MillerCoors Delivers Strong Profit Growth and Synergies in 2009 Despite Challenging Fourth Quarter
9 February 2010
Brewer Withstands Tough Economy and Softening Industry Conditions in First Full Year
February 9, 2010 (London and Denver) - Facing a difficult U.S. economy that took its toll on beer sales in the fourth quarter, SABMiller plc (SAB.L) and Molson Coors Brewing Company (NYSE: TAP; TSX) nonetheless today reported double-digit underlying earnings growth for MillerCoors in its first full year of operations ended December 31, 2009.
MillerCoors full-year underlying net income increased by $138.7 million or 18.4 percent, while fourth quarter underlying net income decreased 21.6 percent to $106.1 million versus prior year. Softening industry volumes and resulting cost deleverage were partly offset by pricing, synergies delivery, and reductions in marketing, general and administrative costs in the fourth quarter.
"It's tough out there, and we saw the effect of ongoing economic pressure and unemployment on beer sales, especially in the fourth quarter," said MillerCoors CEO Leo Kiely. "But we stayed focused on our strategy and invested to grow four out of our six national focus brands in 2009. Our people made it happen, delivering strong profit growth and exceeding our synergy commitments in the midst of a recession."
Key operating results for the fourth quarter are compared to the prior year quarter and include MillerCoors operations in the U.S. and Puerto Rico.
FOURTH QUARTER AND FULL YEAR HIGHLIGHTS
(All amounts are in U.S. dollars and calculated in accordance with U.S. GAAP, unless otherwise indicated. Results for the full year are compared to the prior year on a pro forma basis1)
- Underlying net income, excluding special items, decreased 21.6% to $106.1 million versus the prior year comparable quarter, while full-year underlying net income, excluding special items, increased by $138.7 million or 18.4%;
- Total net revenue declined by 1.6% to $1.712 billion versus fourth quarter 2008, while full-year total net revenue increased by 1.7% to $7.574 billion;
- Domestic net revenue per barrel (NRPB) increased 2.3% in the fourth quarter, while full-year domestic NRPB increased 3.7%;
- Cost of goods sold (COGS) per barrel increased 5.6%, while full-year COGS per barrel increased 4.8%;
- Full-year cost synergies were $245 million, bringing cumulative synergies to $273 million since July 1, 2008.
1 MillerCoors pro forma figures are based on results for Miller and Coors reported under either International Financial Reporting Standards (IFRS) for the fiscal quarter ended March and June 2008, or U.S. GAAP for the fiscal quarter ended March and June 2008. Adjustments have been made to reflect comparative data including amortization of definite-life intangible assets and the exclusion of significant one-time items.
In the fourth quarter, MillerCoors domestic sales-to-retailers (STRs) declined 3.6 percent primarily due to poor industry and economic conditions. For the full-year, STRs were down 1.7 percent.
Fourth quarter sales-to-wholesalers (STWs) declined 4.2 percent driven by lower retail sales and a reduction in contract brewing volumes. Full-year STWs were down 1.7 percent.
Pricing remained solid in the fourth quarter, as domestic NRPB, excluding contract brewing and company-owned distributor sales, increased 2.3 percent. For the full-year, domestic NRPB increased 3.7 percent.
Fourth Quarter Brand STR Highlights
Fourth quarter premium light brand volumes (Miller Lite, Coors Light, MGD 64) were down mid-single digits due to declines in Miller Lite and to a lesser extent Coors Light, which were partially offset by the continued success of MGD 64.
MillerCoors craft and import portfolio fell slightly in the quarter, despite high-single-digit growth in Blue Moon and low-single digit growth in Peroni Nastro Azzurro. The domestic above-premium portfolio - which includes Miller Chill, Sparks and Killian's Irish Red - continued to experience double-digit declines.
The below-premium portfolio was down slightly compared to the prior year fourth quarter despite high-single-digit performance from Keystone Light. Miller High Life experienced a slight decline, and Milwaukee's Best was down high-single digits.
Fourth Quarter Financial Highlights
MillerCoors total net revenue declined by 1.6 percent to $1.712 billion versus fourth quarter 2008.
Excluding contract brewing and company-owned distributor sales, domestic net revenue decreased 2.1 percent to $1.585 billion. Third-party contract brewing volumes declined 4.1 percent versus prior quarter.
COGS per barrel increased 5.6 percent as savings from MillerCoors cost performance initiatives were more than offset by commodity pricing and significant increases in brewing and packaging materials, including glass and aluminum. Additionally, COGS per barrel was impacted by the absorption of fixed costs, and some variable costs, across lower production volume.
Marketing, general and administrative costs decreased by 2.7 percent primarily due to synergies and other cost savings. This decrease would have been approximately 6 percent excluding the significant impact of increased share-based compensation expense, driven by strong SABMiller stock price appreciation versus a year ago.
