Anheuser-Busch InBev SA/NV (BUD) Q1 2018 Earnings Report, Transcript and Summary

Welcome to the Anheuser-Busch InBev's First Quarter 2018 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 Technology 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 Reports and Filings page. Today's webcast will be available for an 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. 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 Annual Report on Form 20-F filed with the Securities and Exchange Commission on the 19 March, 2018. 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. Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: Thank you, Maria. Good morning. Good afternoon, everyone, and welcome to our first quarter 2018 earnings call. Today, I'd like to take you through the results and highlights of our first quarter 2018 performance. Next, I'll take you through our global brand portfolio, as well as Budweiser's plans for the 2018 FIFA World Cup. Finally, I'll spend a few minutes on our recently-launched 2025 Sustainability Goals before handing it over to Felipe to discuss our earnings. Similar to our last conference call on 2017 results, we will not go into all the details of our regional performances. We, therefore, encourage you to refer to the press release we published earlier this morning, and we'll be happy to answer any questions on our markets during the Q&A portion of today's call. So let's start with the highlights. This quarter, we saw beer volume growth of 0.5% with strong performances coming from many of our markets such as Mexico, Argentina, and Colombia, as well as China, following a tough comparable. Our global brand portfolio continues to perform well and to grow faster than our total portfolio. Our EBITDA grew by 6.6% and we continued to expand our margins as a result of healthy top-line growth, ongoing cost efficiencies, and synergy capture. We have also been very focused on preparing for our biggest FIFA World Cup activation ever with Budweiser as the global sponsor in more than 45 of our local brands as local sponsors. I'll share further details about Budweiser's plans in a bit. As part of our ongoing commitment to a Better World, we launched our 2025 Sustainability Goals in March, an ambitious set of targets focused on smart agriculture, water stewardship, circular packaging, and climate action. As you'll see shortly, most of these targets are being championed by one of our global brands, which represents a win-win proposition for our global brands and for the sustainability targets. Let me now tell you more about the results of the quarter. Our revenue in the first quarter grew by 4.7%, with revenue per hectoliter growth of 4.9% and are 5.3% on a constant geographic basis. This growth was led by markets such as Colombia, where our global brand portfolio is rapidly increasing penetration; and Australia, where we continue to see success of Great Northern, as well as our high end portfolio. Western Europe continued this momentum, growing revenue into the fifth straight year and outperforming a weak industry. Our U.K. business delivered double-digit revenue growth despite cycling a very strong prior year. In the U.S., while top-line was softer, due mainly to industry weakness, we continue to see progress in our commercial strategy. Our Above Premium brand portfolio continues to accelerate, increasing share by 80 basis points in Q1 2018. Michelob Ultra once again led the way in our premiumization strategy as the top gainer in the U.S. for the 12th consecutive quarter. Additionally, Budweiser and Bud Light both improved their share trends within their respective segments. Our global brands continued to outperform on a global basis, increasing revenue by more than 12% outside of their home markets. Our own beer volumes grew by 0.5%, as said before. Our business in Mexico delivered outstanding results with beer volume growth in the mid-teens. Argentina grew beer volumes by mid-single digits and grew market share for the third straight quarter, following a successful application of the category expansion framework to reposition Quilmes and Brahma, which are both experiencing solid growth. Additionally, in Africa, excluding South Africa, our own beer volumes grew by double-digits in nearly all countries in which we operate, and Nigeria was the top contributor. EBITDA increased by 6.6% with margin expansion of 70, 7-0, basis points to 38.2%. This will continue to show margin recovery with EBITDA growth of 5.5% and margin expansion of almost 300 basis points. Our normalized EPS decreased by $0.01 to $0.73 per share. In the past, you've heard us discuss our global brands and their increasing expansion to new markets and contribution for our company in our results. Today, I'd like to tell you more about them, including Budweiser's plans as the exclusive official global beer sponsor of this year's FIFA World Cup. In the first quarter of this year, our global brand portfolio of Budweiser, Stella Artois and Corona continued to grow at a strong pace. The portfolio grew revenue by 7.9% and by 12.2% outside of the brand's home markets where they trade at a premium and command higher margins. In the first quarter of 2018, while Budweiser total revenues were down by 1.3% outside of the U.S., we saw growth of 2.5%. This growth was held back by a tough comparable in China, as we discussed at the full-year 2017 results, where Budweiser grew volumes by 18% in last year's first quarter. The brand continued to perform very well in Brazil where it sponsored the Lollapalooza music festival this quarter, featuring several iconic performers. We also saw very strong results from many of the markets where we have been ramping up our presence with Budweiser, such as India, Paraguay, and South Korea. Stella Artois had a solid quarter with revenue growth of 12.3% and strong performances coming from Argentina, the U.K., and the U.S. It was also highlighted in the Super Bowl commercial in the U.S. for the first time since 2011, featuring our Better World campaign of Buy A Lady A Drink. Corona extended its impressive track record of international growth, combined with a very strong result from its home market of Mexico. Revenues were up by 25.1% and by 40.3% outside of Mexico. The brand continues to grow rapidly in the Super Premium segment in China where it recently became the