The Best Beer Company in a Better World - Anheuser-Busch InBev

Capital resources and equity
Financial Report Annual Report 2008 | 51
AB InBev’s net financial debt increased to 40 713 million euro as of December 2008, from 5 093 million euro as of December 2007. Apart from
operating results net of capital expenditures, the net financial debt is impacted by the acquisition of Anheuser-Busch and other business
combinations (39 966 million euro); the net proceeds from the issue of share capital (6 337 million euro); the AB InBev (706 million euro) and
AmBev (236 million euro) share buy-back programs; the purchase of minority interests of Quinsa and Zheijang Shiliang (respectively
291 million euro and 54 million euro); dividend payments and the impact of changes in foreign exchange rates (2 489 million euro).
To finance the acquisition of Anheuser-Busch, AB InBev entered into a 45 billion US dollar senior facilities agreement and a 9.8 billion US dollar
bridge facility agreement, enabling us to consummate the acquisition, including the payment of 52.5 billion US dollar to shareholders of
Anheuser-Busch, refinancing certain Anheuser-Busch indebtedness, payment of all transaction charges, fees and expenses and accrued but
unpaid interest to be paid on Anheuser-Busch’s outstanding indebtedness. On 18 December 2008, AB InBev repaid the debt it incurred under
the bridge facility with the net proceeds of the rights issue and cash proceeds received by AB InBev from pre-hedging the foreign exchange rate
between the euro and the US dollar in connection with the rights issue. AB InBev intends to refinance a portion of the debt incurred under the
senior credit facility with the proceeds of one or more debt capital markets offerings. In addition, AB InBev may, in the future, dispose of certain
of the assets or businesses and expects to utilize proceeds from any such disposals to repay indebtedness incurred to finance the acquisition.
Consolidated equity attributable to equity holders of AB InBev as at 31 December 2008 was 16 126 million euro, compared to 13 625 million
euro at the end of 2007. The movement of the foreign exchange translation adjustment of (1 335) million euro is the effect of the weakening
of mainly the closing rates of the Mexican peso, the Brazilian real, the Pound sterling, the Russian ruble, the South Korean won, the Ukrainian
hryvnia and the Canadian dollar, offset by a positive currency translation effect as a result of the weakening of the US dollar since 18 November
2008, as the major part of our net debt is US dollar denominated. Further details on equity movements can be found in note 23 Changes in
equity to the consolidated financial statements.
As a result of share buy-back programs of 2008 AB InBev acquired 12.7 million AB InBev shares for an amount of 706 million euro and AmBev
acquired 5 million AmBev shares for an amount of 236 million euro.
Research & development
Given its focus on innovation, AB InBev places a high value on research and development. In 2008 AB InBev expensed 52 million euro in
research, mainly in its Belgian research and development centre, compared to 20 million euro in 2007. Part of this was spent in the area of
market research, but the majority is related to innovation in the areas of process optimization and product development.
Research and development in process optimization is primarily aimed at capacity increase (plant debottlenecking and addressing volume issues,
while minimizing capital expenditure), quality improvement and cost management. Newly developed processes, materials and/or equipment
are documented in best practices and shared across business zones. Current projects range from malting to bottling of finished products.
Research and development in product innovation covers liquid, packaging and draft innovation. Product innovation consists of breakthrough
innovation, incremental innovation and renovation (that is, implementation of existing technology). The main goal for the innovation process
is to provide consumers with better products and experiences. This implies launching new liquid, new packaging and new draught products
that deliver better performance both for the consumer and in terms of financial results, by increasing AB InBev’s competitiveness in the relevant
markets. With consumers comparing products and experiences offered across very different drink categories and the offering of beverages
increasing, AB InBev’s research and development efforts also require an understanding of the strengths and weaknesses of other drink
categories, spotting opportunities for beer and developing consumer solutions (products) that better address consumer need and deliver
better experience. This requires understanding consumer emotions and expectations. Sensory experience, premiumization, convenience,
sustainability and design are all central to AB InBev’s research and development efforts.
Knowledge management and learning is also an integral part of research and development. AB InBev seeks to continuously increase its
knowledge through collaborations with universities and other industries.
AB InBev’s research and development team is briefed annually on the company’s and the business zones’ priorities and approves concepts which
are subsequently prioritized for development. Launch time, depending on complexity and prioritization, usually falls within the next calendar year.
The Global Innovation and Technology Center (‘GITeC’), located in Leuven, accommodates the Packaging, Product, Process Development
teams and facilities such as Labs, Experimental Brewery and the European Central Lab, which also includes Sensory Analysis. In addition to
GITeC, AB InBev also has Product, Packaging and Process development teams located in each of the six AB InBev geographic regions focusing
on the short-term needs of such regions.