Mr. Gavin Hattersley reports

MOLSON COORS BEVERAGE COMPANY REPORTS 2023 FOURTH QUARTER AND FULL YEAR RESULTS

Molson Coors Canada Inc. parent company Molson Coors Beverage Company has released its results for the 2023 fourth quarter and full year.

Note: Unless otherwise indicated in this release, all dollar amounts are in United States dollars, and all comparative results are for the company's fourth quarter or full year ended Dec. 31, 2023, compared with the fourth quarter or full year ended Dec. 31, 2022. Some numbers may not sum due to rounding.

Two thousand twenty-three fourth quarter financial highlights:

• Net sales increased 6.1 per cent reported and 5 per cent in constant currency.
• United States GAAP (generally accepted accounting principles) income before income taxes of $165.5-million improved $729.6-million, primarily driven by lower non-cash impairment charges of $692-million.
• Underlying (non-GAAP) income before income taxes of $345.8-million increased 2.1 per cent in constant currency.

Two thousand twenty-three full-year financial highlights:

• Net sales increased 9.4 per cent reported and 9.3 per cent in constant currency.
• U.S. GAAP income before income taxes of $1,252.5-million improved $1,315-million, including lower non-cash impairment charges of $720.5-million and the $126.9-million of favourable changes in the company's unrealized mark-to-market commodity positions.
• Underlying (non-GAAP) income before income taxes of $1,531.2-million increased 36.9 per cent in constant currency.
• U.S. GAAP net income attributable to Molson Coors of $948.9-million, $4.37 per share on a diluted basis. Underlying (non-GAAP) diluted earnings per share (EPS) of $5.43 per share increased 32.4 per cent.
• Net cash provided by operating activities of $2,079-million and underlying (non-GAAP) free cash flow of $1,420-million.
• Reduction in net debt of $607.3-million since Dec. 31, 2022.
• Cash paid for share repurchases of $205.8-million compared with $51.5-million in the prior year.

Chief executive officer and chief financial officer perspectives

The fourth quarter of 2023 was a strong finish to an incredible year for Molson Coors. Full-year net sales grew 9.3 per cent on a constant currency basis, while underlying income before income taxes increased 36.9 per cent on a constant currency basis.

This is the company's second consecutive year of delivering both top-line and bottom-line growth. Molson Coors was well positioned to benefit from the significant shifts in consumer purchasing habits, largely in the United States premium segment in 2023. Meeting the strong demand, the company grew annual U.S. brand volumes for both Coors Light and Miller Lite close to double digits, and Coors Banquet performed even stronger. Through its pro-active commercial efforts and powerful distributor network, the company believes that these actions support its continued momentum and underscore the belief that the shifts in the industry have become structural.

Expanding on this success, Molson Coors achieved volume, share and net sales growth in each of the company's three largest global markets in 2023. While its core brands were a strong driver, Molson Coors's above premium innovations like Simply Spiked and Madri also contributed to these results.

Molson Coors's successes over the last several years have established a new foundation from which to grow. Supported by its investments in its breweries, its commercial capabilities and its people worldwide, Molson Coors is confident in its ability to achieve its long-term growth algorithm in the future.

Gavin Hattersley, president and chief executive officer, states:

"Two thousand twenty-three marked the second straight year in which Molson Coors did exactly what we set out to do -- grow our business. But more than that, last year we achieved the highest reported top- and bottom-line figures in the history of our company. We plan to build on this momentum in 2024, with strong commercial plans, a powerful and supportive distributor network, and the financial flexibility to reinvest in our business."

Tracey Joubert, chief financial officer, states:

"We are incredibly proud of our accomplishments in 2023. We achieved strong top- and bottom-line growth driven in both our business units, while we continued to strategically invest in our business, further strengthen our balance sheet, and return cash to shareholders through a higher dividend and a larger new share repurchase program. We enter 2024 in a position of strength and are confident in our ability to continue to grow our business."

Quarterly consolidated highlights (versus fourth-quarter 2022 results):

• Net sales: The associated table highlights the drivers of the change in net sales and net sales per hectolitre for the three months ended Dec. 31, 2023, compared with Dec. 31, 2022 (in percentages).