number one imported beer brand in the country. We're also seeing very promising results from our new markets where we have been stepping up our activation and distribution. This portfolio of global brands plays an important role within our category expansion framework that we introduced to you during the last year's call about 2017. This framework allow us to think deeply about the beer category as a whole and how it can be expanded to meet new consumers in new occasions. Premiumization represents a major opportunity in many of our markets, both emerging and developed, as a rapidly growing and profitable trend. Within the category expansion framework, our global brand portfolio premiumizes and drives the category upward to provide incremental value to our consumers by expanding the price and spectrum. Let me share some of the unique attributes that have allowed our portfolio to grow successfully as a genuinely global brand portfolio. Within the global brand portfolio, each brand maintains its own territory, brand position, and price point, allowing differentiation and minimizing overlaps. Budweiser's the perfect beer for high energy, premium party occasions such as Tomorrowland, which we have highlighted in the past. Budweiser's positioned below Stella Artois on the pricing ladder and above core lagers, an affordable luxury to which consumers can trade up. Stella Artois premiumizes the new occasion, as well as adding an element of sophistication when one is hosting an event. Stella Artois sits right in the middle of the three brands within the price ladder. Corona's primary position is within co-ed social occasions, enabling us to bring more women into the beer category, its position as a super premium brand commanding a higher price point than Budweiser and Stella Artois. Now I'd like to take a few more minutes to discuss each brand in further detail. I'll start with Corona, our most premium global brand and the world's second largest global brand by volume, behind only Budweiser according to Plato Logic. Corona encourages consumers to spend more time outside, disconnecting from the daily grind. This is evident in its campaign platforms and experiential activations such as the 7,500 Corona SunSets music festivals we've held. It's also evident in how the brand works toward a Better World through its partnership with Parley. Together, we have committed to help clean up the ocean by making 100 Islands free of plastic by 2020, cleaning up the outdoors so that we can spend more time there. The opportunity we see with Corona is that it has a market share of 3% or higher in only three countries where we own the brand: Chile, Australia, and Mexico. With the brand continuing to grow double-digits globally, it's still very far from reaching its full potential. Moving on, I would like now to discuss Stella Artois from our home country of Belgium, with a brewing heritage dating back to 1366. Stella Artois stands for the Joie de Bière and enjoying life, especially during the meal occasion. We estimate that meals represent over 40% of total alcohol-appropriate occasions globally, though beer is under-represented in this space. Stella Artois is the perfect beer to gain share of alcohol volume in this occasion, especially from wine, as markets mature. Stella Artois is also committed toward our shared dream of bringing people together for a Better World. This is especially evident through its Buy A Lady A Drink platform, while it's in partnership with Water.org and Matt Damon. This platform has helped provide water access to over 1.7 million people since its launch in 2015. This past year, we sold more than 350,000 limited edition Stella Artois Chalices that benefit the program, a year-over-year increase of 35%. From here, I'd like to talk about Budweiser, both its position and its role as the global beer sponsor of this year FIFA World Cup. Budweiser is the most valuable beer brand in the world according to BrandZ and the number-one global beer brand by volume. Budweiser encourages consumers to trade up in high-energy social occasions and is the flagship premium brand in the party space. This is also where our high-impact entertainment assets come into play such as music festivals like Tomorrowland and Lollapalooza as well as sporting events including this year's FIFA World Cup in Russia. This year, we launched the biggest commercial campaign ever for AB InBev called Light Up the FIFA World Cup. The FIFA World Cup is the world's largest sporting event, bringing together more than 3.2 billion people around the world. We're leveraging this sponsorship to tap into consumer excitement around this unparalleled occasion. A truly global event such as the World Cup deserves a truly global brand. Budweiser is making the most of its sponsorship by activating its campaign in more than 50 countries around the world, reaching hundreds of millions of consumers. These activations are not only occurring in markets where Budweiser already has a strong presence such as China, Brazil, the U.K., and Russia, but also in new markets such as Colombia, Peru, Ecuador, and Australia; in Africa, where we have now begun brewing Budweiser locally in Nigeria and South Africa for both domestic consumption and exports to other African markets. Additionally, we have recently repatriated Budweiser in Argentina where its market share is approximately 5% and football is, of course, a national passion. Across all of those markets, we'll be activating one global campaign. The Light Up the FIFA World Cup campaign is all about energy and excitement in line with the brand's position. It's an ambitious, full integrated campaign, kicking off with a disruptive piece of video content that illustrates with the help of thousands of drones how Budweiser will deliver energy and excitement to the 2018 FIFA World Cup. One of the major assets of the campaign will be our Red Light Cup, which embodies and responds to the energy of fans watching the tournament. This is achieved through lights within the cup that illuminate when there is an increase in ambient sound, such as when fans cheer after a goal is scored. It's important to note that the only way beer will be served in World Cup stadiums in Russia is in our Red Light Cup. It will also be made available to fans all over the world, especially in designated fan zones. In addition to the