SABMiller plc, London, and Molson Coors Brewing Co., Denver, reported that MillerCoors’ second quarter underlying net income, excluding special items, increased 2.6 percent to $400 million compared to the second quarter of 2010. The companies attributed MillerCoors’ profit increase to positive pricing growth, favorable brand mix and strong cost management amid a challenging industry environment.
“We delivered profit growth in the second quarter despite a weakening economy combined with an array of headwinds, including record rainfall in key markets and high fuel prices, all of which dampened consumer spending on beer,” said Tom Long, chief executive officer of MillerCoors, in a statement. “But we are not satisfied with profit growth alone and we remain committed to investing behind our brands to drive volume and share growth over time.”
MillerCoors reported total net sales were in line with the prior year second quarter at $2.1 billion. For the quarter, the company’s domestic sales to retailers (STRs) decreased 2.7 percent, which MillerCoors attributed to a continued weak economic environment combined with record rainfall in key markets and high gas prices throughout the United States. Domestic sales to wholesalers dropped 3.1 percent, MillerCoors reported.
The company’s premium-light STRs were down low-single digits as Coors Light grew slightly, Miller Lite declined mid-single digits and MGD 64 decreased by double digits, the company says. It says the Coors Light Super Cold packaging that launched in May helped drive volume for the brand in the quarter.
The company’s below-premium portfolio declined mid-single digits as reduced price gaps between premium and below-premium beers drove continued trading up in the MillerCoors portfolio, the company said. Its premium-regular portfolio decreased high-single digits with a double-digit decline by Miller Genuine Draft, which was partially offset by a low single-digit increase by Coors Banquet, the company reported.
Tenth and Blake Beer Co. grew the MillerCoors Craft and Import portfolio double digits, which was driven by double-digit increases in Blue Moon and Leinenkugel’s. The company experienced success with seasonal releases, including Leinenkugel’s Summer Shandy and Blue Moon Summer Honey Wheat, it says. Import brand Peroni Nastro Azzurro also delivered good growth, MillerCoors reported.
In the second quarter, synergy savings of $18 million were delivered, which comprised of savings in procurement, corporate services and brewing materials, the company said. To date, MillerCoors’ cumulative synergies total $546 million, which surpasses the original commitment of $500 million to be achieved by June 30.
Molson Coors Brewing Co. also released its second quarter results and the company reported 5.7 percent higher net sales, a 5.7 percent decrease in net income from continuing operations and a 1.2 percent decrease in underlying after-tax income. The performance was driven by lower sales volumes, higher commodity inflation and investments in the company’s international business that were largely offset by positive pricing, continued cost reductions and favorable foreign currency movements.
The company also announced that its board of directors has approved a new program authorizing the repurchase of up to $1.2 billion of the company’s Class B common stock, with an expected program term of three years.
“In the past several years, we have continued to strengthen the company’s balance sheet, added new brands and businesses in select markets, and doubled our dividends,” said Peter Swinburn, president and chief executive officer of Molson Coors, in a statement. “The combination of substantial cash generation and cash balances now also permits us to use our cash to increase returns to shareholders through a stock repurchase program.”
