Earnings Call: Q2 2019

Jul 25, 2019

Welcome to the Anheuser Busch InBev Second Quarter 2019 Earnings Conference Call and Webcast. Hosting the today from AB InBev are Mr. Carlos Brito, Chief Executive Officer and Mr. Felipe Dutra, Chief Financial and Solutions Officer. To access the slides accompanying today's call, please visit AB InBev's website now at www.ab inbev.com and click on the Investors tab in the Results Center page. Today's webcast will be available for on demand playback later today. At this time, all participants have been placed in a listen only mode and the floor will be open for your questions following the presentation. Some of the information provided during the conference call may contain statements of future expectations and other forward looking statements. These expectations are based on management's current views and assumptions and involve known and unknown risks and uncertainties. It is possible that AB InBev's actual results and financial condition may differ possibly materially from the anticipated results and financial condition indicated in these forward looking statements. For a discussion of some of the risks and important factors that could affect AB InBev's future results, see Risk Factors in the company's latest 20 F filed with the Securities and Exchange Commission on the 22nd March 2019. AB InBev assumes no obligation It is now my pleasure to turn the floor over to Mr. Carlos Breter. Sir, you may begin. Thank you, Maria, and good morning, good afternoon, everyone. Welcome to our 2nd quarter and half year twenty nineteen earnings call. Today, I'll be taking you through the highlights of the Q2, then spending some time discussing our Middle Americas region before handing over to Felipe, who'll discuss our financials. We'll then take your questions. Let's start with the highlights. This quarter, we delivered our best quarterly performance volume performance in more than 5 years, with total volumes growing by 2.1%. A broad based group of markets contributed to the strong results, including Mexico, Brazil, Europe, South Africa, Nigeria, Australia and Colombia. Revenue grew by 6.2% and EBITDA grew by more than 9% with margin expansion of 100 and 23 basis points to 42%. This was primarily due to the strong top line performance with healthy volume growth enhanced by favorable brand mix as well as ongoing cost discipline, partially offset by significant commodity and transactional currency headwinds a result of the timing of our hedges. We expect that these headwinds will pick up in the Q3 before moderating in the Q4. Our full year guidance remains unchanged. Our performance this quarter was supported by the successful execution of our premiumization strategy, led by the double digit revenue growth of both the high end company and our global brands outside of their home markets. This reinforces our condition that a diverse portfolio of brands is critical to win in the premium segment. Furthermore, this quarter, we reached a major milestone on the path to achieving our 2025 sustainability goals. We're now halfway to reaching our goal of securing 100 percent of our ports of electricity from renewable sources. We remain firmly committed to creating a better world for all our stakeholders, while creating value for our business. Let me now take you through the key figures for the quarter. In the second quarter, our revenues grew by 6.2 percent with revenue per hectoliter growth of 3.8%. Total volumes grew by 2.1%, which is consistent with our objective to achieve more balanced top line growth. Our beer volumes grew by 2.2%, while non beer volumes increased by 1.8%. Healthy volume performance coupled with favorable brand mix, operating leverage and continued cost discipline resulted in EBITDA growth of 9.4% and margin expansion of more than 120 basis points to an EBITDA margin of 42%. This result is supported by favorable comparable as our sales and marketing investments in 2018 were weighted to the first half of the year due to the FIFA World Cup. This year, we expect that our sales and marketing investments will be much more balanced throughout the year, resulting in a more difficult comparable in the second half, particularly in the third quarter. Underlying EPS increased by $0.06 to $1.16 in the quarter as a result of the very strong performance. Deleveraging to our optimal capital structure of a net debt to EBITDA ratio of around 2x remains a priority for us. And in the first half of this year, our net debt to EBITDA ratio decreased from 4.61x at the end of 20 18 to 4.58x. We expect to deliver further progress on deleveraging by the end of 2019 as the majority of our cash flow is generated in the second half of the year. Our global brands continue to lead our growth with global revenue up by 8% and by 11.3% outside of the brand's home markets, where they typically command a premium price point. Budweiser grew revenue by 5.6% outside of the U. S, a solid result in light of the fact it was lapping its sponsorship of the 2018 FIFA World Cup, which was our largest ever commercial activation. Budweiser continues to strengthen its connection to football as the brand recently announced its multiyear sponsorship of the Premier League and La Liga, 2 of the top international football leagues. Stella Artois grew revenue