Exhibit 99.1

 

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):

 

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

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