SABMiller and Molson Coors Report MillerCoors Fourth Quarter Earnings
MillerCoors total net sales increased by 3.1 percent to $1.740 billion versus the prior pro forma quarter. Excluding contract brewing and company-owned distributor sales, net sales increased 3.4 percent to $1.622 billion. Third-party contract brewing volumes declined 6 percent.
11/02/2009 SABMiller plc and Molson Coors Brewing Company reported double-digit growth in profit on a pro forma basis at MillerCoors behind strong pricing, solid cost management and an acceleration of synergies targets in the fourth quarter ended December 31, 2008.
"While the U.S. beer category softened in the fourth quarter, we increased pricing and net revenue to deliver strong profit growth," said MillerCoors Chief Executive Officer Leo Kiely. "Our early progress with integration, including our efforts to assemble the most talented team in the beer business, is helping us to accelerate the timing of our 2009 synergies."
BRAND HIGHLIGHTS
Key operating results for the fourth quarter are compared to prior year on a pro forma basis1 and include the U.S. and Puerto Rico operations of the combined company.
* Five out of six MillerCoors priority brands increased sales-to-retailers (STRs) in the fourth quarter
o Coors Light increased 1.0%, posting its fourteenth consecutive quarter of growth
o MGD 64 continued to deliver strong growth since its national launch
o Blue Moon was up double digits
o Keystone Light delivered strong double-digit growth, while Miller High Life increased marginally
* Miller Lite STRs declined 7.5% with particularly strong net price growth for the quarter
* The craft and import portfolio rose in the fourth quarter led by the strong double-digit performance of Blue Moon, high-single-digit growth of Peroni Nastro Azzurro and sales of Grolsch, despite overall weakness in the industry import segment
* Coors Banquet increased mid-single digits, posting its seventh consecutive quarter of growth.
During the period, MillerCoors overall STRs declined 2.3 percent, reflecting a weaker quarter for the industry and softness in Miller Lite and certain above-premium brands. Domestic sales-to-wholesalers (STWs) dropped 4.3 percent, driven largely by a reduction in distributor inventory levels and lower sales to retail.
Pricing remained strong as domestic net sales per barrel, excluding contract brewing and company- owned distributor sales, increased 8.0 percent versus the prior year driven by strong front line pricing, reductions in discounting and favorable mix. Front-line pricing in the period benefited from an acceleration of general price increases, which took effect in September and October of 2008 vs. early 2009.
STRs for the company’s premium light brands were down 2.4 percent, due to a reduction in discounting activity, softness in on-premise channels and minor trade-down in off-premise channels. Coors Light momentum slowed to a 1 percent increase in the quarter over prior year. Miller Lite volume continued to decline, down 7.5 percent in the fourth quarter, with particularly strong net price growth for the brand. MGD 64 delivered strong growth after its national launch, selling more than double the prior year MGD Light volume.
Despite overall weakness in the import segment, the MillerCoors craft and import portfolio rose 1.6 percent led by strong double-digit growth of Blue Moon, high single-digit growth of Peroni Nastro Azzurro and low-single-digit growth of Leinenkugel’s. The addition of Grolsch to the portfolio also contributed to the increase.
The domestic above-premium portfolio, which includes Miller Chill, Sparks and Killian’s Irish Red, experienced a double-digit decline as Miller Chill cycled tough load-in comparatives from the previous year, while facing a new competitive entry in the category.
The premium regular portfolio was down high single-digits based on continued MGD declines, although Coors Banquet grew at a mid-single digit rate and posted its seventh consecutive quarter of growth. The below-premium portfolio was flat. Double-digit growth by Keystone Light and continued growth by Miller High Life were offset by declines in other heritage brands, largely Milwaukee’s Best.
Fourth Quarter Financial Highlights
(All amounts are in U.S. dollars and calculated in accordance with U.S. GAAP, unless otherwise indicated.)
* Total net sales increased 3.1 percent to $1.740 billion
* Underlying net income, excluding special items, increased 16.5 percent to $135 million
* Domestic net revenue per barrel increased by 8.0 percent
* Cost of goods sold (COGS) per barrel increased by 5.2 percent
* Marketing, general and administrative costs increased by 6.1 percent
MillerCoors total net sales increased by 3.1 percent to $1.740 billion versus the prior pro forma quarter. Excluding contract brewing and company-owned distributor sales, net sales increased 3.4 percent to $1.622 billion. Third-party contract brewing volumes declined 6 percent.
Cost of Goods Sold (COGS) per barrel increased by 5.2 percent, as savings from performance initiatives (Unicorn, Resources for Growth, integration synergies) were more than offset by increasing commodity costs. Fourth quarter results were only minimally improved by significant recent commodity price reductions as materials were largely hedged through calendar year 2008 and 2009 prior to the reductions.
Marketing, general and administrative expenses increased by 6.1 percent to $514 million, driven primarily by integration costs of $10 million and higher spending on the launch of MGD 64, Coors Light media, increased sales and tactical spending.
Underlying net income for the quarter, excluding special items, increased 16.5 percent to $135 million from the prior year pro forma result, driven primarily by strong pricing and cost management, which more than offset increases in commodity costs and a reduction in shipment volume. Depreciation and amortization expense for MillerCoors in the fourth quarter was approximately $77 million and additions to tangible and intangible assets totaled $128 million.
