August 7, 2012 / 12:05 PM / 5 years ago

UPDATE 4-Molson Coors profit beats, but new unit disappoints

* Adjusted profit $1.38/shr vs Street view $1.19
    * Sales $999.4 mln vs Street view $934.8 mln
    * Pro-forma results for acquired business show profit
declines
    * Shares up slightly


    By Martinne Geller
    Aug 7 (Reuters) - Molson Coors Brewing Co reported
quarterly profit that blew past Wall Street estimates on
Tuesday, due in part to the acquisition of the Central European
maker of Staropramen beer, which Molson bought in June.
    Wall street estimates did not include results from the
business, formerly known as StarBev and analysts were caught off
guard by declines in profits for the last two quarters.
    In explaining the weakness at the unit which operates in the
Czech Republic, Romania, Hungary and other countries, Molson
executives blamed very bad weather in February, the stronger
U.S. dollar which reduced the value of overseas sales, and
up-front investment in new products and marketing ahead of the
peak summer selling season. 
    They said those investments would pay off in the back half
of the year, and that they remained confident that the deal
would boost the company's growth in a short time frame. 
    Molson, whose business is more geographically concentrated
than that of larger rivals Anheuser-Busch InBev and
SABMiller Plc, bought StarBev in June in a $3.4 billion
deal that expands its reach.
    The acquisition, which closed two weeks before the second
quarter ended, added $19.7 million of pretax income in the
quarter, Molson said. 
    Molson shares were up 41 cents, or 1 percent, at $42.73 in
early afternoon trading. Through Monday's close, Molson shares
had gained 10 percent from early June but remained down more
than 3 percent on the year.
    
    IMPROVEMENTS IN CORE MARKETS
    The maker of Molson Canadian, Coors Light and Blue Moon
beers also saw increased sales in Canada due to a change in the
timing of when Canada Day fell in the company's fiscal calendar.
It shipped more beer in advance of the holiday during the second
quarter this year, as opposed to the third quarter last year.  
    Net income was $105.1 million, or 57 cents per share, in the
second quarter, down from $222.8 million, or $1.18 per share, a
year earlier.
    Excluding one-time items, earnings were $1.38 per share. On
that basis, analysts, on average, were expecting $1.19,
according to Thomson Reuters I/B/E/S.
    "The quarter was a beat on an out-of-favor stock," said
Stifel Nicolaus analyst Mark Swartzberg.
    Still, Swartzberg affirmed his "hold" rating on the shares,
saying multiples were not low enough to justify an upgrade in
the face of continued share loss in all three of its core
markets -- Britain, Canada and the United States.
    Net sales were $999.4 million, up from $933.6 million a year
earlier and topping analysts' average estimate of $934.8
million.
    The company sold 13.9 million hectoliters of beer, a 6.4
percent increase from the prior year.
    Earlier Tuesday, MillerCoors - the combined U.S. operations
of Molson Coors and SABMiller - posted a 9.1 percent rise in net
income, driven by price increases, a move toward more expensive
beers and continued cost savings. 
    Molson said sales to wholesalers rose 0.3 percent in the
second quarter, an improvement from the 0.9 percent decline seen
in the first quarter. Sales from wholesalers to retailers, a
closer gauge of consumer demand, fell 1.4 percent, versus a 1.6
percent decline in the first quarter.
    In Canada, Molson's profit fell as the stronger U.S. dollar
reduced the value of overseas sales. Profit in local currency
rose 4 percent, helped by higher sales volume and pricing. Sales
to wholesalers and retailers both rose 1.8 percent due to the
shift in the timing of Canada Day. 
    Profit in the UK business tumbled 19.3 percent due to lower
sales volume, higher pension and marketing expenses and currency
exchange rates. Sales to retailers fell 7.9 percent in Britain,
with the company citing poor weather and increased promotions by
rivals.

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