MillerCoors Posts Strong Profit Growth in 2010
10 February 2011
Despite Soft Volumes, Fourth Quarter Premium Light Sales Trends Improved
Brewer Surpasses $500 Million in Annualized Synergy Savings Six Months Ahead of Schedule
February 10, 2011 (London and Denver) -SABMiller plc (SAB.L) and Molson Coors Brewing Company (NYSE: TAP; TSX) reported that MillerCoors underlying net income increased at double-digit rates in the fourth quarter and full year ended December 31, 2010, despite one of the most challenging years on record for the U.S. beer industry.
MillerCoors fourth quarter underlying net income, excluding special items, increased 38.0 percent to $146 million compared with the prior year period, while full year underlying net income increased 21.9 percent to $1.087 billion behind positive pricing, favorable brand mix, and continued strong cost management. While industry volumes remained soft in the quarter, MillerCoors' Premium Light portfolio saw continued trend improvements.
"We continue to invest in innovation behind our premium light brands, drive growth in our craft and import portfolio and deliver synergy and cost savings as promised," said Leo Kiely, chief executive officer, MillerCoors. "Our consistent focus generated positive net revenue per barrel growth for the fourth quarter. We are building brand equity and improving our mix to meet the challenges ahead in 2011."
Key operating results for the fourth quarter are compared to the prior year comparable quarter and include MillerCoors operations in the U.S. and Puerto Rico.
FOURTH QUARTER AND FULL YEAR HIGHLIGHTS
(Unless otherwise indicated, all amounts are in U.S. dollars and calculated in accordance with U.S. GAAP, and all percentages are versus the prior-year comparable period.)
- Fourth quarter underlying net income, excluding special items, increased 38.0% to $146 million, while full-year underlying net income, excluding special items, grew 21.9% to $1.087 billion
- Fourth quarter total net sales increased 0.4% to $1.720 billion, while full-year total net sales were unchanged;
- Revenue per barrel growth was positive in the fourth quarter, as domestic net revenue per barrel (NRPB), excluding contract brewing and company-owned distributor sales, increased 1.7 percent, driven by pricing growth and favorable mix. For the full year, domestic NRPB increased 2.3 percent.
- Fourth quarter total cost of goods sold (COGS) per barrel increased 1.8%, while domestic COGS per barrel were flat. Full-year total COGS per barrel increased 2.1%.
- MillerCoors surpassed its three-year synergies goal six months ahead of schedule delivering $60 million of synergy savings in the fourth quarter, for a total of $505 million in cumulative synergy savings realized since July 1, 2008. Additional cost savings of $31 million were achieved in the fourth quarter, bringing total synergy and cost savings to $655 million since July 1, 2008.
For the quarter, MillerCoors domestic sales-to-retailers (STRs) declined 2.5 percent, about half the decline in the third quarter due to trend improvements in premium light sales. For the full year, STRs were down 3.2 percent.
Domestic sales-to-wholesalers (STWs) declined 2.2 percent in the quarter driven by STR declines. Full-year STWs were down 3.0 percent.
Fourth Quarter Brand STR Highlights
Premium Light STRs were down slightly in the fourth quarter, as Coors Light was up low-single digits due to strong distribution gains in the quarter; and Miller Lite trends continued to stabilize since the launch of the Miller Lite Vortex bottle and expanded distribution of the Miller Lite Aluminum Pint. MGD 64 declined at a double-digit rate.
MillerCoors Craft and Import portfolio managed by Tenth and Blake Beer Company grew double digits in the quarter, driven by the strong performance of Blue Moon, the biggest-selling craft beer brand in the country. The smaller Domestic Above-Premium portfolio continued to experience double-digit declines.
The Below Premium portfolio was down mid-single digits due to declines in Miller High Life and Milwaukee's Best. Keystone Light was down low-single digits.
Fourth Quarter Financial Highlights
MillerCoors total net sales increased 0.4 percent to $1.720 billion versus fourth quarter 2009. Full-year total net sales were $7.571 billion, virtually unchanged from prior year. Third party contract brewing volumes were down 3.7 percent for the quarter. Full-year contract brewing was down 0.7 percent.
Fourth quarter COGS per barrel increased 1.8 percent versus the prior year. The increase was primarily due to Coors Distributing Company's acquisition of Western Beverage in Denver. Domestic COGS per barrel were flat for the quarter despite higher fuel costs and unfavorable mix, which were offset by synergy and cost saving programs. Full-year COGS per barrel increased 2.1 percent.
Marketing, general and administrative costs decreased 5.4 percent to $472.5 million in the fourth quarter, primarily due to synergy savings and lower promotional and tactical spending.
Depreciation and amortization expenses for MillerCoors in the fourth quarter were $70.6 million and additions to tangible and intangible assets totaled $124.0 million.
During the fourth quarter, special items were $2.2 million primarily related to integration charges.
Integration, Synergies and Cost Savings
In the fourth quarter, synergy savings of $60 million were realized, driven by non-organizational synergies of $58 million. The non-organizational savings were primarily realized from media, regional tactical spending, inbound and outbound freight, packaging and brewing materials and point-of-sale materials.
To date, MillerCoors cumulative synergies have grown to $505 million, surpassing the original commitment to deliver $500 million by June 30, 2011.
In addition to synergies, an additional $31 million of cost savings were realized in the quarter driven by various cost savings initiatives led by the integrated supply chain, marketing and sales divisions. Cumulative cost savings to date total $150 million.
In total, MillerCoors has delivered $655 million in cumulative synergies and cost savings since July 1, 2008, and is on track to deliver $750 million of total synergies and cost savings by the end of 2012.
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, 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 offers innovative products such as MGD 64, Miller Chill and Sparks. Through its new craft and import company, Tenth and Blake, imports Peroni Nastro Azzurro, Pilsner Urquell, Grolsch and Molson Canadian and 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, Wisconsin, 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 Pilsner Urquell, Peroni Nastro Azzurro, Miller Genuine Draft and Grolsch, as well as leading local brands such as Aguila, Castle, Miller Lite, Snow and Tyskie. SABMiller plc is also one of the world's largest bottlers of Coca-Cola products. In the year ended March 31, 2010, the group reported $3,803 million adjusted pre-tax profit and group revenue of $26,350 million. SABMiller plc is listed on the London and Johannesburg stock exchanges. For more information on SABMiller plc, visit the company's website: 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, 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, 2010, 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/ 414 931 2000|
|Nigel Fairbrass||Media Relations, SABMiller||Tel: +44 20 7659 0105|
|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|
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.
1Special, or Exceptional items include one-time integration charges and other pension charges related to the MillerCoors Joint Venture.
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, 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.
|Dollars in Millions||
|Dec 31, 2010||Dec 31, 2009||Dec 31, 2010||Dec 31, 2009|
|US -GAAP: Net Income attributable to MillerCoors||144.2||102.2||1,057.0||842.8|
|Plus: Special (Exceptional)items1||2.2||3.9||30.3||49.4|
|Non – GAAP Underlying Net Income||146.4||106.1||1,087.3||892.2|
|Plus: Adjustments to arrive at IFRS Underlying EBITA2||37.3||35.2||141.0||141.7|
|IFRS: MillerCoors underlying earnings before interest, taxes and amortization before exceptional items (EBITA3 )||183.7||141.3||1,228.3||1,033.9|
|Percent change vs. prior year MillerCoors underlying EBITA3||30.0%||18.8%|
|MILLERCOORS LLC RESULTS OF OPERATIONS (VOLUMES IN THOUSANDS, DOLLARS IN MILLIONS)(UNAUDITED)|
|Dec 31, 2010||Dec 31, 2009||Dec 31, 2010||Dec 31, 2009|
|Volume in barrels||15,051||15,411||67,175||69,098|
|Cost of Goods Sold||(1,096.2)||(1,102.1)||(4,686.3)||(4,720.9)|
|Marketing, General and Administrative Expenses||(472.5)||(499.5)||(1,775.1)||(1,937.9)|
|Special Items, net||(2.2)||(3.9)||(30.3)||(49.4)|
|Other Income (Expense), net||(1.1)||(0.7)||2.4||0.9|
|Income Before Income Taxes and Non-controlling Interests||147.7||106.0||1,081.3||867.0|
|Income Tax Expense||(1.7)||(1.5)||(7.6)||(8.4)|
|Net Income Attributable to Non-controlling Interests||(1.8)||(2.3)||(16.7)||(15.8)|
|Net Income Attributable to MillerCoors LLC||$144.2||$102.2||$1,057.0||$842.8|