Canada: Molson Coors shares dipped; analysts’ overview

Shares of Molson Coors Brewing Co. dipped before rebounding Thursday after the world's fifth-largest brewer said net income fell nearly 60 % in the fourth quarter because of higher costs and persistent market challenges, Associated Press commented on February 9.

Investors who examined the numbers more closely apparently were encouraged by some positive trends and the cost-savings achieved as a result of last year's merger of Golden, Colo.-based Adolph Coors Co. and Montreal-based Molson Inc. which created Molson Coors.

"I think it went down because their initial earnings report just looked kind of depressing," said Harry Schuhmacher, editor and publisher of trade publication Beer Business Daily. "When you really look at the report, their profits look pretty strong when you take out the one-time charges," he said. "I think they're ahead on synergies and they've got some momentum at least in the U.S."

Molson Coors' shares fell 47 cents to close at $63 on the New York Stock Exchange. On the day, the price ranged from $60.75 a share to $63.82 a share.

The Denver-based company, which marked the first anniversary of its merger Thursday, said net income totaled $22.4 million, or 26 cents per share, in the quarter that ended Dec. 31 compared with year-ago income of $55.7 million, or $1.45 per share. The year-ago figure is on a pro forma basis which assumes the merger was in effect at the beginning of the period.

The latest quarter's per-share earnings were disproportionately lower because of a large increase in shares outstanding that resulted from the merger. Molson Coors reported historical results from its troubled Brazilian unit as discontinued operations since it sold a majority interest in the unit last month.

During a conference call with analysts, Chief Executive Officer Leo Kiely said the company faced challenges as a result of flat markets and transportation, energy and packaging material costs that were at historical highs.

"Our fourth quarter 2005 financial performance reflects challenging operating environments in all of our major markets but also significant improvements in key trends in our businesses as the year progressed," Kiely said in a statement. "Although significant input cost inflation impacted results companywide, the impact was significantly offset by merger cost synergies and underlying cost initiatives across all of our businesses."

Kiely said he expects to achieve $175 million in synergies, or savings and revenue, as promised by 2007, noting that the company chalked up $59 million in 2005 and hoped to recoup at least $40 million this year. He said Molson Coors' bottom line will be helped in the current quarter by the sale of the Brazilian unit, which will improve consolidated cash flow and eliminate pretax losses, debts and contingent liabilities.

Bear, Stearns & Co. analyst Carlos Laboy, who tracks Molson Coors, said in a research note Thursday that the company had weak volume and pricing. He said he views it as the "global brewer with (the) weakest fundamentals."

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