Exhibit 99.2

 

Management report

 

 

Anheuser-Busch InBev is a publicly traded company (Euronext: ABI) based in Leuven, Belgium, with secondary listings on the Mexico (MEXBOL: ANB) and South Africa (JSE: ANH) stock exchanges and with American Depositary Receipts on the New York Stock Exchange (NYSE: BUD). As a company, we dream big to create a future with more cheers. We are always looking to serve up new ways to meet life’s moments, move our industry forward and make a meaningful impact in the world. 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 169 000 employees based in nearly 50 countries worldwide. For 2021, our reported revenue was 54.3 billion US dollar (excluding joint ventures and associates).

The following management report should be read in conjunction with our audited consolidated financial statements.

In the rest of this document we refer to Anheuser-Busch InBev as “AB InBev”, “the company”, “we”, “us” or “our”.

Selected financial figures

To facilitate the understanding of our underlying performance, the comments in this management report, unless otherwise indicated, are based on organic and normalized numbers. “Organic” means the financials are analyzed eliminating the impact of changes in currencies on translation of foreign operations, and scopes. Scopes represent the impact of acquisitions and divestitures, the start-up or termination of activities or the transfer of activities between segments, curtailment gains and losses and year-over-year changes in accounting estimates and other assumptions that management does not consider part of the underlying performance of the business.

The tables in this management report provide the segment information per region for the period ended 31 December 2021 and 2020 in the format up to Normalized EBIT level that is used by management to monitor performance.

Whenever used in this report, the term “normalized” refers to performance measures (EBITDA, EBIT, Profit, EPS, effective tax rate) before non-underlying items and discontinued operations. Non-underlying items are either income or expenses which do not occur regularly as part of the normal activities of the company. They are presented separately because they are important for the understanding of the underlying sustainable performance of the company due to their size or nature. Normalized measures are additional measures used by management and should not replace the measures determined in accordance with IFRS as an indicator of the company’s performance, but rather should be used in conjunction with the most directly comparable IFRS measures.

On 1 June 2020, we completed the previously announced sale of Carlton & United Breweries (“CUB”), our Australian subsidiary, to Asahi Group Holdings, Ltd (“Asahi”). Effective 30 September 2019, following the announcement on 19 July 2019 of the agreement to divest CUB to 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. As a result, all the presentations of our underlying performance and organic growth figures do not reflect the results of the Australian operations.

 

AB InBev – Financial Report 2021 | 2

The tables below set out the components of our operating income and operating expenses, as well as the key cash flow figures.

 

For the year ended 31 December  Million US dollar		2021				%				2020				%
Revenue¹			54 304				100%				46 881				100%
Cost of sales			(23 097)				43%				(19 634)				42%
Gross profit			31 207				57%				27 247				58%
SG&A			(17 574)				32%				(15 368)				33%
Other operating income/(expenses)			805				1%				845				2%
Normalized profit from operations (Normalized EBIT)			14 438				27%				12 723				27%
Non-underlying items			(614)				1%				(3 103)				7%
Profit from operations (EBIT)			13 824				25%				9 620				21%
Depreciation, amortization and impairment			4 771				9%				4 598				10%
Non-underlying impairment			281				1%				2 733				6%
Normalized EBITDA			19 209				35%				17 321				37%
EBITDA			18 876				35%				16 951				36%
Normalized profit attributable to equity holders of AB InBev			5 723				11%				3 807				8%
Profit from continuing operations attributable to equity holders of AB InBev			4 670				9%				(650)				1%
Profit from discontinued operations attributable to equity holders of AB InBev			-				-				2 055				4%
Profit attributable to equity holders of AB InBev			4 670				9%				1 405				3%
For the year ended 31 December  Million US dollar										2021				2020
Operating activities
Profit from continuing operations											6 114				147
Interest, taxes and non-cash items included in profit											12 693				17 024
Cash flow from operating activities before changes in working capital and use of provisions											18 806				17 171
Change in working capital											2 459				592
Pension contributions and use of provisions											(375)				(616)
Interest and taxes (paid)/received											(6 197)				(6 391)
Dividends received											106				51
Cash flow from operating activities on Australia discontinued operations											-				84
Cash flow from operating activities											14 799				10 891
Investing activities
Net capex											(5 498)				(3 687)
Acquisition and sale of subsidiaries, net of cash acquired/disposed of											(444)				(510)
Net proceeds from sale/(acquisition) of other assets											65				(292)
Proceeds from Australia divestiture											-				10 838
Cash flow from investing activities on Australia discontinued operations											-				(13)
Cash flow from investing activities											(5 878)				6 336
Financing activities
Dividends paid											(2 364)				(1 800)
Net (payments on)/proceeds from borrowings											(8 511)				(8 294)
Payment of lease liabilities											(531)				(461)
Sale/(purchase) of non-controlling interests and other											(192)				2 086
Cash flow from financing activities on Australia discontinued operations											-				(6)
Cash flow from financing activities											(11 598)				(8 475)
Net increase/(decrease) in cash and cash equivalents											(2 677)				8 752

 

 

¹ Turnover less excise taxes. In many jurisdictions, excise taxes make up a large proportion of the cost of beer charged to the company’s customers.

 

AB InBev – Financial Report 2021 | 3

Financial performance

We are presenting our results under five regions: North America, Middle Americas, South America, EMEA and Asia Pacific.

The tables in this management report provide the segment information per region for the period ended 31 December 2021 and 2020 in the format down to Normalized EBIT level that is used by management to monitor performance.

The tables below provide a summary of our performance for the period ended 31 December 2021 and 2020 (in million US dollar, except volumes in thousand hectoliters) and the related comments are based on organic numbers.

 

AB INBEV WORLDWIDE		2020				Scope				Currency translation				Organic growth				2021				Organic growth %
Volumes			530 644				56				-				50 979				581 678				9.6%
Revenue			46 881				(193)				326				7 290				54 304				15.6%
Cost of sales			(19 634)				61				(119)				(3 405)				(23 097)				(17.4)%
Gross profit			27 247				(132)				207				3 885				31 207				14.3%
SG&A			(15 368)				100				(180)				(2 126)				(17 574)				(13.9)%
Other operating income/(expenses)			845				(187)				8				139				805				32.3%
Normalized EBIT			12 723				(218)				35				1 899				14 438				15.4%
Normalized EBITDA			17 321				(207)				96				2 000				19 209				11.8%
Normalized EBITDA margin			36.9%				-				-				-				35.4%				-118 bps

In 2021, our normalized EBITDA increased 11.8%, while our normalized EBITDA margin contracted 118 bps, reaching 35.4%.

Consolidated volumes grew by 9.6%, with own beer volumes up 9.7% and non-beer volumes up 8.7%, driven by a recovery year-over-year as the COVID-19 pandemic negatively impacted our volumes in 2020.

Consolidated revenue grew by 15.6% to 54 304m US dollar, with revenue per hectoliter growth of 5.5% driven by premiumization and revenue management initiatives. Combined revenues of our global brands, Budweiser, Stella Artois and Corona increased by 17.6% globally and 22.9% outside of their respective home markets.

Consolidated Cost of Sales (CoS) increased 17.4%, and increased 7.2% on a per hectoliter basis, driven by anticipated transactional foreign exchange and commodity headwinds.

Consolidated selling, general and administrative expenses (SG&A) increased 13.9% due primarily to higher variable compensation accruals and elevated supply chain costs.

Consolidated other operating income/(expenses) in 2021 increased by 32.3% primarily driven by higher government grants and sales of non-core assets. In the fourth quarter of 2020 and in the second quarter of 2021, Ambev, recognized 481m US dollar and 226m US dollar income in Other operating income respectively related to tax credits in Brazil. The net impact is presented as a scope change and does not impact the presented organic growth. Additionally, Ambev recognized 118m US dollar of interest income in Finance income in 2021 (2020: 315m US dollar) related to these credits. Underlying profit attributable to equity holders and underlying EPS were positively impacted by 165m US dollar after tax and non-controlling interest (30 December 2020: 325m US dollar). Ambev’s tax credits and interest receivables are expected to be collected over a period exceeding 12 months after the balance sheet date. As of 31 December 2021, the total amount of such credits and interest receivables represented 960m US dollar.

 

AB InBev – Financial Report 2021 | 4

VOLUMES

The table below summarizes the volume evolution per region and the related comments are based on organic numbers. Volumes include not only brands that we own or license, but also third-party brands that we brew as a subcontractor and third-party products that we sell through our distribution network, particularly in Europe. Volumes sold by the Global Export business, which includes our global headquarters and the export businesses which have not been allocated to our regions, are shown separately.

 

Thousand hectoliters		2020				Scope				Organic growth				2021				Organic growth %
North America			106 846				72				47				106 965				-
Middle Americas			120 800				(1)				20 648				141 447				17.1%
South America			144 209				(67)				12 480				156 622				8.7%
EMEA			76 207				(275)				10 775				86 707				14.2%
Asia Pacific			81 649				-				6 730				88 379				8.2%
Global Export and Holding Companies			933				326				299				1 558				23.8%
AB InBev Worldwide			530 644				56				50 979				581 678				9.6%

North America total volumes were flat.

In the United States, our sales-to-retailers (“STRs”) declined by 2.3%, estimated to be below the industry, while sales-to-wholesalers (“STWs”) were flattish as inventories normalized following pandemic related volatility. In 2021, our above core portfolio delivered high-single digit volume growth, and now represents over 30% of revenue. Michelob ULTRA, the #2 beer brand in the country by volume, continued to outperform the industry and grew STRs by double digits in 2021. Our seltzer portfolio grew 1.7x the segment in 2021. Within the ready-to-drink cocktail segment, Cutwater once again grew by triple-digits for 2021.

In Canada, our volume was flattish versus in 2021 compared to 2020, as on-premise channel closures were mostly offset by strength in the off-premise channel. We continued to outperform the industry, led by our above core brands. Our Beyond Beer portfolio grew volume by double-digits.

Middle Americas total volumes increased by 17.1%.

In Mexico, in 2021 compared to 2020, our volumes grew by double-digits, below the industry. Our continued momentum is fueled by category and portfolio development, digital transformation, and channel expansion. In 2021, we expanded in the fast-growing Beyond Beer segment through innovations such as Michelob ULTRA Hard Seltzer and Corona Agua Rifada. We launched the next phase of our OXXO rollout, expanding to approximately 3,400 additional stores by January 2022. Our BEES platform continues to expand, with over 70% of our revenues now digital.

