Budweiser Brewing Co. Apac (HKEX:1876) Q1 2026 Earnings Call

0:00 Welcome to the twenty twenty six First Quarter Results Announcements Conference Call for Budweiser Brewing Co, APAC Limited. Hosting the call today from Budweiser Pack is Mr. YJ Chung, Chief Executive Officer and Co Chair of the Board and Mr. Bernard Onovec, Chief Financial Officer. The results for the three months ended 03/31/2026 can be found in the press release published earlier today and available on the Hong Kong Stock Exchanges and Budweiser's APAC websites. Before proceeding, let me remind you that some of the information provided during this results call, including our answers to your questions on this call, may contain statements of future expectations and other forward looking statements. These expectations are based on the management's current views and assumptions and involve known and unknown risks, uncertainties and other factors beyond our control.

0:56 It is possible that Budweiser's impact actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward looking statements. Budweiser Pack is under no obligation to and expressly disclaims any such obligation to update the forward looking statements as a result of new information, future events, or otherwise. For a discussion of some of the risks and important factors that could affect Budweiser Pack's future results, the risk factors in the company's prospectus dated 09/18/2019, the 2025 Annual Report published, and any other documents that Budweiser Pack has made public.

1:42 I would also like to remind everyone that the financial papers discussed here today are provided in U. S. Dollars unless stated otherwise. The percentage changes that will be discussed during today's call are both organic and normalized in nature unless otherwise stated. Percentage changes refer to comparisons with the 2025 full year. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of Budweiser Pact's normal activities. As normalized figures are non GAAP measures, the company disclosed the consolidated profit, EPS, EBIT and EBITDA on a fully reported basis in the press release published earlier today.

2:29 Further details of the twenty twenty six first quarter results can also be found in the press release. It is now my pleasure to pass the time to YJ. Sir, you may begin. Thank you, Yuri, and good morning, everyone. Thank you for joining today's call. We entered 2026 with a clear focus on recovering volume through disciplined execution across our market. For BudAPAC, total volume returned to a positive growth, supported by continued strong momentum in India. In China, our increased investment shows sign of a progress. With the quarter over quarter volume decline tightening further as we remain committed to our strategy of enhancing our e home route to market, enriching our portfolio and innovating behind our mega brand to rebuild momentum.

3:34 In South Korea, we gained market share in both on premise and e home channels. Before we go over financial results, I wanted to take a moment to introduce Fernando Novick, our new Chief Financial Officer, effective from April one this year. Nowick joined ABI Group in 2009 through the global MBE program and has worked across various functions in multiple markets. He brings deep finance and global resource education expertise. He leads projects, delivering savings and meaningful value creation.

4:25 I'm pleased to welcome him to the team. Let me now hand over to Novik for a brief introduction. Good morning, everyone. I am delighted to join the BudAPAC team. I would like to thank UYJ for your trust and invitation to join the team. I joined AB InBF sixteen years ago and spent five years in finance roles, five years in commercial roles, and five years in innovation roles where I led the corporate venture capital arm in New York. Most recently, I was responsible for our global capital allocation division reporting to the global CFO. I hope I can bring this experience to grow Budweiser's business in a profitable way. I have already had the pleasure of meeting some of you joining the call today, and I look forward to meeting many more in the next weeks and months ahead.

5:19 Let me share our financial results for the first quarter of twenty twenty six in more detail. In the first quarter, APAC volume returned to growth, even if it's just 0.1% after many quarters driven by strong growth in India and a sequential improvement in the industry and our volumes in China with volume decline narrowing quarter over quarter. This progress was driven by both enhanced execution as well as increased investments across channels and our portfolio, which added temporary pressure to our bottom line. We also maintained strong brand momentum in South Korea despite a soft industry and a challenging comparable last year.

6:05 In India, we continued to advance premiumization, delivering strong double digit volume and revenue growth. In summary, for Budapack, total volumes increased by 0.1%, Revenue and revenue per hectoliter decreased by zero point seven percent and zero point eight percent, respectively. Normalized EBITDA decreased by 8.1%, while our normalized EBITDA margin contracted by two forty six basis points. Now, let me cover some of the highlights from each of our major markets. In China, volumes decreased by 1.5, improving sequentially with a quarter over quarter decline continuing to narrow since the second half of twenty twenty five.

6:55 Revenue and revenue per hectoliter decreased by 42.5%, respectively, impacted by increased investments to support wholesalers and activate our brands in the in home and emerging channels. Normalized EBITDA decreased by 10.9%, impacted by our top line performance and increased investments. We continue to make progress in expanding our distribution in the in home channel, while increasing the distribution of our premium brands. This premiumization is more clear in the online to offline or O2O channel, which grew strong double digits in the quarter. Now let me share with you some of the investments we are making on our brands through our marketing campaigns, as well as liquid and package innovations to better connect with our consumers across more occasions and increase sales momentum, particularly in the new home channel.