Red Light Cup, another pillar of the Budweiser's FIFA World Cup campaign is the Man of the Match Program. The activation will feature Budweiser own trophy, which is given to the best player of each match as voted by fans. The world's biggest football stars will be included in digital content featuring the Budweiser trophy and broadcast across the globe. This campaign will also be anchored in the trade featuring our limited-edition packaging and promotions that invite consumers to win tickets to the FIFA World Cup. In summary, we believe the journey of our global brand portfolio is only just beginning, especially given the increased access to high growth markets following the combination with SAB. Furthermore, our High End Company provides us with a dedicated platform to establish and grow the global brands. Through what we've learned from scaling up this portfolio, we have developed a replicable model that can be used to quickly penetrate new markets in a margin-accretive way. Our global platforms, such as music and sports, contribute to higher awareness and pent-up demand even in markets where they are not yet present. What makes us even more excited is that, in 2017, the brands represented only 11.4% of our total revenue outside their home markets but more than 35% of our net revenue growth. We look forward to continuing to leverage this complementary premium brands to grow the global beer category. Let's now turn to our newly-announced 2025 Sustainability Goals. Having achieved all of our previous sustainability goals last year, in March we announced our new 2025 Goals and the 100+ Sustainability Accelerator. The new goals build on our past achievements and are our most ambitious yet. Their delivery will have a wide-reaching impact that includes: first, connecting thousands of farmers to technologies and developing skills; second, ensuring water access and quality in high-stress water communities; third, partnering with our packaging suppliers to increase recycling content; and lastly, adding renewable energy, renewable electricity capacity to regional grids, as well as reducing carbon emissions across our value chain. We know the challenges we face are too big for one company or organization to solve alone, that's why we also announced the 100+ Sustainability Accelerator. This accelerator will be supported by ZX Ventures, our global growth and innovation group, and will spread across all regions with a goal of identifying and supporting promising ideas and technologies. The first set of challenges will be announced in June. We continue to brew high-quality beers and build brands that will bring people together for the next 100 years and beyond, and believe our new set of goals and the 100+ Sustainability Accelerator will better position us to continue to do so. I'd now like to hand over to Felipe, who will take you through more details on our financial results for the quarter. Luis Felipe Pedreira Dutra Leite - Anheuser-Busch InBev SA/NV: Thank you, Brito, and good morning, everyone. Let's start with an update on our synergies. In the first quarter, we delivered $160 million of synergies, bringing the total synergies captured to-date to almost $2.3 billion. Our total synergy guidance remains at $3.2 billion to be delivered within the four-year period following the close of the combination. This number is inclusive of the $1.05 billion of cost savings previously identified by SAB. As a reminder, these synergies do not include any top line or working capital synergies. We continue to expect that synergy capture should require approximately $1 billion of one-off cash costs to be incurred in the first three years after the closing and, of which, $640 million has been spent to-date. Net finance costs in the quarter were $1.545 billion, compared to $1.492 billion in the first quarter of last year. The increase was due to mark-to-market losses linked to the hedging of our share-based payment programs of $242 million, compared to a gain of $130 million in the first quarter of last year, or a swing of $372 million. We did see year-over-year savings of approximately $320 million across all other components of net finance costs. Our normalized effective tax rate for the first quarter was 28.3%, up from 20.4% in the first quarter of 2017. The effective tax rate was negatively impacted by the mark-to-market adjustments linked to the hedging of our share-based payment programs. Excluding the mark-to-market of EBITDA swaps, the normalized effective tax rate would have been 25.7% in the first quarter 2018 and 21.6% in the first quarter 2017. The year-over-year increase of the effective tax rate before the impact of EBITDA swaps results from the timing of certain deductions and the fact that EBIT growth is taxed at higher marginal rates. Our effective tax guidance for the full year 2018 remains in the range of 24% to 26%, which excludes the impact of any future gains and losses related to the hedging of our share-based payment programs. Moving on now to earnings per share. Normalized earnings per share decreased by $0.01 to $0.73 this quarter from $0.74 in the first quarter 2017. Lower net finance costs and higher normalized EBIT were offset by losses from the mark-to-market adjustments linked to the hedging of our share-based payment programs as well as an increase in income tax expenses. It is worth noting that excluding the mark-to-market adjustments linked to the hedging of our share-based payment programs, both periods' EPS increased by 27% or $0.18 from $0.67 in the first quarter 2017 to $0.85 in the first quarter 2018. I will now take a moment to update you on our debt. So we continue to actively manage our debt portfolio to optimize maturities, coupons, and currency mix. This quarter we had two issuances, a newer offering with a nine-year weighted average maturity and a weighted average coupon of 0.9% and a U.S. dollar offering with a weighted average maturity of 20 years and a weighted average coupon of 4.2%. These issuances were primarily used to repay most of the near-term maturities in 2019 and 2020, as you can see from slide 23. Our optimal capital structure remains a net debt-to-EBITDA ratio of around 2 times, and our capital allocation objectives remain unchanged, as you can see on slide 24. And with that, I will hand it back to Maria to begin the Q&A section. Thank you.

