Welcome to the Anheuser-Busch InBev's Second Quarter 2019 Earnings Conference Call and Webcast. Hosting the call today from AB InBev are Mr. Carlos Brito, Chief Executive Officer; 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 the 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 annual report on Form 20-F filed with the Securities and Exchange Commission on 22 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 second quarter and half year 2019 earnings call. Today, I'll be taking you through the highlights of the second, then spend some time to discuss our Middle Americas region before handing over to Felipe, who will discuss our financials. We'll then take your questions. Let's start with the highlights. This quarter will deliver our best quarterly performance, one performance in more than five years, with total volumes down by 2.1%. Our broad-based group of markets contributed to the strong results including Mexico, Brazil, Europe, South Africa, Nigeria, Australia and Colombia. Revenue grew by 6.2% and EBITDA grew by more than 9% with margin expansion of 123 basis points to 42%. This was primarily due to the strong top-line performance with sales and volume growth enhanced by favorable brand mix as well as ongoing cost discipline partially offset the significant commodity and transactional currency headwinds. As a result of the timing of our hedges, we expect that this headwind will pick up in the third quarter before moderating in the fourth quarter, our full year guidance remains unchanged. Our performance this quarter was supported by the successful execution of our position premiumization strategy led by the double-digit revenue growth of both the high-end company in our global brands outside of their home markets. This reinforces our conviction that the gross portfolio is critical to win in the premium segment. Furthermore, this quarter, we reached a major milestone, the path to achieving our 20 to 25 sustainability goals. We now are halfway to reaching our goal of securing 100% of our purchased electricity from renewable sources. We remain firmly committed to creating a wealth [ph] for our stakeholders, while creating value for our business. Let me now take you through…

Thank you, Brito, and good morning everyone. Let's start with an update on our synergies. The second quarter of the year, we delivered $113 million of synergies, bringing the total synergies captured from the SMB combination to $3.15 billion. Our total synergy guidance remains $3.2 billion, which will be delivered by the end of 2019. As a reminder, these synergies do not include any top-line or working capital synergies. Net finance costs in the second quarter 2019 were $1 billion compared to $1.3 billion in the second quarter 2018. This decrease was primarily due to mark to market gains linked to the hedging of our share-based payment programs of $473 million, compared to a loss of $16 million in the second quarter of last year. We also delivered a year-over-year improvement across all lines, with the exception of accretion expenses following the adoption of IFRS 16. Excluding the fact of gains and losses related to the hedging of our share-based payment programs, our effective tax rate this quarter was 27.2% primarily driven by country mix. We're maintaining our full year 2019 guidance of an effective tax rate between 25% to 27% excluding any gains and losses related to the hedging of our share-based payment programs. Our underlying EPS define as our normalized EPS, excluding the impact of mark to market related to our share-based payment programs and hyperinflation adjustment in Argentina increased by $0.06 to $1.16, as our strong organic performance and savings, net finance costs, more than offset the negative impact of higher income tax expenses, inflation of currency headwinds. I will now take a moment to update you on our debt position. Our bond maturity profile is well distributed across the next several years, and we maintained over $17 billion of liquidity at half year 2019. We have…

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

Hi, good morning, Brito, Felipe. Just one question on Europe, you are lapping obviously very tough comps from the favorable weather last year and also the fantastic World Cup. Now what could give us confidence that this cost [indiscernible] will continue and should we expect more distribution gains of the roll out of Corona across Europe? And also, could you talk about your cost strategy in Europe and what role this plays for your portfolio? And if I just may -- just have a quick follow-up on your transition regarding Mexico, EBITDA grew by 30% in Q2, I was trying to understand how you speak that between obviously your packing leverage half, linkage is strong top-line, but also the benefits from the new brewery and perhaps also how material is that impact from the phasing of marketing on this 30% growth that you had in Mexico in Q2? Thank you.

