EX-99.1 2 d882489dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

Unaudited Interim Report

for the six-month period ended

30 June 2020


The following is a review of our financial condition and results of operations as of 30 June 2020 and for the six-month periods ended 30 June 2020 and 2019, and of the key factors that have affected or are expected to be likely to affect our ongoing and future operations.

This document includes information from the previously published results announcement and unaudited interim report of Anheuser-Busch InBev SA/NV for the six-month period ended 30 June 2020, as amended to comply with the requirements of Regulation G and Item 10(e) of Regulation S-K promulgated by the U.S. Securities and Exchange Commission (“SEC”). The purpose of this document is to provide such additional disclosure as may be required by Regulation G and Item 10(e) and to delete certain information not in compliance with SEC regulations. This document does not update or otherwise supplement the information contained in the previously published results announcement and unaudited interim report.

Some of the information contained in this discussion, including information with respect to our plans and strategies for our business and our expected sources of financing, contain forward-looking statements that involve risk and uncertainties. You should read “Forward-Looking Statements” below for a discussion of the risks related to those statements. You should also read “Item 3. Key Information—D. Risk Factors” of our Annual Report on Form 20-F for the year ended 31 December 2019 filed with the SEC on 24 March 2020 (“2019 Annual Report”) for a discussion of certain factors that may affect our business, financial condition and results of operations. See “Presentation of Financial and Other Data” in our 2019 Annual Report for further information on our presentation of financial information.

We have prepared our interim unaudited condensed consolidated financial statements as of 30 June 2020 and for the six-month period ended 30 June 2020 and 2019 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and in conformity with International Financial Reporting Standards as adopted by the European Union (“IFRS”). The financial information and related discussion and analysis contained in this report are presented in U.S. dollars except as otherwise specified. Unless otherwise specified the financial information analysis in this Form 6-K is based on interim unaudited condensed financial statements as of 30 June 2020 and for the six-month period ended 30 June 2020 and 2019. The reported numbers as of 30 June 2020 and for the six-month period ended 30 June 2020 and 2019 are unaudited, and in the opinion of management, include all normal adjustments that are necessary to present fairly the results for the interim periods. Due to seasonal fluctuations and other factors, the results of operations for the six-month period ended 30 June 2020 and 2019 are not necessarily indicative of the results to be expected for the full year. Certain monetary amounts and other figures included in this report have been subject to rounding adjustments. Accordingly, any discrepancies in any tables between the totals and the sums of amounts listed are due to rounding.

We are a publicly traded company (Euronext: ABI) based in Leuven, Belgium, with secondary listings on the Mexico (MEXBOL: ANB) and South Africa (JSE: ANH) stock exchanges and with American Depositary Receipts on the New York Stock Exchange (NYSE: BUD). Our Dream is to bring people together for a better world. Beer, the original social network, has been bringing people together for thousands of years. We are committed to building great brands that stand the test of time and to brewing the best beers using the finest natural ingredients. Our diverse portfolio of well over 500 beer brands includes global brands Budweiser®, Corona® and Stella Artois®; multi-country brands Beck’s®, Hoegaarden®, Leffe® and Michelob Ultra®; and local champions such as Aguila®, Antarctica®, Bud Light®, Brahma®, Cass®, Castle®, Castle Lite®, Cristal®, Harbin®, Jupiler®, Modelo Especial®, Quilmes®, Victoria®, Sedrin® and Skol®. Our brewing heritage dates back more than 600 years, spanning continents and generations. From our European roots at the Den Hoorn brewery in Leuven, Belgium. To the pioneering spirit of the Anheuser & Co brewery in St. Louis, US. To the creation of the Castle Brewery in South Africa during the Johannesburg gold rush. To Bohemia, the first brewery in Brazil. Geographically diversified with a balanced exposure to developed and developing markets, we leverage the collective strengths of approximately 170 000 employees based in nearly 50 countries worldwide. For 2019, AB InBev’s reported revenue was 52.3 billion US dollar (excluding joint ventures and associates).

Capitalized terms used herein and not defined have the meanings given to them in the 2019 Annual Report.

Forward-Looking Statements

There are statements in this document, such as statements that include the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “anticipate,” “estimate,” “project,” “may,” “might,” “could,” “believe,” “expect,” “plan,” “potential,” “we aim,” “our goal,” “our vision,” “we intend” or similar expressions that are forward-looking statements. These statements are subject to certain risks and uncertainties. Actual results may differ materially from those suggested by these statements due to, among others, the risks or uncertainties listed below. See also “Item 3. Key Information—D. Risk Factors” of our 2019 Annual Report for further discussion of risks and uncertainties that could impact our business.

These forward-looking statements are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside our control and are difficult to predict, that may cause actual results or developments to differ materially from any future results or developments expressed or implied by the forward-looking statements. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include, among others:

 

1


   

local, regional, national and international economic conditions, including the risks of a global recession or a recession in one or more of our key markets, and the impact they may have on us and our customers and our assessment of that impact;

 

   

the effects of the COVID-19 pandemic and uncertainties about its impact and duration;

 

   

financial risks, such as interest rate risk, foreign exchange rate risk (in particular as against the U.S. dollar, our reporting currency), commodity risk, asset price risk, equity market risk, counterparty risk, sovereign risk, liquidity risk, inflation or deflation, including inability to achieve our optimal net debt level;

 

   

continued geopolitical instability, which may result in, among other things, economic and political sanctions and currency exchange rate volatility, and which may have a substantial impact on the economies of one or more of our key markets;

 

   

changes in government policies and currency controls;

 

   

continued availability of financing and our ability to achieve our targeted coverage and debt levels and terms, including the risk of constraints on financing in the event of a credit rating downgrade;

 

   

the monetary and interest rate policies of central banks, in particular the European Central Bank, the Board of Governors of the U.S. Federal Reserve System, the Bank of England, Banco Central do Brasil, Banco Central de la República Argentina, the Central Bank of China, the South African Reserve Bank, Banco de la República in Colombia, the Bank of Mexico and other central banks;

 

   

changes in applicable laws, regulations and taxes in jurisdictions in which we operate, including the laws and regulations governing our operations and changes to tax benefit programs, as well as actions or decisions of courts and regulators;

 

   

limitations on our ability to contain costs and expenses;

 

   

our expectations with respect to expansion plans, premium growth, accretion to reported earnings, working capital improvements and investment income or cash flow projections;

 

   

our ability to continue to introduce competitive new products and services on a timely, cost-effective basis;

 

   

the effects of competition and consolidation in the markets in which we operate, which may be influenced by regulation, deregulation or enforcement policies;

 

   

changes in consumer spending;

 

   

changes in pricing environments;

 

   

volatility in the prices of raw materials, commodities and energy;

 

   

difficulties in maintaining relationships with employees;

 

   

regional or general changes in asset valuations;

 

   

greater than expected costs (including taxes) and expenses;

 

   

the risk of unexpected consequences resulting from acquisitions, joint ventures, strategic alliances, corporate reorganizations or divestiture plans, and our ability to successfully and cost-effectively implement these transactions and integrate the operations of businesses or other assets we have acquired;

 

   

the outcome of pending and future litigation, investigations and governmental proceedings;

 

   

natural and other disasters, including widespread health emergencies, cyberattacks and military conflict and political instability;

 

   

any inability to economically hedge certain risks;

 

   

inadequate impairment provisions and loss reserves;

 

   

technological changes, threats to cybersecurity and the risk of loss or misuse of personal data;

 

   

other statements included in these interim unaudited condensed consolidated financial statements that are not historical; and

 

   

our success in managing the risks involved in the foregoing.

Many of these risks and uncertainties are, and will be, exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result. Our statements regarding financial risks, including interest rate risk, foreign exchange rate risk, commodity risk, asset price risk, equity market risk, counterparty risk, sovereign risk, inflation and deflation, are subject to uncertainty. For example, certain market and financial risk disclosures are dependent on choices about key model characteristics and assumptions and are subject to various limitations. By their nature, certain of the market or financial risk disclosures are only estimates and, as a result, actual future gains and losses could differ materially from those that have been estimated.

 

2


COVID-19 Risk Factors

The following risk factors are provided to supplement the risk factors previously disclosed in periodic reports, including our 2019 Annual Report and our unaudited interim report for the three-month period ended 31 March 2020.

Our business, financial condition, cash flows and operating results have been and may continue to be negatively impacted by the COVID-19 pandemic. The public health crisis caused by the COVID-19 pandemic, as well as measures taken in response to contain or mitigate the pandemic, have had, and we expect will continue to have, certain negative impacts on our business including, without limitation, the following:

 

   

We have experienced disruptions to our ability to operate our production facilities in some countries, and in the future, we may experience further disruption to its ability to operate its production facilities or distribution operations as a result of regulatory restrictions, safety protocols, social distancing requirements and heightened sanitation measures. In addition, although at this time we have not experienced any material disruption to our supply chain, we may experience delays in deliveries of key supplies or disruptions to our distribution operations. Any sustained interruption in our operations or our business partners’ operations, distribution network or supply chain, or any significant continuous shortage of raw materials or other supplies could impact our ability to make, manufacture, distribute or sell our products or may result in an increase in our costs of production and distribution.

 

   

Sales of our products in the on-premise channel have been significantly impacted by the implementation of social distancing and lockdown measures in most of our markets, including the closure of bars, clubs and restaurants and restrictions on sporting events, music festivals and similar events. Although sales in the on-premise channel have begun to improve as a result of the easing of social distancing and lockdown measures in many of these markets, such improvements may be impacted by the re-implementation of restrictions in certain markets, such as the restrictions imposed in South Africa in July. Any future outbreak or recurrence of COVID-19 cases in other markets that are currently in the process of easing social distancing and lock down measures may similarly result in the re-implementation of such measures and a further negative impact on our sales. Furthermore, if the COVID-19 pandemic intensifies and expands geographically or in duration, its negative impacts on our sales could be more prolonged and may become more severe. While we have experienced increased sales in the off-premise channel in certain markets since the outbreak, such increased volumes may not continue in the longer term and may not offset the pressure we are experiencing in the on-premise channel.

 

   

Consumption of beer and other alcohol and non-alcohol beverages in many of the jurisdictions in which we operate is closely linked to general economic conditions, with levels of consumption tending to rise during periods of rising per capita income and fall during periods of declining per capita income. Deteriorating economic and political conditions in many of our major markets affected by the COVID-19 pandemic, such as increased unemployment, decreases in disposable income, declines in consumer confidence, or economic slowdowns or recessions, could cause a further decrease in demand for our products. Furthermore, even as governmental restrictions are lifted and economies gradually reopen in many of our major markets, the ongoing economic impacts and health concerns associated with the COVID-19 pandemic may continue to affect consumer behavior, spending levels and consumption preferences

 

   

The impact of the COVID-19 pandemic on global economic conditions has impacted and may continue to impact the proper functioning of financial and capital markets, as well as foreign currency exchange rates, commodity and energy prices and interest rates. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access, or costs of, capital or borrowings, our business, our liquidity, our net debt to EBITDA ratio, credit ratings, results of operations and financial condition.

 

   

Compliance with governmental measures imposed in response to the COVID-19 pandemic has caused and may continue to cause us to incur additional costs, and any inability to comply with such measures can subject us to restrictions on our business activities, fines, and other penalties, any of which can adversely affect our business. In addition, responses to the COVID-19 pandemic may result in both short-term and long-term changes to fiscal and tax policies in impacted jurisdictions, including increases in tax rates.

Any of the negative impacts of the COVID-19 pandemic, including those described above, alone or in combination with others, may have a material adverse effect on our results of operations, financial condition and cash flows. The full extent to which the COVID-19 pandemic will negatively affect our business, financial condition, cash flows and operating results will depend on future developments that are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.

We caution that the forward-looking statements in this document are further qualified by the risk factors disclosed in “Item 3. Key Information—D. Risk Factors” of our 2019 Annual Report that could cause actual results to differ materially from those in the forward-looking statements. Subject to our obligations under Belgian and U.S. law in relation to disclosure and ongoing information, we undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

3


Business update in light of the global COVID-19 pandemic

The COVID-19 pandemic continues to present unprecedented challenges for societies, governments and businesses across the world. The health and safety of our colleagues is our first priority, and we are finding new ways to do our part globally to help our communities, support our partners and connect with our consumers.

Our performance in the second quarter was materially impacted by the COVID-19 pandemic, as expected. As the quarter progressed, however, we saw considerable improvement in performance from month to month. We came out of the quarter with reinforced confidence in the resilience of our business and the global beer category.

In April 2020, our volumes declined by 32.4%1, as we faced a shutdown of our beer operations in key markets such as Mexico, South Africa and Peru, and the closure of the on-premise channel in most of our markets.

We saw a sequential improvement in May 2020, with a volume decline of 21.1%1. While we continued to face a shutdown of our beer operations in markets such as Mexico and South Africa, this improvement was driven by a return to positive volume growth in China, a healthy performance from our beer business in Brazil, the gradual reopening of the on-premise channel in certain markets, particularly in Europe, and the strength of the off-premise channel in both developed and developing markets.

In June 2020 we delivered volume growth of 0.7%1, despite cycling a strong performance from the prior year. We saw a significant recovery in June in Mexico and South Africa, where the resumption of operations was met with robust consumer demand. Brazil accelerated its healthy performance with meaningful beer volume growth as we leveraged our best-in-class distribution network, innovations and digital capabilities to reach consumers in new ways. In the US, we delivered top and bottom-line growth through the success of our premium brands, known and trusted mainstream brands and the strength of the off-premise channel. China delivered exceptional results, with its highest ever monthly volume.

In total, our volumes in the second quarter 2020 declined by 17.1%1 with own beer volumes declining 17.2%1. Revenue per hl declined by 0.6%, leading to a total revenue decline of 17.7%2. EBITDA, as defined, before exceptional items3, declined by 34.1%4 to USD 3,414 million, with margin contraction of 825 bps to 33.2%, due to the top-line decline and lower operational leverage, especially in the beginning of the second quarter 2020 when we faced significantly reduced volume. These headwinds were partially offset by successful resource allocation initiatives that drove a meaningful reduction in selling, general and administrative expenses.

The trajectory of the business throughout the second quarter reinforced our confidence in the resilience of the beer category, particularly in the off-premise channel, where we saw healthy growth in both developed and developing markets. The continued reopening of the on-premise channel around the world also contributed to an improved performance, especially in May and June. We are excited about the return of these consumption occasions, while remaining cautious as we are now seeing renewed on-premise restrictions in certain markets. South Africa implemented a second ban on alcohol sales in the middle of July 2020, which will impact our results in the third quarter of 2020.

In view of the economic uncertainties caused by the COVID-19 pandemic, we performed an impairment review considering different scenarios for recovery of sales for our cash generating units: a base case, which we deem to be the most likely case, a best case and a worst case to which we applied different probabilities of occurrence. Based on the information available, we concluded that no impairment was warranted under the base and best case scenarios. However, we were exposed to a risk of impairment for the South Africa and Rest of Africa cash-generating units under the worst case scenario and concluded that it was prudent to recognize a 2.5 billion USD non-cash goodwill impairment charge applying a 30% probability of occurrence of the worst case scenario. This charge is partially offset by a 1.9 billion USD gain on the disposal of the Australian operations.

We have been investing behind capabilities such as B2B platforms, e-commerce channels and digital marketing for several years. These trends have accelerated over the past few months, positioning us well to capture growth.

We have taken significant actions to maintain strong liquidity in a more volatile and uncertain environment, while proactively managing our debt profile. We also implemented several initiatives that drove a meaningful reduction in SG&A, while we continue to invest effectively behind our brands and commercial strategy, preparing for a strong recovery.

The fundamental strengths of our company remain unchanged. We have a clear commercial strategy, diverse geographic footprint, the world’s most valuable portfolio of beer brands, industry-leading profitability, a strong team and an incredibly deep talent pool.

Management Comments

Our purpose at AB InBev is to bring people together for a better world. As the world continues to face an extraordinary and unprecedented crisis, our purpose drives us today as much as ever, even if it means finding new ways to be together. We once again extend our immense gratitude to those on the frontlines, especially healthcare workers around the world, for their commitment to keeping us, our families and our communities safe.

 

1 

Excluding volume changes attributable to the 2019 and 2020 acquisitions and disposals, see “—Volumes” below.

2 

Excluding the effects of the 2019 and 2020 acquisitions and disposals and currency translation effects, see “—Revenue” below.

3 

For a discussion of how we use EBITDA, as defined, and its limitations, and a table showing the calculation of our EBITDA, as defined, for the periods shown, see “—EBITDA, as defined” below.

4 

Excluding the effects of the 2019 and 2020 acquisitions and disposals, currency translation effects and exceptional items, see “—EBITDA, as defined” and “—Exceptional Items” below.

 

4


Supporting our People

The health and safety of our people continues to be our top priority. We thank all our colleagues for their resilience, dedication and agility, especially those on the ground to ensure business continuity. As more of our colleagues return to the workplace in markets where restrictions are being lifted, we have implemented stringent safety measures, such as strict sanitation practices, workplace capacity and social distancing guidelines, health tracking and personal protective equipment.

Helping our Communities

Our products are almost entirely sourced and brewed locally, making us deeply connected to the communities in our markets around the world. We have not experienced any material disruption to our supply chain and continue to monitor and adapt our operations to prioritize continuity.

We are working closely with local governments and other stakeholders to leverage our scale, capabilities and resources to support the fight against the pandemic and to do our part in the economic recovery. We have leveraged our facilities to produce and donate millions of units of hand sanitizer, face shields and packaged water. To support and empower the 20,000 direct farmers in our global supply chain, we fulfilled commitments to purchase crops in markets such as Mexico and India, even when our production was shut down. We are also providing farmers with personal protective equipment and critical information on health, hygiene and safe cultivation of their crops.

Our customers also have been severely impacted by the pandemic, particularly our on-premise partners, and we are working closely with them to support business continuity and a healthy recovery. For example, we created voucher programs in several markets to “buy a beer now, enjoy later” and initiatives to ensure the availability of fresh beer, such as Bud Light’s “Certified Fresh” platform in the US.

Leveraging our Global Footprint

When the COVID-19 pandemic began spreading across the globe, we grouped our markets into four clusters, enabling us to facilitate best practice sharing across similar markets. The four clusters were defined as: (1) Recovering Markets, (2) Less Restrictive Developed Markets, (3) Less Restrictive Developing Markets, and (4) More Restrictive Developing Markets.

As the pandemic evolved throughout the second quarter of 2020, we reclassified some of our markets between clusters. For example, many European countries became “Recovering Markets” as restrictions began to ease in May and June, inspiring our colleagues in Europe to replicate best practices from our teams in China and South Korea to support our customers in the on-premise channel for a successful re-opening. “Welcome Kits” were provided with personal protective equipment, such as branded masks and hand sanitizer produced with our surplus alcohol, and manuals with guidelines to help prevent the spread of COVID-19. In addition, we offered digital solutions to our customers that supported increased efficiency while reassuring consumers in the new environment.

Our global footprint is truly an asset as we leveraged learnings from across our business to position our markets for a strong and swift recovery.

