MillerCoors Increases First Quarter Profits
3 May 2011
Brewer Drives Net Revenue Growth and Positive Brand Mix, While Trend Improvements Continue for Premium Lights
May 3, 2011 (London and Denver) - SABMiller plc (SAB.L) and Molson Coors Brewing Company (NYSE: TAP; TSX) reported that MillerCoors first quarter underlying net income, excluding special items, increased 8.7 percent to $236 million versus the first quarter 2010, driven by positive pricing growth, continued synergies and cost savings, and favorable brand mix.
"Our continued success in building brand equity, driving positive mix, as well as strong cost management contributed to a good start out of the blocks in 2011," said Leo Kiely, chief executive officer, MillerCoors. "We said topline growth would be our priority, and we believe our strategic focus within premium lights on innovation, organic revenue growth and marketing execution are delivering wins in the marketplace."
Key operating results for the first quarter are compared to the prior year comparable quarter and include MillerCoors operations in the U.S. and Puerto Rico.
FIRST QUARTER 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.)
- Underlying net income increased 8.7% to $236 million
- Total net sales of $1.699 billion were in line with first quarter 2010
- First quarter domestic net revenue per barrel, excluding contract brewing and company-owned distributor sales, increased 2.1%
- First quarter total cost of goods sold (COGS) per barrel increased 1.2%
- Marketing, general and administrative costs decreased 1.3% due to the one-time receipt of $14 million from a third party
For the quarter, MillerCoors domestic sales-to-retailers (STRs) were down 1.4 percent due to continued industry headwinds. This represents an improved volume trend versus the previous five quarters. Domestic sales-to-wholesalers (STWs) were down 2.5 percent.
First Quarter Brand STR Highlights
Premium Light STRs were level, as Coors Light was up low-single digits, while Miller Lite improved, but was still down slightly. MGD 64 volumes were down by double digits.
MillerCoors Craft and Import portfolio, managed by Tenth and Blake Beer Company, grew 14 percent, driven by double-digit increases in Blue Moon and Leinenkugel's brands. In imports, Peroni Nastro Azzurro was up high-single digits, ahead of the import category.
The Below Premium portfolio was down low-single digits in the quarter as a result of MillerCoors "mind the gap" strategy, which is delivering a reduced gap between premium and below premium segment pricing, resulting in continued uptrading in the MillerCoors portfolio.
The Premium Regular portfolio was down mid-single digits driven by Miller Genuine Draft, partially offset by a mid-single-digit increase in Coors Banquet.
First Quarter Financial Highlights
MillerCoors total net sales of $1.699 billion were in line with the first quarter 2010.
Domestic net revenue per barrel grew 2.1 percent driven primarily by frontline pricing and brand mix, partially offset by increased costs associated with planned cross-merchandising programs. Total company net revenue per barrel, including contract brewing and company-owned distributor sales, increased in the first quarter by 2.6 percent. Third-party contract brewing volumes were down 4.0 percent for the quarter.
First quarter COGS per barrel increased 1.2 percent versus the prior year quarter, almost entirely due to increases in freight and fuel costs, which were partially offset by synergies and cost savings.
Marketing, general and administrative costs decreased 1.3 percent due to the one-time receipt of $14 million from a third party.
Depreciation and amortization expenses in the first quarter were $71.5 million and additions to tangible and intangible assets totaled $89.2 million.
Special items for the quarter were $1.4 million related to relocation costs associated with the joint venture integration.
Integration, Synergies and Cost Savings
In the first quarter, synergy savings of $23 million were delivered, driven by plant initiatives, lower inbound and outbound freight costs, and reductions in packaging and brewing materials.
To date, MillerCoors annualized synergies total $528 million, surpassing the original commitment to deliver $500 million by June 30, 2011.
In addition to synergies, an additional $6 million of cost savings were realized in the quarter related to various cost savings initiatives within the integrated supply chain. Cumulative cost savings to date total $156 million.
MillerCoors has delivered $684 million in total annualized synergies and other cost savings since July 1, 2008, and is on track to deliver its target of $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 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/ +1 414 931 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: +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 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.
Dollars in millions
|Three Months Ended|
|US GAAP: Net Income attributable to MillerCoors||$234.7||$208.6|
|Plus: Special (Exceptional) items1||1.4||8.6|
|Non – GAAP Underlying Net Income||236.1||217.2|
|Plus: Adjustments to IFRS Underlying EBITA2||32.2||28.5|
|IFRS: MillerCoors underlying earnings before interest, taxes and amortization before exceptional items (EBITA3)||$268.3||$245.7|
|Percent change vs. prior year MillerCoors underlying EBITA3||9.2%|
1Special, or Exceptional items include one-time integration 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.
MILLERCOORS LLC RESULTS OF OPERATIONS (VOLUMES IN THOUSANDS, DOLLARS IN MILLIONS) (UNAUDITED)
|Three Months Ended|
|Mar 31, 2011||Mar 31, 2010|
|Volume in Barrels||14,829||15,228|
|Cost of Goods Sold||(1,063.0)||(1,078.6)|
|Marketing, General and Administrative Expenses||(396.0)||(401.2)|
|Special Items, net||(1.4)||(8.6)|
|Other (Expense) Income, net||(0.4)||2.3|
|Income before Income Taxes and Noncontrolling Interests||238.3||214.8|
|Net income attributable to Noncontrolling interest||(2.1)||(4.8)|
|Net Income Attributable to MillerCoors LLC||$234.7||$208.6|