Carlos Brito - Chief Executive Officer Luis Felipe Leite - Chief Financial Officer.

Edward Mundy - Jefferies Robert Ottenstein - Evercore Olivier Nicolai - Morgan Stanley Tristan Van Strien - Redburn Partners Simon Hales - Citi Trevor Stirling - Bernstein Brett Cooper - Consumer Edge Research Komal Dhillon - JPMorgan Mark Swartzberg - Franklin Lakes Mitch Collett - Goldman Sachs Pablo Zuanic - SIG Sanjeet Aujla - Credit Suisse.

Welcome to the Anheuser-Busch InBev Full Year 2017 Earnings Conference Call and webcast. Hosting the call today, from AB InBev are Mr. Carlos Brito, Chief Executive Officer, and Mr. Felipe Dutra, Chief Financial and Technology 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 and the reports and filings 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 opened for your questions following the presentation. [Operator Instructions] 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 Annual Report on Form 20-F filed with the Securities and Exchange Commission on the 22 of March 2017.

AB InBev assumes no obligation to update or revise any forward-looking information provided during the conference call and shall not be liable for any action taken in reliance upon such information. It is now my pleasure to turn the floor over to Mr. Carlos Brito. Sir, you may begin..

agricultural development, energy and carbon, water stewardship, and packaging. And we look forward to sharing them with you soon. I'd now like to hand it over to Felipe who will take you through our 2017 earnings, cash flow, and capital allocation.

Felipe?.

Thank you, Brito, and good morning, good afternoon, everyone. Let's start with an update on the synergies. In the fourth quarter, we delivered $381 million of synergies, bringing the total for fiscal year 2017 to just over $1.3 billion dollars and the total synergies captured to date to over $2.1 billion.

Our total synergy guidance remains at $3.2 billion to be delivered within the four-year period following the close of the combination. This number is inclusive of the $1.05 billion of cost savings previously identified by SAB. As a reminder, these synergies do not include any top line or working capital synergies.

We continue to expect the synergies captured to require approximately $1 billion of one off cash costs to be incurred in the first three years after closing and of which $588 million has been spent to date. Net finance costs in the year were over $5.8 billion compared to over $5.2 billion in 2016.

This increase was driven primarily by the interest expenses on the legacy debt of SAB, the amortization of the bonds issued in 2016 to France for the combination with SAB, as well as currency and other hedging tools.

The increase was partially of mark to market losses, linked to the hedging of our share-based payment programs of $291 million compared to a loss of $384 million in 2016.

Our normalized effective tax rate for the fourth quarter was 33.1%, up from 28.6% in the fourth quarter of 2016, resulting from higher profit and the timing of certain deductions during the year. In 2017, our normalized effective tax rate was 22.9% as compared to 20.9% in 2016. I would also like to update you on the impact of the recent U.S.

tax reform legislation. With over 80,000 U.S. employees and significant tax payments in the U.S. since 2009, we are proud to be the leading employer and taxpayer in the country. We believe a tax reform bill that lowers and incentivizes domestic investment will benefit American workers. We are hopeful that this tax reform grows innovation.

In terms of impact on the company's tax, during the fourth quarter, we recognized a one off non-cash gain -- it will be cash in the future -- but non-cash gain of $1.8 billion, which is primarily driven by the remeasurement of deferred tax liabilities resulting from the reduction in the U.S.'s statutory corporate tax rate from 35% to 21%.

As we complete our analysis of this new legislation, it is possible that we will make adjustments to this provision or amount. As of 2018, we do not expect to see a benefit of the lower U.S. corporate tax rate in our effective tax rate, as the U.S.

tax reform introduces a broader tax base and new limitations on certain business deductions which offset the effect of the reduced rate.

For the group, the effective tax rate guidance for the full year 2018 is in the range of 24% to 26%, which again excludes the impact of any future gains and losses related to the hedging of our share-based payment programs. Moving on now to the earnings per share, normalized earnings per share increased by 42.8% from $2.83 in 2016 to $4.04 in 2017.

This was largely driven by a $2.66 increase in normalized EBIT linked to the organic growth and benefiting from earnings of the retained SAB business and partially offset by a decrease in income tax expense and dilution due to the increased number of shares.

We closed fiscal year 2017 with $50.4 billion of cash flow from operations and EBITDA margin of 39.1% and converted 27.3% of our net revenue into cash, well ahead of our peer growth in all three dimensions. Moving to core working capital, another important dimension for cash flow generation.

Core working capital consists of those elements of working capital which we consider fundamental to the operation of our business. It excludes certain items which management has little or no ability to influence, for example, payroll-related payables. In 2017, we reached an average level of negative 13.4% of net revenue.

The decline reported in '17 was a direct consequence of the SAB consolidation, which was a much less efficient level of core working capital as a percentage of net revenue. This is another area of synergy potential when applying our traditional company cash conversion efficiencies in the combined footprint.

I will now spend some time discussing our debt portfolio. On Slide 34, you see that our debt maturity portfolio is well distributed across the next several years.

A strong cash flow generation provides us with sufficient cushion to repay or refinance outstanding debt without being dependent on capital markets transactions to meet our short-term funding needs. In addition, we obtained over $20 billion of liquidity, composed of cash and revolving credit lines, as shown on this slide.

