Wednesday, November 5, 2008

Molson Coors Rises on Sales Gains, Quicker Savings

By Allison Abell Schwartz (Bloomberg)

Molson Coors Brewing Co., the third- largest U.S. beer maker, rose 8.3 percent in New York trading because of market-share gains in Canada and the U.K. and after the company said it expects to achieve total cost savings from its joint U.S. venture with SABMiller Plc six months early. Sales to retailers in Canada climbed 3.7 percent, led by “double-digit growth“ of Coors Light, Carling and Rickard’s, the company said today. Those sales gained 0.7 percent in the U.S. In the U.K., the brewer grew market share amid a slowing economy and fewer pub visits because of a smoking ban there. An increase in sales to retailers in the U.S. and Canada and Molson Coors’s cost savings announcement helped send the shares higher in New York trading today, Brian Yarbrough, an analyst at Ed Edward Jones in St. Louis, said in a telephone interview. “We are in probably the healthiest position we could wish to be in,” Chief Executive Officer Peter Swinburn said today in a telephone interview. Molson Coors, based in Denver and Montreal, climbed $3.20 to $41.78 at 4:12 p.m. in New York Stock Exchange composite trading. The shares have lost 19 percent this year. Net income jumped 29 percent to $173.2 million, or 94 cents a share, Molson Coors said in a statement. Profit excluding some one-time costs and gains was unchanged at 95 cents from a year earlier, 2 cents lower than the average estimate of 11 analysts surveyed by Bloomberg. Revenue after excise taxes dropped 45 percent to $921.1 mi million from $1.69 billion in the three months ended Sept. 28 as Molson Coors separated its U.S. operations into the MillerCoors venture. Including the U.S. business, its worldwide beer volume rose less than 1 percent to 12 million barrels.

Canadian Sales

Beer discounts and commodity inflation hurt earnings in Canada, where sales grew by a “high-single-digit” percentage, the brewer said. Profit in the country fell 8.1 percent to $151 million before taxes as the cost of goods sold rose 7 percent because of higher material, packaging material and fuel prices. Earnings in the U.K. climbed 19 percent before taxes, helped by new contracts with suppliers and lower pension costs. Sales volume declined and a 7 percent drop in the pound against the dollar trimmed profit, Molson Coors said. As commodity costs begin to slow, Molson Coors may be well positioned to boost profit, said Yarbrough, who recommends investors buy the shares.

MillerCoors Venture

Earlier today, MillerCoors reported third-quarter profit increased 15 percent to $168.2 million on sales gains of 1.9 percent, helped by purchases of Coors Light. It was the first period of joint operations. MillerCoors will cut “a lot” of jobs in the coming weeks, the unit’s executives said on a Webcast discussing earnings. The venture is the second-biggest U.S. beer company behind Anheuser- Busch Cos. and holds 30 percent of the country’s beer market. In June, Molson Coors and SABMiller joined their U.S. divisions and said they expect to save $500 million over three years from the combination. The brewer said today it anticipates accelerating by six months that savings plan, with the first $50 million by June 30 and $350 million in the second year of the venture. A year earlier, Molson Coors earned $134.7 million, or 74 cents a share.

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