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Molson Coors Canada Inc
Symbol TPX
Shares Issued 11,104,565
Close 2021-10-27 C$ 53.75
Recent Sedar Documents

Molson Coors earns $453.8-million (U.S.) in Q3

2021-10-28 07:25 ET - News Release

Mr. Gavin Hattersley reports

MOLSON COORS BEVERAGE COMPANY REPORTS 2021 THIRD QUARTER RESULTS

Molson Coors Canada Inc. has released its results for the 2021 third quarter. Unless otherwise indicated in this release, all dollars amounts are in U.S. dollars, and all quarterly comparative results are for the company's third quarter ended Sept. 30, 2021, compared with the third quarter ended Sept. 30, 2020. Some numbers may not sum due to rounding.

2021 third quarter financial highlights:

  • Net sales revenue increased 2.5 per cent reported and 1.0 per cent in constant currency, as the impact of strong net pricing, positive brand and channel mix, more than offset lower financial volumes driven by economy brand declines and U.S. domestic shipment timing.
  • Net sales revenue per hectolitre increased 3.6 per cent, on a brand volume basis in constant currency, primarily due to strong net pricing, favourable brand mix related to portfolio premiumization and the favourable impact of channel mix as the on-premise reopens further.
  • U.S. GAAP (generally accepted accounting principles) net income attributable to Molson Coors Beverage Company (MCBC) of $453.0-million, $2.08 per share on a diluted basis. Non-GAAP diluted EPS (earnings per share) of $1.75 per share increased 8.0 per cent.
  • Underlying (non-GAAP) EBITDA (earnings before interest, taxes, depreciation and amortization) of $642.6-million decreased 10.9 per cent in constant currency as net sales revenue growth and lower general and administrative expenses were more than offset by increases in cost of goods sold and higher marketing spend.

Chief executive officer and chief financial officer perspectives

The company laid out its revitalization plan two years ago and can proudly say it continues to make progress against that plan.

The company's third quarter successes included its biggest brand, Coors Light, growing total share of beer in the United States. The company's above premium portfolio's net sales revenue has surpassed 25 per cent of the company's brand volume net sales revenue on a trailing 12-month basis for the first time since the revitalization plan was announced. The company has also grown its share of the U.S. above premium segment for two straight quarters for the first time in over five years. And, with three months still left in the year, the company has sold nearly two million cases of non-alcohol products for the first time in company history as the company continues to deliver against its beyond beer ambitions.

The momentum the company has established and gains it has made come against an incredibly difficult backdrop of global supply chain challenges and transportation cost inflation.

Gavin Hattersley, president and chief executive officer, said: "Twenty-four months ago, we announced a revitalization plan to put Molson Coors on track to deliver sustainable top- and bottom-line growth, and we continue to make meaningful progress towards that goal. In spite of a difficult environment, global supply chain challenges and significant inflation in the third quarter, Coors Light is growing share of the U.S. beer category, we are premiumizing our portfolio, and we are driving scale beyond the beer aisle. We have more work ahead but our production and our inventory levels are improving and we will continue to invest behind our growth. I remain confident that we are on track to deliver our full-year key financial guidance for 2021."

Tracey Joubert, chief financial officer, said: "Today we are able to again reaffirm our key financial annual guidance thanks to the actions we have and are taking to manage through the supply chain challenges and inflationary cost headwinds facing all consumer products companies. We have invested behind our business, driving premiumization of our portfolio of brands and strengthening our core business while continuing to delever our balance sheet and to reinstate a dividend."

                CONSOLIDATED PERFORMANCE -- THIRD QUARTER 2021
                    (in millions, except per-share data)

                                               Three months ended
                                        Sept. 30, 2021       Sept. 30, 2020

Net sales                                     $2,822.7             $2,753.5
U.S. GAAP net income (loss)                      453.0                342.8
Per diluted share                                 2.08                 1.58
Underlying net income (loss)                     380.5                350.8
Per diluted share                                 1.75                 1.62
Underlying EBITDA                                642.6                712.5

                                                 Nine months ended
                                        Sept. 30, 2021       Sept. 30, 2020

Net sales                                     $7,660.5             $7,359.7
U.S. GAAP net income (loss)                      925.7                420.8
Per diluted share                                 4.26                 1.94
Underlying net income (loss)                     725.9                765.1
Per diluted share                                 3.34                 3.53
Underlying EBITDA                              1,620.4              1,757.0

