SABMiller Plc and Molson Coors Report MillerCoors Third Quarter Earnings
New U.S. joint venture increases sales-to-retailers, pricing, revenue and underlying income in first quarter of combined operations.
06/11/08 SABMiller plc (SAB.L) and Molson Coors Brewing Company reported strong performance by their new U.S. joint venture in its first quarter of combined operations. MillerCoors drove higher sales-to-retailers, pricing, revenue, as well as strong double-digit underlying income for the fiscal third quarter ended September 30, 2008.
“As expected, MillerCoors is already driving profitable growth based on our early efforts to build a stronger and more competitive U.S. brewer with the people, partners, brands and scale to win,” said MillerCoors Chief Executive Officer Leo Kiely. “Our people are making it happen and these impressive financial results demonstrate our passion to deliver on our vision to become America’s best beer company.”
“Despite the challenging U.S. economy and ongoing changes to the competitive dynamics in the U.S. beer industry, our first quarter of combined performance demonstrates the tremendous potential of our new company,” Kiely added.
BRAND HIGHLIGHTS
Key operating results for the third quarter are compared to prior year on a pro forma basis1 and include the U.S. and Puerto Rico operations of the combined company.
* MillerCoors total brand portfolio grew sales-to-retailers (STRs) by 0.7 percent on a comparable basis
* Seven of the 12 largest MillerCoors brands increased STRs, led by strong Coors Light growth; five brands grew share including Coors Light, Blue Moon, Miller High Life, Peroni Nastro Azzuro and Coors Banquet
* Blue Moon, Peroni Nastro Azzurro, Coors Banquet, Sparks and Keystone Light achieved double-digit growth
* MGD 64 grew well ahead of expectations in the early stages of its national launch
During the period, MillerCoors STRs rose by 0.7 percent after adjusting for the extra trading day in the period (+2.3% unadjusted), due to continued momentum from seven of its 12 largest brands. MillerCoors shipments-to-wholesalers (STWs) declined by 0.5 percent, due to reductions in distributor inventory levels in the third quarter.
STRs for the company’s flagship premium light brands were up 1.4 percent (+3.0% unadjusted) versus the prior year. Coors Light STRs increased an impressive 6.8 percent (+8.5% unadjusted), due to gains in both distribution and velocity, while Miller Lite STRs decreased 3.6 percent (-2.1% unadjusted), due to volume declines in the Midwest and Pacific regions as the brand cycled a difficult volume comparison in the prior year.
The craft and import portfolio rose 5.0 percent (+6.6% unadjusted), led by the strong performance of Blue Moon, Leinenkugel’s and Peroni Nastro Azzurro. 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 comparatives from the previous year, while facing a new competitive entry to the category.
Other premium brands grew 0.2 percent (+1.8% unadjusted) as Coors Banquet delivered double-digit growth offsetting Miller Genuine Draft declines. Below premium brands grew 2.3 percent (+3.9% unadjusted) as Keystone Light posted double-digit gains and Miller High Life continued to generate solid growth.
MGD 64 showed strength ahead of expectations as consumers and retailers responded favorably to the national launch of this innovative premium light beer. During its roll-out in the third quarter, MGD 64 gained traction across the country as STRs rose 77 percent versus MGD Light volume a year earlier.
THIRD 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 2.1 percent to $1.950 billion
* Underlying net income, excluding special items, increased 28.2 percent to $191 million
* Domestic net revenue per barrel increased by 2.9 percent
* Cost of goods sold (COGS) per barrel increased by 5.6 percent
* Marketing, general and administrative costs decreased by 9.1 percent
MillerCoors total net sales increased by 2.1 percent to $1.950 billion versus the prior period pro forma results. Excluding contract brewing, net sales were up 2.3 percent to $1.818 billion. Third-party contract brewing volumes decreased 3.3 percent.
Pricing remained strong as total company net sales per barrel increased 3.0 percent. Excluding contract brewing, net sales per barrel grew at 2.9 percent versus the prior year pro forma results, driven by strong pricing. MillerCoors revenue growth outlook for the balance of the year is expected to remain strong, as the company implemented selective price increases on the majority of its beer volume in September and October this year. Net sales mix was virtually unchanged, due to strong growth by the company’s premium light, craft and import brands, largely offset by cycling significant Miller Chill launch ramp-up volumes in the prior year.
COGS per barrel increased by 5.6 percent, as reductions related to legacy savings initiatives by Miller Brewing Company (Project Unicorn) and Coors Brewing Company (Resources for Growth) were more than offset by increased commodity and fuel costs.
Marketing, general and administrative expense decreased 9.1 percent reflecting favorability due to the non-recurrence of prior year Miller Chill launch costs, which were partially offset by MGD 64 launch costs, as well as a reduction in share based compensation expenses.
Underlying net income, excluding special items, for the quarter increased to US $191 million, up 28.2 percent from the prior year pro forma result, driven primarily by strong pricing and reductions in marketing and overhead expenses, which more than offset increases in COGS and the reduction in shipment volume. Depreciation and amortization expense for MillerCoors in the third quarter was approximately $70 million, and additions to properties and intangible assets totaled $67 million.
