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SABMILLER PLC - MillerCoors delivers 7.4% underlying net income growth in first quarter

Release Date: 08/05/2014 07:40
Code(s): SAB     PDF:  
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MillerCoors delivers 7.4% underlying net income growth in first quarter

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

MillerCoors delivers 7.4% underlying net income growth in first quarter
Brewer gains market share in above premium, premium lights


May 7, 2014 (London and Denver) – SABMiller plc (LN:SAB; OTC:SABMRY) and
Molson Coors Brewing Company (NYSE: TAP; TSX: TPX) reported that MillerCoors
first quarter underlying net income grew 7.4 percent to $291.9 million versus the
same period in the prior year. This income growth was driven by positive pricing and
sales mix, cost savings, and lower marketing spending, primarily due to timing
differences versus last year.


“In the first quarter, we continued to gain share in the high-margin and fast-growing
Above Premium space with Miller Fortune and the Redd’s franchise,” said MillerCoors
Chief Executive Officer Tom Long. “In Above Premium, we are expanding the
category and attracting new legal drinking age consumers to beer with our
innovations and brands like Leinenkugel’s and Blue Moon. The key to our success
will be our performance in Premium Lights, which have been particularly challenged
recently, including in the first quarter. We have made Miller Lite more relevant for
millennials by bringing back the Original Lite Can, and we gained share in the
Premium Light segment. This month, we will continue to engage legal drinking age
millennials around Premium Lights with the release of Coors Light’s first line
extension, Coors Light Summer Brew.”


First Quarter Highlights
Unless otherwise indicated, all amounts are in U.S. dollars and calculated in
accordance with accounting principles generally accepted in the U.S. (U.S. GAAP).
All percentages are versus the prior year comparable period and include MillerCoors
operations in the U.S. and Puerto Rico.


   -   Underlying net income, a non-GAAP measure, increased 7.4 percent to $291.9
       million for the first quarter.
   -   Total net sales increased 0.1 percent to $1.790 billion.
   -   Domestic net revenue per barrel, excluding contract brewing and company-
       owned distributor sales, increased 3.3 percent.
   -   Total cost of goods sold (COGS) per barrel increased 3.8 percent.
   -   Domestic sales-to-retail (STRs) decreased 3.4 percent.
   -   Domestic sales-to-wholesalers (STWs) decreased 3.0 percent.




Brand Highlights for the First Quarter
Premium Light portfolio STRs declined mid-single digits but still gained segment
share in the first quarter, according to Nielsen.


Coors Light declined mid-single digits in the first quarter. The brand will connect with
legal drinking age millennial consumers in 2014 by introducing new, cutting-edge
designs on packaging each trimester. Last week, Coors Light introduced its first line
extension, Coors Light Summer Brew, which will be available exclusively in 10 ounce
cans while supplies last. Coors Light will engage sports fans and Latino consumers
by continuing its partnership with the LigaMx soccer league and through advertising
during this year’s World Cup broadcasts from Brazil.


Miller Lite declined mid-single digits in the first quarter, but achieved a high-single
digit trend improvement in can STRs versus the fourth quarter of 2013. The brand
brought back the Original Lite Can in the first quarter to tell the story of Miller Lite’s
authenticity to a new generation of legal age beer drinkers. Based on these strong
results, the Original Lite Can will be in-market through September, and an updated
design inspired by the brand’s original look will be unveiled in October across all
packaging. This summer, Miller Lite will launch its “Miller Time for America”
campaign, which will encourage consumers to engage with the brand online for a
chance to have their photos included in a national television commercial.


Above Premium portfolio STRs grew high teens in the first quarter and ahead of the
industry in the segment. Innovations delivered excellent volume and value growth in
Above Premium, led by Miller Fortune and the Redd’s franchise. Launched in
February, Miller Fortune was supported with strong distribution and gained a 0.3
share of total industry volume in March, according to Nielsen. The Redd’s franchise
performed well in the first quarter, more than doubling its volume versus the prior
year, and Redd’s Apple Ale continues to be one of the fastest growing brands in the
U.S. beer category.


Overall, Tenth and Blake Beer Company declined mid-single digits, driven by double-
digit declines in Blue Moon seasonals, Henry Weinhard’s, Killian’s and Batch 19. This
was partially offset by double-digit growth of the Leinenkugel’s franchise and low-
single digit growth of Blue Moon Belgian White, which extended its run of 74
consecutive quarters of growth. Leinenkugel’s Shandy variants continued to capture
the most absolute volume growth among all craft brands in the quarter, according to
Nielsen.


Coors Banquet grew mid-single digits in the first quarter and has grown for over
seven consecutive years. In 2014, the brand launched one of the biggest media
plans in its history, and Coors Banquet television advertising will air nationally
throughout the year. Coors Banquet will continue to tell its story of timeless Western
masculinity with four new can designs in market from April through June.




In April 2014, Miller High Life and Keystone Light returned to television with national
advertising campaigns for the first time since 2012, and Keystone Light is continuing
its partnership with the FLW Walmart Bass Fishing Tour Series.