In Colombia, our volumes grew over 20% in 2021 compared to 2020, reflecting the power of our enhanced brand portfolio and consistent commercial strategy execution. Led by the implementation of our category expansion levers, the beer category continues to grow, with 2021 marking the highest per capita consumption in Colombia in the last 25 years. We saw growth across all segments of our portfolio this year. In 2021 compared to 2020, our core portfolio grew by double-digits and our super-premium portfolio grew even faster, led by the nearly 40% combined growth of our global brands and local premium brand, Club Colombia. The roll out and adoption of the BEES platform continued with over 85% of our revenues in 2021 through digital channels.

In Peru, fueled by consistent execution of our commercial strategy, we delivered record high volumes in the fourth quarter of 2021. On a full-year basis, our volumes grew by double-digits. Our global and local premium brands delivered particularly strong performances, growing double-digits in 2021. BEES continues to expand and 75% of our revenue is now digital.

In Ecuador, we delivered volume growth of double-digits in 2021 compared to 2020. We continue to focus on expanding the beer category and driving premiumization. Over 90% of our revenue in Ecuador is now digital.

South America total volumes increased by 8.7%.

In Brazil, our total volume grew by 7.3%, with beer volumes up by 7.0% and non-beer volumes up by 8.3%, in 2021 compared to 2020. We continue to execute our consumer and customer-centric strategy focused on innovation and the digital transformation of our business. In 2021, we delivered record high beer volumes and strengthened the health of our portfolio. Innovations represented more than 20% of revenue this year. BEES now covers more than 85% of our active customers across the country and helped contribute to an all-time high Net Promoter Score (“NPS”). Zé Delivery fulfilled more than 61 million orders in 2021, more than doubling versus 2020.

In Argentina, we grew volume by low teens in 2021 compared to 2020. Our premium brands led the way, due to the outperformance of Andes Origen, Corona and Stella Artois.

 

AB InBev – Financial Report 2021 | 5

EMEA total volumes increased by 14.2%.

In Europe, our volumes grew by mid-single digits in 2021 compared to 2020. We continue to drive premiumization across Europe. Premium and super premium brands now make up over 50% of our revenue. In 2021, our global brands and our super premium portfolio grew by double-digits, led by Corona and Leffe. Our DTC solution, PerfectDraft, delivers the ultimate home beer experience, growing 9x as fast as the online beer category in both France and the UK according to our estimates.

In South Africa, our volumes grew by strong double-digits in 2021 compared to 2020. In 2021, strong underlying consumer demand for our products resulted in market share expansion in both beer and total alcohol versus pre-pandemic levels. We saw consistent growth across all segments of our brand portfolio in 2021, led by Carling Black Label, our leading core brand. We continue to accelerate the premium and Beyond Beer segments, both delivering strong double-digit growth. The adoption of the BEES platform continued with almost 90% of our revenues now through digital channels.

In Africa excluding South Africa, we continue to see an improving operating environment and strong consumer demand for our brands. This led to volume and growth across most of our key markets versus 2020. In Nigeria, our volumes outperformed the industry in 2021, despite supply chain constraints.

Asia Pacific total volumes increased by 8.2%.

In China, volumes grew by 9.3% in 2021 compared to 2020. Our market share expanded by an estimated 80bps versus 2020. We remain focused on driving premiumization, digital transformation, and expansion of our business. All segments of our portfolio grew in 2021, led by the double-digit increase of our premium and super premium portfolios, both above pre-pandemic levels. We addressed new consumer trends and occasions through the expansion of Budweiser Supreme as well as the launch of various flavor options, including Hoegaarden Fruity and Corona Sea Salt Guava.

In South Korea, in 2021, COVID-19 restrictions continued to impact the industry resulting in low-single digit volume decline compared to 2020. Our market share momentum accelerated throughout the year delivering an estimated expansion of nearly 130 bps, driven by the continued success of our innovations, the “All New Cass” and our new classic lager HANMAC.

 

AB InBev – Financial Report 2021 | 6

OPERATING ACTIVITIES BY REGION

The tables below provide a summary of the performance of each region, for the period ended 31 December 2021 (in million US dollar, except volumes in thousand hectoliters) and the related comments are based on organic numbers.

 

AB INBEV WORLDWIDE		2020				Scope				Currency translation				Organic growth				2021				Organic growth %
Volumes			530 644				56				-				50 979				581 678				9.6%
Revenue			46 881				(193)				326				7 290				54 304				15.6%
Cost of sales			(19 634)				61				(119)				(3 405)				(23 097)				(17.4)%
Gross profit			27 247				(132)				207				3 885				31 207				14.3%
SG&A			(15 368)				100				(180)				(2 126)				(17 574)				(13.9)%
Other operating income/(expenses)			845				(187)				8				139				805				32.3%
Normalized EBIT			12 723				(218)				35				1 899				14 438				15.4%
Normalized EBITDA			17 321				(207)				96				2 000				19 209				11.8%
Normalized EBITDA margin			36.9%				-				-				-				35.4%				-118 bps
North America		2020				Scope				Currency translation				Organic growth				2021				Organic growth %
Total volumes (thousand hls)			106 846				72				-				47				106 965				-
Revenue			15 622				(16)				144				507				16 257				3.3%
Cost of sales			(5 870)				36				(47)				(303)				(6 185)				(5.2)%
Gross profit			9 752				20				97				204				10 072				2.1%
SG&A			(4 369)				(69)				(52)				(279)				(4 769)				(6.4)%
Other operating income/(expenses)			(14)				1				-				59				46				-
Normalized EBIT			5 369				(48)				44				(16)				5 349				(0.3)%
Normalized EBITDA			6 172				(36)				52				(56)				6 131				(0.9)%
Normalized EBITDA margin			39.5%				-				-				-				37.7%				-160 bps
Middle Americas		2020				Scope				Currency translation				Organic growth				2021				Organic growth %
Total volumes (thousand hls)			120 800				(1)				-				20 648				141 447				17.1%
Revenue			10 032				5				16				2 488				12 541				24.8%
Cost of sales			(3 331)				(6)				(21)				(1 070)				(4 428)				(32.1)%
Gross profit			6 701				(1)				(5)				1 418				8 113				21.2%
SG&A			(2 710)				(3)				(16)				(421)				(3 149)				(15.5)%
Other operating income/(expenses)			6				-				-				18				24				-
Normalized EBIT			3 997				(4)				(20)				1 015				4 988				25.4%
Normalized EBITDA			5 014				(4)				(6)				1 121				6 126				22.4%
Normalized EBITDA margin			50.0%				-				-				-				48.8%				-96 bps
South America		2020				Scope				Currency translation				Organic growth				2021				Organic growth %
Total volumes (thousand hls)			144 209				(67)				-				12 480				156 622				8.7%
Revenue			8 092				(61)				(653)				2 116				9 494				26.3%
Cost of sales			(3 786)				4				309				(1 290)				(4 763)				(34.1)%
Gross profit			4 306				(58)				(344)				826				4 730				19.4%
SG&A			(2 417)				75				194				(615)				(2 762)				(26.2)%
Other operating income/(expenses)			522				(189)				(8)				71				397				65.3%
Normalized EBIT			2 412				(171)				(157)				282				2 365				14.0%
Normalized EBITDA			3 179				(171)				(209)				326				3 125				11.7%
Normalized EBITDA margin			39.3%				-				-				-				32.9%				-401 bps
EMEA		2020				Scope				Currency translation				Organic growth				2021				Organic growth %
Total volumes (thousand hls)			76 207				(275)				-				10 775				86 707				14.2%
Revenue			6 835				(364)				377				1 184				8 032				18.0%
Cost of sales			(3 394)				172				(160)				(411)				(3 793)				(12.7)%
Gross profit			3 441				(192)				217				774				4 239				23.0%
SG&A			(2 696)				198				(143)				(214)				(2 855)				(8.2)%
Other operating income/(expenses)			163				-				8				30				200				18.6%
Normalized EBIT			907				6				82				590				1 584				64.6%
Normalized EBITDA			1 895				4				118				581				2 598				30.6%
Normalized EBITDA margin			27.7%				-				-				-				32.4%				308 bps

 

AB InBev – Financial Report 2021 | 7

Asia Pacific		2020				Scope				Currency translation				Organic growth				2021				Organic growth %
Total volumes (thousand hls)			81 649				-				-				6 730				88 379				8.2%
Revenue			5 648				(46)				420				826				6 848				14.8%
Cost of sales			(2 605)				(2)				(184)				(257)				(3 048)				(9.9)%
Gross profit			3 042				(48)				236				570				3 800				19.0%
SG&A			(2 097)				46				(139)				(140)				(2 330)				(6.8)%
Other operating income/(expenses)			146				-				9				(16)				139				(11.1)%
Normalized EBIT			1 091				(3)				107				413				1 609				37.9%
Normalized EBITDA			1 737				(2)				152				434				2 321				25.0%
Normalized EBITDA margin			30.8%				-				-				-				33.9%				277 bps
Global Export and Holding Companies		2020				Scope				Currency translation				Organic growth				2021				Organic growth %
Total volumes (thousand hls)			933				326				-				299				1 558				23.8%
Revenue			652				289				22				169				1 133				18.1%
Cost of sales			(648)				(142)				(16)				(74)				(880)				(9.5)%
Gross profit			4				147				6				95				252				63.8%
SG&A			(1 079)				(148)				(25)				(457)				(1 709)				(37.3)%
Other operating income/(expenses)			22				1				(1)				(22)				-				(96.6)%
Normalized EBIT			(1 053)				1				(20)				(384)				(1 457)				(36.5)%
Normalized EBITDA			(677)				2				(11)				(407)				(1 093)				(60.4)%

REVENUE

Our consolidated revenue grew by 15.6% to 54 304m US dollar with revenue per hectoliter growth of 5.5% driven by premiumization and revenue management initiatives.

COST OF SALES

Our cost of Sales (CoS) increased by 17.4% and increased by 7.2% on a per hectoliter basis, driven by anticipated transactional foreign exchange and commodity headwinds.

OPERATING EXPENSES

Our total operating expenses increased 13.4% in 2021:

 

●

Selling, General & Administrative Expenses (SG&A) increased by 13.9% due primarily to higher variable compensation accruals and elevated supply chain costs.

