SABMiller plc (LN:SAB; OTC:SABMRY) and Molson Coors Brewing Company (NYSE: TAP; TSX: TPX) reported solid pricing and strong Above Premium sales growth at MillerCoors in the second quarter, despite difficult trading conditions. Domestic net revenue per barrel increased 2.6 percent versus the same quarter in the prior year, while underlying net income declined 5.3 percent to $412.7 million. “This was a tough volume quarter for us and for the beer industry overall,” said MillerCoors Chief Executive Officer Tom Long. “Our strategy to evolve our portfolio to the fast-growing and higher-margin areas of the business is working, as shown by the successful launch of Redd’s Apple Ale and the nationwide expansion of Leinenkugel’s Summer Shandy. Thanks to these initiatives, as well as the introduction of Third Shift Amber Lager and continued growth of Blue Moon Belgian White, we have already grown our Above Premium brand volumes to more than 9% of our portfolio in the quarter. While we continued to gain share in Premium Lights according to Nielsen data, we are working hard to restore volume growth which we believe will come as the health of the category is defined by the Premium Light performance.” Second Quarter Highlights Unless otherwise indicated, all amounts are in U.S. dollars and calculated in accordance with U.S. GAAP. All percentages are versus the prior year comparable period and include MillerCoors operations in the U.S. and Puerto Rico.
- Total net sales decreased 2.9 percent to $2.159 billion for the quarter.
- Total cost of goods sold (COGS) per barrel increased 2.4 percent.
- Underlying net income (a non-GAAP measure) decreased 5.3 percent to $412.7 million.
- Domestic net revenue per barrel, excluding contract brewing and company-owned distributor sales, increased 2.6 percent.
- Domestic sales-to-retailers (STRs) decreased 4.4 percent.
- Domestic sales-to-wholesalers (STWs) decreased 5.3 percent.
Tenth and Blake Beer Company grew the MillerCoors Craft and Import portfolio by double digits. Leinenkugel’s Summer Shandy increased double digits as the brand continued its national expansion. Blue Moon Belgian White grew high-single digits in the quarter, continuing its run of 46 consecutive quarters of growth. Batch 19 more than doubled as it continued to expand nationally.MillerCoors new expansion brands delivered strong growth in Above Premium. Redd’s Apple Ale continued an aggressive marketing campaign, including national and local TV, sponsorship of NASCAR Sprint Cup Series champion Brad Keselowski for two races, and integrations with Discovery Network. Redd's volume doubled versus the prior quarter, sourcing most of its sales from consumers who normally drink outside the MillerCoors portfolio. Third Shift Amber Lager gained momentum behind strong distribution and increasing velocity trends and is already a larger brand than well-known craft brands, such as Goose Island 312 and New Belgium Ranger IPA, according to year-to-date Nielsen all outlet data. MillerCoors Premium Regular portfolio declined mid-single digits. Coors Banquet grew mid-single digits fueled by the June debut of the new 12-ounce “stubby” bottle modeled after the brand's post-Prohibition bottle. Coors Banquet’s continued growth was offset by declines in Miller Genuine Draft. MillerCoors Economy portfolio declined mid-single digits. Miller High Life continued its military veteran program and kicked off a partnership with Harley-Davidson to celebrate the 110th anniversaries of the two iconic American brands. Keystone Light continued its partnership with the FLW Walmart Bass Fishing Tour Series that culminates with the Forrest L. Wood Cup in August. Financial Highlights for the Second Quarter Domestic net revenue per barrel grew 2.6 percent for the quarter as a result of higher net pricing and favorable mix. Total company net revenue per barrel, including contract brewing and company-owned distributor sales, increased 2.7 percent. Third-party contract brewing volumes were down 6.6 percent.
Total COGS per barrel increased 2.4 percent, driven by commodity inflation, brand innovation and lower fixed cost absorption.Marketing, general and administrative costs increased 0.2 percent for the quarter, driven primarily by increased marketing investments in support of the national launches of Redd’s Apple Ale and Third Shift Amber Lager and the expansion of Leinenkugel’s Summer Shandy partially offset by lower pension expense. In the second quarter, MillerCoors achieved $25 million of cost savings, primarily related to procurement savings, logistics savings and brewery efficiencies. Depreciation and amortization expenses for MillerCoors in the second quarter were $69.7 million, and additions to tangible and intangible assets totaled $65.9 million. There were no special items during the second quarter. Overview of MillerCoors MillerCoors brews, markets and sells the MillerCoors portfolio of brands in the U.S. and Puerto Rico. Built on a foundation of great beer brands and nearly 300 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, Coors Light and Miller Lite, MillerCoors has a broad portfolio of highly complementary brands across every major industry segment. The company offers a variety of leading craft and import brands, including Blue Moon and Leinenkugel’s, through its Tenth and Blake division. 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 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. Learn more at MillerCoors.com, at facebook.com/MillerCoors or on Twitter through @MillerCoors.
