MillerCoors Delivers Double Digit Underlying Profit Growth In Third Quarter
6 November 2013
Domestic Net Revenue Per Barrel Growth Best Since First Quarter, 2009
November 6, 2013 (London and Denver) – SABMiller plc (LN:SAB; OTC:SABMRY) and Molson Coors Brewing Company (NYSE: TAP; TSX: TPX) reported that MillerCoors posted underlying profit growth of 11.7 percent and a 4.1 percent increase in domestic net revenue per barrel versus the same quarter in the prior year.
“Led by Redd’s, Leinenkugel’s and Blue Moon, our strategy to grow share in the high-margin and fast-growing above premium space is driving excellent sales mix,” said MillerCoors Chief Executive Officer Tom Long. “The quality of our beers continues to be second to none and we are pleased consumers and customers are responding. And even though we continue to increase total company net revenue and total company net income, we are not satisfied with the on-premise distribution or volume performance of our premium light brands. Our recently announced restructuring will reduce our fixed cost base and allow increased brand investment moving forward, particularly on our premium lights.”
Third Quarter Highlights
Unless otherwise indicated, all amounts are in U.S. dollars and calculated in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). All percentages are versus the prior year comparable period and include MillerCoors operations in the U.S. and Puerto Rico. Quarterly sales-to-retailers (STRs) results are presented on a trading-day-adjusted basis, as the third quarter of 2013 had one more trading day compared with the same quarter in the prior year.
- Total net revenue increased 2.9 percent to $2.051 billion for the quarter.
- Total cost of goods sold (COGS) per barrel increased 3.8 percent.
- Underlying net income (a non-GAAP measure) increased 11.7 percent to $363.8 million.
- Domestic net revenue per barrel, excluding contract brewing and company-owned distributor sales, increased 4.1 percent, representing the best quarterly performance since first quarter, 2009.
- Domestic STRs decreased 1.9 percent.
- Domestic sales-to-wholesalers decreased 1.5 percent.
Brand Highlights for the Third Quarter
Coors Light continued to gain share within the premium light segment according to Nielsen, and leveraged its “Rocky Mountain Cold Refreshment” positioning. Volume declined low-single digits in the quarter. Miller Lite declined mid-single digits in the quarter. The “Don’t Mess with Miller Time” Hispanic advertising campaign, featuring actor Danny Trejo, began in early October and is airing on Spanish-language television and digital outlets. The brand will be bringing back the original Miller Lite can design from January 1 – March 15, 2014 to drive new interest and trial by legal drinking age millennials.
Tenth and Blake Beer Company grew the MillerCoors Craft and Import portfolio by high-single digits. Leinenkugel’s Summer Shandy expanded nationally and increased double digits. In 2013, Summer Shandy is the single largest driver of craft volume growth, accounting for nearly 10 percent of total craft industry growth, according to Nielsen. In addition, Leinenkugel’s Orange Shandy has made a promising start and is outperforming initial expectations. Blue Moon Belgian White grew mid-single digits in the quarter, continuing its run of 72 consecutive quarters of growth. Batch 19 volumes grew 275 percent as it continued to expand nationally.
MillerCoors new brands delivered exceptional volume and value growth in above premium. Redd’s Apple Ale has quickly become one of the fastest growing beer brands in the United States. Redd’s Strawberry Ale was introduced in the third quarter and has had a strong start, gaining incremental shelf space for the Redd’s franchise. Third Shift Amber Lager continues to perform well and is now a top 15 craft brand by dollar sales according to Nielsen.
Coors Banquet grew double digits fueled by the new 12-ounce “stubby” heritage bottle modeled after the brand's post-Prohibition era packaging. It’s making an extraordinary comeback in the American lager category and is on track to achieve its 7th consecutive year of growth.
Miller High Life continued its military veteran program and completed a partnership with Harley-Davidson to celebrate the 110th anniversaries of the two iconic American brands. Miller High Life and Keystone Light will begin national television advertising campaigns next spring.
Financial Highlights for the Third Quarter
Domestic net revenue per barrel grew 4.1 percent for the quarter as a result of higher net pricing and favorable brand mix. Brand mix favorability was driven largely by the success of Redd’s and Leinenkugel’s Shandy variants.
Total company net revenue per barrel, including contract brewing and company-owned distributor sales, increased 3.9 percent. Third-party contract brewing volumes were up 2.8 percent.
Total COGS per barrel increased 3.8 percent, driven by commodity and brewery inflation and higher costs associated with brand innovation.
Marketing, general and administrative costs decreased by 3.4 percent for the quarter, driven primarily by lower pension expense, a reduction in costs associated with the business transformation initiative and less promotional activity, which more than offset increased investments in support of new brand offerings.
In the third quarter, MillerCoors achieved $33 million of cost savings, primarily related to procurement, logistics and brewery efficiencies.
Depreciation and amortization expenses in the third quarter were $71.6 million, and additions to tangible and intangible assets totaled $88.1 million.
Severance costs of $15.0 million related to a restructuring were recorded as a special item in the quarter.
