SABMiller and Molson Coors Report Higher MillerCoors Second Quarter Earnings
3 August 2009
MillerCoors Delivers Four Consecutive Quarters of Double-Digit Underlying Profit Growth Since Beginning Combined Operations July 2008
August 3, 2009 (London and Denver) – Driven by strong net revenue growth, cost management and continued synergy delivery, SABMiller plc (SAB.L) and Molson Coors Brewing Company (NYSE: TAP; TSX) today reported double-digit profit growth for MillerCoors on a pro forma basis for the quarter ended June 30, 2009.
"Since combining operations last July, we have achieved double-digit growth in underlying earnings for four consecutive quarters," said MillerCoors CEO Leo Kiely. "These results show MillerCoors is connecting consumers with its new brand portfolio and effectively driving synergies to become stronger and more competitive in the U.S. beer industry."
"We have grown five of our six national focus brands in the past year. This demonstrates the power of our portfolio to drive profitable growth in this challenging economic environment," added Kiely.
Key operating results for the second quarter are compared to the prior year on a pro forma basis1 and include MillerCoors operations in the U.S. and Puerto Rico.
SECOND QUARTER HIGHLIGHTS
(All amounts are in U.S. dollars and calculated in accordance with U.S. GAAP, unless otherwise indicated.)
- Six national focus brands² increased sales-to-retailers by 1.3%, led by Coors Light and MGD 64
- Underlying net income, excluding special items, increased by 16.4% to $325.3 million
- Total net sales increased by 1.6% to $2.14 billion
- Domestic net revenue per barrel increased by 3.0%
- $60 million delivered in synergies, bringing year-to-date synergy total to $110 million
In a soft beer market, MillerCoors domestic sales-to-retailers (STRs) were down 0.8 percent versus the prior year pro forma quarter due to a decline in Miller Lite STRs and softness in above premium brands, mostly offset by positive results in five of the six national focus brands. Domestic sales-to-wholesalers (STWs) declined 1.1 percent driven by lower STRs and a slight reduction in distributor inventories.
Pricing remained strong in the second quarter as domestic net sales per barrel, excluding contract brewing and company-owned distributor sales, increased by 3.0 percent based on 2008 price increases.
Overall, premium light brand volumes (Miller Lite, Coors Light, MGD 64) were down slightly as current economic challenges continue to result in trade-down in the off-premise channel and ongoing softness in the on-premise channel. Coors Light was up low-single digits versus prior year driven in part by distribution gains. Miller Lite STRs were down mid-single digits due in part to the reduction of price promotions, trade-down from the premium-and-above categories and weakness in the on-premise channel.
MGD 64 continued to accelerate since its national launch in fall 2008. The MGD franchise has remained in growth after its positive performance for the first time in over a decade during the first quarter.
The craft and import portfolio grew slightly during the quarter, driven by Blue Moon and Leinenkugel's. Peroni Nastro Azzurro was virtually unchanged in a challenged import market. The domestic above-premium portfolio, which includes Miller Chill, Sparks and Killian's Irish Red experienced a double-digit decline.
Coors Banquet continued to generate good growth, but the premium regular portfolio, which includes Miller Genuine Draft, was down high-single digits. The below-premium portfolio was up low-single digits as double-digit growth by Keystone Light and low-single-digit growth by Miller High Life more than offset the mid-single digit decline by Milwaukee's Best.
SECOND 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 16.4% to $325.3 million versus the prior pro forma quarter
- Total net sales increased by 1.6% to 2.14 billion
- Domestic net revenue per barrel increased by 3.0%, driven by firm pricing and reduced discounts, offset by consumer trade-down between industry segments
- Cost of goods sold (COGS) per barrel increased by 5.1%
- Marketing, general and administrative costs decreased by 10.8% driven primarily by synergies and other cost savings
MillerCoors total net sales increased by 1.6 percent to $2.14 billion versus the prior pro forma quarter. Excluding contract brewing and company-owned distributor sales, net sales increased 1.7 percent to $2.00 billion. Third-party contract brewing volumes declined 6.5 percent, though profits were in line with the prior-year comparable quarter.
Though MillerCoors continues to realize supply chain related synergies and deliver savings from its cost leadership programs, Cost of Goods Sold per barrel increased by 5.1 percent due to significant prior year hops sales, as well as increased brewing and packaging material costs this year, primarily glass, aluminum and barley.
For the quarter, marketing, general and administrative costs decreased by 10.8 percent, driven primarily by synergies and other cost savings.
