| Tue 10 Feb 2009, 14:26 | | SAB - SABMiller And Molson Coors Report Millercoors Fourth Quarter Earnings |
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SAB
SOSAB
SAB - SABMiller And Molson Coors Report Millercoors Fourth Quarter Earnings
SABMILLER PLC
JSEALPHA CODE: SAB
ISSUER CODE: SOSAB
ISIN CODE: GB0004835483
SABMILLER AND MOLSON COORS REPORT MILLERCOORS FOURTH QUARTER EARNINGS
Strong Pricing, Cost Management, Acceleration of Synergies
Drive Double-Digit Profit Growth
February 10, 2009 (London and Denver) -- SABMiller plc (SAB.L) and Molson
Coors Brewing Company (NYSE: TAP; TSX) today 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 basis (1) 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
- Coors Light increased 1.0%, posting its fourteenth consecutive quarter of
growth
- MGD 64 continued to deliver strong growth since its national launch
- Blue Moon was up double digits
- 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
(1) MillerCoors pro forma figures are based on results for Miller and Coors
reported under either International Financial Reporting Standards (IFRS) for
the fiscal quarter ended December 2007, or U.S. GAAP for the fiscal quarter
ended December 2007. Adjustments have been made to reflect comparative data
including amortization of definite-life intangible assets and the exclusion of
significant one-time items.
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
favourable 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 totalled $128
million.
COST SYNERGIES (2)
The MillerCoors integration is proceeding well. Talent selection was
completed in the fourth quarter, enabling the realization of significant
organizational synergies. In addition, non-organizational savings have been
realized due to progress in brewery optimization and opportunities to
consolidate national media buying, regional distributor meetings and
insurance.
MillerCoors is well on its way to deliver its stated goal of $500 million of
annual cost synergies by the third year of combined operations. For the
quarter, MillerCoors delivered $26 million in synergies, for a total of $28
million since combining operations. The timing to achieve the company`s
original goal of $50 million in synergies in the first 12 months of operations
has accelerated and the company now expects to realize $128 million of
synergies by June 30, 2009. By the end of calendar year 2009, the company
expects to achieve a total of $238 million in synergies, surpassing its
original forecast of $225 million. While the timing of synergy delivery has
accelerated, MillerCoors goal to achieve its $500 million annual synergy plan
remains the same.
(2) For SABMiller`s financial year 2009, the company expects to realize
roughly $68 million of synergies by March 31, 2009. By the end of fiscal year
2010, the company expects to achieve approximately $300 million in cumulative
synergies.
During the fourth quarter of 2008, MillerCoors reported special items
totalling $81 million, which included a Sparks brand impairment of $65 million
as well as integration costs. Incurring these integration costs will enable
MillerCoors to meet its stated three-year synergy plan.
For 2009, the MillerCoors portfolio is well-positioned to compete in all
consumer segments amidst a difficult macro-economic environment. The company
will continue its commitment to grow its premium light brands with a focus on
returning Miller Lite to growth, maintaining momentum for Coors Light and
capturing new growth through the success of MGD 64. And MillerCoors will
continue to build on the momentum of its broad portfolio of craft and import
brands including Blue Moon, Leinenkugel`s, Peroni Nastro Azzurro and Grolsch,
while leveraging the messaging and equity of its below-premium brands Keystone
Light and Miller High Life to take advantage of consumer shifts toward value.
MillerCoors will continue to build healthy sustainable growth through its net
revenue management strategy enabling its portfolio of brands to have strong
positions in every segment of the category for the long term. With a new
sales force in place, the company will seek to increase its chain business and
drive increasing, profitable distribution behind its priority brands with
enhanced retail positioning and shelf space. Finally, the company is
confident that it will continue to display strong cost management and achieve
its synergy commitment.