by nearly 12 Corona, our most premium global brand, accelerated its growth in the Q2 with revenues up by nearly 24% outside of Mexico. It also achieved its goal of cleaning up 100 islands, 1 year ahead of schedule, demonstrating our brand's commitment to a better world. I'm especially proud of our success yet again at this year's Cannes Lions International Festival of Creativity, the largest gathering of the advertising and creative communications industry. We won 20 awards across 7 of our brands and 4 of our markets, testament to our persistent focus on brand building and creativity. One major reason why our brands are sold out by consumers is their connection with key fashion points. In amongst these fashion points, football is far away the number 1. This quarter, we have a lot of exciting news to share about our brand's connections to the world of football. In addition to Budweiser's sponsorship of the Premier League and La Liga, the brand also became the 1st official beer sponsor of the U. S. National Women's Soccer League, exciting partnership in the home of the reigning female football champions of the world. Many of our local brands, especially those in the classic largest space also showed their natural fight through activations around the Sears Copa America Championship, including Killness in Argentina, Aguila in Colombia and Brana in Brazil, where the national team won on their own turf. As a long time partner of the FIFA World Cup and supporter of several football leagues and national teams worldwide, we'll continue to expand our support for the world's game and connect to millions of football fans around the world. Shifting gears now to our commitment to a better world. As I mentioned earlier, we're now halfway to achieving our goal of securing 100% of our purchased electricity from renewable sources at rates that are more competitive than other existing sources. We also launched the road safety toolkit in partnership United Nations Institute For Training and Research, UNITAR, which is able to provide governments throughout the world with a proven methodology to design and implement locally driven solutions to reduce road traffic injuries and fatalities. I'd also like to highlight a very exciting achievement in South Africa. Broad based Black Economic Empowerment, commonly referred to as BBBEE for short, is a national program aimed at empowering previously disadvantaged groups and enhancing the South African economy. I'm honored to announce that we have achieved level 3 status for the first time in the company's history. As one of the country's leading corporate citizens, we believe that the transformation and the empowerment of communities in which we operate is critical to our future growth and success. Now I'd like to take you through some of the quarterly highlights from our major markets. Further details can be found in our Q2 2019 results press release published earlier today. In the U. S, we delivered strong revenue and EBITDA growth as a result of ongoing premiumization and the success of our innovation portfolio coupled with the price increase in April that was earlier than in prior years. We estimate the market share decline of 55 basis points in the quarter, in part impacted by the earlier price increase. We're committed to leading future growth in the U. S. Through successful execution of our commercial priorities. In Mexico, we grew revenue and volume by double digits due to broad based growth across our core and premium portfolios and favorable Easter time, resulting in accelerated market share gains. In Colombia, we grew volumes by more than 3% with revenue growth of mid single digits. We remain focused on growing the beer category and estimate that we gained 30 basis points of share of total alcohol in the quarter. The strong result was led by our global brand portfolio, which grew by more than 50%. Brazil had another quarter of healthy volume growth with both beer and non beer volumes growing ahead of their respective industries. In beer, our premium brands led by our global brand portfolio as well as our local champions delivered double digit volume growth and share gains within the segment. In June, we launched another brand in line with our smart affordability strategy called Nezhitma, brewed with ingredients grown by local farmers in the state of Ceara, following the continued success of Nossa and Magnifica. These brands increase our presence in the value segment at comparable margins to our core portfolio. South Africa delivered an improved performance this quarter despite a challenging macroeconomic environment, which has helped by the timing of Easter, which was helped by the timing of Easter. We grew volume by mid single digits, leading to continued share gains of total alcohol. Revenue grew by high single digits supported by the ongoing premiumization of our portfolio. The premium segment where we under indexed continues to grow faster than the total industry, and we outperformed the segment once again led by the triple digit growth of corona. In China, ongoing premiumization efforts led to volume and revenue growth as well as market share gains and ongoing margin expansion. Healthy top line growth was led by our super premium portfolio and enhanced by mid single digit growth from Budweiser in the premium segment. E commerce is becoming an increasingly relevant channel for our business, and we continue to drive double digit volume growth in this channel. Our business in Europe had a fantastic quarter, beating the tough comparable set by the 2018 FIFA World Cup. We grew volume and revenue by mid single digits and EBITDA by high single digits, thanks to the ongoing strong performance of our global brands, meaningful results from our craft and specialty portfolio and market share gains across all of our markets. Corona grew volumes by double digits with exceptional performance in the U. K. And Germany. Budweiser continues to grow across Europe by high single digits, fueled by its recent launch in France and a successful women's FIFA World Cup campaign. Stella Artois has more than doubled its volume in Italy and continues to grow in established markets such as the U. K. And Belgium. I'd now like to go into further detail on our Middle Americas region, our largest contributor to volume and revenue growth this quarter. Our Middle Americas region is comprised of many markets with favorable demographics and growth potential, including Mexico, Colombia, Peru, Ecuador, Central America and the Caribbean. They are going to more detail on the largest markets, Mexico and Colombia. We combined with Grupo Mobile in 2013, solidifying our position as the largest brewer in Mexico. Since then, we have focused on growing the beer category by expanding consumption occasions to reach more consumers. And as a result, the beer category has grown by 33%. We have seen healthy consistent growth across our portfolio brands, enabling us to gain market share. Our core portfolio brands led by Corona and Victoria has grown by a CAGR of more than 5% on a 3 year basis. Furthermore, the premium segment in Mexico remains underdeveloped and represents a significant opportunity for further growth. We have been investing to expand the segment and our premium portfolio has grown by a CAGR of more than 90 percent in the past 3 years led by Stella Artois and Michelob Ultra. We're always looking for new ways to reach consumers with our unparalleled portfolio of beers. Earlier this year, we were pleased to announce a partnership with OXXO to sell our beer brands in their stores for the first time. OXXO is the largest convenience store chain in Mexico with over 17 1,000 locations. This milestone represents an exciting opportunity to grow our brand and be a category in Mexico. In the Q2, we successfully rolled out our portfolio to more than 4,000 stores in and around Guadalajara and Mexico City. In the stores where our brands are offered, they are prominently displayed with fair share of the beer shelf space. We're on track to roll out our portfolio to all of the 17,000 plus Oatsa stores in Mexico by the end of 2022. We're excited about this new partnership and we'll continue to strengthen our relationship to bring our portfolio to more consumers in more locations. Moving now to Colombia. Colombia is a middle maturity market with per capita consumption of approximately 45 liters per year, which has the potential to grow considerably as the country matures. We're focused on growing the beer category and gaining share of taroaco primarily from local spirits. Over the last 3 years, we have gained almost 2 percentage points of share of Torroco as we have successfully employed the category expansion framework to reach more consumers in more occasions. Premiumization has contributed meaningfully to the growth of the beer category in Colombia. Our consistent investment over the past 3 years in our premium portfolio, particularly behind our global brands, has enabled the premium and super premium segments of the industry to grow by 68%. Expansion of our global brands has led to the growth of our market share within the premium segment from less than 25% in October 2016 to more than 75% today. Corona and Budweiser have led this growth and are now the number 1 and number 2 international premium brands, respectively. In summer, we're very excited about our business in Colombia, given the country's relatively low per capita consumption, our strong portfolio brands and the significant opportunity to continue shaping and leading the growing premium segment. Felipe will now take you through our Q2 2019 financials. Felipe? Thank you, Brito, and good morning, everyone. Let's start with an update on our synergies. The Q2 of the year, we delivered $113,000,000 of synergies, bringing the total synergies captured from the S and B combination to $3,150,000,000 Our total synergy guidance remains $3,200,000,000 which will be delivered by the end of 2019. As a reminder, these synergies do not include any top line or working capital synergies. Net finance costs in the Q2 2019 were $1,000,000,000 compared to $1,300,000,000 in the Q2 2018. This decrease was primarily due to mark to market gains linked to the hedging of our share based payment programs of $173,000,000 compared to a loss of $16,000,000 in the Q2 of last year. We also delivered a year over year improvement across all lines with the exception of accretion expenses following the adoption of IFRS 16. Excluding the impact of gains and losses related to the hedging of our share based payment programs, our effective rate this quarter was 