Welcome to the Anheuser-Busch InBev's Second Quarter 2019 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 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, and 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. [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 the 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 22 of March 2019.

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..

Thank you, Maria, and good morning. Good afternoon everyone. Welcome to our second quarter and half year 2019 earnings call. Today, I'll be taking you through the highlights of the second, then spend some time to discuss our Middle Americas region before handing over to Felipe, who will discuss our financials. We'll then take your questions.

Let's start with the highlights. This quarter will deliver our best quarterly performance, one performance in more than five years, with total volumes down by 2.1%. Our 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 123 basis points to 42%. This was primarily due to the strong top-line performance with sales and volume growth enhanced by favorable brand mix as well as ongoing cost discipline partially offset the significant commodity and transactional currency headwinds.

As a result of the timing of our hedges, we expect that this headwind will pick up in the third quarter before moderating in the fourth quarter, our full year guidance remains unchanged.

Our performance this quarter was supported by the successful execution of our position premiumization strategy led by the double-digit revenue growth of both the high-end company in our global brands outside of their home markets. This reinforces our conviction that the gross portfolio is critical to win in the premium segment.

Furthermore, this quarter, we reached a major milestone, the path to achieving our 20 to 25 sustainability goals. We now are halfway to reaching our goal of securing 100% of our purchased electricity from renewable sources. We remain firmly committed to creating a wealth [ph] for 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% with revenue per hl growth of 3.8%. Further volumes grew by 2.1%, which is consistent with our objective to achieve more balanced topline 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 was 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 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.

The leveraging to our optimal capital structure of a net debt to EBITDA ratio of around 2 times remains a priority for us. And in the first half of this year, our net debt to EBITDA ratio decreased from 4.621 times at the end of 2018 to 4.58 times.

We expect to deliver further progress on the leveraging by the end of 2019 is the majority of our cash flows 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 brands for 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 that it was lapping, it's a 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, two of the top international football leagues.

Aguila grew revenue by nearly 12% this quarter, with broad based growth delivering double-digit revenue growth in more than 25 countries supported by strong presence in the meal occasion [ph]. Corona, our most premium global brand accelerated its growth in the second quarter with revenues up by nearly 24% outside of Mexico.

We also achieved its goal of cleaning up 100 islands, one 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 seven of our brands and four of our markets, a testament to our persistent focus on brand building and creativity. One major reason why our brands are so loved by consumers is their connection with key passion points. And amongst this passion points, football is far away the number one.

This quarter, we have a lot of exciting news to share about our brands connections to the world of football. In addition to Budweiser sponsorship of the Premier League and La Liga, the brand also became the first official beer sponsor of the U.S.

National Women's Soccer League, an exciting partnership in the home of the reigning female football champions of the world.

Many of our local brands especially those in the classic locker space also showed their national pride to activations around the Copa America Championship, including Quilmes in Argentina, Aguila in Colombia and Brahma in Brazil, where the national team won on their home turf.

As a longtime 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 Better World.

As I mentioned earlier, we're now halfway to achieving our goal of securing 100% of our purchase electricity from renewable sources at rates that are more competitive than other existing sources.

We also launched the road safety toolkit, in partnership with the 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 the very exciting achievement in South Africa. Broad Based Black Economic Empowerment, commonly referred to as BBBEE for short, is a national program and empowering previously disadvantaged groups and enhancing the South African economy.

I am 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 second quarter 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 a price increase in April that was earlier than in prior years. We estimate the market share decline 55 basis points in the quarter import 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 in favorable Eastern 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 going 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 growth and share gains within the segment.

In June, we launched another brand in-line with our smart affordability strategy called Legitima, brewed with ingredients grown by local farmers in the state of Ceara, following the continued success of Nossa and Magnifica. This brand increases our presence in the various segment at comparable margin store our core portfolio.

South Africa delivered an improved performance this quarter, despite the challenging macroeconomic environment, which has helped by the time of Easter, which was helped by the timing of Easter. We grew volume by mid-single digits lead 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 index 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 increasingly relevant channel for business.

And we continue to drive double-digit volume growth in this channel. Our business in Europe had a fantastic quarter.

During 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 UK and Germany. Budweiser continues to grow across Europe by high-single-digits, fueled by its recent launch in France, in successful Women's FIFA World Cup contains.

Brahma [ph] more than doubled its volume in Italy and continues to grow established markets such as the UK and Belgium. I'll 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. We are going into more detail on the two largest markets, Mexico and Colombia.

