February 12, 2008 / 1:57 PM / in 10 years

UPDATE 4-Molson Coors profit tops view; shares jump

(Adds company comments, details on costs and savings outlook)

By Martinne Geller

NEW YORK, Feb 12 (Reuters) - Molson Coors Brewing Co (TAP.N) reported much higher-than-expected quarterly profit on Tuesday, boosted by cost savings and strong beer sales in the United States, helping to send its shares up 9.5 percent.

The maker of Molson Canadian and Coors Light, whose shares had lost nearly 11 percent over the past month, said fourth- quarter net income rose about 75 percent to $173.2 million, or 95 cents per share, from $99.2 million, or 57 cents per share, a year earlier.

Excluding special items, the company earned 73 cents per share, handily topping analysts’ average estimate of 64 cents, according to Reuters Estimates.

“I think we surprised people by actually building momentum right through the fourth quarter (which) really reflects the strength of the core business,” Kiely told Reuters, also pointing to a sales growth rate that outpaced the industry, a gain in Canadian market share and aggressive cost cuts.

Goldman Sachs analyst Judy Hong said the quarter’s big surprise was the magnitude of cost savings at its U.S. and European divisions.

Overall marketing, general and administrative expenses were 3.3 percent lower in the quarter, as aggressive cost controls in Europe led to a 13 percent decline there.

The U.S. business saw $21 million in cost savings, the company said.

Currency fluctuations also aided quarterly income by $12 million, the company said. The weak dollar boosts the value of international sales when they are converted to dollars for inclusion on the company’s income statement.

During 2007, the company saved more than $146 million, including $91 million in cost cuts and $55 million in merger synergies from the 2005 combination of Canada’s Molson Inc with U.S. rival Adolph Coors Co.

These cuts helped the world’s seventh-largest brewer by volume offset more than 80 percent of the $175 million it had to spend last year in higher costs for fuel and commodities like grain and aluminum.

The company said it expects cost inflation to continue in 2008, with costs per barrel of beer rising at a low single-digit rate in Canada and the United States.

The company, which is expecting regulatory approval by the summer for its proposal to combine U.S. operations with those of larger rival SABMiller Plc SAB.L, said it expects an incremental $77 million in cost cuts for 2008.

OPERATIONS

Net sales rose 4.5 percent to $1.6 billion even though sales volume fell 3.7 percent to 10.5 million barrels, due to one less selling week in the latest fiscal quarter.

Net sales per barrel rose 8.5 percent to $153, the company said, citing price increases.

Sales from wholesalers to retailers rose 1.5 percent, as increases of 5.5 percent in the United States and 0.7 percent in Canada offset a 6 percent decline in Europe.

Business in the United States was strong as cost savings, higher volume and pricing helped offset higher costs for commodities such as grain and aluminum.

U.S. sales of Coors Light rose at a mid single-digit rate, with strong double-digit growth of Blue Moon and low double-digit growth of Keystone Light, the company said.

In an interview, CEO Kiely said Molson’s business has not been impacted by a slowdown in spending by U.S. consumers and that he expects the U.S. beer industry as a whole to weather it well.

UBS analyst Kaumil Gajrawala, who was expecting strong U.S. results, said performance was ahead of his expectations, “indicating continued momentum in the core business.”

Gajrawala has a “Buy” rating on Molson shares. It remains one of his top picks in the U.S. beverage sector, due mostly to what he sees as future catalysts -- a March analyst meeting where Molson could announce a share buyback or dividend increase and the anticipated approval to form what will be called MillerCoors.

Molson shares closed up $4.30, or 9.5 percent, at $49.66 on the New York Stock Exchange trading. (Reporting by Martinne Geller; Editing by Andre Grenon/Leslie Gevirtz)

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