• Net sales increased 6.1 per cent, driven by favourable price and sales mix, favourable foreign currency impacts, and higher financial volumes. Net sales increased 5 per cent in constant currency.
• Financial volumes increased 0.8 per cent, primarily due to higher financial volumes in the Americas segment, partially offset by a decrease in EMEA (Europe, the Middle East and Africa) and APAC (Asia Pacific) financial volumes. Brand volumes increased 4.3 per cent due to a 6.7-per-cent increase in the Americas, partially offset by a 2.2-per-cent decline in EMEA and APAC.
• Price and sales mix favourably impacted net sales and net sales per hectolitre by 4.2 per cent, primarily due to increased net pricing, as well as favourable sales mix as a result of lower contract brewing volume related to the wind-down of a contract brewing arrangement leading up to the termination by the end of 2024.
• Cost of goods sold (COGS) increased 3 per cent on a reported basis, primarily due to unfavourable foreign currency impacts, higher cost of goods sold per hectolitre and higher financial volumes. Cost of goods sold per hectolitre increased 2.2 per cent on a reported basis, including the unfavourable currency impact of 1.2 per cent, primarily due to cost inflation related to materials and manufacturing expenses, and unfavourable mix driven by lower contract volumes in the Americas segment, as well as higher factored volumes in the EMEA and APAC segment, partially offset by cost-savings. Underlying COGS per hectolitre increased 1.4 per cent in constant currency, primarily due to cost inflation related to materials and manufacturing expenses, and unfavourable mix driven by lower contract volumes in the Americas segment, as well as higher factored volumes in the EMEA and APAC segment, partially offset by cost-savings.
• Marketing, general and administrative (MG&A) increased 18.7 per cent on a reported basis, due to increased marketing investment, higher incentive compensation expense and the unfavourable impact of foreign currency movements. Underlying MG&A increased 17.4 per cent in constant currency.
• U.S. GAAP income before income taxes: U.S. GAAP income before income taxes of $165.5-million improved $729.6-million on a reported basis from a loss in the prior year, primarily due to lower non-cash impairment charges of $692-million, increased net pricing to customers, favourable sales mix, cost-savings and higher financial volume, partially offset by higher MG&A expense, and cost inflation related to materials and manufacturing expense.
• The company recorded a non-cash $845-million partial goodwill impairment charge in its Americas segment in the fourth quarter of 2022. In the fourth quarter of 2023, Molson recorded a non-cash $160.7-million partial indefinite-lived intangible impairment charge in its EMEA and APAC segment as a result of the decline in the fair value of the Staropramen family of brands. The fair value decline was largely driven by reductions in management forecasts as a result of the delays in the expansion and distribution of the brand family, increased optionality for consumers in the premium sector in key markets, and reduced demand in Central and Eastern Europe due to cost inflation pressures on consumers, as well as macroeconomic factors, including an increase in the discount rate as a result of the recent rising interest rate environment.
• Underlying income before income taxes: Underlying income before income taxes of $345.8-million improved 2.1 per cent in constant currency, primarily due to increased net pricing to customers, favourable sales mix, cost-savings and higher financial volumes, partially offset by higher MG&A, and cost inflation related to materials and manufacturing expenses.

Quarterly segment highlights (versus fourth-quarter 2022 results)

Americas segment:

• Net sales: The associated table highlights the drivers of the change in net sales and net sales per hectolitre for the three months ended Dec. 31, 2023, compared with Dec. 31, 2022 (in percentages).

• Net sales increased 4.7 per cent, driven by higher financial volumes, and favourable price and sales mix.
• Financial volumes increased 2.2 per cent primarily due to an increase in U.S. brand volumes driven by volume growth in Molson's core brands, partially offset by U.S. shipment timing and lower contract brewing volume. The increase in U.S. volume was driven in part by the continued shifts in consumer purchasing behaviour largely within the premium beer segment. Americas brand volumes increased 6.7 per cent, including an 8.5-per-cent increase in the U.S., driven by growth in the company's core brands, with Coors Light, Miller Lite and Coors Banquet each up double digits. Canada brand volumes increased 0.7 per cent, driven by growth in the company's above premium brands. Latin America volumes decreased 5 per cent, largely due to challenging economic conditions in key markets.
• Price and sales mix favourably impacted net sales and net sales per hectolitre by 2.5 per cent, primarily due to favourable impacts from both increased net pricing and sales mix. Favourable sales mix was due to lower contract brewing volume related to the wind-down of a contract brewing arrangement leading up to the termination by the end of 2024.
• U.S. GAAP income before income taxes: U.S. GAAP income before income taxes of $362.5-million improved $861.7-million on a reported basis from a loss in the prior year, primarily due to a non-cash $845-million partial goodwill impairment charge recognized in the fourth quarter of 2022, higher financial volumes, increased net pricing, lower logistics expenses and cost-savings, partially offset by higher MG&A expenses, and cost inflation related to materials and manufacturing expenses. The higher MG&A spend was driven by increased marketing investment and higher incentive compensation expense.
• Underlying income before income taxes: Underlying income before income taxes of $363-million increased 5 per cent in constant currency, primarily due to higher financial volumes, increased net pricing, lower logistics expenses and cost-savings, partially offset by higher MG&A expense, and cost inflation related to materials and manufacturing expenses.