7:51 On Budweiser, we accelerated the national expansion of Budweiser Magnum, building on its strong consumer traction and sustained sales growth. In March, Budweiser Magnum launched an integrated nationwide campaign anchored by strategic partnership with global football icon, Erling Haaland and the FIFA World Cup Mega Platform to drive geographic and channel expansion. Regarding our Harbin family, we introduced Harbin 1900, celebrating its brewing heritage as the birthplace of Chinese beer. Positioning the core plus plus segment, which is the RMB eight-ten price range, this new innovation is 100% pure malt classic lager pairing distinctive vintage packaging with a rich authentic taste.

8:44 The launch reinforces Harvey's role in driving innovation and placing new bets in this growing and important core plus plus segment. In South Korea, volumes decreased by low teens and revenue decreased by mid single digits, mainly due to a challenging comparable in the first quarter of last year, driven by shipments facing ahead of a price increase that if you recall was in April 2025. Revenue per hectoliter, on the other hand, increased by low single digits, also comparing with the first quarter last year before the price increase. This led to a normalized EBITDA decreasing by low teens. Having said that, we maintain a good commercial momentum in both in home and on premise channels and we foresee a recovery in the second quarter.

9:36 Finally, India continues to grow and will play a bigger role in our footprint. Industry momentum continued in the first quarter and we gained total market share. We delivered strong double digit volume and revenue growth led by a strong growth in our premium and super premium portfolio. We also continue to see momentum in the moderation agenda with states like Maharashtra and Karnataka introducing changes that decrease the current relative tax advantage of hard liquor versus beer. We see this as a step in the right direction and a sign that some states understand the importance of evolving towards an alcohol tax policy that are consistent with global policy standards where high alcohol products are taxed higher than low alcohol products like beer.

10:28 And with that, YJ and I are here to answer any questions that you might have. Thank you. Ladies and gentlemen, the floor is now open for questions. And please press 1 to ask a question. If you wish to cancel a request, press 2. In the interest of time, we ask participants to limit themselves to two questions, and please ask one question at a time in both English and Mandarin. Our first question is coming from Xiaobo Wei from Citi. Please go ahead. Sharpe, your line is on mute. Please go ahead.

11:32 Can now? You hear we can hear you very well. I'm sorry. That I have two questions on China. I'll ask one by one. The first one, in the past two years, we have seen a few senior management leadership changes in the company. So far, is there any shipment or breakthrough that the company would like to share with us with the new leadership? Let me take this question.

12:36 So let me start in English then I may turn to Chinese if needed. So the changes we have mainly happened first half year last year and the reason for the changes is kind of retention between either global, other zone, between the region in China, and also between headquarter in China versus operation in the field East South region. And the reason for that is to share some best practice and to further strengthen their strengths in each area or in each function and also learn each other best practice sharing.

13:31 So that's kind of normal retention changes. And to be able to share the more the answer to your question about the changes of the pupil. As I mentioned in earlier, we keep a consistent of our strategy, which is focused on portfolio, brand portfolio, which is mainly Harbin and Budweiser and also focus on in home and rural market, and third one is focus on execution.

14:17 So those are the three strategies we set up early last year and we have no changes. And also you see the program we have been made as Novick just mentioned, quarter over quarter volume decline narrow quarter by quarter and see very good trends. And also we see the execution in each area make a huge improvement and we put a lot of effort to invest our brand and also further focus on the new home channel that the channel changes reach which is our further opportunity in our operation.

15:09 So we see starting from the second quarter last year and the fourth quarter last year and the first quarter this year, the trends getting improved time quarter by quarter. So I think that's a try to answer your question. Okay. Thank you. Should I start the second question? Yes, go ahead. Okay. The second question is about the channel inventory. As far as I can recall, the company in China start destocking the channel in 4Q24. It has been a few quarters of destocking.

15:55 And I remember in the last quarter, your earning call, you mentioned that actually our China inventory actually was lower versus historic level. But we know the China is a very dynamic market and the changing areas on a daily basis. So where you foresee in the future that the China channel inventory will be below historical level as a new norm or is any factor you expect to see before you become more exciting and try to restart the channel looking for? Thank you for your question. You're right. We have been proactively taking steps to adjust our inventory given the current business environment.

19:55 Thank you. Our next question is coming from Alif Zayo from Goldman Sachs. Please go ahead. Thanks. Can you hear me? Yes. Hi, YJ Nowick. This is Leaf from Goldman Sachs. Thanks a lot for the opportunity. And welcome, Nowick, for your first earnings call with BioApak. I have two questions. The first one is on China. So basically, our ground check shows that there has been some volume recovery in the super premium segment, including corona blue growth in the first quarter. So how to look at the sustainability of this trend? How to comment on the on trade consumption recovery so far, including any color on 2Q to date on the on trade performance in China? I will translate to Mandarin by myself.

