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UPDATE 4-Molson Coors profit jumps more than expected
August 3, 2009 / 5:17 PM / 8 years ago

UPDATE 4-Molson Coors profit jumps more than expected

* Q2 adj EPS $1.11 vs Wall Street view of $0.96

* MillerCoors JV sees quarterly income rise 16.4 pct

* Shares up 4 pct (Adds CEO comments, byline, updates stock action)

By Ben Klayman

CHICAGO, Aug 3 (Reuters) - Molson Coors Brewing Co (TAP.N) reported a higher-than-expected quarterly profit on Monday, helped by increased beer prices and savings from its U.S. joint venture with SABMiller Plc SAB.L.

Tim Ghriskey, chief investment officer with New York-based Solaris Asset Management, cited aggressive cost-cutting by the maker of Coors Light and Molson Canadian as well as stronger-than-expected pricing.

“Expectations were low for this quarter. There was concern about price competition in Canada,” said Ghriskey, whose firm does not own Molson Coors shares but follows the sector. “In this competitive environment, to raise prices certainly shows strong underlying demand.”

Shares of Molson Coors jumped nearly 5 percent.

For the rest of the year, Molson Coors expects challenges stemming from competitive price discounting in Canada and higher costs, Chief Executive Peter Swinburn said.

“We expect the balance of 2009 to present continued challenges as consumers seek value and markets remain subdued,” he said, adding the focus would be on its brands, cost cuts and cash generation.

Molson Coors generally does not give earnings forecasts.

However, Swinburn said comparable sales to retail in Canada through the first three weeks of July were down at a mid-single-digit rate, versus last year. He also said U.K. sales to retail slipped at a low-single-digit rate in the first four weeks of the third quarter, and at the same rate at MillerCoors for the five weeks ending July 25.

PROFIT SOARS

Second-quarter net income more than doubled to $187.3 million, or $1.01 a share, from $79.4 million, or 42 cents a share, a year earlier, when the company recorded charges from the joint venture and wrote down Molson brands.

Income from continuing operations, excluding items, was $1.11 a share, easily topping the 96 cents analysts polled by Reuters Estimates had expected.

Stifel Nicolaus analyst Mark Swartzberg said in a research note that the company’s 22 percent underlying tax rate was four percentage points lower than he had expected, contributing about 6 cents a share to the upside.

Sales dropped 55 percent to $798.9 million, but topped the analysts’ average forecast of $765.0 million. The sales decline was particularly steep because the year-earlier results included U.S. sales that have fallen under the MillerCoors joint venture since its formation in July 2008.

Molson Coors said second-quarter global beer volume fell 3.2 percent on a pro forma basis, while Coors Light volume rose 3 percent.

Molson Coors combined its U.S. operations with those of SABMiller to form MillerCoors, which earlier on Monday reported a 16.4 percent rise in second-quarter net income while accelerating the timing of its merger savings.

MillerCoors now expects cost savings of $260 million by the end of 2009, up from the original forecast of $225 million. Its overall projection for cost savings from the merger is unchanged at $500 million.

Shares of Molson Coors were up $1.87, or 4.14 percent, at $47.08 in early afternoon on the New York Stock Exchange. (Reporting by Ben Klayman, editing by Gerald E. McCormick, Lisa Von Ahn and Gunna Dickson)

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