MillerCoors Reports Challenging Third Quarter
2 November 2011
Slight Improvement in Retail Trends with Tenth and Blake Leading Craft Segment Growth
November 2, 2011 (London and Denver) - SABMiller plc (SAB.L) and Molson Coors Brewing Company (NYSE: TAP; TSX) reported that MillerCoors third quarter underlying net income, excluding special items, decreased 14.1 percent to $286.9 million versus the third quarter 2010, driven by a weak economy, low consumer spending and commodity inflation.
"Despite the toughest headwinds we've seen as a company, we slightly improved our sales to retailer trend this quarter versus last quarter and continued to deliver our cost savings commitments," said MillerCoors Chief Executive Officer Tom Long. "We remain focused on driving profitable top-line and share growth with a strong and steady commitment to our brands."
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
(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 (a non-GAAP measure) decreased 14.1 percent to $286.9 million
- Total net sales decreased 2.5 percent to $1.965 billion
- Domestic net revenue per barrel, excluding contract brewing and company-owned distributor sales, increased 1.8 percent
- Total cost of goods sold (COGS) per barrel increased 3.2 percent
- Special charges for the quarter totaled $110.9 million
For the quarter, MillerCoors domestic sales-to-retailers (STRs) were down 2.0 percent, a slight improvement from the second quarter. Domestic sales-to-wholesalers (STWs) were down 4.7 percent. The STW decline was higher than the STR decline due to the timing of shipments year over year.
Third Quarter Brand STR Highlights
Premium Light STRs were down low-single digits, as Coors Light grew low-single digits, Miller Lite declined mid-single digits and MGD 64 declined double digits.
Tenth and Blake Beer Company grew the MillerCoors Craft and Import portfolio by 17.2 percent in the quarter driven by double digit increases in Blue Moon and Leinenkugel's. The company continues to drive success with its innovative seasonal craft brand extensions, such as Blue Moon Summer Honey Wheat and Leinenkugel's Summer Shandy. Peroni Nastro Azzurro also delivered good growth in the mid-single digits.
The Below Premium portfolio declined mid-single digits, as the company reduced price gaps between Premium and Below Premium beers.
The Premium Regular portfolio was down mid-single digits, with a double-digit decline by Miller Genuine Draft, partially offset by a mid-single-digit increase by Coors Banquet.
Third Quarter Financial Highlights
MillerCoors total net sales declined by 2.5 percent to $1.965 billion.
Domestic net producer revenue per barrel grew 1.8 percent primarily due to front line pricing and favorable brand mix.
Total company net producer revenue per barrel, including contract brewing and company-owned distributor sales, increased by 1.7 percent. Third-party contract brewing volumes were up by 1.0 percent.
Total COGS per barrel increased 3.2 percent driven by higher freight, fuel and packaging costs, an out-of-period depreciation charge of $5.2 million, as well as lower absorption of fixed-costs, partly offset by cost savings.
Marketing, general and administrative costs increased 3.2 percent driven primarily by higher information system spending, an out-of-period depreciation charge of $7.3 million and higher marketing costs.
Depreciation and amortization expenses for MillerCoors in the third quarter were $87.0 million and additions to tangible and intangible assets totaled $62.2 million.
Special charges for the quarter were $110.9 million, which included a $60.0 million write-down in the value of the Sparks brand and a charge of $50.9 million related to the planned assumption of a multi-employer pension plan for brewery workers.
In the third quarter, $27 million of cost savings were realized driven by a variety of initiatives primarily within the integrated supply chain. Annualized cost savings realized since the inception of the joint venture total $192 million. Synergies remain at $546 million as the program completed at the end of the second quarter.
MillerCoors has delivered $738 million in total annualized synergies and cost savings since July 1, 2008, and now expects to deliver on its target of $750 million of total synergies and other cost savings by the end of 2011, a year earlier than originally planned.
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 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 positive 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.
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.
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: +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.
1Current year, Special, or Exceptional, items include a write-down in the value of the Sparks brand, a charge related to the planned assumption of a multi-employer pension plan for our workers and integration charges related to the MillerCoors Joint Venture. Prior year includes pension and post-retirement benefit curtailments and integration charges related to the MillerCoors Joint Venture.
3US - 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.
|(In millions of $US)||Three Months |
|Nine Months |
|Sept 30, 2011||Sept 30, 2010||Sept 30, 2011||Sept 30, 2010|
|US -GAAP: Net Income Attributable to MillerCoors||$176.4||$313.0||$809.8||$912.8|
|Plus: Special (Exceptional) items1||110.9||21.0||113.4||28.1|
|Tax effect of the adjustments to arrive at underlying net income2||(0.4)||(0.1)||(0.4)||(0.1)|
|Non – GAAP Underlying Net Income||$286.9||$333.9||$922.8||$940.8|
|Plus: Adjustments to IFRS Underlying EBITA3||29.1||47.8||100.6||103.8|
|IFRS: MillerCoors underlying earnings before interest, taxes and amortization before exceptional items (EBITA4 )||$316.0||$381.7||$1,023.4||$1,044.6|
|Percent change vs. prior year MillerCoors underlying EBITA4||-17.2%||-2.0%|
|MILLERCOORS LLC RESULTS OF OPERATIONS (VOLUMES IN THOUSANDS, DOLLARS IN MILLIONS US$) (UNAUDITED)|
|Three Months |
|Nine Months |
|Sept 30, 2011||Sept 30, 2010||Sept 30, 2011||Sept 30, 2010|
|Volume in barrels||17,167||17,914||50,321||52,124|
|Cost of Goods Sold||(1,213.3)||(1,226.7)||(3,545.1)||(3,590.1)|
|Marketing, General and Administrative Expenses||(461.5)||(447.4)||(1,313.5)||(1,302.6)|
|Special Items (net)||(110.9)||(21.0)||(113.4)||(28.1)|
|Other Income (Expense), net||2.4||0.2||0.5||3.5|
|Income Before Income Taxes and Non-controlling Interests||181.6||321.0||824.8||933.6|
|Net Income Attributable to Non-controlling Interests||(3.6)||(5.9)||(9.0)||(14.9)|
|Net Income Attributable to MillerCoors LLC||$176.4||$313.0||$809.8||$912.8|