AB InBev Financial Results
controls and restrictions on carrying out certain activities in Russia or in support of Russian businesses. As a result of the
conflict and international reactions thereto, Russian authorities have also imposed various economic and financial
restrictions, including currency controls and restrictions on transacting with non-Russian parties. The implementation or
expansion of these sanctions, trade restrictions, export and currency controls and other restrictive measures may make it
difficult for AB InBev to divest its non-controlling interest in the AB InBev Efes joint venture and repatriate, or otherwise
remit, cash from Russia to other jurisdictions. Any failure to comply with applicable sanctions and restrictions could subject
AB InBev to regulatory penalties and reputational risk. Even though AB InBev has forfeited all financial benefits from the
AB InBev Efes joint venture, these developments have had, and may continue to have, an adverse impact on the
company's business, financial performance and results of operations, and could result in damage to its reputation.
Furthermore, the conflict has resulted and could continue to result in volatile energy, commodity and raw materials markets,
supply chain disruptions and inflation, which has affected and may continue to affect the price and availability of certain
raw materials or commodities required for AB InBev's products and may adversely affect its operations. These and other
impacts of the conflict could have the effect of heightening other risks described herein, including, but not limited to, adverse
effects on economic and political conditions in AB InBev's key markets, increased risk of cyber incidents or other disruptions
to AB InBev's information systems, reputational risks and additional trade restrictions, which could materially and adversely
affect AB InBev's business and results of operations. The ultimate impact of these disruptions depends on events beyond
AB InBev's knowledge or control, including the scope and duration of the conflict and actions taken by parties other than
AB InBev to respond to them, and cannot be predicted.
AB InBev's results of operations are affected by fluctuations in exchange rates. Any change in exchange rates between
AB InBev's operating companies' functional currencies and the U.S. dollar will affect its consolidated income statement
and statement of financial position when the results of those operating companies are translated into U.S. dollar for
reporting purposes as translational exposures are not hedged. Also, there can be no assurance that the policies in place
to manage commodity price and transactional foreign currency risks to protect AB InBev's exposure will be able to
successfully hedge against the effects of such foreign exchange exposure, especially over the long-term. Further, the use
of financial instruments to mitigate currency risk and any other efforts taken to better match the effective currencies of AB
InBev's liabilities to its cash flows could result in increased costs.
Following the categorization of Argentina in AB InBev's results for the third quarter of 2018 as a country with a three-year
cumulative inflation rate greater than 100%, the country is considered as a hyperinflationary economy in accordance with
IFRS rules (IAS 29), resulting in the restatement of certain results for hyperinflation accounting. If the economic or political
situation in Argentina further deteriorates, the South America operations may be subject to additional restrictions under
new Argentinean foreign exchange, export repatriation or expropriation regimes that could adversely affect AB InBev's
ability to access funds from Argentina, financial condition and operating results.
AB InBev may not be able to obtain the necessary funding for its future capital or refinancing needs and may face financial
risks due to its level of debt and uncertain market conditions. AB InBev may be required to raise additional funds for its
future capital needs or to refinance its current indebtedness through public or private financing, strategic relationships or
other arrangements and there can be no assurance that the funding, if needed, will be available or provided on attractive
terms. AB InBev has incurred substantial indebtedness by entering into a senior credit facility and accessing the bond
markets from time to time based on its financial needs, including as a result of the acquisition of SAB. For the near term,
the portion of AB InBev's consolidated statement of financial position represented by debt is expected to remain higher as
compared to its historical position. AB InBev's increased level of debt could have significant consequences for AB InBev,
including (i) increasing its vulnerability to general adverse economic and industry conditions, (ii) limiting its flexibility in
planning for, or reacting to, changes in its business and the industry in which AB InBev operates, (iii) impairing its ability to
obtain additional financing in the future and limiting its ability to fund future working capital and capital expenditures, to
engage e in future acquisitions or development activities or to otherwise realize the value of its assets and opportunities fully,
(iv) requiring AB InBev to issue additional equity (potentially under unfavorable market conditions), and (v) placing AB
InBev at a competitive disadvantage compared to its competitors that have less debt. AB InBev's ability to repay and
renegotiate its outstanding indebtedness will be dependent upon market conditions. Unfavorable conditions, including
significant price volatility, dislocations and liquidity disruptions in the global credit markets in recent years, as well as
downward pressure on credit capacity for certain issuers without regard to those issuers' underlying financial strength,
could increase costs beyond what is currently anticipated. Such costs could have a material adverse impact on AB InBev's
cash flows, results of operations or both. While AB InBev aims to dynamically allocate its surplus free cash flow to balance
its leverage, return cash to shareholders and pursue selective mergers and acquisitions, the company's level of debt may
restrict the amount of dividends it is able to pay.
Also, a credit rating downgrade could have a material adverse effect on AB InBev's ability to finance its ongoing operations
or to refinance its existing indebtedness. In addition, a failure of AB InBev to refinance all or a substantial amount of its
debt obligations when they become due, or more generally a failure to raise additional equity capital or debt financing or
15View entire presentation