We combined with Group Modelo in 2013, solidify our positions with the largest brewer in Mexico. Since then we are 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. For core portfolio brands led by Corona and Victoria has grown by CAGR of more than 5% on a three-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% in the past three years led by Stella Artois and Michelob Ultra. We're always looking for new ways to reach more consumers with our unparalleled portfolio of beers.

Earlier this year, we're 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 17,000 locations. This milestone represents an exciting opportunity to grow our brands and beer category in Mexico.

In the second quarter, we successfully rolled out our portfolio to more than 4000 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 also stores in Mexico by the end of 2022. We're excited about this new partnership and we will continue to strengthen our relationship to bring our portfolio to more consumers in more locations.

Moving out to Colombia, Colombia is the 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 gain share of total alcohol primarily from local spirits.

Over the last three years, we have gained almost 2 percentage points of share of total alcohol as that 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 three 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 with inter premium segment from less than 25% in October 2016, to more than 75% today. Corona and Budweiser have led this growth and they're now the number one and number two international premium brands respectively.

This summer, we're very excited about our business in Colombia, given the country's relatively low per capita consumption, our strong portfolio brands as a significant opportunity to continue shaping and leading the growing premium segment. Felipe will now take you through our second quarter 2019 financials.

Felipe?.

Thank you, Brito, and good morning everyone. Let's start with an update on our synergies. The second quarter of the year, we delivered $113 million of synergies, bringing the total synergies captured from the SMB combination to $3.15 billion. Our total synergy guidance remains $3.2 billion, 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 second quarter 2019 were $1 billion compared to $1.3 billion in the second quarter 2018.

This decrease was primarily due to mark to market gains linked to the hedging of our share-based payment programs of $473 million, compared to a loss of $16 million in the second quarter 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 fact of gains and losses related to the hedging of our share-based payment programs, our effective tax rate this quarter was 27.2% primarily driven by country mix.

We're maintaining 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 define as our normalized EPS, excluding the impact of mark to market related to our share-based payment programs and hyperinflation adjustment in Argentina increased by $0.06 to $1.16, as our strong organic performance and savings, net finance costs, more than offset the negative impact of higher income tax expenses, inflation of 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 maintained over $17 billion of liquidity at half year 2019.

We have eliminated refinancing pressure for the foreseeable future in our redemptions in any given year are considerably lower than our annual cash flow generation. Our bond portfolio remains insulated from interest rates volatility as 91% carries [ph] a fixed rate.

Furthermore, the portfolio is 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 euros as a proxy giving its strong correlation, the basket of emerging market currencies that are relevant to our EBITDA and cash flow generation.

Our bonds have a weighted average maturity of roughly 14 years, and we continue to expect the average pretax gross debt couponing full year 2019 to be between 3.75% and 4%.

On July 19th, we announced an agreement to divest our Australian subsidiary to Asahi for approximately US$11.3 billion which represents for an implied multiple of 14.9 times 2019 normalized EBITDA. As part of this transaction, we have granted Asahi the rights to commercialize the portfolio of our global finance and international brands in Australia.

The transaction is expected to close by the first quarter of 2020. The divestiture of 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 traditional shareholder value by optimizing our business at an attractive price by further deleveraging our balance sheet and strengthening our position for growth opportunities.

We anticipate that substantially all of the proceeds we will be using to pay down debt with an estimated reduction of our net debt-to-EBITDA ratio of approximately 0.35 times.

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 business in APAC and the region remains a growth engine within our company.

With our unparalleled portfolio of brands, the strong commercial brands and talented people, we are eminently positioned to capture opportunities for growth across the APAC region. Our capital allocation objectives remain unchanged.

Deleveraging to around two times remains our commitment and we will prioritize debt repayment in order to meet these objectives. As of June 30, 2019, our net debt-to-EBITDA rates are decreased from 4.61 at December last year to 4.58 times this year despite the seasonality of our cash flow which SKUs towards the second half of the year.

We expect our net debt-to-EBITDA ratio to be below 4 times by the end of 2020, our commitment that is not dependent on the sale of the Australian business or a completion of potential IPO of Budweiser APAC. And with that, I will hand back to Maria to begin the Q&A session. Thank you..

Thank you. The floor is now open for questions. In interest of time, we will limit participants to one question only. [Operator Instructions] Our first question comes from the line of Olivier Nicolai of Morgan Stanley..

