Molson Coors Brewing Company (TAP)

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Molson Coors Brewing (TAP)

Q4 2011 Earnings Call

February 16, 2012 11:00 am ET


Peter S. Swinburn - Chief Executive Officer, President and Director

David Perkins - Chief Executive Officer of Molson Coors Canada, President of Global Brand & Market Development and President of Molson Coors Canada

Mark Hunter - Chief Executive Officer of Molson Coors (UK) and President of Molson Coors (UK)


Judy E. Hong - Goldman Sachs Group Inc., Research Division

Mark Swartzberg - Stifel, Nicolaus & Co., Inc., Research Division

John A. Faucher - JP Morgan Chase & Co, Research Division

James Watson - HSBC, Research Division

Bryan D. Spillane - BofA Merrill Lynch, Research Division



Welcome to the Molson Coors Brewing Company 2011 Fourth Quarter and Year-End Earnings Conference Call.

Before we begin, I will 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, 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. Also, unless otherwise indicated, all financial results the company discusses are versus the comparable prior-year period and in U.S. dollars.

Now I would like to turn the call over to Peter Swinburn, President and CEO of Molson Coors.

Peter S. Swinburn

Thank you, Martina. Hello and welcome, everybody, to the Molson Coors earnings call. Thanks for joining us today. With me on the call is Stewart Glendinning, Molson Coors CFO; Dave Perkins, COO of Molson Coors Canada; Tom Long, CEO of MillerCoors; Mark Hunter, the CEO of Molson Coors U.K.; Kandy Anand, President of Molson Coors International; Sam Walker, Molson Coors Chief Legal and People Officer; Zahir Ibrahim, Molson Coors Controller; and Dave Dunnewald, Molson Coors VP of Investor Relations.

On the earnings call today, Stewart and I will take you through highlights of our fourth quarter and full year 2011 results for Molson Coors Brewing Company, along with some initial perspectives on 2012. For Molson Coors, the fourth quarter was a positive finish to a challenging year, with underlying after-tax income up more than 42%; earnings per share, up 47%; and net sales growth of 12%. The fourth quarter benefited from solid pricing, an additional week in our fiscal 2011 calendar and cycling comparatively weak quarterly results the year before.

For the full year, net sales increased 8% and underlying earnings per share grew nearly 6%, driven by positive pricing, cost reduction initiatives, favorable foreign currency movements and an additional trading week. Our focus in 2011 continued to be on the 3 pillars of our growth strategy, namely to grow profitably in our core businesses to advance in innovation, to grow in new and emerging markets and, when it meets our strict shareholder return criteria, to grow through M&A.

In 2011, our primary focus remained on the first of these pillars as we continued to invest in our key brands and fill our innovation pipeline. Increased sales, pricing and underlying earnings tell us we are moving in the right direction. In Canada, during 2011, we grew volume and profit in the back half of the year to improve performance of Coors Light, Molson Canadian and our above premium portfolio, highlighted by the launch of Rickard's Blonde and the expansion of Creemore and Granville Island into new markets.

Our Canada team secured the key national hockey league sponsorship property, which is adding visibility to our brands. We introduced Molson Canadian 67 Sublime and Miller Chill Lemon, and we expanded Molson Canadian 67 into Québec and Molson M into Ontario on the west. In the U.S., Coors Light significantly outperformed the premium light segment, in both share and average price and became the second largest beer in the market. The Blue Moon brands continued to lead the craft beer segment, with more than 20% growth. Leinenkugel's also grew to double-digit rate. These brands drive the Tenth and Blake business, which is focused on our craft and import brands. We introduced value-driving innovations, including Coors Light Super Cold activation and expanded the Miller Lite aluminum pint, Leinenkugel Summer Shandy, Blue Moon Seasonals and Batch 19 all into new markets.

However, the Miller Lite performance was a disappointment. In a very challenging U.K. market, we gained market share, and in the first half of the year, successfully completed a major SAP system implementation and then focused on brands and innovation in the second half, with the result being accelerated share performance. We acquired the Sharp's Brewery and Doom Bar brand early in 2011, added the Modelo brands to our portfolio and relaunched Carling and Coors Light in the second half. We introduced aluminum bottles for Carling, Coors Light and Caffrey's, and we had a limited launch of Carling Chrome and Animée.

Also in the second half of 2011, we initiated a multi-year redevelopment program for our U.K. brewing network, which will support brand growth, innovation and operations efficiencies in the years ahead. The second pillar of our growth strategy, our approach to international organic growth, is based upon disciplined market development, strong strategic partnerships and sound investment in our brands. Specifically in 2011, we expanded our Cobra partnership to include the Indian subcontinent, which now gives us global control of this promising premium brand. Together with our partner, Obolon, we set up a commercial venture to sell Carling in the Ukraine, Eastern Europe's second-biggest beer market, and this venture is off to a very strong start.

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