud Light, but today, Bud and Bud Light, of course, remain the two most important brands in our portfolio. But if you look at Michelob Ultra, it's already 10% of our portfolio and growing; the biggest share gain in the US for now four years. And if you look at craft, if you look at Stella Artois, if you look at the new line extensions we've had like Pure Gold for Michelob Ultra, the Bud Light, I mean, the Budweiser series and the Bud Light Organe line, I mean, all these things are getting consumers to trade up. It is true that there is some cannibalization, because Michelob Ultra, of course, is growing and Bud Light being the biggest win in the US, it's being cannibalized by Michelob Ultra as well for sure, but at a much better margin. So in a way, it's accretive to the business and it's in line with consumer trend. So, Bud and Bud Light will remain key brands for us in our portfolio, but maybe they will be smaller in size going forward, and other brands will be bigger, but because we are trading up, those that is that in move, that's accretive in nature. So again as a portfolio play and some brands will be smaller, some brands will be bigger for sure. In terms of Zenzele, the current Zenzele scheme matures next year, 2020, and we have already engaged with government authorities and other stakeholders on an outline for our plans to be adopted upon maturity. So as engagements are still ongoing, it would be premature to provide details at this time. But we'll continue to update you as we have new news on the scheme, but again the scheme will mature only next year.

Our next question comes from the line of Carlos Laboy of HSBC.

Brito, can you speak to how you determine whether a line extension is successful or not as it's rolling along and what criteria guide you to make sure that you're doing it right and optimizing it? And then on an unrelated basis, if you can just give us an update on your thinking how it's evolving regarding brewing capacity rationalization is a room for improvement here in the U.S., Canada, and Mexico? Thanks.

So in terms of your second question, I mean brewing capacity, in Mexico, we continue to invest. I mean, we have just officially opened in the first quarter our central brewery in Hidalgo, that's going to be very important to rationalize the current footprint we have in Mexico, in which we still import quite a sizable volume from the U.S., so be more self-contained in Mexico is very important. We also added significant capacity to our grid by naming two new lines in our Yucatan plants brewery, which we also invested some years ago. So with all this new capacity in the U.S., of course we have enough capacity, but we continue to invest in U.S. capacity, because we have craft brewers or craft dealers that are expanding, we have more premium beers, premium packaging, we have more assortment and in the U.S., we continue to transfer line, shift this line, adapt a new line to new package assortment. So this thing of brewers' footprint is very dynamic and it's always happens; same in Canada. But in Mexico, clearly, we're adding capacity. In the U.S., we're managing the existing footprint, but we'll continue to invest because of package assortment and new brands. In terms of line extension, I mean, of course, we tried to do line extension on things that will make the mother brand stronger, things that connects with the mother brand, connects with the brand positioning of the mother brand, so this is key. So, whenever we do something in Bud Light, it has to do with the easy drinking, the refreshment, the young side of the brand, same we do with Skol in Brazil as we did with Puro Malte. And of course, we have a plan in terms of volume, in terms of distribution, in terms of consumer take out and we also have social listening that today is very active in our Company. So that's a very correct way to look at what consumers are saying, behaving, talking about the brand, sharing with their friends about their news. So, I mean, all those things are things that are there for us to judge line extensions doing well or not but not forgetting the mother brand. So line extension should always not bold, but also add to the mother brand franchise.

Our next question comes from the line of Edward Evers of Investec.

First, just briefly going back to South Africa. You've obviously gone through the macro and portfolio positioning issues there. In addition, you have been experiencing some distribution and stock out difficulties. Can you confirm that those issues are now resolved? And then my second question is a broader one. I know you're constrained with what you can say on the potential partial IPO, but it was striking in your statement that you're talking about the creation of an APAC champion in consumer goods being the main merit of this. Can you explain how that would be advantageous for you and surely European and soft drinks Company, you're not thinking expanding into infant milk or noodles, are you?

I think on your second question, you got it right. I mean, it's more about the pursuing of the IPO at this point and the why we're doing it the platform. I wouldn't get hung up on the consumer goods. I mean, I just said, we're not going to go into infant milk or anything like that. So I think the important thing is the platform. And if you compare to Ambev as another platform that is a champion our growth and expansion in Latin America, that's the parallel we try to drive, not in terms of the percentage that we owe or anything like that, but just the idea of having something that we have a lot of experience with, which is the Ambev platform, replicating that in a new exciting growth market like APAC. So that's the main idea, and that's why we use the word platform. On your first question about South Africa, in terms of out of stocks, it is pretty much resolved. Of course, when you look at things like Flying Fish, which is a growing brand we have in South Africa, we still have some issues there with expanding capacity, because we still have some cap. So yes there's still a few brands that are cap. But I mean, the bulk of our brands the out-of-stocks are resolved. They were resolved by the end of last year.