The weighted average, pure form, of our debt is 3.7% with a weighted average tenure of slightly more than 10 years. 93% of our debt portfolio is locked into fixed interest rates, reducing our exposure to market volatility. 58% of our debt is denominated in U.S. dollars, while roughly 33% is linked to the Euro.

We use the Euro currency as a proxy for the emerging market basket of currencies that are relevant to our EBITDA and cash flow generation. The Euro has a strong correlation with our main emerging market currencies and has the advantage of providing access to bond markets with significantly higher liquidity and lower costs.

In order to further balance our currency mix, we have also been issuing more debt in alternative currencies such as the Canadian dollar, the Australian dollar, and the British pound. Moving now to our dividend.

The Board is proposing, subject to shareholder approval, a final dividend of €2 per share, which combined with the interim dividend of €1.6 per share paid toward the end of last year will lead to a total dividend payment for fiscal year 2017 of €3.6 per share.

As you can see from Slide 36, we have maintained a dividend payment at the same level as the last two years and consistent with our commitment to deleveraging. Expected dividend payment dates for each of our listings are shown on Page 19 of our press release.

Our net debt to EBIDTA ratio decreased from 5.5 times on a reported basis in 2016 to 4.8 times in 2017, or 4.7 times when adjusted for the closing of disposals and for the foreign exchange mismatch between the balance sheet and the P&L inflation. And we are tracking in line with our internal deleveraging targets.

Our optimal capital structure remains a net debt to EBITDA ratio of around two times and our capital allocation objectives remain unchanged. Our first priority for the use of cash will always be to invest behind our brands and to take full advantage of the organic growth opportunities in our business.

Deleveraging to around two times remains our commitment and we will prioritize every payment in order to meet this objective. M&A remains a core competency and we will always be ready to look at opportunities, when and if they arrive, subject to our strict financial discipline and deleveraging commitment.

Our goal is for dividends to be a growing flow over time, consistent with the non-cyclical nature of our business. However, as we have said before, given our emphasis on deleveraging, dividend growth is expected to modest in the short-term. And with that, I will hand it back to Maria to begin the Q&A section. Thank you..

The floor is now open for questions. [Operator instructions] Our first question comes from the line of Edward Mundy of Jefferies..

Morning, afternoon, everyone. I've got one question and one follow up. Brito, I think in your opening markets, you flagged that the emerging markets are positioned for accelerated future growth.

Are you able to provide us with a whistle stop tour of the key emerging market regions and your degree of confidence in acceleration in 2018?.

I think the comment was much more -- again, this is the first year, 2017 was the first year of our combined company. And the idea is that we gave you in that opening a little bit of our split between emerging markets and more mature markets.

And in our view, I mean, we all come from emerging markets and we know it's volatile at times but it provides a lot of growth and an opportunity for value creation.

So, to go through our outlook, we also say that, while we recognize volatility as I said before, we expect to continue to deliver strong revenue and EBITDA in fiscal year '18 driven by performance in our portfolio, our footprint, and our commercial plants. This is all tied together.

We're very happy with the footprint we have and this footprint, as said before, is one that should deliver growth ahead of our CAGR of five years, as we shared with you today. For example, this year it already did. It's more diversified and less dependent on any one single market. That was the message..

And the follow up is more of a philosophical question and I really appreciate the discussion on the category expansion model. You've seen that Dr. Pepper, Snapple, and Keurig are taking a less silent approach to their business by combining both hot and cold drinks.

So, you think about the market for consumer lens based on consumer needs rather than a traditional manufacturer led approach, largely based on beer.

Is there not more logic in combining beer and spirits together over the medium term as you think about the next 100 years?.

Well, at this point we see lots of opportunities that were unveiled to us by this model and we're really surprised that every time we go to adjacencies with beer, or with near-beer, we tend to do well.

If you look at our styles that go more to food occasions, for example, or consumers that want a different experience, they're doing very well, growing ahead of our average portfolio. If you go to the left side, flavored beer, we don't have many examples but the few we have are doing very well.

And so, we feel that affordability with what we learned with our new colleagues -- so, I mean, improving everywhere. And in Core Lager, the heart of our business. So, if you look at all those points, there's so much more beer can accomplish.

It's just a question of, instead of fighting for just a share of beer, of steering the category in directions and occasions where beer can play a role and start planting seeds today that could be part of the portfolio of the future, as trends evolve and consumers change..

Our next question comes from the line of Robert Ottenstein of Evercore..

Just a few related questions on the global brands. There's been some controversy on the relative profitability and you mentioned that they had higher margins, but could you be specific? Are you talking about gross margin or EBITDA margin in terms of the global brands in their out-of-home markets? And then related to that, Corona doing extremely well.

A rough sense of how many markets, and I know you may not have the precise number, but a rough sense of how many markets Corona is growing double-digit and you think can have a meaningful presence. And then as a follow on, just some more details about the high-end company that you discussed in terms of the structure of that company..

So first, profitability. I mean, that's an easy one. These high-end brands, these global brands or craft brands or specialty brands, they have way higher margins than our average margins, even after sales and marketing investments. You can see that in many ways. You can see that because of our mix effect has been growing year after year.

Even in the U.S., you can see that. You can see that in our outlook, we have signaled that we expect our revenue practically to grow ahead of inflation and that's not because of rate. That's because of the fact that mix is becoming more and more important in our net revenue by quarter. So, at the end, it's all about dollars when it's all said and done.

