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SABMILLER PLC - MillerCoors grows above premium portfolio in challenging quarter

Release Date: 06/08/2013 13:00
Code(s): SAB     PDF:  
Wrap Text
MillerCoors grows above premium portfolio in challenging quarter

SABMiller plc
JSEALPHA CODE: SAB
ISSUER CODE: SOSAB
ISIN CODE: GB0004835483

MILLERCOORS GROWS ABOVE PREMIUM PORTFOLIO IN CHALLENGING QUARTER


Above-Premium Innovations Help Drive 2.6% Increase in Domestic Net Revenue per Barrel
Profit Declines Due to Weak Sales in Premium Light and Economy Segments


August 6, 2013 (London and Denver) – SABMiller plc (LN:SAB; OTC:SABMRY) and Molson Coors
Brewing Company (NYSE: TAP; TSX: TPX) reported solid pricing and strong Above Premium sales growth
at MillerCoors in the second quarter, despite difficult trading conditions. Domestic net revenue per barrel
increased 2.6 percent versus the same quarter in the prior year, while underlying net income declined 5.3
percent to $412.7 million.


“This was a tough volume quarter for us and for the beer industry overall,” said MillerCoors Chief Executive
Officer Tom Long. “Our strategy to evolve our portfolio to the fast-growing and higher-margin areas of the
business is working, as shown by the successful launch of Redd’s Apple Ale and the nationwide expansion
of Leinenkugel’s Summer Shandy. Thanks to these initiatives, as well as the introduction of Third Shift
Amber Lager and continued growth of Blue Moon Belgian White, we have already grown our Above
Premium brand volumes to more than 9% of our portfolio in the quarter. While we continued to gain share
in Premium Lights according to Nielsen data, we are working hard to restore volume growth which we
believe will come as the health of the category is defined by the Premium Light performance.”


Second Quarter Highlights
Unless otherwise indicated, all amounts are in U.S. dollars and calculated in accordance with U.S. GAAP.
All percentages are versus the prior year comparable period and include MillerCoors operations in the U.S.
and Puerto Rico.
    o   Total net sales decreased 2.9 percent to $2.159 billion for the quarter.
    o   Total cost of goods sold (COGS) per barrel increased 2.4 percent.
    o   Underlying net income (a non-GAAP measure) decreased 5.3 percent to $412.7 million.
    o   Domestic net revenue per barrel, excluding contract brewing and company-owned distributor
        sales, increased 2.6 percent.
    o   Domestic sales-to-retailers (STRs) decreased 4.4 percent.
    o   Domestic sales-to-wholesalers (STWs) decreased 5.3 percent.


Brand Highlights for the Second Quarter


                                                                                                              1
MillerCoors Premium Light STRs decreased high-single digits in the quarter. Coors Light declined mid-
single-digits, yet continues to lead the Premium Light segment in share growth by leveraging its “Rocky
Mountain Cold Refreshment” positioning through advertising, innovation and promotions. The spring
launch of the new World’s Most Refreshing Can was supported with national media, digital marketing,
retail and innovative programming like the Coors Light Refresherator, a customized personal vending
machine designed to highlight the World’s Most Refreshing Can. Miller Lite declined high-single digits.
The launch of the new Miller Lite Pilsner Bottle has been well-received among retailers and consumers.


Tenth and Blake Beer Company grew the MillerCoors Craft and Import portfolio by double digits.
Leinenkugel’s Summer Shandy increased double digits as the brand continued its national expansion.
Blue Moon Belgian White grew high-single digits in the quarter, continuing its run of 46 consecutive
quarters of growth. Batch 19 more than doubled as it continued to expand nationally.


MillerCoors new expansion brands delivered strong growth in Above Premium. Redd’s Apple Ale
continued an aggressive marketing campaign, including national and local TV, sponsorship of NASCAR
Sprint Cup Series champion Brad Keselowski for two races, and integrations with Discovery Network.
Redd's volume doubled versus the prior quarter, sourcing most of its sales from consumers who normally
drink outside the MillerCoors portfolio. Third Shift Amber Lager gained momentum behind strong
distribution and increasing velocity trends and is already a larger brand than well-known craft brands, such
as Goose Island 312 and New Belgium Ranger IPA, according to year-to-date Nielsen all outlet data.


MillerCoors Premium Regular portfolio declined mid-single digits. Coors Banquet grew mid-single digits
fueled by the June debut of the new 12-ounce “stubby” bottle modeled after the brand's post-Prohibition
bottle. Coors Banquet’s continued growth was offset by declines in Miller Genuine Draft.


MillerCoors Economy portfolio declined mid-single digits. Miller High Life continued its military veteran
program and kicked off a partnership with Harley-Davidson to celebrate the 110th anniversaries of the two
iconic American brands. Keystone Light continued its partnership with the FLW Walmart Bass Fishing
Tour Series that culminates with the Forrest L. Wood Cup in August.