27.2%, primarily driven by country mix. We maintain our full year 2019 guidance of an effective tax rate between 25% to 27%, excluding any gains and losses related to the hedging of our share based payment programs. Our underlying EPS, defined as our normalized EPS, excluding the impact of mark to market related to our share based payment programs and hyper inflation adjustment in Argentina increased by $0.06 to 1 $0.16 as our strong organic performance and savings in net finance costs more than offset the negative impact of higher tax expenses and translational currency headwinds. I will now take a moment to update you on our debt position. Our bond maturity profile is well distributed across the next several years, and we maintain over $17,000,000,000 of liquidity at half year twenty nineteen. We have eliminated refinancing pressure for the foreseeable future bond portfolio remains insulated from interest rate volatility as 91% carries a fixed rate. Furthermore, the portfolio comprised of a diverse mix of currencies with 60% of our debt denominated in U. S. Dollars and roughly 30% in euros. We use the euro as a proxy, giving its strong correlation to basket of emerging market currencies that are relevant to our EBITDA and flow generation. Our bonds have a weighted average maturity of roughly 14 years, we continue to expect the average pretax gross debt coupon in full year 2019 to be between 3.75% 4%. On July 19, we announced an agreement to divest our Australian subsidiary to Assai for approximately USD 11,300,000,000 which represents an implied multiple of 14.9x2018 normalized EBITDA. As part of this transaction, we will grant Assai the rights to commercialize the portfolio of our global brands and international brands in Australia. The transaction is expected to close by the Q1 of 2020. The divestiture CUP will help us to accelerate our expansion into other fast growing markets in the APAC region and globally. It will also allow us to create additional shareholder value by optimizing our business at an attractive price while further deleveraging our balance sheet and strengthening our position for growth opportunities. We anticipate that substantially all of the proceeds will be used to pay down debt with an estimated reduction of our net debt to EBITDA ratio of approximately 0.35x. In addition, we continue to believe in the strategic rationale of a potential offering of a minority stake of Budweiser APAC, excluding Australia, provided that it can be completed at the right valuation. We continue to see great potential for our portfolio of brands, strong commercial plans and talented people, we are uniquely positioned to capture opportunities for growth across the APAC region. Our capital allocation objectives remain unchanged. De leveraging to around 2x remains our commitment, and we will prioritize debt repayment in order to meet this objective. As of June 30, 2019, our net debt to EBITDA rate decreased from 4.61 at December last year to 4.58 times this year despite the seasonality of our cash flows, which scales towards the second half of the year. We expect our net debt to EBITDA ratio to be below 4x by the end of 2020, a commitment that is dependent on the sale of the Australian business or a completion of a potential IPO of Budweiser APAC. And with that, I will hand back to Maria to begin the Q and A session. Thank you. Thank you. The floor is now open for questions. In the interest of time, we will limit participants to one question Our first question comes from the line of Olivier Nicolai of Morgan Stanley. Hi, good morning, Britto, Felipe. Just one question on Europe. You are lapping obviously very tough comps from the favorable weather last year and also the fantastic world cup. Now what could give us confidence that this growth and share gain will continue? And should we expect more distribution gain from the rollout of Corona across Europe? And also, could you talk about your craft strategy in Europe and what role this plays for your portfolio? And if I just may, I just have a quick follow-up on your transition regarding Mexico. EBITDA grew by 30% in Q2. I was trying to understand how you would split that between, obviously, the operating leverage that you have linked to the strong top line, but also the benefit from the new brewery and perhaps also how material is that impact from the phasing of marketing on this 30% growth that you had in Mexico in Q2? Thank you. Okay. So Olivier, first on Europe. I mean, in Europe, revenue grew by mid single digits. So it was an amazing quarter in Europe, revenue growing, volume growth across pretty much all markets. Global Brands had a great quarter, growing by high single digits. Corona grew double digits driven by many countries, but especially in Germany. Budweiser also double digits growth supported by Budwe launch in France, which you see we're very optimistic about it and Stella Quad Group revenue driven by higher volumes in the UK, Italy and Belgium. And I think more importantly, we gained market share in all markets. And you're right, I mean, we're cycling a very strong quarter last year because the World Cup being in Europe. So the time of the games, everything was perfect. So it was a very strong quarter in Europe, and we're able to lap it with another amazing quarter. If you look