OREANDA-NEWS. November 28, 2011. Revenue growth: Revenue grew 3.6% in 3Q11 and 4.2% in 9M11, with revenue per hl increasing 4.0% in 3Q11 and 4.5% in 9M11. On a constant geographic basis (i.e. eliminating the impact of faster growth in countries with lower revenue per hl) revenue per hl improved 4.7% in 3Q11 and 5.3% in 9M11, reported the press-centre of Anheuser-Busch InBev.

Volume performance: Total volumes in 3Q11 decreased 0.2%, with own beer volumes decreasing 0.6% and non-beer volumes growing 6.4%. Other volumes decreased 35.0% in 3Q11 following the previously reported termination of legacy commercial products contracts in the United Kingdom in March, which has no material impact on EBITDA. In 9M11, total volumes decreased 0.1%, with own beer volumes flat and non-beer volumes growing 1.9%

Focus Brands: In 3Q11, our Focus Brands volumes grew 1.1%, led by Stella Artois in the United States and the United Kingdom, Budweiser and Harbin in China, Antarctica in Brazil, Quilmes in Argentina and Bud in Russia. In 9M11, our Focus Brands volumes grew 1.3%

Market share: In 3Q11, market share was ahead in Germany, Russia, Ukraine and China; flat in Argentina and marginally lower in Canada and the United Kingdom. In the United States, market share declined by 25 bp concentrated in sub-premium brands, while Focus Brands continued to perform well. We continue to make consistent progress with our strategy of balancing market share and profitability in Brazil and Belgium

Cost of Sales: Cost of Sales (CoS) increased 1.4% in 3Q11, or 1.8% per hl. In 9M11, CoS increased 2.2%, or 2.1% per hl. On a constant geographic basis, CoS per hl increased 3.0% in 3Q11 and 3.1% in 9M11

EBITDA: In 3Q11, EBITDA grew 12.2% in nominal terms and 5.5% organically to 3 965 million USD with a margin of 38.8%, an organic improvement of 71 bp. In 9M11, EBITDA improved 11.5% in nominal terms and 6.0% organically to 11 120 million USD with a margin of 38.1%, an organic improvement of 63 bp

Profit: Normalized profit attributable to equity holders of AB InBev grew 16.3% in nominal terms to 1 731 million USD in 3Q11 from 1 489 million USD in 3Q10, and by 17.5% in nominal terms to 4 490 million USD in 9M11 from 3 820 million USD in 9M10

Earnings per share: Normalized earnings per share (EPS) grew to 1.09 USD in 3Q11 from 0.94 USD in 3Q10. EPS in 9M11 grew to 2.82 USD from 2.40 USD in 9M10

Net finance costs of 814 million USD in 3Q11 include net interest expenses of 561 million USD, accretion expenses of 54 million USD, and other financial costs of 199 million USD mainly due to unrealized, non-cash currency translation impacts on intercompany balances

Non-recurring net finance costs of 127 million USD in 3Q11 include incremental accretion expenses of 48 million USD as a result of the early redemption of certain outstanding notes and a one-time mark-to-market adjustment of 79 million USD, as the final interest rate swaps hedges related to the combination with Anheuser-Busch became no longer effective

MANAGEMENT COMMENTS
Anheuser-Busch InBev is pleased to report another quarter of solid EBITDA margin expansion and earnings growth. EBITDA margin has now expanded for 12 consecutive quarters, year over year, since the combination with Anheuser-Busch in 2008.

Total revenue for the company grew 3.6% in 3Q11, helped by volume growth in Brazil, Argentina and China, and supported by consistent execution of our brand building strategies across all of our markets.

Our strategy of concentrating our investment and resources on a few large brands continues to drive improvements in key brand health indicators and top line growth. Our Focus Brands continue to outperform the rest of our portfolio, with volumes growing by 1.1% in 3Q11, compared to a decline in overall own beer volumes of 0.6%.

Strong cost management and efficiencies within our breweries in 3Q11 saw Cost of Sales increase by only 1.4%, leading to gross profit growth of 5.2% and gross margin expansion of 91 bp to 57.0%.

As expected, the growth in distribution expenses continued to decelerate in 3Q11, with growth of 4.9% compared to 12.0% in HY11. As previously reported, distribution expenses this year have been impacted by a higher mix of direct distribution and transfers of product between regions in Brazil. These cost pressures continue to ease as we cycle the incremental direct distribution costs and as new capacity comes on stream in existing breweries. In addition, the new brewery in Pernambuco, in the northeast of Brazil is adding available beer capacity in November, after a small delay due to heavy rains in the region, and will further reduce the pressure on distribution expenses in 4Q11.

Overall company profitability continues to grow. In 3Q11, EBITDA margin increased 71 bp to 38.8% and in 9M11 by 63 bp to 38.1%, with 3Q11 growth in the North America, Latin America North, Latin America South and Western Europe Zones.

FOCUS BRANDS AND INNOVATION
Our Focus Brands strategy ensures that the majority of our marketing resources are directed to the brands with the greatest growth potential which today represent approximately 70% of our own beer volume. Our Focus Brands grew by 1.1% in 3Q11, ahead of total own beer volumes which declined 0.6%. Focus Brands grew 1.3% in 9M11 compared to flat total own beer volume growth.

