Molson Coors Brewing Co.’s (TAP) second-quarter earnings came in at $222.1 million, compared to $93.7 million in the year-ago quarter. Excluding certain one-time items, pro forma earnings came in at $1.02 per share, which missed the Zacks Consensus Estimate of $1.10 per share derived from 9 covering analysts. The worse-than-expected results were primarily caused by sluggish volumes and cost inflation in the U.S. and the U.K.
Net sales recorded a growth of 11.0% to $820.8 million from $739.2 million in the year-ago quarter, primarily due to positive pricing and favorable mix. In terms of segments, sales grew 8.9% to $442.8 million in Canada, 13.6% in the U.K. to $358.6 million and 15.5% in the international segment to $19.4 million.
Overall beer volumes slipped 4.0% year-over-year to 12.11 million hectoliters. The company’s Canadian segment volumes remained essentially flat at 2.099 million hectoliters, while the U.K. segment recorded a decrease of 9.3% to 2.462 million hectoliters.
Molson Coors’ gross margin improved by 260 bps year-over-year to 42.1%, mainly due to favorable mix and lower commodity and packaging-related costs in Canada. However, marketing, general and administrative expenses rose by 25.8% to $247.5 million, primarily due to higher compensation and brand investments. Accordingly, operating margin declined by 310 bps to 16.6% from 19.7% in the year-ago quarter.
Molson Coors ended the quarter with cash and cash equivalents of $723.2 million, compared to $390.9 million in the year-ago period. During 2009, the company deployed $170.4 million towards dividend payments, $124.7 million towards capital expenditure and $66.3 million towards investment in the MillerCoors JV.
Looking forward, Molson Coors expects volumes to remain challenging, particularly in the first-half of 2010 amid weak consumer demand. The Zacks Consensus Estimate on the company’s earnings for 2010 is currently pegged at $3.71 per share, which reduced by 3 cents over the past month as 5 of 10 covering analysts lowered expectations.
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