 

●

Other operating income increased 32.3% primarily driven by higher government grants and sales of non-core assets. In addition, in the second quarter of 2021, Ambev, our subsidiary, recognized 226m US dollar income in Other operating income related to tax credits following a favorable decision from the Brazilian Supreme Court. In the fourth quarter of 2020 Ambev, recognized 481m US dollar related to tax credits in Brazil. The net impact is presented as a scope change.

NORMALIZED PROFIT FROM OPERATIONS BEFORE DEPRECIATION AND AMORTIZATION (NORMALIZED EBITDA)

Our normalized EBITDA increased 11.8% organically to 19 209m US dollar, with an EBITDA margin of 35.4%, representing an EBITDA margin organic contraction of 118 bps.

 

●

North America EBITDA decreased 0.9% to 6 131m US dollar with a margin contraction of (160) bps to 37.7% primarily due to increased selling, general and administrative expenses.

 

●

Middle Americas EBITDA increased 22.4% to 6 126m US dollar with a margin contraction of (96) bps to 48.8%. driven by top-line growth coupled with operational efficiencies.

 

●

South America EBITDA increased 11.7% to 3 125m US dollar with a margin contraction of (401) bps to 32.9% as top-line growth was partially offset by anticipated transactional foreign exchange and commodity headwinds and higher selling, general and administrative expenses.

 

●

EMEA EBITDA increased 30.6% to 2 598m US dollar with a margin enhancement of 308 bps to 32.4%, driven by top-line growth and strong operational leverage.

 

●

Asia Pacific EBITDA increased 25.0% to 2 321m US dollar with a margin enhancement of 277 bps to 33.9% due to top-line growth driven by ongoing premiumization and revenue management initiatives.

 

●

Global Export and Holding Companies EBITDA of (1 093)m US dollar in 2021 (2020: (677)m US dollar).

 

AB InBev – Financial Report 2021 | 8

Differences in normalized EBITDA margins by region are due to a number of factors such as different routes to market, share of returnable packaging in the region’s sales and premium product mix.

RECONCILIATION BETWEEN NORMALIZED EBITDA AND PROFIT ATTRIBUTABLE TO EQUITY HOLDERS

Normalized EBITDA and EBIT are measures utilized by us to demonstrate the company’s underlying performance.

Normalized EBITDA is calculated excluding profit from discontinued operations and the following effects from profit from continuing operations attributable to our equity holders: (i) Non-controlling interest, (ii) Income tax expense, (iii) Share of results of associates, (iv) Net finance cost, (v) Non-underlying net finance cost, (vi) Non-underlying items above EBIT (including non-underlying impairment) and (vii) Depreciation, amortization and impairment.

Normalized EBITDA and EBIT are not accounting measures under IFRS accounting and should not be considered as an alternative to Profit from continuing operations attributable to equity holders as a measure of operational performance or as an alternative to cash flow as a measure of liquidity. Normalized EBITDA and EBIT do not have a standard calculation method and our definition of normalized EBITDA and EBIT may not be comparable to that of other companies.

 

For the year ended 31 December  Million US dollar		Notes				2021				2020
Profit attributable to equity holders of AB InBev							4 670				1 405
Non-controlling interest							1 444				797
Profit of the period							6 114				2 202
Profit from discontinued operations			21				-				(2 055)
Profit from continuing operations							6 114				147
Income tax expense			12				2 350				1 932
Share of result of associates			16				(248)				(156)
Non-underlying net finance cost/(income)			11				806				1 738
Net finance cost			11				4 803				5 959
Non-underlying items above EBIT (including non-underlying impairment)			8				614				3 103
Normalized EBIT							14 438				12 723
Depreciation, amortization and impairment (excluding non-underlying impairment)			10				4 771				4 598
Normalized EBITDA							19 209				17 321

Non-underlying items are either income or expenses which do not occur regularly as part of the normal activities of the company. They are presented separately because they are important for the understanding of the underlying sustainable performance of the company due to their size or nature. Details on the nature of the non-underlying items are disclosed in Note 8 Non-underlying items.

 

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IMPACT OF FOREIGN CURRENCIES

Foreign currency exchange rates have a significant impact on our financial statements. The following table sets forth the percentage of our revenue realized by currency for 2021 and 2020:

 

		2021				2020
US dollar			29.6%				31.9%
Brazilian real			12.4%				12.7%
Chinese yuan			9.7%				9.1%
Mexican peso			9.4%				8.9%
Euro			6.2%				6.9%
Colombian peso			4.1%				3.8%
South African rand			4.0%				3.3%
Canadian dollar			3.7%				3.9%
Argentinean peso¹			3.0%				2.4%
Pound sterling			2.7%				2.7%
Peruvian peso			2.6%				2.5%
Dominican peso			2.1%				1.9%
South Korean won			2.1%				2.3%
Other			8.1%				7.6%

The following table sets forth the percentage of our normalized EBITDA realized by currency for 2021 and 2020:

 

		2021				2020
US dollar			32.8%				31.6%
Mexican peso			13.6%				13.0%
Brazilian real			9.8%				14.5%
Chinese yuan			9.4%				7.6%
Colombian peso			5.4%				4.9%
Euro			4.3%				7.1%
Peruvian peso			4.0%				3.6%
South African rand			3.9%				2.6%
Dominican peso			3.0%				2.8%
Canadian dollar			2.9%				2.9%
Argentinean peso¹			2.7%				2.0%
South Korean won			1.7%				1.9%
Pound sterling			0.3%				0.7%
Other			6.2%				5.0%

In 2021, the fluctuation of the foreign currency rates had a positive translation impact, including hyperinflation accounting impact, of 326m US dollar on our revenue (2020: negative impact of 3 410m US dollar), of 96m US dollar on our normalized EBITDA (2020: negative impact of 1 292m US dollar) and of 35m US dollar on our normalized EBIT (2020: negative impact of 950m US dollar).

Our profit from continuing operations (after tax) has been positively affected by the fluctuation of foreign currencies, including hyperinflation accounting impact, amounted to 41m US dollar (2020: negative impact of 288m US dollar), while the positive translation impact, including hyperinflation accounting impact, on our EPS (profit attributable to our equity holders) was 38m US dollar or 0.02 US dollar per share (2020: negative impact of 174m US dollar or 0.09 US dollar per share).

The impact of the fluctuation of the foreign currencies on our net debt amounted to 1 609m US dollar (decrease of net debt) in 2021, as compared to an impact of 3 426m US dollar (increase of net debt) in 2020. The impact of the fluctuation of the foreign currencies on the equity attributable to our equity holders amounted to 4 320m US dollar (decrease of equity), as compared to an impact of 9 943m US dollar (decrease of equity) in 2020.

 

 

¹ Hyperinflation accounting was adopted in 2018 to report the company’s Argentinian operations.

 

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PROFIT

Normalized profit attributable to our equity holders was 5 723m US dollar (normalized EPS 2.85 US dollar) in 2021, compared to 3 807m US dollar (normalized EPS 1.91 US dollar) in 2020. Underlying profit (normalized profit attributable to equity holders of AB InBev excluding mark-to-market gains or losses linked to the hedging of our share-based payment programs and the impact of hyperinflation) was 5 774m US dollar in 2021 (Underlying EPS 2.88 US dollar) as compared to 5 022m US dollar in 2020 (Underlying EPS 2.51 US dollar) (see Note 22 Changes in equity and earnings per share for more details). Profit attributable to our equity holders for 2021 was 4 670m US dollar, compared to 1 405m US dollar for 2020 and includes the following impacts:

 

●

Net finance costs (excluding non-underlying net finance items): 4 803m US dollar in 2021 compared to a net finance cost of 5 959m US dollar in 2020. This decrease was primarily due to mark-to-market adjustment linked to the hedging of our share-based payment programs amounting to a loss of 23m US dollar in 2021, compared to a loss of 1 211m US dollar in 2020 resulting in a change of 1 188m US dollar.

 

●

Non-underlying net finance cost: Non-underlying net finance cost amounted to 806m US dollar in 2021 compared to 1 738m US dollar cost in 2020. 25m US dollar loss resulted from mark-to-market adjustments on derivative instruments entered into to hedge the shares issued in relation to the combination with Grupo Modelo and the restricted shares issued in connection with the combination with SAB (2020: 1 008m US dollar loss) and 741m US dollar loss resulted from the early termination of certain bonds (2020: 795m US dollar loss).

 

●

Non-underlying items: In 2021, we incurred (614)m US dollar of non-underlying costs (2020: (603)m US dollar) mainly comprising of (172)m US dollar of restructuring costs (2020: (157)m US dollar), (247)m US dollar of business and asset disposal costs (including impairment losses), mainly comprising 258m US dollar of non-cash impairment charge associated with Bedford Systems, a joint venture with Keurig Dr. Pepper following the announcement of the cessation of its business in December 2021 (2020: (239)m US dollar of costs mostly related to non-underlying impairment of intangible assets classified as assets held for sale and other intangibles), (105)m US dollar of costs associated with COVID-19 (2020: (182)m US dollar) which mainly relate to personal protection equipment for our colleagues, charitable donations and other costs incurred as a direct consequence of the COVID-19 pandemic, and (72)m US dollar cost related to the Zenzele Kabili scheme. During the second quarter of 2020, we reported a 2.5 billion US dollar non-cash goodwill impairment charge. The goodwill impairment charge was partially offset by a 1.9 billion US dollar gain on the disposal of the Australia operations reported in discontinued operations.

 

●

Income tax expense: 2 350m US dollar in 2021 with an effective tax rate of 28.6% compared to 1 932m US dollar in 2020 with an effective tax rate of 100.4%. The 2021 and 2020 effective tax rates are negatively impacted by the non-deductible losses from derivatives related to the hedging of share-based payment programs and the hedging of the shares issued in a transaction related to the combination with Grupo Modelo and SAB. The effective tax rate for 2020 was also negatively impacted by the non-deductible, non-cash goodwill impairment loss. The normalized effective tax rate excluding mark-to-market gains or losses linked to the hedging of our share-based payment programs was 27.9% in 2021 compared to 26.2% in 2020.

 

●

Profit attributable to non-controlling interest: 1 444m US dollar in 2021 compared to 797m US dollar in 2020.

 

●

Profit from discontinued operations: In 2020, we reported 2 055m US dollar in discontinued operations primarily attributable to an exceptional 1.9 billion US dollar gain on the divestiture of the Australian operations completed on 1 June 2020 (2021: nil).