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

Hi, Brito and Felipe. So two questions from my side, please. So the first one was, last time, there was – volumes clearly very weak but still we've managed to deliver over 300 bps of EBITDA margin expansion. Was that mainly done to the rollover of the hedges on the transactional FX or were there other factors at play there? And the second question, I suppose, looking at the other angle, South Africa had very strong margin expansion, 300 bps, but EMEA was still down 100 bps. So what was going on in the rest of EMEA that pulled down the region? Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: So, Trevor – hi, Brito here – so your first question's about Brazil, right? The connection's not so good, but I understood it was about Brazilian's margin, right?

Yes, and the strong margin. Exactly. Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: Yeah, well, strong margin, first, we're in margin recovery mode in Brazil, as you know. I mean, we have high watermarks some years ago. Then we had the tax issues and currency issue in 2016 that we couldn't pass all the way to consumers. So we're now in recovery mode. And this quarter was no different. We recovered some, mostly because of a couple things. First, the mix continued to evolve as high-end brands continue to outpace core brands in terms of segment growth. Second, the growth of the returnable glass bottle, which is margin accretive, continues to be the case. And third, when you think of cost of sales, there was a benefit this quarter in terms of our hedge position, currency hedge position, because the currency was lower than it was a quarter, year ago. So those three. So mix of brands, RGD, COGS, currency would have been behind the margin expansion, despite a top line that was subdued.

Great. Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: And your second question about South Africa, can you repeat that? Because, again, connection's not good.

Yeah, sorry, Brito. You had very good margin expansion in South Africa, but EMEA was down 100 basis points. Just wondering what was going on in the rest of the region that managed to drag down the strongest results in South Africa? Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: Okay. Yeah, yes. That was because of basically sales and marketing in Europe ahead of the World Cup. That was one of our regions where sales and marketing was more, not more, but having more of an impact in the first quarter P&L. So because Africa and Europe were together, that would be the explanation. So (28:01).

Thank you very much, Brito. Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: Okay. Great.

Our next question comes from the line of Olivier Nicolai of Morgan Stanley. Olivier Nicolai - Morgan Stanley & Co. International Plc: Hi. Good morning, Brito, Felipe. First question is regarding the U.S. Your margin came down in Q1 and you flagged in the press release that negative operating leverage, higher input costs and also freight costs. Now how should we think about 2018? You said that your margin could still be flat or even growing slightly only driven by the positive mix, how do you expect freight costs to, for instance, be worse? And just to follow-up on your presentation. Your global brands are growing really fast and they have obviously a higher revenue per hectoliters. Now out of your 4.9% organic revenue per hectoliter growth in Q1 for the group, could you perhaps quantify the mix benefit from the three global brands outside of their home markets? Thank you very much. Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: So, hi, Olivier. So, in terms of the first questions about U.S. margins, again, it is true that transportation costs is higher year-on-year, around 15% higher. And as you said, we had commodity prices impacting the EBITDA number for this quarter and, of course, the weak industry compared to last year. So delta industry, delta commodity and delta transportation costs explained the decrease in margin in the U.S. In terms of margin – in terms of EBITDA, in terms of EBITDA margin, I don't think we should take one quarter because if you look at last year, U.S. increased EBITDA margin by 159 basis points. Last quarter, fourth quarter last year increased by 213 basis points (29:52). This quarter decreased by 1 or 2 basis points (29:54) at 39 – getting to 39%. So still very high margins. And what we see about the U.S. is what we see about all markets in which we operate is that we continue to see space and room for margin expansion, not every quarter, not every year, but as we continue to premiumize our mix, as we continue to use the category expansion model, as we continue to be more efficient in our investments and the way we use our money to run our business, we continue to see opportunities to continue to expand margins. So that's exciting news for us and has always been the mantra in our company. In terms of your second question of global brands and how much, it represents of our top line. What I can say is that global brands in 2017, which didn't (30:44) have a full year, represented 35% of our total net revenue growth for the company. Okay? Olivier Nicolai - Morgan Stanley & Co. International Plc: Thank you, Brito. Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: Again, outside of their home markets. Okay? Olivier Nicolai - Morgan Stanley & Co. International Plc: Yes.

