DENVER & MONTREAL-Molson Coors Brewing Company (NYSE: TAP; TSX: TPX) today reported results for the 2018 third quarter. Molson Coors president and chief executive officer Mark Hunter said:
“In the U.S., brand volumes or STRs were below industry volumes. As we have indicated, improving our volume performance in the U.S. is a priority and the first step is to improve our share performance through Coors Light and accelerated premiumization of the portfolio. ”
"This quarter reflects progress on a number of fronts as we drive our consistent First Choice strategy of earning more, using less and investing wisely as brand volume grew in developed and developing markets outside of North America, NSR/HL grew globally, and we grew underlying EBITDA in constant currency in each of our four business units."
Mark continued, "The volume growth we are seeing outside North America is driven by consistency of our First Choice strategy, the breadth and depth of our global brand portfolio and a positive industry. Europe, our second largest business unit by volume, is growing consistently and accelerating the pace of portfolio premiumization while our International business unit, led by the Latin American markets, posted mid-teens growth due to the strong performance of our global brands, led by Coors Light and the Miller Trademark brands of MGD, Miller Lite and Miller High Life.
"In the U.S., brand volumes or STRs were below industry volumes. As we have indicated, improving our volume performance in the U.S. is a priority and the first step is to improve our share performance through Coors Light and accelerated premiumization of the portfolio.
"Additionally, across Molson Coors we are over delivering on our synergy and cost savings program to counter higher than anticipated commodity inflation and maintain our deleverage commitment and dividend plan."
Quarterly Highlights (versus Third Quarter 2017 Results)
- Net sales: $2.9 billion, increased by 1.8 percent, driven by positive global net pricing in all segments, higher financial volume in Europe, U.S. and Canada and favorable mix in Europe, partially offset by unfavorable foreign currency movements and the adoption of the new revenue recognition accounting standard (discussed in the Appendix below). Net sales in constant currency increased 2.5 percent.
- Net sales per HL: $110.67 on a reported financial-volume basis, increased 0.9 percent. Net sales per HL on a brand volume basis(1) in constant currency increased by 0.4 percent, driven by positive global net pricing as well as favorable mix in Europe, partially offset by the adoption of the new revenue recognition accounting standard.
- Volume: Worldwide brand volume of 25.3 million hectoliters decreased 1.0 percent driven by declines in the U.S. and Canada, partially offset by growth in Europe and International. Financial volume of 26.5 million hectoliters increased 0.8 percent, driven by Europe, U.S. and Canada. Global priority brand volume decreased 1.4 percent.
- U.S. GAAP net income attributable to MCBC increased 17.9 percent, driven by higher net sales, a net benefit to U.S. MG&A resulting from the amicable resolution of a dispute with a vendor, global marketing optimization, cost savings to manage inflationary pressure, partially offset by higher special charges and unrealized mark-to-market changes on commodity positions. This performance further benefited from lower income tax expense driven by the reduction to the U.S. federal income tax rate and discrete tax benefits.
- Underlying net income increased 34.4 percent, driven by the same factors as U.S. GAAP results with the exception of special charges and unrealized mark-to-market changes.
- Underlying EBITDA: Increased 9.9 percent on a reported basis and increased 11.1 percent on a constant-currency basis, driven by higher net sales, a net benefit to U.S. MG&A resulting from the amicable resolution of a dispute with a vendor, global marketing optimization, and cost savings to manage inflationary pressures.
- U.S. GAAP cash from operations: Net cash provided by operating activities for the first three quarters of 2018 was approximately $1.8 billion, which represents an improvement of $646.0 million from the prior year, driven by the $328 million cash payment received in January 2018 related to the receipt of a purchase price adjustment for our acquisition of the Miller International business, as well as lower cash paid for pension contributions and lower interest paid.
- Underlying free cash flow: cash received of $1.0 billion for the first three quarters, which represents an increase of $189.0 million from the prior year, driven by lower cash paid for pension contributions and lower interest paid, partially offset by lower underlying EBITDA and higher cash paid for capital expenditures.
- Debt: During the third quarter, we repaid our CAD 400 million 2.25% notes with cash on hand as part of our deleverage commitment resulting in total debt and cash and cash equivalents of $10.6 billion and $750.1 million, respectively, or net debt of $9.8 billion, at the end of the third quarter of 2018.
(1)
Brand Volume Basis NSR/HL: Effective in the first quarter of 2018, we have revised our net sales revenue (NSR) per HL performance discussions to be on a brand volume basis, with all per-hectoliter calculations including owned and actively managed brands, along with royalty volume, in the denominator, as well as the financial impact of these sales in the numerator, unless otherwise indicated. See Appendix for definitions.
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