Molson Coors shies away from major M&A in short term


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Molson Coors brand Molson Canadian has been hit by the NHL lockout in the country (Picture Copyright: Molson Coors)
Molson Coors brand Molson Canadian has been hit by the NHL lockout in the country (Picture Copyright: Molson Coors)
Molson Coors does not contemplate making any major acquisitions in the short term but says it may examine small portfolio ‘in fills’ if the right transactions present themselves.

Last Thursday the company reported its Q4 and full-year results for 2012, with net sales of $3.92bn (+11.4%) for the fully year, but net income from continuing operations fell 34.5% to $441.5m, due to costs associated with the $3.4bn acquisition of Molson Coors Central Europe (StarBev).

For Q4 2012, the US-Canadian brewer of Carling and Blue Moon, Molson Coors reported underlying tax earnings down 65.1% to $60.1m, with management blaming weak economic conditions and challenging prior year comparisons.

Worldwide, Molson Coors’ beer volumes rose by 13.9% to 55.1m hectoliters, due to the addition of Central European results – the company gained approval for this transaction last June – and strong Coors Light growth.

Still digesting $3.4bn StarBev

But on a pro forma​ basis – including Central Europe results from 2011 – worldwide volumes fell 7% in Q4, driven by lower volumes in the firm’s UK, Canada, Central Europe and International businesses.

On a later analyst call Bank of America Merrill Lynch analyst Bryan Spillane noted that, due to an attractive financing environment, it seemed like the market was conducive to M&A.

“I know that you’re still digesting StarBev, but could you talk more broadly about your perspective on M&A, on the environment, your willingness to look at things today?”​ Spillane asked.

Peter Swinburn, Molson Coors CEO replied that, since the StarBev acquisition, his firm had focused on paying down debt and maintaining its investment grade.

“So that really is what we’re focused on. If there is some small in-fills in terms of portfolio fills or whatever, we would be interested and would look at that,” ​he said.

Swinburn added: “But if you’re talking about major M&A activity, that’s not something that’s on our agenda in the short term.”

Hockey lockout hurts

Discussing the impact of a 20% excise tax increase implemented in November in Quebec, Molson Coors Canada CEO Stewart Glendinning said that it hit Q4 sales (-13%) as did a National Hockey League lockout that only ended in January that hit the firm’s marketing exposure.

Moreover, a competitive dynamic in Western Canada meant that smaller brewers had continued to extend in the value space (which had grown quite dramatically) and the craft space, he added.

Molson Coors was competing with Keystone and Granville Island (value) and with Creemore at the top end, Glendenning added, with competitors showing “more aggressive innovation”​ last year.

A sales rebound in January, with mid-single-digit growth in sales to Canadian retailers, reflected timing of promotions and customer buy-in rather than market fundamentals, Glendinning said.

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