| Thu 6 Nov 2014, 14:00 | | SABMILLER PLC - Trading Update - MillerCoors Q3 Release |
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SAB 201411060034A
Trading Update - MillerCoors Q3 Release
SABMiller plc
JSEALPHA CODE: SAB
ISIN CODE: SOSAB
ISIN CODE: GB0004835483
Trading Update
Millercoors Delivers 3.5% Underlying Net Income Growth In Third Quarter
Total Net Sales Increased 0.9 Percent in the Third Quarter to $2.070 Billion
November 6, 2014 (London and Denver) – SABMiller plc (LN:SAB; OTC:SABMRY) and Molson Coors
Brewing Company (NYSE: TAP; TSX: TPX) reported that MillerCoors third quarter underlying net income
grew 3.5 percent to $376.7 million versus the same period in the prior year, driven by positive pricing,
sales mix and cost savings. Total net sales increased 0.9 percent in the third quarter to $2.070 billion.
“Despite a tough quarter in the overall industry, MillerCoors delivered profit growth driven primarily with
Above Premium brands like Redd’s, Smith & Forge, Leinenkugel’s Summer Shandy and Blue Moon Belgian
White,” said Tom Long, MillerCoors CEO. “Our success model is to continue to develop our Above
Premium portfolio and to renovate our Premium Light business behind Coors Light and Miller Lite, two
iconic brands with unmatched quality and consistency. We've demonstrated that when we market these
brands and tell their story with conviction, consistency and authenticity, beer drinkers respond positively.
We believe we are on the right track and will accelerate our investments to grow our priority brands.”
Third Quarter Highlights
Unless otherwise indicated, all amounts are in U.S. dollars and calculated in accordance with generally
accepted accounting principles in the U.S. (U.S. GAAP). All percentages are versus the prior year
comparable period and include MillerCoors operations in the U.S. and Puerto Rico.
- Underlying net income, a non-GAAP measure, increased 3.5 percent to $376.7 million for the
third quarter.
- Total net sales increased 0.9 percent to $2.070 billion.
- Domestic net revenue per barrel, excluding contract brewing and company-owned distributor
sales, increased 2.5 percent.
- Total cost of goods sold (COGS) per barrel increased 2.0 percent.
- Domestic sales-to-retailers (STRs) volume decreased 3.7 percent.
- Domestic sales-to-wholesalers (STWs) volume decreased 1.7 percent.
Brand Highlights for the Third Quarter
Premium Light portfolio STRs declined mid-single digits, with Coors Light declining mid-single digits and
Miller Lite down low-single digits for the quarter.
In the third quarter, Coors Light Summer Brew, Coors Light’s summer-only offering, gained 0.4 share
points of the Premium Light segment. Summer Brew will return next summer in 12 ounce cans and
singles. Coors Light debuted new advertising this fall highlighting its core difference versus other
American light lagers: It is cold filtered, never heat pasteurized and lagered below freezing to deliver
refreshment that never stops. These ads will run in heavy rotation through the end of the year.
Miller Lite, the beer that won the gold medal this year in the Great American Beer Festival’s American
Style Lager category, held share of segment in the third quarter, according to Nielsen. The graphic design
overhaul that began with cans has now extended to bottles and will finish with secondary packaging in
October. The consumer response to the new packaging has been terrific, and Miller Lite 52 week volume
trends continue to improve.
Total Above Premium portfolio STRs grew mid-single digits in the third quarter, led by the Redd’s
franchise, Smith & Forge, Miller Fortune and craft brands like Blue Moon Belgian White and Leinenkugel’s
Summer Shandy. The Redd’s franchise grew double digits in the third quarter. Redd’s is the fastest
growing brand in flavored malt beverages according to Nielsen, and over half its volume is sourced from
outside the beer category. In the third quarter, Redd’s launched Wicked Apple, a higher-ABV apple ale,
which is now a top ten growth brand in Grocery, according to Nielsen. Smith & Forge gained 0.2 share
points of the Above Premium segment in the third quarter, and in October the brand announced that it
will be available on-premise in draught beginning this fall. Miller Fortune gained 0.5 share points of the
Above Premium segment in the third quarter, and it is the third largest new brand of 2014, according to
Nielsen. This performance was partially offset by strategically deprioritized brands like Henry Weinhard’s
and Batch 19, which both declined double digits.
Blue Moon Belgian White, the most popular craft beer in America, grew low-single digits in the third
quarter. Blue Moon will celebrate its 20th anniversary in 2015. Blue Moon’s seasonal business is beginning
to improve, with Harvest Pumpkin Ale off to a promising start. The Leinenkugel’s franchise grew low-
single digits in the third quarter, due, in large part, to Summer Shandy: Summer Shandy grew double
digits in the third quarter and gained share in the craft segment. The success of Summer Shandy was
partially offset by the soft performance of Leinenkugel’s Heritage portfolio. In November, the brand will
release its Winter Explorer Pack, which will feature a new beer, Winter’s Bite, a Cocoa Spice Black Lager,
along with Helles Yeah, Cranberry Ginger Shandy and Snowdrift Vanilla Porter.