So, net-net, it's a great business and that's why, Robert, we decided to invest in your other question, in the high-end company.

Because it deserves a special group of people that are trained, that have a special profile, to make, of course, use of what the mother company offers but be very focused on these brands that sell maybe less volume, that have a more qualified distribution, but they have amazing margins and amazing potential.

And they travel well, they have global platforms, and we have a portfolio of brands, not just one or two, we have a portfolio of brands that are complementary. And the most important things, among other things, is that these brands enter new occasions.

So, when you look at Corona or Coronita and how well it does with women, with different occasions where beer normally wouldn't enter, when you look at Stella and the meal occasion, when you look at Budweiser and sports and the Americana in the bottle that travels so well, like any American brands.

So, it is very profitable when it's all said and done. So much so that we decided to specialize people in the company to do just that. And in terms of Corona, I think I said that in calls before, these are all public numbers, if you look at Corona in most of our markets, it represents less than 1 share of total market in terms of beer.

On the other hand, you have markets of ours in which Corona is already 2% to 6% of share of total market. So, it can only run some numbers. And Corona is a higher priced beer from our global brands. So, amazing margins and growing amazingly well in places like China, growing 39% outside of Mexico.

So, it's all a good story in global brands with amazing profitability..

Our next question comes from the line of Olivier Nicolai of Morgan Stanley..

Just a first question for Felipe. You have refinanced some bonds at the beginning of the year at a much more favorable interest rate. Now looking at the next two years of your U.S.

dollar bonds with higher interest will reach maturity and I was just wondering if you are confident about the 3.7% average interest rate that you gave for the group is going to stay beyond 2018. And just a follow-up on the networking capital chart where I think it was showing your networking capital at minus 13.

Should we assume a bigger contribution on your cash flow from working capital in 2018 versus 2017, considering that you have still probably some synergies to do on the SAB market and that your sales are obviously going to grow?.

The first one was the retiring bonds..

On the bond market, the expected rate of around 3.7%, around 3.7%, you have to be mindful about the outstanding debt, which is at this point around $104 billion.

As we recycle and retire and amortize and pay, depending on the decision to repay or refinance, and given the fact that these are primarily fixed interest rates, there may have some room for this point to go down. But depending on what happens to interest rates in the future.

But I do not expect swings, for example, in 2018, in terms of the weighted average being around the 3.7%. On the core working capital, the slide shows that from the former ABI side, we have been improving, core working capital as a percentage of net revenue by 1, sometimes 2 percentage points year-over-year. This trend continues.

And when you see the decline of the 15.2% to 13.4%, you should expect former ABI to continue to improve and then as we add the former SAB at low- to mid-single digits, negative, core working capital as a percentage of total revenue, so that is the 13.4%. From that point, I would expect the combined company to continue to expand.

We expect to do faster on the former SAB side. There is no reason why former SAB should not come to similar levels of former ABI. I'm not detailing here market by market, but overall, I see us both similar, comparable companies. And therefore, core working capital should be an area of relevant contribution for the overall cash flow.

And the view of being in the negative territory is the more we grow revenues, the more cash it generates. Right? And we extract from that. So that should continue to be an important cash flow contribution going forward..

Our next question comes from the line of Tristan Van Strien of Redburn Partners..

Good afternoon, guys. Yeah, two questions, or one question and one follow-on. Just first, on your dividend, you talk about a growing flow of dividends. Can you just confirm that it's in Euros? And would you consider a script dividend or it's just cash? And just a follow-up on, I guess, both the high end and the category framework.

I mean, you're really looking at a longer time frame, three to 10 years, to build brands and portfolios. How does that work with your zero-based budgeting framework? Do you have to change that a bit? Do you ring fence money year-over-year? Just how you think about that going forward. Thanks..

Hi, Tristan. Let me take the first one of your questions. We've always been a company of "and" not "or". And we used to do top line and be efficient in costs, so much so that we have a term we use inside the company called "cost, connect, win," which says let's be efficient on cost so we can connect with more consumers so we can win more business.

And that's exactly one of the charts we showed in which we compare our sales to other companies, to FMCG. And if you put those two charts together, you see that we have better EBITDA margin and we have a higher top line growth. So, I think those things show that over a period of time, five years, we can accomplish both.

We can be efficient while having best in class and generate cash. So, I think that's what we try to do as a company to the end. I don't see any conflict. Quite the opposite.

When you say about building brands for ten years, let's not forget that, when I talk about portfolio of today and portfolio of the future, sometimes it's about developing one brand of today that can be bigger tomorrow. It's not all about new brands.

It's about getting resource allocation done in a different way so you can get a brand that's growing and accelerate the growth. So, most of it is about brands that exist at market or brands that are global or international that can be introduced in that market. So, it's not about creating new brands that will take ten years to perform.

And on the first question?.

Yes, let me speak up on the dividend piece. We have to look at both at the end of the day. So, most of our cash flow generation is in U.S. dollars. We report in U.S. dollars. At the same time, we are a European-based company, primarily listed in Belgium.

Share price are trading in Euros and therefore it is a legal requirement to declare dividend in Euros and pay in Euros. So, we have to think of both and, at the end, what makes more sense for the company in terms of capital allocation, deleveraging commitment, and so on and so forth.

So, in this end, there is a big detach in terms of FX rates between Euros and dollars. We'll have to review what makes sense again but for now, the 3.6 is something that fits within our commitments..

