UPDATE 2-Monster Bev. profit misses, again rejects safety claims

Wed Nov 7, 2012 7:03pm EST

* Third-quarter earnings/share $0.47 vs estimates $0.55

* Net sales rise 14.2 percent but miss analyst estimates

* CEO says lawsuit filed against co is "baseless"

* Shares down 12 percent after market

By Siddharth Cavale

Nov 7 (Reuters) - Monster Beverage Corp, facing investigations into the safety of its energy drinks, reported a smaller-than-expected quarterly profit as it stepped up promotional spending.

Shares in Monster, which again rejected the safety concerns as "baseless," slid 12 percent in after-hours trading even as the company reported rising sales.

The U.S. Food and Drug Administration said last month it was investigating reports of five deaths that may be related to Monster Beverage's namesake drinks.

The company is also being sued by the family of a 14-year old Maryland girl with a heart disorder who died after drinking two cans of Monster Energy drink in a 24-hour period.

As well, the company said in August that it had received a subpoena from an unnamed state attorney general related to its ingredients and advertising.

Energy drinks have come under review due to health concerns surrounding high concentrations of ingredients such as caffeine.

The earnings for the three months to Sept. 30 predated news of the investigation and company officials did not say if they were seeing an impact on sales in the current quarter.

Monster is the top-selling energy drink in the United States but falls behind Austria's Red Bull in dollar sales. The company also sells drinks such as Java Monster and X-Press Monster.

Monster Beverage said it was not aware of a single instance in the world in which its energy drinks have caused deaths.

"There is not a shred of information which causally linked Monster to these adverse events and the lawsuit is the first the company has received alleging a fatality caused by Monster," Chief Executive Rodney Sacks said on a conference call for analysts.

Sacks added that the company should not be singled out in the case as there were many other major energy drinks on the market with comparable or higher amounts of caffeine per ounce than Monster's.

QUARTERLY PROFIT WHIMPERS

Monster's net income for the quarter ended Sept. 30 rose to $86.1 million, or 47 cents per share, from $82.4 million or 44 cents per share, a year earlier.

But analysts on average had expected earnings of 55 cents per share, according to Thomson Reuters I/B/E/S.

Gross margin fell to 50.5 percent from 52.7 percent a year earlier, hurt by the promotional and operational costs. Promotion spending rose 23 percent.

Net sales increased 14.2 percent to $541.9 million, but this lagged analyst estimates of $578.5 million.

Sales in the quarter were partly hurt by a drop in Canada due to inventory adjustments made by distributor Coca-Cola Refreshments Canada, Monster said.

A stronger U.S. dollar had a negative impact of $12 million on sales and lower sales of its Monster Energy Extra Strength drink also hurt revenue, Sacks said. All other energy drinks posted higher sales, he added.

Sales of energy drinks form the fastest growing segment of the soft drinks market. Sales rose 17 percent to $9 billion in 2011 and are expected to exceed $10 billion this year, according to Beverage Digest.

Shares of the company closed at $44.97 on the Nasdaq on Wednesday.

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (1)
thebevman wrote:
I used to see a lot of marketing activity in my city, they must of had 5 monster trucks in the city running around and really being out there. Its been over a year since I see any activity and 0 truck. Seems company got lazy or no one is paying attention to work anymore, being conservative and only looking at how to lay low and collect the dough.
Did they just run out of momentum, loose motivation and have uninspired staff? I like to monitor companies on staff motivation via LinkedIn, when you see staff being promoted every couple years or shifted around normally spells good things. When you see staff at the same position for many years with no movement, it usually causes a downward spiral.
I think they need to bring back that Energy that Unleashed the Beast at the beginning of this company’s Monstrous entrance into the market.

Nov 07, 2012 8:26pm EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.