SABMiller and Molson Coors Report MillerCoors First Quarter Earnings
5 May 2009
Accelerated Synergies, Strong Revenue Growth, and Cost Management Drive Nearly 50% Increase in Underlying Profits Despite Continuing Commodity Cost Pressures
May 5, 2009 (London and Denver) -- Based on accelerated synergy delivery, strong revenue growth, disciplined cost management and timing of marketing expenditure, SABMiller plc (SAB.L) and Molson Coors Brewing Company (NYSE: TAP; TSX) today reported increased profits for MillerCoors on a pro forma basis for the quarter ended March 31, 2009, despite continuing commodity cost pressures.
"We delivered growth on five of our six focus brands, and we increased profitability through strong pricing growth and reduced price promotions," said MillerCoors Chief Executive Officer Leo Kiely. "These results demonstrate the strength of the MillerCoors portfolio in the face of a challenging economy and intense competition."
Key operating results for the first quarter are compared to the prior year on a pro forma basis1 and include MillerCoors operations in the U.S. and Puerto Rico. MillerCoors volumes for the period are reported on a trading-day-adjusted basis, which reflects one fewer trading day in the quarter versus a year ago.
- Five out of six MillerCoors focus brands increased sales-to-retailers (STRs) in the first quarter:
- Coors Light STRs were up low single digits
- Miller Lite STRs decreased mid single digits, a reduced year-over-year rate of decline versus the previous quarter
- The continued acceleration of MGD 64 led to volume growth in the Miller Genuine Draft franchise (up mid single digits) for the first time in a decade
- The craft and import portfolio rose in the first quarter, as Blue Moon continued to perform well with STRs up high single digits
- Keystone Light delivered a strong double-digit increase in STRs
- Miller High Life growth accelerated to mid single digits
1MillerCoors 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 2008, or U.S. GAAP for the fiscal quarter ended March 2008. Adjustments have been made to reflect comparative data including amortization of definite-life intangible assets and the exclusion of significant one-time items.
MillerCoors domestic STRs increased 0.4 percent versus the prior year pro forma quarter due to strong results from five of the six focus brands, offset primarily by declines in Milwaukee's Best. Domestic sales-to-wholesalers (STWs) declined 1 percent versus prior year, while total STWs declined 2 percent driven by a double-digit reduction in contract brewing volumes.
Pricing remained strong in the first quarter as domestic net sales per barrel, excluding contract brewing and company-owned distributor sales, increased 5.6 percent based on 2008 price increases (in the first and fourth quarters) and reductions in discounting. Pricing growth was lower than the previous quarter due to cycling of early 2008 general price increases.
Premium light brand STRs were up slightly versus prior year due to solid growth of Coors Light and continued acceleration of MGD 64, despite price increases across the premium light brand segment. Coors Light was up low single digits versus prior year. Miller Lite STRs were down mid single digits, a reduced rate of decline versus the previous quarter.
A new marketing campaign for Miller Lite launched in late March focused on the brand's long-standing consumer equity associated with the brand's taste. Innovative new packaging reinforcing the brand's taste platform is rolling out nationwide this month. MGD 64 continued to accelerate since its national launch in fall 2008. For the quarter, MGD 64 exceeded Miller Genuine Draft Light volumes versus the prior quarter and drove mid-single-digit growth in the MGD franchise. Coors Banquet continued to generate good growth.
The craft and import portfolio rose slightly in the quarter, led by the strong performance of Blue Moon and Peroni Nastro Azzurro, offset by declines in Pilsner Urquell and Weinhard's.
The domestic above premium portfolio declined double digits due to lower Miller Chill volume. The new reformulated 100-calorie Miller Chill featuring new packaging and advertising is currently rolling out nationwide. The Sparks franchise continued to generate growth in the first quarter following reformulation of the product.
The below premium portfolio was up low single digits compared to the prior year's first quarter, as the strong performance of Keystone Light and accelerated growth of Miller High Life more than offset declines in Milwaukee's Best and Icehouse.
FIRST QUARTER FINANCIAL HIGHLIGHTS
(All amounts are in U.S. dollars and calculated in accordance with U.S. GAAP, unless otherwise indicated.)
- Underlying net income attributable to MillerCoors, excluding special items, increased by 46.3% to US$216.4 million
- IFRS Underlying EBITA increased by 52.6%
- Total net sales increased 3.8% to $1.716 billion
- Domestic net revenue per barrel increased by 5.6%
- Cost of goods sold (COGS) per barrel increased by 5.3%
- Marketing, general and administrative costs decreased by 9.1%, driven in part by marketing expenditure timing and synergy delivery
MillerCoors total net sales increased by 3.8 percent to $1.716 billion versus the prior pro forma quarter. Excluding contract brewing and company-owned distributor sales, net sales increased 4.5 percent to $1.609 billion. Third-party contract brewing volumes declined 10 percent, though profits from contract brewing increased slightly.