Hi, good morning, Brito, 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 cost [indiscernible] will continue and should we expect more distribution gains of the roll out of Corona across Europe? And also, could you talk about your cost strategy in Europe and what role this plays for your portfolio? And if I just may -- just have a quick follow-up on your transition regarding Mexico, EBITDA grew by 30% in Q2, I was trying to understand how you speak that between obviously your packing leverage half, linkage is strong top-line, but also the benefits 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 – first on Europe and in Europe revenue grew by mid-single-digit, so an amazing quarter in Europe, revenue growing one growth across through multiple markets. Global brands had a great quarter growing by high single-digits, Corona grew double-digits as driven by many countries especially UK and Germany.

Budweiser also double-digits growth supported by Bud launch in France, which you see, we're very optimistic about it. And Stella Artois revenue driven by higher volumes in the UK, Italy and Belgium. And I think more importantly, we gain market share in all markets.

And you're right, I mean we are recycling that a very strong quarter last year, because the World Cup in Europe. So, the time of the games, everything was perfect. So, it was very strong for the 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 good years and beyond trade channel. And we continue to have amazing results now for [indiscernible] in the UK. So, it's not something of this quarter, it's more than four years. [indiscernible] has always been a strong market for us as well, double-digit growth in revenues and volume.

Bud Watch [ph] very interesting because we didn't have a presence in the classic premium side of the market. So that's what Bud is, less than Brahma [ph]is doing very well. In Belgium, again, we’re back to growth, we grow volumes mid-single digits, with market share gains. Germany also good growth Corona.

Europe has been the major market for us in the last four years. And it's accelerating this year, if you look at the quarter and a half, we’re very excited about Europe. And 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 we 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 the central brewery, also the UK brewery that we added some lines, two lines UK brewery.

So, we added capacity to Mexico given the very strong one goal. And that of course is some great facts in terms of cost of sales and distribution. So, all-in-all, a great story from Mexico, again, has been since 2013. So, it's not new. It is now 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 complimentary 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, so it’s a phased approach. But 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 Robert Ottenstein of Evercore ISI..

Great, thank you very much. Brito, a lot of your commercial success over the last two 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 from Michelob Ultra.

And so, I guess the question is, and we're seeing pop up in more and more countries around the world Mexico, China, for instance. Have you decided to take [indiscernible] 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..

To your question, Robert. Michelob Ultra has been an amazing brand, if you look at the U.S. it's home market. It's the biggest share gain in the U.S.

market overall for more than four years in percent of our business around 10% and it continues to grow from strength to strength, you saw what Pure Gold is doing now with first organic at scale being the U.S. sold at a premium to Michelob Ultra.

And again, adding to the franchise, not subtracted both brands, Michelob Ultra and Pure Gold 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, it just seems that it's becoming a more international brand.

All markets are asking for it, because again, it goes into the active lifestyle, the trend that we see out there with consumers in health and wellness. So, it's a brand that has always been in that space, this space is growing and the brands there positioned in consumer's mind.

So again, it's amazing success story that we tend to get to more and more countries because this thing about health and wellness and active lifestyle segment of our consumers, the growth segment of our consumers is getting -- is everywhere develop and developed markets. So, big opportunity..

Thank you..

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

Hi, Brito.

Lot of the question have been answered already but one question on Colombia, I think we discussed in the last quarter, do you have any entrant there, but it doesn't really appear to be said dampening your growth rates, can you just about how much market share you think you may have picked up if any and little bit more color on that new entry please..

Well, Colombia, in Colombia we have resume competitor dynamics, would know about it for a couple 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 matters is that we're gaining share in Colombia and its local volume this quarter growth had 3%.

We had also revenue growth in mid-single digits, beer also growing low single digits. And I think it's important that we're trying to categorize it, with the kind of market share we have in Colombia, we have to build the category of course you take every competitive change very seriously.

Got to say, there are global brands did an amazing job because they've been there just for three years and they are growing now ahead of 50% versus last year, this quarter, and now they have the bulk of this share of international premium segment with Corona being the number one brand now in the international premium segment and Budweiser the number two brand.

And now have over 75%, three quarters of the segments 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.

Clearly it seems to be to know about Colombia, until you know it, is that still a country where the per capita consumption still low but again growing, so it’s something it’s very exciting and that's what we talked about share of total alcohol..

Thank you, Brito..

Thanks, Trevor..

Our next question comes from the line of Christen [ph] of Redburn Partners..

I just want to follow-up on Australia, I mean Philippe you've made very clear that debt is not a problem, under control, everything is on track and nothing is due. So, 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, Christen, I think the points 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&A for consolidation in the region, while establishing local trade, kind of that remain 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 consistence.