Our next question comes from the line of Andrea Pistacchi of Deutsche Bank.

So I have two questions please. The first one is on Argentina, where you had a difficult quarter unsurprisingly but mid-teens or teens volume decline if you can talk a bit about whether the worst is behind there in your opinion. And then the second question is on Nigeria please. If you could -- you gave us a lot of color on Nigeria at the Investor Day in South Africa in August, where you said that you had about 22% market share. Could you just give us an update please on Nigeria, what you're seeing in the market, maybe where your share is now and the progress you've made in the past six, nine months?

Well, first I mean, Andrea, let's go to Argentina. So, you're right, I mean, consumers are in a tough spot in Argentina, very high inflation, 50% or more on yearly basis. Elections coming up in October, a lot of uncertainty in terms of the future in the political side, currency also devalued. So, I mean, lots of pressure on the consumer. So yes, there's consumption contraction in Argentina as a result of all those things I just described. We believe in our commercial strategy. The premium portfolio amazingly enough continues to show very strong performance with Stella Artois, Corona and local brand of ours, Patagonia. We're very excited also to have Budweiser back, but of course, it's true that overall volume is suffering. We also have now some price controls that would not affect our business. We have two SKUs in the price control, one in soft drinks, one in beer, but those represent small percentage of our volume. But it's hard to predict what Argentina will look like. Consumers will remain under pressure we think this year. But it's not the first time where in a way our people are used to deal with this situation and we have a great team in Argentina that's, of course, always looking at ways to adapt a strategy, because we are there to service consumers and that’s the best part right now. So again, hard to predict, it's not a first time we see that in Argentina. In terms of Nigeria, we had a very strong first quarter. Continued volume and revenue growth, double-digits. So, Nigeria remains a very successful story for us now with the capacity that we haven't had for some years in which we're capped. Now we can tell Trophy and Hero are big brands alongside with Budweiser in a more freely way in Nigeria. So that's why growth continues and growth can be seen across all regions in Nigeria. So, doing very well, very excited now with a portfolio that's also has core but also global premium brand with Budweiser. Budweiser was launched last year during the FIFA World Cup and our consumers in Nigeria, they're very connected to soccer and very connected also to American brands. So that dual did very well and Budweiser is off to a very strong start in Nigeria. Thank you.

Thank you, ladies and gentlemen, we have time for one more question. Our final question will come from the line of Robert Ottenstein of Evercore.

You're clearly getting some nice progress on the top line and on the margins, and I'm wondering if you could tie that into some of the initiatives that you talked about in South Africa, particularly Felipe Dutra went into some good length on what you are doing with big data, artificial intelligence, machine learning and I'd love to hear how that's helping you both connect to the consumer and be more of a consumer-centric Company, giving consumers what they want as well as driving productivity. Thank you.

I mean, let's talk about two fronts; consumer and customer. But I think the most important one is that technology is all about business transformation first. So, in business transformation, 70% of it is around people and ways of work and 20% or 30% is around technology per se. That's what we've learned as we did it ourselves and benchmarked with other companies that are ahead of us. So in terms of customer, as we showed in South Africa, there's a big effort we showed many things, but I'll focus on content strategy. There was a big effort on evolving our content strategy. Our content strategy with the retailers used to be all based on the sales rep. Today, it's much more of a hybrid strategy in which we're evolving from that model with sales rep, they're becoming more of a business development rep to one where we have the business development rep plus a sales support, plus we have our B2B strategy. So today, we have 40% of our sales are digital sales and we want to get that to 70%, so 40% digital to-date, 60% to analog with the sales rep. So connected park is also something we showed in South Africa. That's the means by which we'd connect the point of sale equipment of the block and we not only deliver an app in which the park can manage its business, but we also in return get access to data and consumer insights to better service our parks, but also understand consumers on a more real-time basis. So that's getting closer to the consumer via the customer. On the consumer front, we are of course are trying to get closer to consumers and have a more one-to-one contact with consumers. That's what we showed in South Africa,…

Thank you. This concludes today's earnings conference call and webcast. Please disconnect your lines at this time and have a wonderful day.