Okay so – first on Europe and in Europe revenue grew by mid-single-digit, so an amazing quarter in Europe, revenue growing one growth across through multiple markets. Global brands had a great quarter growing by high single-digits, Corona grew double-digits as driven by many countries especially UK and Germany. Budweiser also double-digits growth supported by Bud launch in France, which you see, we're very optimistic about it. And Stella Artois revenue driven by higher volumes in the UK, Italy and Belgium. And I think more importantly, we gain market share in all markets. And you're right, I mean we are recycling that a very strong quarter last year, because the World Cup in Europe. So, the time of the games, everything was perfect. So, it was very strong for the Europe, and we're able to lap it with another amazing quarter. If you look at the UK, again, global brands leading the way. We also have good years and beyond trade channel. And we continue to have amazing results now for [indiscernible] in the UK. So, it's not something of this quarter, it's more than four years. [indiscernible] has always been a strong market for us as well, double-digit growth in revenues and volume. Bud Watch [ph] very interesting because we didn't have a presence in the classic premium side of the market. So that's what Bud is, less than Brahma [ph]is doing very well. In Belgium, again, we’re back to growth, we grow volumes mid-single digits, with market share gains. Germany also good growth Corona. Europe has been the major market for us in the last four years. And it's accelerating this year, if you look at the quarter and a half, we’re very excited about Europe. And your second question was about Mexico. So, Mexico again, since we…

Thank you very much.

Thank you.

Our next question comes from Robert Ottenstein of Evercore ISI.

Great, thank you very much. Brito, a lot of your commercial success over the last two years and continuing now has been with the global brands. I noticed that at one point during the quarter, you signed a global media advertising contract from Michelob Ultra. And so, I guess the question is, and we're seeing pop up in more and more countries around the world Mexico, China, for instance. Have you decided to take [indiscernible] global, what sort of price point positioning, are you thinking about that, and how do you see that fitting in with the other global brands, if that's the case? Thank you.

To your question, Robert. Michelob Ultra has been an amazing brand, if you look at the U.S. it's home market. It's the biggest share gain in the U.S. market overall for more than four years in percent of our business around 10% and it continues to grow from strength to strength, you saw what Pure Gold is doing now with first organic at scale being the U.S. sold at a premium to Michelob Ultra. And again, adding to the franchise, not subtracted both brands, Michelob Ultra and Pure Gold growing very fast. It's the fastest growing brand in Canada as well. It's also one of the top growing brands in Mexico. Now we took it to the UK, and we're also doing a pilot in China. So, it just seems that it's becoming a more international brand. All markets are asking for it, because again, it goes into the active lifestyle, the trend that we see out there with consumers in health and wellness. So, it's a brand that has always been in that space, this space is growing and the brands there positioned in consumer's mind. So again, it's amazing success story that we tend to get to more and more countries because this thing about health and wellness and active lifestyle segment of our consumers, the growth segment of our consumers is getting -- is everywhere develop and developed markets. So, big opportunity.

Thank you.

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

Hi, Brito. Lot of the question have been answered already but one question on Colombia, I think we discussed in the last quarter, do you have any entrant there, but it doesn't really appear to be said dampening your growth rates, can you just about how much market share you think you may have picked up if any and little bit more color on that new entry please.

Well, Colombia, in Colombia we have resume competitor dynamics, would know about it for a couple years. So, we're prepared for it in terms of our portfolio, in terms of price points, in terms of new launches. The fact of the matters is that we're gaining share in Colombia and its local volume this quarter growth had 3%. We had also revenue growth in mid-single digits, beer also growing low single digits. And I think it's important that we're trying to categorize it, with the kind of market share we have in Colombia, we have to build the category of course you take every competitive change very seriously. Got to say, there are global brands did an amazing job because they've been there just for three years and they are growing now ahead of 50% versus last year, this quarter, and now they have the bulk of this share of international premium segment with Corona being the number one brand now in the international premium segment and Budweiser the number two brand. And now have over 75%, three quarters of the segments is ours. And so, it's an amazing story. A great team, strong brands, and the portfolio today, that's stronger and more completed and more ready in terms of price points and everything. Clearly it seems to be to know about Colombia, until you know it, is that still a country where the per capita consumption still low but again growing, so it’s something it’s very exciting and that's what we talked about share of total alcohol.