at the UK, again, Global Brands leading the way. We also have some good news in the on trade channel and we could achieve to have amazing results now for the 4th year in the UK. So it's not something of this quarter, it's now more than 4 years going. France has always been a strong market for us as well, double digit growth in revenues and volume. But launch, very interesting because we didn't have a presence in the classic premium side of the market. So that's where butter is. Less than triple carbonate doing very well. In Belgium, again, back to growth, to growth volumes, mid single digits with market share gains. In Germany, also good growth in Corona and Swimming. Europe has been an amazing market for us in the last 4 years, and it's accelerating this year if you look at the quarter and a half. So very excited about Europe. And then your second question was about Mexico. So Mexico, again, since we got there in 2013, Mexico has gone from strength to strength. If you look at the presentation just went through, you saw that the industry has expanded big time in Mexico and the premiumization continues to be strong. Our core brands continue to do very well. And we have a new brewery that we invested that's the central brewery, also the new contemporary that we added some lines, 2 lines to the new contemporary. So adding capacity in Mexico given the very strong volume growth and that of course has some good effect in terms of cost of sales and distribution. So all in all, a great story for Mexico. Again, it has been since 2013, so it's not new. It is growing ahead of 30%. If you look at the half, ahead of 20% with margin expansion. And we did all that without the new partnership with OXXO. And I think OXXO will be very complementary to everything we're doing. OXXO has an amazing position in terms of developing premium brands, which is underdeveloped in Mexico as a segment. So I think we and the industry will benefit big time with our brands that are the market leaders in the country, finally now being present in OXXO. It's a phased approach. Again, very happy that we have all this momentum before OXXO. And now with OXXO, I think it will add to the whole momentum. Thank you very much. Thank you. Our next question comes from the line of Robert Ottenstein of Evercore ISI. Great. Thank you very much. Brito, a lot of your commercial success over the last 2 years and continuing now has been with the global brands. I noticed that at one point during the quarter, you signed a global media advertising contract for Michelob Ultra. And so I guess the question is and we're seeing it pop up in more and more countries around the world, Mexico, China for instance. Have you decided to take Michelob Ultra global? What sort of price point positioning are you thinking about that? And how do you see that fitting in with the other global brands, if that's the case? Thank you. Very good question, Robert. Michelob Ultra has been an amazing brand. If you look at the U. S, its own market, It's the biggest share gainer in the U. S. Market overall for more than 4 years, 10% of our business, around 10% and it continues to grow from strength to strength. You saw what Pure Gold is doing now, the first organic at scale being the U. S. Sold at a premium to Michelob Ultra And again, adding to the franchise, not subtracting both brands, Michelob Ultra and Pure World growing very fast. It's the fastest growing brand in Canada as well. It's also one of the top growing brands in Mexico. Now we took it to the UK and we're also doing a pilot in China. So what you see is that it's becoming a more international brand. All markets are asking for it because again, it goes into the active lifestyle trend that we see out there with consumers and health and wellness. So it's a brand that has always been in that space. The space is growing and the brand is there, position in consumers' minds. So again, it's amazing success story that we intend to get to more and more countries because this thing about health and wellness and active lifestyle for segment of our consumers, the growth segment of our consumers is getting is everywhere, developed and developed markets. So a big opportunity. Our next question comes from the line of Trevor Stirling of Bernstein. Hi, Brito. Just I suppose a lot of the questions have been answered already, but one question on Colombia. I think we discussed in the last quarter, but you do have a new entrant there, but it doesn't really appear to be dampening your growth rates. Can you just talk a little bit about how much market share you think they may have picked up, if any? And a little bit more color on that new entrant, please. Well, Colombia, we have the 0 competitors dynamics. We've known about it for a couple of years, so we're prepared for it in terms of our portfolio, in terms of price points, in terms of new launches. The fact of the matter is that we're gaining share in Colombia in terms of total ALCO. Our volume this quarter grew ahead of 3%. We also have revenue growing mid single digits, revenue per hectoliter also growing low single digits. And I think it's important that we're trying to category. With the kind of market share we have in Colombia, we have to grow the category. Of course, we take every competitive change very seriously. On the