For the quarter, underlying net income attributable to MillerCoors (excluding special items) increased by 16.4 percent to $325.3 million versus the prior-year pro forma quarter. Depreciation and amortization expenses for MillerCoors in the second quarter was approximately $72million, and additions to tangible and intangible assets totaled $120 million.
INTEGRATION AND COST SYNERGIES
MillerCoors achieved $60 million in synergies in the second quarter, largely due to the network optimization savings realized from moving production of the Coors brands into former Miller breweries, continued realization of organizational savings, and savings in marketing investment. Year-to-date, MillerCoors has delivered $110 million in synergies, and MillerCoors now expects to achieve $260 million of cumulative synergies by the end of calendar 2009 surpassing its original commitment of $225 million. While the timing of synergy delivery has accelerated, MillerCoors $500 million synergy goal is unchanged.
During the second quarter of 2009, MillerCoors reported special items totaling $20.4 million due to a charge for pension curtailment and integration expenses.
During the key summer selling season, MillerCoors remains focused on driving the great taste platform of Miller Lite, while accelerating Coors Light growth with new Rocky Mountain cold refreshment messaging and cold activated packaging. MillerCoors is also working to add new legal-age drinkers to the premium light category by driving repeat purchases on MGD 64. As we continue to see shifts in both segments and channels, we will be leveraging our full brand portfolio to meet changing consumer and customer needs. Finally, MillerCoors is committed to driving sustainable net revenue growth.
1 MillerCoors pro forma figures are based on results for Miller and Coors reported under either International Financial Reporting Standards (IFRS) for the fiscal quarter ended June 2008, or U.S. GAAP for the fiscal quarter ended June 2008. Adjustments have been made to reflect comparative data including amortization of definite-life intangible assets and the exclusion of significant one-time items.
2 MillerCoors six national focus brands are Coors Light, Miller Lite, MGD 64, Blue Moon, Miller High Life and Keystone Light.
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 and distribution agreements across six continents. The group's wide portfolio of brands includes premium international beers such as Grolsch, Miller Genuine Draft, Peroni Nastro Azzurro and Pilsner Urquell, as well as market-leading local brands such as Aguila, Castle, Miller Lite, Snow and Tyskie. SABMiller plc is also one of the largest bottlers of Coca-Cola products in the world. In the year ended March 31, 2009, the group reported $3,405 million adjusted pre-tax profit and group revenue of $25,302 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, http://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, 2009, 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.
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.
|(In millions of $US)||June 30, 2009||June 30, 2008||June 30, 2009||June 30, 2008|
|US -GAAP: Net Income||304.9||174.6||510.9||311.2|
|Plus: Special items1||20.4||104.8||30.8||116.1|
|Non-GAAP Underlying Net Income||325.3||279.4||541.7||427.3|
|Plus: Adjustments to arrive at IFRS Underlying EBITA2||42.6||45.9||61.3||51.6|
|IFRS: MillerCoors underlying earnings before interest, taxes and amortization before exceptional items (EBITA3)||367.9||325.3||603.0||478.9|
|Percent change vs. prior year MillerCoors pro-forma underlying EBITA3||13.1%||25.9%|
1Current year special items include one-time integration charges related to the MillerCoors Joint Venture, and a charge for pension curtailment. Prior year special items include one-time integration charges, asset impairment charges, and a loss on sale of a company owned distributorship.
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.
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)
|June 30, 2009||June 30, 2008||June 30, 2009||June 30, 2008|
|Actual||Pro Forma||Actual||Pro Forma|
|Volume in barrels||19,547||19,878||35,246||35,891|
|Cost of Goods Sold||(1,302.3)||(1,259.8)||(2,352.2)||(2,276.8)|
|Marketing, General and Administrative Expenses||(500.6)||(561.2)||(942.4)||(1,047.1)|
|Special Items (net)||(20.4)||(104.8)||(30.8)||(116.1)|
|Other Income (Expense), net||(0.2)||2.2||(0.7)||4.8|
|Income before Income Taxes and Minority Interests||313.2||180.4||526.5||321.2|
|Income Tax Expense||(2.5)||-||(4.6)||-|
|Net income attributable to Non-controlling interest||(5.8)||(5.8)||(11.0)||(10.0)|
|Net Income Attributable to MillerCoors LLC||304.9||174.6||510.9||311.2|
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|
|Colin Wheeler||Media Relations, Molson Coors||Tel: 303/927-2443|
|Dave Dunnewald||Investor Relations, Molson Coors||Tel: 303/927-2334|
|Leah Ramsey||Investor Relations, Molson Coors||Tel: 303/927-2397|