Molson Coors Brewing Company
) reported better-than-expected adjusted earnings of 69 cents per
share in the fourth quarter of 2012, beating the Zacks Consensus
Estimate of 64 cents per share. The results however declined
28.9% from the prior-year earnings of 97 cents, due to higher tax
rates this year and strong earnings in the prior-year period due
to an extra week.
Revenues and Operating Profits
Net sales, including excise tax, grew 9.9% to $1.03 billion in
the quarter compared with $0.94 billion reported a year ago, due
to the addition of Central European operations in the reported
results. It, however, lagged the Zacks Consensus Estimate of
$1.05 billion. Total worldwide beer volume increased 15.3% in the
quarter to 14.1 million hectoliters.
Underlying (excluding special and other non-core items)
pre-tax income plummeted 19.2% year over year to $153.9 million
in the fourth quarter of 2012, despite the impact of favorable
foreign exchange in the quarter.
The company operates through the following geographical
Molson Coors' Canada segment net sales declined 7.5% to $471.5
million in the quarter, due to 12% decline in sales volume. The
segment reported underlying pretax income of $101.0 million, down
22.2% from the prior-year quarter, due to lower volume, focus on
higher-cost products, higher pension expense, and positive
adjustments in the prior-year period due to an extra week.
United States (MillerCoors):
MillerCoors' net sales climbed 1.7% to $1.78 billion in the
fourth quarter of 2012. The segment's underlying U.S. segment
pretax income decreased 5.4% to $80.9 million in the quarter, due
to increased marketing expenses.
Molson Coors' United Kingdom segment net sales slipped 6.8% to
$363.2 million from the prior-year period. The segment reported
underlying pretax income of $22.6 million, down 35.1% from the
prior-year quarter, due to volume decline, higher input costs and
increase in pension cost offset by improved product mix, cost
saving initiatives and lower marketing expenses.
The segment reported net sales of $159.7 million in the fourth
quarter of 2012, down 8.3% from the prior-year quarter. Sales
volume declined 5%, primarily due to the inventory destocking and
a focus on maintaining price growth in all markets. The segment
reported underlying pretax income of $12.9 million, down 12.2%,
owing to lower volumes due to destocking of inventories.
Molson Coors International ('MCI')
: The segment's net sales declined 7.0% to $38.8 million in the
quarter. The segment reported underlying pretax income of $0.3
million, up from a loss of $7.5 million in the prior-year
quarter, due to improved performance in Japan, the inclusion of
Central Europe export results, reduced overhead costs, and the
elimination of losses related to the China joint venture, which
was deconsolidated in the third quarter. The Central Europe
export business contributed underlying pretax income of $2.7
million in the third quarter.
Year 2012 Results
The company's adjusted earnings increased 4.0% to $3.91 per
share in 2012. The results also beat the Zacks Consensus Estimate
of $3.84 per share. Net sales, including excise tax, grew 11.4%
to $3.92 billion in the year compared with $3.52 billion reported
a year ago, due to the addition of Central European operations in
the reported results. It, however, lagged the Zacks Consensus
Estimate of $3.93 billion. Total worldwide beer volume increased
13.9% in the year to 55.1 million hectoliters.
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
Central Europe business in Jun 2012 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. Molson Coors currently holds a Zacks Rank #3
Other stocks in the consumer staples sector that are worth
Tyson Foods Inc
The J.M. Smucker Co.
). Tyson holds a Zacks Rank #1 (Strong Buy), while Kellogg and
Smucker carry a Zacks Rank #2 (Buy).
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