other hand, we have to say that our global brands did an amazing job because they've been there just for 3 years, and they are growing now 50 ahead of 50% versus last year in this quarter. And now they have the bulk of the share of the international premium segment with Corona being the number one now in the international premium segment and Budweiser the number 2 brand. And now we have over 75%. Three quarters of the segment is ours. And so it's an amazing story, a great team, strong brands and the portfolio today that's stronger and more completed and more ready in terms of price points and everything. The other thing to be to tell about Colombia, you know it, is that still a country where the per capita consumption is still low, but again growing. So it's something that's very exciting. And that's why we talk about share at Toronto. Our next question comes from the line of Tristan Van Strain of Redburn Partners. Hi, good morning gentlemen. I just want to follow-up on Australia. I mean, Felipe, you've made very clear that debt is not a problem, you're under control, everything is on track and nothing is due. So I'm not quite I don't understand why you felt the need to sell off Australia. What is it about Australia that wasn't attractive anymore? And I guess related to that, are there other businesses you may have to divest off in order to optimize your business? Thanks. Hi, Tristan. I think the point goes back to consistency and discipline. We have always said that we would consider the Asia IPO for the merits of doing the Asia IPO. We believe we have an amazing business there and an attractive M and A for consolidation in the region while establishing local champion. All of that remained intact, but we also said we would only execute at the right valuation. And we remain at the same point. That is exactly the point on consistency. The point on discipline, it's also connected to that. The same discipline in which we would consider the IPO led us to the decision of the past week advance and we remain focused on driving our business in this high growth region. Okay. So the idea perhaps that if you look around your you're basically around the world and you look at some other assets that don't have the same growth rate, there's no reason why you look at them and wouldn't sell them either if you get the right price? Well, I'm not saying that. Look at our deleveraging path and the fact that we and and the IPO. In fact, if you're looking to this Q1 and knowing that our cash flow generation is skewed towards the second half of the year. A good example of that was last year in which net debt to EBITDA increased from 4 0.8 to 4.87, given the seasonality of this cash flow, which is 0.07, the deterioration in leverage. And this year, we were able to deliver against the seasonality in which the net debt EBITDA declined from 4.61 to 4.58, which is a 0.07 improvement. So we 0.03, sorry. We continue to deleverage organically. In fact, we have been able to accelerate that and not being dependent on, let's say, of any asset to reach our goals. Okay. Thank you. You're welcome. Our next question comes from the line of Fernando Ferreira of Bank of America Merrill Lynch. Hi, Britta and Felipe. Thanks for taking my question. I have another one on Mexico. Can you quantify the benefit you had from OXXO this quarter? Or was this recovery primarily led by the timing of Easter? And also on margins, I mean, when we look ahead, is it fair to say that the margin tailwinds that you're having from the new breweries will continue at least until the end of this year? Thank you. Hi, Fernando. I think what we need to understand is that in Mexico, when you look at it, most of the gross profit evolution, right, was I mean, most of gross profit evolution for the company was really led by top line, right? So I mean, this thing about phasing is something that it's there. We had signaled that before. But I think that the important thing about the results of the company this quarter, right, was that 90% of the organic growth at the EBITDA level was driven by top line 90%. So if there was some phasing here and there, okay, that contributed a little bit, but 90% was really top line driven and gross profit driven. And that's a little different in Mexico. So I think that's the first thing to say on Mexico. And your second point was? The new breweries. The new breweries. Yes, the new breweries. Yes. That was much needed. You're right, this will have a benefit. It's already having a benefit on our logistics and our production costs because we in terms of whether the consumption is growing, we need some more capacity. You have to remember that since 2013, our volumes in Mexico have been growing very fast and we've been adding capacity first with Yucatan Brewery and now with the Central Brewery. The Central Brewery will be bigger than the Yucatan Brewery. Of course, it will be built in stages. But this year, not only we added lines in the central brewery, but also lines in the Yucatan brewery. So we continue to add capacity in Mexico, which has been an amazing market in terms of industry expansion, category expansion, in terms of share and in terms of profitability, has been very consistent. So that's what we like about the Mexico market. Very clear. Thanks, Britta. Our next question