London and Denver, Aug. 3 - Driven by strong net revenue growth, cost management and continued synergy delivery, SABMiller plc and Molson Coors Brewing Company today reported double-digit profit growth for MillerCoors on a pro forma basis for the quarter ended June 30, 2009.
"Since combining operations last July, we have achieved double-digit growth in underlying earnings for four consecutive quarters," said MillerCoors CEO Leo Kiely. "These results show MillerCoors is connecting consumers with its new brand portfolio and effectively driving synergies to become stronger and more competitive in the U.S. beer industry."
"We have grown five of our six national focus brands in the past year. This demonstrates the power of our portfolio to drive profitable growth in this challenging economic environment," added Kiely.
Key operating results for the second quarter are compared to the prior year on a pro forma basis(1) and include MillerCoors operations in the U.S. and Puerto Rico.
SECOND QUARTER HIGHLIGHTS
(All amounts are in U.S. dollars and calculated in accordance with U.S. GAAP, unless otherwise indicated.)
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Six national focus brands(2) increased sales-to-retailers by 1.3%, led by Coors Light and MGD 64
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Underlying net income, excluding special items, increased by 16.4% to $325.3 million
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Total net sales increased by 1.6% to $2.14 billion
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Domestic net revenue per barrel increased by 3.0%
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$60 million delivered in synergies, bringing year-to-date synergy total to $110 million
In a soft beer market, MillerCoors domestic sales-to-retailers (STRs) were down 0.8 percent versus the prior year pro forma quarter due to a decline in Miller Lite STRs and softness in above premium brands, mostly offset by positive results in five of the six national focus brands. Domestic sales-to-wholesalers (STWs) declined 1.1 percent driven by lower STRs and a slight reduction in distributor inventories.
Pricing remained strong in the second quarter as domestic net sales per barrel, excluding contract brewing and company-owned distributor sales, increased by 3.0 percent based on 2008 price increases.
Overall, premium light brand volumes (Miller Lite, Coors Light, MGD 64) were down slightly as current economic challenges continue to result in trade-down in the off-premise channel and ongoing softness in the on-premise channel. Coors Light was up low-single digits versus prior year driven in part by distribution gains. Miller Lite STRs were down mid-single digits due in part to the reduction of price promotions, trade-down from the premium-and-above categories and weakness in the on-premise channel.
MGD 64 continued to accelerate since its national launch in fall 2008. The MGD franchise has remained in growth after its positive performance for the first time in over a decade during the first quarter.
The craft and import portfolio grew slightly during the quarter, driven by Blue Moon and Leinenkugel's. Peroni Nastro Azzurro was virtually unchanged in a challenged import market. The domestic above-premium portfolio, which includes Miller Chill, Sparks and Killian's Irish Red experienced a double-digit decline.
Coors Banquet continued to generate good growth, but the premium regular portfolio, which includes Miller Genuine Draft, was down high-single digits. The below-premium portfolio was up low-single digits as double-digit growth by Keystone Light and low-single-digit growth by Miller High Life more than offset the mid-single digit decline by Milwaukee's Best.
SECOND QUARTER FINANCIAL HIGHLIGHTS
(All amounts are in U.S. dollars and calculated in accordance with U.S. GAAP, unless otherwise indicated.)
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Underlying net income attributable to MillerCoors, excluding special items, increased 16.4% to $325.3 million versus the prior pro forma quarter
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Total net sales increased by 1.6% to 2.14 billion
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Domestic net revenue per barrel increased by 3.0%, driven by firm pricing and reduced discounts, offset by consumer trade-down between industry segments
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Cost of goods sold (COGS) per barrel increased by 5.1%
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Marketing, general and administrative costs decreased by 10.8% driven primarily by synergies and other cost savings
MillerCoors total net sales increased by 1.6 percent to $2.14 billion versus the prior pro forma quarter. Excluding contract brewing and company-owned distributor sales, net sales increased 1.7 percent to $2.00 billion. Third-party contract brewing volumes declined 6.5 percent, though profits were in line with the prior-year comparable quarter.
Though MillerCoors continues to realize supply chain related synergies and deliver savings from its cost leadership programs, Cost of Goods Sold per barrel increased by 5.1 percent due to significant prior year hops sales, as well as increased brewing and packaging material costs this year, primarily glass, aluminum and barley.
For the quarter, marketing, general and administrative costs decreased by 10.8 percent, driven primarily by synergies and other cost savings.
For the quarter, underlying net income attributable to MillerCoors (excluding special items) increased by 16.4 percent to $325.3 million versus the prior-year pro forma quarter. Depreciation and amortization expenses for MillerCoors in the second quarter was approximately $72 million, and additions to tangible and intangible assets totaled $120 million.
