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MONTREAL - North American beer maker Molson Coors saw its shares jump Tuesday after the company's second-quarter profit beat expectations despite dismal June weather and weakened consumer demand.
The Montreal and Denver-based brewer reported that it earned US$278.4 million profit or $1.51 per diluted share for the period ended June 29. That was up from US$105.1 million or 57 cents per share a year ago after recording fewer acquisition-related items and higher sales volumes than last year.
Shares of the brewing company (TSX:TPX.B) gained five per cent to $55.49 on the Toronto Stock Exchange.
Adjusting for numerous items, Molson Coors earned US$278.6 million or $1.51 per share, up from $250.1 million or $1.38 per share a year earlier. The company was expected to earn $1.38 per share in adjusted profits, according to analysts polled by Thomson Reuters.
Worldwide sales volume in the second quarter for Molson Coors was up 20.2 per cent, while net sales were $1.18 billion, up 17.9 per cent from a year earlier — mostly as a result of a European acquisition last year.
However, Canadian sales to retailers were down 4.3 per cent and sales volume for Molson Coors Canada fell 2.6 per cent, which the company attributed to a weak Canadian market and unfavourable weather in key regions.
"I don't think that Canada is any different to the rest of North America in that consumers are still very cautious about how and when they spend," CEO Peter Swinburn said in an interview.
Still, he said the brewer improved its overall underlying earnings by double digits, driven largely by a full quarter of operations in Central Europe compared to only two weeks last year. It generated lots of cash that was in part used to pay down debt.
"So structurally the business is looking good, albeit the external environment remains challenging."
Mark Swartzberg of Stifel Nicolaus said Molson Coors beat expectations on a lower tax rate in Canada despite weaker revenues. The effective Canadian tax rate was lowered by five percentage points following legislative changes during the quarter.
"We consider the underlying 'meet' a positive, given market expectations of negative revisions on second-quarter results and a higher-than-usual discount to peers," he wrote in a report.
In Canada, underlying pretax profits were $138 million, down 0.7 per cent, but up slightly in Canadian dollars.
Overall, the company's revenues were up 23 per cent to US$1.2 billion due primarily to the StarBev acquisition in Central and Eastern Europe.
The industry has shown signs of weakness in the quarter with shipments continuing to fall, hurt by consumer drinking changes and poor weather.
Molson Coors gained some market share in the value beer segment, but its Coors Light brands suffered a weaker quarter.
Swinburn said the company is addressing a number of challenges, including tackling the craft business with the launch of Six Pints specialty beer company.
"We know what we need to do and the buttons we're pushing are giving us the results we want albeit a lot of those will take time to develop, six pints being the obvious one.
Molson is also working to harness the potential of its hockey sponsorship by preparing for the upcoming NHL season and next winter's Olympic games in Russia, which is not expected to be as large as the 2010 Games in Vancouver.
"That was on our home territory but... the hockey tie-in reinforces the whole piece which is a good bit of synergy from our point of view," he added.
In June, the brewer won a legal battle when an Ontario court granted a temporary injunction preventing Miller Brewing Co. from terminating its Canadian licensing agreement with Molson Coors until a trial can be scheduled for later this year.
The agreement covers such well-known brands as Millers Genuine Draft, Miller Lite and Miller High Life.
Miller, a subsidiary of SABMiller plc, a multinational company with headquarters in the United Kingdom, wants to develop the brands in Canada on its own and intended to terminate the agreement with Molson Coors on July 22, saying it had given the required six-month notification.
Molson Coors has a portfolio of more than 65 strategic and partner brands, including Coors, Coors Light, Molson Canadian, Carling, Blue Moon, Keystone and Rickard's.
The Molson Coors Brewing Co. was formed in 2005 following the merger between North American family-run breweries Molson Inc. and the Adolph Coors Company.
It employs 15,000 people at 18 breweries and has operations in more than 30 countries.
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