Connecting with our Customers and Consumers

Growing trends such as online B2B platforms, e-commerce and digital marketing have accelerated dramatically in recent months. We have been investing in these capabilities that we believe will transform our business into a truly customer- and consumer-centric organization, putting us in an advantaged position to capture growth from these evolving trends.

BEES, our proprietary B2B digital ordering platform, empowers our customers and propels us to be even more customer-centric. It combines our best-in-class logistics and sales systems with new digital capabilities, including artificial intelligence-based algorithms. The ability to maintain a consistent dialogue without the use of in-person interactions has proven exceptionally valuable during this volatile time, further strengthening our relationships with our customers.

We continue to see strong growth in the e-commerce channel, both through our direct-to-consumer platforms and our partnerships with major global online retailers. Consistent investments in owned and third-party e-commerce, including 20+ direct-to-consumer ventures globally, are positioning us to lead online sales. For example, in the second quarter of 2020, our owned e-commerce beer store portfolio in Europe more than doubled compared to the prior year and Zé Delivery has significantly accelerated the growth of the beer e-commerce segment in Brazil.

We have also developed new proprietary platforms in response to the crisis, such as Tienda Cerca, a free online delivery service that is now used by approximately 400,000 neighborhood shops in eight markets in Latin America.

We have also developed innovative ways to connect with consumers at a distance over the past few months. In the UK, Budweiser celebrated the return of the English Premier League by giving fans the opportunity to cheer for their favorite teams from our billboards. In Brazil, we launched “lives,” a series of livestreamed online concerts to support our portfolio of brands, including our recent innovation Brahma Duplo Malte, which generated over 675 million views and considerable earned media.

 

5


Exercising Financial Discipline

Our commitment to financial discipline is unwavering. We continue to proactively manage the factors that are within our influence to preserve our liquidity while supporting the long-term growth of our business.

Efficiently utilizing our resources remains a core competency. In the second quarter of 2020, we delivered meaningful savings from several initiatives while continuing to invest effectively behind our brands and commercial strategy.

We have taken significant actions to maintain strong liquidity in a more volatile and uncertain environment, while proactively managing our debt profile. Earlier in 2020, we drew down our USD 9 billion revolving credit facility (RCF) in full and successfully completed bond issuances of EUR 4.5 billion and USD 6.0 billion. Subsequently, we received approximately USD 10.8 billion from the sale of the Australian subsidiary. We also had improved cash flow generation from our continuing operations over the course of the second quarter of 2020.

As a result, we repaid our RCF in full in June 2020. In July, we executed a series of tender offers for certain USD and EUR bonds and announced a redemption of certain USD, AUD and CAD bonds, resulting in a gross debt paydown of more than USD 4.7 billion. These proactive measures significantly reduced our upcoming liabilities while maintaining strong liquidity.

Net debt to normalized EBITDA, as defined, before exceptional items, was 4.86x for the 12-month period ending 30 June 2020, impacted by the COVID-19 pandemic on our results and the seasonality of our cash flows, which are typically weighted toward the second half of the year. Deleveraging to around 2x remains our commitment and we will prioritize debt repayment in order to meet this objective.

Positioned for a Strong Recovery

The first half of 2020 has tested all of us in many ways. We are inspired by the resilience of our people, our business and the global beer category.

Our company is well-positioned for a strong recovery. We have a diverse geographic footprint with exposure to high-growth regions. A clear commercial strategy gives us the tools to lead and grow the global beer category and scale best practices across markets. Our portfolio of the world’s most valuable beer brands enables us to reach more consumers on more occasions. Our profitability is industry-leading, allowing us to weather even extreme volatility. Investments in capabilities such as B2B sales, e-commerce and digital marketing put us in an advantaged position to capture growth from these accelerating trends.

Most importantly, we have a culture of ownership and a long-term mindset. Our people are rising to the challenge each day, demonstrating ingenuity, passion and strength to keep us moving forward. We are privileged to lead the global beer category, a category that has existed for centuries through many crises and will continue to thrive long after the current crisis is behind us.

 

6


Selected Financial Information

The selected historical financial information presented below as of 31 December 2019 and for the five years ended 31 December 2019 has been derived from our audited consolidated financial statements, which were prepared in accordance with IFRS. The selected historical financial information presented below as of 30 June 2020 and for the six-month periods ended 30 June 2020 and 2019 has been derived from our unaudited IFRS condensed consolidated interim financial statements. The interim data include all adjustments, consisting of normally recurring adjustments, necessary for a fair statement of the results for the interim period.

Divestiture of Australia to Asahi

Effective 30 September 2019, following the announcement on 19 July 2019 of the agreement to divest Carlton & United Breweries (“CUB” or “Australian operations”), the Australian subsidiary, to Asahi Group Holdings, Ltd. (“Asahi”), we classified the assets and liabilities associated with the Australian operations as assets held for sale and liabilities associated with assets held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. In addition, since the results of the Australian operations represented a separate major line of business, these were accounted for as discontinued operations as required by IFRS 5 and presented in a separate line in the consolidated income statement (“profit from discontinued operations”) up to 31 May 2020. Consequently, our consolidated results for the six-month period ended 30 June 2019 have been restated as if the classification had been applied as of 1 January 2017 to exclude the results of the Australian operations. The transaction closed on 1 June 2020.

The selected historical financial information presented in the tables below should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements and the accompanying notes. The audited consolidated financial statements and the accompanying notes as of 31 December 2019 and 2018 and for the three years ended 31 December 2018 (prior to the adoption of IFRS 16) are included in our 2019 Annual Report. Similarly, the unaudited consolidated interim financial statements and the accompanying notes as of 30 June 2020 and for the six-month periods ended 30 June 2020 and 2019 are included in this interim report.

 

    Six-month period
ended 30 June
    Year ended 31 December  
    2020     2019(9)     2019      2018(7)(8)      2017(8)      2016(6)      2015  
    (USD millions)  
    (Unaudited)     (Audited8)  

Income Statement Data

                 

Revenue(1)

    21,298       25,823       52,329        53,041        54,859        45,517        43,604  

Profit from operations

    2,306       8,077       16,098        16,414        16,460        12,882        13,904  

Profit from continuing operations

    (3,744     6,406       9,990        5,157        8,606        2,721        9,867  

Profit of the period

    (1,688     6,642       10,414        5,688        9,166        2,769        9,867  

Profit attributable to our equity holders

    (1,900     6,055       9,171        4,370        7,990        1,241        8,273  

Weighted average number of Ordinary and Restricted Shares
(million shares)(2)

    1,995       1,980       1,984        1,975        1,971        1,717        1,638  

Diluted weighted average number of Ordinary and Restricted Shares
(million shares)(3)

    2,034       2,011       2,026        2,011        2,010        1,755        1,668  

Basic earnings per share (USD)(4)

    (0.95     3.06       4.62        2.21        4.05        0.72        5.05  

Basic earnings per share from continuing operations (USD)(4)

    (1.98     2.94       4.41        1.94        3.77        0.69        5.05  

Diluted earnings per share (USD)(5)

    (0.95     3.01       4.53        2.17        3.98        0.71        4.96  

Dividends per share (USD)

    n/a       n/a       2.02        2.05        4.33        3.85        3.95  

Dividends per share (EUR)

    n/a       n/a       1.80        1.80        3.60        3.60        3.60  

Other Data

                 

Volumes (million hectoliters)

    240       276       561        560        605        500        457  

 

     As of
30 June
     As of 31 December  
     2020      2019      2018(7)(8)      2017(8)      2016(6)      2015  
     (USD millions)  
     (Unaudited)      (Audited8)  

Financial Position Data

                 

Total assets

     225,448        236,648        233,868        248,208        258,381        134,635  

Equity

     68,347        84,553        71,889        80,200        81,425        45,719  

Equity attributable to our equity holders

     60,065        75,722        64,485        72,576        71,339        42,137  

Issued capital

     1,736        1,736        1,736        1,736        1,736        1,736  

 

7


Notes:

 

(1)

Turnover less excise taxes and discounts. In many jurisdictions, excise taxes make up a large proportion of the cost of beer charged to our customers (see “Item 5. Operating and Financial Review—A. Key Factors Affecting Results of Operations—Excise Taxes”).

(2)

Weighted average number of Ordinary and Restricted Shares means, for any period, the number of shares outstanding at the beginning of the period, adjusted by the number of shares canceled, repurchased or issued during the period, including deferred share instruments and stock lending, multiplied by a time-weighting factor.

(3)

Diluted weighted average number of Ordinary and Restricted Shares means the weighted average number of Ordinary and Restricted Shares, adjusted by the effect of share options and restricted stock units issued.

(4)

Earnings per share means, for any period, profit attributable to our equity holders for the period divided by the weighted average number of Ordinary and Restricted Shares.

(5)

Diluted earnings per share means, for any period, profit attributable to our equity holders for the period divided by the diluted weighted average number of Ordinary and Restricted Shares.

(6)

Following the combination with SAB, we consolidated SAB and report results and volumes of the retained SAB operations as of the fourth quarter of 2016.

(7)

The financial information for 2018 is presented under IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers, which were adopted by us with effect on 1 January 2018 in accordance with the modified retrospective application.

(8)

The financial information for 2018 and 2017 is presented under IFRS 16 Leases which was adopted by us with effect on 1 January 2017 in accordance with the full retrospective application. In addition, the financial information for 2018 and 2017 reflects the classification of the Australian operations as discontinued operations. The financial information for 2016 and 2015 has not been restated to reflect these changes.

(9)

The financial information for the six-month period ended 30 June 2019 has been restated to reflect the classification of the Australian operations as discontinued operations.

 

8


Results of Operations for the Six-month period ended 30 June 2020 Compared to Six-month period ended 30 June 2019

Divestiture of Australia to Asahi

Effective 30 September 2019, following the announcement on 19 July 2019 of the agreement to divest Carlton & United Breweries (“CUB” or “Australian operations”), the Australian subsidiary, to Asahi Group Holdings, Ltd. (“Asahi”), we classified the assets and liabilities associated with the Australian operations as assets held for sale and liabilities associated with assets held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. In addition, since the results of the Australian operations represented a separate major line of business, these were accounted for as discontinued operations as required by IFRS 5 and presented in a separate line in the consolidated income statement (“profit from discontinued operations”) up to 31 May 2020. Consequently, our consolidated results for the six-month period ended 30 June 2019 have been restated as if the classification had been applied as of 1 January 2017 to exclude the results of the Australian operations. The transaction closed on 1 June 2020, resulting in a net gain on disposal of USD 1.9 billion recognized in profit from discontinued operations.

The table below presents our condensed consolidated results of operations for the six-month periods ended 30 June 2020 and 2019.

 

     Six-month period ended 30
June 2020
     Six-month period ended
30 June 2019
(3)
     Change  
     (USD million, except volumes)      (%)(1)  

Volumes (thousand hectoliters)

     239,577        276,031        (13.2

Revenue

     21,298        25,823        (17.5

Cost of sales

     (9,097      (9,953      8.6  

Gross profit

     12,201        15,869        (23.1

Selling, General and Administrative expenses

     (7,257      (8,077      10.2  

Other operating income/(expenses)

     158        388        (59.3

Exceptional items

     (2,796      (103      —    

Profit from operations

     2,306        8,077        (71.4

EBITDA, as defined(2)

     7,217        10,342        (30.2

 

Note:

 

(1)

The percentage change reflects the improvement (or worsening) of results for the period as a result of the change in each item.

(2)

For a discussion of how we use EBITDA, as defined, and its limitations, and a table showing the calculation of our EBITDA, as defined, for the periods shown, see “—EBITDA, as defined” below.

(3)

Our condensed consolidated results of operations for 2019 have been restated to reflect the classification of the Australian operations as discontinued operations.

Volumes

Our reported volumes include both beer (including near-beer) and non-beer (primarily carbonated soft drinks) volumes. In addition, volumes include not only brands that we own or license, but also third-party brands that we brew or otherwise produce as a subcontractor and third-party products that we sell through our distribution network, particularly in Europe. Volumes sold by the Global Export and Holding Companies businesses are shown separately.

The table below summarizes the volume evolution by business segment.

 

     Six-month period ended
30 June 2020
     Six-month period ended
30 June 2019
(2)
     Change  
     (thousand hectoliters)      (%)(1)  

North America

     51,977        53,635        (3.1

Middle Americas

     51,858        64,722        (19.9

South America

     62,782        66,856        (6.1

EMEA

     33,551        40,214        (16.6

Asia Pacific

     39,045        50,189        (22.2

Global Export & Holding Companies

     364        416        (12.5
  

 

 

    

 

 

    

 

 

 

Total

     239,577        276,031        (13.2
  

 

 

    

 

 

    

 

 

 

 

Note:

 

(1)

The percentage change reflects the improvement (or worsening) of results for the period as a result of the change in each item.

(2)

Effective 30 September 2019, the Australian operations were classified as a disposal group held for sale, and consequently accounted for as discontinued operations. The figures for the period ended 30 June 2019 have been restated to reflect this change.

 

9


Our consolidated volumes for the six-month period ended 30 June 2020 decreased by 36.5 million hectoliters, or 13.2%, to 239,577 million hectoliters compared to our consolidated volumes for the six-month period ended 30 June 2019. The results for the six-month period ended 30 June 2020 reflect the performance of our business after the completion of certain acquisitions and disposals we undertook in 2019 and 2020.

The 2019 and 2020 acquisitions and disposals include acquisitions which were individually not significant (collectively the “2019 and 2020 acquisitions and disposals”).

The 2019 and 2020 acquisitions and disposals impacted positively our volumes by 615 million hectoliters (net) for the six-month period ended 30 June 2020 compared to the six-month period ended 30 June 2019.

Excluding volume changes attributable to the acquisitions and disposals described above, total volumes decreased 13.4%. Our own beer volumes decreased 14.0% in the six-month period ended 30 June 2020 compared to the six-month period ended 30 June 2019. On the same basis, in the six-month period ended 30 June 2020, our non-beer volumes decreased 7.6% compared to the same period in 2019.

The impact of COVID-19 on our global results increased significantly toward the end of the first quarter of 2020. Consequently, in the first quarter of 2020, our total volume declined by 9.3%.

Our performance in the second quarter of 2020 was materially impacted by the COVID-19 pandemic, as expected. As the quarter progressed, however, we saw considerable improvement. April 2020 volumes declined by 32.4%, May 2020 volumes declined by 21.4% and June 2020 volumes grew by 0.7%, demonstrating the resilience of the global beer category.

North America

In the six-month period ended 30 June 2020, our volumes in North America decreased by 1.7 million hectoliters, or 3.1%, compared to the six-month period ended 30 June 2019.

Excluding volume changes attributable to the acquisitions and disposals, our total volumes decreased by 3.3% in the six-month period ended 30 June 2020 compared to the same period last year.

We estimate that our sales-to-retailers (“STRs”) in the United States declined by 0.4% in an industry that we estimate was flattish, resulting in an estimated market share decline of 20 bps in the six-month period ended 30 June 2020 compared to the same period last year. Our sales-to-wholesalers (“STWs”) declined by 3.7%.

In response to the COVID-19 pandemic, “stay-at-home” orders and other social distancing measures were implemented in the United States beginning in the middle of March 2020, at varying levels across states.

Our US business performed well in the second quarter of 2020 even in the face of continued industry pressure and volatility caused by the COVID-19 pandemic, primarily due to the continued implementation of our commercial strategy. We leveraged the learnings from our global colleagues, as well as data and analytics, to quickly and efficiently adapt our operations to continue supplying the market and effectively address changing consumer needs.

Our estimated market share was stable in the second quarter of 2020, as our STRs were flattish along with the industry. In light of the strong consumer demand, depletions of inventory accelerated while STWs declined by 6.1%. Throughout the second quarter, we observed a gradual reopening of the on-premise channel, though many states have since reinstated restrictions.

Our above core portfolio once again led the way and delivered an estimated market share gain of 90 bps in the second quarter of 2020. This was led by the successful launch of Bud Light Seltzer earlier this year, which remains the top innovation in the category by volume in 2020. Michelob Ultra continued its strong momentum as a top share gainer in the category, finding new ways to connect with consumers digitally to support an active lifestyle.

In the mainstream segment, our core, core light and value brands delivered an estimated loss of 90 bps of market share. This improvement versus recent trends is largely due to the uplift of beer sales in the off-premise channel, which disproportionately benefits established brands and larger packs. Within the mainstream segment, we estimate our portfolio lost approximately 15 bps of market share.

Our business in Canada demonstrated resilience in a challenging environment, delivering a flattish volume performance well ahead of the industry. As government restrictions came into place in the middle of March 2020, the on-premise channel was effectively shut down. We observed an uplift in the off-premise channel as consumers prepared to enjoy our products at home. Our beyond beer business considerably outperformed, led by successful innovation launches and the growth of our seltzer portfolio, driven by Nutrl.

Middle Americas

In the six-month period ended 30 June 2020, our volumes in Middle Americas decreased by 12.9 million hectoliters, or 19.9%, compared to the six-month period ended 30 June 2019.

Excluding volume changes attributable to the acquisitions and disposals, our total volumes decreased by 20.6% in the six-month period ended 30 June 2020 compared to the same period last year.

 

10


In Mexico, our volumes declined by high teens in the six-month period ended 30 June 2020 compared to the same period last year.

Our beer business was shut down during the nationwide lockdown in the first two months of the second quarter of 2020. We quickly pivoted to produce low-alcohol beer products, Victoria 1.8 and Corona Ligera, which addressed new in-home consumption occasions. We also leveraged our direct-to-consumer and B2B capabilities, which saw significant acceleration throughout the crisis. Additionally, we launched a platform called “#PorNuestroMexico” to support a strong recovery through humanitarian initiatives, such as face mask and hand sanitizer donations, and customer support initiatives, such as providing safety equipment and credit support.

In June 2020, the restrictions on our operations were lifted and we rapidly returned to full operational status with increased safety measures to protect our people. Our beer volumes grew by high teens in June 2020, due to the replenishment of inventory levels in the trade and strong consumer demand. Our above core portfolio saw strong growth in June 2020, with double-digit growth of our global brands, Michelob Ultra and the Modelo Especial family.

Our portfolio became available in an additional 1,600 OXXO stores in July 2020, as we completed the fourth wave of our expansion into the country’s largest convenience store channel.

In Colombia, total volumes declined by high teens, with beer volumes down high teens and non-beer volumes down low teens in the six-month period ended 30 June 2020 compared to the same period last year.

The first quarter 2020 was significantly impacted by social distancing measures put in place in the middle of March 2020 including a national quarantine, to address the COVID-19 pandemic. The on-premise channel, which comprises slightly more than 50% of our volumes, was closed across the country, although sales were permitted for home delivery.

Our performance in the second quarter of 2020 was significantly impacted by the nationwide lockdown of the on-premise channel and stay-at-home restrictions, though these began to ease throughout the quarter. In June, our volume performance improved versus the first two months of the second quarter of 2020, as the gradual re-opening of certain sectors of the economy led to improving consumer confidence and disposable income. Additionally, while on-premise alcohol consumption remains restricted, many on-premise outlets are now offering take-out, supporting improving volume trends. We continued to expand the premium segment in the quarter while further enhancing our smart affordability strategy. We are supporting the recovery of our customers with initiatives such as Tienda Cerca, an online delivery platform, and our recently-launched proprietary B2B online platform, BEES.