21:16 Let me take this question. I will start the summary of the answer first, then I'm going to talk a little bit detail in Chinese. Indeed, we grew super premier volume by double digit in the first quarter of twenty twenty six as we focus on premiumization in the home channel and O2O channel. In terms of on kids recovering, NINE Life channel contribution was stable and we grew volume in the NINE Life channel in first quarter twenty twenty six. However, Chinese restaurant channel remained under pressure.

24:48 So, the second question is to our new CFO, Nowick. So, I would like to know what's the three key focus for you this year. Would you please share with the investor on the call? Thank you so much. Thank you, Leaf. Nice to hear from you and thanks for the question. So, let me share the three priorities that me and my team will focus this year. The number one priority is growth. And the main objective here is to stabilize the volumes in China. The second priority is to improve execution. And the third priority is value creation. So, number one is consistent with the business strategy that Jay was describing. The And main objective of the business is to grow volumes here. And in order to do that, we really need to stabilize volumes in China. And the finance role to do that is increasing investments and making the investments more effective.

25:44 I think it's important here when we manage to stabilize volumes in China, given our footprint in India and in Southeast Asia, we'll be able to reignite growth for the whole Budweiser APAC. Number two priority is execution. I think here finance has an important role collaborating with our commercial team in China to enable and upgrade our route to market model to help on this transition to more volume in the in home channel. That's another important priority for us. And the third one is value creation. Here, we are reviewing internal investment decisions, improving efficiencies, cost controls. One example here, for example, we are reviewing the unit economics of different packs to make decisions that can help us be more efficient with resource allocation.

26:31 But ultimately, we are here for growth and that's our main priority for this year. Thank you very much for the question. That's super clear. Thanks a lot, Novik. Thanks a lot, Vigi. Thank you. You. Our next question is coming from LC Sheng from CLSA. Please go ahead. Thank you management for taking my questions. Thank you, YJ, and also welcome, Novik. I have two questions. My first question is on China in home development. Do you have any updates or progress to share on the development of trade channel in China? I will translate myself.

27:25 I will ask my second question later. You. Ashley, this is YJ. Let me take this question. As the channel shift to e home channel, we are taking actions to expand in the e home channel to adopt. As we have a relatively low proportion in e home channel, which means we have a massive growth potential. We are invest to catch up. Thank you. My second question is on China

30:48 commercial investment. So previously management mentioned that you will increase marketing this year. Is that plan still on track? And what's the marketing plan for the coming peak season and sport events like World Cup? Yes. So know, commissioned, as I mentioned earlier, in 2026, our top priority in China is a stabilized volume.

31:40 To achieve this, we have given room to the team, to the commercial team, to increase the commercial investment. So that's a direction we set up for the commercial team. Thank you.

34:40 Thank you. Our next question is coming from Mavis Hui from DBS. Please go ahead. Hi management. Thanks for taking my questions. Thank you, Rajeeh and thanks, Novak. My first question is on China. Could we have some more updates on the growth of your emerging channels such as O2O instant retail and e commerce in China? More importantly, how do margins and pricing dynamics across these channels compare with traditional off trade? And how are we managing potential channel conflict with our distributors? Let me translate first. Thank you for your question. I will take this question as well.

35:59 O2O is one of faster growth emerging channel in China. It has started to make a fair significant effort to increase our presence within. And we see this as a great opportunity for us in 2026 and beyond. We partnered with major O2O platform to further expand our petrification. And my second question is on Korea.

38:28 Excluding shipment phasing effects, are we still seeing underlying share gains in South Korea? What are the key challenges to sustaining outperformance in the market? Thank you. Thank you. Let me take this question again. Total industry in Korea have remained soft in the first quarter twenty twenty six with a soft consumer environment continued to impact overall alcohol consumption.

39:19 However, our underlying momentum in Korea continued and we outperformed the industry in both the on premise and in home channel. Thank you. You. Our next question

42:21 is coming from Anne Ling from Jefferies. Please go ahead. Okay. Hi, thank you. Thank you, YJ and thank you, Milvig. I have two questions here. First is on the cost of goods sold in general. We saw some raw materials price volatility and this has been coming up recently, for example, like aluminum. So what will be our view on the raw material cost for year 2027? In twenty twenty six first quarter, our cost per hectoliter has decreased by 0.8, mainly driven by efficiency improvement, partially offset by commodity headwind.

44:49 So my second question is on the India side. So could you share with us now on the Indian market update? How do we see the market competition and our strategy over there? I understand that we are focusing on more market share. So may I know when the company will start focusing on the profitability of the market? Is it still a little bit too early and that competition is still very keen? Should I mean, should Talisburg be listed? Is your view on the competitive environment afterwards? Thank you. In India, we are focused on sustainable and meaningful

46:19 top line growth that can translate to EBITDA and cash flow growth accordingly. Thank you.

