Molson Coors 2Q profit falls on higher costs

AP News
|
Posted: Aug 02, 2011 5:09 PM
Molson Coors 2Q profit falls on higher costs

Molson Coors Brewing Co. found that higher prices were not enough to offset weak beer sales and increased costs for fuel and ingredients in the second quarter. The maker of Coors Light, Keystone Light, Carling and other beers reported Tuesday that its net income fell 6 percent, missing analysts' expectations.

Still, company officials said that Molson Coors is performing quite well despite the larger macroeconomic picture, which including economic woes in U.S. The company said it has been able to gain market share in the U.S. and overseas.

"The external world is what it is," said Molson Coors CEO Peter Swinburne. "But there are a lot of things we are going on internally that we are doing to reach consumers."

Beer makers have been struggling for some time with weak sales volume as consumers grapple with the impact of the tough economy. That problem has been compounded by escalating fuel, packaging and ingredient costs, which are affecting nearly all consumer product makers.

Molson Coors has been particularly hard hit by the U.S. economic downturn as its core customer _ men under the age of 28 _ are seeing particularly high unemployment. The situation worsened during the quarter as unemployment and gas prices ticked up.

To weather the downturn, Molson Coors, which said costs for the quarter were higher than it anticipated six months ago, continued to keep a tight lid on its spending. The company had been using that cost-cutting strategy in the past few quarters to remain profitable.

And like many other companies, Molson Coors has looked to increase its presence overseas as a way to bolster its business at a time when U.S. consumers' spending remains conservative. While the company said it increased its market share in the U.S. slightly, it had bigger gains in places such as U.K. during the period.

The company also increased its push into emerging markets. In India, it purchased a controlling stake in a joint venture during the period. In China, it introduced Coors Light during the quarter.

However, Molson Coors' heavy investment in its overseas business also hurt its bottom line during the period.

Molson Coors reported that it earned $222.8 million, or $1.18 per share, for the period ended June 25. That's down from $237.2 million, or $1.27 per share, a year ago. Revenue rose 6 percent to $933.6 million.

Analysts had expected the company to earn $1.29 per share on revenue of $958.5 million, according to data from FactSet.

Shares of the company fell 30 cents to $44.33.

Molson Coors also said Tuesday that it will buy back up to $1.2 billion shares. The new repurchase program, approved by Molson Coors' board, is expected to span three years.

___

AP Business Writer Michelle Chapman contributed to this report from New York.