 

AB InBev – Financial Report 2021 | 11

Liquidity position and capital resources

CASH FLOWS

 

Million US dollar		2021				2020
Cash flow from operating activities			14 799				10 891
Cash flow from investing activities			(5 878)				6 336
Cash flow from financing activities			(11 598)				(8 475)
Net increase/(decrease) in cash and cash equivalents			(2 677)				8 752

Cash flow from operating activities

 

Million US dollar		2021				2020
Profit/(loss) from continuing operations			6 114				147
Interest, taxes and non-cash items included in profit			12 693				17 024
Cash flow from operating activities before changes in working capital and use of provisions			18 806				17 171
Change in working capital			2 459				592
Pension contributions and use of provisions			(375)				(616)
Interest and taxes (paid)/received			(6 197)				(6 391)
Dividends received			106				51
Cash flow from operating activities on Australia discontinued operations			-				84
Cash flow from operating activities			14 799				10 891

Our cash flow from operating activities reached 14 799m US dollar in 2021 compared to 10 891m US dollar in 2020. The increase primarily results from higher profit and changes in working capital for 2021 compared to 2020 as our results for 2020 were negatively impacted by the COVID-19 pandemic.

Cash flow from investing activities

 

Million US dollar		2021				2020
Net capex			(5 498)				(3 687)
Acquisition and sale of subsidiaries, net of cash acquired/disposed of			(444)				(510)
Net proceeds from sale/(acquisition) of other assets			65				(292)
Proceeds from Australia divestiture			-				10 838
Cash flow from investing activities on Australia discontinued operations			-				(13)
Cash flow from investing activities			(5 878)				6 336

Our cash outflow from investing activities was 5 878m US dollar in 2021 compared to a cash inflow of 6 336m US dollar in 2020. The decrease in the cash flow from investing activities was mainly due to the exceptional 10 838m US dollar proceeds from the divestiture of the Australian business reported in 2020 and higher net capital expenditures in 2021 compared to 2020.

Our net capital expenditures amounted to 5 498m US dollar in 2021 and 3 687m US dollar in 2020. Out of the total 2021 capital expenditures approximately 44% was used to improve the company’s production facilities while 41% was used for logistics and commercial investments and 15% was used for improving administrative capabilities and for the purchase of hardware and software.

Cash flow from financing activities

 

Million US dollar		2021				2020
Dividends paid			(2 364)				(1 800)
Net (payments on)/proceeds from borrowings			(8 511)				(8 294)
Payment of lease liabilities			(531)				(461)
Sale/(purchase) of non-controlling interests and other			(192)				2 086
Cash flow from financing activities on Australia discontinued operations			-				(6)
Cash flow from financing activities			(11 598)				(8 475)

Our cash outflow from financing activities amounted to 11 598m US dollar in 2021, as compared to a cash outflow of 8 475m US dollar in 2020. The increase is primarily driven by higher dividends paid in 2021 and the issuance of a 49.9% minority stake in our US-based metal container operations to Apollo for net proceeds of 3.0 billion USD in 2020. Proactive deployment of excess cash balances toward gross debt reduction resulted in a cash outflow of 8 294m US dollar and 8 511m US dollar in 2020 and 2021, respectively.

 

AB InBev – Financial Report 2021 | 12

As of 31 December 2021, we had total liquidity of 22.2 billion US dollar, which consisted of 10.1 billion US dollar available under our Sustainability-Linked Loan Revolving Credit Facility (“SLL RCF”) and 12.1 billion US dollar 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 amounted to 76.2 billion US dollar as of 31 December 2021 as compared to 82.7 billion US dollar as of 31 December 2020. As a result of our business performance and strong cash flow generation in 2021, we reduced gross debt by nearly 10 billion US dollar to 88.8 billion US dollar as of 31 December 2021, leading to a net debt to EBITDA ratio of 3.96x. This ratio is now below 4.0x for the first time since the combination with SAB in 2016.

Net debt is defined as non-current and current interest-bearing loans and borrowings and bank overdrafts minus debt securities and cash. Net debt is a financial performance indicator that is used by our management to highlight changes in the company’s overall liquidity position. We believe that net debt is meaningful for investors as it is one of the primary measures our management uses when evaluating our progress towards deleveraging toward our optimal net debt to normalized EBITDA ratio of around 2x.

Our net debt decreased by 6.5 billion US dollar as of 31 December 2021 compared to 31 December 2020. Aside from operating results that are net of capital expenditures, the net debt is impacted mainly by the payment of interests and taxes (6.2 billion US dollar increase of net debt), dividend payments to shareholders of AB InBev and Ambev (2.4 billion US dollar) and foreign exchange impact on net debt (1.6 billion US dollar decrease of net debt).

Net debt to normalized EBITDA decreased from 4.8x for the 12-month period ending 31 December 2020 to 3.96x for the 12-month period ending 31 December 2021. Deleveraging to around 2x remains our commitment and we will prioritize debt repayment in order to meet this objective.

Consolidated equity attributable to our equity holders as at 31 December 2021 was 68 669m US dollar, compared to 68 024m US dollar as at 31 December 2020. The net increase in equity results from the profit attributable to equity shareholders partially offset by dividends paid and foreign exchange losses on translation of foreign operations primarily related to the combined effect of the weakening of the closing rates of the Colombian pesos, the Peruvian Sol, the South African rand and the Mexican pesos, partially offset by the weakening of the closing rate of the Euro, which resulted in a foreign exchange translation adjustment of 4 320m US dollar as of 31 December 2021 (decrease of equity).

Further details on interest-bearing loans and borrowings, repayment schedules and liquidity risk, are disclosed in Note 23 Interest-bearing loans and borrowings and Note 28 Risks arising from financial instruments.

As of 31 December 2021, the company’s credit rating from Standard & Poor’s was BBB+ for long-term obligations and A-2 for short-term obligations, with a stable outlook, and the company’s credit rating from Moody’s Investors Service was Baa1 for long-term obligations and P-2 for short-term obligations, with a stable outlook.

 

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Research and development

Given our focus on innovation, we place a high value on research and development. In 2021, we spent 298m US dollar in research and development (2020: 296m US dollar). The spent focused on product innovations, market research, as well as process optimization and product development.

Research and development in product innovation covers liquid, packaging and draft innovation. Product innovation consists of breakthrough innovation, incremental innovation and renovation. The main goal for the innovation process is to provide consumers with better products and experiences. This implies launching new liquid, new packaging and new draught products that deliver better performance both for the consumer and in terms of top-line results, by increasing our competitiveness in the relevant markets. With consumers comparing products and experiences offered across very different drink categories and the offering of beverages increasing, our research and development efforts also require an understanding of the strengths and weaknesses of other beverage categories, spotting opportunities for beer and developing consumer solutions (products) that better address consumer need and deliver better experience. This requires understanding consumer emotions and expectations. Sensory experience, premiumization, convenience, sustainability and design are all central to our research and development efforts.

Research and development in process optimization is primarily aimed at quality improvement, capacity increase (plant debottlenecking and addressing volume issues, while minimizing capital expenditure) and improving efficiency. Newly developed processes, materials and/or equipment are documented in best practices and shared across business regions. Current projects range from malting to bottling of finished products.

Knowledge management and learning is also an integral part of research and development. We seek to continuously increase our knowledge through collaborations with universities and other industries.

Our research and development team is briefed annually on the company’s and the business regions’ priorities and approves concepts which are subsequently prioritized for development. The research & development teams invest in both short- and long-term strategic projects for future growth, with the launch time depending on complexity and prioritization. Launch time usually falls within the next calendar year.

The Global Innovation and Technology Center (“GITeC”), located in Leuven, accommodates the Packaging, Product, Process Development teams and facilities such as Labs, Experimental Brewery and the European Central Lab, which also includes Sensory Analysis. In addition to GITeC, we also have Product, Packaging and Process development teams located in each of our geographic regions focusing on the short-term needs of such regions.

 

AB InBev – Financial Report 2021 | 14

Risks and uncertainties

Under the explicit understanding that this is not an exhaustive list, AB InBev’s major risk factors and uncertainties are listed below. There may be additional risks which AB InBev is unaware of. There may also be risks AB InBev now believes to be immaterial, but which could turn out to have a material adverse effect. Moreover, if and to the extent that any of the risks described below materialize, they may occur in combination with other risks which would compound the adverse effect of such risks. The sequence in which the risk factors are presented below is not indicative of their likelihood of occurrence or of the potential magnitude of their financial consequence.

AB InBev’s business, financial condition, cash flows and operating results have been and may continue to be negatively impacted by the COVID-19 pandemic. AB InBev has experienced disruptions to its ability to operate its production facilities in some countries, and in the future, it 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. AB InBev has also experienced constraints in its ability to source beverage containers and disruptions in the availability of transportation services and labor in certain markets, and may experience further disruption to its supply chain and distribution operations. Any sustained interruption in AB InBev’s operations or its business partners’ operations, distribution network or supply chain, or any significant continuous shortage of raw materials or other supplies could impact AB InBev’s ability to make, manufacture, distribute or sell its products or may result in an increase in its costs of production and distribution. Sales of AB InBev’s products in the on-premise channel have been significantly impacted by the implementation of social distancing and lockdown measures in most of its 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 improved as a result of the easing of social distancing and lockdown measures in many of these markets, such improvements have been, and may continue to be, impacted by the re-implementation of restrictions in certain markets due to the emergence and spread of new COVID-19 variants. Any future outbreak or recurrence of COVID-19 cases in other markets that have eased social distancing and lock down measures may similarly result in the re-implementation of such measures and a further negative impact on our sales. If the COVID-19 pandemic intensifies and expands geographically, or efforts to curb the pandemic are ineffective, its negative impacts on AB InBev’s sales could be more prolonged and may become more severe. Deteriorating economic and political conditions in many of AB InBev’s 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 its products. Furthermore, 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 AB InBev’s ability to access, or costs of, capital or borrowings, its business, its liquidity, its net debt to EBITDA ratio, credit ratings, results of operations and financial condition. Compliance with governmental measures imposed in response to COVID-19 has caused and may continue to cause us to incur additional costs, and any inability to comply with such measures can subject AB InBev to restrictions on its business activities, fines, and other penalties, any of which can adversely affect its 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 (or any future outbreak or recurrence of COVID-19 following the relaxation of social distancing and lockdown measures or the emergence and spread of new COVID-19 variants), including those described above, alone or in combination with others, may have a material adverse effect on AB InBev’s results of operations, financial condition and cash flows.