Thank you, Brito.

Thanks, Trevor.

Our next question comes from the line of Christen [ph] of Redburn Partners.

I just want to follow-up on Australia, I mean Philippe you've made very clear that debt is not a problem, under control, everything is on track and nothing is due. So, I don’t understand why you felt the need to sell off Australia, what is it about Australia that wasn't attractive anymore. And I guess related to that, are there other businesses you may have to divest off in order to optimize your business. Thanks.

Hi, Christen, I think the points goes back to consistency and discipline, we have always said that we would consider the Asia IPO for the merits of doing the Asia IPO. We believe we have an amazing business there and an attractive M&A for consolidation in the region, while establishing local trade, kind of that remain intact, but we also said we would only execute at the right valuation and we remain at the same point that is exactly the point on consistence. The point on discipline is also connected to that the same discipline in which we would consider the IPO decision of the past week advance and we remain focused on driving our business in this hyperinflation.

So, the idea perhaps that if you look around to your -- basically around the world, you look at some other assets that don't have the same growth rate, there is no reason why you look at them and wouldn’t sell them either if you get the right price?

Well, I’m not saying that, look at our deleveraging path and the fact that we remain on track to reach our commitments regardless as I said the disposal for Australia and the IPO. In fact, if you're looking for this first quarter and knowing that our cash flow generation is geared towards the second half of the year, a good example of debt was last year in which net debt to EBITDA increased from 4.8 to 4.87. Given the seasonality of this cash flow, which is 0.07, the deterioration in leverage. And this year, we were able to deliver against the seasonality in which the net debt to EBITDA declined from 4.61 to 4.58, which is a 0.07 improvement. So, we point out pretty solid. We continue to delever organically. In fact, we have been able to accelerate that and not being dependent on the sale of any assets to reach our goals.

Okay. Thank you.

You're welcome.

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

Hi, Brito and Felipe. Thanks for taking my question. I have another one on Mexico. Can you quantify the benefit you had from OXXO this quarter? Or was this recovery primarily led by the timing of Easter? And also, on margins, I mean, we look ahead. Is it fair to say that the margin tailwinds that you're having from the new breweries will continue at least until the end of this year? Thank you.

Hi Fernando, I think what we need to understand is that in Mexico, when you look at it, most of the gross profit evolution, right. It was, I mean also gross profit evolution for the company has really led by top-line, right? So, I mean this is about saving, it is something that it's fair. We had signaled that before. But I think that the important thing about the results of the company. This quarter but the 90% of organic growth EBITDA level was driven by top-line 90%. So, it's -- there was some phasing here and there. Okay, that contributed a little bit. But 90% was really top-line driven, and gross profit driven and definitely Mexico. So, I think that's the first thing to say for Mexico. And your second point was?

The new breweries.

The new breweries.

Yes. The new breweries.

That was much needed. You're right, this will have benefit -- is already having a benefit on our logistics and our production costs. Because we -- in terms of whether the consumption is wrong. We need some more capacity. You have to remember that since 2013, our volumes in Mexico having run very fast, and we've been adding capacity for Yucatan brewery and our Centro brewery. The Centro brewery will be bigger than the Yucatan brewery. Of course, it will be built in stages. But this year, not only we added lines in the Centro brewery, but also lines in the Yucatan brewery. So, continue to add capacity Mexico, which has been an amazing market in terms of industry expansion, category expansion, in terms of share, and in terms of possibility has been very consistent. So that's what we like about the Mexico market.

Thank you. Thanks, Brito.