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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 nearly 300 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, Coors Light and Miller Lite, MillerCoors has a broad portfolio of highly complementary brands across every major industry segment. The company offers a variety of leading craft and import brands, including Blue Moon and Leinenkugel’s, through its Tenth and Blake division. 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 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. Learn more at MillerCoors.com, at facebook.com/MillerCoors or on Twitter through @MillerCoors.
Overview of SABMiller
SABMiller plc is one of the world’s leading brewers with more than 200 beer brands and some 70,000 employees in over 75 countries. The group’s portfolio includes global brands such as Pilsner Urquell, Peroni Nastro Azzurro, Miller Genuine Draft and Grolsch; as well as leading local brands such as Aguila (Colombia), Castle (South Africa), Miller Lite (USA), Snow (China), Victoria Bitter (Australia) and Tyskie (Poland). SABMiller also has growing soft drinks businesses and is one of the world’s largest bottlers of Coca-Cola products.
In the year ended 31 March 2013 the group reported group lager volumes of 242 million hectolitres, group net producer revenue of US$26,932 million and EBITA of US$6,379 million. SABMiller plc is listed on the London and Johannesburg stock exchanges.
On 17th October 2013 SABMiller announced new and revised reporting metrics in which a new reporting metric ‘group net producer revenue’ and a restatement of the calculation of EBITA, among other things, were explained. These new and revised metrics are included for the year ended 31 March 2013.
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, Blue Moon, Staropramen, Carling, Coors Banquet and Keystone Light in North America, Europe and Asia. For more information regarding Molson Coors Brewing Company, visit the company’s web site: 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 audit. 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, 2013, 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. You should not place undue reliance on any forward-looking statement. 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.
For further information, please contact:
|SABMiller plc||Tel: +44 20 7659 0100 / +1 414 931 2000|
|Richard Farnsworth||Media Relations, SABMiller||Mob: +44 207 659 0188|
|Gary Leibowitz||Investor Relations, SABMiller||Mob: +44 771 742 8540|
|Colin Wheeler||Media Relations, Molson Coors||Tel: +1 303 927 2443|
|Dave Dunnewald||Investor Relations, Molson Coors||Tel: +1 303 927 2334|
MillerCoors Results and Related Reconciliations
The table below reconciles net income attributable to MillerCoors, reported in accordance with U.S. 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 as adopted by the European Union. 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 between companies.
1Current year Special/Exceptional items include severance costs related to a restructuring. Prior year includes the write-off of assets related to the Home Draft package and a pension curtailment gain.
2U.S. 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, share-based compensation, severance expenses and certain special items between U.S. GAAP and IFRS. Amortization of intangible assets, interest, taxes and non-controlling interest have been removed to arrive at underlying EBITA.
3With effect from April 1, 2013, SABMiller has adopted the amended IAS 19, “Employee Benefits.” The new accounting standard has been applied retrospectively and SABMiller’s fiscal year ended March 31, 2013 results have been restated accordingly.
4EBITA-Earnings Before Interest, Taxes, and Amortization, excluding exceptional items.
|(In millions of $U.S.)||Three Months
|Sept 30, 2013||Sept 30, 2012||Sept 30, 2013||Sept 30, 2012|
|U.S. GAAP: Net Income Attributable to MillerCoors||$348.8||$306.9||$1,033.4||$1,020.5|
|Plus: Special/Exceptional items1||15.0||18.7||15.0||16.4|
|Non-GAAP Underlying Net Income||$363.8||$325.6||$1,048.4||$1,036.9|
|Plus: Adjustments to IFRS Underlying EBITA-Reported2||33.1||15.8||63.9||95.4|
|Less: Restatement Adjustments to IFRS Underlying EBITA-Restated3||-||(13.0)||-||(25.8)|
|IFRS: MillerCoors underlying earnings before interest, taxes and amortization excluding exceptional items (EBITA-Restated4)||$396.9||$328.4||$1,112.3||$1,106.5|
|Percent change versus prior year MillerCoors underlying EBITA-Restated4||20.9%||0.5%|
|MILLERCOORS LLC RESULTS OF OPERATIONS (VOLUMES IN THOUSANDS, DOLLARS IN MILLIONS $US) (UNAUDITED)|
|Volume in barrels||16,745||16,915||48,739||50,197|
|Cost of goods sold||(1,234.0)||(1,201.1)||(3,592.8)||(3,582.9)|
|Marketing, general and administrative expenses||(447.5)||(463.2)||(1,343.6)||(1,344.1)|
|Special items, net||(15.0)||(18.7)||(15.0)||(16.4)|
|Interest income (expense), net||(0.5)||(0.4)||(1.4)||(1.1)|
|Other income (expense), net||0.3||1.5||1.6||4.6|
|Income before income taxes and non-controlling interests||354.3||311.6||1,047.1||1,037.4|
|Net income attributable to non-controlling interests||(4.1)||(3.4)||(10.6)||(13.1)|
|Net income attributable to MillerCoors LLC||$348.8||$306.9||$1,033.4||$1,020.5|