USA: Molson Coors Brewing Company recorded higher consolidated net sales and a net loss in Q1 2005

Molson Coors Brewing Company announced on April 28 higher consolidated net sales and sales volume for the first quarter of 2005 compared to the first quarter of 2004, but reported a net loss in the 2005 first quarter. The net loss was primarily attributable to lower sales volume in key markets versus a year earlier and special charges related to the recent Molson Coors merger totaling $40.7 million in the first quarter of 2005.

The company's 2005 first quarter results include the business of Molson Inc. following the completion of the merger on Feb. 9, 2005, compared to the first quarter of 2004, which includes only the results of the former Adolph Coors Company. The company's reported consolidated sales volume and net sales increased in the 2005 first quarter compared to the first quarter 2004 due to the combination of the Molson and Coors businesses.

For the 13-week first quarter ended March 27, 2005, the merged company reported net sales of $1.1 billion and sales volume of 8,094,000 barrels, or 9,497,985 hectoliters (HLs). The company reported a net loss of $46.5 million, or $0.74 per share, during the 2005 first quarter. Excluding special items, the company reported an after-tax loss of $5.1 million during the 2005 first quarter.

Leo Kiely, Molson Coors president and chief executive officer, said, "The common underlying cause for difficult first quarter results was the lack of volume growth in each of our major markets. While disappointing, this performance reinforces the importance of integrating the operations and organization of the combined company, so we can capitalize on our new strengths and build an even more competitive and profitable global enterprise.

"Our synergy work is well underway, and since the completion of the merger on Feb. 9, we have taken major steps to establish our new leadership team. As we now head into our key selling season in our biggest markets, we are focused on driving volume and market share growth this summer."

Pro forma Canada segment net sales were $297 million, down from $303 million in the first quarter of 2004. Pro forma sales volume of 1,570,000 barrels (1,842,330 HLs) was down from 1,691,000 barrels (1,984,320 HLs) a year ago. Canada segment pro forma sales to retail were down 4.8 percent during the first quarter 2005 compared to a year ago largely due to declines in the overall market for premium brands such as Molson Canadian and Molson Dry. Coors Light sales to retail in Canada grew at a low-single-digit rate during the quarter. Canada segment pro forma pretax income decreased 44 percent in the first quarter of 2005 from the prior year.

Kiely added, "We have a number of initiatives underway in Canada to regain volume momentum, including fully integrated marketing programs and strategies as evidenced by significantly increased investment in new advertising copy and product news, such as Molson Kick and Molson Canadian Sub Zero."

In the first quarter 2005, pro forma net sales in the U.S. segment decreased 2 percent from the first quarter a year ago. The company's U.S. business faced continued softness in the beer industry, aggravated by increased interest in spirits brands, especially in on-premise channels. The company's U.S. business also faced significant cost pressures, primarily continued industry-wide increases in freight and packaging-material rates, as well as the de-leveraging of fixed costs due to the lower sales volume, partially offset by continued progress on cost saving and productivity initiatives in U.S. operations. Pro forma U.S. pretax earnings decreased 35 percent from a year earlier.

Excluding a special charge of $7 million pretax, primarily merger-related costs, pro forma pretax earnings would have declined 3 percent to $23 million.

"A slight decline in our U.S. sales to retail reflects weak industry volume conditions," Kiely added. "Nevertheless, we are heading into our peak season in the U.S. with a focus on regaining volume growth on Coors Light with continued success in key channels, such as our gains in chain accounts and improvements in Hispanic markets, new advertising copy -- which has been well received among our U.S. distributors -- as well as product and packaging innovations directed at adding focused excitement for the key summer selling season."

In the first quarter 2005, Europe segment net sales decreased 17 percent from the first quarter of 2004. Sales volume decreased 6.0 percent versus a year ago. Excluding special charges, the company reported a $7 million pretax loss in Europe for the 2005 first quarter.

"The U.K. beer industry as a whole was impacted negatively by very weak consumer demand," Kiely said. "In addition, our off-trade business in the U.K. lapped a substantial inventory build in the first quarter last year in advance of an excise tax increase, and in the on-trade, our major competitors are responding aggressively with product entries in the 'extra cold' beer category due to the success of Carling Extra Cold.

"Though, as in our U.S. and Canada segments, the first quarter is the smallest quarter of the year for our U.K. business, we are working to re-establish volume momentum with expanded distribution in key multiple on-trade accounts. We're also increasing distribution through entry into new markets, such as our recent introduction of Coors Fine Light Beer in Russia."

Pro forma Brazil segment net sales during the first quarter increased 11 percent from the first quarter of 2004. Pro forma sales volume of 2,212,000 barrels (2,595,700 HLs) declined 7.1 percent versus a year ago. Sales for the portfolio's lead brand, Kaiser, which accounts for more than three quarters of the company's Brazil business sales, decreased at a low-single-digit rate. Excluding special charges, the Brazil segment reported a first quarter pro forma pretax loss of $18 million, compared to a loss of $16 million in the same period a year ago.

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .