Welcome to the 2026 nine-month results announcement conference call for Budweiser Brewing Company APAC Limited. Hosting the call today from Budweiser APAC is Mr. YJ Cheng, Chief Executive Officer and Co-Chair for the board, and Mr. Bernardo Novick, Chief Financial Officer. The results for the nine months ended September 30, 2026 can be found in the press release published earlier today and available on the Hong Kong Stock Exchange and Budweiser APAC websites. Before proceeding, let me remind you that some of the information provided during this results call, including our answers to your questions on this call, may contain statements of future expectations and other forward-looking statements. These expectations are based on the management's current views and assumptions and involve known and unknown risks, uncertainties, and other factors beyond our control.
It is possible that Budweiser APAC actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicating this forward-looking statements. Budweiser APAC is under no obligation to, and expressly disclaims any such obligation to, update the forward-looking statements as a result of the new information, future events, or otherwise. For discussion of some of the risks and important factors that could affect Budweiser APAC's future results, see risk factors in the company's prospectus dated September 18, 2019, the 2025 annual report published, and any other documents that Budweiser APAC has made public. I would also like to remind everyone that the financial figures discussed today are provided in USD, unless stated otherwise. The percentage changes that will be discussed during today's call are both organic and normalized in nature, unless otherwise stated.
Percentage changes refer to comparisons with the same periods in 2025. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of Budweiser APAC's normal activities. As normalized figures and non-GAAP measures, the company disclosed the consolidated profit, EPS, EBIT, and EBITDA on a fully reported basis in the press release published earlier today. Further details of the 2026 nine-month results can also be found in the press release. It is now my pleasure to pass the time to YJ. Sir, you may begin.
Thank you. Good morning, everyone. Thank you for joining today's call. Our business in China continues to face challenges, while our overall results remain below our potential. We saw progress in area of strategic focus, and we are taking actions to support our future volume recovery by strengthening execution, evolving our channel mix towards in-home and digital channels, and continue to invest behind our mega brand and innovations. Beyond China, we continue to see positive commercial momentum in South Korea and strong volume growth in India, reflecting the strength and resilience of our geographic footprint. Specifically, in the third quarter, our business in China faced a challenging industry environment, which was impacted by abnormal weather and ongoing weakness in their on-premise channels. In South Korea, continued market share gains in both on-premise and in-home channels helped partially offset industry softness.
In India, industry growth, market share gains, and the continued momentum of our premium and above portfolio drove double-digit volume growth. I will now hand it over to Novick to discuss our performance in more details. Thank you.
Thank you, YJ, and good morning, everyone. In the first nine months of 2026, total volumes decreased by 4.9%. Revenue decreased by 3.7%, while net revenue per hectoliter increased by 1.2%. Our normalized EBITDA decreased by 13.2%, while our normalized EBITDA margin contracted by 297 bps. Further, our profits attributable to equity holders of Bud APAC decreased from $594 million in the first nine months of 2025 to $565 million in the first nine months this year, as we were impacted by a $52 million non-underlying income tax charge from an internal restructuring in China and a $30 million receivables provisions related to the supply of products in India. In the third quarter, total volumes decreased by 10.1%, impacted by our performance in China and partially offset by growth in India. Revenue decreased by 8.4%, while net revenue per hectoliter increased by 1.9%, benefiting from a positive country mix.
Our normalized EBITDA decreased by 22.9%, impacted by our top-line performance in China, cost escalation, operational deleverage, and reduced other operating income. Now let me cover some highlights from each of our major markets. In China, volumes in the third quarter decreased by 16.8% as we faced a challenging industry decline of our high single digits, which was impacted by adverse weather and continuous weakness in the on-premise channel. Revenue decreased by 16.9%, while net revenue per hectoliter was flat, with a positive brand mix offset by promotional investments in the in-home channel. Normalized EBITDA decreased by 30.2%, impacted by our top-line performance, operational deleverage, and reduced other operating income. In the first nine months, both volumes and revenue decreased by 9.7%, while net revenue per hectoliter was flat. We continued executing our channel expansion strategy, focusing on premiumizing the in-home and expanding our penetration in O2O.