Quarterly highlights (versus third quarter 2020 results):

  • Net sales revenue increased 2.5 per cent on a reported basis and 1.0 per cent in constant currency due to strong net pricing in both North America and Europe, favourable brand mix from premiumization of the portfolio, as well as positive channel mix as the on-premise continues to reopen, particularly in Europe and Canada, partially offset by the impact of lower financial volumes driven by economy brand declines and U.S. domestic shipment timing. Financial volumes decreased 3.9 per cent, primarily due to lower brand volumes. Brand volumes decreased 3.6 per cent, primarily due to a decline in the United States driven by economy brands including the deprioritization of non-core SKUs (stock-keeping units), as well as lower Central Europe volumes and the cycling of prior-year volumes of the company's India business, which was disposed of in the first quarter of 2021, partially offset by brand volume growth in Canada and Latin America as the on-premise continues to reopen. Net sales per hectolitre on a brand volume basis increased 3.6 per cent in constant currency, reflecting the strong net pricing growth as well as favourable impact to brand mix of premiumization of the portfolio, as well as favourable channel mix.
  • Cost of goods sold (COGS) per hectolitre increased 9.3 per cent on a reported basis, primarily due to higher transportation costs and other input costs inflation, mix impacts from premiumization of the portfolio and volume deleverage, partially offset by cost savings and favourable unrealized mark-to-market changes on the company's commodity positions. Underlying COGS per hectolitre increased 8.9 per cent in constant currency primarily due to higher transportation costs and other input costs inflation, mix impacts from the premiumization of the portfolio and volume deleverage, partially offset by cost savings.
  • Marketing, general and administrative expenses increased 4.8 per cent on a reported basis. Underlying MG&A increased 3.5 per cent in constant currency primarily due to the increase in marketing spend against the company's core brands and new innovations, as well as the cycling of lower prior-year marketing spend in areas impacted by the coronavirus pandemic, partially offset by lower incentive compensation and equity income related to the Yuengling Company LLC (TYC) joint venture, which started distribution in Texas in the third quarter of 2021.
  • U.S. GAAP pretax income increased 6.7 per cent on a reported basis, primarily due to strong net pricing, favourable brand and channel mix, lower special items charges, lower incentive compensation, and favourable movement on unrealized mark-to-market valuations on the company's commodity positions, partially offset by increases in cost of goods sold from both inflation and mix, lower financial volumes and higher marketing spend.
  • Underlying EBITDA decreased 10.9 per cent in constant currency, primarily due to increases in cost of goods sold due to inflation and mix, lower financial volumes, as well as increased marketing spend to support the company's brands and new innovations, partially offset by strong net pricing, positive brand and channel mix, and lower general and administrative spend.

Cash flow and liquidity highlights:

  • U.S. GAAP cash from operations: Net cash provided by operating activities was $1,267.7-million for the nine months ended Sept. 30, 2021, compared with $1,493.2-million in the prior year. The decrease was primarily due to the unfavourable timing of working capital, higher cash paid for taxes and lower net income adjusted for non-cash add backs, partially offset by lower interest paid. The nine months ended Sept. 30, 2020, benefited from over $200-million of net tax payment deferrals related to various government-sponsored deferral programs associated with the coronavirus pandemic while during the nine months ended Sept. 30, 2021, the company made approximately $75-million of net repayments against the tax payment deferral.
  • Underlying free cash flow: Cash received of $933.0-million for the nine months ended Sept. 30, 2021, represents a decrease in cash received of $227.3-million from the prior year, primarily due to the unfavourable timing of working capital and lower underlying EBITDA, partially offset by lower capital expenditures. The nine months ended Sept. 30, 2020, benefited from over $200-million of net tax payment deferrals related to various government-sponsored deferral programs associated with the pandemic while during the nine months ended Sept. 30, 2021, the company made approximately $75-million of net repayments against the tax payment deferral. The decrease in capital expenditures resulted from the timing of capital projects.
  • Debt: Total debt at the end of the third quarter of 2021 was $7.2-billion, and cash and cash equivalents totalled $600-million, resulting in net debt of $6.6-billion. Continuing its commitment to deleverage, in July, 2021, the company repaid in full $1.0-billion 2.1 per cent senior notes that matured on July 15, 2021, using a combination of cash on hand and proceeds from commercial paper issuances.
  • Dividends: A quarterly dividend was reinstated in the third quarter of 2021. On July 15, 2021, the company's board of directors declared a quarterly cash dividend of 34 cents per share, which was paid on Sept. 17, 2021, to holders of Class A and Class B common stock. Shareholders of exchangeable shares received the Canadian dollar equivalent of dividends declared on Class A and Class B common stock, equal to 42 Canadian cents per share.

