Molson Coors Brewing Company (TAP)

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Molson Coors Brewing Company (TAP)

Q2 2010 Earnings Call Transcript

August 3, 2010 11:00 am ET

Executives

Peter Swinburn – President and CEO

Stewart Glendinning – Global CFO

Tom Long – President and COO, MillerCoors

Dave Perkins – President and CEO, Molson Coors Canada

Mark Hunter – President and CEO, Molson Coors U.K.

Analysts

Judy Hong – Goldman Sachs

Mark Swartzberg – Stifel Nicolaus

Carlos Laboy – Credit Suisse

Karen Lamar – Federated Investors

Christine Farkas – Banc of America

Presentation

Operator

Good day, ladies and gentlemen; and welcome to the Molson Coors Brewing Company 2010 second quarter earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

Before we get started, I want to paraphrase the company’s Safe Harbor language. Some of the discussion today may include forward-looking statements. Actual results could differ materially from what the company projects today, so please refer to its most recent 10-K and 10-Q filings for a more-complete description of factors that could affect these projections.

The company does not undertake to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Regarding any non-U.S. GAAP measures that may be discussed during the call and from time-to-time by the company’s executives in discussing the company’s performance, please visit the company’s website www.molsoncoors.com, and click on the Financial Reporting tab of the Investor Relations page for a reconciliation of these measures to the nearest U.S. GAAP results.

Now, I would like to turn the call over to Peter Swinburn, President and CEO of Molson Coors. Mr. Swinburn, you may go ahead.

Peter Swinburn

Thank you, Howard. Hello and welcome everybody; and thank you for joining us today.

With me on the call are Stewart Glendinning, Molson Coors CFO; Tom Long, President and COO of MillerCoors; Gavin Hattersley, CFO of MillerCoors; Dave Perkins, CEO of Molson Coors Canada; Mark Hunter, CEO of Molson Coors U.K.; Kandy Anand, President of Molson Coors International; Sam Walker, Molson Coors Chief Legal Officer; Bill Waters, Molson Coors Controller; and Dave Dunnewald, Molson Coors Vice President of Investor Relations.

Leo Kiely, CEO of MillerCoors could not be with us this morning as he is recovering from surgery on a broken leg that he suffered over the weekend. We all wish him a speedy recovery. In Leo’s absence, Tom Long will be providing commentary on MillerCoors performance on today’s call.

On the earnings call today, Stewart and I will share highlights of our second quarter 2010 results for Molson Coors Brewing Company, along with some perspectives on the balance of 2010. And then, we will open it up for questions.

Our second quarter financial results showed good progress against our strategic priorities of building brands, driving value from innovation, and delivering on our cost-savings commitments. Total company underlying earnings increased 14.2% on an after-tax basis, driven by double-digit net sales growth and positive results from our cost reduction initiatives, along with a lower tax rate and favorable foreign exchange versus a year ago.

In the U.S., strong cost management and higher net pricing drove double-digit earnings growth. In Canada, although underlying pretax income declined 3% in local currency, we grew volume and market share and reduced our cost of goods sold per hectoliter. In the U.K., business profit declined due to a non-cash increase in pension expense, but we achieved solid top-line performance, growing volume and price in the quarter.

On brands, in Canada and the U.K., our market share performance in the second quarter represented an improvement for both businesses versus earlier in the year. In the U.S., MillerCoors gave up a small amount of market share, but improved sales trends in all channels versus last quarter, and leveraged the strength of its brands to achieve solid net price growth and positive sales mix in a weak market.

Also in the second quarter, our international team grew volume more than 24%, launched Coors Light in the Moscow region of Russia, and agreed to form a joint venture in China that will reduce our costs and increase the growth potential for Coors Light in the world’s largest beer market.

The innovations we have brought to the market are driving competitive advantage for our businesses locally. In Canada, our innovations added significant volume in the quarter and contributed to the best quarterly market share performance in more than a decade. In the U.K., our innovative packaging for Blue Moon, Coors Light, and Carling helped to drive positive volume in the quarter. And in the U.S., our innovations helped drive strong pricing for our leading brands.

On costs in the second quarter, we again exceeded our cost-reduction targets, with $16 million of RFG2 savings and $72 million of MillerCoors cost reductions, underscoring our ability to meet or exceed these critical commitments. These cost reductions helped us to overcome input inflation, to continue to build our brands, and invest in innovations, and grow earnings and cash in a weak economy.

By staying focused on our strategic priorities of brands, innovation, and reducing costs, we have increased profits, generated substantial cash, and strengthened our balance sheet. Most importantly, this focus has positioned our company to take advantage of growth opportunities, while driving even better performance as the economy improves.

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