Financial Highlights for the First Quarter
Domestic net revenue per barrel grew 3.3 percent for the quarter as a result of
favorable net pricing and positive brand mix.


Total company net revenue per barrel, including contract brewing and company-
owned distributor sales, increased 3.4 percent. Third-party contract brewing volumes
were down 4.5 percent.


Total COGS per barrel increased 3.8 percent, driven by commodity and brewery
inflation, lower volume, and higher costs associated with brand innovation.


Marketing, general and administrative costs decreased by 6.4 percent. The decrease
was driven primarily by timing of media investments and lower employee-related
expenses.
MillerCoors achieved $42 million of cost savings in the first quarter, primarily related
to procurement savings, brewery efficiencies and lower overhead costs.


Depreciation and amortization expenses for MillerCoors in the first quarter were $79.1
million, and additions to tangible and intangible assets totaled $107.2 million.


Special items in the quarter included restructuring related costs of $0.7 million.


Overview of MillerCoors

Through its diverse collection of storied breweries, MillerCoors brings American beer
drinkers an unmatched selection of the highest quality beers steeped in centuries of
brewing heritage. Miller Brewing Company and Coors Brewing Company offer
domestic favorites such as Coors Light, Miller Lite, Miller High Life and Coors
Banquet, as well as innovative new products such as Miller Fortune. Tenth and Blake
Beer Company, our craft and import division, offers beers such as Leinenkugel’s
Summer Shandy from sixth-generation Jacob Leinenkugel Brewing Company and
Blue Moon Belgian White from modern craft pioneer Blue Moon Brewing Company.
Tenth and Blake also operates Crispin Cidery, an artisanal maker of pear and apple
ciders using 100 percent fresh-pressed American juice. The company imports world-
renowned beers such as Italy’s Peroni, the Czech Republic’s Pilsner Urquell,
Canada’s Molson Canadian and the Netherlands’ Grolsch. MillerCoors also offers
pioneering new brands such as Redd’s Apple Ale, Batch 19 Pre-Prohibition Lager,
Third Shift Amber Ale and Smith & Forge Hard Cider. MillerCoors seeks to become
America’s best beer company through an uncompromising promise of quality, a keen
focus on innovation and a deep commitment to sustainability. 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 (USA), 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, SABMiller reported group lager volumes of 242
million hectolitres, group net producer revenue of US$26,932 million and EBITA of
US$6,379 million. SABMiller plc is listed on the London and Johannesburg stock
exchanges.

On 17th October 2013 SABMiller announced new and revised reporting metrics in
which a new reporting metric ‘group net producer revenue’ and a restatement of the
calculation of EBITA, among other things, were explained. These new and revised
metrics are included above for the year ended 31 March 2013.

Further information is also available on
www.sabmiller.com
www.facebook.com/sabmiller
www.twitter.com/sabmiller
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.

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 cost
saving 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

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 as adopted by the European Union. 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 between companies.


                                     Three Months Ended
                                    Mar 31,         Mar 31,
 (In millions of $U.S.)              2014            2013

 U.S. GAAP: Net Income                      $               $
 Attributable to MillerCoors            291.2           271.9
 Plus: Special/Exceptional
 Items¹                                   0.7                 -

 Non-GAAP Underlying Net                    $               $
 Income                                 291.9           271.9
 Plus: Adjustments to IFRS
 Underlying EBITA-
 Reported2                               24.0            28.0
 Less: Restatement
 Adjustments to IFRS
 Underlying
 EBITA-Restated3                              -         (15.1)

 IFRS: MillerCoors                          $               $
 underlying earnings before             315.9           284.8
 interest, taxes and
 amortization excluding
 exceptional items
 (EBITA-Restated4)

 Percent change versus prior           10.9%
 year MillerCoors underlying
 EBITA-Restated4
 1
 Current year Special/Exceptional items include restructuring related costs.
 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, severance expenses and certain
 special items 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 adopted the amended IAS 19, “Employee
Benefits.” The 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.


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

U.S. GAAP
                            Three Months Ended
                           Mar 31,       Mar 31,
                            2014          2013

STW volume in barrels        14,051         14,514

                                   $              $
Sales                        2,050.1        2,056.7

Excise taxes                 (259.7)        (268.4)

Net sales                    1,790.4        1,788.3

Cost of goods sold         (1,094.1)      (1,088.7)

Gross profit                  696.3           699.6

Marketing, general and
administrative
expenses                     (398.1)        (425.1)
Special items, net             (0.7)               -

Operating income              297.5           274.5

Interest income
(expense), net                 (0.3)           (0.5)

Other income
(expense), net                   0.3            0.8

Income before income
taxes and non-
controlling interests         297.5           274.8

Income taxes                   (1.9)           (0.4)

    Net income                295.6           274.4
 Net income attributable
 to non-controlling
 interests                      (4.4)           (2.5)

 Net income attributable           $               $
 to MillerCoors LLC            291.2           271.9


8 May 2014

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

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