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Article published May 6, 2009 Molson Coors Brewing marks first Q profit rises
By Emily Fredrix The Associated Press
MILWAUKEE -- Molson Coors Brewing Co. said Tuesday its first-quarter profit more than doubled, though sales of its beers fell in its stronghold of Britain and stagnated in Canada. In the U.S., profits rose in its MillerCoors joint venture, even as sales of flagship Miller Lite continued to fall.
Chief Executive Peter Swinburn said the company is making growing Miller Lite its top priority, and that effort will start with a new marketing push touting the beer's taste. Miller Lite, which saw volume slip 4.5 percent in the most recent quarter, has been declining for the last 12 months, though Swinburn said the drops are moderating from steeper declines.
The company has been easing its discounting of Miller Lite to build its brand equity, Swinburn told The Associated Press in an interview. Now it's ready to add what Swinburn called a sizable marketing campaign."Then you can engage the consumer," he said. "Really that's a very basic, straightforward belief that we have. You've got to have strong brands in the first place."
A turnaround for Miller Lite, which leads the MillerCoors portfolio along with Coors Light, won't take place immediately, he said. But it should happen in the next 12 months as the company pushes the beer's taste and the use of three hops in the brewing process.
Molson Coors and SABMiller PLC said sales to retailers by their joint U.S. venture rose 0.4 percent in the quarter and profits rose due to higher prices and fewer promotions. The companies said they expected to see more cost-savings from the nation's second-biggest brewer, which was formed last summer, to compete against industry leader Anheuser-Busch, which later sold itself to Belgium-based InBev.
Denver-based Molson Coors, which makes brands like British top-seller Carling, said its profits rose in the first quarter as it benefited from higher prices, handily beating analyst estimates.
The company said it earned $75.7 million, or 41 cents a share, in the three months that ended in March. That compares to earnings of $34.3 million or 19 cents a share, in the same period last year -- before MillerCoors began.
Excluding one-time charges, Molson Coors earned 53 cents per share, higher than the 33 cents predicted by analysts, according to Thomson Reuters.
Net sales -- total sales less excise taxes -- were $559 million in the quarter, down from last year's $1.36 billion. But last year's figure includes the U.S. business which has since joined up in the MillerCoors venture. Analysts expected revenue of about $568 million.
Investors were buoyed by the earnings beat. Shares of Molson Coors rose $3.67, or 9.5 percent, to close at $42.17 on heavy volume Tuesday.
Deutsche Bank-North America analyst Marc Greenberg wrote to clients that the better than expected earnings should be received well, "given concerns regarding Canada, currency and chronic U.K. weakness."
The company said volumes dropped 13.8 percent in Britain and were flat in Canada as cash-strapped consumers pulled back on their spending. Worldwide, the volume of beer sold fell 2.7 percent. Coors Light posted a 4 percent volume increase from the same year as the brand continued to make inroads around the world.
In Britain, Molson Coors said its volume loss outpaced an industrywide decline of 8 percent, as the company takes what it called a "firm stand" on pricing there. It is also resisting promotions in Canada, it said, as it seeks to protect the images of its brands and the strength of its business.
Swinburn said he remained "cautious" about the rest of the year because of the strong dollar, volatile commodity price inflation and the possibility that consumer demand for its beer could drop.
The strong dollar is dragging on international sales for U.S. companies as they are translated from local currencies into the dollar. Molson Coors said that in the first quarter foreign currency movements hurt its pretax income by $9 million.
In the MillerCoors business in the U.S., revenue rose 4 percent in the quarter to $1.72 billion from $1.65 billion.
First-quarter profit rose 51 percent as sales of Coors Light and other brands were helped by higher prices and fewer promotions. MillerCoors earned $206 million for the period ended March 31 compared with a year-ago pro forma profit of $136.6 million.
Excluding employee relocation and retention costs, net income was $216.4 million.
MillerCoors is seeing heightened cost savings and boosted its expectations through 2009 for savings of $238 million, up from $225 million as it originally predicted.
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AP Business Writer Vinnee Tong in New York contributed to this report.