In Peru, our volumes declined by high teens in the first quarter of 2020, driven by lockdown measures implemented across the country as of the middle of March 2020 in response to COVID-19. Prior to the lockdown, we saw strong performances from our global brands and our innovations in the first quarter of 2020, including the continued success of Golden, a smart affordability innovation we launched in the fourth quarter of 2019. Our volumes declined significantly in the second quarter of 2020 compared to the same period last year, as a result of government lockdown restrictions implemented in March 2020. At the end of April 2020, we resumed sales and distribution of existing inventory, and in June 2020 we resumed full brewing operations, resulting in improved volume trends throughout the second quarter of 2020. We continue to work to transform our business to better reach consumers through an enhanced portfolio of new brands, such as our smart affordability brand Golden.

In Ecuador, our performance was also significantly impacted by government measures in March 2020 to shut down the on-premise channel across the country, as well as some local measures to shut down full regions, which affected approximately half of our total volumes. In the first quarter of 2020, our volumes declined by double-digits. Prior to March 2020, our volumes were growing by double-digits, driven by the strong performance of our brand portfolio across the price spectrum. Our volumes declined significantly in the second quarter of 2020 compared to the same period last year, due to the COVID-19 pandemic and associated government restrictions. In June 2020, we saw a gradual easing of restrictions, leading to improved volume trends in the month. Despite the challenging environment, our premium and super premium brands gained share in the second quarter of 2020. We also expanded our smart affordability strategy to brew beers with local crops, through a program called Siembra por Contrato, supporting farmers in the country.

South America

In the six-month period ended 30 June 2020, our volumes in South America decreased by 4.1 million hectoliters, or 6.1%, compared to the six-month period ended 30 June 2019, with our beer volumes decreasing 6.1% and soft drinks decreasing 6.7%.

In Brazil, our volumes declined by 6.9%, with beer volumes down 6.9% and non-beer volumes down 6.8% in the six-month period ended 30 June 2020 compared to the same period last year.

In March 2020, restrictive measures were implemented across Brazilian states in response to the COVID-19 pandemic, including the lockdown of the on-premise channel, which represents more than half of our volume. We were committed to staying close to our consumers and customers throughout that time by leveraging technology. We saw an opportunity to grow the in-home consumption occasion, especially through our unique Direct-to-Consumer platform “Zé Delivery”. Through the platform, we connect our customers, bars, restaurants, consumers and drivers to enable cold beer delivery in less than 60 minutes.

 

11


Our beer business delivered a healthy performance in the context of a volatile external environment in the second quarter of 2020, with a volume decline of 1.3%, outperforming the industry according to our estimates. We saw an improving trend throughout the second quarter of 2020 driven by the success of our innovation strategy, reliability of our supply chain and customer relationships, the strengths of our distribution footprint and a shift in off-premise consumption to traditional outlets, where our portfolio over-indexes. Furthermore, these benefits were amplified by the positive impact of government subsidies on consumer disposable income. Our non-beer business declined by 12.6% in the second quarter of 2020, impacted by COVID-19 restrictions and the consequent change in consumption occasions.

Although the COVID-19 pandemic has created significant challenges for our business, it has also accelerated consumer trends that we have been investing behind, primarily reinforcing the need for an innovative, consumer-centric mindset and advancing our business transformation enabled by technology. We have been enhancing our portfolio across a variety of segments. In the mainstream segment, Skol Puro Malte grew by strong double-digits from a meaningful base. In the core plus segment, Bohemia more than doubled in the second quarter of 2020 supported by its repositioning and new visual brand identity, and we are further elevating our presence in the segment through the successful launch of Brahma Duplo Malte. In the premium segment, our global brands grew by double-digits, led by Budweiser, though our domestic premium brands declined given their over-exposure to the on-premise channel.

Our digital transformation continues to gain traction. Our customers are increasingly relying on our B2B digital solutions, and our direct-to-consumer e-commerce platform, Zé Delivery, has been rapidly increasing geographic coverage, reaching 2.2 million orders in June 2020 versus 1.5 million orders in full year ended 31 December 2019. We continue to connect with consumers in new ways with initiatives such as “lives,” a series of livestreamed online concerts, which reached more than 675 million views in the second quarter of 2020.

In Argentina, our business was impacted by the ongoing challenging environment. We delivered high single digit volume growth in the first quarter of 2020, ahead of the industry and supported by a favorable comparable. In response to the COVID-19 pandemic, a full national lockdown was implemented as of the middle of March 2020. The on-premise channel was effectively shut and there were restrictions on hours of operation in the off-premise channel, which represents approximately 90% of our volume. Volumes declined by low teens in the second quarter of 2020. Our above core portfolio remained resilient and performed well, led by the growth of our global and local brands. Corona and our local champion in the core plus segment, Andes Origen, delivered high double-digit growth in the second quarter of 2020. We continue to focus on the digital transformation of our business and have observed strong results from our direct-to-consumer initiatives and our e-retail platforms, aimed at supporting local businesses.

EMEA     

In EMEA, our volumes, including subcontracted volumes, for the six-month period ended 30 June 2020 decreased by 6.7 million hectoliters, or 16.6%, compared to the six-month period ended 30 June 2019.

Excluding volume changes attributable to the acquisitions and disposals, our beer volumes for the six-month period ended 30 June 2020 decreased 16.4% compared to the same period last year.

In Europe, our volumes declined by low single-digits in the first quarter of 2020 as a result of COVID-19 restrictive measures. We observed a full shut down of the on-premise channel throughout March 2020, which represented approximately 30% of our business in the region. Europe volumes declined by mid-teens in the second quarter of 2020. We have seen an uplift in the off-premise channel since the outbreak of the COVID-19 pandemic, with accelerated growth of premium brands and larger packs. In June 2020, we saw the gradual re-opening of the on-premise channel in most of our markets, resulting in improved volume trends. We continued to gain market share across the majority of our markets in the first six months of 2020, supported by the strong growth of Budweiser following its successful launch in France and the Netherlands last year.

Our business in South Africa was significantly impacted by the nationwide lockdown that began in late March 2020 and lasted until the end of May 2020, which included a complete ban on the sale of alcohol beverages. Our brewery and distribution operations were severely restricted by government mandates. Our volumes in South Africa declined by double-digits in the six-month period ended 30 June 2020 compared to the same period last year. We fully resumed our operations at the beginning of June 2020, and we saw a strong recovery in the month with volume growth of high single digits. However, a second ban on the sale of alcohol beverages was implemented in the middle of July 2020. Our priority is and continues to be the safety and well-being of our people and our communities. We remain focused on working with the South African government on measures that will meaningfully combat the public health crisis, while supporting the country’s much-needed economic recovery.

In Africa excluding South Africa, measures taken to combat the COVID-19 pandemic varied by country, but implementation generally began in late March and early April 2020 to shut down the on-premise channel in most markets. Our breweries mostly remained operational and we were servicing the market, primarily the off-premise channel, in compliance with government regulations. Our breweries remained operational throughout the second quarter of 2020 in most of our key markets. In Nigeria, we saw a rapid recovery following the easing of restrictions in May 2020, leading to volume growth in June 2020. We saw a similar trajectory in the rest of our markets in Africa, with April the most impacted month of the second quarter of 2020, followed by improving volume trends in May and growth in many markets in June 2020.

 

12


Asia Pacific

For the six-month period ended 30 June 2020, our volumes decreased by 11.1 million hectoliters, or 22.2%, compared to the six-month period ended 30 June 2019.

Excluding volume changes attributable to the acquisitions and disposals, our total volumes decreased by 22.2% in the six-month period ended 30 June 2020 compared to the same period last year.

In China, our volumes declined by 20.6% in the six-month period ended 30 June 2020 compared to the same period last year. COVID-19 struck China in late January 2020, just before the start of the Chinese New Year celebrations, one of the largest consumption occasions of the year. Most provinces implemented significant lockdown measures to combat the virus, lasting from late January through at least the end of February 2020. During this period, we observed virtually no activity in the nightlife channel, very limited activity in the restaurant channel and a meaningful decline in the in-home channel. However, we saw a significant acceleration of the e-commerce channel, where we are the market leader. We grew volumes by strong double-digits in this channel in the first quarter of 2020. We re-allocated our resources to take advantage of these trends, particularly in the in-home and e-commerce channels.

In March 2020, we observed a steady recovery in the in-home and restaurant channels, though the nightlife channel recovered at a slower pace due to social distancing measures. By the end of March 2020, almost all our wholesalers had resumed operations though operating at lower demand levels in light of the situation and we had re-opened all our breweries in China.

Our business in China continued its recovery throughout the second quarter of 2020, delivering a slight volume decline of 0.4%. While we faced a 17% decline in April 2020, we achieved mid-single digit growth in May and June 2020. Our June 2020 performance represented our highest ever monthly volumes in China, while still maintaining healthy levels of inventory in the trade.

In the second quarter of 2020, our Super Premium portfolio continued its momentum with volume growth. Additionally, our mainstream brands outperformed in the second quarter of 2020, especially our local brands. We believe that the long-term premiumization trend in China remains intact, given the continued healthy performance of the Super Premium segment, strong indications of economic recovery and encouraging stimulus policies.

We launched several new brands across a variety of price segments and styles ahead of the summer season. Leveraging our global portfolio of brands and the category expansion framework, we have launched Bud Light as a premium lager and Beck’s as an international pure malt offering. Additionally, we expanded Sedrin Lychee nationally in the flavored beer segment.

Throughout the second quarter of 2020, we saw improving trends across channels. The in-home channel is effectively fully open, and our business performed very well, with volume growth of high single digits. In the on-premise channel, more than 90% of restaurants were open by the end of June 2020 with comparable rates of sale to last year. The nightlife channel improved significantly month-over-month with more than 80% of venues open at the end of June 2020. The e-commerce channel, where we have grown our market share to more than twice that of the next brewer, continued to accelerate its growth.

In South Korea, our volumes experienced a meaningful decline in the first quarter of 2020 driven by COVID-19 as well as a challenging comparable. South Korea faced a significant outbreak of the virus in late February 2020, though businesses largely remained open across most of the country. Consumers actively practiced social distancing, which led to a meaningful decline in the on-premise channel in the first quarter of 2020. However, since the middle of March 2020, we observed a consistent improvement in consumer sentiment. Our volumes declined in the second quarter of 2020 driven by a softer industry resulting from the COVID-19 pandemic. We continue to leverage our full portfolio of brands to connect with consumers across price segments and channels. In the premium segment, our strong portfolio of established brands and recent innovations outperformed the industry. In total, we estimate that our market share grew quarter-over-quarter once again. We are encouraged by our full portfolio’s momentum in the market.

Global Export & Holding Companies

For the six-month period ended 30 June 2020, Global Export and Holding Companies volumes decreased by 0.1 million hectoliters. Excluding the volume changes attributable to the acquisitions and disposals, our total volumes in the six-month period ended 30 June 2020 decreased 10.3% compared to the same period last year.

 

13


Revenue

The following table reflects changes in revenue across our business segments for the six-month period ended 30 June 2020 as compared to our revenue for the six-month period ended 30 June 2019:

 

     Six-month period ended 30
June 2020
     Six-month period ended
30 June 2019
(2)
     Change  
     (USD million)      (%) (1)  

North America

     7,536        7,701        (2.1

Middle Americas

     4,246        5,735        (26.0

South America

     3,613        4,769        (24.2

EMEA

     3,007        3,784        (20.5

Asia Pacific

     2,609        3,514        (25.8

Global Export & Holding Companies

     287        319        (10.0
  

 

 

    

 

 

    

 

 

 

Total

     21,298        25,823        (17.5
  

 

 

    

 

 

    

 

 

 

 

Note:

 

(1)

The percentage change reflects the improvement (or worsening) of results for the period as a result of the change in each item.

(2)

Effective 30 September 2019, the Australian operations were classified as a disposal group held for sale, and consequently accounted for as discontinued operations. The figures for the period ended 30 June 2019 have been restated to reflect this change.

Our consolidated revenue was USD 21,298 million for the six-month period ended 30 June 2020. This represented a decrease of USD 4,525 million, or 17.5%, as compared to our consolidated revenue for the six-month period ended 30 June 2019 of USD 25,823 million. The results for the six-month period ended 30 June 2020 reflect (i) the performance of our business after the completion of certain acquisitions and disposals we undertook in 2018 and 2019 and (ii) currency translation effects.

 

   

The 2019 and 2020 acquisitions and disposals positively impacted our consolidated revenue by USD 53 million for the six-month period ended 30 June 2020 compared to the six-month period ended 30 June 2019.

 

   

Our consolidated revenue for the six-month period ended 30 June 2020 also reflects a negative currency translation impact of USD 1,470 million mainly arising from currency translation effects in South America.

Excluding the effects of the 2019 and 2020 acquisitions and disposals and currency translation effects, our revenue decreased 12.0% in total and increased by 1.6% on a per hectoliter basis in the six-month period ended 30 June 2020 compared to the same period in 2019, and declined by 0.6% on a per hectoliter basis in the second quarter of 2020, driven by restrictions related to the COVID-19 pandemic. Our consolidated revenue for the six-month period ended 30 June 2020 was partially impacted by the decrease in volumes discussed above. On the same basis, our revenue per hectoliter for the six-month period ended 30 June 2020 increased compared to the same period last year. This increase was most significant in South America, where revenue per hectoliter increased by mid-single digits, primarily driven by double-digit revenue per hectoliter growth in Argentina in line with inflation, and in North America, as a result of the price increase in the second half of 2019. During the second quarter, our revenue on a per hectoliter basis declined by 0.6% compared to the same period in 2019. The COVID-19 pandemic resulted in a shift from the on-premise channel to the off-premise channel in different markets, impacting our top-line.

Combined revenues of our global brands, Budweiser, Stella Artois and Corona, declined by 14.1% globally and 14.9% outside their respective home markets in the six-month period ended 30 June 2020.

Cost of Sales

The following table reflects changes in cost of sales across our business segments for the six-month period ended 30 June 2020 as compared to the six-month period ended 30 June 2019:

 

     Six-month period ended
30 June 2020
     Six-month period ended
30 June 2019
(2)
     Change  
     (USD million)      (%)(1)  

North America

     (2,842      (2,868      0.9  

Middle Americas

     (1,454      (1,711      15.0  

South America

     (1,727      (1,928      10.4  

EMEA

     (1,555      (1,636      5.0  

Asia Pacific

     (1,217      (1,535      20.7  

Global Export & Holding Companies

     (302      (274      (10.2
  

 

 

    

 

 

    

 

 

 

Total

     (9,097      (9,953      8.6  
  

 

 

    

 

 

    

 

 

 

 

14


 

Note:

 

(1)

The percentage change reflects the improvement (or worsening) of results for the period as a result of the change in each item.

(2)

The financial information for six-month period ended 30 June 2019 has been restated to reflect the classification of the Australian operations as discontinued operations.

Our consolidated cost of sales was USD 9,097 million for the six-month period ended 30 June 2020. This represented a decrease of USD 856 million, or 8.6%, compared to our consolidated cost of sales for the six-month period ended 30 June 2019. The results for the six-month period ended 30 June 2020 reflect (i) the performance of our business after the completion of certain acquisitions and disposals we undertook in 2019 and 2020 and (ii) currency translation effects.

 

   

The 2019 and 2020 acquisitions and disposals described above negatively impacted our consolidated cost of sales by USD 68 million for the six-month period ended 30 June 2020 compared to the six-month period ended 30 June 2019.

 

   

Our consolidated cost of sales for the six-month period ended 30 June 2020 also reflects a positive currency translation impact of USD 676 million mainly arising from currency translation effects in South America.

Excluding the effects of the business acquisitions and disposals and currency translation effects, our cost of sales decreased USD 249 million or 2.5%. On the same basis, our consolidated cost of sales per hectoliter increased by 12.9%. This was driven primarily by operational deleverage resulting from the impact of COVID-19 on our volumes, particularly in markets where our beer operations were shut down within the second quarter of 2020. Our consolidated cost of sales for the six-month period ended 30 June 2020 was partially impacted by decrease in volumes discussed above. The increase in cost of sales per hectoliter was most significant in Middle Americas, South America and EMEA.

Operating Expenses

The discussion below relates to our operating expenses, which equal the sum of our distribution, sales and marketing expenses, administrative expenses and other operating income and expenses (net), for the six-month period ended 30 June 2020 as compared to the six-month period ended 30 June 2019. Our operating expenses do not include exceptional charges, which are reported separately.

Our operating expenses for the six-month period ended 30 June 2020 were USD 7,099 million, representing a decrease of USD 590 million, or 7.7%, compared to our operating expenses for the same period in 2019.

 

     Six-month period ended 30
June 2020
     Six-month period ended 30
June 2019 (2)
     Change  
     (USD million)      (%)(1)  

Selling, General and Administrative expenses

     (7,257      (8,077      10.2  

Other Operating Income/(Expenses)

     158        388        (59.3
  

 

 

    

 

 

    

 

 

 

Total Operating Expenses

     (7,099      (7,689      7.7  
  

 

 

    

 

 

    

 

 

 

 

Note:

 

(1)

The percentage change reflects the improvement (or worsening) of results for the period as a result of the change in each item.

(2)

The financial information for six-month period ended 30 June 2019 has been restated to reflect the classification of the Australian operations as discontinued operations.

Selling, General and Administrative Expenses

The following table reflects changes in our distribution expenses, sales and marketing expenses and administrative expenses (our “selling, general and administrative expenses”) across our business segments for the six-month period ended 30 June 2020 as compared to the six-month period ended 30 June 2019:

 

     Six-month period ended 30
June 2020
     Six-month period ended 30
June 2019 (2)
     Change  
     (USD million)      (%)(1)  

North America

     (2,104      (2,197      4.2  

Middle Americas

     (1,258      (1,483      15.2  

South America

     (1,205      (1,427      15.6  

EMEA

     (1,263      (1,358      7.0  

Asia Pacific

     (961      (1,048      8.3  

Global Export & Holding Companies

     (466      (564      17.4  
  

 

 

    

 

 

    

 

 

 

Total

     (7,257      (8,077      10.2  
  

 

 

    

 

 

    

 

 

 

 

15


 

Note:

 

(1)

The percentage change reflects the improvement (or worsening) of results for the period as a result of the change in each item.

(2)

The financial information for six-month period ended 30 June 2019 has been restated to reflect the classification of the Australian operations as discontinued operations.

Our consolidated selling, general and administrative expenses were USD 7,257 million for the six-month period ended 30 June 2020. This represented a decrease of USD 820 million, or 10.2%, as compared to the six-month period ended 30 June 2019. The results for the six-month period ended 30 June 2020 reflect (i) the performance of our business after the completion of certain acquisitions and disposals we undertook in 2019 and 2020 and (ii) currency translation effects.

 

   

The 2019 acquisitions and disposals described above positively impacted our consolidated selling, general and administrative expenses by USD 4 million for the six-month period ended 30 June 2020 compared to the six-month period ended 30 June 2019.

 

   

Our consolidated selling, general and administrative expenses for the six-month period ended 30 June 2020 also reflects a positive currency translation impact of USD 498 million mainly arising from currency translation effects in South America.