Just brief and maybe just a follow-up and maybe a bit esoteric.

But in the same way in ZX ventures you have different incentive systems for these guys, and they're much more softer targets rather than hard KPIs, I guess, is the same applicable for your high-end unit or the guys in charge of really changing the categories because there's a much more longer time frame father than just hard numbers? Do you measure them differently?.

Yes, sure. I mean, the incentive system is very similar but the KPIs is different because, as I said, when you're building high end brands, the distribution has to be qualified, the execution has to be premium, the pricing discipline has to be 100%, the global platforms and execution have to be very well coordinated on global brands, for example.

The specialty brands are developed through brewpubs and different experiences. So, it's a different kind of activation in the marketplace. But we can measure with KPIs the same way we measure for the core business and we can use the same incentive system, just based on different KPIs..

Our next question comes from the line of Simon Hales of Citi..

A couple of questions and the first one really just around how we think about your cost space, particularly input costs around 2018. I appreciate there's obviously FX transactional moves impacting the set aside.

Can you talk about maybe some of the big moving headwinds or tailwinds you may be seeing? And specifically, in that regard, with regards to the U.S., your FMCG peers have been flagging a tightening of trucking capacity of late.

Is that something that you're seeing and is it having any impact on your thoughts there? And then secondly, Brito, with regards to your comments around low- and no-alcohol, you're clearly on track to your 20% by 2025, how should we think about the build toward that? I mean, how much of your business is already in that low- and no-alcohol segment and how rapidly should we expect it to grow over the next couple of years?.

Yes, I'll tackle the second question first. Today we are around 8% of our portfolio. We want to get to 20% by 2025. So, we're not starting from zero. Quite the opposite. The big thing that will accelerate this, in my view, is two things.

First, the category expansion model because it's showing us there are opportunities in adjacencies, easy drinking and flavored liquids, that we can explore. And the second one is that now we already have five of our main countries in which NABLAB, or non-alcohol beer and low-alcohol beer, represents more than 20% and in some even 30%.

Right? And what we see is that this [indiscernible] comes even with higher margin, if done correctly. So, I think this is going to be a big motivation for our people because they're going to be inspired. They can visit those countries. They can see how it was done. There is a toolkit to be shared with other countries.

Again, so we're not starting from zero, the margins are very interesting, and category expansion shows the way on how to use some of those products to enter new categories or new occasions, and we have already five countries that are already beyond 20%, beyond 20% and 30%.

And on the first question on cost, I mean, we have here in our outlook, in terms of overall performance, we say premiumization, revenue, and management initiatives toward the end of the first paragraph, while keeping cost below inflation.

So here we tried to answer your question with this part of the outlook for the total company, not for any market in specific, saying that we'll continue to match the cost of inflation..

And then can you comment specifically at all around that trucking capacity issue in the U.S.

that others have been talking about?.

Yeah, there is some trucking capacity issues in the U.S. The economy, of course, is heated. But because we have some inventory and some flexibility, we can avoid peak times. And we know what the peak times are. The end of the month, a lot of companies shipping things. Or big events for e-commerce, like Black Friday and things like that.

That for beer doesn't make any sense. So, I mean, we can work around those holidays and work around those peak times that were generated by e-commerce and try to manage that. But you're right. There's some pressure there in terms of trucking. It's also true that a lot of companies are buying more trucks in response to that.

So, like any market, price goes up, more people come in. This pressure, of course, is not new. It’s started already in the second half of last year and should continue during the first half. So, there'll be some cycling. But there's already some of it in the base..

Our next question comes from the line of Trevor Stirling of Bernstein..

There are two questions on my side, please. Brito, in the first quarter, there was this significant acceleration in revenue per hectoliter in LatAm North, in Mexico, in Asia Pacific.

Could you give us a bit more color on what actually lay behind that? Was it easy comps? And how exactly where you achieving that acceleration? And the second question posed more for Felipe. Looking at the associates, Felipe, that rose significantly in the quarter to a bit over $200 million.

Is that the new norm that we should be expecting, plus or minus, or are there some one-offs in there?.

Trevor, Brito here. I'll tackle the first one.

I think what you're saying is net revenue per hectoliter in the fourth quarter, right? Compared to the rest of the year?.

Correct..

So, for example, if you look at North America, let's take the U.S., which is 90% of the zone, I mean, Q1 our net revenue by hectoliter increased by 2.2%, Q2 0.9%, Q3 0.9%, and Q4 2.1%. So, for an average for the year of 1.5%. So, yes, but you see that there's not only Q4.

There is some ups and downs, depending on price increases, on mix of shipments, on many things. So, you'll see it started at 2.2%, went down to 0.9%, came back to 2.1%. So, I would consider that normal course of business. Latin America West, I'm seeing here 9.5% for the fourth quarter, for a full-year of around 6%, I think, or nine months of 4.9%.

So that was mainly revenue management in Columbia. In Columbia, as we flagged through the whole year, volumes were slightly negative but consumers had a fee increase of 15% on the overall economy. So, our guys tried with some discounts to move volume. When they saw it was not happening, they kind of rethought their discount strategy.

So that, I would say, was mostly what happened in the fourth quarter. In LAN, it was really easy comps on the fourth quarter. If you remember in 2016, or maybe you don't remember, but in 2016, the net revenue for hectoliter was negative in the fourth quarter by negative 4.6%. So, the 10% should be viewed in that context.

And then the other zones, I don't see -- yeah. And then in APAC, there was the repatriation of Corona that impacted the third and especially the fourth quarter in APAC and Australia mainly. So those are the big things that could explain those variations..

Very helpful. Thank you, Brito..

Hi, Trevor. Let me take the share of associates. First, kind of a disclaimer here that the share of associates as well as minorities are two lines that are not normalized. It's really as reported. And secondly, there is no reference base.

For example, when you compare full-year '17 versus '16, in '16, we only have three months of those, which should not impact the comparisons for the quarter. The comparison for the quarter, year-over-year, is impacted by basically two things.

First, at the very beginning of the integration, some of the profit recognition in the fourth quarter '16 shifted into the first quarter '17, causing the fourth quarter '16 to be, let's say, abnormally low.

In addition to that, we do a lot of the accruals based on estimates and there is a true-up toward year-end, which caused the fourth quarter '16 to recognize incremental profits that were incurred throughout the year. So, when you compare fourth quarter, year-over-year, you have this big mismatch..

Our next question comes from the line of Brett Cooper of Consumer Edge Research..

Hello? Can you hear me? Hi. I was wondering if we could get a little more specific on the category framework.

And if we take a look at the U.S., I mean, you've been trying to expand your portfolio in flavored beers, you've been doing premiumization and that's obviously gone well, you've been expanding styles, but it's been unable to drive growth in that market.

And I'm just trying to figure out what changes going forward, versus what we've seen over the last several years, as you apply this framework to your business?.

Well, Brett, we've seen that in other markets. Right? I mean, look at Australia. When Australia decided to shift resources or to start accelerating some brands, it does take a while for things to compensate because some big things and the other ones are small.

So, the big things are declining, the smaller things are growing, and it takes a while for one to grow to a size to compensate for the other. But the direction is set. So, we think some of our brands in the U.S.

will remain very important in our portfolio but albeit at the lower size, at the smaller size, and some others will continue to grow and will be more of a bigger brand within our portfolio. That happens all the time in all markets. If you look at Brazil, the same happened.

If you look at Argentina, the same happened, in which at some point a brand declines, another brand grows, and the portfolio -- the important thing is that it should be margin accretive, right? And that's what we've been trying to do in the U.S. Our battle in the U.S.

has always been to stabilize or to thread bolt at the ends, share stabilization and profitability. So, if you look at our gross profit margin in the U.S., now for eight years in a row has gone up. And if you look at our portfolio in the U.S., we've been trying to rejig it, trying to add new things that we think are growth engines for the future.

And I think we're now, with the Category Expansion Framework and with the new leadership in the U.S., I think we're now at a very important point to really start making all those things kind of connect the dots. Not going to happen overnight. But from a brewer for 600 years, so we're here for the long-term and we'll do what's best for the long-term.

You have to remember that the ship issue we have in the U.S. was created by ourselves. When we came to the U.S., we said we like the share position, not the share composition. It's too much based on low macro brands, low profitability brands. We don't think that creates a great business for the future. We're here for the long-term.

We're willing to take the pain to rejig this portfolio. It is true that it's taken a bit longer than we thought but, again, the direction has been set from the very beginning. We've learned along the way, addressed it here and there, but the direction is pretty much set and that is we want to develop Bud and Bud Light and above.

And that's the direction we're headed. Interesting enough, if you look at the first ten years or nine years in the U.S., our financial performance has been way ahead of our plan. EBITDA almost doubled, cash flow more than three times, volume was below what our plan was.

And now for the second ten years, I think we have a great base to start connecting those dots like we did in Western Europe, where for many years we couldn't grow. The last four years, Western Europe has been growing top line and bottom line consistently four years in a row. Now we have the same thing in Australia.

And this all serves as inspirations and reasons to believe that we can do the same thing in the U.S. If we look at the U.S., I mean, Michelob Ultra is already 10% of our business and it's the fastest growing brand now for three years in a row, almost 12 quarters in a row, the biggest share gain in the U.S.

And if you look at the big share gain of brands in the U.S., out of the six brands, we have three, which is Michelob Ultra, Stella Artois, and Bud Ice. So, I mean, we have brands that are growing. We have, of course, to do a better job on Bud Light specifically and continue to accelerate, like we did in the fourth quarter, the brands that are growing.

And if you look at our fourth quarter, our share performance was better than our second quarter and third quarter and that was across the board. Not only the brands that are growing accelerated, but the brands that were declining, declined less. That's why we went back to 55 bps share loss as opposed to 80 bps share loss.

So, again, it's one quarter but we've been learning a lot and applying those learnings in the marketplace..

And if I can have one follow-up. Is there a reason why we've seen less of the no and low-alcohol beer in the U.S.

as opposed to other markets, especially in light of as you mentioned, volume struggle that you've had here?.

That's a good point. I think we have our plate full in the U.S. We've been testing some of the things in other markets so as not to distract them, our guys in the U.S., but, of course, with the learnings, you can be sure that some of those things will be migrating to the U.S. pretty soon..

Our next question comes from the line of Komal Dhillon of JPMorgan..

Just two questions please. One on the global brands. So, the slide on the growth of those brands was very helpful. But could you comment on the underlying volume growth rate from these brands' home markets, and I mean excluding the one from taking distribution back in-house, like with Corona and Australia.