Quarterly segment highlights (versus third quarter 2020 results):

North America business:

  • Revenue: Net sales on a reported basis decreased 1.2 per cent and 2.1 per cent in constant currency primarily due to a 4.8-per-cent decrease in financial volumes, which was driven by lower brand volumes and unfavourable shipment timing in the U.S. North America brand volumes decreased 3.8 per cent primarily due to a 5.2-per-cent decline in the U.S. driven by economy brands including the deprioritization of non-core SKUs, partially offset by growth in above premium. Brand volumes in Canada and Latin America grew 0.5 per cent and 9.0 per cent, respectively, reflecting the benefit of fewer on-premise restrictions in the third quarter of 2021.
  • Net sales per hectolitre on a brand volume basis increased 2.4 per cent in constant currency due to net pricing increases and positive brand mix, partially offset by unfavourable geographic mix attributed to growing licence volume in Latin America. In the U.S., net sales per hectolitre on a brand volume basis increased 3.2 per cent, which reflects strong brand mix performance as the company continues to premiumize its portfolio. The rate favourability was offset by financial volume decreases, resulting in a 3.7-per-cent decrease in net sales revenue in the U.S. Net sales per hectolitre on a brand volume basis grew in Canada due to positive brand and channel mix, as well as net pricing increases, while Latin America also increased due to favourable sales mix.
  • U.S. GAAP pretax income (loss) decreased 13.7 per cent on a reported basis primarily due to lower financial volumes, inflation within cost of goods sold, including higher transportation and input costs, and higher MG&A expense, partially offset by net pricing increases, cost savings in cost of goods sold, lower special items charges and favourable brand mix. The higher MG&A expense was driven by higher marketing investment on innovation brands and cycling lower prior-year marketing spending in areas impacted by the coronavirus pandemic, partially offset by lower incentive compensation expense and equity income from the TYC joint venture.
  • Underlying EBITDA decreased 14.3 per cent in constant currency primarily due to lower U.S. GAAP pretax income (loss) and the add back of lower special items charges.

Europe business:

  • Revenue: Net sales increased 19.2 per cent on a reported basis and 14.7 per cent in constant currency, primarily due to the increase in net sales per hectolitre on a reported basis. Financial volume decreased 2.0 per cent and brand volumes decreased 3.0 per cent, primarily due to increased on-premise restrictions in certain Central and Eastern European markets and the cycling of prior-year volumes of the company's India business, which was disposed of in the first quarter of 2021. Net sales per hectolitre on a brand volume basis increased 11.0 per cent in constant currency primarily due to favourable sales mix, and positive net pricing, as well as cycling prior-year estimated keg sales returns related to the on-premise impacts resulting from the coronavirus pandemic.
  • U.S. GAAP pretax income (loss) increased 124.2 per cent on a reported basis primarily due to higher gross profit as a result of favourable sales mix, positive net pricing and lower special items charges, partially offset by cost inflation and higher MG&A expenses due to increased marketing spend to support the company's brands and the cycling of lower spend in the prior year driven by cost mitigation efforts as a result of the impact of the coronavirus pandemic.

Underlying EBITDA increased 2.7 per cent in constant currency due to higher gross profit as a result of favourable sales mix and positive net pricing, partially offset by cost inflation and higher MG&A expenses due to increased marketing spend to support the company's brands and the cycling of lower spend in the prior year driven by cost mitigation efforts as a result of the impact of the coronavirus pandemic.

Other results

                          EFFECTIVE INCOME TAX RATES       
                                                           Three months ended                   
                                        Sept. 30, 2021         Sept. 30, 2020

U.S. GAAP effective tax rate                        6%                    23%
Underlying effective tax rate                       1%                    20%

 

  • The decrease in the company's third quarter U.S. GAAP effective tax rate and the company's third quarter underlying effective tax rate was primarily driven by the release of $68-million of reserves for unrecognized tax positions, including $49-million of a discrete tax benefit, recorded due to the effective settlement reached on a tax audit during the three months ended Sept. 30, 2021.
  • The lower U.S. GAAP effective tax rate for the third quarter of 2021, compared with the third quarter of 2020, was also driven by recognition of a $6-million discrete tax expense in the third quarter of 2020 from the remeasurement of certain deferred tax liabilities. In the third quarter of 2020, the United Kingdom government announced that the legislation to decrease the U.K. corporate income tax rate would be repealed and the rate would not be reduced from 19 to 17 per cent as originally planned.

