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MillerCoors Increases Second Quarter Profits

2 August 2011

 

Pricing Growth, Positive Brand Mix, Strong Cost Management Offset Major Headwinds

August 2,  2011 (London and Denver) -SABMiller plc (SAB.L) and Molson Coors Brewing Company (NYSE: TAP; TSX) reported that MillerCoors second quarter underlying net income, excluding special items, increased 2.6 percent to $400 million versus the second quarter 2010, driven by positive pricing growth, favorable brand mix, and strong cost management amid a challenging industry environment.

"We delivered profit growth in the second quarter despite a weakening economy combined with an array of headwinds, including record rainfall in key markets and high fuel prices, all of which dampened consumer spending on beer," said Chief Executive Officer Tom Long. "But we are not satisfied with profit growth alone and we remain committed to investing behind our brands to drive volume and share growth over time."

Key operating results for the second quarter are compared to the prior year comparable quarter and include MillerCoors operations in the U.S. and Puerto Rico.

SECOND 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 2.6 percent to $400 million
  • Total net sales were in line with the prior year second quarter at $2.132 billion
  • Domestic net revenue per barrel, excluding contract brewing and company-owned distributor sales, increased 2.9 percent
  • Total cost of goods sold (COGS) per barrel increased 2.3 percent, driven by increases in freight and fuel and commodity costs

For the quarter, MillerCoors domestic sales-to-retailers (STRs) were down 2.7 percent as a result of a continued weak economic environment combined with record rainfall in key markets and high gas prices throughout the U.S.  Domestic sales-to-wholesalers (STWs) were down 3.1 percent.

Second Quarter Brand STR Highlights
Premium Light STRs were down low-single digits, as Coors Light grew slightly, Miller Lite declined mid-single digits and MGD 64 declined by double digits.  The Coors Light Super Cold packaging launched in May helped drive volume on the brand in the quarter. 

Tenth and Blake Beer Company grew the MillerCoors Craft and Import portfolio double digits, driven by double-digit increases in Blue Moon and Leinenkugel's. The company continues to experience success with its growing line-up of innovative seasonal craft brand extensions, including Leinenkugel's Summer Shandy and Blue Moon Summer Honey Wheat.  Peroni Nastro Azzurro also delivered good growth.

The Below Premium portfolio declined mid-single digits, as reduced price gaps between Premium and Below Premium beers drove continued trading up in the MillerCoors portfolio.

The Premium Regular portfolio was down high-single digits, with a double-digit decline by Miller Genuine Draft, partially offset by a low-single-digit increase by Coors Banquet.

Second Quarter Financial Highlights
MillerCoors total net sales were in line with the prior year second quarter at $2.132 billion.

Domestic net producer revenue per barrel grew 2.9 percent, due to frontline pricing and favorable brand mix. This growth was an acceleration over first quarter 2011 primarily driven by improved mix.

Total company net producer revenue per barrel, including contract brewing and company-owned distributor sales, increased by 3.5 percent. Third-party contract brewing volumes were down 7.0 percent for the quarter.

Total COGS per barrel increased 2.3 percent driven by increases in freight and fuel and commodity costs, partially offset by synergies and cost savings.

Marketing, general and administrative costs increased 0.4 percent, driven primarily by higher information system spending, which was offset in part by continued cost savings.

Depreciation and amortization expenses for MillerCoors in the second quarter were $72.6 million and additions to tangible and intangible assets totaled $62.5 million.
 
Special items for the quarter were $1.1 million primarily related to relocation costs associated with the joint venture integration.

Synergies and Cost Savings
In the second quarter, synergy savings of $18 million were delivered, which comprised savings in procurement, corporate services and brewing materials.

To date, MillerCoors cumulative synergies total $546 million, surpassing the original commitment of $500 million to be achieved by June 30, 2011.

In addition to synergies, $9 million of other cost savings were realized, driven by a variety of initiatives within the integrated supply chain.  Cumulative cost savings realized to date total $165 million.

MillerCoors has delivered $711 million in total annualized synergies and cost savings since July 1, 2008, and is ahead of plan to deliver its target of $750 million of total synergies and other 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.  Tenth and Blake Beer Company, MillerCoors new craft and import company, imports Peroni Nastro Azzurro, Pilsner Urquell and 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 includes global brands 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 is also one of the world's largest bottlers of Coca-Cola products.

In the year ended 31 March 2011, the group reported US$4,491 million adjusted pre-tax profit and group revenue of US$28,311 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/.


Forward-Looking Statements 
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, 2011, 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. 

 

Contacts

For further information, please contact:

SABMiller plc Tel: +44 20 7659 0100
Nigel Fairbrass Media Relations, SABMiller Mob: +44 7799 894265
Gary Leibowitz Investor Relations, SABMiller Mob: +44 7717 428540
Molson Coors  
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.  

   

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, asset disposal, deferred taxes, share based compensation and severance expenses between US GAAP and IFRS.  Amortization of intangible assets, Interest Taxes, Equity Income and non-controlling interest have been removed to arrive at underlying EBITA.

3EBITA - Earnings Before Interest, Taxes, and Amortization, excluding exceptional items.

(In million of $US) Three Months
Ended
Six Months
Ended
  June 30, 2011 June 30, 2010 June 30, 2011 June 30, 2010
US -GAAP: Net Income Attributable to MillerCoors $398.7 $391.2  $633.4 $599.8
Plus: Special (Exceptional) items1     1.1   (1.5)      2.5     7.1 
Non – GAAP Underlying Net Income $399.8   $389.7   $635.9   $606.9 
Plus: Adjustments to IFRS Underlying EBITA2   39.3    27.5   71.5    56.0 
IFRS: MillerCoors underlying earnings before interest, taxes and amortization before exceptional items (EBITA3 )    $439.1 $417.2   $707.4 $662.9
Percent change vs. prior year MillerCoors underlying EBITA3 5.2%   6.7%  

MILLERCOORS LLC RESULTS OF OPERATIONS (VOLUMES IN THOUSANDS, DOLLARS IN MILLIONS US$) (UNAUDITED)
US GAAP
Three Months
Ended
Six Months
Ended
  June 30, 2011 June 30, 2010 June 30, 2011 June 30, 2010
Volume in barrels 18,325 18,982 33,154 34,210
Sales $2,473.1 $2,485.8 $4,448.4 $4,469.6
Excise Taxes (340.8) (351.7) (617.0) (634.6)
Net Sales 2,132.3 2,134.1 3,831.4 3,835.0
Cost of Goods Sold (1,268.8) (1,284.8) (2,331.8) (2,363.4)
Gross Profit 863.5 849.3 1,499.6 1,471.6
Marketing, General and Administrative Expenses (456.0) (454.0) (852.0) (855.2)
Special Items (net) (1.1) 1.5 (2.5) (7.1)
Operating Income 406.4 396.8 645.1 609.3
Other Income (Expense), net (1.5) 1.0 (1.9) 3.3
Income Before Income Taxes and Non-controlling Interests 404.9 397.8 643.2 612.6
Income Taxes (2.9) (2.4) (4.4) (3.8)
Net Income 402.0 395.4 638.8 608.8
Net Income Attributable to Non-controlling Interests (3.3) (4.2) (5.4) (9.0)
Net Income Attributable to MillerCoors LLC $398.7 $391.2 $633.4 $599.8

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