August 2, 2011 / 2:33 PM / 6 years ago

UPDATE 4-Molson profit misses; share buyback announced

* Q2 adjusted EPS $1.23 vs Wall St estimate $1.30

* Net sales $933.6 mln vs Street estimate $953.6 mln

* Announces $1.2 billion stock repurchase program

* Shares fall 1.2 percent in afternoon trading (Adds comments from CEO interview)

By Martinne Geller

NEW YORK, Aug 2 (Reuters) - Molson Coors Brewing Co (TAP.N) reported lower-than-expected quarterly results on Tuesday as high gasoline prices and unemployment hurt beer sales.

The maker of Coors Light, Molson Canadian and Blue Moon beers also announced a $1.2 billion share repurchase program, which probably pleased investors who want the company to do something with its cash.

“For years, investors have agitated for any share repurchase,” Stifel Nicolaus analyst Mark Swartzberg said in a research note.

Molson shares were down more than 1 percent in afternoon trading.

As with many food and beverage makers, the economy and higher gas prices have hurt Molson Coors’ sales because people are spending less money on items like beer at convenience stores and gas stations.

On top of that, many beer drinkers are young men, a group acutely hurt by high unemployment.

The economy, higher ingredient costs and international investments offset benefits from price increases on beer, cost cuts and favorable foreign exchange rates, said Molson Coors Chief Executive Officer Peter Swinburn.

“The biggest thing continues to be the weak volumes,” said Edward Jones analyst Brian Yarbrough. “They can’t get any volume traction in the U.S.; they can’t get any traction in Canada.”

After Molson Coors combined its U.S. operations with those of SABMiller PLC SAB.L in July 2008 to form the MillerCoors joint venture, earnings were driven largely by cost cuts, Yarbrough said.

“Now they’re running out of cost savings, and they really need to show some volume growth, and we’re really not seeing that yet,” Yarbrough said.

GROWING INTERNATIONALLY

Second-quarter net income fell to $222.8 million, or $1.18 per share, from $237.2 million, or $1.27 per share, a year earlier.

Excluding special items, earnings were $1.23 per share. Analysts on average were expecting $1.30, according to Thomson Reuters I/B/E/S.

Net sales rose 5.7 percent to $933.6 million, below analysts’ expectations of $953.6 million.

The company sold 2.8 percent less beer in the quarter.

In Molson Coors’ still-small international business, sales volume jumped 54 percent, helped by a joint venture in China and the expansion of Carling beer in new markets such as Ukraine. The company also recently announced a joint venture in India.

“We have progressed more quickly than we expected, and we’re pleased with the way that’s growing,” CEO Swinburn told Reuters.

Revenue also benefited from price increases in the United States and Canada, and the company selling a greater proportion of higher-priced beers, such as Leinenkugel’s Summer Shandy.

Sales from wholesalers to retailers, a key gauge of consumer demand, fell 4.2 percent in Canada, 2.7 percent in the United States and 5.7 percent in Britain, because of strong sales a year earlier related to the World Cup.

Besides international expansion, the company is trying to improve results by boosting sales in its core developed-market businesses and is eyeing acquisitions.

Still, Swinburn said the most important factor in improving performance will be the economy.

“There’s no doubt that would be the major driver certainly, the unemployment rate, but we’re not just sitting back waiting for that to happen,” Swinburn said.

Molson shares were down 1.2 percent at $44.11 on the New York Stock Exchange. (Editing by John Wallace, Lisa Von Ahn and Robert MacMillan)

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