* Q2 adj EPS $1.25 tops Wall Street view for $1.20/shr
* Q2 sales up 11 pct to $883.3 mln; tops Street estimate
* Volume down 0.7 pct
* Shares up 1.3 pct (Adds CEO comments from interview)
By Martinne Geller
NEW YORK, Aug 3 (Reuters) - Molson Coors Brewing Co (TAP.N) posted a higher-than-expected profit, helped by cost cuts and higher U.S. beer prices, and expressed optimism that improvements in the U.S. market would continue.
U.S. beer industry sales trends improved in the second quarter from the first quarter, the company said.
“Our industry volumes remain soft and we expect 2010 to be a difficult year for the industry,” said Molson Chief Executive Officer Peter Swinburn on a conference call. But he added that “recent trend improvements do give us grounds for cautious optimism moving forward.”
Swinburn said that in the first month of the current third quarter, sales to retailers rose at a mid-single-digit rate in Canada, but fell at a double-digit rate in the United Kingdom and at a low single-digit rate in the United States.
He said performance in Canada and the United States has been largely in line with that of the second quarter, and the weakness in Britain related to pubs going through their existing inventories after stocking up for the World Cup soccer tournament.
In the United States, Swinburn said sales have improved in critical areas such as restaurants and convenience stores, and consumers are slowly beginning to spend more on beer.
“More people are beginning to come into the category; those people in the category are beginning to trade up,” Swinburn told Reuters in an interview. “It’s very gradual, but we’re cautiously optimistic.”
Molson Coors, which makes beers such as Coors Light, Molson Canadian and Blue Moon, said net income rose to $237.2 million, or $1.27 per share, in the second quarter, from $187.3 million, or $1.01 per share, a year earlier.
Excluding items, Molson earned $1.25 per share, topping analysts’ average estimate of $1.20 per share, according to Thomson Reuters I/B/E/S.
The company said foreign currency fluctuations boosted its underlying profit by $11 million.
Net sales rose 10.6 percent to $883.3 million, compared with a Wall Street forecast of $876.3 million.
The company’s volume of beer sold declined 0.7 percent from the year-earlier period, due to a weak U.S. economy, offset partially by increases in Canada, Britain and international markets.
Volume in Canada was up 2.6 percent, but sales to retailers — a closer gauge of consumer demand — rose 2.2 percent, topping Stifel Nicolaus analyst Mark Swartzberg’s estimate.
“Molson Coors is known for earnings volatility versus Street estimates, and one beat does not a trend make,” Swartzberg said in a research note. “But we believe estimates are likely to go higher on this result and view the North America trends as a sign of stable-to-improving industry conditions.”
Separately, MillerCoors, the combined U.S. operations of SABMiller Plc SAB.L and Molson Coors, said its net income rose by nearly 20 percent. [ID:nLDE6711LC]
MillerCoors posted a 2.8 percent rise in net revenue per barrel, as it sold beer at higher prices — “a very positive sign for the U.S. beer market,” according to UBS analysts.
“U.S. pricing remained strong,” said UBS analyst Kaumil Gajrawala. “We expect continued, positive MillerCoors trends through the summer with improving volumes and rational pricing.”
Americans are drinking alcohol at the highest rate in 25 years, according to a Gallup poll. [ID;nN02112921]
Molson shares rose 1.3 percent to $46.59 on the New York Stock Exchange. (Reporting by Martinne Geller; editing by Gerald E. McCormick and Gunna Dickson)