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Molson Coors Canada Inc
Symbol TPX
Shares Issued 11,104,565
Close 2022-02-23 C$ 64.69
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Molson Coors earns $1-billion (U.S.) in 2021

2022-02-23 09:35 ET - News Release

Mr. Gavin Hattersley reports

MOLSON COORS BEVERAGE COMPANY REPORTS 2021 FOURTH QUARTER AND FULL YEAR RESULTS

Molson Coors Beverage Company's Molson Coors Canada Inc. has released results for the 2021 fourth quarter and full year.

As of Dec. 31, 2021, the company changed the names of its reporting segments to the Americas and EMEA/APAC (Europe, the Middle East and Africa/Asia Pacific) segments (formerly named the North America segment and Europe segment, respectively) to better reflect the geographic locations encompassed within the reportable segments. This change to the company's segment names had no impact on the composition of its segments, its financial position, results of operations, cash flow or segment-level results previously reported.

2021 fourth quarter financial highlights:

  • Net sales increased 14.2 per cent reported and 13.7 per cent in constant currency, primarily due to financial volume growth in both the Americas and EMEA/APAC segments, positive net pricing and favourable sales mix.
  • Net sales per hectolitre increased 3.8 per cent on a brand volume basis in constant currency, primarily due to positive net pricing in both the Americas and EMEA/APAC segments and favourable brand and channel mix resulting from portfolio premiumization and fewer on-premise channel restrictions than the prior year.
  • U.S. GAAP (generally accepted accounting principles) net income attributable to Molson Coors Beverage Company (MCBC) of $80-million, 37 cents per share on a diluted basis. Non-GAAP diluted EPS (earnings per share) of 81 cents increased 102.5 per cent.
  • Underlying (non-GAAP) EBITDA (earnings before interest, taxes, depreciation and amortization) of $457.3-million increased 21.9 per cent in constant currency.

2021 full-year financial highlights:

  • Net sales increased 6.5 per cent reported and 4.7 per cent in constant currency, primarily due to positive net pricing, favourable sales mix, primarily due to portfolio premiumization and the reopening of the on-premise channel, and increased financial volumes in the EMEA/APAC segment, partially offset by lower financial volumes in the Americas segment.
  • Net sales per hectolitre increased 3.8 per cent on a brand volume basis in constant currency, primarily due to positive net pricing and favourable sales mix resulting from portfolio premiumization and fewer on-premise channel restrictions than the prior year.
  • U.S. GAAP net income attributable to MCBC was $1-billion, or $4.62 per share on a diluted basis. Non-GAAP diluted EPS of $4.15 increased 5.9 per cent.
  • Underlying (non-GAAP) EBITDA of $2.1-billion decreased 3.5 per cent in constant currency.
  • Operating cash flow was $1.6-billion and underlying (non-GAAP) free cash flow was $1.1-billion.
  • The company reduced net debt by $900-million since Dec. 31, 2020.

Chief executive officer and chief financial officer perspectives

This past year, the company made significant progress against its revitalization plan -- from growing its topline to premiumizing its global portfolio to a record level to making significant investments in its capabilities. The company accomplished this against a challenging inflationary environment and continued impact from the coronavirus pandemic, including returning restrictions with the Omicron variant in the fourth quarter. Key highlights included revenue growth of Coors Light and Miller Lite and the company's successful ventures beyond beer, which are a component of Molson's emerging growth division that continues to track ahead of the company's $1-billion annual revenue target for this business by 2023. The company succeeded in emerging markets, like Latin America, and saw strong performances in its more traditional markets, like Canada. Molson also continued to make investments to increase its global hard seltzer production capacity with expansions in Canada and the United Kingdom as the company supports its rapidly growing global hard seltzer portfolio.

Gavin Hattersley, president and chief executive officer, stated: "This year, we grew the topline for the first time in a decade; our two biggest brands each grew net sales and we now have a larger global above premium portfolio than ever before. These were all goals of the revitalization plan, against which we continue to make tremendous progress. While we're proud of the steps we've taken, we're even more excited about where we can go from here, having established a strong foundation for 2022 successes and beyond."

Tracey Joubert, chief financial officer, stated: "Our progress in 2021 is clear. For the year, we achieved our top-line guidance of mid-single-digit growth, delivered strong free cash flow, further reduced our leverage ratio and returned cash to shareholders all despite the global macro inflationary challenges. Building off our strong foundation, we have issued fiscal 2022 guidance for both top- and bottom-line growth, which underscores our progress against our revitalization plan goals."