We delivered strong double-digit growth in the channel in both the third quarter and the first nine months of 2026, supported by package innovations and brands. We also continue strengthening the brand power of our portfolio as we invest behind our mega brands and innovations and focus on connecting with consumers across multiple occasions and increase sales momentum, particularly in the in-home channel. In South Korea, volumes in the third quarter decreased by low single digits, outperforming a soft industry. Net revenue per hectoliter decreased slightly, impacted by a negative packaging mix, partially offset by a premium brand mix. Normalized EBITDA decreased by low double digits impacted by weaker volumes and commodity headwinds. In the first nine months, we outperformed the industry with market share gains in both on-premise and in-home channels.
Normalized EBITDA decreased by low single digits, with stable margins supported by revenue management initiatives and positive brand mix, partially offset by negative channel and packaging mix. We continue to invest behind innovations tailored to consumer preference in South Korea. in September, we launched Chalrang, a zero-sugar soju featuring Jeju volcanic bedrock water and lava seawater salt as ingredients. The product is positioned as a differentiated offering within the soju category. Finally, in India, industry momentum continued, and consistent execution of our strategy drove further market share gains. Increased commercial investment support accelerated growth across our portfolio, with a premium and above segment delivering double-digit growth in both the third quarter and in the first nine months of the year. The Budweiser brand continued to outperform the industry, with India now ranking among the brand's top three markets globally.
With that, YJ and I are here to answer any questions that you might have. Thank you.
Thank you. Ladies and gentlemen, the floor is now open for questions. Please press star one to ask a question. If you wish to cancel your request, please press star two. In the interest of time, we ask participants to limit themselves to two questions and please ask one question at a time in both English and Mandarin. Our first question is coming from Linda Huang of Macquarie. Please go ahead.
[Non-English content] Now, my first question is for YJ.
This is regarding for the overall beer market. Because it seems to us that China business adjustment is longer than the market expectation. It could be the macro issue, could be the industry issue. I just want to know, is there any of the company's specific strategy that we can see the business to turn around?
[Non-English content] Linda.
[Non-English content] YJ. [Non-English content] My second question is for Bernardo. Hi, good morning, Bernardo. In consumer space, lately I found that many investors care about dividend, especially the sustainable dividend is more important than anything else now. Given that operation is quite tough, will management change the dividend policy? Is there any long-term dividend guidance?
[Non-English content]
Hi, Linda. Thank you. Nice to hear from you. You are right. We fully recognize how important our dividends are for our shareholders. But in my answer, I will have probably to be consistent with what I have shared with all of you in the last quarter. Our capital allocation strategy does not change. The first priority is always to focus on organic growth and allocate resources to strengthen our business, and that is what we have been doing. The second one is inorganic opportunities that have not appeared yet, and the third one is return capital to shareholder, which is what we have been doing consistently in the past. Then the question about the future, I repeat the same. I think, yes, it is fair to assume that if results remain challenging and do not improve, it, of course, becomes increasingly difficult to maintain the same dividend.
But having said that, there has not been any decision yet. But I want to say again that we understand the importance of the dividends for our shareholders, but of course, ultimately, it is about business performance, right? And our priority in order to achieve that is work on stabilize our China business so we can improve our profitability. Thank you for the question.
Thank you very much.
Thank you. Our next question is from Lillian Lou of Morgan Stanley. Please go ahead.
Thank you for the chance to ask the question. My first question is about China latest trend on volume and demand. Any update on the latest sell-out situation? Any sign of recovery or we still expect some pressure to continue?
Hi, Lillian. Thank you for the question. Look, I think that Q3 was very challenging. I think you are hearing from many in the beer industry. The industry was worse than we expected, around a high single-digit decline. That was worse than it was at Q1 and worse than Q2. We believe the main two reasons are both weather and also continued softness in the consumer environment and macroeconomics. We saw, particularly, softness in the on-premise channels that impact our volume and our profitability usually more than that. We continue to lose share. This is clear in the volumes we shared. But at least we saw some positive pockets of good news. For example, in the in-home, our trend of share versus last year is better, our innovations continue to grow. O2O continues to grow, although, not as much as Q2.