Excluding the effects of the business acquisitions and disposals and currency translation effects, our consolidated selling, general and administrative expenses decreased by 4.0% driven by successful resource allocation initiatives.

Other operating income/(expense)

The following table reflects changes in other operating income and expenses across our business segments for the six-month period ended 30 June 2020 as compared to the six-month period ended 30 June 2019:

 

    Six-month period ended 30
June 2020
    Six-month period ended
30 June 2019
(2)
    Change  
    (USD million)     (%)(1)  

North America

    (10     20       —    

Middle Americas

    —         55       —    

South America

    54       100       (46.0

EMEA

    55       98       (43.9

Asia Pacific

    40       86       (53.5

Global Export & Holding Companies

    19       29       (34.5
 

 

 

   

 

 

   

 

 

 

Total

    158       388       (59.3
 

 

 

   

 

 

   

 

 

 

 

Note:

 

(1)

The percentage change reflects the improvement (or worsening) of results for the period as a result of the change in each item.

(2)

The financial information for six-month period ended 30 June 2019 has been restated to reflect the classification of the Australian operations as discontinued operations.

The net positive effect of our consolidated other operating income and expenses was USD 158 million for the six-month period ended 30 June 2020. This represented a decrease of USD 230 million, or 59.3%, as compared to the six-month period ended 30 June 2019. The results for the six-month period ended 30 June 2020 reflect (i) the performance of our business after the completion of certain acquisitions and disposals we undertook in 2019 and 2020, and (ii) currency translation effects.

 

   

The 2019 acquisitions and disposals negatively impacted our net consolidated other operating income and expenses by USD 2 million for the six-month period ended 30 June 2020 compared to the six-month period ended 30 June 2019.

 

   

Our net consolidated other operating income and expenses for the six-month period ended 30 June 2020 also reflect a negative currency translation impact of USD 11 million.

Excluding the effects of the business acquisitions and disposals and currency translation effects, our net consolidated other operating income and expenses decreased by 56.3%, primarily driven by a decrease in government grants in Brazil and China and sale of non-core assets in Europe and Africa.

Exceptional Items

Exceptional items are items which, in our management’s judgment, need to be disclosed separately by virtue of their size and incidence in order to obtain a proper understanding of our financial information. We consider these items to be significant in nature, and accordingly, our management has excluded these items from their segment measure of performance.

 

16


For the six-month period ended 30 June 2020, exceptional items consisted of impairment of goodwill, COVID-19 costs, restructuring charges, business and asset disposals (including impairment losses), acquisition costs of business combinations and gain on divestiture of Australia. Exceptional items were as follows for the six-month period ended 30 June 2020 and 2019:

 

     Six-month period ended 30
June 2020
     Six-month period ended 30
June 2019 (1)
 
     (USD million)  

Goodwill impairment

     (2,500      —    

COVID-19 costs

     (78      —    

Restructuring

     (60      (58

Business and asset disposal (including impairment)

     (154      (24

Acquisition costs of business combinations

     (4      (21

Gain on divestiture of Australia (in discontinued operations)

     1,919        —    
  

 

 

    

 

 

 

Total

     (877      (103
  

 

 

    

 

 

 

 

Note:

 

(1)

The financial information for 2019 has been restated to reflect the classification of the Australian operations as discontinued operations.

Goodwill impairment

During the second quarter of 2020, we reported a USD 2.5 billion non-cash goodwill impairment charge. The COVID-19 pandemic resulted in a sharp contraction of sales during the second quarter of 2020 in many countries in which we operate. We concluded that a triggering event occurred which required us to perform an impairment test. The impairment test considered three scenarios for recovery of sales for the tested cash-generating units: a base case, which we deem to be the most likely case, a best case and a worst case. Based on the results of the impairment test, we concluded that no impairment was warranted under the base and best case scenarios.

Nevertheless, under the worst case scenario ran with higher discounts rates to factor the heightened business risk, we concluded that the estimated recoverable amounts of the South Africa and Rest of Africa cash-generating units were below their carrying value. Accordingly, we determined that it was prudent, in view of the uncertainties to record an impairment charge of USD 2.5 billion applying a 30% probability of occurrence of the worst case scenario.

COVID-19 costs

Cost associated with COVID-19 amounted to USD 78 million for the six-month period ended 30 June 2020. These expenses mainly comprise costs related to personal protection equipment for our colleagues, charitable donations and other costs incurred as a direct consequence of the COVID-19 pandemic.

Restructuring

Exceptional restructuring charges amounted to a net cost of USD 60 million for the six-month period ended 30 June 2020 as compared to a net cost of USD 58 million for the six-month period ended 30 June 2019. These charges primarily relate to organizational alignments. These changes aim to eliminate overlapping organizations or duplicated processes, taking into account the right match of employee profiles with the new organizational requirements. These expenses provide us with a lower cost base in addition to a stronger focus on our core activities, quicker decision-making and improvements to efficiency, service and quality.

Business and asset disposal

Business and asset disposals amounted to a net cost of USD 154 million for the six-month period ended 30 June 2020 mainly comprising of a USD 150 million impairment of intangible assets classified as assets held for sale as of 30 June 2020 and other intangibles. Business and asset disposals amounted to a net cost of USD 24 million for the six-month period ended 30 June 2019 mainly comprising costs incurred in relation to the completion of 2018 disposals.

Acquisitions costs of business combinations

The acquisition costs of business combinations amounted to a net cost of USD 4 million for the six-month period ended 30 June 2020 as compared to a net cost of USD 21 million for the six-month period ended 30 June 2019.

Gain on divestiture of Australia

On 1 June 2020, we completed the previously announced sale of CUB to Asahi resulting in a net exceptional gain of USD 1,919 million reported in discontinued operations.

 

17


Profit from Operations

The following table reflects changes in profit from operations across our business segments for the six-month period ended 30 June 2020 as compared to the six-month period ended 30 June 2019:

 

     Six-month period ended
30 June 2020
     Six-month period ended
30 June 2019
(2)
     Change  
     (USD million)      (%)(1)  

North America

     2,496        2,655        (6.0

Middle Americas

     1,484        2,569        (42.3

South America

     719        1,501        (52.1

EMEA

     (2,344      870        —    

Asia Pacific

     462        1,013        (54.4

Global Export & Holding Companies

     (509      (533      4.5  
  

 

 

    

 

 

    

 

 

 

Total

     2,306        8,077        (71.4
  

 

 

    

 

 

    

 

 

 

 

Note:

 

(1)

The percentage change reflects the improvement (or worsening) of results for the period as a result of the change in each item.

(2)

The financial information for six-month period ended 30 June 2019 has been restated to reflect the classification of the Australian operations as discontinued operations.

Our profit from operations was USD 2,306 million for the six-month period ended 30 June 2020. This represented a decrease of USD 5,771 million, or 71.4%, as compared to our profit from operations for the six-month period ended 30 June 2019. The results for the six-month period ended 30 June 2020 reflect (i) the performance of our business after the completion of certain acquisitions and disposals we undertook in 2019 and 2020, (ii) currency translation effects and (iii) the effects of certain exceptional items as described above.

 

   

The 2019 acquisitions and disposals described above negatively impacted our consolidated profit from operations by USD 12 million for the six-month period ended 30 June 2020 compared to the six-month period ended 30 June 2019.

 

   

Our consolidated profit from operations for the six-month period ended 30 June 2020 also reflects a negative currency translation impact of USD 285 million.

 

   

Our profit from operations for the six-month period ended 30 June 2020 was negatively impacted by USD 2,796 million of certain exceptional items, as compared to a negative impact of USD 103 million for the six-month period ended 30 June 2019. See “Exceptional Items” above for a description of the exceptional items during the six-month period ended 30 June 2020 and 2019.

Excluding the effects of the business acquisitions and disposals described above and currency translation effects, our profit from operations decreased by 67.6%. This decrease was most significant in Middle Americas, South America, EMEA and Asia Pacific as a result of the COVID-19 pandemic.

EBITDA, as defined

The following table reflects changes in our EBITDA, as defined, for the six-month period ended 30 June 2020 as compared to six-month period ended 30 June 2019:

 

    Six-month period ended 30
June 2020
    Six-month period ended 30
June 2019 (3)
    Change  
    (USD million)     (%)(1)  

Profit attributable to equity holders of AB InBev

    (1,900     6,055       —    

Profit attributable to non-controlling interests

    211       587       (64.1

Profit of the period

    (1,688     6,642       —    

Profit from discontinued operations

    (2,055     (236     —    

Profit from continuing operations

    (3,744     6,406       —    

Net finance cost

    5,592       169       —    

Income tax expense

    492       1,565       68.6  

Share of result of associates and joint ventures

    (33     (62     (46.8
 

 

 

   

 

 

   

 

 

 

Profit from operations

    2,306       8,077       (71.4

Depreciation, amortization and impairment

    2,261       2,265       0.2  

Exceptional impairment

    2,650       —         —    
 

 

 

   

 

 

   

 

 

 

EBITDA, as defined(2)

    7,217       10,342       (30.2
 

 

 

   

 

 

   

 

 

 

 

18


 

Note:

 

(1)

The percentage change reflects the improvement (or worsening) of results for the period as a result of the change in each item.

(2)

See “Item 5. Operating and Financial Review and Results of Operations—Results of Operations—Year Ended 31 December 2019 Compared to Year Ended 31 December 2018—EBITDA, as defined” of our 2019 Annual Report for additional information on our definition and use of EBITDA, as defined.

(3)

The financial information for six-month period ended 30 June 2019 has been restated to reflect the classification of the Australian operations as discontinued operations.

Our EBITDA, as defined, was USD 7,217 million for the six-month period ended 30 June 2020. This represented a decrease of USD 3,125 million, or 30.2%, as compared to our EBITDA, as defined, for the six-month period ended 30 June 2019. The results for the six-month period ended 30 June 2020 reflect (i) the performance of our business after the completion of the acquisitions and disposals we undertook in 2019 and 2020 and (ii) currency translation effects. Furthermore, our EBITDA, as defined, was negatively impacted by certain exceptional items by USD 146 million (excluding impairment losses) in the six-month period ended 30 June 2020, as compared to a negative impact of USD 103 million (excluding impairment losses) during the six-month period ended 30 June 2019. See “Exceptional Items” above for a description of the exceptional items during the six-month period ended 30 June 2020 and 2019.

Net Finance Income/(Cost)

Our net finance income/(cost) items were as follows for the three-month periods ended 30 June 2020 and 30 June 2019:

 

     Six-month period ended
30 June 2020
     Six-month period ended
30 June 2019
(2)
     Change  
     (USD million)      (%)(1)  

Net interest expense

     (1,898      (1,946      2.5  

Net interest on net defined benefit liabilities

     (41      (48      14.6  

Accretion expense

     (291      (287      (1.4

Mark-to-market (hedging of our share-based payment programs)

     (1,724      1,124        —    

Other financial results

     (250      (213      (17.4
  

 

 

    

 

 

    

 

 

 

Net finance cost before exceptional finance results

     (4,204      (1,370      —    

Mark-to-market

     (1,438      1,098        —    

Other

     50        103        (51.5
  

 

 

    

 

 

    

 

 

 

Exceptional net finance income/(cost)

     (1,388      1,201        —    
  

 

 

    

 

 

    

 

 

 

Net finance income/(cost)

     (5,592      (169      —    

 

Note:

 

(1)

The percentage change reflects the improvement (or worsening) of results for the period as a result of the change in each item.

(2)

The financial information for six-month period ended 30 June 2019 has been restated to reflect the classification of the Australian operations as discontinued operations.

Our net finance cost for the six-month period ended 30 June 2020 was USD 5,592 million, as compared to a net finance cost of USD 169 million for the six-month period ended 30 June 2019, representing a cost increase of USD 5,423 million.

The increase in net finance costs before exceptional financial items from USD 1,370 million for the six-month period ended 30 June 2019 to USD 4,204 million for the six-month period ended 30 June 2020 is driven primarily by a negative mark-to-market adjustment of USD 1,724 million in the six-month period ended 2020, linked to the hedging of our share-based payment program, compared to a positive mark-to-market adjustment of USD 1,124 million in the six-month period ended 30 June 2019.

The number of shares covered by the hedging of our share-based payment programs, together with the opening and closing share prices, are shown below:

 

     Six-month period ended
30 June 2020
     Six-month period ended
30 June 2019
 

Share price at the start of the six-month period (in euro)

     72.71        57.70  

Share price at the end of the six-month period (in euro)

     43.87        77.84  

Number of derivative equity instruments at the end of the period (in millions)

     55.0        46.9  

 

19


Exceptional net finance income/(cost) includes a negative mark-to-market adjustment of USD 1,438 million on derivative instruments entered into to hedge the shares issued in relation to the combination with Grupo Modelo and SAB, compared to a positive mark-to-market adjustment of USD 1,098 million for the six-month period ended 30 June 2019. The number of shares covered by the hedging of the deferred share instrument and the restricted shares, together with the opening and closing share prices, are shown below:

 

     Six-month period ended
30 June 2020
     Six-month period ended
30 June 2019
 

Share price at the start of the six-month period (in euro)

     72.71        57.70  

Share price at the end of the six-month period (in euro)

     43.87        77.84  

Number of derivative equity instruments at the end of the period (in millions)

     45.5        45.5  

Other exceptional finance income for the six-month period ended 30 June 2020 includes USD 50 million gain related to remeasurement of deferred considerations on prior year acquisitions.

Other exceptional net finance income/(cost) for the six-month period ended 30 June 2019 includes USD (46) million of foreign exchange translation losses on intragroup loans that were historically reported in equity and were recycled to profit and loss account, upon the reimbursement of these loans and cost related to incremental accruals of deferred considerations on prior year acquisitions, and USD 149 million gain resulting from the early termination of certain bonds.

Share of Results of Associates and Joint Ventures

Our share of results of associates and joint ventures for the six-month period ended 30 June 2020 was USD 33 million as compared to USD 62 million for the six-month period ended 30 June 2019. The decrease in share of results of associates and joint ventures is mainly resulting from the COVID-19 pandemic and currency devaluation.

Income Tax Expense

Our total income tax expense for the six-month period ended 30 June 2020 was USD 492 million, with an effective tax rate of (15.0)%, as compared to an income tax expense of USD 1,565 million and an effective tax rate of 19.8% for the six-month period ended 30 June 2019. The effective tax rate for the six-month period ended 30 June 2020 was negatively impacted by the non-deductible, non-cash goodwill impairment charge and by non-deductible mark-to-market losses from derivatives related to the hedging of our share-based payment programs and the hedging of the shares issued in a transaction related to the combination with Grupo Modelo and SAB. The effective tax rate for the six-month period ended 30 June 2019 was positively impacted by non-taxable gains from these derivatives.

Profit Attributable to Non-Controlling Interests

Profit attributable to non-controlling interests was USD 211 million for the six-month period ended 30 June 2020, a decrease of USD 376 million from USD 587 million for the six-month period ended 30 June 2019.

Profit Attributable to Our Equity Holders

Profit/(loss) attributable to our equity holders for the six-month period ended 30 June 2020 was USD (1,900) million compared to USD 6,055 million for the same period in 2019. Basic earnings per share of USD (0.95) is based on 1,995 million shares outstanding, representing the weighted average number of ordinary and restricted shares outstanding during the six-month period ended 30 June 2020.

Excluding the after-tax impact of exceptional items discussed above, profit attributable to our equity holders from continuing operations for the six-month period ended 30 June 2020 would have been a gain of USD 76 million, and basic earnings per share would have been USD 0.04.

Underlying EPS for the six-month period ended 30 June 2020 was USD 0.90. Underlying EPS is basic earnings per share excluding the after-tax exceptional items discussed above, the mark-to-market of the hedging of our share-based payment programs, the impact of hyperinflation accounting and the impact of discontinued operations.

The decrease in profit attributable to our equity holders for the six-month period ended 30 June 2020 was primarily due to a negative mark-to-market adjustment linked to the hedging of our share-based payment programs and losses on the hedging of the shares issued in transactions related to the combination with Grupo Modelo and SAB, compared to a positive mark-to-market adjustment linked to these hedges for the six-month period ended 30 June 2019, and due to a USD 2.5 billion non-cash goodwill impairment charge that was partially offset by a USD 1.9 billion gain on the disposal of the Australian operations.

 

20


     Six-month period ended 30
June 2020
     Six-month period ended 30
June 2019(1)
 
     (USD per share)  

Profit from continuing operations excluding exceptional items and hyperinflation

     2.58        4.15  

Hyperinflation accounting impacts

     (0.02      (0.02
  

 

 

    

 

 

 

Profit from continuing operations excluding exceptional items

     2.56        4.13  

Mark-to-market (hedging of our share-based payment programs)

     (0.86      0.57  

Net finance cost (excluding mark-to-market related to the hedging of our share-based payment programs)

     (1.24      (1.26

Income tax expense

     (0.30      (0.79

Associates & non-controlling interest

     (0.11      (0.27
  

 

 

    

 

 

 

Earnings per share excluding exceptional items and discontinued operations

     0.04        2.38  

Mark-to-market (hedging of our share-based payment programs)

     0.86        (0.57
  

 

 

    

 

 

 

Underlying EPS

     0.90        1.81  

Earnings per share excluding exceptional items and discontinued operations

     0.04        2.38  

Exceptional items, before taxes, attributable to equity holders of AB InBev

     (1.40      (0.05

Exceptional net finance cost, before taxes, attributable to equity holders of AB InBev

     (0.70      0.61  

Exceptional taxes attributable to equity holders of AB InBev

     0.05        —    

Exceptional non-controlling interest

     0.02        0.01  

Profit from discontinued operations attributable to equity holders of AB InBev

     1.03        0.12  
  

 

 

    

 

 

 

Basic earnings per share

     (0.95      3.06  

 

Note:

 

(1)

The financial information for six-month period ended 30 June 2019 has been restated to reflect the classification of the Australian operations as discontinued operations.

Impact of Changes in Foreign Exchange Rates

Foreign exchange rates have a significant impact on our consolidated financial statements. The following table sets forth the percentage of our revenue realized by currency for the six-month period ended 30 June 2020 and 2019:

 

     Six-month period ended  
     30 June 2020     30 June 2019(2)  

U.S. dollar

     34.7     30.4

Brazilian real

     12.6     13.8

Chinese yuan

     9.0     9.9

Mexican peso

     8.6     8.8

Euro

     6.0     6.2

Canadian dollar

     4.0     3.4

Colombian peso

     3.4     4.0

South African rand

     2.8     3.7

Pound sterling

     2.7     2.2

South Korean won

     2.5     2.8

Argentinean peso(1)

     2.4     2.4

Peruvian peso

     2.3     3.2

Dominican peso

     1.7     1.8

Other

     7.2     7.6

Note:

 

(1)

Hyperinflation accounting was adopted starting from the September year-to-date 2018 results.

(2)

The financial information for six-month period ended 30 June 2019 has been restated to reflect the classification of the Australian operations as discontinued operations.