Depreciation and amortization expenses for MillerCoors in the fourth quarter were $76 million, and additions to tangible and intangible assets totaled $118 million.
During the fourth quarter, MillerCoors reported special charges totaling $3.9 million, which includes relocation and severance expenses relating to the integration of MillerCoors.
Integration, Synergies and Cost Savings
MillerCoors continues to aggressively optimize production across its breweries. In the fourth quarter, the company produced 2.1 million barrels of Coors brands in five out of our eight breweries. The brewery optimization program will continue to realize synergy commitments over the next few months.
As announced in the third quarter, MillerCoors is on track to deliver $750 million in total synergies and other cost savings by the end of 2012. In the fourth quarter, MillerCoors delivered $62 million in synergies. For the full year, synergies were $245 million bringing cumulative synergy realization to $273 million since July 1, 2008.
In addition to synergies, MillerCoors recently completed the RFG and Unicorn cost savings programs, which delivered $50 million in cost savings since July 1, 2008. For the full year, the company realized $26 million in additional cost savings, toward its $200 million cost savings goal due in 2012.
In total, MillerCoors has delivered $349 million in cumulative synergies and cost savings since July 1, 2008.
Overview of MillerCoors
MillerCoors brews, markets and sells the MillerCoors portfolio of brands in the U.S. and Puerto Rico. Built on a foundation of great beer brands and more than 289 years of brewing heritage, MillerCoors continues the commitment of its founders to brew the highest quality beers. MillerCoors is the second-largest beer company in America, capturing nearly 30 percent of U.S. beer sales. Led by two of the best-selling beers in the industry, MillerCoors has a broad portfolio of highly complementary brands across every major industry segment. Miller Lite is the great-tasting beer that established the American light beer category in 1975, and Coors Light is the brand that introduced consumers to Rocky Mountain cold refreshment. MillerCoors brews premium beers Coors Banquet and Miller Genuine Draft, and economy brands Miller High Life and Keystone Light. The company also imports Peroni Nastro Azzurro, Pilsner Urquell, Grolsch and Molson Canadian and offers innovative products such as Miller Chill and Sparks. MillerCoors features craft brews from the Jacob Leinenkugel Brewing Company, Blue Moon Brewing Company and the Blitz-Weinhard Brewing Company. MillerCoors operates eight major breweries in the U.S., as well as the Leinenkugel's craft brewery in Chippewa Falls, WI and two microbreweries, the 10th Street Brewery in Milwaukee and the Blue Moon Brewing Company at Coors Field in Denver. MillerCoors vision is to create the best beer company in America by driving profitable industry growth. MillerCoors insists on building its brands the right way through brewing quality, responsible marketing and environmental and community impact. MillerCoors is a joint venture of SABMiller plc and Molson Coors Brewing Company.
Overview of SABMiller
SABMiller plc is one of the world's largest brewers with brewing interests and distribution agreements across six continents. The group's wide portfolio of brands includes premium international beers such as Grolsch, Miller Genuine Draft, Peroni Nastro Azzurro and Pilsner Urquell, as well as market-leading local brands such as Aguila, Castle, Miller Lite, Snow and Tyskie. SABMiller plc is also one of the largest bottlers of Coca-Cola products in the world. In the year ended March 31, 2009, the group reported $3,405 million adjusted pre-tax profit and group revenue of $25,302 million. SABMiller plc is listed on the London and Johannesburg stock exchanges. For more information on SABMiller plc, visit the company's website: http://www.sabmiller.com/.
Overview of Molson Coors
Molson Coors Brewing Company is one of the world's largest brewers. It brews, markets and sells a portfolio of leading premium quality brands such as Coors Light, Molson Canadian, Molson Dry, Carling, Coors Banquet and Keystone Light in North America, Europe and Asia. For more information on Molson Coors Brewing Company, visit the company's web site, http://www.molsoncoors.com/.
This press release includes "forward-looking statements" within the meaning of the U.S. federal securities laws, and language indicating trends, such as "anticipated" and "expected". It also includes financial information, of which, as of the date of this press release, the Companies' independent auditors have not completed their review. Although the Companies believe that the assumptions upon which their respective financial information and their respective forward-looking statements are based are reasonable, they can give no assurance that these assumptions will prove to be correct. Important factors that could cause actual results to differ materially from the Companies' projections and expectations are disclosed in Molson Coors' filings with the Securities and Exchange Commission or in SABMiller's annual report and accounts for the year ended March 31, 2009, and in other documents which are available on SABMiller's website at www.sabmiller.com. These factors include, among others, changes in consumer preferences and product trends; price discounting by major competitors; failure to realize anticipated results from synergy initiatives; and increases in costs generally. All forward-looking statements in this press release are expressly qualified by such cautionary statements and by reference to the underlying assumptions. Neither SABMiller nor Molson Coors undertakes to update forward-looking statements relating to their respective businesses, whether as a result of new information, future events or otherwise. Neither SABMiller nor Molson Coors accepts any responsibility for any financial information contained in this press release relating to the business or operations or results or financial condition of the other or their respective groups.