AB InBev is exposed to the risk of a global recession or a recession in one or more of its key markets, and to credit and capital market volatility and an economic or financial crisis (including as a result of the COVID-19 pandemic), or otherwise. These could result in reduced consumption or sales prices of AB InBev’s products, which in turn could result in lower revenue and reduced profit. AB InBev’s financial condition and results of operations, as well as AB InBev’s future prospects, would likely be hindered by an economic downturn in any of its key markets. Consumption of beer and other alcohol and non-alcohol beverages in many of the jurisdictions in which AB InBev operates is closely linked to general economic conditions and changes in disposable income. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on AB InBev’s ability to access capital, its business, results of operations and financial condition, and on the market price of its shares and American Depositary Shares.

AB InBev’s results of operations are affected by fluctuations in exchange rates. Any change in exchange rates between AB InBev’s operating companies’ functional currencies and the U.S. dollar will affect its consolidated income statement and balance sheet when the results of those operating companies are translated into U.S. dollar for reporting purposes as

 

AB InBev – Financial Report 2021 | 15

translational exposures are not hedged. Also, there can be no assurance that the policies in place to manage commodity price and transactional foreign currency risks to protect AB InBev’s exposure will be able to successfully hedge against the effects of such foreign exchange exposure, especially over the long-term. Further, the use of financial instruments to mitigate currency risk and any other efforts taken to better match the effective currencies of AB InBev’s liabilities to its cash flows could result in increased costs.

Following the categorization of Argentina in AB InBev’s results for the third quarter of 2018 as a country with a three-year cumulative inflation rate greater than 100%, the country is considered as a hyperinflationary economy in accordance with IFRS rules (IAS 29), resulting in the restatement of certain results for hyperinflation accounting. If the economic or political situation in Argentina further deteriorates, the South America operations may be subject to additional restrictions under new Argentinean foreign exchange, export repatriation or expropriation regimes that could adversely affect AB InBev’s liquidity and operations, and ability to access funds from Argentina.

AB InBev may not be able to obtain the necessary funding for its future capital or refinancing needs and may face financial risks due to its level of debt and uncertain market conditions. AB InBev may be required to raise additional funds for its future capital needs or to refinance its current indebtedness through public or private financing, strategic relationships or other arrangements and there can be no assurance that the funding, if needed, will be available or provided on attractive terms. AB InBev has incurred substantial indebtedness by entering into a senior credit facility and accessing the bond markets from time to time based on its financial needs, including as a result of the acquisition of SAB. The portion of AB InBev’s consolidated balance sheet represented by debt will remain significantly higher as compared to its historical position. AB InBev’s increased level of debt could have significant consequences for AB InBev, including (i) increasing its vulnerability to general adverse economic and industry conditions, (ii) limiting its flexibility in planning for, or reacting to, changes in its business and the industry in which AB InBev operates, (iii) impairing its ability to obtain additional financing in the future and limiting its ability to fund future working capital and capital expenditures, to engage in future acquisitions or development activities or to otherwise realize the value of its assets and opportunities fully, (iv) requiring AB InBev to issue additional equity (potentially under unfavorable market conditions), and (v) placing AB InBev at a competitive disadvantage compared to its competitors that have less debt. AB InBev’s ability to repay and renegotiate its outstanding indebtedness will be dependent upon market conditions. Unfavorable conditions, including significant price volatility, dislocations and liquidity disruptions in the global credit markets in recent years, as well as downward pressure on credit capacity for certain issuers without regard to those issuers’ underlying financial strength, could increase costs beyond what is currently anticipated. Such costs could have a material adverse impact on AB InBev’s cash flows, results of operations or both. Further, AB InBev may restrict the amount of dividends it will pay as a result of AB InBev’s level of debt and its strategy to give priority to deleveraging toward its optimal net debt to normalized EBITDA ratio of around 2x.

Also, a credit rating downgrade could have a material adverse effect on AB InBev’s ability to finance its ongoing operations or to refinance its existing indebtedness. In addition, a failure of AB InBev to refinance all or a substantial amount of its debt obligations when they become due, or more generally a failure to raise additional equity capital or debt financing or to realize proceeds from asset sales when needed, would have a material adverse effect on its financial condition and results of operations.

AB InBev’s results could be negatively affected by increasing interest rates or the future discontinuance of certain benchmarks. Although AB InBev enters into interest rate swap agreements to manage its interest rate risk and also enters into cross-currency interest rate swap agreements to manage both its foreign currency risk and interest-rate risk on interest-bearing financial liabilities, there can be no assurance that such instruments will be successful in reducing the risks inherent in exposures to interest rate fluctuations.

The ability of AB InBev’s subsidiaries to distribute cash upstream may be subject to various conditions and limitations. The inability to obtain sufficient cash flows from its domestic and foreign subsidiaries and affiliated companies could adversely impact AB InBev’s ability to pay dividends and otherwise negatively impact its business, results of operations and financial condition.

Changes in the availability or price of raw materials, commodities, energy and water, including as a result of currency fluctuations, constraints on sourcing and unexpected increases in tariffs on such raw materials and commodities, like aluminum, could have an adverse effect on AB InBev’s results of operations to the extent that AB InBev fails to adequately manage the risks inherent in such volatility, including if AB InBev’s hedging and derivative arrangements do not effectively or completely hedge against foreign currency risks and changes in commodity prices.

Certain of AB InBev’s operations depend on effective distribution networks to deliver its products to consumers, and distributors play an important role in distributing a significant proportion of beer and other beverages. Generally, distributors purchase AB InBev’s products from AB InBev and then on-sell them either to other distributors or points of sale. Such distributors are either government-controlled or privately owned but independent wholesale distributors for distribution of AB InBev’s products, and there can be no assurance that such distributors will not give priority to AB InBev’s competitors.

 

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Further, any inability of AB InBev to replace unproductive or inefficient distributors, who could engage in practices that harm AB InBev’s reputation as consumers look to AB InBev for the quality and availability of its products, or any limitations imposed on AB InBev to purchase or own any interest in distributors or wholesalers as a result of contractual restrictions, regulatory changes, changes in legislation or the interpretations of legislation by regulators or courts could adversely impact AB InBev’s business, results of operations and financial condition.

The continued consolidation of retailers in markets in which AB InBev operates could result in reduced profitability for the beer industry as a whole and indirectly adversely affect AB InBev’s financial results.

AB InBev relies on key third parties, including key suppliers, for a range of raw materials for its beer, alcoholic beverages and soft drinks, and for packaging material. The termination of or any material change to arrangements with certain key suppliers or the failure of a key supplier to meet its contractual obligations could have a material impact on AB InBev’s production, distribution and sale of beer, alcoholic beverages and soft drinks and have a material adverse effect on AB InBev’s business, results of operations, cash flows or financial condition. Certain of AB InBev’s subsidiaries may purchase nearly all of their key packaging materials from sole suppliers under multi-year contracts. The loss of or temporary discontinuity of supply from any of these suppliers without sufficient time to develop an alternative source could cause AB InBev to spend increased amounts on such supplies in the future. In addition, a number of key brand names are both licensed to third-party brewers and used by companies over which AB InBev does not have control. Although AB InBev monitors brewing quality to ensure its high standards, to the extent that one of these key brand names or joint ventures, companies in which AB InBev does not own a controlling interest and/or AB InBev’s licensees are subject to negative publicity, it could have a material adverse effect on AB InBev’s business, results of operations, cash flows or financial condition.

A portion of the company’s global portfolio consists of associates in new or developing markets, including investments where the company may have a lesser degree of control over the business operations. The company faces several challenges inherent to these various culturally and geographically diverse business interests. Although the company works with its associates on the implementation of appropriate processes and controls, the company also faces additional risks and uncertainties with respect to these minority investments because the company may be dependent on systems, controls and personnel that are not under the company’s control, such as the risk that the company’s associates may violate applicable laws and regulations, which could have an adverse effect on the company’s business, reputation, results of operations and financial condition.

AB InBev may have a conflict of interest with its majority-owned subsidiaries. For example, a conflict of interest could arise if the subsidiary brings a legal claim for an alleged contractual breach, which could materially and adversely affect AB InBev’s financial condition. A conflict of interest may also arise as a result of any dual roles played by AB InBev directors who may also be managers or senior officers in the subsidiary. Notwithstanding policies and procedures to address the possibility of such conflicts of interest, AB InBev may not be able to resolve all such conflicts on terms favorable to AB InBev.

The size of AB InBev, contractual limitations it is subject to and its position in the markets in which it operates may decrease its ability to successfully carry out further acquisitions and business integrations. AB InBev cannot enter into further transactions unless it can identify suitable candidates and agree on the terms with them. The size of AB InBev and its position in the markets in which it operates may make it harder to identify suitable candidates, including because it may be harder for AB InBev to obtain regulatory approval for future transactions. If appropriate opportunities do become available, AB InBev may seek to acquire or invest in other businesses; however, any future acquisition may pose regulatory, antitrust and other risks.

An inability to reduce costs could affect AB InBev’s profitability. Additionally, the Tax Matters Agreement AB InBev has entered into with Altria Group Inc. imposes some limits on the ability of the Combined Group to effect some reorganizations which it may otherwise consider.

Failure to generate significant cost savings and margin improvement through initiatives for improving operational efficiencies could adversely affect AB InBev’s profitability and AB InBev’s ability to achieve its financial goals. AB InBev is pursuing a number of initiatives to improve operational efficiency. If AB InBev fails for any reason to successfully complete these measures and programs as planned or to derive the expected benefits from these measures and programs, there is a risk of increased costs associated with these efforts, delays in benefit realization, disruption to the business, reputational damage or a reduced competitive advantage in the medium term.

AB InBev entered into a consent decree with the U.S. Department of Justice in relation to the combination with SAB, pursuant to which AB InBev’s subsidiary, Anheuser-Busch Companies, LLC, agreed not to acquire control of a distributor if doing so would result in more than 10% of its annual volume being distributed through distributorships controlled by AB InBev in the U.S. AB InBev’s compliance with its obligations under the settlement agreement is monitored by the U.S. Department of

 

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Justice and the Monitoring Trustee appointed by them. Were AB InBev to fail to fulfill its obligations under the consent decree, whether intentionally or inadvertently, AB InBev could be subject to monetary fines or other penalties.

