MillerCoors Achieves Double-Digit Underlying Profit Growth in Q2

MillerCoors second quarter underlying net income, excluding special items, increased 19.8 percent to $389.7 million versus the prior year comparable quarter due to strong innovation, solid price gains, delivery of synergies, and lower marketing, general and administrative costs, which were partially offset by soft volumes.

Aug 4 2010 --- Despite volume headwinds which continue to affect the beer industry at-large, SABMiller plc and Molson Coors Brewing Company reported double-digit underlying earnings growth for MillerCoors in the second quarter ended June 30, 2010. 

MillerCoors second quarter underlying net income, excluding special items, increased 19.8 percent to $389.7 million versus the prior year comparable quarter due to strong innovation, solid price gains, delivery of synergies, and lower marketing, general and administrative costs, which were partially offset by soft volumes.

“Now that we’re into the home stretch of the summer selling season, our results show some positive signs of progress,” said Leo Kiely, chief executive officer, MillerCoors.  “We grew profit by double digits in an unfavorable selling environment.  A few of our key brands showed significant trend improvements from the last quarter, and the craft and import portfolio posted very strong results, driven by our investments in brand innovation.”

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.

MillerCoors domestic sales-to-retailers (STRs) declined 2.4 percent.  Helped by MillerCoors premium light, craft and import brands, the second quarter showed a trend improvement from the first quarter, which was down 4.0 percent.  Domestic sales-to-wholesalers (STWs) declined 3.5 percent in the second quarter, driven primarily by lower STRs.

In the Premium Light portfolio, Coors Light volumes were unchanged and MGD 64 was down low-single digits, while Miller Lite fell by low single digits and cut its decline rate by more than half since the last quarter.

MillerCoors Craft and Import portfolio grew double-digits in the quarter, driven by double-digit-growth of Blue Moon, Leinenkugel’s and Peroni Nastro Azzurro.  The Premium Regular and smaller domestic Above Premium portfolios experienced double-digit declines.

The Below Premium portfolio was down low-single digits due to Miller High Life which declined low-single digits and Milwaukee’s Best which decreased at a high-single-digit rate. Keystone Light grew at a low-single-digit rate partially offsetting the declines in the Below Premium Portfolio. 

MillerCoors total net revenue declined 0.1 percent to $2.134 billion versus second quarter 2009.  Excluding contract brewing and company-owned distributor sales, domestic net revenue decreased 0.8 percent to $1.980 billion, with NRPB up 2.8 percent, driven by firm net pricing and slightly favorable sales mix.  Third-party contract brewing volumes were up 3.0 percent.

Costs of goods sold per barrel increased 1.6 percent, reflecting a significant trend improvement versus the first quarter.  This increase was driven by higher freight rates, product mix and increases in promotional packaging, which were largely offset by the continued delivery of synergies and cost savings.

Marketing, general and administrative costs decreased by 9.3 percent primarily due to synergies and lower marketing spending.

Depreciation and amortization expenses for MillerCoors in the second quarter were $71 million, and additions to tangible and intangible assets totaled $58 million.

During the second quarter, special items reflect a benefit of $1.5 million driven largely by a reduction in estimates for integration costs as a result of the formation of MillerCoors.

MillerCoors remains on track to deliver $750 million in total synergies and other cost savings by the end of 2012.  In the second quarter, MillerCoors delivered total cost reductions of $72 million comprising $63.8 million in synergies and $8.6 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 synergy and other cost savings since July 1, 2008, now stand at $481 million, made up of $50 million in Resources for Growth (RFG) and Unicorn cost initiatives, $389 million in synergies and $42 million in additional cost savings.