Highlights:
Global brands: The combined volume of our three global brands, Budweiser, Stella Artois and Beck’s, grew by 5.8% in 3Q11 and 2.5% during 9M11, well ahead of both total Focus Brand volume growth and total own beer volume growth.

Budweiser global volumes continue to perform very well, increasing by 6.9% in 3Q11 and by 2.5% in 9M11. Very strong results in China, supported by growth in Canada, the United Kingdom, Russia and other international markets, plus the launch in Brazil, more than offset declines in the United States where we continue to make good progress in decelerating the decline in market share. Highlights for the brand in 3Q11 include: - On 25th October we announced the extension of our Official Beer sponsorship for the 2018 FIFA World Cup Russia™ and the 2022 FIFA World Cup Qatar™. This agreement builds on the existing 25 year-old partnership with the FIFA World Cup™. We will also have the opportunity to leverage our portfolio of beers by extending local sponsorship rights to our leading brands in selected football markets, including, but not limited to Brahma (Brazil), Hasseroder (Germany), Jupiler (Belgium and the Netherlands), Quilmes (Argentina) and Harbin (China), as we did during the 2010 FIFA World Cup South Africa™

Budweiser, as sponsor of the FA Cup in the UK for the next three years, made sporting history in August when it facilitated the first ever live broadcast of a soccer game on Facebook. The opening game of the 2011 FA Cup competition was streamed live to thousands of fans

Business Week and the research firm Interbrand have named Budweiser the highest ranking beer brand in their 12th annual “Best of Global Brands” report. The brand’s overall ranking improved one position in 2011 to number 29, well ahead of its beer industry competitors

Budweiser won the gold medal at the Stockholm beer festival in the low bitter lager category and a Silver Effie, a global symbol of achievement, for the Pool Ball campaign in Argentina

Stella Artois grew by 6.8% globally in 3Q11 and by 4.3% in 9M11, driven by strong growth in the United States, Brazil and the United Kingdom. The brand has also continued to gain share in Argentina, supported by the launch of the Chalice can. Highlights for the brand in 3Q11 include:

In Brazil, the brand grew by more than 200% in 9M11 and is the fastest growing brand in the premium segment

The importance of the brand to the Argentinean premium market was recognized by holding the 2011 Stella Artois Draught Masters competition in Buenos Aires at the end of October

The brand was launched in China in 3Q11, as mentioned earlier

At the recent APG Creative Strategy Awards in the United Kingdom, an event which recognizes creative brand building strategies, the Stella Artois “She” campaign won the award for the best global campaign

Stella Artois Cidre, launched in the United Kingdom in April, continues to exceed our expectations. The brand has a 16% share of the Off-trade premium cider market, according to Nielsen, after just six months

The Beck’s brand decreased 0.7% in 3Q11 and grew by 0.6% in 9M11, driven by results in Germany, China and the United Kingdom. The brand’s latest campaign, the Green Box Project, is helping volume performance in key launch markets

Other innovations in 3Q11 included the rollout of thermochromatic cans for Brahma in Paraguay and Becker in Chile , a new Beck’s Vier bottle in the United Kingdom , a new bottle design for Hasseroder, Hasseroder Vier (4%), Hasseroder Schwarz and Franziskaner Royal (Premium) in Germany , Hertog Jan Oerblond in the Netherlands , the launch of Lowenbrau Dunkel (a dark variant), Bagbier Bock (a dark variant) and redesigned BagBier PET 1.5L and 2.5L bottles in Russia , redesigned Chernigivske PET bottles in Ukraine and the launch of Harbin Ice GD and Harbin 1900 Treasure in China

We are also making significant progress in the ability of our Focus Brands to connect more directly with their respective consumer base in the digital media landscape (for example social media and customer relationship management). During the first nine months of 2011, over 14 million consumers have elected to become a “fan” or to be included in our Focus Brands databases. Considering that an average fan has about 100- 150 friends, our Focus Brands now have the ability to reach hundreds of millions of potential consumers with proprietary content

Central and Eastern Europe (CEE)

CEE volumes decreased 9.6% in 3Q11 and 3.8% in 9M11.

In Russia , volumes fell 9.9% in 3Q11 and 5.3% in 9M11 with difficult volume comparisons due to an exceptionally hot summer in 2010 and buying-in at the end of 3Q10 ahead of our excise tax-related price increase. We estimate industry volumes fell by more than 10% in 3Q11. However, we gained market share by volume and by value in 3Q11, driven by our Focus Brands Klinskoe and Bud. Klinskoe performed particularly well, supported by a new campaign. The brand is now the second largest brand in Russia, reaching a share of more than 6%, with the Klinskoe Svetloe half-liter bottle presentation now the largest selling SKU in the market. Bud continues to grow after its launch in May 2010 and now has a market share of over 0.8%.

In Ukraine , beer volumes decreased 9.1% in 3Q11 and 1.5% in 9M11, driven by a weak industry and tough volume comparables. Market share gains in 3Q11 and 9M11 were driven by our main brand Chernigivske, which was supported by the launch of new brand graphics, the introduction of PUB lager and the Chezz line extension in 3Q11.

EBITDA declined 33.8% to 84 million USD in 3Q11 as a result of lower volumes, higher input costs and higher distribution expenses. In 9M11, EBITDA decreased 28.7% to 183 million USD.