Special and other non-core items

The following special and other non-core items have been excluded from underlying results:

  • During the third quarter of 2021, the company recognized net special items gain of $2.6-million, primarily due to a net gain on disposal of a non-core property in Europe, partially offset by asset abandonment charges related to previously disclosed brewery closures in North America and Europe as well as restructuring charges related to the revitalization plan.
  • Additionally during the third quarter of 2021, the company recorded other non-core net benefits of $94.4-million primarily due to changes in the company's unrealized mark-to-market positions on commodity hedges.

2021 outlook

While uncertainty remains regarding the coronavirus pandemic, including the timing and strength of the recovery, the company continues to expect the following results for the full year 2021, which the company considers a year of investment:

  • Net sales revenue: mid-single-digit increase versus 2020 on a constant currency basis;
  • Underlying EBITDA: approximately flat compared with 2020 on a constant currency basis;
  • Deleverage: The company intends to maintain its investment-grade rating as demonstrated by its continued deleveraging actions. The company expects to achieve a net debt to underlying EBITDA ratio of approximately 3.25 times by the end of 2021 and below 3.0 times by the end of 2022;
  • Underlying depreciation and amortization: approximately $800-million;
  • Consolidated net interest expense: approximately $270-million, plus or minus 5 per cent;
  • Underlying effective tax rate: Due to the release of reserves for unrecognized tax positions in the third quarter, the full-year 2021 outlook for the company's underlying effective tax rate is now between 13 and 15 per cent, which compares with the prior full-year outlook of 20 to 23 per cent.

2021 third 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 2021 third quarter 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. Eastern Time on Feb. 23, 2022. The company will post this release and related financial statements on its website today.

About Molson Coors Canada Inc.

Molson Coors Canada is a subsidiary of Molson Coors Beverage Company. Molson Coors Canada's 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 Beverage Company, as described in Molson Coors Beverage Company'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.

                                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                       (in millions, except per-share data) 

                                                 Three months ended                     Nine months ended
                                           Sept. 30, 2021   Sept. 30, 2020    Sept. 30, 2021    Sept. 30, 2020

Financial volume in hectolitres                    22.851           23.789            62.891            64.803
Sales                                            $3,435.4         $3,378.4          $9,255.5          $8,946.0
Excise taxes (loss)                                (612.7)          (624.9)         (1,595.0)         (1,586.3)
Net sales                                         2,822.7          2,753.5           7,660.5           7,359.7
(Cost) of goods sold                             (1,629.1)        (1,551.0)         (4,464.4)         (4,486.6)
Gross profit                                      1,193.6          1,202.5           3,196.1           2,873.1
Marketing, general and
administrative (expenses)                          (664.8)          (634.5)         (1,889.4)         (1,788.7)
Special items, net (loss)                             2.6            (59.7)            (17.3)           (210.6)
Operating income (loss)                             531.4            508.3           1,289.4             873.8
Interest income (expense), net                      (63.3)           (67.9)           (196.5)           (206.5)
Other pension and postretirement
benefits (costs), net                                12.9              7.6              38.9              22.7
Other income (expense), net                          (0.4)             2.4              (2.3)              3.4
Income (loss) before income taxes                   480.6            450.4           1,129.5             693.4
Income tax benefit (expense)                        (26.8)          (104.0)           (203.4)           (265.2)
Net income (loss)                                   453.8            346.4             926.1             428.2
Net (income) loss attributable
to non-controlling interests                         (0.8)            (3.6)             (0.4)             (7.4)
Net income (loss) attributable to MCBC              453.0            342.8             925.7             420.8
Basic net income (loss)
attributable to MCBC per share                       2.09             1.58              4.26              1.94
Diluted net income (loss)
attributable to MCBC per share                       2.08             1.58              4.26              1.94
Dividends per share                                  0.34                -              0.34              0.57

We seek Safe Harbor.

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