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MillerCoors Reports Double-Digit Underlying Profit Growth In Third Quarter

3 November 2010

Woman pulling a pint

Brewer Drives Strong Cost Management, Favorable Pricing in Tough Economic Environment

November 3, 2010 (London and Denver) - SABMiller plc (SAB.L) and Molson Coors Brewing Company (NYSE: TAP; TSX) today reported MillerCoors underlying earnings grew at a double digit rate driven by  strong cost management and net pricing, which were offset by soft volumes  due to a sluggish U.S. beer market in the third quarter ended September 30, 2010.

MillerCoors third quarter underlying net income, excluding special items, increased 36.7 percent to $334 million versus the prior year comparable quarter last year.

"It is still a tough market environment, but we are encouraged by our recent premium light trends and the continued strong momentum of our Tenth and Blake portfolio," said Leo Kiely, chief executive officer, MillerCoors.  "We successfully achieved positive net revenue growth for the quarter and we delivered on our commitment to take our synergy and other cost savings to the bottom line.  Investing behind innovation on our focus brands was also key to our success this summer."

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

THIRD QUARTER HIGHLIGHTS
(All amounts are in U.S. dollars and calculated in accordance with U.S. GAAP, unless otherwise indicated.)

  • Underlying net income (excluding special items) increased 36.7% to $334 million;
  • Total net revenue increased 0.3% to $2.016 billion;
  • Domestic net revenue per barrel (NRPB), excluding contract brewing and company-owned distributor sales, increased 2.4%;
  • Cost of goods sold per barrel decreased 0.3%;
  • Synergies and other cost savings were $83 million, bringing cumulative synergies and cost savings (including legacy cost savings programs) to $564 million since July 1, 2008. 

MillerCoors domestic sales-to-retailers (STRs) declined 4.0 percent. Domestic sales-to-wholesales (STWs) declined 2.7 percent in the third quarter.

Third Quarter Brand STR Highlights
In the Premium Light portfolio, both Coors Light and Miller Lite volumes were down low-single digits.  Notably, Miller Lite trends have continued to stabilize since the launch of the Miller Lite Vortex bottle.  MGD 64 declined at a double-digit rate.

The Tenth and Blake Craft and Import portfolio grew double-digits in the quarter, driven by double-digit-growth of Blue Moon and high-single-digit-growth of Leinenkugel's resulting from our recent "craft beer can" innovation and the success of seasonal brews.  The Premium Regular and smaller domestic Above Premium portfolios experienced 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 volumes were level with the prior year.

Third Quarter Financial Highlights
Total company net producer revenue per barrel increased in the third quarter by 3.3 percent to $112.53 driven by domestic revenue growth.  Excluding contract brewing and company-owned distributor sales, domestic net revenue increased to $1.867 billion, with NRPB up 2.4 percent, driven by firm net pricing and favorable sales mix.  Third-party contract brewing volumes were down 4.8 percent.

Third quarter cost of goods sold (COGS) per barrel decreased slightly (0.3%) versus the prior year primarily due to procurement synergies realized across the supply chain.

Marketing, general and administrative costs decreased 9.8 percent largely due to synergies and other cost savings realized.  

Depreciation and amortization expenses for MillerCoors in the third quarter were $72 million and additions to tangible and intangible assets totaled $50 million.

Special items for the quarter totaled $21 million in special charges, $6 million higher than in the prior year, driven largely by pension and post-retirement benefit curtailment expenses, and integration costs including severance costs resulting from the sales office reorganization.

Integration, Synergies and Cost Savings
In the third quarter, MillerCoors successfully completed initial product transitions within its national brewery network. The company will continue to focus on further network optimization through peak/non-peak season sourcing changes, as well as opportunities for increased efficiencies. 

MillerCoors remains on track to deliver $750 million in total synergies and other cost savings by the end of 2012.  In the third quarter, MillerCoors delivered total cost reductions of $83 million comprising $56 million in synergies and $27 million in additional cost savings.  These cost reductions were primarily realized from agency fees, media, regional tactical spending, inbound and outbound freight; and packaging and brewing materials. 

Total annualized synergy and other cost savings since July 1, 2008, now stand at $564 million, made up of $50 million in Resources for Growth (RFG) and Unicorn cost initiatives, $445 million in synergies and $69 million in additional cost savings.

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, the company  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.

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, 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.

Contacts

For further information, please contact:

SABMiller plcTel: +44 20 7659 0100/ 414 931 2000
Nigel FairbrassMedia Relations, SABMillerMob: +44 7799 894265
Gary LeibowitzInvestor Relations, SABMillerMob: +44 7717 428540
Molson Coors 
Colin WheelerMedia Relations, Molson CoorsTel: 303/927-2443
Dave DunnewaldInvestor Relations, Molson CoorsTel: 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.  

 MillerCoors LLC

1Current year and prior year special items include pension and postretirement benefit curtailments and 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.

Dollars in MillionsThree Months
Ended
Nine Months
Ended
 Sept 30, 2010Sept 30, 2009Sept 30, 2010Sept 30, 2009
US -GAAP: Net Income attributable to MillerCoors$313.0$229.7 $912.8$740.6
Plus: Special items1    21.0   14.7     28.1    45.5
Non – GAAP Underlying Net Income 334.0  244.4  940.9  786.1
Plus: Adjustments to arrive at IFRS Underlying EBITA2   47.7   45.2   103.7    106.5
IFRS: MillerCoors underlying earnings before interest, taxes and amortization before exceptional items (EBITA3 )   $381.7$289.6  $1,044.6$892.6
Percent change vs. prior year MillerCoors underlying EBITA331.8% 17.0% 

MILLERCOORS LLC RESULTS OF OPERATIONS (VOLUMES IN THOUSANDS, DOLLARS IN MILLIONS)(UNAUDITED)

US GAAP 

Three Months
Ended
Nine Months
Ended
 Sept 30, 2010Sept 30, 2009Sept 30, 2010Sept 30, 2009
Volume in barrels17,91418,44152,12453,687
     
Sales$2,350.2 $2,350.7 $6,819.8 $6,855.8
Excise Taxes(334.3) (341.2) (968.9) (993.7)
Net Sales2,015.9 2,009.5 5,850.9 5,862.1 
Cost of Goods Sold(1,226.7)(1,266.6)(3,590.1) (3,618.8)
Gross Profit789.2742.9 2,260.8 2,243.3 
Marketing, General and Administrative Expenses(447.4)(496.0) (1,302.6) (1,438.4)
Special Items, net(21.0) (14.7)(28.1) (45.5)
Operating Income320.8232.2 930.1 759.4 
Other Income (Expense), net0.22.3 3.51.6 
     
Income Before Income Taxes and Non-controlling Interest321.0234.5 933.6 761.0 
Income Tax Expense(2.1)(2.3)  (5.9)(6.9) 
Net Income318.9232.2 927.7 754.1 
Net Income Attributable to Non-controlling Interests(5.9)(2.5)(14.9)(13.5)
Net Income Attributable to MillerCoors LLC$313.0$229.7 $912.8 $740.6

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