 

21


Liquidity and Capital Resources

The following table sets forth our consolidated cash flows for the six-month period ended 30 June 2020 and 2019:

 

     Six-month period ended
30 June 2020
     Six-month period ended
30 June 2019
 
     (USD million)  

Cash flow from operating activities

     1,119        4,897  

Cash flow from/(used in) investing activities

     9,067        (1,755

Cash flow from/(used in) financing activities

     8,231        (1,998
  

 

 

    

 

 

 

Net increase/(decrease) in cash and cash equivalents

     18,416        1,144  

Cash flow from operating activities

The following table sets forth our cash flow from operating activities for the six-month period ended 30 June 2020 and 2019:

 

     Six-month period ended
30 June 2020
     Six-month period ended
30 June 2019
(1)
 
     (USD million)  

Profit from continuing operations

     (3,744      6,406  

Interest, taxes and non-cash items included in profit

     11,164        3,979  
  

 

 

    

 

 

 

Cash flow from operating activities before
changes in working capital and provisions

     7,420        10,385  

Change in working capital

     (2,700      (1,531

Pension contributions and use of provisions

     (327      (279

Interest and taxes (paid)/received

     (3,388      (4,129

Dividends received

     30        137  

Cash flow from operating activities on Australia discontinued operations

     84        314  
  

 

 

    

 

 

 

Cash flow from operating activities

     1,119        4,897  

Note:

 

(1)

The financial information for six-month period ended 30 June 2019 has been restated to reflect the classification of the Australian operations as discontinued operations.

Cash flow from operating activities was USD 1,119 million for the six-month period ended 30 June 2020 compared to USD 4,897 million for the six-month period ended 30 June 2019. The decrease mainly results from the negative impact on our results and reduced payable levels by the end of June 2020 compared to prior year, as a result of the COVID-19 pandemic.

Cash flow from investing activities

The following table sets forth our cash flow from investing activities for the six-month period ended 30 June 2020 and 2019:

 

     Six-month period ended
30 June 2020
     Six-month period ended
30 June 2019
(1)
 
     (USD million)  

Net capital expenditure

     (1,524      (1,488

Acquisition and sale of subsidiaries, net of cash acquired/disposed of

     (204      (245

Net proceeds from the sale/(acquisition) of other assets

     (30      (6

Proceeds from Australia divestiture (discontinued operations)

     10,838        —    

Cash flow from investing activities on Australia discontinued operations

     (13      (16
  

 

 

    

 

 

 

Cash flow from investing activities

     9,067        (1,755

Note:

 

(1)

The financial information for six-month period ended 30 June 2019 has been restated to reflect the classification of the Australian operations as discontinued operations.

Cash flow from investing activities was a net cash inflow of USD 9,067 million for the six-month period ended 30 June 2020 as compared to a net cash outflow of USD 1,755 million for the six-month period ended 30 June 2019. The increase in the cash flow from investing activities was mainly driven by USD 10,838 million proceeds from the divestiture of the Australian business.

 

22


Net capital expenditures were USD 1,524 million for the six-month period ended 30 June 2020 and USD 1,488 million for the six-month period ended 30 June 2019. Out of the total half-year 2020 capital expenditures approximately 41% was used to improve our production facilities, 44% was used for logistics and commercial investments and 15% was used for improving administrative capabilities and the purchase of hardware and software.

Cash flow from financing activities

The following table sets forth our cash flow from financing activities for the six-month period ended 30 June 2020 and 2019:

 

     Six-month period ended
30 June 2020
     Six-month period ended
30 June 2019
(1)
 
     (USD million)  

Dividends paid

     (1,219      (2,389

Net (payments on)/proceeds from borrowings

     10,194        1,410  

Payments of lease liabilities

     (280      (225

Other (including purchase of non-controlling interests)

     (457      (781

Cash flow from financing activities on Australia discontinued operations

     (6      (13
  

 

 

    

 

 

 

Cash flow from financing activities

     8,231        (1,998

Note:

 

(1)

The financial information for six-month period ended 30 June 2019 has been restated to reflect the classification of the Australian operations as discontinued operations.

Cash inflow from financing activities was USD 8,231 million for the six-month period ended 30 June 2020, as compared to a cash outflow of USD 1,998 million for the six-month period ended 30 June 2019. The cash flow from financing activities was primarily driven by dividend payments, net proceeds from borrowings and proceeds from bond issuance. See also note 19 to our unaudited interim report as of 30 June 2020 and for the six-month periods ended 30 June 2020 and 2019.

In March 2020, we drew the full USD 9.0 billion commitment under the 2010 Senior Facilities Agreement and as of 30 June 2020, the amount has been repaid in full. In addition, on 2 April 2020 and 3 April 2020, Anheuser-Busch InBev NV/SA and Anheuser-Busch InBev Worldwide Inc. completed the issuance of a series of EUR and USD bonds for a total amount of approximately USD 11.0 billion.

As of 30 June 2020, we had total liquidity of USD 34.1 billion, which consisted of USD 9 billion available under committed long-term credit facilities and USD 25.1 million of cash, cash equivalents and short-term investments in debt securities less bank overdrafts. Although we may borrow such amounts to meet our liquidity needs, we principally rely on cash flows from operating activities to fund the company’s continuing operations.

Capital Resources and Equity

Our net debt was USD 87.4 billion as of 30 June 2020 as compared to USD 95.5 billion as of 31 December 2019. When adjusted for the proceeds received from the divestment of the Australian operations, our net debt would be USD 84.6 billion as of 31 December 2019.

Apart from operating results net of capital expenditures, our net debt was primarily impacted by the payment of interests and taxes (USD 3.4 billion increase of net debt), foreign exchange impact on net debt (USD 0.1 billion decrease of net debt), settlement of derivatives (USD 0.5 billion increase of net debt), dividend payments to shareholders of AB InBev and Ambev (USD 1.2 billion) and the proceeds from the divestiture of the Australian business (10.8 billion US dollar decrease of net debt).

Consolidated equity attributable to equity holders as of 30 June 2020 was USD 60,065 million, compared to USD 75,722 million as of 31 December 2019. The decrease in equity is primarily related to the combined effect of the weakening of the closing rates of the Mexican pesos, the South African rand, the Colombian pesos and the Brazilian real, which resulted in a foreign exchange translation adjustment of USD 12,293 million as of 30 June 2020.

 

23


The chart below shows the bond repayment schedule1 as of 30 June 2020 (figures in USD million):

 

LOGO

Note:

 

(1)

Pro forma for announced bond redemption transactions that settle after 30 June 2020.

Further details on interest bearing loans and borrowings, repayment schedules and liquidity risk are disclosed in notes 19 and 22 to our unaudited interim report as of 30 June 2020 and for the six-month periods ended 30 June 2020 and 2019.

Adoption of hyperinflation accounting in Argentina

In May 2018, the Argentinean peso underwent a severe devaluation resulting in the three-year cumulative inflation of Argentina exceeding 100% in 2018, thereby triggering the requirement to transition to hyperinflation accounting as prescribed by IAS 29 Financial Reporting in Hyperinflationary Economies as of 1 January 2018.

Consequently, we have applied hyperinflation accounting for our Argentinean subsidiaries for the first time in the year to date September 2018 unaudited interim report, with effect as of 1 January 2018.

The results for the six-month period ended 30 June 2020 were translated at the June 2020 closing rate of 70.454990 Argentinean pesos per US dollar. The results for the six-month period ended 30 June 2019, were translated at the June 2019 closing rate of 42.448916 Argentinean pesos per US dollar.

The impact of hyperinflation accounting for the period ended 30 June 2020 amounted to USD (53) million decrease in revenue, USD 30 million positive monetary adjustment reported in the finance line and no impact in earnings per share excluding exceptional items and discontinued operations.

Recent events

On 7 July 2020, we completed the tender offers of seven series of notes issued by Anheuser-Busch InBev NV/SA (“ABISA”), and Anheuser-Busch InBev Finance Inc. (“ABIFI”) and repurchased approximately USD 3.0 billion aggregate principal amount of these notes. The total principal amount accepted in the tender offers is set out in the table below.

 

Date of
redemption
  Issuer
(abbreviated)
  Title of series of notes
issued exchanged
  Currency   Original principal
amount outstanding

(in millions)
  Principal amount
tendered, accepted and
cancelled

(in millions)
7 July 2020   ABISA   4.000% Notes due 2021   EUR   750   231
7 July 2020   ABISA   1.950% Notes due 2021   EUR   650   123
7 July 2020   ABISA   0.875% Notes due 2022   EUR   2,000   356
7 July 2020   ABISA   0.800% Notes due 2023   EUR   1,000   356
7 July 2020   ABIFI   Floating Rate Notes due 2021   USD   311   129
7 July 2020   ABIFI   2.625% Notes due 2023   USD   643   167
7 July 2020   ABIFI   3.300% Notes due 2023   USD   2,799   1,467

 

24


On 13 July 2020, we announced that our wholly-owned subsidiaries Anheuser-Busch InBev Worldwide Inc (“ABIWW”), Anheuser-Busch InBev Finance Inc. (“ABIFI”) and Anheuser-Busch North American Holding Corporation (“ABNA”) were exercising their options to redeem the outstanding principal amount indicated in the table below of the following series of notes.

 

Date of
redemption
  Issuer
(abbreviated)
  Title of series of notes
issued exchanged
  Currency   Original principal
amount outstanding

(in millions)
  Principal amount to be
redeemed

(in millions)
12 August 2020   ABIWW   2.500% Notes due 2022   USD   454   454
12 August 2020   ABIWW   4.375% Notes due 2021   USD   285   285
29 July 2020   ABIWW   3.250% Notes due 2022   AUD   550   550
12 August 2020   ABIFI   3.375% Notes due 2023   CAD   600   600
12 August 2020   ABNA   3.750% Notes due 2022   USD   150   150

 

25


LOGO

Unaudited Interim Report

for the six-month period ended

30 June 2020

 

1


Index

 

Unaudited condensed consolidated interim financial statements

     3  

Unaudited condensed consolidated interim income statement

     3  

Unaudited condensed consolidated interim statement of comprehensive income

     4  

Unaudited condensed consolidated interim statement of financial position

     5  

Unaudited condensed consolidated interim statement of changes in equity

     6  

Unaudited condensed consolidated interim statement of cash flows

     7  

Notes to the unaudited condensed consolidated interim financial statements

     8  

 

2


Unaudited condensed consolidated interim financial statements

Unaudited condensed consolidated interim income statement

 

For the six-month period ended 30 June

Million US dollar, except earnings per shares in US dollar

   Notes    2020     2019
restated1
 

Revenue

        21 298       25 823  

Cost of sales

        (9 097     (9 953
     

 

 

   

 

 

 

Gross profit

        12 201       15 869  
     

 

 

   

 

 

 

Distribution expenses

        (2 401     (2 709

Sales and marketing expenses

        (3 278     (3 531

Administrative expenses

        (1 578     (1 837

Other operating income/(expenses)

        158       388  

Impairment of goodwill

   7/11      (2 500     —    

COVID-19 costs

   7      (78     —    

Restructuring

   7      (60     (58

Business and asset disposal (including impairment losses)

   7      (154     (24

Acquisition costs business combinations

   7      (4     (21
     

 

 

   

 

 

 

Profit from operations

        2 306       8 077  
     

 

 

   

 

 

 

Finance cost

   8      (5 835     (2 754

Finance income

   8      243       2 586  
     

 

 

   

 

 

 

Net finance income/(cost)

        (5 592     (169
     

 

 

   

 

 

 

Share of result of associates and joint ventures

   16      33       62  
     

 

 

   

 

 

 

Profit before tax

        (3 253     7 970  
     

 

 

   

 

 

 

Income tax expense

   9      (492     (1 565
     

 

 

   

 

 

 

Profit from continuing operations

        (3 744     6 406  
     

 

 

   

 

 

 

Profit from discontinued operations

   15      2 055       236  
     

 

 

   

 

 

 

Profit of the period

        (1 688     6 642  
     

 

 

   

 

 

 

Profit from continuing operations attributable to:

          —    

Equity holders of AB InBev

        (3 955     5 819  

Non-controlling interest

        211       587  

Profit of the period attributable to:

       

Equity holders of AB InBev

        (1 900     6 055  

Non-controlling interest

        211       587  

Basic earnings per share

   18      (0.95     3.06  

Diluted earnings per share

   18      (0.95     3.01  

Basic earnings per share from continuing operations

   18      (1.98     2.94  

Diluted earnings per share from continuing operations

   18      (1.98     2.89  

Basic earnings per share before exceptional items and discontinued operations2

   18      0.04       2.38  

Diluted earnings per share before exceptional items and discontinued operations2

   18      0.04       2.34  

Underlying earnings per share2

   18      0.90       1.81  

The accompanying notes are an integral part of these consolidated financial statements.

 

 

1 

The unaudited condensed consolidated interim income statement for the six-month period ended 30 June 2019 has been restated to reflect the classification of the Australian operations as discontinued operations.

2 

Basic earnings per share and diluted earnings per share before exceptional items and discontinued operations and Underlying earnings per share are not defined metrics in IFRS. Refer to Note 18 Changes in equity and earnings per share for more details.

 

3


Unaudited condensed consolidated interim statement of comprehensive income

 

For the six-month period ended 30 June

Million US dollar

   2020     2019  

Profit of the period

     (1 688     6 642  

Other comprehensive income: items that will not be reclassified to profit or loss:

    

Re-measurements of post-employment benefits

     (1     (35
  

 

 

   

 

 

 
     (1     (35
  

 

 

   

 

 

 

Other comprehensive income: items that may be reclassified subsequently to profit or loss:

    

Exchange differences on translation of foreign operations

     (13 712     1 741  

Effective portion of changes in fair value of net investment hedges

     687       (27

Cash flow hedges recognized in equity

     70       64  

Cash flow hedges and cumulative translation adjustments reclassified from equity to profit or loss in relation to Australia divestiture

     (426     —    

Cash flow hedges reclassified from equity to profit or loss

     (169     (231
  

 

 

   

 

 

 
     (13 550 )      1 547  
  

 

 

   

 

 

 

Other comprehensive income, net of tax

     (13 551     1 512  
  

 

 

   

 

 

 

Total comprehensive income

     (15 239     8 154  
  

 

 

   

 

 

 

Attributable to:

    

Equity holders of AB InBev

     (14 758     7 603  

Non-controlling interest

     (481     551  

The accompanying notes are an integral part of these consolidated financial statements.

 

4


Unaudited condensed consolidated interim statement of financial position

 

As at

Million US dollar

   Notes      30 June
2020
     31 December
2019
 

ASSETS

        

Non-current assets

        

Property, plant and equipment

     10        24 718        27 544  

Goodwill

     11        115 080        128 114  

Intangible assets

     12        40 049        42 452  

Investments in associates and joint ventures

     16        5 788        5 861  

Investment securities

     14        113        110  

Deferred tax assets

        1 958        1 719  

Employee benefits

        14        14  

Income tax receivables

        566        1 081  

Derivatives

     22        297        132  

Trade and other receivables

     13        650        807  
     

 

 

    

 

 

 

Total non-current assets

        189 233        207 834  
     

 

 

    

 

 

 

Current assets

        

Investment securities

     14        102        92  

Inventories

     17        4 339        4 427  

Income tax receivables

        805        627  

Derivatives

     22        545        230  

Trade and other receivables

     13        5 276        6 187  

Cash and cash equivalents

     14        25 018        7 238  

Assets classified as held for sale

     15        128        10 013  
     

 

 

    

 

 

 

Total current assets

        36 215        28 814  
     

 

 

    

 

 

 

Total assets

        225 448        236 648  
     

 

 

    

 

 

 

EQUITY AND LIABILITIES

        

Equity

        

Issued capital

     18        1 736        1 736  

Share premium

        17 620        17 620  

Reserves

        13 104        24 882  

Retained earnings

        27 605        31 484  
     

 

 

    

 

 

 

Equity attributable to equity holders of AB InBev

        60 065        75 722  
     

 

 

    

 

 

 

Non-controlling interests

        8 282        8 831  
     

 

 

    

 

 

 

Total equity

        68 347        84 553  
     

 

 

    

 

 

 

Non-current liabilities

        

Interest-bearing loans and borrowings

     19        106 034        97 564  

Employee benefits

        2 610        2 848  

Deferred tax liabilities

        12 060        12 824  

Income tax payables

        739        1 022  

Derivatives

     22        2 460        352  

Trade and other payables

     21        1 619        1 943  

Provisions

        559        701  
     

 

 

    

 

 

 

Total non-current liabilities

        126 081        117 254  
     

 

 

    

 

 

 

Current liabilities

        

Bank overdrafts

     14        153        68  

Interest-bearing loans and borrowings

     19        6 484        5 410  

Income tax payables

        909        1 346  

Derivatives

     22        4 403        3 799  

Trade and other payables

     21        18 857        22 864  

Provisions

        214        210  

Liabilities associated with assets held for sale

     15        —          1 145  
     

 

 

    

 

 

 

Total current liabilities

        31 020        34 841  
     

 

 

    

 

 

 

Total equity and liabilities

        225 448        236 648  
     

 

 

    

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5


Unaudited condensed consolidated interim statement of changes in equity

 

     Attributable to equity holders of AB InBev              

Million US dollar

   Issued
Capital
     Share
premium
     Treasury
shares
    Reserves      Share-
based
payment
reserves
    Other
comprehensive
income

reserves1
    Retained
earnings
    Total     Non-
controlling
interest
    Total
Equity
 

As per 1 January 2019

     1 736        17 620        (6 549     45 726        2 037       (22 152     26 068       64 485       7 404       71 889  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit of the period

     —          —          —         —          —         —         6 055       6 055       587       6 642  

Other comprehensive income

                       

Exchange differences on translation of foreign operations (gains/(losses))

     —          —          —         —          —         1 719       —         1 719       (3     1 714  

Cash flow hedges

     —          —          —         —          —         (134     —         (134     (34     (168

Re-measurements of post-employment benefits

     —          —          —         —          —         (37     —         (37     2       (35
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

     —          —          —         —          —         1 548       6 055       7 603       551       8 154  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Dividends

     —          —          —         —          —         —         (2 339     (2 339     (214     (2 553

Treasury shares

     —          —          279       —          —         —         (281     (2     (2     (4

Share-based payments

     —          —          —         —          157       —         —         157       3       161  

Hyperinflation monetary adjustments

     —          —          —         —          —         —         127       127       79       206  

Scope and other changes

     —          —          —         —          —         —         202       202       77       279  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As per 30 June 2019

     1 736        17 620        (6 270     45 726        2 194       (20 604     29 831       70 233       7 898       78 131  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Attributable to equity holders of AB InBev              

Million US dollar

   Issued
Capital
     Share
premium
     Treasury
shares
    Reserves      Share-
based
payment
reserves
    Other
comprehensive
income

reserves¹
    Retained
earnings
    Total     Non-
controlling
interest
    Total
Equity
 

As per 1 January 2020

     1 736        17 620        (6 270     50 104        2 327       (21 279     31 484       75 722       8 831       84 553  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit of the period

     —          —          —         —          —         —         (1 900     (1 900     211       (1 688

Other comprehensive income

                       

Exchange differences on translation of foreign operations (gains/(losses))

     —          —          —         —          —         (12 293     —         (12 293     (732     (13 025

Cash flow hedges

     —          —          —         —          —         (138     —         (138     39       (99

Cash flow hedges and cumulative translation adjustments reclassified from equity to profit or loss in relation to Australia divestiture

     —          —          —         —          —         (426     —         (426     —         (426

Re-measurements of post-employment benefits

     —          —          —         —          —         (1     —         (1     —         (1
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

     —          —          —         —          —         (12 858     (1 900     (14 758     (481     (15 239
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Dividends

     —          —          —         —          —         —         (1 118     (1 118     (144     (1 262

Treasury shares

     —          —          1 236       —          —         —         (897     340       —         340  

Share-based payments

     —          —          —         —          (156     —         —         (156     8       (148

Hyperinflation monetary adjustments

     —          —          —         —          —         —         68       68       42       110  

Scope and other changes

     —          —          —         —          —         —         (32     (32     30       (2
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As per 30 June 2020

     1 736        17 620        (5 034     50 104        2 171       (34 137     27 605       60 065       8 282       68 347  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

1 

See Note 18 Changes in equity and earning per share.