Our next question comes from the line of Edward Mundy of Jefferies. Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: Hi, Edward?

And it looks like Edward removed himself from the queue. We'll move on to Robert Ottenstein of Evercore ISI.

Great. Thank you very much. I' wondered if you could give us some more detail on China and Nigeria. And in particular in terms of China a sense of what's going on there in margins specifically for China. And then maybe break out your business in terms of how Corona and Budweiser did in the Chinese market? So that's the questions on China. And then a little bit of detail on your strategy in Nigeria, and in terms of your growth there, how much of that is global brand, and how much of that is value in mainstream? Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: Hi, Robert. So, Brito here. In terms of China, I mean we had an amazing quarter. We have to remember that last year we had a very strong quarter, first quarter last year. Look at Budweiser, for example, last year, first quarter of 2017, we grew Budweiser volumes by 18%, 1-8. Of course, Budweiser was up to a very tough comparable, but even then revenue in China grew by 4.4%, cycling again double-digit revenue growth last year. Volume grew 1.6% and revenue per hectoliter grew 2.7%. Budweiser didn't grow as much as it normally would, because it's against an 18% growth, but continues to lead the Premium segment by far. Our High End Company continues to do very well, especially Corona, which became the number one imported beer in China and growing very rapidly. So China, both Corona and Hoegaarden have doubled the margin of Budweiser and continue to grow in, what we call, the Super Premium Company in China. Our e-commerce is also doing very well, which is also something to be said about China being ahead of any other market in terms of e-commerce development, and that's again is very important for premium and super premium brands. As you asked about EBITDA, so our EBITDA margin increased by more than 200 bps, getting to 35.5%; and EBITDA grew 10.6%. So, again, an amazing quarter with China and we continue to hover above 20% in terms of our total market share and continue to lead by far both Premium and Super Premium segments. So, again, another amazing quarter for China on back of a very tough comparable from last year. And in Nigeria, in Nigeria we are very happy with our business there. We've been capping Nigeria big-time for years in terms of capacity. Now, we are building new capacity there. So the rest of our business outside of Africa grew in most countries by double-digits in terms of revenue. Budweiser was launched in Nigeria ahead of the World Cup, so it was launched in March with very strong demand, and it's been supported by traditional and digital media, given its sponsorship of the World Cup and in which Nigeria National Team will be competing. So Nigeria is one of those countries where soccer or football is a big passion point for our consumers there, and we're very happy. We think Nigeria has a lot to offer both, as you said, in terms of global brands that SAB never had there and local brands. We have very strong brands that are now going to (34:48) trophy and also Budweiser growing. So it's going to be, we think, a very good year, because you're going to have capacity, global brands, the FIFA World Cup, and more capacity also for the local brand expansion.

Thank you very much. Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: Thank you.

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

Yes. Hi. Good morning. Two questions, please. The first one, in your outlook comments, you say that growth will accelerate in the balance of the year, primarily in the second half. Now, how should we read this? Does it mean that you expect to see some acceleration in Q2 and then further acceleration in the second half? Or are there any reasons that could hold back Q2? And the second question, please, on Brazil. What gives you confidence that Brazil will return to volume growth starting in the second quarter? Thank you. Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: Hi, Andrea. First, in terms of Brazil, I mean, we said we're confident. We have reasons to believe, of course, that in the second quarter volume will resume growth. You have to remember we're already in May, so we have some view into the second quarter. And we have the World Cup, right? So those are two big things for the second quarter in Brazil. We also had some one-offs in the first quarter in Brazil that won't happen again in the second quarter. So that's your second question there. In terms of the guidance for the rest for the year, the balance of the year, while we had flagged already in the last call is that there'll be some concentration of sales and marketing expenses in the first half of this year, especially now in the second quarter, and that's one of the reasons why the second half will see better results or more acceleration, because, of course, more sales and marketing will be in the first half. And yes, the first quarter was slightly better than we expected. Yes. That's also true.

Thank you. Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: Thank you.

Our next question comes from the line of Edward Mundy of Jefferies.