Overview of MillerCoors
MillerCoors produces, markets and sells the MillerCoors portfolio of brands in
the U.S. and Puerto Rico. Built on a foundation of great beer brands and more
than 288 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 full-calorie
beers Coors Banquet and Miller Genuine Draft; and economy brands Miller High
Life and Keystone Light. The company also imports Peroni Nastro Azzurro,
Pilsner Urquell, Grolsch and Molson Canadian and offers innovative products
such as Miller Chill and Sparks. MillerCoors 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, WI and two
microbreweries, the 10th Street Brewery in Milwaukee and the Blue Moon Brewing
Company at Coors Field in Denver. MillerCoors vision is to become 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 or
distribution agreements across six continents. The group`s brands include
premium international beers such as Miller Genuine Draft, Peroni Nastro
Azzurro, Grolsch and Pilsner Urquell, as well as an exceptional range of
market leading local brands. Outside the USA, SABMiller plc is also one of
the largest bottlers of Coca-Cola products in the world. In the year ended
March 31, 2008, the group reported $3,639 million adjusted pre-tax profit and
revenue of $21,410 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, http://www.molsoncoors.com.
MILLERCOORS LLC
RESULTS OF OPERATIONS
(VOLUMES IN THOUSANDS, DOLLARS IN MILLIONS)
(UNAUDITED)
Three Months Ended
December 31, 2008 December 31, 2007
Actual Pro forma
Adjusted (3)
Volume in barrels 16,091 16,840
Sales $ 2,036.0 $ 1,989.0
Excise taxes (296.3) (302.4)
Net sales 1,739.7 1,686.6
Cost of goods sold (1,090.0) (1,084.6)
Gross profit 649.7 602.0
Marketing, general and (513.5) (484.1)
administrative expenses
Special items, net (81.2) (25.4)
Operating income 55.0 92.5
Other income (expense), net 1.6 (0.6)
Income before income taxes and 56.6 91.9
minority interests
Income tax expense (1.4) -
Income before minority 55.2 91.9
interests
Minority interests (1.1) (1.2)
Net Income $ 54.1 $ 90.7
(3) The pro forma adjusted profit and loss excludes the benefit of a $26.3
million settlement received from the Ball Corporation which related to the
periods prior to the quarter ended December 31, 2007, which was previously
reported as miscellaneous income by Miller Brewing Company.
MillerCoors Results and Related Reconciliations
The table below reconciles MillerCoors net income 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.
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.
Prior year results are presented on a pro forma basis. Adjustments have been
made to reflect comparative data including amortization of definite life
intangible assets and the exclusion of significant one-time items.
MillerCoors Reconciliation of US GAAP Net Income to Underlying Net
Income (non-GAAP measure)
and to EBITA, calculated under IFRS
MillerCoors
(In Millions of $US) Fourth Quarter Ended
December December
31, 2008 31, 2007
Actual Pro forma-
adjusted
U.S. GAAP: Net Income 54 91
Plus: Special Items1. 81 25
Non-GAAP: Underlying Net Income 135 116
Plus: Adjustments2. 16 8
MillerCoors underlying earnings before 151 124
interest, taxes and amortization and before
exceptional items (EBITA3.)
Percent change vs. prior year MillerCoors 21.8%
pro-forma underlying EBITA3.
Notes:
1.Special items include integration charges related to the
MillerCoors Joint Venture and a charge for the Sparks brand
impairment in 2008.
2. US - GAAP Underlying Net Income to EBITA adjustments relate to
differing treatment of step-up depreciation, pension and post-
retirement benefits, consolidation of container joint ventures,
share based compensation, and severance expenses between US - GAAP
and IFRS. Amortizations of intangible assets, interest, taxes and
minority interests have been added back to arrive at underlying
EBITA.
3.EBITA - Earnings Before Interest, Taxes, and Amortization, and
before exceptional items.
These financial results are not necessarily indicative of the results for
Molson Coors Brewing Company or SABMiller plc for the comparable periods.
This announcement is for information only and does not constitute an offer or
an invitation to acquire or dispose of any securities or investment advice or
an inducement to enter into investment activity. This announcement does not
constitute an offer to sell or issue or the solicitation of an offer to buy or
acquire the securities of SABMiller or Molson Coors (the "Companies") in any
jurisdiction.
The distribution of this announcement may be restricted by law. Persons into
whose possession this announcement comes are required by the Companies to
inform themselves about and to observe any such restrictions.
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, 2008, 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. 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 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
Molson Coors
Paul de la Plante Media Relations, Molson Coors 514/843-2332
Dave Dunnewald Investor Relations, Molson Coors 303/279-6565
Leah Ramsey Investor Relations, Molson Coors 303/279-6565
Date: 10/02/2009 14:26:01 Produced by the JSE SENS Department.
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