INTEGRATION AND COST SYNERGIES
MillerCoors achieved $60 million in synergies in the second quarter, largely due to the network optimization savings realized from moving production of the Coors brands into former Miller breweries, continued realization of organizational savings, and savings in marketing investment. Year-to-date, MillerCoors has delivered $110 million in synergies, and MillerCoors now expects to achieve $260 million of cumulative synergies by the end of calendar 2009 surpassing its original commitment of $225 million. While the timing of synergy delivery has accelerated, MillerCoors $500 million synergy goal is unchanged.
During the second quarter of 2009, MillerCoors reported special items totaling $20.4 million due to a charge for pension curtailment and integration expenses.
During the key summer selling season, MillerCoors remains focused on driving the great taste platform of Miller Lite, while accelerating Coors Light growth with new Rocky Mountain cold refreshment messaging and cold activated packaging. MillerCoors is also working to add new legal-age drinkers to the premium light category by driving repeat purchases on MGD 64. As we continue to see shifts in both segments and channels, we will be leveraging our full brand portfolio to meet changing consumer and customer needs. Finally, MillerCoors is committed to driving sustainable net revenue growth.
Footnotes:
(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 June 2008, or U.S. GAAP for the fiscal quarter ended June 2008. Adjustments have been made to reflect comparative data including amortization of definite-life intangible assets and the exclusion of significant one-time items.
(2) MillerCoors six national focus brands are Coors Light, Miller Lite, MGD 64, Blue Moon, Miller High Life and Keystone Light.
.
MillerCoors Reconciliation of US GAAP Net Income to Underlying Net Income
(non-GAAP measure) and to EBITA, calculated under IFRS, noting that 2008
numbers are Pro Forma.
MillerCoors
Three Months Ended Six Months Ended
------------------ ----------------
(In millions of $US) June 30, June 30, June 30, June 30,
2009 2008 2009 2008
-------- -------- -------- --------
US -GAAP: Net Income 304.9 174.6 510.9 311.2
--------------------
Plus: Special items(1) 20.4 104.8 30.8 116.1
Non - GAAP Underlying
Net Income 325.3 279.4 541.7 427.3
---------------------
Plus: Adjustments to
arrive at IFRS
Underlying EBITA(2) 42.6 45.9 61.3 51.6
IFRS: MillerCoors
underlying earnings
before interest, taxes
and amortization before
exceptional items (EBITA(3)) 367.9 325.3 603.0 478.9
----------------------------
Percent change vs. prior
year MillerCoors
pro-forma underlying
EBITA(3) 13.1% 25.9%
(1) Current year special items include one-time integration charges
related to the MillerCoors Joint Venture, and a charge for pension
curtailment. Prior year special items include one-time integration
charges, asset impairment charges, and a loss on sale of a company
owned distributorship.
(2) US - 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 and severance expenses between US - GAAP and IFRS.
Amortization of intangible assets, Interest, Taxes, Equity Income and
Minority interest have been removed to arrive at underlying EBITA.
(3) EBITA - Earnings Before Interest, Taxes, and Amortization, excluding
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.
MILLERCOORS LLC
RESULTS OF OPERATIONS
(VOLUMES IN THOUSANDS, DOLLARS IN MILLIONS)
(UNAUDITED)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
-------- -------- -------- --------
Actual Pro Actual Pro
Forma Forma
-------- -------- -------- --------
Volume in
barrels 19,547 19,878 35,246 35,891
====== ====== ====== ======
Sales 2,499.4 2,469.7 4,505.1 4,416.8
Excise Taxes (362.7) (365.7) (652.5) (660.4)
------ ------ ------ ------
Net Sales 2,136.7 2,104.0 3,852.6 3,756.4
Cost of
Goods Sold (1,302.3) (1,259.8) (2,352.2) (2,276.8)
Gross profit 834.4 844.2 1,500.4 1,479.6
Marketing,
General and
Administrative
Expenses (500.6) (561.2) (942.4) (1,047.1)
Special Items
(net) (20.4) (104.8) (30.8) (116.1)
Operating
Income 313.4 178.2 527.2 316.4
Other Income
(Expense), net (0.2) 2.2 (0.7) 4.8
---- --- ---- ---
Income before
Income Taxes
and Minority
Interests 313.2 180.4 526.5 321.2
Income Tax
Expense (2.5) - (4.6) -
---- --- ---- ---
Net Income 310.7 180.4 521.9 321.2
Net income
attributable to
Non-controlling
interest (5.8) (5.8) (11.0) (10.0)
---- ---- ----- -----
Net Income
Attributable to
MillerCoors LLC 304.9 174.6 510.9 311.2
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