* 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 Monster Beverage Corp, facing
investigations into the safety of its energy drinks, reported a
smaller-than-expected quarterly profit as it stepped up
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
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
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