comes from the line of Simon Hales of Citi. Thank you. Good morning, good afternoon all. Just a point of clarification first, Britta, if I can with regards to your comments around the marketing and sales spend. I know I think you said that obviously in Q2 marketing spend was lower given the absence of the World Cup from last year. But did you also sort of indicate the underlying spend was more phased to Q3 rather than Q2 this year? And then maybe just following on from that, the second question around just working capital and the benefit you saw on the working capital line in the first half. I wonder if, Felipe, you could talk a little bit to that, where it's coming from, etcetera. Okay. Again, in terms of sales and marketing phasing, we said at the beginning of the year that, that was the case, that because of the comps of the World Cup that sales and marketing this year would be more evenly distributed between half 1 and half 2, more balanced throughout the year. And it will result therefore, it will result in a more difficult comparable in the second half, particularly in the Q3. So that's totally within our guidance that we gave at the beginning of the year. But the important thing again, if you look at total company results this quarter, Simon, you see that the most of the EBITDA growth, organic EBITDA growth, which was $521,000,000 90% of it came from gross profit or top line or $475,000,000 So this quarter, the success of this quarter was top line gross profit driven, not SG and A or sales and marketing phase or anything driven. That might have helped a little bit. That's why we signaled. But the 90% of it was driven by the awesome top line we had translating to gross profit. That was it. That's the basic of what happened this quarter. So on the cash flow, have to be mindful to the fact that there is a seasonality throughout the year, which means between December June, we do invest in working capital before releasing in the second half. The full year, we should release cash from working capital for the simple reason that our core working capital is in the negative territory as a percentage of revenues. And as we grow revenues, we release more. And the same benefit is reflected here since the increasing working capital for the first half was about $600,000,000 less than the prior year, helping us to generate more cash in the first half of this year in comparison to last year based on the working capital driver. Our final question will come from the line of Sanjit Aja of Credit Suisse. Yes. Hi. Just a question on Brazil. You talked about most of your growth coming from the North and Northeast regions. I just wanted to gauge how you're faring in some of the mature parts of the country, particularly Sao Paulo? Are you seeing growth and share gains there as well? Well, I mean Beer volumes, Sanjay, beer volumes include I mean, first of all, let me say, we're very happy to see Brazil back to volumes growth. That's awesome. And the best thing is that one growth was across all segments. So and that was in the backdrop of an industry that was flattish for Intuneus. So this performs the consequence of the consistent investments we've done on our strategic platforms, be it our core brands, premium brands and also what we call now the smart affordability. So on the premium segment, the global brands and local premiums grew ahead of the market, and that was mainly in the Southeast, to your question. So there was growth in all regions. Differentiation of Skol and Brahma families played a very important role in the strategy. So now Skol with pure mugs and Brahma with Brahma Extra and the family of flavors or specialty brands within the Brahma Extra franchise has been very important for the Brahma family. And we continue to spend smart affordability. So the North and Northeast are typically underrepresented in our business and of course are incremental as they grow faster, right? So but that doesn't say that the other regions in the country were not growing, it's just that they were growing faster. And that's why we alluded to some regional mix. On the other hand, we had the premium growing across the country, which is also goes on the other hand by increasing the mix. So again, very happy with Brazil, our strategic imperative for working global brands leading the way. Smart affordability, which is a toolkit that we learned from our African colleagues and we're gaining share. So very good quarter for Brazil. Consumers are feeling better and inflation more back to normal. And so very happy with Brazil overall. Many thanks. All right. So thank you. Thank you, everybody. Thank you, Maria. So in closing, let me say that there was a lot to be proud of this quarter, including our best quarterly volume performance in more than 5 years, leading to more balanced top line growth. Our strong commercial plants, unparalleled portfolio, diverse geographic footprint, best in class operational efficiency and most importantly, our incredibly talented people position us well to shape the global beer category in 2019 and beyond. So again, thank you very much for your time. Enjoy the rest of your day. See you next time. Bye bye. Thank you. This concludes today's earnings conference call and webcast. Please disconnect your lines at this time and have a wonderful day.