Molson Coors Q2 profit falls 53 per cent
Cans of beer are seen on the new Molson Coors can line during its inauguration Monday, March 19, 2012 in Montreal. (Paul Chiasson / The Canadian Press)
Published Tuesday, August 7, 2012 9:49AM EDT
Last Updated Tuesday, August 7, 2012 10:48AM EDT
MONTREAL -- Molson Coors Brewing Co. reported Tuesday that its net earnings fell more than 53 per cent to US$104.3 million in the second quarter on costs linked to the North American beer maker's expansion in Central Europe.
The Denver and Montreal-based brewer, which reports in U.S. dollars, said it earned 57 cents per share for the period ended June 30. That compares with $1.19 or $224.3 million a year earlier.
Excluding one-time costs, Molson Coors earned $250.1 million or $1.38 per share, compared to $231.6 million or $1.23 per share in the prior period.
Net sales increased seven per cent to $999.4 million driven by the performance of its U.S. business and inclusion of two weeks of operation of the StarBev acquisition in Central Europe.
Worldwide beer volume was up 6.4 per cent to 13.9 million hectolitres.
The acquisition of StarBev was completed June 15 at a final purchase price was 2.7 billion euros or US$3.4 billion, including the assumption of debt.
Molson Coors president and chief executive officer Peter Swinburn said the acquisition is a "strategically compelling and financially attraction transaction" that should increase shareholder value in three to five years.
"This significantly enhances our growth profile with leading brands in the Central European markets, which we believe have promising potential both for our top line and bottom line," he said in a news release.
"We remain focused on driving profits across all of our businesses and implementing our growth strategy of investing behind our core brands, delivering innovation, leveraging our above-premium portfolio and scaling our existing business in emerging markets."
In Canada, underlying pretax income decreased 0.6 per cent to $139.0 million due to foreign exchange. Income increased four per cent in Canadian dollars driven by higher volume, higher net pricing, cost reductions, and income from the addition of North American Breweries (NAB) contract brewing.
Sales-to-retail (STRs) and sales volume increased 1.8 per cent due to the addition of Canada Day in this year's second quarter from the third quarter in 2011.
Molson Coors' (TSX:TPX.B) market share in Canada decreased about one-half share point from a year ago on estimated industry growth of three per cent.
Net sales per hectolitre increased six per cent in local currency, with more than half of the increase driven by continued higher pricing, and the remainder due NAB contract sales.
Cost of goods sold (COGS) per hectolitre increased six per cent.
Mark Swartzberg of Stifel Nicolaus said the results beat expectations "on an out-of-favour" stock.
"We are not negative on the shares, however, due to multiples, continued price discipline in Canada and the U.S., and corresponding annual cash flow," he wrote in a report.
Molson Coors underlying U.S. segment pretax income increased 7.2 per cent to $184.6 million.
MillerCoors underlying net income excluding special items, increased 9.1 per cent to $436.0 million, driven by increased pricing, favourable brand mix and cost management. Domestic sales-to-retail fell 1.4 per cent.
In Britain, underlying pretax income decreased 19.3 per cent to $28.0 million due to lower volume, higher pension expense and higher marketing costs.
Total net debt at the end of the second quarter was $4.4 billion, including $2.9 billion related to the European acquisition.
The Central European business' pro forma underlying pretax income decreased 36.6 per cent to $46.2 million in the quarter. Higher volume and pricing were more than offset by unfavourable foreign currency changes, geographic mix, and increased costs.
Pro forma sales volume increased 1.4 per cent while overall market share was up slightly.
During the quarter, Molson Coors recorded $21.2 million in pretax charges, including a $10.4 million writedown of goodwill and assets related to its China business and a $1.4 million special termination benefit costs in Canada, partially offset by a $2.3 million gain related to Toronto flood insurance reimbursement.
Molson Coors employs 19,000 people at 30 breweries and operations in more than 50 countries.
It has a portfolio of more than 65 strategic and partner brands, including Coors, Coors Light, Molson Canadian, Carling, Blue Moon, Keystone and Richard's.
The Molson Coors Brewing Co. was formed in 2005 following the merger between North American family-run breweries Molson Inc. and the Adolph Coors Company.
Founded in 1786, Molson is the largest Canadian brewer with seven breweries, including boutique breweries Creemore and Granville Island Brewing, and 3,000 employees located across the country.
On the Toronto Stock Exchange, Molson Coors shares gained 99 cents, or 2.38 per cent, at C$42.50 in morning trading.