Molson Coors Brewing Company
) reported first quarter 2013 adjusted earnings of 30 cents per
share, missing the Zacks Consensus Estimate of 35 cents per share
by 14.3%. The results declined 36.2% from the prior-year earnings
of 47 cents per share, mainly due to debt service costs related
to the acquisition of StarBev operations (June 2012). Unfavorable
currency impact, increased marketing spending for brands, and
poor weather in key markets also led to the decline in the
Revenues and Operating Profits
Net sales, including excise tax, grew 19.8% to $828.5 million
in the quarter compared with $691.4 million reported a year ago
due to the addition of the StarBev operations. Revenues, however,
lagged the Zacks Consensus Estimate of $862 million. Total
worldwide beer volume increased 20.3% in the quarter to 11.9
Underlying (excluding special and other non-core items)
pre-tax income plummeted 38.5% year over year to $63.3 million in
the first quarter of 2013. Currency headwinds reduced the
underlying pre-tax income by $6 million in the quarter.
The company operates through the following geographical
Molson Coors' Canada segment net sales declined 1.7% to $395.6
million in the quarter due to 1.9% decline in sales volume. The
segment reported underlying pretax income of $37.3 million, down
18.9% from the prior-year quarter due to lower volume, higher
marketing spending and unfavorable currency impact. On a constant
currency basis, underlying pretax income declined 17%.
United States (MillerCoors)
: MillerCoors' net sales climbed 1.6% to $1.79 billion in the
first quarter of 2013. MillerCoors' underlying net income
decreased 1.2% to $271.9 million due to lower beer volumes,
higher commodity costs and increased marketing spending to
support the launch of Redd's Apple Ale and Third Shift Amber
: The segment includes the operations of the U.K. segment
combined with the results of operations for Central Europe,
excluding the Central Europe global export and license
The segment reported net sales of $406.4 million in the first
quarter of 2013, up 2.3% from the prior-year quarter driven by
StarBev operations. Sales volume declined 1%, primarily due to
poor weather in March across the region, along with increased
competition in Romania and Hungary.
The segment's underlying pretax income improved $8.6 million
to a loss of $3.8 million in the first quarter, driven by
positive net pricing and lower acquisition costs. Unfavorable
currency, however, reduced Europe results by approximately $3
Molson Coors International ('MCI')
: Segment net sales declined 3.9% to $27.0 million in the
quarter. The segment reported underlying pretax loss of $6.1
million, much better than a loss of $8.6 million in the
prior-year quarter due to lower marketing expense, the net
positive impact of business transfers between Europe and
International segments, elimination of losses in the China joint
venture, which was deconsolidated in the third quarter of 2012
and a strong performance in the Latin America export business.
Sales volume increased 64% in the segment due to the inclusion of
the Central Europe export business.
Overall, we are encouraged with the company's strong brand
portfolio, continuous innovation and cost-saving initiatives.
Moreover, we believe that the company's acquisition of the
StarBev business significantly enhanced the company's portfolio
of premium brands. It has also created opportunities for the
company in Central Europe to extend its key brands, taking
advantage of the attractive beer market.
In addition, Molson Coors continues to focus on its strategy
of maximizing profitable growth opportunities in the core markets
and expanding into new and emerging markets. The company is also
undertaking restructuring initiatives to reduce overhead costs
and boost profitability.
However, the company's susceptibility to the global economic
downturn, predominantly in mature and low-growth markets, coupled
with currency headwinds undermine its growth prospects and
profitability. Also, debt servicing costs related to the StarBev
acquisition will impact earnings in the coming quarters. Molson
Coors currently holds a Zacks Rank #3 (Hold).
MOLSON COORS-B (TAP): Free Stock Analysis
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