Financial Highlights for the Second Quarter
Domestic net revenue per barrel grew 2.6 percent for the quarter as a result of higher net pricing and
favorable mix.


Total company net revenue per barrel, including contract brewing and company-owned distributor sales,
increased 2.7 percent. Third-party contract brewing volumes were down 6.6 percent.




                                                                                                            2
Total COGS per barrel increased 2.4 percent, driven by commodity inflation, brand innovation and lower
fixed cost absorption.


Marketing, general and administrative costs increased 0.2 percent for the quarter, driven primarily by
increased marketing investments in support of the national launches of Redd’s Apple Ale and Third Shift
Amber Lager and the expansion of Leinenkugel’s Summer Shandy partially offset by lower pension
expense.


In the second quarter, MillerCoors achieved $25 million of cost savings, primarily related to procurement
savings, logistics savings and brewery efficiencies.


Depreciation and amortization expenses for MillerCoors in the second quarter were $69.7 million, and
additions to tangible and intangible assets totaled $65.9 million.


There were no special items during the second quarter.


                                                       ###




                                                                                                            3
Overview of MillerCoors
MillerCoors brews, markets and sells the MillerCoors portfolio of brands in the U.S. and Puerto Rico. Built
on a foundation of great beer brands and nearly 300 years of brewing heritage, MillerCoors continues the
commitment of its founders to brew the highest quality beers. MillerCoors is the second-largest beer
company in America, capturing nearly 30 percent of U.S. beer sales. Led by two of the best-selling beers
in the industry, Coors Light and Miller Lite, MillerCoors has a broad portfolio of highly complementary
brands across every major industry segment. The company offers a variety of leading craft and import
brands, including Blue Moon and Leinenkugel’s, through its Tenth and Blake division. MillerCoors operates
eight major breweries in the U.S., as well as the Leinenkugel’s craft brewery in Chippewa Falls, WI and
two microbreweries, the 10th Street Brewery in Milwaukee and the Blue Moon Brewing Company at Coors
Field in Denver. MillerCoors insists on building its brands the right way through brewing quality,
responsible marketing and environmental and community impact. MillerCoors is a joint venture of
SABMiller plc and Molson Coors Brewing Company. Learn more at MillerCoors.com, at
facebook.com/MillerCoors or on Twitter through @MillerCoors.


Overview of SABMiller
SABMiller plc is one of the world’s leading brewers with more than 200 beer brands and some 70,000
employees in over 75 countries. The group’s portfolio includes global brands such as Pilsner Urquell,
Peroni Nastro Azzurro, Miller Genuine Draft and Grolsch; as well as leading local brands such as Aguila
(Colombia), Castle (South Africa), Miller Lite (U.S.), Snow (China), Victoria Bitter (Australia) and Tyskie
(Poland). SABMiller also has growing soft drinks businesses and is one of the world’s largest bottlers of
Coca-Cola products.

In the year ended 31 March 2013, the group reported group lager volumes of 242 million hectoliters, group
revenue of US$34,487 million and group EBITA of US$6,421 million. SABMiller plc is listed on the London
and Johannesburg stock exchanges.

Learn more at www.sabmiller.com , at www.facebook.com/sabmiller, at www.twitter.com/sabmiller or at
www.youtube.com/sabmiller.


Overview of Molson Coors
Molson Coors Brewing Company is one of the world’s largest brewers. It brews, markets and sells a
portfolio of leading premium quality brands such as Coors Light, Molson Canadian, Blue Moon,
Staropramen, Carling, Coors Banquet and Keystone Light in North America, Europe and Asia. For more
information regarding Molson Coors Brewing Company, visit the company’s web site:
www.molsoncoors.com.




                                                                                                              4
Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of the U.S. federal securities
laws, and language indicating trends, such as “anticipated” and “expected.” It also includes financial
information, of which, as of the date of this press release, the Companies’ independent auditors have not
completed their audit. Although the Companies believe that the assumptions upon which their respective
financial information and their respective forward-looking statements are based are reasonable, they can
give no assurance that these assumptions will prove to be correct. Important factors that could cause
actual results to differ materially from the Companies’ projections and expectations are disclosed in Molson
Coors’ filings with the Securities and Exchange Commission or in SABMiller’s annual report and accounts
for the year ended March 31, 2013, and in other documents which are available on SABMiller’s website at
www.sabmiller.com. These factors include, among others, changes in consumer preferences and product
trends; price discounting by major competitors; failure to realize anticipated results from synergy
initiatives; and increases in costs generally. All forward-looking statements in this press release are
expressly qualified by such cautionary statements and by reference to the underlying assumptions.
Neither SABMiller nor Molson Coors undertakes to update forward-looking statements relating to their
respective businesses, whether as a result of new information, future events or otherwise. You should not
place undue reliance on any forward-looking statement. Neither SABMiller nor Molson Coors accepts any
responsibility for any financial information contained in this press release relating to the business or
operations or results or financial condition of the other or their respective groups.