Our super premium portfolio, it is in the positive side, even in a tough quarter. Those are the good things. October so far, it is too early to tell for Q4, but seems to remain challenging. Let us see how the rest of the quarter goes. I think, the important message is in spite of a challenging environment in the industry, we continue to invest behind our brands, because once the industry recovers, we want to be ready. We want to get back to our market share back, and continue to strengthen our brands and our capabilities to wait for when the recovery comes. But thank you for the question.
Thanks a lot, Bernardo. My second question is also related to that, the inventory situation. If we look back in third quarter, it was still a de-stocking quarter. How did sell-in compare with sell-out? What is the inventory level on quarter end versus quarter beginning, after our so-called efforts to really readjust the business models? When should we see sell-in begin to track more closely to the underlying demand? Whether 2027, we will see de-stocking to continue or actually we are going to build out a new norm and starting to see a more normalized trend?
Thank you, Linda. Lillian, sorry. Inventory is always come up in some of these questions. I think the first point I want to make is that we have been working to improve inventory, so it is not new. However,
We are still not yet where we want to be. There is still more work to do. We are working on improving visibility, particularly on the different tiers of the market. In China, we have different tiers, and we still believe that we have more than what we need to have, and we need to keep managing to keep our beer fresh. We have plans in place, and we expect to keep working on this. We expect still some impact, at least in the short term, but we are moving in the right direction. Thank you for the question.
Thanks a lot, Bernardo.
Thank you. Our next question is from Chen Luo of Bank of America. Please go ahead.
Hi, YJ and Novick. I have got two questions. Both of them are focusing on the cost side. My first question is actually our outlook for how much aluminum and barley cost will go up in the coming 12 months compared with the cost that we have locked in previously. What is our assumption of the unit cost increase in 2027? This is my first question. I will ask my second question later. Thank you.
Thank you, Chen Luo. You are right. Commodities are going to start, and our costs are going to start facing some pressure because of the commodity increase, particularly now, Q4 and next year. The main reason is, as you were saying, aluminum. You know that packaging represents a meaningful part of our cost base in beer. Aluminum, within packaging, it is also a growing part and a very relevant part. Because to have aluminum, you need a lot of energy, and oil prices increase. You see now price of aluminum reaching $3,000 per ton. This is approximately 10% year to date or even 20% if you compare to last year. We have, as you all are aware, a 12-month hedging policy.
What you probably need to do is to go back to last year and make these comparisons to have an idea of what is the impact in our costs, but it is definitely a negative impact on the commodity side. It does not mean that we are not doing anything to offset this. It is clearly going to be difficult to offset the whole impact, but the supply chain team, if it is something in our company that has been working very well in the past few years, it is our supply chain. They work on productivity, on efficiencies, to try to offset some of these cost increases.
Again, the only thing I can say is that, yes, there are some cost headwinds that we will have next quarter, this quarter and next year, but you can count that the whole team is working to drive productivity and efficiencies to try to offset, at least partially, this negative impact.
Thank you. My second question is on the pricing part. Given the cost escalation, do we have any plan for price increase in China either in Q4 or sometime next year? What if competitor raises prices, are we going to follow? That is my second question. Thank you.
It is a good question, too. I like to always start the answers reminding the strategy, particularly the strategy that we have in this phase that we are right now in the China business. What we have been saying many times is that the priority right now is to stabilize volumes. Stabilizing share as a first step in order to do that. When we think about pricing in India, a significant part of our net revenue per hectoliter increase in the past has always been driven with premiumization. We expect this part to continue, even though, of course, now we are investing a little bit more, to solve some of the problems that we have. What I can say to you about next year is that we will, of course, always monitor not only the input costs, but the consumer dynamics, what everybody is doing.
We will always look to that to make a decision. There is nothing that we can communicate right now regarding potential price increases in the China market. Thank you for the question.
Okay. Thank you, Novick, and also thank you, YJ.
Thank you. Our next question is from Jessie Xu of JPMorgan. Please go ahead.