 

6


Unaudited condensed consolidated interim statement of cash flows

 

For the six-month period ended 30 June

Million US dollar

   Notes      2020     2019
restated12
 

OPERATING ACTIVITIES

       

Profit from continuing operations

        (3 744     6 406  
     

 

 

   

 

 

 

Depreciation, amortization and impairment

        2 402       2 265  

Impairment losses on goodwill

        2 500       —    

Impairment losses on receivables, inventories and other assets

        237       54  

Additions/(reversals) in provisions and employee benefits

        186       87  

Net finance cost/(income)

     8        5 592       169  

Loss/(gain) on sale of property, plant and equipment and intangible assets

        (4     (29

Loss/(gain) on sale of subsidiaries, associates and assets held for sale

        4       —    

Equity-settled share-based payment expense

     20        (18     180  

Income tax expense

     9        492       1 565  

Other non-cash items included in profit

        (194     (250

Share of result of associates and joint ventures

     16        (33     (62
     

 

 

   

 

 

 

Cash flow from operating activities before changes in working capital and use of provisions

        7 420       10 385  
     

 

 

   

 

 

 

Decrease/(increase) in trade and other receivables

        15       (237

Decrease/(increase) in inventories

        (487     (409

Increase/(decrease) in trade and other payables

        (2 228     (885

Pension contributions and use of provisions

        (327     (279
     

 

 

   

 

 

 

Cash generated from operations

        4 393       8 575  
     

 

 

   

 

 

 

Interest paid

        (2 203     (2 406

Interest received

        172       244  

Dividends received

        30       137  

Income tax paid

        (1 357     (1 967

Cash flow from operating activities on Australia discontinued operations

     15        84       314  
     

 

 

   

 

 

 

Cash flow from operating activities

        1 119       4 897  
     

 

 

   

 

 

 

INVESTING ACTIVITIES

       

Acquisition of property, plant and equipment and of intangible assets

     10/12        (1 580     (1 710

Proceeds from sale of property, plant and equipment and of intangible assets

        56       222  

Acquisition of subsidiaries, net of cash acquired

     6        (204     (337

Sale of other subsidiaries, net of cash disposed of

     6        —         92  

Net proceeds from sale/(acquisition) of other assets

        (30     (6

Proceeds from Australia divestiture (discontinued operations)

     15        10 838       —    

Cash flow from investing activities on Australia discontinued operations

     15        (13     (16
     

 

 

   

 

 

 

Cash flow from investing activities

        9 067       (1 755
     

 

 

   

 

 

 

FINANCING ACTIVITIES

       

(Purchase)/sale of non-controlling interest

     18        —         —    

Proceeds from borrowings

     19        14 522       22 012  

Payments on borrowings

     19        (4 328     (20 602

Cash net finance (cost)/income other than interests

        (457     (781

Payment of lease liabilities

        (280     (225

Dividends paid

        (1 219     (2 389

Cash flow from financing activities on Australia discontinued operations

     15        (6     (13
     

 

 

   

 

 

 

Cash flow from financing activities

        8 231       (1 998
     

 

 

   

 

 

 

Net increase/(decrease) in cash and cash equivalents

        18 416       1 144  
     

 

 

   

 

 

 

Cash and cash equivalents less bank overdrafts at beginning of year

        7 169       6 960  

Effect of exchange rate fluctuations

        (720     (29
     

 

 

   

 

 

 

Cash and cash equivalents less bank overdrafts at end of period

     14        24 865       8 075  
     

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

1 

The unaudited condensed consolidated interim statement of cash flows for the six-month period ended 30 June 2019 has been restated to reflect the classification of the Australian operations as discontinued operations.

2 

The unaudited condensed consolidated interim statement of cash flows for the six-month period ended 30 June 2020 has been presented to include operating, investing and financing activities from discontinued operations separately in the cashflow statement. The unaudited condensed consolidated interim statement of cash flows for the six-month period ended 30 June 2019 has been restated to reflect this change in presentation.

 

7


Notes to the consolidated financial statements

 

     Note  

Corporate information

     1  

Statement of compliance

     2  

Summary of significant accounting policies

     3  

Use of estimates and judgments

     4  

Segment reporting

     5  

Acquisitions and disposals of subsidiaries

     6  

Exceptional items

     7  

Finance cost and income

     8  

Income taxes

     9  

Property, plant and equipment

     10  

Goodwill

     11  

Intangible assets

     12  

Trade and other receivables

     13  

Cash and cash equivalents and investment securities

     14  

Assets classified as held for sale, liabilities associated with assets held for sale and discontinued operations

     15  

Investments in associates

     16  

Inventories

     17  

Changes in equity and earnings per share

     18  

Interest-bearing loans and borrowings

     19  

Share-based payments

     20  

Trade and other payables

     21  

Risks arising from financial instruments

     22  

Collateral and contractual commitments for the acquisition of property, plant and equipment, loans to customers and other

     23  

Contingencies

     24  

Related parties

     25  

Supplemental guarantor financial information

     26  

Events after the balance sheet date

     27  

 

8


1. Corporate information

Anheuser-Busch InBev is a publicly traded company (Euronext: ABI) based in Leuven, Belgium, with secondary listings on the Mexico (MEXBOL: ANB) and South Africa (JSE: ANH) stock exchanges and with American Depositary Receipts on the New York Stock Exchange (NYSE: BUD). Our Dream is to bring people together for a better world. Beer, the original social network, has been bringing people together for thousands of years. We are committed to building great brands that stand the test of time and to brewing the best beers using the finest natural ingredients. Our diverse portfolio of well over 500 beer brands includes global brands Budweiser®, Corona® and Stella Artois®; multi-country brands Beck’s®, Hoegaarden®, Leffe® and Michelob Ultra®; and local champions such as Aguila®, Antarctica®, Bud Light®, Brahma®, Cass®, Castle®, Castle Lite®, Cristal®, Harbin®, Jupiler®, Modelo Especial®, Quilmes®, Victoria®, Sedrin® and Skol®. Our brewing heritage dates back more than 600 years, spanning continents and generations. From our European roots at the Den Hoorn brewery in Leuven, Belgium. To the pioneering spirit of the Anheuser & Co brewery in St. Louis, US. To the creation of the Castle Brewery in South Africa during the Johannesburg gold rush. To Bohemia, the first brewery in Brazil. Geographically diversified with a balanced exposure to developed and developing markets, we leverage the collective strengths of approximately 170 000 employees based in nearly 50 countries worldwide. For 2019, AB InBev’s reported revenue was 52.3 billion US dollar (excluding joint ventures and associates).

The unaudited condensed consolidated interim financial statements of the company for the six-month period ended 30 June 2020 comprise the company and its subsidiaries (together referred to as “AB InBev” or the “company”) and the company’s interest in associates, joint ventures and operations. The condensed consolidated interim financial statements for the six-month periods ended 30 June 2020 and 2019 are unaudited; however, in the opinion of the company, the interim data include all adjustments, consisting of only normally recurring adjustments, necessary for a fair statement of the results for the interim period.

The unaudited condensed interim financial statements were authorized for issue by the Board of Directors on 29 July 2020.

2. Statement of compliance

The unaudited condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34 Interim Financial Reporting as issued by the International Accounting Standard Board (IASB) and as adopted by the European Union. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the company as at and for the year ended 31 December 2019. AB InBev did not early apply any new IFRS requirements that were not yet effective in 2020 and did not apply any European carve-outs from IFRS.

3. Summary of significant accounting policies

The accounting policies applied are consistent with those applied in the annual consolidated financial statements ended 31 December 2019.

(A) SUMMARY OF CHANGES IN ACCOUNTING POLICIES

A number of new standards, amendment to standards and new interpretations became mandatory for the first time for the financial year beginning on 1 January 2020 and have not been listed in these unaudited condensed consolidated interim financial statements as they either do not apply or are immaterial to AB InBev’s consolidated financial statements.

(B) FOREIGN CURRENCIES

Foreign currency transactions

Foreign currency transactions are accounted for at exchange rates prevailing at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates prevailing on the date of the balance sheet. Gains and losses resulting from the settlement of foreign currency transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement. Non-monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rate prevailing at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to US dollar at foreign exchange rates prevailing at the dates the fair value was determined.

Translation of the results and financial position of foreign operations

Assets and liabilities of foreign operations are translated to US dollar at foreign exchange rates prevailing at the balance sheet date. Income statements of foreign operations, excluding foreign entities in hyperinflationary economies, are translated to US dollar at exchange rates for the year approximating the foreign exchange rates prevailing at the dates of the transactions. The components of shareholders’ equity are translated at historical rates. Exchange differences arising from the translation of shareholders’ equity to US dollar at period-end exchange rates are taken to other comprehensive income (translation reserves).

Financial Reporting in hyperinflationary economies

In May 2018, the Argentinean peso underwent a severe devaluation, causing Argentina’s three-year cumulative inflation to exceed 100% and thus, triggering the requirement to transition to hyperinflation accounting as prescribed by IAS 29 Financial Reporting in Hyperinflationary Economies. IAS 29 requires that the results of the company’s Argentinian operations be reported as if these were highly inflationary as of 1 January 2018.

Under IAS 29, non-monetary assets and liabilities stated at historical cost, equity and income statements of subsidiaries operating in hyperinflationary economies are restated for changes in the general purchasing power of the local currency, applying a general price index. These re-measured accounts are used for conversion into US dollar at the period closing exchange rate. As a result, the balance sheet and net results of subsidiaries operating in hyperinflation economies are stated in terms of the measuring unit current at the end of the reporting period.

 

9


Consequently, the company applied hyperinflation accounting for its Argentinean subsidiaries for the first time in the year-to-date September 2018 unaudited condensed interim financial statements, with effect as of 1 January 2018. The IAS 29 rules are applied as follows:

 

   

Non-monetary assets and liabilities stated at historical cost (e.g. property plant and equipment, intangible assets, goodwill, etc.) and equity of Argentina were restated using an inflation index. The hyperinflation accounting impacts resulting from changes in the general purchasing power from 1 January 2018 are reported in the income statement in a dedicated account for hyperinflation monetary adjustments in the finance line (see also Note 8 Finance cost and income);

 

   

The income statement is adjusted at the end of each reporting period using the change in the general price index. It is converted at the closing exchange rate of each period (rather than the year-to-date average rate which is used for non-hyperinflationary economies), thereby restating the year-to-date income statement account for both inflation index and currency conversion.

The results for the six-month period ended 30 June 2020, restated for purchasing power, were translated at the June 2020 closing rate of 70.454990 Argentinean pesos per US dollar (30 June 2019 results—at 42.448916 Argentinean pesos per US dollar).

Exchange rates

The most important exchange rates that have been used in preparing the financial statements are:

 

     Closing rate      Average rate  

1 US dollar equals:

   30 June 2020      31 December 2019      30 June 2020      30 June 2019  

Argentinean peso

     70.454990        59.890668        —          —    

Brazilian real

     5.476011        4.030696        4.683731        3.834084  

Canadian dollar

     1.368460        1.299449        1.362592        1.339411  

Colombian peso

     3 752.17        3 272.63        3 581.62        3 217.98  

Chinese yuan

     7.074411        6.961461        7.052919        6.786388  

Euro

     0.893017        0.890155        0.906152        0.884945  

Mexican peso

     22.971498        18.845242        20.397344        19.218716  

Pound sterling

     0.814816        0.757344        0.791317        0.771278  

Peruvian nuevo sol

     3.544000        3.317006        3.377006        3.337727  

South Korean won

     1 201.90        1 154.54        1 204.98        1 143.34  

South African rand

     17.362387        14.044287        16.230856        14.176131  

(C) RECENTLY ISSUED IFRS

There are no new IFRS requirements that are not yet effective which have been early applied in preparing these unaudited condensed consolidated interim financial statements.

4. Use of estimates and judgments

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

These estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or, if the revision affects both current and future periods, in the period of the revision and future periods.

Although each of its significant accounting policies reflects judgments, assessments or estimates, AB InBev believes that the following accounting policies reflect the most critical judgments, estimates and assumptions that are important to its business operations and understanding results: business combinations, intangible assets, goodwill, impairment, provisions, share-based payments, employee benefits and accounting for current and deferred tax.

The fair values of acquired identifiable intangibles are based on an assessment of future cash flows. Impairment analyses of goodwill and indefinite-lived intangible assets are performed annually and whenever a triggering event has occurred, in order to determine whether the carrying value exceeds the recoverable amount. These calculations are based on estimates of future cash flows.

The company uses its judgment to select a variety of methods including the discounted cash flow method and option valuation models and makes assumptions about the fair value of financial instruments that are mainly based on market conditions existing at each balance sheet date.

Actuarial assumptions are established to anticipate future events and are used in calculating pension and other long-term employee benefit expenses and liabilities. These factors include assumptions with respect to interest rates, rates of increase in health care costs, rates of future compensation increases, turnover rates, and life expectancy.

The company is subject to income tax in numerous jurisdictions. Significant judgment is required to determine the worldwide provision for income tax. There are some transactions and calculations for which the ultimate tax determination is uncertain. Some subsidiaries within the group are involved in tax audits and local enquiries usually in relation to prior years. Investigations and negotiations with local tax authorities are ongoing in various jurisdictions at the balance sheet date and, by their nature, these can take considerable time to conclude. In assessing the amount of any income tax provisions to be recognized in the financial statements, estimates are made of the expected successful settlement of these matters. Estimates of interest and penalties on tax liabilities are also recorded. Where the final outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period that such determination is made.

Judgments made by management in the application of IFRS that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the following year are further discussed in the relevant notes hereafter.

 

10


In preparing these unaudited condensed consolidated interim financial statements, the significant judgments made by management in applying the company’s accounting policies and the key sources of uncertainty relate mainly to the following: accounting for the COVID-19 pandemic impact on the company’s results and the divestiture of the Australian operations as discussed below.

(A) COVID-19 pandemic impact

The company’s business, financial condition, cash flows and operating results have been and may continue to be negatively impacted by the COVID-19 pandemic. The public health crisis caused by the COVID-19 pandemic, as well as measures taken in response to contain or mitigate the pandemic, have had, and are expected to continue to have, certain negative impacts on the company’s results including, without limitation : a negative impact on volume sold and revenue, a negative impact on cost of sales per hectoliter driven by non-variable cost and the loss of operational efficiencies due to volume declines, impairment losses on inventories, impairment losses on trade and other receivables, a series of cost incurred exclusively as a result of the COVID-19 pandemic and goodwill impairment charges referred to below and reported in non-recurring items – see also Note 7 Non-recurring items, Note 11 Goodwill, Note 13 Trade and other receivables and Note 17 Inventories.

Management considered the impact of COVID-19 and the current economic environment on the basis of preparation of these interim condensed consolidated financial statements. Although the company has noticed an adverse impact on its financial position, results of operations, and cash flows during the first six month of 2020, it continues to adequately manage its liquidity and capital resources (refer to Note 14 Cash and cash equivalents and investment securities, Note 19 Interest-bearing loans and borrowings and Note 22 Risks arising from financial instruments). As such, management concluded the company is able to continue as a going concern.

Goodwill impairment

The COVID-19 pandemic resulted in a sharp contraction of sales during the second quarter of 2020 in many countries in which the company operates. The decline in performance resulting from the COVID-19 pandemic is viewed as a triggering event for impairment testing in accordance with IAS 36 Impairment of Assets. Consequently, the company conducted an impairment test during the second quarter of 2020 for the cash-generating units showing the highest invested capital to EBITDA multiples: Colombia, Rest of Middle Americas, South Africa, Rest of Africa and Rest of Asia Pacific.

During its interim goodwill impairment testing, the company considered several scenarios of the recovery of sales for the different cash-generating units being tested and ran sensitivity analysis for key assumptions including the weighted average cost of capital and the terminal growth rate. These scenarios are based on management’s assumptions on the recovery in a base case (which the company deemed to be the most likely case at the time of the impairment test), a best case and a worst case scenario per cash generating unit following the common recovery shapes: L, U and V where the letters describe the trajectory of key assumptions tracking economic conditions. In view of the uncertainties, management assumed a 15 to 30% probability for the worst case scenario, dependent on the cash generating units in this interim impairment testing.

Based upon the results of the impairment test and considering the assumptions described in Note 11 Goodwill, the company concluded that no goodwill impairment was warranted under the base and best case scenarios. Neverhteless, under the worst case scenario ran with higher discount rates to factor the heightened business risk, the company concluded that the recoverable amounts were below the carrying value for the South Africa and Rest of Africa cash-generating units. As a consequence, management concluded, based on the valuations performed, that it was prudent in view of the uncertainties to record an impairment of goodwill of (1.5) billion US dollar for the South Africa cash generating unit and (1.0) billion US dollar for the Rest of Africa cash generating unit applying a 30% probability of occurrence. Refer to Note 11 Goodwill.

COVID-19 costs

As required by IAS 1 Presentation of financial statements, the company has assessed the impact of the COVID-19 outbreak on its performance for the six-month period ended 30 June 2020, and reported (78)m US dollar of costs in exceptional items as a result of the pandemic. These expenses mainly comprise costs related to personal protection equipment for the company’s employees, charitable donations and other costs incurred as a direct consequence of the COVID-19 pandemic. Refer to Note 7 Exceptional items.

(B) DIVESTITURE OF AUSTRALIA BUSINESS TO ASAHI

On 19 July 2019, AB InBev announced an agreement to divest its Australia business (Carlton & United Breweries) to Asahi at 16 billion AUD in enterprise value. As part of this transaction, the company granted Asahi rights to commercialize its portfolio of global and international brands in Australia. The transaction closed on 1 June 2020.

As of 31 December 2019, AB InBev classified the assets and liabilities associated with the Australian operations as assets held for sale and liabilities associated with assets held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. In addition, since the results of the Australian operations represented a separate major line of business, these were accounted for as discontinued operations, as required by IFRS 5 and presented in a separate line in the consolidated income statement (“profit from discontinued operations”), up to 31 May 2020. Refer to Note 15 Assets classified as held for sale, liabilities associated with assets held for sale and discontinued operations. On 1 June 2020, following the closing of the transaction, the company recognized a net gain on disposal of 1.9 billion US dollar in discontinued operations. Refer to Note 15 Assets classified as held for sale, liabilities associated with assets held for sale and discontinued operations.