49:52 Our next question is coming from Leland Lo from Morgan Stanley. Please go ahead. Thanks for the opportunity and thank you YJ and Bernardo for the other detailed answer previously. Congrats to Bernardo for your new role. I have two questions. The first one is on China pricing. Because YJ just mentioned that the raw material are fully hedged and they were relatively stable. But on the pricing side, any price action and the mix shift that you observed that could improve the overall pricing in the market in general. Hi, Lillian.

51:14 Nice to hear from you. Thank you for the question. I think all the answers should start with the same reminder that our main priority, right, is growth and particularly to stabilize the volumes in China. It's true that in the first quarter, our net revenue per hectoliter was below last year. And this was impacted by investments mainly in three objectives for the investments: to support our wholesalers, to activate our brands, and also to accelerate the growth in O2O. But on the other hand, we have positive mix effects coming from our brands, mainly driven by our premium and premium super premium brands. I think it's important to mention to you and the press that we expect to continue to invest in 2026.

52:02 Regarding price, we will continue to monitor always the prices in the market. And we are open to adjustments if something changes. But at this moment, we don't have any news regarding price increase for China. Thank you, Lillian, for the question. Thanks a lot, Bernardo. My second question is on Korea, South Korea market. So, we all know that last year, April, you had price increase and which still benefited the first Q this year on the pricing side. But what will drive the South Korea revenue and also pricing and the EBITDA growth for the rest of the year.

52:48 In particular, the industry remain a little bit soft and the competition is still there. So this is the question on Korea. I can take this one too. Very good question, Lillian. Thanks. When we think about like a medium term margin growth for APAC East and Korea, I think there are mainly three things that can drive this. One is of course pricing.

53:49 The second one operational efficiencies. And the third one I think is important to mention is mix and innovations. Maybe let me talk about each one of them. On prices, of course, we always consider our pricing decisions looking at what's happening in the beer market, but also the macroeconomic situation in the country. We'll continue to monitor Similar to China, we don't have anything to announce at this point. On the second part, operational efficiencies. Here we continue to implement cost management initiatives. This is one of our main strengths at Budweiser APAC. That's why Jay was talking about our efficiency and excellence programs that we have. So, this is something that we still see opportunities. And number three, I think mix and premiumization and innovations are very important for us in the future.

54:36 Maybe I can share a couple of examples. One of them is the growth of Stella Artois in the entree. I think that's good and healthy growth. The other one is the non alcoholic beer, like for example, Cav Zero Zero. I think both of them are good examples of innovations that can both drive volume growth but also margin expansion. So, overall, I think that we see opportunities to keep recovering margins in Korea in the future. Thank you for the question. Thanks a lot, Bernardo. Thank you. In the interest of time, our final questions will come from Linda Huang from Macquarie. Please go ahead.

55:24 Thank you management for taking my questions. My first one is regarding for the dividends. And for given that Bernardo has really taken up the CFO role. So I just want to know that whether from the group perspective, whether you change the capital approach, especially that last two years, right? We they pay out $5.66 per share dividend to the shareholders. So whether this is the dividend per share policy under review. So these are my first question. Thank you very much.

56:32 Thank you, Linda. Nice to hear from you. Thanks for the question. So I think it's important to remind everybody, right, we are working to deliver sustainable long term results for our shareholders, right? And the other message is that our capital allocation strategy remains the same. Our first priority continues to be to invest in our business like we are doing this year to drive organic growth, followed by M and A when we see opportunities for acquisitions. That's the second one. And then the third one to return to our shareholders, for example, via dividend. That is also what we have been doing, right? So, I think we are very proud of our dividend track record since the beginning. Recently with the announcement of the $750,000,000 dividend that we announced for 2025, which by the way was consistent to the dividend for the previous 2024.

57:27 So, think if I have to summarize, we are working towards improving our business performance this year to be able to keep this consistency in the future. Thanks for the question. Thank you very much. My second question is regarding for our products and I think this may be why Jay and Yi can help. So when we compare China to the other Western countries, I think there's always plenty of room for alcohol product innovation. So I just want to know that again, whether management can elaborate more about our product innovation plans. And then what kind of the innovation strategy will fit well for our China market?

1:01:16 Thank you. That concludes our Q and A session today. I would like to turn the conference back over to YJ for the closing remarks. Thank you. As I mentioned on our 2025 annual results call early this year, our priority is to stabilize volume and rebuild our market share momentum in China by investing in our e home route to market and a leading premium portfolio. The progress we have been seeing in the first quarter have been encouraging. On this positive note, thank you all for joining us today and I'm looking forward to speaking to you soon. Thank you. And this concludes today's results call.

1:02:08 Please disconnect your lines. Thank you.