Hi, YJ, Bernardo. This is Jessie Xu from JPMorgan. Thanks for taking my questions. My first question is about the pricing trend in China. We have noticed that promotions in the in-home and also O2O channels appear to have increased in the third quarter, while if we look at ASP, it remains largely stable year-on-year. How should we think about this and the trade-off between defending market share and pricing as of now? Are current promotions more tactical and temporary, or do they point to a more structural reset in pricing?
Thank you, Jessie. I think, probably the easiest way to explain some of these questions about profitability and investments is always think maybe in our strategy, in two phases. We have the phase we are right now in the strategy is focusing on stabilizing volumes and market share. Then we have probably after this, a second phase, hopefully sooner rather than later, that we can focus on reigniting growth and bringing back margins in profitability. So in this phase that we are, of course, we continue to have the positive brand mix effect, but we are also investing behind our brands and innovations. We are investing to protect our wholesalers. We are investing behind the growing channels like in home O2O. So these things offset each other.
That's why you see a net revenue per hectoliter that is flattish, some quarters a little bit up, a little bit down, but around that. So I expect this strategy to continue in the short term until we can stabilize share and we can go back to growth and hopefully recover some of the lost margins in the future. So I think this is probably the easiest way to explain how we are thinking about it. So we will continue to be disciplined with our revenue management initiatives, and we will continue to invest behind our brands to bring this stabilization in market share and volume. Thank you.
Thanks for the color, Bernardo. My second question is also about China, but on margins. Could you help us break down the drivers of the margin decline in the third quarter, including premium mix and packaging costs, maybe higher discounts in sales and marketing, and lower government incentives? More importantly, if we look beyond third quarter, what level of China margins should we view as a sustainable level once the channel transition matures?
Thank you, Jessie. I think it seems like people always ask me, as a CFO, "What is the most important line of the P&L?" My answer is, of course, all the lines are important because you need to drive volume growth to make all the P&L work. You need to bring profitability. It's important to bring cash flow. I think at the end with YJ here and the China team, strategy is always about choosing at a period of time, what's the most important line. It doesn't mean that the other ones are not important. Again, if we divide, as I was saying before, our strategy at this phase of the company, the priority is to stabilize volumes. Right?
That means, yes, that we are investing more behind our brands, that we are investing for the future to protect our wholesalers because we want to be in China for the long term, right? What does it mean? It means that when you have an industry decline with high single digits where we are still recovering, so it means that we are still losing some share and we are investing, right? Together with some cost headwinds. It not creates an operational deleverage that is difficult to adjust in the short term. So that's why you see some of the pressure margins in the short term. Now, does it mean that it will continue in the long term? No. We want to stabilize so we can go back to our, let's say, phase II of the strategy that is reigniting the growth in APAC. Right?
So when that happens, we'll have more flexibility, right, to align maybe the cost structure we have in the company to the scale of the business we have today, and we can bring back some of the lost margins. So again, I would think, as I'm saying, a strategy in two parts. Of course, always the question is, when the second part of the strategy, when the second phase will start, and we don't know, but we are working hard to try to solve some of the issues we have in the short term, so we can quickly go to the second phase. So I hope I can clarify some of these questions without sharing a lot of particular numbers.
But this is how we are thinking as a management about how to prioritize and what will happen with margins in the short term and in the medium to long term. Thank you, Jessie.
Thank you.
Thank you. Our next question is from Anne Ling of Jefferies. Please go ahead.
Hey. Hi. Can you hear me?
Yes.
Yes.
Hi. Thank you, YJ and Bernardo. My two questions are on South Korea. Let me ask in English, and then translate it. In South Korea, what is your expectation for the beer industry volume in year 2027? Do you see sufficient innovation and market share gain to offset continued weakness in the underlying category?
Thank you, Anne. Nice to hear from you too. Good to talk about South Korea a little bit too, of course. Maybe I can divide the answer in two parts. The industry and our performance. The industry in Korea, yes, has been declining slightly, let's say low single digits in the first half. Q3, the industry was a little bit weaker. I do think that it is mostly explained by some phasing because of the Chuseok Mid-Autumn Festival and between Q3 and Q4. I am not worried. If you ask me about expectations, I still expect industry in Korea to be slightly negative, low single digits, in the future. Of course, we cannot foresee what is going to happen, but it has been like that in the past, and that is what we expect. Having said that, when we go to our performance, we have been able to outperform the industry.
