Molson Coors 2Q profit falls 56 percent
Molson Coors Brewing Co. said Tuesday its second-quarter profit dropped 56 percent due to higher costs and charges associated with combining the company’s U.S. arm with the maker of Miller beers. Its shares tumbled as the results missed Wall Street’s expectations.
The Denver-based maker of Coors Light said it earned $80.9 million, or 43 cents per share in the three-month period ending in June, down from $184.9 million, or $1.02 per share, a year earlier.
Excluding special items related to the joint venture with brewer SABMiller PLC and other items, worth a total of $103.9 million, the company said it earned 93 cents per share.
The earnings fell short of analyst expectations. According to a poll by Thomson Financial, analysts expected profit of $1.16 per share on revenue of $1.76 billion. Analysts generally exclude one-time items.
The company’s stock dropped on the news. Shares of the nation’s third-largest brewer fell $6.03, or 11 percent, to $48.40 in heavy trading.
Increased energy and commodity costs and a higher tax rate also cut into profit, the company said.
But revenue rose 5 percent to $1.76 billion from $1.68 billion in the quarter. Volume grew both overall and in the U.S.
On July 1, Molson Coors combined its U.S. operations with SABMiller’s Miller Brewing Co., the country’s second-largest brewer. The joint venture, called MillerCoors LLC, aims to combine resources like marketing and distribution and trim costs.
It also hopes to better compete against industry-leader Anheuser-Busch Cos. Inc. That company, the maker of Bud Light, is being sold to Belgian-based InBev SA in a deal worth $52 billion.
The MillerCoors combination changes the U.S. beer industry by creating a stronger competitor to Anheuser-Busch, which controls about half the U.S. market, Molson Coors President and Chief Executive Peter Swinburn said in a statement. MillerCoors has about 30 percent of the market.
“MillerCoors is bringing new energy to the beer industry and will drive profitable growth, which provides Molson Coors Brewing Co. with important new financial resources to continue building our brands in our core markets and around the world,” he said.
The company’s sales to retailers in the U.S. improved 5.1 percent in the quarter, at a time when the industry’s sales are relatively flat. Molson Coors said Coors Light, its best-selling beer, was up in the mid-single digits, while Coors Banquet grew in the high single digits, and craft-style Blue Moon and Keystone Light were up in the double digits.
But rising production and distribution costs are hurting the company, and others in the industry. Molson Coors said the cost of goods sold per barrel in the U.S. was up 4.9 percent in the quarter, due primarily to increased fuel prices and packaging material costs.
The company took a $50.6 million non-cash charge in the second quarter to reduce the value of its Molson brands in the U.S. The company said that those brands, including Molson Canadian, have been declining in recent years, and increases in packaging and freight costs along with the volume declines hurt the profitability of the brands.