The Premium Regular portfolio was down mid-single digits in the third quarter, driven by a double digit
decline in Miller Genuine Draft and a low-single digit decline of Coors Banquet, which was cycling double
digit volume growth last year driven by the successful rollout of its “stubby” heritage bottle. In 2015, the
stubby bottle will be expanded into 12-packs, 18-packs and 20-packs nationwide.
The Below Premium portfolio declined mid-single digits in the quarter driven by high-single digit declines
in Keystone Light and Milwaukee’s Best. Miller High Life declined low-single digits in the third quarter,
but brand trends have improved sequentially over the last two quarters as a result of its “I Am Rich”
national advertising campaign and its Artist Series packaging design program, in which influential artists
created limited edition designs inspired by Harley Davidson and Miller High Life. Steel Reserve grew mid-
single digits in the third quarter, due in part to the success of the Steel Reserve Alloy Series, the brand’s
line of flavored malt beverages.
Financial Highlights for the Third Quarter
Total domestic net revenue per barrel grew 2.5 percent for the quarter as a result of favorable net pricing
and positive sales mix.
Total company net revenue per barrel, including contract brewing and company-owned distributor sales,
increased 2.6 percent. Contract brewing volumes were down 1.0 percent.
Total COGS per barrel increased 2.0 percent, driven primarily by commodity and brewery inflation and
higher costs associated with brand innovation, partially offset by supply chain cost savings.
Marketing, general and administrative costs increased by 0.5 percent, driven primarily by higher
expenses relating to the Business Transformation initiative, partially offset by lower employee related
expenses.
MillerCoors achieved $31 million of cost savings in the third quarter, primarily related to procurement
savings, brewery efficiencies and lower overhead costs.
Depreciation and amortization expenses for MillerCoors in the third quarter were $76.6 million, and
additions to tangible and intangible assets totaled $85.0 million.
Special items in the quarter included restructuring charges of $0.2 million.
Overview of MillerCoors
Through its diverse collection of storied breweries, MillerCoors brings American beer drinkers an
unmatched selection of the highest quality beers steeped in centuries of brewing heritage. Miller
Brewing Company and Coors Brewing Company offer domestic favorites such as Coors Light, Miller Lite,
Miller High Life and Coors Banquet, as well as innovative new products such as Miller Fortune. Tenth and
Blake Beer Company, our craft and import division, offers beers such as Leinenkugel’s Summer Shandy
from sixth-generation Jacob Leinenkugel Brewing Company and Blue Moon Belgian White from modern
craft pioneer Blue Moon Brewing Company. Tenth and Blake also operates Crispin Cidery, an artisanal
maker of pear and apple ciders using 100 percent fresh-pressed American juice. The company imports
world-renowned beers such as Italy’s Peroni, the Czech Republic’s Pilsner Urquell, Canada’s Molson
Canadian and the Netherlands’ Grolsch. MillerCoors also offers pioneering new brands such as Redd’s
Apple Ale, Batch 19 Pre-Prohibition Lager, Third Shift Amber Ale and Smith & Forge Hard Cider.
MillerCoors seeks to become America’s best beer company through an uncompromising promise of
quality, a keen focus on innovation and a deep commitment to sustainability. MillerCoors is a joint
venture of SABMiller plc and Molson Coors Brewing Company. Learn more at MillerCoors.com, at
facebook.com/MillerCoors or on Twitter through @MillerCoors.
Overview of SABMiller
SABMiller plc is in the beer and soft drinks business. We are the world's second largest brewing company
and are one of the world's largest bottlers of Coca-Cola drinks. We also produce a portfolio of wholly-
owned soft drinks brands. We are a FTSE-20 company, with shares trading on the London Stock
Exchange, and we have a secondary listing on the Johannesburg stock exchange. We operate in more
than 80 countries with around 70,000 employees. The group's brand portfolio includes leading local
brands such as Aguila (Colombia), Castle (South Africa), Miller Lite (USA), Snow (China), Victoria Bitter
(Australia) and Tyskie (Poland) as well as global brands such as Pilsner Urquell, Peroni Nastro Azzurro,
Miller Genuine Draft and Grolsch. Every minute of every day, more than 140,000 bottles of SABMiller
beer are sold.
In the year ended 31 March 2014, the group sold 318 million hectoliters of lager, soft drinks and other
alcoholic beverages, generating group net producer revenue of US$26,719 million and EBITA of US$6,453
million.
