RNS Number : 0777N
SABMiller PLC
10 February 2009
 






SABMILLER AND MOLSON COORS REPORT MILLERCOORS FOURTH QUARTER EARNINGS 

Strong Pricing, Cost ManagementAcceleration 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 quarterwe 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 businessis 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. 


(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 favorable mix.  Front-line pricing in the period benefited from an acceleration ogeneral 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.)


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 totaled $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.  Bthe end of calendar year 2009, the company expects to achieve a total of $238 million in synergiessurpassing 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 totaling $81 million, which included 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 FallsWI 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 administrative expenses
  (513.5)
 
  (484.1)
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 minority interests
  56.6
 
  91.9 
Income tax expense
  (1.4)
 
   -  
 
Income before minority interests
  55.2 
 
  91.9 
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 31, 2008

December 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 interest, taxes and amortization and before exceptional items (EBITA³)

151

124

Percent change vs. prior year MillerCoors pro-forma underlying EBITA³ 

21.8%


Notes:

¹Special items include integration charges related to the MillerCoors Joint Venture and a charge for the Sparks brand impairment in 2008.

²US - 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.  

³EBITA - 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


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