Different to China, we have a very good commercial momentum and gaining market share both in in-home and out-of-home. The reason I think of our commercial momentum is, of course, we have a very good route to market in Korea. We have strong brands. Cass is doing very well. I think one of the highlights also has been our ability to innovate in the non-alcohol, ready to drink category, and even further. I think we just announced, recently, that we are launching soju brand named Chalrang. It is a zero sugars, low alcohol soju that is around 15% ABV, that comes from Jeju Island. It is made with volcanic bedrock water and lava seawater salt. All typical ingredients we just launched in some regions in South Korea, and we plan to expand.
These are the ways that we are working always to try to offset this slight negative, industry in South Korea. We will continue to invest behind innovations. We will continue to invest behind our brands to be able to sustain this momentum and hopefully, by bringing beer and new products to different occasions, trying to offset this slightly negative industry we see in Korea. I hope this answers your questions. Thank you.
Yes. Thank you. My second question is on the pricing. Should investors be expecting some price hike in South Korea in 2027, particularly if aluminum, logistic cost, and also raw material cost remained elevated?
I think, Anne, here, the answer is maybe in part similar to China, in part a little bit different. Similar to China, we also have some commodity cost pressures in South Korea because the hedging policy is the same, right? Everything I said about the cost of aluminum, the packaging in aluminum and how aluminum is relevant, it is also very important in Korea. We have the same 12-month hedging policy, which means that now Q4 and next year we will have some cost headwinds, in South Korea, too, right? Regarding the pricing, we did a price increase last year. We have not done any price increase this year in South Korea, and we do not have at this moment anything to announce regarding pricing. But also we are working on revenue management initiatives like we are this year, right? To drive premiumization.
Some of the innovations we are launching always help with that. We are also doing some non-alcohol beer that help with margins, too. As a whole, we are still working on revenue management initiatives. The supply team also is working very hard to offset some of these cost pressures that we have. If you are thinking about margins, I think, Korea is a more stable market, right? When we think China under pressure, India improving, Korea more stable. Having said that, we still see opportunities to slowly improve in the future, doing some initiatives. Again, I want to be clear that, yes, from the cost perspective, next year we are going to have some headwinds on the commodity side. Thank you for the question, Anne.
Got it. Thank you very much. Thank you.
Thank you. Our next question is from Carol Xia of Daiwa. Please go ahead.
Thank you, YJ and Bernardo, for sharing. This is Carol Xia from Daiwa Capital Markets. My two questions are all about China. Firstly, on China investment. I think maybe it is a little bit early to talk about 2027, but right now, could you please share any initial thoughts on next year, which channels do you think that you will step up investments relative to the other channels? And where do you think you can continue to save some costs?
I can take this one, too. I do not think it is too early to start talking about 2027. We are in the process of, as every company at this part of the year, of reviewing what are the things that are working and what are the things we need to improve. Our view on always about what to invest in the future is to, of course, keep investing on the things that we are working, right? Again, strategy in China is to stabilize volumes and share, which means to keep increasing investments in spite of the situation. You will see this year we are increasing our commercial investment as a percentage of net revenue. The way we are doing, and we are thinking about not only for this year but for the future, is to invest on the things that are growing, right?
We are prioritizing segments that are growing, like Core Plus. We are prioritizing Premium. We are prioritizing channels that are growing, like O2O, and we are prioritizing consumer occasions where we see that things, and that consumers are moving, particularly towards this in-home part, right? Another way to answer is our investments in innovation. Maybe I can highlight a few, right? On the Core Plus, Harbin 1900, we have a bet on this. That is the first beer in China, a classic lager, that we are very excited about the launch that we did this year. Bud Magnum. Another innovation is on the packaging side that is doing very well, it is our 740ml mega can for Budweiser. The Corona Open Lid is another example. I think all these are investments that we plan to continue doing because they are working.
The part more maybe theoretical of the answer is how we think about resource allocation. We are always trying to look at the ROI of the investments. We have seen this year that some of them are working and we are investing. Some of them were not bringing the ROI that we wanted, and we are deprioritizing a bit. But again, as a whole, going back to the strategy, stabilizing share and stabilizing volume and increasing investments overall. Of course, maintaining discipline on the allocation of resources. Thank you, Carol.
