Global brewer Molson Coors Brewing Company (TAP) reported fourth quarter and full year 2013 results. Adjusted earnings of 68 cents in the fourth quarter missed the Zacks Consensus Estimate of 72 cents per share by 5.6%. The results also declined 1.4% from the prior-year earnings of 69 cents per share due to lower sales.
Revenues and Operating Profits
Net sales, including excise tax, declined 0.2% to $1.03 billion in the fourth quarter, due to unfavorable foreign exchange. Sales however beat the Zacks Consensus Estimate of $1 billion.
Sales volume increased 2.3% year over year to 7.06 million hectoliters but declined 21.2% sequentially due to weak consumer demand across all markets owing to macro-economic headwinds. Total worldwide beer volume increased 0.1% to 14.1 million hectoliters, but was lower than 17.0 million hectoliters in the sequentially preceding quarter.
Underlying (excluding special and other non-core items) pre-tax income increased 6.5% year over year to $163.9 million in the fourth quarter of 2013, driven by improved performance in the U.S. and Europe and lower underlying interest expense. Currency did not impact fourth quarter underlying pre-tax income.
Segment Details
The company operates through the following geographical segments.
Canada: Molson Coors Canada net sales declined 1.7% to $463.3 million in the quarter, despite a 2.4% increase in sales volume. The segment reported underlying pretax income of $86.9 million, down 14% from the prior-year quarter due to weak consumer demand and a weaker Canadian dollar compared to the U.S. dollar. On a constant currency basis, underlying pretax income declined 9.0%.
United States (MillerCoors): MillerCoors’ net sales increased 1.0% to $1.08 billion in the fourth quarter of 2013. MillerCoors’ underlying net income increased 30.2% to $241.9 million driven by stronger pricing, brand mix and cost reductions, partially offset by the impact of higher commodity costs and lower volumes. Sales volume declined 1.8% in the quarter.
Europe: The segment includes the operations of the U.K. segment combined with the results of operations for Central Europe, excluding the Central Europe global export and license business.
The segment reported net sales growth of 0.9% to $527.8 million in the fourth quarter of 2013. Sales volume also increased 1.5%, owing to improved performance in the U.K., Romania, Hungary and the Czech Republic, which was partially offset by weak demand particularly in Serbia and Bulgaria. The segment’s underlying pretax income improved 11.8% to $39.7 million, driven by volume growth, positive pricing, lower supply chain costs and favorable currency movements.
Molson Coors International (MCI): Segment net sales declined 1.5% to $38.2 million in the quarter. Sales volume including royalty volume also declined 3.6% due to industry weakness in Ukrainian license markets and the negative impact of transferring the Carling travel and export business to the Europe segment. This decline was partially offset by strong growth in Mexico and Latin America.
The segment posted an underlying pretax loss of $5.6 million in the fourth quarter, down from an income of $0.3 million in the year-ago period due to transfer of the Carling travel and export business to the Europe segment.
Full Year 2013 Results
For 2013, Molson Coors reported adjusted earnings of $3.95 per share, missing the Zacks Consensus Estimate of $3.99 per share by 1%. Earnings however increased 1% from the prior-year earnings of $3.91 per share, owing to higher sales. Net sales, including excise tax, grew 7.4% to $4.21 billion in 2013. Sales also beat the Zacks Consensus Estimate of $4.20 billion.
Other Financial Update
During the quarter, the board of Molson Coors increased its quarterly dividend by 16%. The new dividend of 37 cents per share will be paid on Mar 17, 2014 to shareholders of record as of Feb 28.
Outlook
Molson Coors has struggled hard in the past one year owing to weak consumer demand in the face of macro-economic headwinds. We also note that Molson Coors has been struggling in terms of sales volume for the past three years. However, we believe that the company’s initiatives and increased marketing investments in its brands will drive volumes in the coming quarters.
While Molson Coors currently holds a Zacks Rank #4 (Sell), Constellation Brands Inc. (STZ) is a better-ranked stock with a Zacks Rank #1 (Strong Buy). Other consumer staple companies worth considering include Post Holdings Inc. (POST) and Hain Celestial Group Inc. (HAIN), both of them carrying a Zacks Rank #2 (Buy).
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