MillerCoors Results and Related Reconciliations
The table below reconciles net income attributable to MillerCoors, reported in accordance with US GAAP as used for inclusion within Molson Coors reported results, to MillerCoors EBITA as used for inclusion within SABMiller's reported results in accordance with IFRS. Underlying net income and EBITA are non-GAAP measures. Management of both companies believes that underlying net income and EBITA provide shareholders with a useful basis for assessing the profit performance of MillerCoors. There are limitations to using non-GAAP financial measures, including the difficulty associated with comparing companies that use similarly named non-GAAP measures whose calculations may differ from the company's calculations. Prior year results for the first six months are presented on a pro forma basis. Adjustments have been made to reflect comparative data including amortization of definite life intangible assets.
MillerCoors Reconciliation of US GAAP Net Income to Underlying Net Income (non-GAAP measure) and to EBITA, calculated under IFRS, noting that first half 2008 numbers are Pro Forma.
|Three Months Ended||Year Ended|
|(In millions of $US)||Dec 31, 2009||Dec 31, 2008||Dec 31, 2009||Dec 31, 2008|
|US -GAAP: Net Income||$102.2||$54.1||$842.8||$533.6|
|Plus: Special items1||3.9||81.2||49.4||219.9|
|Non – GAAP Underlying Net Income||106.1||135.3||892.2||753.5|
|Plus: Adjustments to arrive at IFRS Underlying EBITA2||35.2||15.6||141.7||88.9|
|IFRS: MillerCoors underlying earnings before interest, taxes and amortization before exceptional items (EBITA3)||$141.3||$150.9||$1,033.9||$842.4|
|Percent change vs. prior year MillerCoors pro-forma underlying EBITA3||(6.4%)||22.7%|
1Current year special items include integration charges related to the MillerCoors Joint Venture, and charges for pension curtailment. Prior year special items include integration charges, asset impairment charges, asset impairment charges and a loss on sale of a company owned distributorship.
2US – GAAP Underlying Net Income to IFRS EBITA adjustments relate to differing treatment of step-up depreciation, pension, post retirement benefits, consolidation of container joint ventures, asset disposal, deferred taxes, share based compensation and severance expenses between US - GAAP and IFRS. Amortization of intangible assets, Interest, Taxes, Equity Income and Minority interest have been removed to arrive at underlying EBITA.
3EBITA - Earnings Before Interest, Taxes, and Amortization, excluding exceptional items.
These financial results are not necessarily indicative of the results for Molson Coors Brewing Company or SABMiller plc for the comparable periods.
This announcement is for information only and does not constitute an offer or an invitation to acquire or dispose of any securities or investment advice or an inducement to enter into investment activity. This announcement does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire the securities of SABMiller or Molson Coors (the "Companies") in any jurisdiction.
The distribution of this announcement may be restricted by law. Persons into whose possession this announcement comes are required by the Companies to inform themselves about and to observe any such restrictions.
MILLERCOORS LLC RESULTS OF OPERATIONS (VOLUMES IN THOUSANDS, DOLLARS IN MILLIONS) (UNAUDITED)
|Three Months Ended||Year Ended|
|Dec 31, 2009||Dec 31, 2008||Dec 31, 2009||Dec 31, 2008|
|Volume in barrels||15,411||16,091||69,098||70,628|
|Cost of Goods Sold||(1,102.1)||(1,090.0)||(4,720.9)||(4,602.8)|
|Marketing, General and Administrative Expenses||(499.5)||(513.5)||(1,937.9)||(2,079.5)|
|Special Items (net)||(3.9)||(81.2)||(49.4)||(219.9)|
|Other Income (Expense), net||0.7||1.6||0.9||7.7|
|Income before Income Taxes and Minority Interests||106.0||56.6||867.0||551.3|
|Income Tax Expense||(1.5)||(1.4)||(8.4)||(3.3)|
|Net income attributable to Non-controlling interest||(2.3)||(1.1)||(15.8)||(14.4)|
|Net Income Attributable to MillerCoors LLC||$102.2||$54.1||$842.8||$533.6|
For further information, please contact:
|SABMiller plc||Tel: +44 20 7659 0100/ 414 931 2000|
|Nigel Fairbrass||Media Relations, SABMiller||Mob: +44 7799 894265|
|Gary Leibowitz||Investor Relations, SABMiller||Mob: +44 7717 428540|
|Colin Wheeler||Media Relations, Molson Coors||Tel: 303/927-2443|
|Dave Dunnewald||Investor Relations, Molson Coors||Tel: 303/927-2334|
|Leah Ramsey||Investor Relations, Molson Coors||Tel: 303/927-2397|