Hi. Morning. Thanks for taking the question. Two questions, please. Brito, I think you flagged an increase in sales and marketing spend ahead of the World Cup in Q1. When I look back at Q1 2014, I think this is about a 3% drag on your EBITDA growth in that quarter. Is it roughly a similar drag on your EBITDA growth in Q1? Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: Well, the drag, I would say, this time is more between 50 and 100 basis points. So compared to 2014, it would be more concentrated in the second quarter.

Okay. Great. Thank you. And the second question is on the U.S. Clearly, we have Michel Doukeris now as part of the year (37:57), slightly different style. Are there any early signs you can point to of encouragement? I mean your market share losses are moderated to some extent in the first quarter. Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: Yeah, I mean, as you saw it again, despite the tough industry, that declined 2.3% compared to 1.3% on average last year. So one percentage point worse. Of course, that's all due, we think, because of the cold temperatures we experienced in the quarter, right, way worse, like 10% worse what you would have seen in other years. And our market share, the share – the trends are improving. Our share performance, we lost 50 bps. That's much better than we had – 20 bps at least better than what we had on average over the last three quarters and the last year. At the same time, net revenue per hectoliter grew 1.9%, so very healthy brand mix once again. And gross profit expanded once again. Right? Gross profit margin. The Above Premium portfolio in terms of the share, Above Premium portfolio continues to accelerate and Michelob Ultra, again, the biggest share gain in the U.S. for the 12th consecutive quarter, was the number one share gainer. And the Above Premium portfolio grew by 80 bps, right, in this quarter. The other thing we said is that both Bud and Bud Light saw sequential improvements in terms of their share within their respective segments. And that's good news. I think Bud Light, (39:32) Dilly Dilly and the Philly Philly and everything that came from that, I mean that brought the brand back as the number one social beer conversation topic in the quarter. Budweiser continued to show improvement and got to a flat share within the Premium segment this quarter year-on-year, so again, that's growing nicely in terms of share within segment. It's still losing share of total market. In terms of Michelob Ultra, we had new news. So innovation has been more active this year than last year so we have Michelob Ultra Pure Gold. Also Bud Light Lime has been relaunched and Bud Light Orange (40:23) Budweiser line extensions coming in the second half and third – second quarter and third quarter. So I think all-in-all, we are more confident this year in terms of our brands, in terms of trends, I just spoke about, but also the innovation calendar we have which is more active than last year. And Michel again is a very strategic and commercially savvy person that did some interesting moves in terms of people and we feel the team is a very strong team to do what needs to be done in the U.S. So again, good start. Better than the industry.

Thank you.

Our next question comes from the line of Sanjeet Aujla of Credit Suisse. Sanjeet Aujla - Credit Suisse Securities (Europe) Ltd.: Yeah, hi, Brito, Felipe. A couple of questions, please. Firstly on, you use Argentina as a good example of how category expansion is working. Can you perhaps talk about some of the initiatives you have driving the growth in other markets like Mexico and Colombia, in particular with regards to category expansion? And also can you just talk a little about the weakness in South Africa? How much of that is perhaps due to the tax changes versus the competitive environment? Thank you. Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: Yeah, good point. On South Africa, the tax – there was a tax increase, excise tax increase that was 10% tax increase versus an average inflation of 5.5%. But, of course, that forced us to increase prices on March 1 compared to last year July 1. So there is little bit of a phasing there in South Africa. It's also true that in South Africa the High End segment like in many markets is growing ahead of the core segment and our participation in the High End segment has been always minimum because SAB did not have brands to compete in that segment, but now we do. We've just introduced Bud on a national basis, and we just introduced last week Budweiser, the bulk pack, the big bottle, which is where most of the growth in the High End is coming from, so now we're going to be competitive for the first time. And even with these initial steps, we already gain 600 basis points within that High End segment in South Africa, so we're going to be much more competitive. We're going to have all our brands there, and the FIFA World Cup, and we intend to grow very fast within the High End segment which is growing ahead of the core segment. So that's South Africa. In terms of Argentina, we used to have a little bit of an overlap between our two main core brands, Brahma and Quilmes Clásica and the framework we have now for category expansion helped us separate those two brands into, what's called, core classic lager and an easy-drinking lager. So Brahma is an easy-drinking, Quilmes is more of a classic lager. So, the good thing now is that we have both brands in growth which was not the case because Brahma was growing a lot at the expense of Quilmes, and now we have both brands growing high single-digits in Q1. And that, of course, we think it's because of the fact that now they are both focused on different occasions, all that coming from the framework and the toolkit on how to localize brands in different occasions within core lager where most of our business sits. So again, in summary, before they were sitting on top of each other, now they've been separated in terms of liquid, packaging, occasions, activations, and that has proven to be incremental to each other as opposed to cannibalistic, so that has been very good. Sanjeet Aujla - Credit Suisse Securities (Europe) Ltd.: Thank you.

