(Adds executives’ comments)
By Martinne Geller
NEW YORK, May 6 (Reuters) - Molson Coors Brewing Co (TAP.N) posted a better-than-expected quarterly profit on Tuesday as volume gains and price increases offset rising commodity costs, sending its shares up nearly 8 percent to a six-month high.
The maker of Molson Canadian and Coors Light beer said net income in the first quarter ended March 30 jumped to $37.1 million, or 20 cents per share, from $4.4 million, or 3 cents per share, a year earlier.
Excluding special charges of $7.3 million and one-time debt extinguishment costs of $12.4 million, the company earned 32 cents per share. On that basis, analysts, on average, were expecting 26 cents per share, according to Reuters Estimates.
Goldman Sachs analyst Judy Hong said results were strong across the board, with impressive sales growth, solid pricing and cost savings ahead of expectations.
“We expect the solid underlying volume and pricing performance to dispel concerns about the competitive outlook,” Hong said, adding that she expects momentum in the company’s portfolio, which includes Coors Banquet, Keystone and Blue Moon, to continue despite improved sales trends for rival Anheuser-Busch Cos Inc (BUD.N).
The company said its underlying tax rate was 2 percent in the latest quarter, down from 21 percent a year ago.
The weakness of the U.S. dollar versus other currencies added $4 million to Molson’s profit.
Net sales rose 10.4 percent to $1.36 billion, as sales per barrel rose 7.4 percent and sales by volume rose about 3 percent to 9.1 million barrels.
Volume to wholesalers rose 7.4 percent in the United States and 1 percent in Britain, but fell 8.6 percent in Canada due to a distribution contract change. Excluding that change, Canadian volume rose slightly.
“The brand portfolio continued to drive growth across all of our markets and that’s how you make money in beer,” Molson Chief Executive Leo Kiely said in an interview.
Analysts were expecting the UK to post a sales decline as recent public smoking bans has been keeping many would-be pub goers at home. But the latest quarter’s UK sales were buoyed by the earlier Easter holiday and an increase in purchases ahead of a major tax increase.
Overall sales to retailers, a closer measure of consumer demand, rose 4.6 percent with a 6.6 percent gain in the United States and a 2.5 percent gain in Canada.
The U.S. beer industry is suffering this year, said Coors CEO Peter Swinburn, as cash-strapped consumers cut down on going out to bars and restaurants.
“We are not reflective of that,” Swinburn said in an interview. “At the moment we are not evidencing any trading out or trading down in our portfolio.”
For example Molson’s most expensive brew, Blue Moon, is still growing at high double-digit rates as it did last year, Swinburn said, while at the low end, Keystone Light is growing at low double-digits as it was last year.
UBS analyst Kaumil Gajrawala reiterated his “buy” rating on Molson shares based on continued U.S. strength despite an industry slowdown in March, improving volume trends in Canada and Britain, solid cost savings and likely approval for its MillerCoors joint venture this month.
Molson Coors, the world’s sixth-largest brewer by volume, is waiting for antitrust regulators to approve its proposal to combine its U.S. operations with those of larger rival SABMiller Plc SAB.L.
Total cost of goods sold per barrel rose 5.5 percent, due mostly to rising costs for fuel and aluminum for cans.
The U.S. business saw its costs per barrel rise by only 1.6 percent, as the higher transportation and packaging material costs were partially offset by cost-saving initiatives.
Molson said it achieved about $29 million in cost reductions in the quarter as part of its three-year, $250 million cost-cutting plan.
Molson shares, which had fallen 5 percent from April 24 through Monday’s close, were up $3.60, or 6.8 percent, at $56.76 on the New York Stock Exchange. They rose as high as $57.65 earlier in the session. (Editing by Brian Moss and Braden Reddall)