Yes. Thank you, Bernardo. The second question, if I may, on China O2O channel in particular. Can you please give us an update on the O2O channel, given that it is growing faster than others? How is the product mix trending in this channel and also other, if any, margin implication on that?
Here, O2O, I think it is one of these areas where I was speaking before that we believe not only are growing, but we believe that are expected to keep growing, and it is very in line with this consumer behavior and in-home trend. Regarding O2O, I will say two things. People ask me about margins. If you look at the same product, maybe in O2O versus in another channel. Yes, because of the last mile delivery and other things, it is a little bit more expensive. But on the other hand, it is a channel that continues to drive premium and super premium mix. I think as a company here, when we think about this channel as a channel of growth in the future, I think Budweiser APAC is very well positioned because of our premium and super premium portfolio.
One of the reasons our super premium portfolio is in positive growth in spite of a very weak industry in China, is because O2O. I think this is helping us offset some of these negative cost mix of the channel. When I look at the long term, I think we know, of course, we need to keep working on having the right portfolio for this channel with the right packaging that goes to the right occasions, maybe bigger packs, different packs, more tailored to what the consumer wants for this channel. Then also we will be working on improving the margins of the channel. I think that as the channel consolidates, as we can improve some of the efficiencies of how we deliver to the channel, we can see some opportunities to improve our margins in the channel.
But we are not waiting to solve these issues to embrace the channel. We are embracing it. We are using it to innovate, and we believe that we can see a lot of growth for our premium and super premium brands in the O2O in the next years. Thank you again for the question, Carol.
Thank you so much, Bernardo. Thank you.
Thank you. In interest of time, our final question will come from Leaf Liu of Goldman Sachs. Please go ahead.
Hi, YJ and Bernardo, can you hear me?
Yes.
Thanks for taking my questions. I have two questions. The first one is on India. What is the latest status of the overdue receivables collection from the Telangana state government? Have any bad debt provisions been recognized further, and has the issue impacted your shipment allocation or growth strategy in Southern India?
[Non-English content] It's the first question, thanks.
Thank you, Leaf, for the question. I think it is an important topic, that is why we made the announcement to the market earlier this month. Maybe I will give you a little more context of this issue. As you know, India is a very complex market. Every state is different, has different rules, different ways, different taxation, different ways for us to deliver, different route to markets. In the state of Telangana, how the route to market works is that we deliver through a state-owned corporation.
So basically to the government that distributes to the retailers. The total receivables amount from the state is actually being quite stable during the year. But some of the overdues and outstanding have become aged, and we have a very disciplined approach to overdues in AB InBev and as a multinational company that I think gives also comfort to investors that we are very disciplined. So following the internal rules we have, we decided to recognize this provision of $30 million regarding the aged receivables from the state.
Having said that, we are of course working and our best efforts to recover this outstanding amount and take all the necessary actions we can to protect, of course, the interest of the shareholders. There is always another question about one-offs that I receive. We do not expect further meaningful one-offs from this situation in the future. Of course things can change, but at this point, the big provision was already made in this quarter. Thank you for the question, Leaf.
Thanks a lot, Bernardo. Then comes with my second question. [Non-English content] My second question is about the industry outlook for next year for China. While the seasonal factors, extreme weathers and some local catering consumption cycles impacted China beer sales performance this year, what is our industry view for China beer industry next year in terms of volume, premium trend and competition landscape? [Non-English content]
Leaf， [Non-English content]
[Non-English content]
Thank you. This concludes our Q&A session today. I would like to turn the conference back over to YJ for the closing remarks.
Thank you. We are taking targeted action to stabilize volume, rebuild market share momentum in China, and bring our performance back in line with our long-term potential. We will continue investing behind our mega brand and innovations, strengthening execution, and expand our in-home channel presence as we navigate a challenging industry environment. We remain confident in our strategies and, most importantly, in our people. Thank you all for joining us today, and I look forward to speaking to you soon.
This concludes today's conference call. Please disconnect your lines. Thank you.