Our next question comes from the line of Mitch Collett of Goldman Sachs. Mitch, your line is open. Make sure you're not on mute.

Hello. Hi, hopefully you can you hear me. You said that you expect sales to retailers and sales to wholesalers to converge for the full year, and sales to wholesalers have been below sales to retailers in three of the last four years. Are you able to elaborate on why you would expect this year to be better? And then maybe just a longer-term question on the U.S. You commented on why it was slightly worse this quarter and I think that's mainly weather. Longer term, do you think there's any chance that the market goes back to growth, and that your own positions within the market can stabilize? Thank you. Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: Good point, Mitch. I'll start with the second question. Again, I think category expansion framework taught us that there are many occasions where beer is just not present or very under-represented. And more importantly, taught us how to think about getting beer to expand into those occasions. So I just gave the example of Argentina in the question prior. And what we see is that, in the U.S., there are many opportunities and many occasions that have been growing like meal, the meal occasion, like women participation in our category, like the more high energy party occasion. So many occasions that are growing in which beer tends to be either totally absent or very under-represented, so I think now we have the tools and knowledge and insights to try to get beer to be more present, so I would think that this is not going to be overnight, but I think this gives us – this changed our mindset because in the old days we were just doing share of beer which is a zero-sum game, for me to gain somebody has to lose, that game will continue to be played in all markets. But if you add that to a category view, especially if you're the market leader, you need to – as a leader, you have to lead growth and lead thinking about the category. I think this framework, category expansion framework, because it talks not only about how to best use core lager brands – again, the example of Argentina, but how also to think about getting consumers to trade up and about the adjacencies to beer will help us think better about occasions, consumer needs, states (46:49) and portfolio. I think prior to the category expansion framework, we thought a lot about brands in isolation and now we're thinking more and more about where consumers are going, where our portfolio sits today, and what kind of portfolio makeup we need three, five years from now in order to do the things we need to do now in terms of resource location as well to get there. So I think that gives me hope that we can get this industry again to growth. In terms of wholesalers, STRs, STWs, we continue to say what we've always said, of course if you go back to some of the other years, there's always a difference a little bit here and there, but ballpark you could say that towards year end those two things tend to converge. There's breakage, there's lots of things that can happen, but on average, big numbers. The distance tend to converge. Not to the second decimal point, but within 50 basis points they converge.

Thank you.

Our next question comes from the line of Mark Swartzberg of Stifel Financial. Mark David Swartzberg - Stifel, Nicolaus & Co., Inc.: Thanks. Good morning, gentlemen. Felipe, a few cash flow questions. We didn't get a net debt figure in the release, but based on your deck, it looks like net debt was about $100 billion at the end of March. So can you give us that number? And then more importantly, can you speak to your outlook for free cash flow growth this year and the scope for a dividend increase later this year? Luis Felipe Pedreira Dutra Leite - Anheuser-Busch InBev SA/NV: Okay. So in terms of debt and cash flow balance sheet, we do not publish on a quarterly basis. However, it is clear that due to seasonality, our cash flow generation is much stronger in the second half, as dividends are more concentrated in the first half, as well as some certain tax payments, as well as CapEx investments. So historically, cash flow is much stronger in the second half as compared to the first half. So that impacts the net debt to EBITDA upwards during the first half, before it goes down in the second half of the year. In terms of cash flow generation, deleveraging remains our priority, and capital allocation remains unchanged. We see dividends as a growing flow over time. However, in the short term, we don't see much room for that, given the leverage levels. But in terms of cash flow generation, the fact that we are already in the negative territory, that is, as we grow revenues, that helps to release funds from invested capital, and we continue to work to improve our working capital as a percentage of net revenue. It's not only in the former ABI but also in the former SAB as part of the synergies not quantified in the $3.2 billion. Mark David Swartzberg - Stifel, Nicolaus & Co., Inc.: Okay. And a more technical question. On slide 23, if we simply sum these blue bars and say they represent a little more than 95% of your total debt, that'll get us to your March debt level? Luis Felipe Pedreira Dutra Leite - Anheuser-Busch InBev SA/NV: Yeah, well, we have some local debt, for example, BNDES (50:29) in Brazil and things like that that is not included into this debt maturity profile. But they are very small in comparison to all of this. And the orange bars are actually the ones of the new issuances since December last year, which indicates that the debt maturity portfolio is not only a healthier one but become even healthier as we are proactively taking out some of the maturities already for 2019 and 2020. Mark David Swartzberg - Stifel, Nicolaus & Co., Inc.: Yeah, and we'd add those orange bars. Okay. Great. Thanks, Felipe. Luis Felipe Pedreira Dutra Leite - Anheuser-Busch InBev SA/NV: You're welcome.