Though MillerCoors continues to realize supply chain related synergies and deliver savings from its cost leadership programs - Resources For Growth and Project Unicorn - Cost of Goods Sold (COGS) per barrel increased by 5.3 percent due to significant increases in brewing and packaging materials related to high commodity costs this year.
For the quarter, marketing, general and administrative costs decreased by 9.1 percent driven by timing and management of marketing and sales spending and the accelerated timing of synergy delivery.
For the quarter, net income attributable to MillerCoors (excluding special items) is $68.5 million ahead of the prior pro forma quarter. Depreciation and amortization expense for MillerCoors in the first quarter was approximately $71 million and additions to tangible and intangible assets totaled $97 million.
INTEGRATION AND COST SYNERGIES
The integration of MillerCoors business processes and systems to enable faster local decision-making and streamlining of costs is proceeding well. The MillerCoors network optimization project is ahead of schedule, as more than 60 percent of the planned brewing production relocations were completed by April 1, 2009. Finally, construction of the new MillerCoors Chicago corporate headquarters is nearing completion with an expected occupancy date in the third quarter of 2009.
MillerCoors further accelerated synergy delivery timing, realizing $50.1 million in the first quarter, which captures some savings originally planned for delivery in the second quarter. A total of $78.4 million in synergy savings has been realized since July 1, 2008, exceeding the company's original goal of $50 million for the first 12 months of operations. The company now expects to realize $128 million of synergies by June 30, 2009.
By the end of calendar year 2009, MillerCoors expects to achieve a total of $238 million in synergies, surpassing its original forecast of $225 million. While the timing of synergy delivery has accelerated, MillerCoors $500 million synergy goal is unchanged.
During the first quarter of 2009, MillerCoors reported special items totaling $10.4 million due to employee relocation and retention expenses relating to the formation of the company.
As demonstrated in the first quarter, MillerCoors will continue to execute net revenue management strategies that drive the size and value of the beer category, creating strong brand positions for the long term. The company plans to execute strong marketing programs in national chains to create profitable growth opportunities for the upcoming key summer selling season. Finally, MillerCoors continues to pursue strong cost management and is well on its way to deliver its stated synergies goal of $500 million in three years.
Overview of MillerCoors
MillerCoors produces, 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 288 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 become 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 or distribution agreements across six continents. The group's brands include premium international beers such as Miller Genuine Draft, Peroni Nastro Azzurro, Grolsch and Pilsner Urquell, as well as an exceptional range of market leading local brands. Outside the USA, SABMiller plc is also one of the largest bottlers of Coca-Cola products in the world. In the year ended March 31, 2008, the group reported $3,639 million adjusted pre-tax profit and revenue of $21,410 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/.
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. 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 are presented on a pro forma basis. Adjustments have been made to reflect comparative data including amortization of definite life intangible assets and the exclusion of significant one-time items.
MillerCoors Reconciliation of US GAAP Net Income to Underlying Net Income (non-GAAP measure) and to EBITA, calculated under IFRS, noting that 2008 numbers are Pro Forma.
Fourth Quarter Ended
|(In Millions of $US)||March 31, 2009||March 31, 2008|
|US-GAAP: Net Income attributable to MillerCoors||206||137|
|Plus: Special (Exceptional) items1||10||11|
|Non-GAAP: Underlying Net Income attributable to MillerCoors||216||148|
|Plus: Adjustments to IFRS Underlying EBITA2||19||6|
|IFRS: MillerCoors underlying earnings before interest, taxes and amortization before exceptional items (EBITA3)||235||154|
|Percent change vs. prior year MillerCoors pro-forma underlying EBITA3||52.6%|
1Special, or Exceptional items include one-ti<strme integration charges related to the MillerCoors Joint Venture
²US - GAAP Underlying Net Income attributable to MillerCoors 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. Amortizations 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|
|March 31, 2009||March 31, 2008|
|Volume in barrels||15,699||16,013|
|Cost of Goods Sold||(1,049.9)||(1,017.0)|
|Marketing, General and Administrative Expenses||(441.8)||(485.9)|
|Special Items (net)||(10.4)||(11.3)|
|Other Income (Expense), net||(0.5)||2.6|
|Income before Income Taxes and Non-controlling Interests||213.3||140.8|
|Income Tax Expense||(2.1)||-|
|Net income attributable to Non-controlling interests||(5.2)||(4.2)|
|Net Income attributable to MillerCoors||206.0||136.6|
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, 2008, 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.
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|
|Paul de la Plante||Media Relations, Molson Coors||Tel: 514/843-2332|
|Dave Dunnewald||Investor Relations, Molson Coors||Tel: 303/927-2334|
|Jane Armstrong||Investor Relations, Molson Coors||Tel: 303/927-2394|