November 3/London/London Stock Exchange Aggregated Regulatory News Service (ARNS) -- SABMiller plc and Molson Coors Brewing Company reported MillerCoors' underlying earnings grew at a double digit rate driven by strong cost management and net pricing, which were offset by soft volumes due to a sluggish U.S. beer market in the third quarter ended September 30, 2010.
MillerCoors' third quarter underlying net income, excluding special items, increased 36.7% to $334 million versus the prior year comparable quarter last year.
"It is still a tough market environment, but we are encouraged by our recent premium light trends and the continued strong momentum of our Tenth and Blake portfolio," said Leo Kiely, chief executive officer, MillerCoors. "We successfully achieved positive net revenue growth for the quarter, and we delivered on our commitment to take our synergy and other cost savings to the bottom line. Investing behind innovation on our focus brands was also key to our success this summer."
Key operating results for the third quarter are compared to the prior year comparable quarter and include MillerCoors operations in the U.S. and Puerto Rico.
Third Quarter Highlights
(All amounts are in U.S. dollars and calculated in accordance with U.S. GAAP, unless otherwise indicated.)
* Underlying net income (excluding special items) increased 36.7% to $334 million;
* Total net revenue increased 0.3% to $2.016 billion;
* Domestic net revenue per barrel (NRPB), excluding contract brewing and company-owned distributor sales, increased 2.4%;
* Cost of goods sold per barrel decreased 0.3%;
* Synergies and other cost savings were $83 million, bringing cumulative synergies and cost savings (including legacy cost savings programs) to $564 million since July 1, 2008.
MillerCoors' domestic sales-to-retailers (STRs) declined 4.0%. Domestic sales-to-wholesales (STWs) declined 2.7% in the third quarter.
Third Quarter Brand STR Highlights
In the Premium Light portfolio, both Coors Light and Miller Lite volumes were down low-single digits. Notably, Miller Lite trends have continued to stabilize since the launch of the Miller Lite Vortex bottle. MGD 64 declined at a double-digit rate.
The Tenth and Blake Craft and Import portfolio grew double-digits in the quarter, driven by double-digit-growth of Blue Moon and high-single-digit-growth of Leinenkugel's resulting from our recent "craft beer can" innovation and the success of seasonal brews. The Premium Regular and smaller domestic Above Premium portfolios experienced double-digit declines.
The Below Premium portfolio was down mid-single digits due to declines in Miller High Life and Milwaukee's Best. Keystone Light volumes were level with the prior year.
Third Quarter Financial Highlights
Total company net producer revenue per barrel increased in the third quarter by 3.3% to $112.53 driven by domestic revenue growth. Excluding contract brewing and company-owned distributor sales, domestic net revenue increased to $1.867 billion, with NRPB up 2.4%, driven by firm net pricing and favorable sales mix. Third-party contract brewing volumes were down 4.8%.
Third quarter cost of goods sold (COGS) per barrel decreased slightly (0.3%) versus the prior year primarily due to procurement synergies realized across the supply chain.
Marketing, general and administrative costs decreased 9.8%, largely due to synergies and other cost savings realized.
Depreciation and amortization expenses for MillerCoors in the third quarter were $72 million, and additions to tangible and intangible assets totaled $50 million.
Special items for the quarter totaled $21 million in special charges, $6 million higher than in the prior year, driven largely by pension and post-retirement benefit curtailment expenses, and integration costs including severance costs resulting from the sales office reorganization.
Integration, Synergies and Cost Savings
In the third quarter, MillerCoors successfully completed initial product transitions within its national brewery network. The company will continue to focus on further network optimization through peak/non-peak season sourcing changes, as well as opportunities for increased efficiencies.
MillerCoors remains on track to deliver $750 million in total synergies and other cost savings by the end of 2012. In the third quarter, MillerCoors delivered total cost reductions of $83 million comprising $56 million in synergies and $27 million in additional cost savings. These cost reductions were primarily realized from agency fees, media, regional tactical spending, inbound and outbound freight; and packaging and brewing materials.
Total annualized synergy and other cost savings since July 1, 2008, now stand at $564 million, made up of $50 million in Resources for Growth (RFG) and Unicorn cost initiatives, $445 million in synergies and $69 million in additional cost savings.
From the November 4, 2010, Prepared Foods' Daily News
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