And then just to follow up on that working capital synergies question please. So, you're expecting to take former SAB to former ABI levels for core working cap to sales. But is the current lack of capital synergies from the SAB so far due to difficulties in changing terms with the drive in Africa.

Just can you give us some more color on what is going on in the first 15 months of integration please?.

Hi, Komal. This is Felipe. On the core working capital side, we have been progressing across the SAB territory and, as I said before, there was, I think, a question on that one. We see no reason why former SAB shouldn't get to similar levels of former ABI, quite frankly. And that is where we are heading to.

And the first 15 months, that was not an exception..

Well, Komal, I think your first question was -- let me see if I understood correctly.

You want to know what global brands, what kind of growth they have in their home markets, right?.

Yeah, in volume terms please. And exclude distribution, taking back distribution in-house, like Corona in Australia.

So just underlying, what could we expect in the future?.

Yeah, I mean, what I know, I don't have the exact number in front of me, but what I know is that Stella Artois is back to growth in Belgium. What I know is that Corona is growing in Mexico. And Lauren can confirm the numbers afterwards to you. And what I know is that Budweiser is declining 35 bps in terms of share last quarter in the U.S.

So, Lauren can give you..

Sorry, just on what ex-home markets? In the growth markets?.

I had that in my speech. We had that on Page 11 of the script.

So, if you look at global brands outside of home markets, they are growing at 16.8% for 2017, revenue growth, right? But if you go now for Page 12, you see that Stella Artois, or better to say Corona, is growing revenue 39.9% outside of Mexico, Budweiser 10.8% outside of the U.S., and Stella Artois, we'll have to get you that number.

But it should be very close to the 12.8% because Belgium is growing very slightly. So around 12% outside of the home market. So those are the numbers..

Our next question comes from the line of Mark Swartzberg of Franklin Lakes..

Okay. It's Stifel Financial. Good afternoon, everyone. Retail on the U.S., really building on Brett's questions. You drew attention to this focus on hyper local execution.

So, Question 1 is how important might that be? What are you seeing from these test markets that might be encouraging for the larger performance in the U.S.? And then secondly, you also drew attention to quality messaging and innovation for Bud Light and you've been seen encouraging signs for Bud Light for a number of years.

Is there any reason to think that the quality messaging will be more impactful to improving the share trends for the brand?.

Mark, I think on Bud Light, it's interesting. We've had a lot of positive feedback from Bud Light drinkers on our essentially ingredients contained because it had been a while since the last time we spoke about ingredients, what goes into the beer, and quality of Bud Light and the special process and everything.

So that was something that was very well-received. We will continue to make that part of our Bud Light communication. So, we made it a priority for Bud Light to defend its quality credentials, for sure. And we'll continue to highlight the power and mostly the simplicity.

We see that some consumers are a bit tired of the complexity of the category that became all crafts and all different liquids that are very hard to understand. And Bud Light is a simple beer with essential ingredients, fresh, and that appeals to a lot of consumers. And "Dilly, Dilly," on the other hand, put Bud Light back into pop culture.

Number one topic in conversation in terms of beer and social media. It's something that brought Bud Light a lot of what Bud Light big, which is being in tune with young people, young adults, and also being topical in terms of conversation.

So, I think "Dilly, Dilly," I think quality message, and the continued execution, and some insights from the Category Expansion Model in terms of easy drinking will make a difference for Bud Light.

Your first question was?.

About the hyper local execution. You cut some test markets in '17.

How encouraging are they for what might happen nationally in '18?.

Yeah. I think one thing we did in the U.S. is we centralized maybe too much and we have too many programs that are national. And the fact is that the U.S., like China and Brazil, is a continent in itself and you have many different U.S.s within the U.S.

So, states are very different, from the heartland to the coast to more Hispanics to all sorts of different Hispanics, some more Mexican, some Cubans, some Dominicans. And we have brands that appeal to all those different ethnicities. But when you have a national program, it's very hard to execute as per different markets' makeup.

So, I've been traveling the U.S. for the past three weeks with the new leadership, Michel, Brendan, Marcel, and what we see is that there is an opportunity to really go back to many years ago when we had more regional events and we had different portfolio make-ups, slightly different, per region. Because again, in some places, you have Dominicans.

We have presented the No. 1 by far in the Dominican Republic. Then if you have Mexicans, again, Bud Light is the No.

1 beer with Hispanics but we need to tailor the message to the Hispanic consumer and also invest behind Estrella Jalisco, which by the way, this year will be a big year for it because it's the sponsor of the World Cup and the Mexican National Team in the U.S. And so, on and so forth. So, I think it's something that we need to do better.

You go to Miami, Beck's, for example, has a strong following. So, I mean, there are many different things that could be hidden jewels. Not to talk about craft and specialties that go better here than there, places where you have more events than others.

So different things that we're trying more and more to tackle in this huge continent called the U.S., as we do in China, as we do in Brazil. So, nothing new, just that we have to apply to the U.S. as well..

Our next question comes from the line of Mitch Collett of Goldman Sachs..

In the outlook statement, you say that you expect to deliver net revenue per hectoliter ahead of inflation.

Do you think you achieved that in F '17? And does that imply revenue per hectoliter growth can accelerate in F '18? And if it does, would you expect that to be offset by volume being slightly softer? And then I just wanted to come back to the U.S. where you said a few times that you want to get the right balance between share and profitability.

This year your gross margin went up 90 basis points more than your EBITDA margin.

What would be the right balance between profitability and market share within the U.S.?.

Well, let's start with the second question. I mean, in terms of the U.S., what we have is a market with very strong cash flow, very strong margins, hard currency, and an amazing scale. So, we want to keep that. Of course, we want to grow that.

But more than growing, we want to first keep and then grow as we did, by the way, in 2017 in which we grew EBITDA by 1.9%. We want to continue to grow cash flow as we did, by the way, in 2017 in North America. But we have to get that share profitability right. I mentioned here with Mark and Brett many of the things we're doing in the U.S.

and we're going to do it the right way so it's sustainable, so it's profitable, so it's accretive. So that's our intention in the U.S. In terms of your first question, our implied inflation for our footprint was 4% or between 3.5% and 4% last year and we grew top line by 5.1%.

So, what we said for the outlook was already achieved last year and prior to that. And that is done through mix mostly. Okay? So, yes, just for an example, '17 was a good example..

And then I guess as a follow-up to that, given the shift you've highlighted in your business toward growth markets and given the acceleration of your global brands as well as your new category management initiative, do you think that the five-year CAGR is the right starting point when you think about your organic revenue growth for the next two or three years? Or could it be slightly higher than that?.

Well, in '17, it was higher. And SAB brought us markets that are more growth-oriented by the very nature of those markets. So, we're not giving any guidance here but, of course, we'll continue to work to beat that five-year CAGR going forward. That you can be sure..

Our next question from the line of Pablo Zuanic of SIG..

Thanks for taking my question. One for Felipe and one for Brito. Felipe, just remind us by how much EBITDA margins in Mexico increased over the last five years.

And the reason I ask for that refresher is just, if you can, give us some color in terms of where were margins for the beer business in Columbia, Peru, and South Africa when you took over that business. Obviously, we have the SAB numbers at the regional level and consolidated but we don't have that country individuality. So that would help.

And the second one, Brito, for you, obviously great quarter, great year, lots of momentum in the beer business. So much to do, so much opportunity. And even in the U.S., you talk about the next ten years.

So, I guess my question is, when I hear Felipe in every call tell us that M&A remains a core competency for the company, and here we are, all of us, on the buy-and-sell side thinking, Okay, there's nothing else for Anheuser Busch to buy in the beer industry pretty much that's sizable and relevant for them.

So, you're going to have to get out of beer and go into other categories. And I guess I'm just asking, just help us think through that. Because you've done so well in beer, you do have a lot of opportunity there. So, there's this risk looming that you have to enter a new category.

How should we think about that?.

Well, Pablo, thanks. At this point, we're really focused on finishing our integration. Let's just remember, we did a huge business combination. We're far from done but we had a very good start. 2017 was our first full year. Integrations normally take two to three years to be totally done, in terms of synergies, integration, best practice, best of both.

So, I wouldn't just write off what we're doing now as, Okay, it's done, next. We also have deleveraging that we need to do before we can think of anything else. And so, 99.9% of our people in the company, of our 200,000 colleagues, are always, not now but always, focused on the organic business enhance.

And only a few people are looking at the market opportunities and we don't do that every day. So, our business is really to grow what we have. We don't need to do any more acquisitions. We have an amazing portfolio. We have leading positions in nine out of the 10 top markets for beer today and where growth is going to come from in the future.

We operate in 50 markets. As you saw in the two charts, we have leading top line and cash conversion and EBITDA margin compared to FMCG. We want to do better than that. We can do better than that. So, we have lots to do. We're very happy with year one of integration but it's not done yet. So too soon to think of anything other than that at this point..

So, on the first one, for decisions announced as part of the Modelo transaction, that would imply an EBITDA margin expansion in the mid-teens and to be captured in three years.

Three years are well behind and the business continues to execute that margin, showing that yeah, there is a big wait that comes together with synergies and then it's more a combination of keeping net revenues growing ahead of inflation while costs grow below inflation that should be right for the margin expansion, compounded by volumes growth.

So that is that. On the SAB transactions, it's no different. When you apply the $3.2 billion on the former SAB EBITDA prior to the combination, that would imply margin expansions in the mid-teens. And therefore, that should be captured across all SAB markets as synergies are captured. I hope that gives you a sense on what is coming..

Thank you. That's very helpful, Felipe. Brito, can I ask just a quick follow-up? In the U.S., I mean, obviously Corona is doing great overseas, like you described. It's also doing very well in the U.S. Right? And so far, your Mexican brands, Modelo, Estrella, haven't really tackled Corona.

I would argue Corona is more a lifestyle brand that supports the growth there than necessarily the Hispanic side of it, although that also helps. My question is you have Kona in your portfolio that, in my opinion, a very strong potential direct competitor of Corona, but your distribution is not doing much with it.

When I say you have it, I mean obviously it belongs to another company but you're the distributor for it. I think you could be doing a lot more with that brand and maybe challenging Corona more directly in lifestyle. Thanks..

Yeah, I think the Category Expansion Model, opening our eyes to many opportunities. I'm not going to comment to anything specifically because it is competitive sensitive. But I think it's something that we're applying to the U.S., our main market, and it's interesting to see how some insights are sometimes not the obvious ones.

