AB InBev Financial Results
Currency sensitivity analysis
Currency transactional risk
Most of AB InBev's non-derivative financial instruments are either denominated in the functional currency of the subsidiary
or are converted into the functional currency through the use of derivatives. Where illiquidity in the local market prevents
hedging at a reasonable cost, the company can have open positions. The transactional foreign currency risk mainly arises
from open positions in Argentinean peso, Brazilian real, Canadian dollar, Colombian peso, Mexican peso and South African
rand against the US dollar.
The company uses a sensitivity analysis to estimate the impact in its consolidated income statement and other
comprehensive income of a strengthening or a weakening of the US dollar against the other group currencies. In case the
open positions remain unchanged and with all other variables held constant, a 10% strengthening or weakening of the US
dollar against other currencies could lead to an estimated decrease/increase on the consolidated profit before tax of
approximately 144m US dollar over the next 12 months (31 December 20211: 99m US dollar). Applying a similar sensitivity
on the total derivatives positions could lead to a negative/positive pre-tax impact on equity reserves of 537m US dollar (31
December 20211: 523m US dollar). The results of the sensitivity analysis should not be considered as projections of likely
future events, as the gains or losses from exchange rates in the future may differ due to developments in the global financial
markets.
Foreign exchange risk on net investments in foreign operations
AB InBev mitigates exposures of its investments in foreign operations using both derivative and non-derivative financial
instruments as hedging instruments.
As of 31 December 2022, designated derivative financial instruments in net investment hedges applied on the company's
debt amount to 8 482m US dollar equivalent (31 December 20211: 7 473m US dollar). These instruments hedge foreign
operations with Canadian dollar, Chinese yuan and South Korean won functional currencies.
Net foreign exchange results
Foreign exchange results recognized on hedged and unhedged exposures are as follows:
Million US dollar
Hedged (economic hedges)
Not hedged
2022
2021
297
717
(660)
(801)
(363)
(84)
D) INTEREST RATE RISK
The company applies a dynamic interest rate hedging approach whereby the target mix between fixed and floating rate
debt is reviewed periodically. The purpose of AB InBev's policy is to achieve an optimal balance between the cost of
funding and the volatility of financial results, while taking into account market conditions as well as AB InBev's overall
business strategy.
Fair value hedges
US dollar fixed rate bond hedges (interest rate risk on borrowings in US dollar)
The company manages and reduces the impact of changes in the US dollar interest rates on the fair value of certain fixed
rate bonds with an aggregate principal amount of 1.0 billion US dollar through fixed/floating interest rate swaps. These
derivative instruments have been designated in fair value hedge accounting relationships.
Cash flow hedges
Pound sterling bond hedges (foreign currency risk and interest rate risk on borrowings in pound sterling)
In September 2013, the company issued a pound sterling bond for 500m pound sterling at a rate of 4.00% per year and
maturing in September 2025. The impact of changes in the pound sterling exchange rate and interest rate on this bond is
managed and reduced through pound sterling fixed/euro fixed cross currency interest rate swaps. These derivative
instruments have been designated in a cash flow hedge relationship.
1 Amended to conform to 2022 presentation.
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