 

11


5. Segment reporting

Segment information is presented by geographical segments, consistent with the information available to and regularly evaluated by the chief operating decision maker. AB InBev operates its business through six business segments. Regional and operating company management is responsible for managing performance, underlying risks, and the effectiveness of operations. Internally, AB InBev’s management uses performance indicators such as normalized profit from operations (normalized EBIT) and normalized EBITDA as measures of segment performance and to make decisions regarding the allocation of resources. The organizational structure effective as of 1 January 2019 comprises five regions: North America, Middle Americas, South America, EMEA and Asia Pacific. In addition to these five geographic regions, the company uses a sixth segment, Global Export and Holding Companies, for all financial reporting purposes.

On 19 July 2019, AB InBev announced the agreement to divest CUB, its Australian subsidiary, to Asahi. Consequently, as at 31 December 2019, the company classified the assets and liabilities associated with the Australian operations as assets held for sale and liabilities associated with assets held for sale, respectively. In addition, since the results of the Australian operations represented a separate major line of business, these were accounted for as discontinued operations (“profit from discontinued operations”) up to 31 May 2020. The transaction closed on 1 June 2020. Accordingly, the 2019 results (referred to as “2019 restated”) have been restated to exclude the results of the Australian operations in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. See Note 15 Assets classified as held for sale, liabilities associated with assets held for sale and discontinued operations for more details.

All figures in the tables below are stated in million US dollar, except volume (million hls) and Normalized EBITDA margin (in %). The information presented is for the six-month period ended 30 June 2020 and 2019, except for segment assets (non-current) with comparatives at 31 December 2019.

 

    North America     Middle Americas     South America     EMEA     Asia Pacific     Global Export and
Holding Companies
    Consolidated  
    2020     2019     2020     2019     2020     2019     2020     2019
restated
    2020     2019
restated
    2020     2019
restated
    2020     2019
restated
 

Volume

    52       54       52       65       63       67       34       40       39       50       —         —         240       276  

Revenue

    7 536       7 701       4 246       5 735       3 613       4 769       3 007       3 784       2 609       3 514       287       319       21 298       25 823  

Normalized EBITDA

    2 986       3 045       2 021       3 036       1 146       1 976       713       1 372       783       1 352       (287     (335     7 363       10 446  

Normalized EBITDA margin %

    39.6     39.5     47.6     52.9     31.7     41.4     23.7     36.2     30.0     38.5     —         —         34.6     40.5

Depreciation, amortization and impairment

    (407     (389     (486     (441     (410     (462     (470     (485     (311     (335     (175     (155     (2 261     (2 265

Normalized profit from operations (EBIT)

    2 579       2 656       1 535       2 595       736       1 514       243       887       472       1 017       (462     (490     5 102       8 180  

Exceptional items (see Note 7)

    (83     (1     (51     (26     (17     (13     (2 587     (17     (10     (4     (47     (43     (2 796     (103

Profit from operations (EBIT)

    2 496       2 655       1 484       2 569       719       1 501       (2 344     870       462       1 013       (509     (533     2 306       8 077  

Net finance income/(cost)

                            (5 592     (169

Share of results of associates
and joint ventures

                            33       62  

Income tax expense

                            (492     (1 565

Profit from continuing operations

                            (3 744     6 406  

Discontinued operations

                            2 055       236  

Profit/(loss)

                            (1 688     6 642  

Segment assets (non-current)

    63 322       63 725       67 989       76 168       10 807       13 452       32 477       39 447       12 751       13 450       1 886       1 592       189 233       207 834  

Gross capex

    (225     (182     (350     (471     (387     (288     (301     (425     (191     (236     (126     (107     (1 580     (1 709

For the six-month period ended 30 June 2020, net revenue from the beer business amounted to 19 510m US dollar (30 June 2019: 23 673m US dollar) while the net revenue from the non-beer business (soft drinks and other business) accounted for 1 807m US dollar (30 June 2019: 2 150m US dollar). Additionally, for the six-month period ended 30 June 2020, net revenue from the company’s business in the United States amounted to 6 675m US dollar (30 June 2019: 6 833m US dollar) and net revenue from the company’s business in Brazil amounted to 2 641m US dollar (30 June 2019: 3 516m US dollar).

 

12


6. Acquisitions and disposals of subsidiaries

The table below summarizes the impact of acquisitions and disposals on the statement of financial position and cash flows of AB InBev for the six-month periods ended 30 June 2020 and 30 June 2019:

 

Million US dollar

   2020
Acquisitions
     2019
Acquisitions
     2020
Disposals
     2019
Disposals
 

Non-current assets

           

Property, plant and equipment

     3        26        —          —    

Intangible assets

     14        307        —          (15

Current assets

           

Inventories

     5        39        —          —    

Trade and other receivables

     3        12        —          —    

Cash and cash equivalents

     —          40        —          —    

Non-current liabilities

           

Interest-bearing loans and borrowings

     (1      (4      —          —    

Trade and other payables

     (24      —          —       

Deferred tax liabilities

     —          (49      —          4  

Current liabilities

           

Interest-bearing loans and borrowings

     (1      (2      —          —    

Trade and other payables

     (5      (47      —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Net identifiable assets and liabilities

     (6      322        —          (11
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-controlling interest

     —          (62      —          —    

Goodwill on acquisitions and goodwill disposed of

     73        389        —          (15

Loss/(gain) on disposal

     —          —          —          (13

Consideration to be (paid)/received

     (8      (348      —          —    

Net cash paid on prior years acquisitions/(disposals)

     145        81        —          (53

Consideration paid/(received)

     204        382        —          (92

Cash (acquired)/disposed of

     —          (40      —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Net cash outflow / (inflow)

     204        342        —          (92
  

 

 

    

 

 

    

 

 

    

 

 

 

Net cash outflow / (inflow) on continuing operations

     204        337        —          (92

Net cash outflow / (inflow) on discontinued operations

     —          5        —          —    

On 1 June 2020, AB InBev completed the divestiture of CUB to Asahi – see Note 15 Assets classified as held for sale, liabilities associated with assets held for sale and discontinued operations.

The company undertook a series of additional acquisitions and disposals during 2020 and 2019, with no significant impact in the company’s consolidated financial statements.

 

13


7. Exceptional items

IAS 1 Presentation of financial statements requires that material items of income and expense be disclosed separately. Exceptional items are items that in management’s judgment need to be disclosed by virtue of their size or incidence so that a user can obtain a proper understanding of the company’s financial information. The company considers these items to be significant and accordingly, management has excluded them from their segment measure of performance as noted in Note 5 Segment Reporting.

The exceptional items included in the income statement are as follows:

 

For the six-month period ended 30 June

Million US dollar

   2020      2019 restated  

Impairment of goodwill

     (2 500      —    

COVID-19 costs

     (78      —    

Restructuring

     (60      (58

Business and asset disposal (including exceptional impairment losses)

     (154      (24

Acquisition costs business combinations

     (4      (21
  

 

 

    

 

 

 

Impact on profit from operations

     (2 796      (103
  

 

 

    

 

 

 

In the second quarter of 2020, the company recognized (2 500)m US dollar of goodwill impairment for its South Africa and Rest of Africa cash-generating units (see Note 4 Use of estimates and judgments and Note 11 Goodwill for further details).

COVID-19 costs amount to (78)m US dollar for the six-month period ended 30 June 2020. These expenses mainly comprise costs related to personal protection equipment for the company’s employees, charitable donations and other costs incurred as a direct consequence of the COVID-19 pandemic.

The exceptional restructuring charges for the six-month period ended 30 June 2020 total (60)m US dollar (30 June 2019: (58)m US dollar). These charges primarily relate to organizational alignments. These changes aim to eliminate overlapping organizations or duplicated processes, taking into account the matching of employee profiles with new organizational requirements. These one-time expenses provide the company with a lower cost base and bring a stronger focus to AB InBev’s core activities, quicker decision-making and improvements to efficiency, service and quality.

Business and asset disposals amount to (154)m US dollar for the six-month period ended 30 June 2020 mainly comprising impairment of intangible assets classified as assets held for sale as of 30 June 2020 and other intangibles. Business and asset disposals amounted to (24)m US dollar for the six-month period ended 30 June 2019, mainly comprising of costs incurred in relation to the completion of 2018 disposals.

The acquisition costs of business combinations amount to (4)m US dollar for the six-month period ended 30 June 2020 (30 June 2019: (21)m US dollar).

On 1 June 2020, the company completed the previously announced sale of CUB to Asahi resulting in a net exceptional gain of 1 919m US dollar reported in discontinued operations. For more details, refer to Note 15 Assets classified as held for sale, liabilities associated with assets held for sale and discontinued operations.

The company incurred a exceptional net finance cost of (1 388)m US dollar for the six-month period ended 30 June 2020 (30 June 2019: 1 201m US dollar income) – see Note 8 Finance cost and income.

All the amounts referenced above are before income taxes. The exceptional items for the six-month period ended 30 June 2020 decreased income taxes by 107m US dollar (30 June 2019: increase of income taxes by 5m US dollar).

Non-controlling interest on the exceptional items amounts to 46m US dollar for the six-month period ended 30 June 2020 (30 June 2019: 12m US dollar).

 

14


8. Finance cost and income

The finance costs included in the income statement are as follows:

 

For the six-month period ended 30 June

Million US dollar

   2020      2019
restated
 

Interest expense

     (2 002      (2 110

Capitalization of borrowing costs

     5        12  

Net interest on net defined benefit liabilities

     (41      (48

Accretion expense

     (291      (287

Net losses on hedging instruments that are not part of a hedge accounting relationship

     (219      (106

Net foreign exchange results (net of the effect of foreign exchange derivative instruments)

     —          (54

Tax on financial transactions

     (48      (33

Net mark-to-market results on derivatives related to the hedging of share-based payment programs

     (1 724      —    

Other financial costs, including bank fees

     (77      (82
  

 

 

    

 

 

 
     (4 397      (2 708
  

 

 

    

 

 

 

Exceptional finance cost

     (1 438      (46
  

 

 

    

 

 

 

Finance costs

     (5 835      (2 754
  

 

 

    

 

 

 

Finance income included in the income statement is as follows:

 

For the six-month period ended 30 June

Million US dollar

   2020      2019
restated
 

Interest income

     98        152  

Hyperinflation monetary adjustments

     30        48  

Market-to-market gains on derivatives related to the hedging of share-based payment programs

     —          1 124  

Net foreign exchange results (net of the effect of foreign exchange derivative instruments)

     61        —    

Other financial income

     4        15  
  

 

 

    

 

 

 
     193        1 339  
  

 

 

    

 

 

 

Exceptional finance income

     50        1 247  
  

 

 

    

 

 

 

Finance income

     243        2 586  
  

 

 

    

 

 

 

Net finance costs, excluding exceptional items, were 4 202 m US dollar for the six month period ended 30 June 2020 compared to 1 369m US dollar for the six month period ended 30 June 2019. The increase was predominantly due to a mark-to-market loss of 1 724m US dollar in the six-month period ended 30 June 2020, compared to a gain of 1 124m US dollar in the six-month period ended 30 June 2019, resulting in a swing of 2 848m US dollar.

Borrowing costs capitalized relate to the capitalization of interest expenses directly attributable to the acquisition and construction of qualifying assets mainly in China. Interest is capitalized at a borrowing rate ranging from 3% to 4%.

In the six-month period ended 30 June 2020, accretion expense includes interest on lease liabilities of 54m US dollar (30 June 2019: 55m US dollar).

Interest expenses is presented net of the effect of interest rate derivative instruments hedging AB InBev’s interest rate risk – see also Note 22 Risks arising from financial instruments.

Exceptional finance cost for the six-month period ended 30 June 2020 includes (1 438)m US dollar resulting from mark-to-market adjustments on derivative instruments entered into to hedge the shares issued in relation to the combination with Grupo Modelo and the restricted shares issued in connection with the combination with SAB (30 June 2019: 1 098m US dollar gain).

Exceptional finance cost for the six-month period ended 30 June 2019 includes (46)m US dollar foreign exchange translation losses on intragroup loans that were historically reported in equity and were recycled to profit and loss account, upon the reimbursement of these loans and cost related to incremental accruals of deferred considerations on prior year acquisitions.

Exceptional finance income for the six-month period ended 30 June 2020 includes 50m US dollar gain related to remeasurement of deferred considerations on prior year acquisitions. Exceptional finance income for the six-month period ended 30 June 2019 includes 1 098m US dollar mark-to-market gain and 149m US dollar gain resulting from the early termination of certain bonds.

No interest income was recognized on impaired financial assets.

 

15


9. Income taxes

Income taxes recognized in the income statement can be detailed as follows:

 

For the six-month period ended 30 June

Million US dollar

   2020      2019
restated
 

Current tax expense

     

Current year

     (807      (1 735

Deferred tax (expense)/income

     315        170  
  

 

 

    

 

 

 

Total income tax expense in the income statement

     (492      (1 565
  

 

 

    

 

 

 

The reconciliation of the effective tax rate with the aggregated weighted nominal tax rate can be summarized as follows:

 

For the six-month period ended 30 June

Million US dollar

   2020     2019
restated
 

Profit before tax

     (3 253     7 970  

Deduct share of result of associates and joint ventures

     33       62  
  

 

 

   

 

 

 

Profit before tax and before share of result of associates and joint ventures

     (3 286     7 908  
  

 

 

   

 

 

 

Adjustments on taxable basis

    

Government incentives

     (194     (379

Non-deductible/(non-taxable) marked to market on derivatives

     3 162       (2 222

Non-deductible impairment of goodwill

     2 500       —    

Other expenses not deductible for tax purposes

     1 208       1 098  

Other non-taxable income

     (607     (549
  

 

 

   

 

 

 
     2 783       5 856  
  

 

 

   

 

 

 

Aggregated weighted nominal tax rate

     27.0     27.1

Tax at aggregated weighted nominal tax rate

     (751     (1 614

Adjustments on tax expense

    

Utilization of tax losses not previously recognized

     117       38  

Recognition of deferred taxes assets on previous years’ tax losses

     6       3  

Write-down of deferred tax assets on tax losses and current year

losses for which no deferred tax asset is recognized

     (61     (126

(Underprovided)/overprovided in prior years

     34       13  

Deductions from interest on equity

     144       197  

Deductions from goodwill

     8       11  

Other tax deductions

     125       108  

Change in tax rate

     71       (9

Withholding taxes

     (195     (257

Other tax adjustments

     10       71  
  

 

 

   

 

 

 
     (492     (1 565
  

 

 

   

 

 

 

Effective tax rate

     (15.0 %)      19.8

The total income tax expense for the six-month period ended 30 June 2020 amounts to 492m US dollar compared to 1 565m US dollar for the six-month period ended 30 June 2019. The effective tax rate for the six-month period ended 30 June 2020 is (15.0)% compared to 19.8% for the six-month period ended 30 June 2019. The 2020 effective tax rate is impacted by the non-deductible, non-cash goodwill impairment loss and the non-deductible losses from derivatives related to the hedging of share-based payment programs and the hedging of the shares issued in a transaction related to the combination with Grupo Modelo and SAB. The 2019 effective tax rate was positively impacted by non-taxable gains from these derivatives.

The company benefits from tax exempted income and tax credits which are expected to continue in the future. The company does not have significant benefits coming from low tax rates in any particular jurisdiction.

 

16


10. Property, plant and equipment

Property, plant and equipment comprises owned and leased assets, as follows:

 

Million US dollar

   30 June
2020
     31 December
2019
 

Property, plant and equipment owned

     22 669        25 515  

Property, plant and equipment leased (right-of-use assets)

     2 049        2 029  
  

 

 

    

 

 

 

Total property, plant and equipment

     24 718        27 544  
  

 

 

    

 

 

 

 

     30 June 2020     31 December
2019
 

Million US dollar

   Land and
buildings
    Plant and
equipment,
fixtures and
fittings
    Under
construction
    Total     Total  

Acquisition cost

          

Balance at end of previous year

     12 216       34 381       2 160       48 757       47 969  

Effect of movements in foreign exchange

     (1 043     (2 908     (239     (4 190     (485

Acquisitions

     6       382       871       1 259       4 451  

Acquisitions through business combinations

     —         3       —         3       24  

Disposals

     (16     (394     —         (409     (1 987

Disposals through the sale of subsidiaries

     —         —         —         —         (4

Transfer (to)/from other asset categories and other movements1

     211       623       (1 014     (180     (1 211
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of the period

     11 374       32 087       1 778       45 239       48 757  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation and impairment losses

          

Balance at end of previous year

     (3 604     (19 638     —         (23 242     (22 331
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effect of movements in foreign exchange

     237       1 551       —         1 788       310  

Depreciation

     (194     (1 419     —         (1 613     (3 370

Disposals

     4       365       —         369       1 734  

Disposals through the sale of subsidiaries

     —         —         —         —         3  

Impairment losses

     —         (26     —         (26     (87

Transfer to/(from) other asset categories and other movements1

     (24     177       —         153       499  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of the period

     (3 581     (18 990     —         (22 571     (23 242
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amount

          

at 31 December 2019

     8 612       14 743       2 160       25 515       25 515  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

at 30 June 2020

     7 794       13 097       1 778       22 669       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As at 30 June 2020, the carrying amount of property, plant and equipment subject to restrictions on title amounted to 2m US dollar (31 December 2019: 4m US dollar).

Contractual commitments to purchase property, plant and equipment amounted to 596m US dollar as at 30 June 2020 compared to 457m US dollar as at 31 December 2019.

AB InBev’s net capital expenditures in the statement of cash flow amounted to 1 524m US dollar in the first six months of 2020 compared to 1 488m US dollar for the same period last year. Out of the total 2020 capital expenditures approximately 41% was used to improve the company’s production facilities while 44% was used for logistics and commercial investments and 15% for improving administrative capabilities and for the purchase of hardware and software.

 

 

1 

The transfer (to)/from other asset categories and other movements relates mainly to transfers from assets under construction to their respective asset categories, to contributions of assets to pension plans, to the separate presentation in the balance sheet of property, plant and equipment held for sale in accordance with IFRS 5 Non-current assets held for sale and discontinued operations and to the restatement of non-monetary assets under hyperinflation accounting in line with IAS 29 Financial reporting in hyperinflationary economies. Accordingly, the transfers include the balances of Australian operations reclassified to assets held for sale as at 31 December 2019 and disposed of upon the completion of the sale on 1 June 2020.

 

17


Property, plant and equipment leased by the company (right-of-use assets) is detailed as follows:

 

     2020  

Million US dollar

   Land and
buildings
     Machinery,
equipment
and other
     Total  

Net carrying amount at 30 June

     1 765        284        2 049  

Depreciation for the six-month period ended 30 June

     (169      (75      (244

 

     2019  

Million US dollar

   Land and
buildings
     Machinery,
equipment
and other
     Total  

Net carrying amount at 31 December

     1 723        306        2 029  

Depreciation for the six-month period ended 30 June (restated)

     (173      (77      (250

Additions to right-of-use assets for the six-month period ended 30 June 2020 were 393m US dollar (30 June 2019: 293m US dollar). Following the sale of Dutch and Belgian pub real estate to Cofinimmo in October 2007, AB InBev entered into lease agreements with a term of 27 years. Furthermore, the company leases a number of warehouses, trucks, factory facilities and other commercial buildings, which typically run for a period of five to ten years. Lease payments are increased annually to reflect market rentals, if applicable. None of the leases include contingent rentals.