So, again, we have an amazing portfolio. We have brands that, as you said, can be activated more intensely in segments or regions. We have to be more region-specific because the U.S. is a continent. We already do that, by the way, in Brazil.

If you go to Brazil and you look at what they do in the northeast compared to the southeast, the programs are very different. Of course, when you have a World Cup or Carnival, that's across the country. But the rest of the year, the programs are very different. You go to China, same thing. And then go to Guangdong or go to Szechuan.

The programs, of course, some are national but a lot of them are very, very localized. And in the U.S., for some reason, we took that empowerment from the regions and now we're giving it back, of course, in the last two years.

And we're giving some of that back because we see opportunities with zip code analysis, a database we have now with big data with lots of things that were not available before and that now are available. We also enhanced our leadership to be able to have that kind of empowerment to make those kinds of decisions on a local level.

And the wholesalers that are now closer to us and vice versa are also amazing partners in deciding or helping us decide how to best tailor programs to different regions. They've been there for generations. They have a vested interest.

90% of their volume or close to it is our products and they're very, very loyal to our brands and very interested in succeeding. It's a win-win for both of us. So, we're going to be working more closely with the panel in our Win Together program with the wholesalers that was started two years ago. And that's going very well.

So that's all part of this logic of more localization..

And ladies and gentlemen, we do have time for one more question. Our final question will come from the line of Sanjeet Aujla of Credit Suisse..

A few questions on the Category Expansion Framework please. If my memory serves me correct, this was a five to 10-year plan for SAB.

How quickly do you think it can have a visible impact on your results? Do you think it should be sooner than that? Secondly, do you think you've got enough people from SAB to help you execute on the Category Expansion Framework and embedding that across your organization? And thirdly, just specifically on refreshing and segmenting Core Lager brands between classic and easy drinking, you gave the example of having done it in Argentina.

Are you planning to implement that across all markets and will that be happening over the next 12 to 18 months?.

That's a very good question because what we're seeing in many of our markets is that, because Core Lager has always been the center of gravity of our business, most of our business, most of our strong brands are in that box. Sometimes we've been not very accurate in positioning brands in different domains in consumers' minds.

And sometimes they are just on top of each other. And what the Category Framework showed us is that these brands can be better positioned and therefore have less cannibalization and appeal to different occasions and different consumer needs, if done correctly according to the model.

So, for example, in Argentina, we had the example of Quilmes and Brahma being right on top of each other and consumers didn't know exactly why I should pick one or the other.

And last year we did -- it was the first country where we took the learning's, even before the year started because we learned about that in 2016, and executed that and separated, in terms of communication, packaging, every touch point to separate more between Core Lager or classic lager or easy drinking.

And the results are very good; were very good. So, we are very excited about going to markets where we have similar issues, including the U.S., where Bud and Bud Light sometimes sit very close to each other.

Including Brazil, where Skol and Brahma for a long time have used some properties that are the same or very close, executed the same displays in the supermarket and all that, and tried to really get the personalities of these brands to really be more accentuated so they appeal to different occasions, different consumer needs, and are therefore more complementary than cannibalistic.

Okay? In terms of people, yes, we have the people, our new colleagues from SAB. Most of them that work with the Category Expansion Model and most of them that we invited to stay that embrace our new dream of the new company stayed. So, we're very excited, very proud to be called their partners. Very proud to have them with us.

And, yes, so again as I said at the very beginning of the call, the Category Expansion has been adopted last year in our three-year plan, in our one-year plan, and it became company language. It's not a marketing language, it's a company language. Right? So, thank you. So, if there are no more further questions, Maria, let me summarize the call.

So, in summary, 2017 was a transformational year for our company. The integration with SAB is our most successful ever. This is first and foremost due to our people, who have continued to amaze us throughout this process.

We're also very excited about the intellectual synergies that have arisen from the combination, such as, for example, the Category Expansion Framework we just discussed. Additionally, we achieved our best performance in the last three years, grew revenue nine out of the top 10 markets and achieving double digit EBITDA growth.

We will continue to work hard to grow the global beer category while evolving our brand portfolio to ensure we are rising to every occasion to capture future growth. We're very excited about 2018 knowing that the first quarter will be soft. And the reasons for that are very simple.

First, phasing of sales and marketing initiatives, largely due to the World Cup year. If you go back to 2010 and 2014, the two last World Cups, you'll see that our first quarters or first half of the year are normally more charged in terms of sales and marketing because of all the promotions we do leading to the World Cup.

So, this year will be no different. But the other reason is there is a soft top line start in Brazil.

So not only Carnival, which was earlier this year, second, we had very poor weather since mid-December in Brazil, which again affected sales, and we also have a tough comp because last year in the first quarter, our Brazilian beer business grew ahead of the industry, 5.5% ahead of the industry. So, it gained share big time last quarter.

So, weather, Carnival, tough comp. And there's also some inventory in China that moved because of Chinese New Year, just like Carnival moving in the calendar year. But, again, we're very excited about 2018.

As we said in our outlook, we remain excited and committed to deliver strong revenue and EBITDA growth in the year, knowing that the first quarter will be soft as a result of everything I said. So, again, thank you very much for joining the call and dilly, dilly to all of you. Thanks so much. Bye-bye..

Thank you. And this does conclude today's earnings conference call and webcast. Please disconnect your lines at this time and have a wonderful day..