The point on discipline is also connected to that the same discipline in which we would consider the IPO decision of the past week advance and we remain focused on driving our business in this hyperinflation..

So, the idea perhaps that if you look around to your -- basically around the world, you look at some other assets that don't have the same growth rate, there is 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 remain on track to reach our commitments regardless as I said the disposal for Australia and the IPO.

In fact, if you're looking for this first quarter and knowing that our cash flow generation is geared towards the second half of the year, a good example of debt was last year in which net debt to EBITDA increased from 4.8 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 to EBITDA declined from 4.61 to 4.58, which is a 0.07 improvement. So, we point out pretty solid. We continue to delever organically. In fact, we have been able to accelerate that and not being dependent on the sale of any assets to reach our goals..

Okay. Thank you..

You're welcome..

Next question comes from the line of Fernando Ferreira of Bank of America Merrill Lynch..

Hi, Brito 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, 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. It was, I mean also gross profit evolution for the company has really led by top-line, right? So, I mean this is about saving, it is something that it's fair. We had signaled that before.

But I think that the important thing about the results of the company. This quarter but the 90% of organic growth EBITDA level was driven by top-line 90%. So, it's -- 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 definitely Mexico.

So, I think that's the first thing to say for Mexico.

And your second point was?.

The new breweries..

The new breweries..

Yes. The new breweries..

That was much needed. You're right, this will have benefit -- is already having a benefit on our logistics and our production costs. Because we -- in terms of whether the consumption is wrong. We need some more capacity.

You have to remember that since 2013, our volumes in Mexico having run very fast, and we've been adding capacity for Yucatan brewery and our Centro brewery. The Centro 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 Centro brewery, but also lines in the Yucatan brewery. So, continue to add capacity Mexico, which has been an amazing market in terms of industry expansion, category expansion, in terms of share, and in terms of possibility has been very consistent. So that's what we like about the Mexico market..

Thank you. Thanks, Brito..

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

Thank you and good morning. Just a point to clarification first, Brito. If I can with regards to your comments around the marketing and sales spend. And I think you said that I've seen Q2 marketing spend, it 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. And second question around just working capital, and the benefit you saw on the working capital line in the first half. Felipe, you could talk a little bit to that where it's coming from et cetera..

Again, in terms of sales and marketing phases, 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 will be more evenly distributed between half one and half two, more bands throughout the year.

And it will result -- therefore, it will result in a more difficult comparable in the second half, particularly in the third quarter. 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 the total company results, this quarter, Simon, you see that most of the EBITDA growth, organic EBITDA growth, which was $521 million, 90% of it came from gross profit for top-line, 475.

So, this quarter, the success of this quarter was top-line gross profit driven, not SG&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 rate was driven by the awesome top-line we had translated to gross profit. That was it. That's the basic of what happened this quarter..

So on the on the cash flow, you had to be mindful to the fact that there is a seasonality throughout the year, which means between December and June, we do invest in working capital before releasing 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 million 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 working capital driver..

Got it? Thanks Felipe. Thanks Brito..

You're welcome..

And ladies and gentlemen, we have time for one more question. Our final question will come from the line as Sanjiv Aja [ph]of Credit Suisse..

Yeah, I just had a question on Brazil. You talk about most of your growth coming from the north and northeast region.

So, I just wanted to, to gauge how you're fairing 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 Sanjiv. First let me say, we’re very happy to see Brazil back to volume growth. That's awesome. And the best thing is that volume growth was across all segments. So that wasn't the backdrop of an industry that was flattish. So, this performance because that consequence of the consistent investments we've done on a strategic platform.

Be it our core brands, premium brands, and also what we recall now the smart affordability. From the premium segment, the global brands and local premiums grew ahead of the market. And that was mainly in the southeast. Your question, so there was growth in all regions, differentiation of brand of families played a very important role in this strategy.

And now with Pure Gold and Brahma, with Brahma Extra in the family of flavors, or specialties brands within the Brahma Extra franchise has been very important for the Brahma family. And we continue to expand 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 are 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, that increase in the mix.

So again, very happy with Brazil. Our strategic imperatives are working, global brands leading the way. Smart affordability, which is a tool kit that we learned from our African colleagues and we gain share, so very good, good quarter for Brazil. Consumers are feeling better, and inflation more back to normal. And so, very happy with Brazil..

Many thanks..

Alright, 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 volume performance in more than five years, leading to more balanced top-line growth.

Our strong commercial plans, 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..