Our next question comes from the line of James Edwardes Jones of RBC.

Good morning, all. Two questions again, please. Mexico and Colombia, can you expand a bit on why those markets were so strong in the quarter and how sustainable this sort of performance is? And secondly, other operating income was clearly a bit of a drag in the quarter. Can you give us any sort of idea of what trend we should expect for either operating income over the remainder of the year? Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: Hi, James. It's Brito here. So Mexico has been an amazing market for us. And then it continues to grow very strongly. Volume's growing in the mid-teens during the first quarter. Even if you take Easter out, it would be still double-digit growth in Mexico and revenue in the high-teens. So, I mean, Corona is doing very well, grew double-digits. Victoria, the same thing, double-digits. Bud Light, more than 20% growth, especially in the north region. Michelob Ultra growing triple-digits. Summing, we have all cylinders in Mexico going well, and we see no reason why this should change. And we have the World Cup coming, right? So, I mean, that's important for both Mexico and Colombia as you asked. In Colombia, again, revenue growing 12% this quarter, beer volumes growing 8.3%. If you take the Easter effect, it would be 6.4%. So, again, very strong anyway, and momentum is there. Of course, we had – when you think about Colombia, of course, there was some easy comps in terms of volumes, because remember last year we had the tax increase from 16% to 19%, that affected the whole economy starting on January 1, 2017. And that, of course, put pressure on consumers and now we're cycling that period and again we have the World Cup. But, again, very strong in both markets with very strong margins as well. So great markets for us. Luis Felipe Pedreira Dutra Leite - Anheuser-Busch InBev SA/NV: On non-operating income, that line is usually connected to fiscal incentives in countries like Brazil, as well as China, although they're becoming less representative as a percentage of overall EBITDA and EBITDA growth. On this quarter, in particular, we have a tough comp, if I'm not mistaken, for a one-time gain recorded in the first quarter 2017 in Mexico that is connected to the sale of some assets. But aside from that, this is as normal.

Thank you.

And, ladies and gentlemen, we have time for one more question. Our final question will come from the line of Nik Oliver of UBS.

Hi, guys. Thanks for the question. And just one left from me. Back on the SAB synergies, I'm assuming some of those are coming from the centralizing of functions in a more zone level as opposed to the country level under SAB. Just interested how you're sort of balancing that with the risk of perhaps losing touch with some quite diverse country markets. I think in the past, you mentioned maybe when you first bought Anheuser-Busch, say, in China things became too centralized, which then got reversed. Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: Yeah, hi, Nik. Brito here. I mean, what we're centralizing in our company are functions that merit centralization. So, clearly, like procurement, right? You deal with global suppliers, so it makes sense to deal on a one-on-one-touchpoint-type basis. We centralized IT or solutions, right, because the backbone tends to be the same or it needs or it tends to be the same everywhere. We centralized global brands, because they are, by their very name, global in nature and should have the same look and feel everywhere. So we do centralize things that make sense. But when you think about our commercial activity, it's the center of gravity is the zone, not the global headquarters and, more important, the markets. Think about this, today with the country clusters, where we compare countries with similar maturity level in terms of beer and alcohol segment, it's much easier to compare notes within countries that are more similar, not linked to geography, but linked to similarity in terms of maturity model, maturity level. So those things are done at a country-by-country level and our people have a lot of autonomy to lead their business at each country market level. So, I mean, you're right. I think the beautiful thing about companies that are built to last is the capacity to do the and not the or, so, yes, you have to be centralized in many things and you have to be local in what matters and that's the balance we always try to strive. So our regional guys in the markets are very strong. They have a lot of autonomy, power, to conduct their business. What we do from a central location is to stimulate them to compare and learn from other markets that are in similar stages of development, so they can be even better at what they do in their local markets. So that's the idea.

Okay. That's very clear. Thank you. Carlos Alves de Brito - Anheuser-Busch InBev SA/NV: Thank you, Nik. Well, thank you, Maria. In summary, the first quarter was better than initially expected and we remain confident that growth will accelerate for the balance of the year, primarily in the second half. We continue to scale up our category expansion framework in a way that allows us to focus on organic growth in all segments across our geographic footprint. We remain committed to further enhancing our leadership position in the premium space with the support of our complementary global brand portfolio to fuel the growth of the global beer category. And finally, we're excited to be launching our biggest ever commercial activation for 2018 FIFA World Cup in Russia. And look forward to sharing the results with you soon. So again, thank you very much for your time. Thanks for joining the call today, and enjoy the rest of your day. See you next quarter. Bye, bye. Thank you.

Thank you, ladies and gentlemen. This does conclude today's earnings conference call and webcast. Please disconnect your lines at this time, and have a wonderful day.