Contacts
For further information, please contact:


SABMiller
Tel: +44 20 7659 0100 / 414 931 2000
Richard Farnsworth       Media Relations, SABMiller                Mob: +44 207 659 0188
Gary Leibowitz           Investor Relations, SABMiller             Mob: +44 771 742 8540


Molson Coors
Colin Wheeler            Media Relations, Molson Coors             303 927 2443
Dave Dunnewald           Investor Relations, Molson Coors          303 927 2334




Sponsor: J.P. Morgan Equities South Africa (Pty) Ltd




                                                                                                          5
MillerCoors Results and Related Reconciliations
The table below reconciles net income attributable to MillerCoors, reported in accordance with U.S. GAAP
as used for inclusion within Molson Coors reported results, to MillerCoors EBITA as used for inclusion
within SABMiller’s reported results in accordance with IFRS. Underlying net income and EBITA are non-
GAAP measures. Management of both companies believes that underlying net income and EBITA provide
shareholders with a useful basis for assessing the profit performance of MillerCoors. There are limitations
to using non-GAAP financial measures, including the difficulty associated with comparing companies that
use similarly named non-GAAP measures whose calculations may differ from the company’s calculations.


                                              Three Months Ended                     Six Months Ended

                                           June 30,          June 30,           June 30,          June 30,
 (In millions of $US)                        2013              2012               2013              2012

 U.S. GAAP: Net Income                    $     412.7        $    438.3          $     684.6      $     713.6
 Attributable to MillerCoors
 Plus: Special/Exceptional Items¹                     -            (2.3)                   -             (2.3)

 Non-GAAP Underlying Net
 Income                                   $     412.7        $    436.0          $     684.6      $     711.3
 Plus: Adjustments to IFRS
                           2
 Underlying EBITA-Reported                         2.8              41.7                30.8             79.6

 Less: Restatement Adjustments
 to IFRS Underlying
                 3
 EBITA-Restated                                       -           (12.8)                   -            (12.8)

 IFRS: MillerCoors underlying             $     415.5        $    464.9          $     715.4      $     778.1
 earnings before interest, taxes
 and amortization before
 exceptional items
                  4
 (EBITA-Restated )

 Percent change versus prior year              -10.6%                                  -8.1%
 MillerCoors underlying
                4
 EBITA-Restated
 1
  There were no Special/Exceptional items in the current year. Prior year includes a pension curtailment
 gain.
 2
  U.S. GAAP Underlying net income to IFRS EBITA adjustments relate to differing treatment of step-up
 depreciation, pension, post-retirement benefits, consolidation of container joint ventures, share-based
 compensation and severance expenses between U.S. GAAP and IFRS. Amortization of intangible assets,
 interest, taxes and non-controlling interest have been removed to arrive at underlying EBITA.
 3
  With effect from April 1, 2013, SABMiller has adopted the amended IAS 19, “Employee Benefits.” The
 new accounting standard has been applied retrospectively and SABMiller’s fiscal year ended March 31,
 2013 results have been restated accordingly.
 4
  EBITA-Earnings Before Interest, Taxes, and Amortization, excluding exceptional items.




                                                                                                           6
                                    MILLERCOORS LLC
                                 RESULTS OF OPERATIONS
                     (VOLUMES IN THOUSANDS, DOLLARS IN MILLIONS $US)
                                       (UNAUDITED)

U.S. GAAP
                                  Three Months Ended               Six Months Ended
                                June 30,       June 30,        June 30,        June 30,
                                  2013           2012            2013            2012

Volume in Barrels                    17,480          18,490            31,994          33,282

Sales                          $    2,484.4    $    2,567.2    $       4,541.1   $    4,601.8

Excise Taxes                        (325.4)         (343.2)            (593.8)        (618.0)

Net Sales                           2,159.0         2,224.0            3,947.3        3,983.8

Cost of Goods Sold                 (1,270.1)       (1,311.8)       (2,358.8)         (2,381.8)

Gross Profit                          888.9           912.2            1,588.5        1,602.0

Marketing, General and
Administrative Expenses             (471.0)         (470.1)            (896.1)        (880.9)

Special Items, net                         -            2.3                  -            2.3

Operating Income                      417.9           444.4             692.4           723.4

Other Income (Expense):

Interest Expense, net                  (0.4)           (0.4)             (0.9)           (0.7)

Other Income, net                       0.5             1.5                1.3            3.1
Total Other Income
(Expense), net                          0.1             1.1                0.4            2.4

Income Before Income
Taxes and Non-controlling
Interests                             418.0           445.5             692.8           725.8

Income Taxes                           (1.3)           (1.8)             (1.7)           (2.5)

 Net Income                           416.7           443.7             691.1           723.3

Net Income Attributable to
Non-controlling Interests              (4.0)           (5.4)             (6.5)           (9.7)

Net Income Attributable
to MillerCoors LLC             $      412.7    $      438.3        $    684.6    $      713.6




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