A substantial portion of AB InBev’s operations are carried out in developing European, African, Asian and Latin American markets. AB InBev’s operations and equity investments in these markets are subject to the customary risks of operating in developing countries, which include, amongst others, political instability or insurrection, human rights concerns, external interference, financial risks, changes in government policy, political and economic changes, changes in the relations between countries, actions of governmental authorities affecting trade and foreign investment, regulations on repatriation of funds, interpretation and application of local laws and regulations, enforceability of intellectual property and contract rights, local labor conditions and regulations, lack of upkeep of public infrastructure, potential political and economic uncertainty, application of exchange controls, nationalization or expropriation, empowerment legislation and policy, corrupt business environments, crime and lack of law enforcement as well as financial risks, which include risk of illiquidity, inflation, devaluation, price volatility, currency convertibility and country default. Moreover, the economies of developing countries are often affected by changes in other developing market countries, and, accordingly, adverse changes in developing markets elsewhere in the world could have a negative impact on the markets in which AB InBev operates. Such developing market risks could adversely impact AB InBev’s business, results of operations and financial condition. Furthermore, the global reach of AB InBev’s operations exposes it to risks associated with doing business globally, including changes in tariffs. The Office of the United States Trade Representative has enacted tariffs on certain imports into the United States from China. If significant tariffs or other restrictions are placed on imports from China or any retaliatory trade measures are taken by China, this could have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade, which in turn could have a material adverse effect on AB InBev’s business in one or more of its key markets and results of operations.

Competition and changing consumer preferences in its various markets and increased purchasing power of players in AB InBev’s distribution channels could cause AB InBev to reduce prices of its products, increase capital investment, increase marketing and other expenditures or prevent AB InBev from increasing prices to recover higher costs and thereby cause AB InBev to reduce margins or lose market share. Also, innovation faces inherent risks, and the new products AB InBev introduces may not be successful, while competitors may be able to respond more quickly to the emerging trends, such as the increasing consumer preference for “craft beers” produced by smaller microbreweries. In recent years, many industries have seen disruption from non-traditional producers and distributors, in many cases, from digital only competitors. AB InBev’s business could be negatively affected if it is unable to anticipate changing consumer preference for such platforms. Any of the foregoing could have a material adverse effect on AB InBev’s business, financial condition and results of operations.

If any of AB InBev’s products is defective or found to contain contaminants, AB InBev may be subject to product recalls or other associated liabilities. Although AB InBev maintains insurance against certain product liability (but not product recall) risks, it may not be able to enforce its rights in respect of these policies and, in the event that contamination or a defect occurs, any amounts it recovers may not be sufficient to offset any damage it may suffer, which could adversely impact its business, reputation, prospects, results of operations and financial condition.

In recent years, there has been public and political attention directed at the soft drinks and alcoholic beverage industries, as a result of a rising health and well-being trend. Despite the progress made on AB InBev’s Smart Drinking Goals, AB InBev may be criticized and experience an increase in the number of publications and studies debating its efforts to reduce the harmful consumption of alcohol, as advocates try to shape the public discussions. AB InBev may also be subject to laws and regulations aimed at reducing the affordability or availability of beer in some of its markets. Additional regulatory restrictions on AB InBev’s business, such as those on the legal minimum drinking age, product labeling, opening hours or marketing activities, may cause the social acceptability of beer to decline significantly and consumption trends to shift away from it, which would have a material adverse effect on AB InBev’s business, financial condition and results of operations.

Negative publicity and campaigns by activists, whether or not warranted, connecting us, our supply chain or our business partners with workplace and human rights issues, whether actual or perceived, could adversely impact our corporate image and reputation and may cause our business to suffer. We have made a number of commitments to respect human rights, including our commitment to the principles and guidance contained in the UN Guiding Principles on Business and Human Rights, through our policies. Allegations, even if untrue, that we are not respecting our commitments or actual or perceived failure by our suppliers or other business partners to comply with applicable workplace and labor laws, including child labor laws, or their actual or perceived abuse or misuse of migrant workers could negatively affect our overall reputation and brand image.    

AB InBev could incur significant costs as a result of compliance with, and/or violations of or liabilities under, various regulations that govern AB InBev´s operations or the operations of its licensed third parties, including the General Data Protection Regulation adopted in the European Union, which was fully implemented in May 2018.

 

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A wholly-owned subsidiary of Labatt Breweries of Canada (“Labatt”), the Canadian subsidiary of our subsidiary Ambev, researches non-alcohol beverages containing tetrahydrocannabinol (“THC”) and cannabidiol (“CBD”), both derived from cannabis, and also commercializes a non-alcohol CBD beverage in Canada only, which could lead to increased legal, reputational and financial risks as the laws and regulations governing recreational cannabis are still developing, including in ways that AB InBev may not foresee. For instance, the involvement in the legal cannabis industry in Canada may invite new regulatory and enforcement scrutiny in other markets. Cannabis remains illegal in many markets in which AB InBev operates, and violations of Law could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings or criminal charges. Furthermore, the political environment and popular support for cannabis legalization has changed quickly and remains in flux.

AB InBev is now, and may in the future be, a party to legal proceedings and claims, including collective suits (class actions), and significant damages may be asserted against it. Given the inherent uncertainty of litigation, it is possible that AB InBev might incur liabilities as a consequence of the proceedings and claims brought against it, including those that are not currently believed by it to be reasonably possible, which could have a material adverse effect on AB InBev’s business, results of operations, cash flows or financial position. Important contingencies are disclosed in Note 30 Contingencies of the 2021 consolidated financial statements.

AB InBev may be subject to adverse changes in taxation, which makes up a large proportion of the cost of beer charged to consumers in many jurisdictions. Increases in excise and other indirect taxes applicable to AB InBev’s products tend to adversely affect AB InBev’s revenue or margins, both by reducing overall consumption and by encouraging consumers to switch to other categories of beverages, including unrecorded or informal alcohol products. Minimum pricing is another form of fiscal regulation that can affect AB InBev’s profitability. Furthermore, AB InBev may be subject to increased taxation on its operations by national, local or foreign authorities, to higher corporate income tax rates or to new or modified taxation regulations and requirements (including potential changes in the U.S and Brazil). For example, in response to the increasing globalization and digitalization of trade and business operations, the Organization for Economic Co-operation and Development (OECD) is working on proposals for international tax reform as an extension of its Base Erosion and Profit Shifting project. The proposals are comprised in a two-pillar approach: Pillar One, which is focused on the re-allocation of some of the taxable profits of multinational enterprises to the markets where consumers are located; and Pillar Two, which is focused on establishing a global minimum corporate taxation rate. In June 2021, the finance ministers of the G7 nations announced an agreement on the principles of the two-pillar approach. Subsequently, in October 2021, the OECD/G20 Inclusive Framework announced that 136 countries and jurisdictions had joined an agreement on the two-pillar approach, including the establishment of a global minimum corporate tax rate of 15%. The OECD aims for a multilateral convention on Pillar One to be signed in 2022 and implemented in 2023. The aim for Pillar Two is for domestic legislation to be introduced during the course of 2022 and become effective in 2023 and for treaty changes to be implemented by a multilateral instrument in 2024. Changes in tax treaties, the introduction of new legislation, updates to existing legislation, or changes to regulatory interpretations of existing legislation as a result of these or similar proposals could impose additional taxes on businesses and increase the complexity, burden and cost of tax compliance in countries where we operate. An increase in excise taxes or other taxes could adversely affect the financial results of AB InBev as well as its results of operations.

Antitrust and competition laws and changes in such laws or in the interpretation and enforcement thereof, as well as being subject to regulatory scrutiny, could affect AB InBev’s business or the businesses of its subsidiaries. For example, in connection with AB InBev’s previous acquisitions, various regulatory authorities have imposed (and may impose) conditions with which AB InBev is required to comply. The terms and conditions of certain of such authorizations, approvals and/or clearances required, among other things, the divestiture of the company’s assets or businesses to third parties, changes to the company’s operations, or other restrictions on the company’s ability to operate in certain jurisdictions. Such actions could have a material adverse effect on AB InBev’s business, results of operations, financial condition and prospects. In addition, such conditions could diminish substantially the synergies and advantages which the company expects to achieve from such future transactions.

AB InBev operates its business and markets its products in emerging markets that, as a result of political and economic instability, a lack of well-developed legal systems and potentially corrupt business environments, present it with political, economic and operational risks. Although AB InBev is committed to conducting business in a legal and ethical manner in compliance with local and international statutory requirements and standards applicable to its business, there is a risk that the employees or representatives of AB InBev’s subsidiaries, affiliates, associates, joint ventures/operations or other business interests may take actions that violate applicable laws and regulations that generally prohibit the making of improper payments to foreign government officials for the purpose of obtaining or keeping business, including laws relating to the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act.

Although AB InBev’s operations in Cuba are quantitatively immaterial, its overall business reputation may suffer or it may face additional regulatory scrutiny as a result of Cuba being a target of U.S. economic and trade sanctions. In addition, in

 

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January 2021, the former Trump Administration designated Cuba as a state sponsor of terrorism. If investors decide to liquidate or otherwise divest their investments in companies that have operations of any magnitude in Cuba, the market in and value of AB InBev’s securities could be adversely impacted. In addition, Title III of U.S. legislation known as the “Helms-Burton Act” authorizes private lawsuits for damages against anyone who traffics in property confiscated without compensation by the Government of Cuba from persons who at the time were, or have since become, nationals of the United States. Although this section of the Helms-Burton Act has been suspended by discretionary presidential action since its inception in 1996, on 2 May 2019, the former Trump Administration activated Title III of the Helms-Burton Act, thereby allowing nationals of the United States that hold claims under the Helms-Burton Act to file suit in U.S. federal court against all persons trafficking in property confiscated by the Cuban government.

As a result of the activation of Title III of the Helms-Burton Act, AB InBev may be subject to potential U.S. litigation exposure beginning 2 May 2019, including claims accrued during the prior suspension of Title III of the Helms-Burton Act. Given the unprecedented activation of Title III of the Helms-Burton Act, there is substantial uncertainty as to how the statute will be interpreted by U.S. courts. AB InBev has received notice of a claim purporting to be made under the Helms-Burton Act. It remains unclear how the activation of Title III of the Helms-Burton Act will impact AB InBev’s U.S. litigation exposure with respect to this notice of claim.

