Molson’s profits drop
What a week it was, the first week in August 2011! As stocks tumbled, Europe’s sovereign debt problems spun again out of control and Standard & Poor’s took the unprecedented step of downgrading the U.S. government’s sovereign credit rating, Molson was the first among the world’s biggest brewers to report second quarter earnings.
In case you had any doubts, Molson’s figures confirm it: the U.S. economy is not recovering. As economist Paul Krugman wrote in the International Herald Tribune on 6 August: “It’s not just that the threat of a double-dip recession has become very real. It’s now impossible to deny the obvious: We Americans are not now and never have been on the road to recovery.”
On 2 August 2011 Molson Coors reported lower-than-expected quarterly results which it blamed on high petrol prices and unemployment. As with many food and beverage makers, the economy and higher gas prices have hurt Molson Coors‘ sales because people are spending less money on items like beer at convenience stores and petrol stations.
Besides, many beer drinkers are young men, a group acutely hurt by high unemployment.
Second-quarter (ended 30 June 2011) net income fell to USD 222.8 million (EUR 159 million) from USD 237.2 million a year earlier.
Net sales rose 5.7 percent to USD 933.6 million (EUR 652 million). Revenue, said the brewer, benefited from price increases in the United States and Canada, and the company selling a greater proportion of higher-priced beers.
However, the company sold 2.8 percent less beer in the quarter. This means that Molson Coors underperformed the market. U.S. domestic beer production dropped 1.1 percent in the first half of this year over the same period a year ago, according to the Beer Institute, an industry body.
To make matters worse, sales from wholesalers to retailers, a key gauge of consumer demand, fell 4.2 percent in Canada, 2.7 percent in the United States and 5.7 percent in Britain, because of strong sales a year earlier related to the World Cup.
The maker of Coors Light, Molson Canadian and Blue Moon beers announced a USD 1.2 billion share repurchase programme, which probably pleased investors who want the company to do something with its cash.
After Molson Coors combined its U.S. operations with those of SABMiller in July 2008 to form the MillerCoors joint venture, earnings were driven largely by cost cuts. Now they are running out of cost savings. Investors worry where profit growth will come from in the near future.
