November 5, 2008 / 5:25 PM / 9 years ago

UPDATE 3-Molson Coors Q3 profit rises on market share gains

* Q3 adjusted EPS of 95 cents meets Wall St view

* Sees MillerCoors venture savings earlier than expected

* Says it’s behind 5 pct stake in Foster’s

* Shares gain 8.3 percent (Recasts, adds comments from CEO, analyst, byline)

By Martinne Geller

NEW YORK, Nov 5 (Reuters) - Molson Coors Brewing Co TAP.N posted a higher profit and said savings from its U.S. joint venture with SABMiller Plc SAB.L are being realized faster than expected, assuring investors that the deal will pay off.

Molson also said on Wednesday it was behind the purchase of a 5 percent stake in Australian brewer Foster’s Group FGL.AX via Deutsche Bank.

The stake “was available to us as an attractive price and it represents a prudent and appropriate level of exposure,” said Molson Chief Executive Peter Swinburn in a conference call. “This is an interesting market we’ve been studying for some time.”

Molson said it will continue to review its position in Foster‘s.

Molson combined its U.S. business with that of SABMiller in June and promised $500 million in cost savings from the MillerCoors venture.

As long as the entity’s revenue holds steady, analysts said the savings will leave Molson more free cash to battle a combined InBev INTB.BR and Anheuser-Busch BUD.N, whose $52 billion merger is due to close by the end of the year.

“This isn’t a topline story, it’s an earnings story,” said Morningstar analyst Ann Gilpin about the combination, which may not boost revenue, but benefits the companies by giving them scale and cost-savings opportunities.

Shares in Molson rose 8.3 percent.

“You’re in an economy where people are trading down to lower-priced beers, but you can’t count on that all the time,” Gilpin said. She noted that Molson’s sales in Canada were disappointing while sales in Britain were surprisingly good -- falling less than half as much as the wider industry.

Brewers have struggled in Britain as tax increases, public smoking bans and a weak economy have affected many pub-goers, who are now drinking at home instead.

“The beer industry is a good industry to be in in times like this because it is largely counter-cyclical,” said Molson CEO Peter Swinburn in an interview.

Molson has very little debt and none coming due before 2010, he noted.

“Really, given the external world, we are not exposed at all and that really is an excellent place to be,” Swinburn said.

STRENGTH HIGH AND LOW

The maker of Coors Light and Molson Canadian beer reported that third-quarter net income rose to $173.2 million, or 94 cents per share, from $134.7 million, or 74 cents per share, a year ago.

Underlying profit, excluding items, was 95 cents per share, in line with analysts’ average estimate, according to Reuters Estimates.

Net sales fell 45 percent to $921.1 million, while sales by volume fell 58 percent to 4.6 million barrels. The company cited the transfer of all U.S. beer sales to MillerCoors, in which Molson has an equity stake.

Including volume from the joint venture, total worldwide beer volume rose 0.2 percent to 12 million barrels.

Sales to retailers, which more closely measure consumer demand, rose 0.7 percent in the United States for MillerCoors. Molson said sales to retailers were up 3.7 percent in Canada and fell 3.1 percent in Britain, outperforming the wider industry in both regions.

Sales to retailers of Coors Light rose at a strong single-digit rate in the quarter, while the less expensive Keystone Light and the more expensive Blue Moon both had double-digit sales growth.

The company said MillerCoors plans to deliver $50 million of cost savings in the first year of combined operations, which will end June 30, 2009.

The company said it is also on track to deliver $350 million of savings in the second year, and the remaining $100 million of its promised $500 million in the third year. That is 6 months ahead of schedule.

Molson, whose shares have tumbled 34 percent over the past five months, jumped $3.20 to $41.78 on Wednesday. (See here for "Shop Talk" -- Reuters' retail and consumer blog) (Editing by Jeffrey Benkoe, Phil Berlowitz)

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