EMEA and APAC segment:

• Net sales: The associated table highlights the drivers of the change in net sales and net sales per hectolitre for the three months ended Dec. 31, 2023, compared with Dec. 31, 2022 (in percentages).

• Net sales increased 12.6 per cent, driven by favourable price and sales mix, as well as favourable foreign currency impacts, partially offset by a decline in financial volumes. Net sales increased 6.6 per cent in constant currency.
• Financial volumes decreased 3 per cent and brand volumes decreased 2.2 per cent, driven by lower consumption in the United Kingdom, and inflationary pressures on the consumer in Central and Eastern Europe.
• Price and sales mix favourably impacted net sales and net sales per hectolitre by 9.6 per cent and 9.9 per cent, respectively, primarily due to increased net pricing and favourable sales mix.
• U.S. GAAP income before income taxes: U.S. GAAP loss before income taxes of $147.4-million declined $159.8-million on a reported basis from income in the prior year, primarily due to a non-cash $160.7-million partial impairment charge to the company's indefinite-lived intangible asset related to the Staropramen family of brands, cost inflation on materials and logistics expenses, and higher MG&A, as well as lower financial volumes and the unfavourable impact of foreign currencies, partially offset by increased net pricing to customers and favourable sales mix. Higher MG&A spend was primarily due to increased technology investments and administrative expenses, as well as higher marketing.
• Underlying income before income taxes: Underlying income before income taxes of $15.3-million decreased 52.7 per cent in constant currency, primarily due to cost inflation on materials and logistics expenses, higher MG&A, as well as lower financial volumes, partially offset by increased net pricing to customers and favourable sales mix.

Full-year consolidated highlights (versus 2022 results):

• Net sales: The associated table highlights the drivers of the change in net sales and net sales per hectolitre for the year ended Dec. 31, 2023, compared with Dec. 31, 2022 (in percentages).

• Net sales increased 9.4 per cent, driven by favourable price and sales mix, higher financial volumes, and favourable foreign currency impacts. Net sales increased 9.3 per cent in constant currency.
• Financial volumes increased 1.8 per cent, primarily due to higher financial volumes in the Americas segment, partially offset by lower EMEA and APAC financial volumes. Brand volumes increased 2.2 per cent due to a 4.4-per-cent increase in Americas brand volumes, partially offset by a 3.6-per-cent decrease in EMEA and APAC brand volumes.
• Price and sales mix favourably impacted net sales and net sales per hectolitre by 7.5 per cent and 7.3 per cent, respectively, primarily due to increased net pricing, including the rollover benefit in the first three quarters due to taking several price increases in the prior year, as well as favourable sales mix. Favourable sales mix was driven by geographic mix due to higher volumes in the Americas segment and lower contract brewing volume related to the wind-down of a contract brewing arrangement leading up to the termination by the end of 2024.
• Cost of goods sold increased 4.1 per cent on a reported basis, primarily due to higher cost of goods sold per hectolitre and higher financial volumes. Cost of goods sold per hectolitre increased 2.2 per cent, primarily due to cost inflation related to materials and manufacturing expenses, and unfavourable mix, partially offset by changes in the company's unrealized mark-to-market commodity derivative positions of $126.9-million, cost-savings and volume leverage. Underlying COGS per hectolitre increased 4.2 per cent in constant currency, primarily due to cost inflation related to materials and manufacturing expenses, and unfavourable mix, partially offset by cost-savings and volume leverage.
• Marketing, general and administrative increased 6.2 per cent on a reported basis, primarily due to higher incentive compensation expense, and increased marketing investment on core and innovation brands, partially offset by cycling the recording of a $56-million accrued liability in the prior year related to potential losses as a result of the continuing Keystone litigation case. Underlying MG&A increased 8.3 per cent in constant currency.
• U.S. GAAP income before income taxes: U.S. GAAP income before income taxes of $1,252.5-million improved $1,315-million on a reported basis from a loss in the prior year, primarily due to lower non-cash impairment charges of $720.5-million, increased net pricing to customers, changes in Molson's unrealized mark-to-market commodity positions of $126.9-million, higher financial volumes, favourable sales mix, cost-savings and lower net interest expense, partially offset by cost inflation related to materials and manufacturing expenses, and higher MG&A spend.
• Underlying income before income taxes: Underlying income before income taxes of $1,531.2-million improved 36.9 per cent in constant currency, primarily due to increased net pricing to customers, higher financial volumes, favourable sales mix, cost-savings and lower net interest expense, partially offset by cost inflation related to materials and manufacturing expenses, and higher MG&A spend.