Quarterly consolidated highlights (versus fourth quarter 2020 results):

  • Net sales increased 14.2 per cent on a reported basis and 13.7 per cent in constant currency primarily due to higher financial volumes, positive net pricing and favourable sales mix, attributed to premiumization and improved channel mix. Financial volumes increased 7.4 per cent primarily due to favourable U.S. domestic shipment trends as the company worked to rebuild distributor inventory levels and brand volume growth, including fewer on-premise restrictions in EMEA/APAC, Latin America and Canada. Net sales per hectolitre increased 3.8 per cent on a brand volume basis in constant currency primarily due to positive net pricing in both the Americas and EMEA/APAC segments as well as favourable brand and channel mix resulting from portfolio premiumization and fewer on-premise channel restrictions than the prior year.
  • Cost of goods sold (COGS) per hectolitre increased 17.2 per cent on a reported basis primarily due to changes to the company's unrealized mark-to-market commodity positions, cost inflation mainly on input materials and transportation costs, and the mix impacts of portfolio premiumization, partially offset by volume leverage, lower depreciation expense and cost savings. Underlying COGS per hectolitre increased 5.2 per cent in constant currency primarily due to cost inflation mainly on input materials and transportation costs and the mix impacts of portfolio premiumization, partially offset by volume leverage, lower depreciation expense and cost savings.
  • Marketing, general and administrative (MG&A) expenses increased 2.6 per cent on a reported basis. Underlying MG&A expenses increased 2.4 per cent in constant currency as the company continued to invest in its brands as pandemic-related restrictions eased compared with the prior year.
  • U.S. GAAP income before income taxes of $109.5-million increased $1,446.8-million from a loss of $1,337.3-million -- all on a reported basis. The increase was primarily due to the cycling of special items charges in the prior year related to the $1.5-billion goodwill impairment of the EMEA/APAC segment, net sales growth from higher financial volumes, positive net pricing and favourable sales mix, partially offset by changes to the company's unrealized mark-to-market commodity positions, cost inflation mainly on input materials and transportation costs, and higher MG&A spend.
  • Underlying EBITDA increased 21.9 per cent in constant currency, primarily due to net sales growth from higher financial volumes, positive net pricing and favourable sales mix, partially offset by cost inflation mainly on input materials and transportation costs and higher MG&A spend.

Full-year consolidated highlights (versus 2020 results):

  • Net sales increased 6.5 per cent on a reported basis and 4.7 per cent in constant currency primarily due to strong pricing growth, favourable brand and channel mix resulting from portfolio premiumization and fewer on-premise channel restrictions, partially offset by lower financial volumes. Financial volume decreased 0.5 per cent primarily due to lower economy portfolio volumes, including the deprioritization of certain non-core SKUs (stock-keeping units) in the United States, partially offset by growth in above-premium portfolio volumes due to the increased premiumization efforts and favourable U.S. domestic shipments as the company worked to rebuild distributor inventory levels. Net sales per hectolitre on a brand volume basis increased 3.8 per cent in constant currency, primarily due to positive net pricing in both the Americas and EMEA/APAC segments as well as favourable sales mix resulting from portfolio premiumization and fewer on-premise channel restrictions.
  • Cost of goods sold (COGS) per hectolitre increased 6.4 per cent on a reported basis primarily due to cost inflation mainly on input materials and transportation costs, the mix impacts of portfolio premiumization, and unfavourable foreign exchange movements, partially offset by changes to the company's unrealized mark-to-market commodity positions, lower depreciation and cost savings. Underlying COGS per hectolitre increased 6.9 per cent in constant currency primarily due to cost inflation mainly on input materials and transportation costs and the mix impacts of portfolio premiumization, partially offset by lower depreciation and cost savings.
  • MG&A expenses increased 4.8 per cent on a reported basis. Underlying MG&A expenses increased 2.9 per cent in constant currency primarily due to higher marketing spend in both the Americas and EMEA/APAC segments to support new innovations and core brands as well as the cycling of lower spend in areas impacted by the coronavirus pandemic, partially offset by lower depreciation expense, cost savings and lower incentive compensation.
  • U.S. GAAP income before income taxes of $1,239-million increased $1,882.9-million from a loss of $643.9-million -- both on a reported basis. The increase was primarily due to the cycling of special items charges in the prior year related to the $1.5-billion goodwill impairment of the EMEA/APAC segment, positive net pricing, favourable sales mix, and changes in the company's unrealized mark-to-market commodity positions, partially offset by cost inflation mainly on input materials and transportation costs, lower financial volumes, and higher MG&A spend.
  • Underlying EBITDA decreased 3.5 per cent in constant currency, primarily due to cost inflation mainly on input materials and transportation costs, lower financial volumes, and higher MG&A spend, partially offset by positive net pricing and favourable brand and channel mix.

Cash flow and liquidity highlights:

  • U.S. GAAP cash from operations: Net cash provided by operating activities was $1,573.5-million for the year ended Dec. 31, 2021, which decreased $122.2-million compared with the prior year primarily due to the unfavourable timing of working capital and higher cash paid for income taxes, partially offset by higher net income adjusted for non-cash add-backs and lower interest paid. The unfavourable timing of working capital included $230-million of an unfavourable impact related to prior-year net tax payment deferrals, partially offset by the timing of receipts and payments related to higher financial volumes in the fourth quarter of 2021 compared with the fourth quarter of 2020. Prior-year working capital benefited from approximately $130-million of net tax payment deferrals related to various government-sponsored payment deferral programs associated with the coronavirus pandemic, while, in 2021, the company made over $100-million of net repayments against the net tax payment deferrals.
  • Underlying free cash flow: Cash received was $1,082.8-million for the year ended Dec. 31, 2021, which represents a decrease in cash received of $183.5-million from the prior year, primarily due to the unfavourable timing of working capital and higher cash paid for income taxes, partially offset by lower capital spend and lower underlying EBITDA.
  • Debt: Total debt as of Dec. 31, 2021, was $7,162.1-million and cash and cash equivalents totalled $637.4-million, resulting in net debt of $6,524.7-million and a net debt to underlying EBITDA ratio of 3.14 times. Continuing its commitment to deleverage, in July, 2021, the company repaid in full its $1-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. As of Dec. 31, 2021, the company had no borrowings drawn on its revolving credit facility and no commercial paper borrowings.

Other results

The increase in the company's fourth quarter U.S. GAAP effective tax rate was primarily due to a $1.5-billion goodwill impairment charge in the company's EMEA/APAC segment recognized in the fourth quarter of 2020 that related to non-deductible goodwill for income tax purposes. The increase in the company's full-year U.S. GAAP effective tax rate was primarily due to the $1.5-billion goodwill impairment charge in the company's EMEA/APAC segment recognized in the fourth quarter of 2020 and $18-million of tax expense recognized in the second quarter of 2021 related to the remeasurement of the company's deferred tax liabilities as a result of a corporate income tax rate increase in the United Kingdom from 19 per cent to 25 per cent. These increases to the rate were partially offset by $135-million of tax expense recognized in the second quarter of 2020 related to the hybrid regulations enacted in the United States and the release of $73-million of reserves for unrecognized tax benefit positions as a result of an effective settlement reached on a tax audit in 2021.

The decrease in the company's fourth quarter underlying effective tax rate was primarily due to higher proportional income (loss) before income taxes in jurisdictions with a lower income tax rate in 2021 compared with the prior year, partially offset by higher discrete tax expense recorded in the fourth quarter of 2021. The decrease in the company's full-year underlying effective tax rate was primarily due to the release of $73-million of reserves for unrecognized tax benefit positions recognized in 2021.

Special and other non-core items

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

During the fourth quarter of 2021, the company recognized net special items charges of $27.2-million, consisting of an impairment charge recorded on the remaining portion of its India business and asset abandonment charges related to certain brewery and other closures in the Americas and EMEA/APAC segments.

Additionally during the fourth quarter of 2021, the company recorded other non-core net benefits of $78.8-million, primarily consisting of changes to the company's unrealized mark-to-market commodity positions.

2022 outlook

Full-year guidance

The company expects to achieve the following targets for full-year 2022 despite the inherent uncertainties that exist with the continuing coronavirus pandemic and the global supply chain:

  • Net sales -- mid-single-digit increase versus 2021 on a constant currency basis;
  • Underlying income (loss) before income taxes -- high single-digit increase compared with 2021 on a constant currency basis;
  • Deleverage -- the company expects to achieve a net debt to underlying EBITDA ratio below 3.0 times by the end of 2022;
  • Underlying free cash flow -- $1-billion, plus or minus 10 per cent;
  • Underlying depreciation and amortization -- approximately $750-million, plus or minus 5 per cent;
  • Consolidated net interest expense -- approximately $265-million, plus or minus 5 per cent;
  • Underlying effective tax rate -- in the range of 22 per cent to 24 per cent for 2022.

Capital allocation initiatives

On Feb. 22, 2022, the company's board of directors declared a dividend on its Class A and Class B common shares of 38 cents per share, payable March 18, 2022, to shareholders of record on March 7, 2022. Similarly, the board of directors of Molson Coors Canada, an indirect wholly owned subsidiary of the company, on Feb. 22, 2022, declared the Canadian-dollar equivalent of the dividend declared on Molson Coors stock payable on March 18, 2022, to its Class A and Class B exchangeable shareholders of record on March 7, 2022.

On Feb. 17, 2022, the company's board of directors approved a share repurchase program authorizing the company to purchase up to an aggregate of $200-million of the company's Class B common stock through March 31, 2026, with repurchases primarily intended to offset annual employee equity award grants.

Notes

Unless otherwise indicated in this release, all dollar amounts are in U.S. dollars, and all comparative results are for the company's fourth quarter or full year ended Dec. 31, 2021, compared with the fourth quarter or full year ended Dec. 31, 2020. Some numbers may not sum due to rounding.

2021 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 2021 fourth quarter and full-year results. The live webcast will be accessible through the company's website. An on-line replay of the webcast will be available until 11:59 p.m. Eastern Time on May 2, 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 Class A and Class B exchangeable shares offer substantially the same economic and voting rights as the respective classes of common shares of MCBC, as described in MCBC'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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