World: Molson Coors reports 2018 results

Molson Coors Brewing Company reported on February 12 its results for the 2018 full year and fourth quarter.

Molson Coors president and chief executive officer Mark Hunter said:

"We accomplished much in 2018, delivering strong free cash flow and meeting our deleverage commitments, restoring underlying EBITDA growth in the quarter and second half, premiumizing our portfolio across regions including launching Truss our Canadian cannabis beverage JV, scaling volume and profitability in our fast growing International business and continuing to strengthen our European business. Through the year we further scaled our cost saving program which insulated us in part from the effects of weaker industry demand in North America, higher than anticipated input inflationary pressures and challenges associated with the implementation of our U.S. brewery supply chain system."

Mark continued, "We enter 2019 with a U.S. commercial plan focused on mix and share improvement that is fully resourced and showing early signs of impact against Coors Light, a commercial strategy that is working in Europe and International and continually improving commercial trends in Canada. We are focused on further strong free cash flow delivery and deleverage supported by more than $200 million of cost savings in 2019 and further $450 million across 2020 - 2022. We remain committed to our plan to reinstitute a dividend payout-ratio in the range of 20-25% of annual trailing underlying EBITDA upon achieving 3.75x leverage, which we expect to occur around the middle of 2019."

Full Year Consolidated Highlights (versus 2017 Results)

Net Sales: $10.770 billion, decreased 2.1 percent and 2.7 percent in constant currency driven by volume declines in the U.S. and Canada, impacts of adopting the new revenue recognition accounting standard and cycling the indirect tax provision reversal, partially offset by higher global net pricing.

Volume: Worldwide brand volume of 92.1 million hectolitres decreased 1.9 percent due to lower volume in the U.S. and Canada, partially offset by growth in Europe and International. Financial volume of 96.6 million hectolitres decreased 2.9 percent. Global priority brand volume decreased 3.1 percent.

Net sales per HL: $111.46 on a reported financial-volume basis, increased 0.9 percent. Net sales per HL on a brand volume basis (Brand Volume Basis NSR/HL: Effective in the first quarter of 2018, we revised our net sales revenue (NSR) per HL performance discussions to be on a brand volume basis, with all per-hectoliter calculations including owned and actively managed brands, along with royalty volume, in the denominator, as well as the financial impact of these sales in the numerator, unless otherwise indicated. See appendix for definitions) in constant currency decreased by 0.7 percent, driven by the impacts of cycling the indirect tax provision reversal in Europe and adopting the new revenue recognition accounting standard, partially offset by higher global net pricing. Excluding the impact of the new revenue recognition accounting standard, net sales per hectolitre (brand volume basis) decreased 0.1 percent.

U.S. GAAP net income attributable to MCBC: decreased 28.7 percent, primarily driven by the one-time income tax benefit recognized in the prior year due to the reduction to the U.S. federal corporate income tax rate as a result of U.S. tax reform. This decline was also driven by unrealized mark-to-market changes on commodity positions and lower volume and cost inflation in the U.S. and Canada, partially offset by the $328 million cash payment received in January 2018 related to a purchase price adjustment to our acquisition of the Miller International business, positive global net pricing, global marketing optimization, general and administrative spend reductions and cost savings, as well as lower interest expense.

Underlying net income: increased 12.5 percent, driven by positive global net pricing, global marketing optimization, general and administrative spend reductions, cost savings, lower interest expense and lower income tax expense, partially offset by lower volume and cost inflation in the U.S. and Canada.

Underlying EBITDA: decreased 1.7 percent on a reported basis and decreased 1.5 percent on a constant currency basis, largely driven by the same factors as underlying net income, with the exception of lower interest and income tax expense.

U.S. GAAP cash from operations: net cash provided by operating activities for full year 2018 was approximately $2.3 billion, which represents an improvement of $465 million from the prior year, primarily driven by the $328 million cash payment received in January 2018 related to the receipt of a purchase price adjustment for Molson Coors’ acquisition of the Miller International business, as well as lower pension contributions and lower interest paid, partially offset by unfavorable changes in working capital and lower cash tax receipts.

Underlying free cash flow: $1.4 billion for full year 2018, which represents a decrease of $27.1 million from the prior year, driven by unfavorable changes in working capital, lower full year underlying EBITDA, lower cash tax receipts and higher cash paid for capital expenditures, partially offset by lower cash paid for pension contributions and interest.

Debt: Total debt at the end of 2018 was $10.488 billion, and cash and cash equivalents totaled $1.058 billion, resulting in net debt of $9.430 billion. This net debt is more than $1.4 billion lower than at the beginning of the year, driven by the repayment of the company’s CAD 400 million 2.25% notes with cash on hand as part of the brewer’s deleverage commitment and repayment of outstanding commercial paper as well as higher cash and cash equivalents.

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .