OREANDA-NEWS. Revenue growth: Revenue grew by 5.0% in 2Q14, with revenue per hl growing by 4.3%, driven by our revenue management and premiumization initiatives. On a constant geographic basis, revenue per hl grew by 4.6%. In HY14, revenue grew by 6.8% with revenue per hl growth of 4.7% or 5.2% on a constant geographic basis

Volume performance: Total volumes grew by 1.0% in 2Q14, with own beer volumes increasing by 0.5%, and non-beer volumes increasing by 5.8%. The growth in own beer volumes in the quarter was driven by growth in Brazil of 7.2%, Mexico of 1.5% and China of 4.6%, partly offset by an expected decline in sales-to-wholesalers (STWs) in the US of 3.4% due to inventory adjustments following the closing of labor negotiations. In HY14, total volumes grew by 2.6%, with own beer volumes increasing by 2.4% and non-beer volumes increasing by 4.3%

Focus Brands: Volumes of our Focus Brands grew by 3.1% in 2Q14 and by 4.4% in HY14, while our three Global Brands Budweiser, Corona and Stella Artois, grew by 6.0% in 2Q14 and 7.0% in HY14

Cost of Sales (CoS): CoS increased by 0.4% in 2Q14, and by 0.8% on a per hl basis. This performance was due to efficiency gains and lower commodity prices, as well as a one-time benefit of 57 million USD, linked to the reversal of medical expense accruals in the US. In HY14 CoS grew 1.2% and by 0.1% on a per hl basis. On a constant geographic basis, CoS per hl increased by 1.5% in 2Q14 and by 0.9% in HY14

EBITDA: EBITDA grew by 9.5% in 2Q14 to 4 851 million USD with a margin expansion of 157 bps, driven by strong top line growth and lower cost of sales per hectoliter, partly offset by the timing of sales and marketing investments to support our top line initiatives. In HY14 EBITDA grew by 10.1% with EBITDA margin expansion of 112 bps

Net finance costs: Net finance costs (excluding non-recurring net finance costs) were 382 million USD in 2Q14 compared to 1 000 million USD in 2Q13, with the decrease being driven primarily by a mark-to-market gain of 344 million USD linked to the hedging of our share-based payment programs, compared to a reported loss of 298 million USD in 2Q13. Net finance costs were 1 248 million USD in

HY14 compared to 1 255 million USD in HY13

Income taxes: Income tax in 2Q14 was 647 million USD with a normalized effective tax rate (ETR) of 18.1%, compared to an income tax expense of 516 million USD in 2Q13 and a normalized ETR of 18.7%. The normalized ETR was 18.4% in HY14 compared to 15.8% in HY13

Profit: Normalized profit attributable to equity holders of AB InBev grew by 74% to 2 614 million USD in 2Q14, from 1 504 million USD in 2Q13. Normalized profit attributable to equity holders of AB InBev

grew by 20.0% to 4 030 million USD in HY14, from 3 357 million USD in HY13

Earnings per share: Normalized earnings per share (EPS) grew by 72% to 1.60 USD in 2Q14 from 0.93 USD in 2Q13, due mainly to strong organic EBITDA growth, lower net finance costs, the inclusion of Grupo Modelo for a full quarter and positive scope adjustments described below. EPS increased to 2.47 USD in HY14 from 2.09 USD in HY13

Net debt: Net debt as of 30 June 2014 was 46.3 billion USD, an increase from 38.8 billion USD as of 31 December 2013, due mainly to the acquisition of OB

Management comments

The strong momentum built in the first quarter of the year continued into the second quarter, with volumes benefiting from the 2014 FIFA World Cup. The tournament provided us with an exciting opportunity to build brand equity, not just in Brazil, but in many of our markets around the world. Total volumes in 2Q14 grew by 1.0%, with total revenues growing by 5.0% and revenue per hl growing by 4.3%.

Beer volumes in our top four markets were in line or ahead of our expectations:

In the US, sales-to-wholesalers (STWs) declined by 3.4% due to planned inventory adjustments following the closing of labor negotiations at the start of the quarter. The trend of our selling day adjusted sales-to-retailers (STRs) improved from the first quarter, declining by 1.0% in 2Q14

Volumes in Mexico grew by 1.5%, due to a stronger industry and good growth in the Corona family, Victoria and Bud Light. This growth was achieved despite significant glass shortages which impacted sales of Corona in the quarter. These shortages are being addressed and the supply situation is improving

Brazil beer volumes grew by 7.2%, with the 2014 FIFA World Cup generating incremental beer volumes for our business of 1.4 million hls, according to our estimates. We estimate that approximately 80% of the incremental volume fell in 2Q14 with the remainder falling in 3Q14

China volumes grew by 4.6%, driven by strong Focus Brands growth and estimated market share gains.

Our Focus and Global Brands delivered another strong result. Volumes of our Focus Brands grew by 3.1%, while our three Global Brands grew by 6.0%, led by Budweiser with growth of 6.7%, Corona with growth of 5.3%, and Stella Artois with growth of 4.6%.

Consolidated EBITDA grew by 9.5% in 2Q14, with margin expansion of 157 bps. This growth was driven by a strong revenue performance, supported by good cost management, partly offset by the timing of sales and marketing investments to support our top line initiatives.

In early April we completed the acquisition of OB, the leading brewer in South Korea, and Siping Ginsber in Jilin province in China. We are very pleased with the performances of both businesses and the integration process is going well.