Further information is also available on:
www.sabmiller.com
www.facebook.com/sabmiller
www.twitter.com/sabmiller
www.youtube.com/sabmiller
Overview of Molson Coors
Molson Coors Brewing Company is one of the world’s largest brewers. The Company’s operating
segments include Canada, the United States, Europe, and Molson Coors International (MCI). The
Company has a diverse portfolio of owned and partner brands, including signature brands Carling, Coors
Banquet, Coors Light, Molson Canadian and Staropramen. Molson Coors is listed on the 2014/2015 Dow
Jones Sustainability World Index (W1SGITRD), the most recognized global benchmark of sustainability
among global corporations. For more information on Molson Coors Brewing Company, visit the
company’s website, www.molsoncoors.com.
06 November 2014
Sponsor: J.P. Morgan Equities South Africa (Pty) Ltd
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 audit. 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, 2014, 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 cost saving 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.
Contacts
For further information, please contact:
SABMiller
Tel: +44 20 7659 0100 / 414 931 2000
Richard Farnsworth Media Relations, SABMiller Mob: +44 207 659 0188
Gary Leibowitz Investor Relations, SABMiller Mob: +44 771 742 8540
Molson Coors
Colin Wheeler Media Relations, Molson Coors 303 927 2443
Dave Dunnewald Investor Relations, Molson Coors 303 927 2334
MillerCoors Results and Related Reconciliations
The table below reconciles net income attributable to MillerCoors, reported in accordance with U.S.
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 as adopted by the European Union.
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 between companies.
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
(In millions of $US) 2014 2013 2014 2013
U.S. GAAP: Net Income $ 376.5 $ 348.8 $ 1,112.9 $ 1,033.4
Attributable to MillerCoors
Plus: Special/Exceptional Items¹ 0.2 15.0 1.4 15.0
Non-GAAP Underlying Net Income $ 376.7 $ 363.8 $ 1,114.3 $ 1,048.4
Adjustments to IFRS Underlying
EBITA-Reported2 20.0 33.1 68.8 63.9
Restatement Adjustments to IFRS
Underlying EBITA – Restated3 - 3.7 - (8.0)
IFRS: MillerCoors underlying $ 396.7 $ 400.6 $ 1,183.1 $ 1,104.3
earnings before interest, taxes and
amortization before exceptional
items (EBITA4)
Percent change versus prior year (1.0%) 7.1%
MillerCoors underlying EBITA
Restated4
1
Current and prior year Special/Exceptional items include restructuring related costs.
2
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, share-based compensation, severance expenses and certain special items
between U.S. GAAP and IFRS. Amortization of intangible assets, interest, taxes and non-
controlling interest have been removed to arrive at underlying EBITA.
3
With effect from April 1, 2014 and April 1, 2013, SABMiller adopted IFRS 10,
“Consolidated Financial Statements,” and the amended IAS 19, “Employee Benefits,”
respectively. The accounting standards have been applied retrospectively and results
included in SABMiller’s fiscal years ended March 31, 2014 and March 31, 2013 have been
restated accordingly.
4
EBITA-Earnings Before Interest, Taxes, and Amortization, excluding exceptional items.
MILLERCOORS LLC
RESULTS OF OPERATIONS
(VOLUMES IN THOUSANDS, DOLLARS IN MILLIONS $US)
(UNAUDITED)
U.S. GAAP
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
2014 2013 2014 2013
Total STW volume in
barrels 16,470 16,745 47,843 48,739
Sales $ 2,374.3 $ 2,360.6 $ 6,951.3 $ 6,901.7
Excise taxes (304.8) (309.6) (884.7) (903.4)
Net sales 2,069.5 2,051.0 6,066.6 5,998.3
Cost of goods sold (1,237.7) (1,234.0) (3,614.2) (3,592.8)
Gross profit 831.8 817.0 2,452.4 2,405.5
Marketing, general and
administrative expenses (449.7) (447.5) (1,321.8) (1,343.6)
Special items, net (0.2) (15.0) (1.4) (15.0)
Operating income 381.9 354.5 1,129.2 1,046.9
Interest income (expense),
net (0.4) (0.5) (1.0) (1.4)
Other income (expense),
net 1.1 0.3 4.3 1.6
Income before income
taxes and non-controlling
interests 382.6 354.3 1,132.5 1,047.1
Income taxes (1.3) (1.4) (4.6) (3.1)
Net income 381.3 352.9 1,127.9 1,044.0
Net income attributable to
non-controlling interests (4.8) (4.1) (15.0) (10.6)
Net income attributable
to MillerCoors LLC $ 376.5 $ 348.8 $ 1,112.9 $ 1,033.4
Date: 06/11/2014 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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