Cash flow and liquidity highlights:

• U.S. GAAP cash from operations: net cash provided by operating activities was $2,079-million for the year ended Dec. 31, 2023, which increased $577-million compared with the prior year, primarily due to higher net income and the favourable timing of working capital in the Americas across all categories, partially offset by higher income taxes paid.
• Underlying free cash flow: cash generated of $1,420-million for the year ended Dec. 31, 2023, which represents an increase of $567.1-million from the prior year, primarily due to higher net cash provided by operating activities as described above.
• Debt: total debt as of Dec. 31, 2023, was $6,223.9-million, and cash and cash equivalents totalled $868.9-million, resulting in net debt of $5,355-million and a net debt to underlying EBITDA (earnings before interest, taxes, depreciation and amortization) ratio of 2.21 times. As of Dec. 31, 2022, the company's net debt to underlying EBITDA ratio was 2.93 times.
• Dividends: a cash dividend of 41 cents per share was declared and paid to eligible shareholders of record on the respective quarterly record dates throughout the year ended Dec. 31, 2023, for a total of $1.64 per share, or $2.19 (Canadian) per share.
• Share repurchase program: on Sept. 29, 2023, Molson's board of directors approved a new share repurchase program authorizing the repurchase of up to an aggregate of $2-billion of its Class B common stock. This repurchase program replaces and supersedes any repurchase program previously approved by the board. During the year ended Dec. 31, 2023, Molson repurchased 3,454,694 shares under its respective share repurchase programs, through a combination of open market purchases and Rule 10b5-1 trading arrangements, at a weighted average price of $61.06 per share, including brokerage commissions and excluding excise taxes, for an aggregate value of $211-million.

Other results:

• The increase in Molson's full-year U.S. GAAP effective tax rate was primarily due to the impact of a non-cash $845-million partial goodwill impairment recorded within the company's Americas segment in the fourth quarter of 2022, which related to goodwill not deductible for tax purposes.
• The increase in the company's full-year underlying effective tax rate was primarily due to the impact of geographic mix with higher income before income taxes in higher tax rate jurisdictions.

Two thousand twenty-four outlook

Building off of the growth the company achieved in 2023, Molson expects to achieve the following targets for full-year 2024:

• Net sales: low single-digit increase versus 2023 on a constant currency basis;
• Underlying income (loss) before income taxes: mid-single-digit increase compared with 2023 on a constant currency basis;
• Underlying earnings per share: mid-single-digit increase compared with 2023;
• Capital expenditures: $750-million incurred, plus or minus 5 per cent;
• Underlying free cash flow: $1.2-billion, plus or minus 10 per cent;
• Underlying depreciation and amortization: $700-million, plus or minus 5 per cent;
• Consolidated net interest expense: $210-million, plus or minus 5 per cent;
• Underlying effective tax rate: in the range of 23 per cent to 25 per cent for 2024.

On Feb. 13, 2024, the company's board of directors declared a quarterly dividend of 44 cents per share, to be paid on March 15, 2024, to shareholders of Class A and Class B common stock of record on March 1, 2024. Shareholders of exchangeable shares will receive the Canadian-dollar equivalent of dividends declared on Class A and Class B common stock.

Two thousand twenty-three fourth-quarter investor conference call

Molson Coors Beverage Company will conduct an earnings conference call with financial analysts and investors at 11 a.m. Eastern Time today, to discuss the company's 2023 fourth-quarter and full-year results. The live webcast will be accessible via the company's website. An on-line replay of the webcast will be available until 11:59 p.m. ET on April 29, 2024. The company will post this release on its website today.

About Molson Coors Canada Inc.

Molson Coors Canada is a subsidiary of Molson Coors Beverage Company. Its Class A and Class B exchangeable shares offer substantially the same economic and voting rights as the respective classes of common shares of Molson Coors, as described in Molson Coors's annual proxy statement and Form 10-K filings with the U.S. Securities and Exchange Commission. The trustee holder of the special Class A voting stock and the special Class B voting stock has the right to cast a number of votes equal to the number of then outstanding Class A exchangeable shares and Class B exchangeable shares, respectively.

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