InBev Q2 Performance in Line with Expectations

The majority of Zones delivered a better year on year (yoy) performance in 2Q08 versus the first quarter, and, as expected, Brazil resumed volume growth (+3.8%) after a slow start to the year.

14/08/08 InBev, the world’s leading brewer has said that total volumes grew 0.7% in 2Q08, while own beer volumes increased at the slightly higher rate of 0.9%. The majority of Zones delivered a better year on year (yoy) performance in 2Q08 versus the first quarter, and, as expected, Brazil resumed volume growth (+3.8%) after a slow start to the year. For HY08, total volumes as well as own beer volumes were 0.2% higher than HY07.

The underlying strength of InBev’s brand portfolio, coupled with continued strong investments behind the brands, led to market share being maintained or increased in 8 of our top 10 markets, including our three key Western European markets.

Revenue growth: consolidated revenue increased by 4.5% in 2Q08, and revenue per Hl was up by 3.7% as a result of a continuous improvement in the sales mix and selected price increases. HY08 revenue was 4.6% higher than a year ago, driven by a 4.4% rise in revenue per Hl.

Consolidated cost of sales (CoS) per Hl showed a 6.5% increase in 2Q08, due to increased commodity input costs yoy. Although InBev experienced a strong increase in CoS per Hl in HY08 (1Q08: +9.9%; 2Q08:+6.5%; HY08:+8.0%), as indicated in our 1Q08 disclosure, CoS per Hl growth is expected to decelerate during 2H08, especially in the fourth quarter.

2Q08 operating expenses increased modestly (1.9% higher), with sales and marketing expenses up 6.9% as we continued to invest in our brands and further strengthen our sales execution programs. However, administrative expenses declined 11.3% yoy, as our strong cost discipline continues to reduce non-working expenses.

“Our 2Q results were better than 1Q, as anticipated, but still below our aspirations. Although industry growth in some key markets is below last year, we delivered market share results in the majority of our markets. The main market where we have underperformed so far this year has been Russia, where our value and price brands have lost share at a faster pace than we have been gaining share with our core and premium brands, as evidenced by net sales per Hl growth of 12%. Our overall pricing is healthy, but rising costs continue to put pressure on our margins. On July 13th we announced the proposed combination of our company with Anheuser-Busch. Our team however remains focused on driving our organic business. As we look to the second half, we continue to expect an improved performance and the return to EBITDA margin expansion”, said Carlos Brito, InBev’s CEO.