Overview of SABMillerSABMiller plc is one of the world’s leading brewers with more than 200 beer brands and some 70,000 employees in over 75 countries. The group’s portfolio includes global brands such as Pilsner Urquell, Peroni Nastro Azzurro, Miller Genuine Draft and Grolsch; as well as leading local brands such as Aguila (Colombia), Castle (South Africa), Miller Lite (U.S.), Snow (China), Victoria Bitter (Australia) and Tyskie (Poland). SABMiller also has growing soft drinks businesses and is one of the world’s largest bottlers of Coca-Cola products. In the year ended 31 March 2013, the group reported group lager volumes of 242 million hectoliters, group revenue of US$34,487 million and group EBITA of US$6,421 million. SABMiller plc is listed on the London and Johannesburg stock exchanges. Learn more at www.sabmiller.com, at www.facebook.com/sabmiller, at www.twitter.com/sabmiller or at www.youtube.com/sabmiller. 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, Blue Moon, Staropramen, Carling, Coors Banquet and Keystone Light in North America, Europe and Asia. For more information regarding Molson Coors Brewing Company, visit the company’s web site: www.molsoncoors.com. 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, 2013, 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. 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. 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. 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.
|Three Months Ended||Six Months Ended|
|(In millions of $US)||June 30,2013||June 30,2012||June 30,2013||June 30,2012|
|U.S. GAAP: Net Income Attributable to MillerCoors||$||412.7||$||438.3||$||684.6||$||713.6|
|Plus: Special/Exceptional Items¹||-||(2.3||)||-||(2.3||)|
|Non-GAAP Underlying Net Income||$||412.7||$||436.0||$||684.6||$||711.3|
|Plus: Adjustments to IFRS Underlying EBITA-Reported2||2.8||41.7||30.8||79.6|
|Less: Restatement Adjustments to IFRS Underlying EBITA-Restated3||-||(12.8||)||-||(12.8||)|
|IFRS: MillerCoors underlying earnings before interest, taxes and amortization before exceptional items (EBITA-Restated4)||$||415.5||$||464.9||$||715.4||$||778.1|
|Percent change versus prior year MillerCoors underlying EBITA-Restated4||-10.6||%||-8.1||%|
|1There were no Special/Exceptional items in the current year. Prior year includes a pension curtailment gain.|
|2U.S. 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 U.S. GAAP and IFRS. Amortization of intangible assets, interest, taxes and non-controlling interest have been removed to arrive at underlying EBITA.|
|3With effect from April 1, 2013, SABMiller has adopted the amended IAS 19, “Employee Benefits.” The new accounting standard has been applied retrospectively and SABMiller’s fiscal year ended March 31, 2013 results have been restated accordingly.|
|4EBITA-Earnings Before Interest, Taxes, and Amortization, excluding exceptional items.|
|RESULTS OF OPERATIONS|
|(VOLUMES IN THOUSANDS, DOLLARS IN MILLIONS $US)|
|Three Months Ended||Six Months Ended|
|June 30,2013||June 30,2012||June 30,2013||June 30,2012|
|Volume in Barrels||17,480||18,490||31,994||33,282|
|Cost of Goods Sold||(1,270.1||)||(1,311.8||)||(2,358.8||)||(2,381.8||)|
|Marketing, General and Administrative Expenses||(471.0||)||(470.1||)||(896.1||)||(880.9||)|
|Special Items, net||-||2.3||-||2.3|
|Other Income (Expense):|
|Interest Expense, net||(0.4||)||(0.4||)||(0.9||)||(0.7||)|
|Other Income, net||0.5||1.5||1.3||3.1|
|Total Other Income (Expense), net||0.1||1.1||0.4||2.4|
|Income Before Income Taxes and Non-controlling Interests||418.0||445.5||692.8||725.8|
|Net Income Attributable to Non-controlling Interests||(4.0||)||(5.4||)||(6.5||)||(9.7||)|
|Net Income Attributable to MillerCoors LLC||$||412.7||$||438.3||$||684.6||$||713.6|