The company leases out pub real estate for an average outstanding period of 6 to 8 years and part of its own property under operating leases.

The expense related to short-term and low-value leases and variable lease payments that are not included in the measurement of the lease liabilities is not significant.

11. Goodwill

 

Million US dollar

   30 June 2020      31 December 2019  

Acquisition cost

     

Balance at end of previous year

     128 119        133 316  

Effect of movements in foreign exchange

     (10 658      53  

Acquisitions through business combinations

     73        682  

Disposals through the sale of subsidiaries

     —          (22

Hyperinflation monetary adjustments

     51        171  

Reclassified as held for sale

     —          (6 081
  

 

 

    

 

 

 

Balance at end of the period

     117 585        128 119  
  

 

 

    

 

 

 

Impairment losses

     

Balance at end of previous year

     (5      (5
  

 

 

    

 

 

 

Impairment losses

     (2 500      —    
  

 

 

    

 

 

 

Balance at end of the period

     (2 505      (5
  

 

 

    

 

 

 

Carrying amount

     

at 31 December 2019

     128 114        128 114  
  

 

 

    

 

 

 

at 30 June 2020

     115 080        —    
  

 

 

    

 

 

 

During the six-month period ended 30 June 2020, AB InBev recognized goodwill on acquisitions of subsidiaries of 73m US dollar (30 June 2019: 389m US dollar) – see also Note 6 Acquisitions and disposals of subsidiaries.

The COVID-19 pandemic resulted in a sharp contraction of sales during the second quarter of 2020 in many countries in which the company operates. The decline in performance resulting from the COVID-19 pandemic is viewed as a triggering event for impairment testing in accordance with IAS 36 Impairment of Assets. Consequently, the company conducted an impairment test during the second quarter of 2020 for the cash-generating units showing the highest invested capital to EBITDA multiples: Colombia, Rest of Middle Americas, South Africa, Rest of Africa and Rest of Asia Pacific.

The uncertain course of the pandemic, in the absence thus far of effective vaccines or treatments, has caused extraordinary economic uncertainty, including how different countries will be affected, the speed of their recovery, the financial and fiscal measures these countries could implement and the longer term impact on the weighted average cost of capital and terminal growth rate of these countries.

During its interim goodwill impairment testing, the company considered several scenarios of the recovery of sales for the different cash-generating units being tested and ran sensitivity analysis for key assumptions including the weighted average cost of capital and the terminal growth rate. These scenarios are based on management’s assumptions on the recovery in a base case (which the company

 

18


deemed to be the most likely case at the time of the impairment test), a best case and a worst case scenario per cash generating unit following the common recovery shapes: L, U and V where the letters describe the trajectory of key assumptions tracking economic conditions. In view of the uncertainties, management assumed a 15 to 30% probability for the worst case scenario, dependent on the cash generating units in this interim impairment testing.

Based upon the results of the impairment test and considering the assumptions described below, the company concluded that no goodwill impairment was warranted under the base and best case scenarios. Nevertheless, under the worst case scenario ran with higher discount rates to factor the heightened business risk, the company concluded that the recoverable amounts were below the carrying value for the South Africa and Rest of Africa cash-generating units. As a consequence, management concluded, based on the valuations performed, that it was prudent in view of the uncertainties to record an impairment of goodwill of (1.5) billion US dollar for the South Africa cash generating unit and (1.0) billion US dollar for the Rest of Africa cash generating unit applying a 30% probability of occurrence. The impairment charge was allocated to the company’s EMEA reportable segment.

For the interim goodwill impairment testing the company performed the test at cash generating unit level, which is the lowest level at which goodwill is monitored for internal management purposes.

AB InBev’s impairment testing methodology is in accordance with IAS 36 Impairment of Assets, in which fair-value-less-cost-to-sell and value in use approaches are taken into consideration. This consists in applying a discounted free cash flow approach based on acquisition valuation models for the cash-generating units showing an invested capital to EBITDA multiple above 9x and valuation multiples for the other cash-generating units.

The key judgments, estimates and assumptions used in the discounted free cash flow calculations are generally as follows:

 

   

In the first three years of the model, free cash flows are based on AB InBev’s strategic plan as approved by key management. AB InBev’s strategic plan is prepared per cash-generating unit and is based on external sources in respect of macro-economic assumptions, industry, inflation and foreign exchange rates, past experience and identified initiatives in terms of market share, revenue, variable and fixed cost, capital expenditure and working capital assumptions. For this interim goodwill impairment testing, the company assumed a base case, best case and worst case scenario for reach cash-generating unit being tested and ran sensitivities;

 

   

For the subsequent seven years of the model, data from each scenario was extrapolated generally using simplified assumptions such as macro-economic and industry assumptions, variable cost per hectoliter and fixed cost linked to inflation, as obtained from external sources;

 

   

Cash flows after the first ten-year period are extrapolated generally using expected annual long-term GDP growth rates, based on external sources, in order to calculate the terminal value, considering sensitivities on this metric;

 

   

Projections are discounted at the unit’s weighted average cost of capital (WACC), considering sensitivities on this metric with more conservative assumptions in the worst case scenario to factor the heightened business risk;

 

   

Cost to sell is assumed to reach 2% of the entity value based on historical precedents.

For the main cash generating units, the terminal growth rate applied generally ranged between 2% and 5%.

The WACC applied in US dollar nominal terms were as follow, with the higher WACC applied in the worst case scenario:

 

Cash-generating unit

   30 June 2020    31 December 2019  

Colombia

   6% - 7%      6

Rest of Middle Americas

   10% - 11%      9

South Africa

   7% - 8%      7

Rest of Africa

   10% - 12%      10

Rest of Asia Pacific

   8%      —    

While a change in the weighted average cost of capital and the terminal growth rate used in impairment testing could have a material impact on the calculation of the fair values and trigger an impairment charge, based on the sensitivity analysis performed for the base and best case discounted free cash flow calculations, the company is not aware of any reasonably possible change in the key assumptions that would cause the cash-generating units’ carrying amount to exceed its recoverable amount.

In the sensitivity analyses carried out based on the worst case discounted free cash flow calculations, an adverse change of 1% in the WACC applied would lead to a reduction of the recoverable amount below the carrying amount for the South Africa, Rest of Africa, Columbia and Rest of Middle Americas cash generating units and would give rise to an additional impairment of 0.6 billion US dollar for the South Africa and Rest of Africa cash generating units, applying a 30% probability of ocurrence. The company would therefore be faced with a risk of future impairment under the worst case scenario at these higher WACC assumptions.

A 5% increase/(decrease) in probability applied for the worst case scenario (holding all other assumptions constant) would lead to an additional/(reduced) impairment of 0.4 billion US dollar for the South Africa and Rest of Africa cash-generating units in aggregate.

These calculations are based on management’s assessment of reasonably possible adverse changes in key assumptions, yet they are hypothetical and should not be viewed as an indication that these factors are likely to change. The sensitivity analyses should therefore be interpreted with caution.

AB InBev will re-perform an impairment test for goodwill during the fourth quarter of 2020 when it will have more clarity on the economic recovery of certain countries. Goodwill impairment testing relies on a number of critical judgments, estimates and assumptions. AB InBev believes that all of its estimates are reasonable: they are consistent with the company’s internal reporting and reflect management’s current best estimates. However, inherent uncertainties exist, including the rate of recovery of the countries following the COVID-19 pandemic, and other factors that management may not be able to control. If the company’s current assumptions and estimates, including projected revenues growth rates, competitive and consumer trends, weighted average cost of capital, terminal growth rates, and other market factors, are not met, or if valuation factors outside of the company’s control change unfavorably, the estimated fair value of goodwill could be adversely affected, leading to a potential further impairment in the future.

 

19


Although AB InBev believes that its judgments, assumptions and estimates are appropriate, actual results may differ from these estimates under different assumptions or market or macro-economic conditions.

The carrying amount of goodwill was allocated to the different cash-generating units as follows:

 

Million US dollar

Cash-generating unit

   30 June 2020      31 December 2019  

United States

     33 452        33 451  

Rest of North America

     1 956        1 984  

Mexico

     10 808        13 175  

Colombia

     16 264        18 647  

Rest of Middle Americas

     24 211        25 257  

Brazil

     3 341        4 539  

Rest of South America

     1 062        1 101  

Europe

     2 220        2 277  

South Africa

     9 420        13 500  

Rest of Africa

     5 079        6 691  

China

     3 046        3 095  

Rest of Asia Pacific

     3 675        4 397  

Global Export

     545        —    
  

 

 

    

 

 

 

Total carrying amount of goodwill

     115 080        128 114  
  

 

 

    

 

 

 

 

20


12. Intangible assets

 

     30 June 2020     31 December 2019  

Million US dollar

   Brands     Commercial
intangibles
    Software     Other     Total     Total  

Acquisition cost

            

Balance at end of previous year

     40 074       2 774       2 594       666       46 108       48 465  

Effect of movements in foreign exchange

     (2 107     (132     (194     (37     (2 470     (79

Acquisitions through business combinations

     14       —         —         —         14       99  

Acquisitions and expenditures

     —         174       19       94       287       631  

Disposals

     —         (5     (1     —         (6     (259

Disposals through the sale of subsidiaries

     —         —         —           —       —         (29

Transfer (to)/from other asset categories and other movements1

     —         130       115       (308     (63     (2 720
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

     37 981       2 941       2 533       415       43 870       46 108  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Amortization and impairment losses

            

Balance at end of previous year

     (32     (1 595     (1 851     (178     (3 656     (3 634

Effect of movements in foreign exchange

     —         85       126       14       225       41  

Amortization

     —         (148     (177     (27     (352     (622

Impairment

     —         —         —         (150     (150     —    

Disposals

     —         4       1       —         5       254  

Disposals through the sale of subsidiaries

     —         —         —         —         —         —    

Transfer to/(from) other asset categories and other movements1

     —         (9     17       99       107       305  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

     (32     (1 663     (1 884     (241     (3 821     (3 656
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying value

            

at 31 December 2019

     40 042       1 179       743       488       42 452       42 452  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

at 30 June 2020

     37 949       1 278       649       173       40 049    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

During the six-month period ended 30 June 2020, AB InBev recognized intangible assets on acquisitions of subsidiaries of 14m US dollar (30 June 2019: 307m US dollar)—see also Note 6 Acquisitions and disposals. In addition, the company recognized (150)m US dollar impairment on intangible assets classified as assets held for sale as of 30 June 2020 and other intangibles (30 June 2019: nil) – see also Note 7 Exceptional items.

AB InBev is the owner of some of the world’s most valuable brands in the beer industry. As a result, brands and certain distribution rights are expected to generate positive cash flows for as long as the company owns the brands and distribution rights. Given AB InBev’s more than 600-year history, brands and certain distribution rights have been assigned indefinite lives.

Acquisitions and expenditures of commercial intangibles mainly represent supply and distribution rights, exclusive multi-year sponsorship rights and other commercial intangibles.

Intangible assets with indefinite useful lives are comprised primarily of brands and certain distribution rights that AB InBev purchases for its own products, and were tested for impairment during the second quarter of 2020. Based on the impairment testing results, no impairment loss was allocated to intangible assets with indefinite useful lives – refer to Note 11 Goodwill.

 

 

1 

The transfer (to)/from other asset categories and other movements mainly relates to transfers from assets under construction to their respective asset categories, to contributions of assets to pension plans, to the separate presentation in the balance sheet of intangible assets held for sale in accordance with IFRS 5 Non-current assets held for sale and discontinued operations and to the restatement of non-monetary assets under hyperinflation accounting in line with IAS 29 Financial reporting in hyperinflationary economies. Accordingly, the 2019 transfers include the balances of Australian operations reclassified to assets held for sale as at at 31 December 2019 and disposed of upon the completion of the sale on 1 June 2020.

 

21


13. Trade and other receivables

Non-current trade and other receivables

 

Million US dollar

   30 June 2020      31 December 2019  

Cash deposits for guarantees

     170        219  

Loans to customers

     30        58  

Tax receivable, other than income tax

     147        166  

Trade and other receivables

     303        363  
  

 

 

    

 

 

 
     650        807  
  

 

 

    

 

 

 

Current trade and other receivables

 

Million US dollar

   30 June 2020      31 December 2019  

Trade receivables and accrued income

     3 465        4 046  

Interest receivable

     6        21  

Tax receivable, other than income tax

     618        821  

Loans to customers

     105        119  

Prepaid expenses

     420        563  

Other receivables

     663        616  
  

 

 

    

 

 

 
     5 276        6 187  
  

 

 

    

 

 

 

The carrying amount of trade and other receivables is a good approximation of their fair value as the impact of discounting is not significant.

The ageing of the current trade receivables and accrued income, interest receivable, other receivables and current and non-current loans to customers can be detailed as follows for 2020 and 2019 respectively:

 

     Net carrying
amount as of

30 June 2020
     Of which:
neither
impaired nor
past due on
the reporting
date
     Of which not impaired as of the reporting
date and past due
 
     Less than
30 days
     Between
30 and 59
days
     Between
60 and 89
days
     More than
90 days
 

Trade receivables and accrued income

     3 465        3 156        93        64        75        77  

Loans to customers

     135        133        —          1        1        —    

Interest receivable

     6        6        —          —          —          —    

Other receivables

     966        938        1        18        3        6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     4 572        4 232        94        83        80        83  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Net carrying
amount as of
31 December 2019
     Of which:
neither
impaired nor
past due on
the reporting
date
     Of which not impaired as of the reporting
date and past due
 
     Less than
30 days
     Between
30 and 59
days
     Between
60 and 89
days
     More than
90 days
 

Trade receivables and accrued income

     4 046        3 690        261        44        44        7  

Loans to customers

     177        172        1        2        2        —    

Interest receivable

     21        21        —          —          —          —    

Other receivables

     979        945        9        16        5        4  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     5 223        4 828        271        62        51        11  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The above analysis of the age of financial assets that are past due as at the reporting date but not impaired also includes non-current loans to customers. Past due amounts were not impaired when collection is still considered likely, for instance because the amounts can be recovered from the tax authorities, AB InBev has sufficient collateral or the customer entered into a payment plan. Impairment losses on trade and other receivables recognized in the first six months of 2020 amount to 122m US dollar (30 June 2019: 25m US dollar). The impairment loss recognized in the first six months of 2020 includes AB InBev’s estimate of overdue receivables the company will not be able to collect from defaulting customers as a result of the COVID-19 pandemic before year end 2020.

AB InBev’s exposure to credit, currency and interest rate risks is disclosed in Note 22 Risks arising from financial instruments.

 

22


14. Cash and cash equivalents and investment securities

 

Million US dollar

   30 June
2020
     31 December
2019
 

Short-term bank deposits

     2 977        2 236  

Treasury Bills

     17 155        —    

Cash and bank accounts

     4 886        5 002  
  

 

 

    

 

 

 

Cash and cash equivalents

     25 018        7 238  
  

 

 

    

 

 

 

Bank overdrafts

     (153      (68
  

 

 

    

 

 

 
     24 865        7 169  
  

 

 

    

 

 

 

The company’s investment in Treasury Bills is to facilitate liquidity and for capital preservation.

The cash outstanding as at 30 June 2020 includes restricted cash for an amount of 77m US dollar (31 December 2019: 78m US dollar). This restricted cash relates to an outstanding consideration payable to former Anheuser-Busch shareholders that have not yet claimed the proceeds from the 2008 combination (1m US dollar) and amounts deposited on a blocked account in respect to the state aid investigation into the Belgian excess profit ruling system (76m US dollar) – see also Note 24 Contingencies.

 

Million US dollar

   30 June
2020
     31 December
2019
 

Investment in unquoted companies

     92        85  

Investment in debt securities

     21        25  
  

 

 

    

 

 

 

Non-current investments

     113        110  
  

 

 

    

 

 

 

Investment in debt securities

     102        92  
  

 

 

    

 

 

 

Current investments

     102        92  
  

 

 

    

 

 

 

As at 30 June 2020, current debt securities of 102m US dollar mainly represented investments in government bonds (31 December 2019: 92m US dollar). The company’s investments in such short-term debt securities are primarily to facilitate liquidity and for capital preservation.

15. Assets classified as held for sale, liabilities associated with assets held for sale and discontinued operations

ASSETS CLASSIFIED AS HELD FOR SALE

 

Million US dollar

   30 June
2020
     31 December
2019
 

Balance at the end of previous year

     10 013        39  

Reclassified to assets held for sale in the period

     145        9 692  

Disposals

     (9 540      (59

Effect of movements in foreign exchange

     (490      341  
  

 

 

    

 

 

 

Balance at the end of year

     128        10 013  
  

 

 

    

 

 

 

LIABILITIES ASSOCIATED WITH ASSETS HELD FOR SALE

 

Million US dollar

   30 June
2020
     31 December
2019
 

Balance at the end of previous year

     1 145        —    

Reclassified to liabilities associated with assets held for sale

     (46      1 106  

Disposals

     (1 044      —    

Effect of movements in foreign exchange

     (55      39  
  

 

 

    

 

 

 

Balance at the end of year

     —          1 145  
  

 

 

    

 

 

 

On 19 July 2019, AB InBev announced the agreement to divest CUB, its Australian subsidiary, to Asahi for 16.0 billion AUD on a cash free, debt free basis. Consequently, in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, as at 31 December 2019, assets and liabilities associated with the Australian operations were reclassified to assets held for sale and liabilities associated with assets held for sale. Furthermore, the results of the Australian operations were accounted for as discontinued operations and presented in a separate line in the condensed consolidated interim income statement (“profit from discontinued operations”) up to 31 May 2020. As required by IFRS 5, the 2019 consolidated income statement and statement of cash flows have been restated in these condensed consolidated interim financial statements.

Upon the closing of the transaction on 1 June 2020, the company received 10.8 billion US dollar proceeds net of disposal costs, derecognized (8.5) billion US dollar of net assets in relation to its former Australian operations, recycled (0.4) billion US dollar of the cumulative foreign exchange differences on its former Australian operations and cashflow hedges from equity to profit or loss, resulting in a net gain on disposal of 1.9 billion US dollar recognized in discontinued operations.

 

23


ASSETS AND LIABILITIES HELD FOR SALE

Assets and liabilities relating to the Australian operations were classified as held for sale on the consolidated statement of financial position as at 31 December 2019 and disposed of upon the completion of the sale on 1 June 2020. The relevant assets and liabilities are detailed in the table below:

 

Million US dollar

   1 June 2020      31 December 2019  

Assets

     

Property, plant and equipment

     581        625  

Goodwill and intangible assets

     8 584        9 030  

Other assets

     371        310  
  

 

 

    

 

 

 

Assets classified as held for sale

     9 537        9 965  
  

 

 

    

 

 

 

Liabilities

     

Trade and other payables

     (581      (659

Deferred tax liabilities

     (363      (380

Other liabilities

     (101      (106
  

 

 

    

 

 

 

Liabilities associated with assets held for sale

     (1 044      (1 145
  

 

 

    

 

 

 

Net assets disposed of

     8 493        —