The Montreal and Denver headquartered brewer reported Q2 sales of $999.4m up 7% (which include only its two week period in control of StarBev) in the year to June 30, but net income fell 53.5% to $104.3m, due to StarBev acquisition costs.
Molson Coors completed the StarBev acquisition (the business is now Molson Coors Central Europe) on June 15 for €2.7bn ($3.4bn), at a purchase price of x10.8 pro forma underlying EBITDA for 2011.
Heineken’s current offer for APB stands at around x18 EBITDA, and Swinburn said Molson Coors’ purchase was a “very reasonable multiple for a business with a good long-term growth profile”
Molson Coors expected the StarBev business’s strong EBITDA margins to be sustainable, while synergies were planned and capital expenditure needs were lower than original expectations, Swinburn said.
That said underlying Q2 pre-tax income within the Central European business fell 36.6% to $46.2m, although in terms of these pro-forma results, Molson Coors had only been in control for a couple of weeks.
Volume growth of 1.4% in central Europe and net pricing up 5% was offset by unfavorable foreign currency movements, geographic and channel mix and input cost inflation.
Black label launch plans?
Cost of Goods Sold (COGS) per hectoliter rose 11% in local currency terms, primarily driven by increased sales of innovative products and packages and input cost inflation, particularly malt, utilities and fuel.
HSBC analyst James Walsh asked Molson Coors management what opportunities they saw within the StarBev business; it operates in nine markets including Romania, Hungary Serbia and the Czech Republic.
Swinburn replied Molson Coors Central Europe had strong positions within most of its markets, and that innovative line extensions in H1 mainly concentrated on fruit flavors.
Staropramen had been launched into most of the markets last year and early this year, he added, with Molson Coors investing behind a brand performing “exceptionally well” with strong double-digit growth.
“Looking forward, we’re currently examining the possibility of expanding a Carling brand into some of the markets, but we haven’t yet matched the product, nor do we have the consumer research back yet.”
‘Above mainstream’ category
The ‘above mainstream’ (premium) category in many of the StarBev markets was limited, Swinburn said, but Molson Coors expected it to grow in tandem with regional GDPs, which would present opportunities.
While Molson Coors had yet to receive consumer research back relating to Carling, any launch would certainly see it positioned above the average, he added.
Elsewhere, the US Miller Coors business (via a JV with SAB Miller) saw sales of $436m, with positive pricing, a favorable brand mix and cost management boosting pre-tax income 7.2% to $184.6m in Q2.
Canadian underlying pre-tax income fell 0.6% to $139m due to adverse currency movements, although underlying income in local currency rose. UK pre-tax income fell 19.3% to $28m with weather hitting volumes.
The international business posted a pre-tax loss of $13.4m in Q2, up $10.1m from a year ago due to costs related to the Cobra India business, infrastructure investments and costs related to a JV in China.