AB InBev relies on the reputation of its brands and its success depends on its ability to maintain and enhance the image and reputation of its existing products and to develop a favorable image and reputation for new products. An event, or series of events, that materially damages the reputation of one or more of AB InBev’s brands could have an adverse effect on the value of that brand and subsequent revenues from that brand or business. Further, any restrictions on the permissible advertising style, media channels and messages used may constrain AB InBev’s brand building potential and thus reduce the value of its brands and related revenues.

AB InBev may not be able to protect its current and future brands and products and defend its intellectual property rights, including trademarks, patents, domain names, trade secrets and know-how, which could have a material adverse effect on its business, results of operations, cash flows or financial condition, and in particular, on AB InBev’s ability to develop its business.

If the business of AB InBev does not develop as expected, or if the adverse economic impacts of the COVID-19 pandemic continue, impairment charges on goodwill or other intangible assets may be incurred in the future that could be significant and that could have an adverse effect on AB InBev’s results of operations and financial condition.

Climate change or other environmental concerns, or legal, regulatory or market measures to address climate change or other environmental concerns, could have a long-term, material adverse impact on AB InBev’s business and results of operations. In addition, social attitudes, customer preferences and investor sentiment are increasingly influenced by environmental, social and corporate governance (“ESG”) considerations, and as a result AB InBev may face pressure from its shareholders, regulators, suppliers, customers or consumers to further address ESG-related concerns, and may be subject to regulatory inquiry or legal action. Further, water scarcity or poor water quality may affect AB InBev by increasing production costs and capacity constraints, which could adversely affect AB InBev’s business and results of operations. Additionally, AB InBev’s inability to meet its compliance obligations under EU emissions trading regulations may also have an adverse impact on AB InBev’s business and results of operations.

AB InBev’s operations are subject to environmental regulations, which could expose it to significant compliance costs and litigation relating to environmental issues.

Further, AB InBev may be exposed to labor strikes, disputes and work stoppages or slowdowns, within its operations or those of its suppliers, or an interruption or shortage of raw materials for any other reason that could lead to a negative impact on AB InBev’s costs, earnings, financial condition, production level and ability to operate its business. AB InBev’s production may also be affected by work stoppages or slowdowns that affect its suppliers, distributors and retail delivery/logistics providers as a result of disputes under existing collective labor agreements with labor unions, in connection with negotiations of new collective labor agreements, as a result of supplier financial distress or for other reasons. A work stoppage or slowdown at AB InBev’s facilities could interrupt the transport of raw materials from its suppliers or the transport of its products to its customers. Such disruptions could put a strain on AB InBev’s relationships with suppliers and customers and may have lasting effects on its business even after the disputes with its labor force have been resolved, including as a result of negative publicity.

AB InBev relies on information and operational technology systems, networks and services to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution and consumer marketing, and process, transmit, and store electronic information. Although AB InBev takes various actions to prevent cyber-attacks and to minimize potential technology disruptions, such disruptions could impact AB InBev’s business and expose it to legal claims or regulatory penalties. For example, if outside parties gained access to AB InBev’s confidential data or strategic

 

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information and appropriated such information or made such information public, this could harm AB InBev’s reputation or its competitive advantage, or could expose AB InBev or its customers to a risk of loss or misuse of information. More generally, technology disruptions can have a material adverse effect on AB InBev’s business, results of operations, cash flows or financial condition.

AB InBev may not be able to recruit or retain key personnel and successfully manage them, which could disrupt AB InBev’s business and have an unfavorable material effect on AB InBev’s financial position, its income from operations and its competitive position.

AB InBev’s business and operating results could be negatively impacted by social, technical, natural, physical, public health or other disasters.

Although AB InBev maintains insurance policies to cover various risks, it also uses self-insurance for most of its insurable risks. Should an uninsured loss or a loss in excess of insured limits occur, this could adversely impact AB InBev’s business, results of operations and financial condition.

AB InBev’s ordinary shares currently trade on Euronext Brussels in euros, the Johannesburg Stock Exchange in South African rand, the Mexican Stock Exchange in Mexican pesos and its ordinary shares represented by American Depositary Shares (the “ADSs”) trade on the New York Stock Exchange in U.S. dollars. Fluctuations in the exchange rates between the euro, the South African rand, the Mexican peso and the U.S. dollar may result in temporary differences between the value of AB InBev’s ordinary shares trading in different currencies, and between its ordinary shares and its ADSs, which may result in heavy trading by investors seeking to exploit such differences.

RISKS ARISING FROM FINANCIAL INSTRUMENTS

Note 28 of the 2021 consolidated financial statements on Risks arising from financial instruments contain detailed information on the company’s exposures to financial risks and its risk management policies.

Changes in labels of alternative performance measurements (“APMs”)

Following a report on European Union (EU) issuers’ use of Alternative Performance Measures (i.e., non-IFRS measures, or “APMs”), issued by the European Securities and Markets Authority (ESMA) in December 2019, the company has relabeled “non-recurring” items to “non-underlying” items.

Events after the balance sheet date

Please refer to Note 33 Events after the balance sheet date of the consolidated financial statements.

Corporate governance

For information with respect to Corporate Governance, please refer to the Corporate Governance section, which forms an integral part of our annual report.

 

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Statement of the Board of Directors

 

 

The Board of Directors of AB InBev SA/NV certifies, on behalf and for the account of the company, that, to their knowledge, (a) the financial statements which have been prepared in accordance with International Financial Reporting Standards give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the entities included in the consolidation as a whole and (b) the management report includes a fair review of the development and performance of the business and the position of the company and the entities included in the consolidation as a whole, together with a description of the principal risks and uncertainties they face.

 

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Independent auditors’ report

 

 

 

                     

STATUTORY AUDITOR’S REPORT TO THE GENERAL SHAREHOLDERS’ MEETING OF ANHEUSER-BUSCH INBEV NV/SA ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021

 

 

We present to you our statutory auditor’s report in the context of our statutory audit of the consolidated financial statements of Anheuser-Busch InBev NV/SA (the “Company”) and its subsidiaries (jointly “the Group”). This report includes our report on the consolidated financial statements, as well as the other legal and regulatory requirements. This forms part of an integrated whole and is indivisible.

We have been appointed as statutory auditor by the general meeting d.d. 24 April 2019, following the proposal formulated by the board of directors and following the recommendation by the audit committee and the proposal formulated by the works’ council. Our mandate will expire on the date of the general meeting which will deliberate on the annual accounts for the year ended 31 December 2021. We have performed the statutory audit of the consolidated financial statements of Anheuser-Busch InBev NV/SA for three consecutive years.

Report on the consolidated financial statements

Unqualified opinion

We have performed the statutory audit of the Group’s consolidated financial statements, which comprise the consolidated statement of financial position as at 31 December 2021, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies and other explanatory information, and which is characterised by a consolidated statement of financial position total of USD 217 627 million and a profit for the year of USD 6 114 million.

In our opinion, the consolidated financial statements give a true and fair view of the Group’s net equity and consolidated financial position as at 31 December 2021, and of its consolidated financial performance and its consolidated cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium.

Basis for unqualified opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in Belgium. Furthermore, we have applied the International Standards on Auditing as approved by the IAASB which are applicable to the year-end and which are not yet approved at the national level. Our responsibilities under those standards are further described in the “Statutory auditor’s responsibilities for the audit of the consolidated financial statements” section of our report. We have fulfilled our ethical responsibilities in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Belgium, including the requirements related to independence. We have obtained from the board of directors and Company officials the explanations and information necessary for performing our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

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Key Audit Matter		How our audit addressed the key audit matter
Impairment of goodwill and intangible assets with indefinite useful life
As described in Notes 4, 14 and 15 to the consolidated financial statements, the Company has recorded goodwill and intangible assets with indefinite useful life for an amount of $115 796 million and $38 320 million, respectively, as of 31 December, 2021. Impairment analyses of goodwill and indefinite-lived intangible assets are performed annually and whenever a triggering event has occurred, in order to determine whether the carrying value exceeds the recoverable amount.   Impairment tests are conducted by management, in accordance with IAS 36, in which management applies a discounted cash flow approach based on current acquisition valuation models for its cash-generating units showing an invested capital to EBITDA multiple above 9x and valuation multiples for its other cash-generating units. The Company uses a strategic plan based on external sources in respect of macro-economic assumptions, industry, inflation and foreign exchange rates, past experience and identified initiatives in terms of market share, revenue, variable and fixed cost, capital expenditure and working capital assumptions. Management’s cash flow projections include significant judgement, estimates and assumptions, related to the weighted average cost of capital and the terminal growth rate.   The principal considerations for our determination that performing procedures relating to the impairment of goodwill and intangible assets with indefinite useful life is a key audit matter are the following: (i) the high degree of auditor judgment and subjectivity in applying procedures relating to the valuation of the cash-generating units due to the significant amount of judgment by management when developing this estimate, (ii) the audit effort involved the use of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained from these procedures and (iii) the significant audit effort necessary in evaluating the significant assumptions relating to the estimate, related to the weighted average cost of capital and the terminal growth rate.		Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill and indefinite-lived asset impairment testing, including controls over the valuation of the Company’s cash-generating units.   These procedures also included, among others, testing management’s process for developing the fair value estimates; evaluating the appropriateness of the discounted cash flow model; testing the completeness, accuracy, and relevance of underlying data used in the models; and, with the assistance of professionals with specialized skill and knowledge, evaluating the significant assumptions used by management, related to the weighted average cost of capital and the terminal growth rate.   Evaluating management’s assumptions involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the cash-generating unit, (ii) the consistency with external market and industry data, (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit and (iv) analysis of sensitivities in the Company’s discounted cash flow model.
Key Audit Matter		How our audit addressed the key audit matter
Uncertain tax positions
As described in Notes 4 and 30 to the consolidated financial statements, significant judgment by management is required in determining the worldwide provision for income tax. There are some transactions and calculations for which the ultimate tax determination is uncertain. Some subsidiaries within the group are involved in tax audits and local enquiries usually in relation to prior years. Investigations and negotiations with local tax authorities are ongoing in various jurisdictions at the balance sheet date and, by their nature, these can take considerable time to conclude. In assessing the amount of any income tax provisions to be recognized in the consolidated financial statements, estimation is made of the expected successful settlement of these matters.   The principal considerations for our determination that performing procedures relating to uncertain tax positions is a key audit matter are the following (i) the high degree of auditor judgment and subjectivity in applying procedures related to uncertain tax positions due to the significant amount of judgment by management when developing this estimate, including a high degree of estimation uncertainty relative to the numerous and complex tax laws, frequency of tax audits, and the considerable time to conclude investigations and negotiations with local tax authorities as a result of such audits, and (ii) the involvement of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained from these procedures.		Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to completeness of the uncertain tax positions, as well as controls over measurement of the liability.   These procedures also included, among others, (i) testing the information used in the calculation of the income tax provisions, including intercompany agreements, international, federal, and state filing positions, and the related final tax returns; (ii) testing the calculation of the income tax provision by jurisdiction, including management’s assessment of the technical merits of tax positions and estimates of the amount of tax benefit expected to be sustained; (iii) testing the completeness of management’s assessment of both the identification of uncertain tax positions and possible outcomes thereof; and (iv) evaluating the status and results of income tax audits by the relevant tax authorities.   Professionals with specialized skill and knowledge were used to assist in the evaluation of the completeness and measurement of the Company’s uncertain tax positions, including evaluating the reasonableness of management’s assessment of the chance of loss related to tax positions and the application of relevant tax laws.