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

Thank you and good morning. Just a point to clarification first, Brito. If I can with regards to your comments around the marketing and sales spend. And I think you said that I've seen Q2 marketing spend, it was lower given the absence of the World Cup from last year. But did you also sort of indicate the underlying spend was more phased to Q3 rather than Q2 this year? And then maybe just following on from that. And second question around just working capital, and the benefit you saw on the working capital line in the first half. Felipe, you could talk a little bit to that where it's coming from et cetera.

Again, in terms of sales and marketing phases, we said at the beginning of the year that that was the case, that because of the comps of the World Cup, that sales and marketing this year will be more evenly distributed between half one and half two, more bands throughout the year. And it will result -- therefore, it will result in a more difficult comparable in the second half, particularly in the third quarter. So, that's totally within our guidance that we gave at the beginning of the year. But the important thing again, if you look at the total company results, this quarter, Simon, you see that most of the EBITDA growth, organic EBITDA growth, which was $521 million, 90% of it came from gross profit for top-line, 475. So, this quarter, the success of this quarter was top-line gross profit driven, not SG&A or sales and marketing phase or anything driven. That might have helped a little bit. That's why we signaled. But the 90% of rate was driven by the awesome top-line we had translated to gross profit. That was it. That's the basic of what happened this quarter.

So on the on the cash flow, you had to be mindful to the fact that there is a seasonality throughout the year, which means between December and June, we do invest in working capital before releasing the second half, the full year, we should release cash from working capital for the simple reason that our core working capital is in the negative territory as a percentage of revenues. And as we grow revenues, we release more. And the same benefit is reflected here. Since the increasing working capital for the first half was about $600 million less than the prior year, helping us to generate more cash in the first half of this year in comparison to last year, based on working capital driver.

Got it? Thanks Felipe. Thanks Brito.

You're welcome.

And ladies and gentlemen, we have time for one more question. Our final question will come from the line as Sanjiv Aja [ph]of Credit Suisse.

Yeah, I just had a question on Brazil. You talk about most of your growth coming from the north and northeast region. So, I just wanted to, to gauge how you're fairing in some of the mature parts of the country, particularly Sao Paulo? Are you seeing growth and share gains there as well?

Well, I mean Sanjiv. First let me say, we’re very happy to see Brazil back to volume growth. That's awesome. And the best thing is that volume growth was across all segments. So that wasn't the backdrop of an industry that was flattish. So, this performance because that consequence of the consistent investments we've done on a strategic platform. Be it our core brands, premium brands, and also what we recall now the smart affordability. From the premium segment, the global brands and local premiums grew ahead of the market. And that was mainly in the southeast. Your question, so there was growth in all regions, differentiation of brand of families played a very important role in this strategy. And now with Pure Gold and Brahma, with Brahma Extra in the family of flavors, or specialties brands within the Brahma Extra franchise has been very important for the Brahma family. And we continue to expand smart affordability. So, the north and northeast are typically underrepresented in our business. And, of course are incremental as they grow faster. Right. So, but that doesn't say that the other regions are not growing, it's just that they were growing faster. And that's why we alluded to some regional mix. On the other hand, we had the premium growing across the country, which is also goes on the other hand, that increase in the mix. So again, very happy with Brazil. Our strategic imperatives are working, global brands leading the way. Smart affordability, which is a tool kit that we learned from our African colleagues and we gain share, so very good, good quarter for Brazil. Consumers are feeling better, and inflation more back to normal. And so, very happy with Brazil.

Many thanks.

Alright, so thank you. Thank you, everybody. Thank you, Maria. So, in closing, let me say that there was a lot to be proud of this quarter, including our best volume performance in more than five years, leading to more balanced top-line growth. Our strong commercial plans, unparalleled portfolio, diverse geographic footprint, best-in-class, operational efficiency, and most importantly, our incredibly talented people position us well to shape the global beer category in 2019 and beyond. So again, thank you very much for your time. Enjoy the rest of your day. See you next time. Bye-bye.

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