 

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Responsibilities of the board of directors for the preparation of the consolidated financial statements

The board of directors is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium, and for such internal control as the board of directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the board of directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the board of directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Statutory auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

In performing our audit, we comply with the legal, regulatory and normative framework applicable to the audit of the consolidated financial statements in Belgium. A statutory audit does not provide any assurance as to the Group’s future viability nor as to the efficiency or effectiveness of the board of directors’ current or future business management at Group level. Our responsibilities in respect of the use of the going concern basis of accounting by the board of directors’ are described below.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

●

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

●

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control;

●

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the board of directors;

●

Conclude on the appropriateness of the board of directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our statutory auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our statutory auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern;

●

Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation;

●

Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with the audit committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the audit committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the audit committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter.

Other legal and regulatory requirements

Responsibilities of the board of directors

The board of directors is responsible for the preparation and the content of the directors’ report on the consolidated financial statements.

 

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Statutory auditor’s responsibilities

In the context of our engagement and in accordance with the Belgian standard which is complementary to the International Standards on Auditing (ISAs) as applicable in Belgium, our responsibility is to verify, in all material respects, the directors’ report on the consolidated financial statements and to report on these matters.

Aspects related to the directors’ report on the consolidated financial statements

In our opinion, after having performed specific procedures in relation to the directors’ report on the consolidated financial statements, this directors’ report is consistent with the consolidated financial statements for the year under audit, and it is prepared in accordance with article 3:32 of the Companies’ and Associations’ Code.

In the context of our audit of the consolidated financial statements, we are also responsible for considering, in particular based on the knowledge acquired resulting from the audit, whether the directors’ report is materially misstated or contains information which is inadequately disclosed or otherwise misleading. In light of the procedures we have performed, there are no material misstatements we have to report to you.

The non-financial information is included in a separate report of the directors’ report which is part of section “2021 AB InBev Environmental, Social & Governance Report” of the annual report. The report of non-financial information contains the information required by virtue of article 3:32, §2 of the Companies’ and Associations’ Code, and agrees with the consolidated accounts for the same year. The Company has prepared the non-financial information, based on reference framework Global Reporting Initiative (GRI) Standards and relevant United Nations Sustainable Development Goals. However, in accordance with article 3:80, §1, 5° of the Companies’ and Associations’ Code, we do not express an opinion as to whether the non-financial information has been prepared in accordance with the said framework as disclosed in the separate report of the directors’ report on the consolidated accounts.

Statement related to independence

 

●

Our registered audit firm and our network did not provide services which are incompatible with the statutory audit of the consolidated financial statements, and our registered audit firm remained independent of the Group in the course of our mandate.

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The fees for additional services which are compatible with the statutory audit of the consolidated financial statements referred to in article 3:65 of the Companies’ and Associations’ Code are correctly disclosed and itemized in the notes to the consolidated financial statements.

European Uniform Electronic Format (ESEF)

We have also verified, in accordance with the draft standard on the verification of the compliance of the financial statements with the European Uniform Electronic Format (hereinafter “ESEF”), the compliance of the ESEF format with the regulatory technical standards established by the European Delegate Regulation No. 2019/815 of 17 December 2018 (hereinafter: “Delegated Regulation”). The board of directors is responsible for the preparation, in accordance with ESEF requirements, of the consolidated financial statements in the form of an electronic file in ESEF format (hereinafter “consolidated financial statements”) included in the annual financial report.

Our responsibility is to obtain sufficient appropriate evidence to conclude that the format and marking language of the digital consolidated financial statements comply in all material respects with the ESEF requirements under the Delegated Regulation.

Based on the work we have performed, we believe that the format of and marking of information in the digital consolidated financial statements included in the annual financial report of Anheuser-Busch InBev NV/SA per 31 December 2021 comply in all material respects with the ESEF requirements under the Delegated Regulation.

Other statements

This report is consistent with the additional report to the audit committee referred to in article 11 of the Regulation (EU) N°537/2014.

Diegem, 23 February 2022

The statutory auditor

PwC Bedrijfsrevisoren BV / Reviseurs d’Entreprises SRL

Represented by

 

Koen Hens

Statutory Auditor

 

AB InBev – Financial Report 2021 | 26

Consolidated financial statements

 

 

Consolidated income statement

 

For the year ended 31 December   Million US dollar, except earnings per shares in US dollar		Notes		2021				2020
Revenue					54 304				46 881
Cost of sales					(23 097)				(19 634)
Gross profit					31 207				27 247
Distribution expenses					(5 889)				(5 104)
Sales and marketing expenses					(7 292)				(6 861)
Administrative expenses					(4 394)				(3 404)
Other operating income/(expenses)		7			805				845
Profit from operations before non-underlying items					14 438				12 723
COVID-19 costs		8			(105)				(182)
Restructuring		8			(172)				(157)
Business and asset disposal (including impairment losses)		8			(247)				(239)
Acquisition costs business combinations		8			(17)				(25)
Zenzele Kabili costs		8			(72)				-
Impairment of goodwill		8			-				(2 500)
Profit from operations					13 824				9 620
Finance cost		11			(5 234)				(6 601)
Finance income		11			431				642
Non-underlying net finance income/(cost)		11			(806)				(1 738)
Net finance income/(cost)					(5 609)				(7 697)
Share of result of associates and joint ventures		16			248				156
Profit before tax					8 463				2 079
Income tax expense		12			(2 350)				(1 932)
Profit from continuing operations					6 114				147
Profit from discontinued operations		21			-				2 055
Profit of the period					6 114				2 202
Profit/(loss) from continuing operations attributable to:
Equity holders of AB InBev					4 670				(650)
Non-controlling interest					1 444				797
Profit of the period attributable to:
Equity holders of AB InBev					4 670				1 405
Non-controlling interest					1 444				797
Basic earnings per share		22			2.33				0.70
Diluted earnings per share		22			2.28				0.69
Basic earnings per share from continuing operations		22			2.33				(0.33)
Diluted earnings per share from continuing operations		22			2.28				(0.33)
Basic earnings per share before non-underlying items and discontinued operations¹		22			2.85				1.91
Diluted earnings per share before non-underlying items and discontinued operations¹		22			2.80				1.87
Underlying earnings per share1		22			2.88				2.51

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

 

 

¹ Basic earnings per share and diluted earnings per share before non-underlying items and discontinued operations and Underlying earnings per share are not defined metrics in IFRS. Refer to Note 22 Changes in equity and earnings per share for more details.

 

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Consolidated statement of comprehensive income/(loss)

 

For the twelve-month period ended 31 December   Million US dollar		Notes				2021				2020
Profit of the period							6 114				2 202
Other comprehensive income/(loss): items that will not be reclassified to profit or loss:
Re-measurements of post-employment benefits			22				504				(263)
							504				(263)
Other comprehensive income/(loss): items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations			22				(4 681)				(10 951)
Effective portion of changes in fair value of net investment hedges							156				479
Cash flow hedges recognized in equity							1 060				739
Cash flow hedges and cumulative translation adjustments reclassified from equity to profit or loss in relation to Australia divestiture			22				-				426
Cash flow hedges reclassified from equity to profit or loss							(920)				(533)
							(4 385)				(9 841)
Other comprehensive income/(loss), net of tax							(3 881)				(10 104)
Total comprehensive income/(loss)							2 233				(7 901)
Attributable to:
Equity holders of AB InBev							934				(8 156)
Non-controlling interest							1 299				255

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

 

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Consolidated statement of financial position

 

As at   Million US dollar		Notes		31 December 2021				31 December 2020
ASSETS
Non-current assets
Property, plant and equipment		13			26 678				26 419
Goodwill		14			115 796				120 971
Intangible assets		15			40 430				41 527
Investments in associates and joint ventures		16			5 874				6 143
Investment securities		20			161				137
Deferred tax assets		17			1 969				2 019
Employee benefits		24			5				6
Income tax receivables					1 137				869
Derivatives		28			48				138
Trade and other receivables		19			1 580				1 661
Total non-current assets					193 678				199 891
Current assets
Investment securities		20			374				396
Inventories		18			5 399				4 482
Income tax receivables					381				655
Derivatives		28			621				827
Trade and other receivables		19			5 046				4 833
Cash and cash equivalents		20			12 097				15 252
Assets classified as held for sale		21			30				74
Total current assets					23 949				26 519
Total assets					217 627				226 410
EQUITY AND LIABILITIES
Equity
Issued capital		22			1 736				1 736
Share premium					17 620				17 620
Reserves					15 431				17 798
Retained earnings					33 882				30 870
Equity attributable to equity holders of AB InBev					68 669				68 024
Non-controlling interests		32			10 671				10 327
Total equity					79 340				78 351
Non-current liabilities
Interest-bearing loans and borrowings		23			87 369				95 478
Employee benefits		24			2 261				2 970
Deferred tax liabilities		17			12 204				12 627
Income tax payables					726				808
Derivatives		28			100				1 759
Trade and other payables		27			1 008				1 522
Provisions		26			436				544
Total non-current liabilities					104 104				115 707
Current liabilities
Bank overdrafts		20			53				5
Interest-bearing loans and borrowings		23			1 408				3 081
Income tax payables					1 334				1 036
Derivatives		28			5 786				5 046
Trade and other payables		27			25 434				22 965
Provisions		26			169				219
Total current liabilities					34 184				32 352
Total equity and liabilities					217 627				226 410

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

 

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