Molson Coors Reports 2017 Full Year and Fourth Quarter Results

From MolsonCoors:

Full Year (FY) Worldwide Brand Volume Increased 1.0%; FY Priority Brand Volume Grew 2.8%

FY Net Sales Revenue (NSR)/HL Increased 2.6%

FY Net Income of $1.4 Billion ($6.52 Per Share) Increased 379%, and FY Underlying (Non-GAAP) EPS of $4.47 Increased 1.1%

FY Operating Cash Flow of $1.87 Billion; Underlying Free Cash Flow of $1.45 Billion

More Than $255 Million of Cost Savings Delivered in 2017; Raising 3-year Target to $600 Million

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4th Quarter (4th Q) Worldwide Brand Volume Decreased 1.1%, and Priority Brand Volume Decreased 1.9%

4th Q NSR/HL Increased 5.8%

4th Q EPS of $2.72, Up from ($2.83), and Underlying EPS of $0.62 Increased 31.9%

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February 14, 2018 07:00 AM Eastern Standard Time

DENVER & MONTREAL–(BUSINESS WIRE)–Molson Coors Brewing Company (NYSE: TAP; TSX: TPX) today reported results for the 2017 full year and fourth quarter. Molson Coors president and chief executive officer Mark Hunter said:

“Actual and Pro Forma Worldwide Brand and Financial Volume”

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“2017 marked the first full year of the bigger, stronger Molson Coors, and our full year results demonstrated balance and progress against both our bottom-line and top-line goals. Integration, synergies and costs savings were all delivered on or ahead of plan by engaged employees around the world who are aligned behind our First Choice for consumer and customer ambition. For the full year 2017 versus pro forma 2016 results, we over-delivered on costs savings and free cash flow and optimized commercial spending, delivering strong net income growth, underlying EBITDA margin expansion of 77 basis points, and underlying EBITDA growth of 3.7 percent. We also strengthened our balance sheet by more than $900 million through debt pay-down and pension contributions as part of our deleverage strategy. This was complemented by an improving top line, with global brand volume growth of 1 percent and net sales per hectoliter growth of 2.6 percent, driven by revenue management and portfolio premiumization. We also grew market share in Canada and Europe for the year and delivered positive underlying EBITDA in our International business.”

Mark added, “Across Molson Coors, against a backdrop of integration and challenging market conditions during 2017, we delivered financial and commercial results that demonstrate our balanced priorities for bottom- and top-line growth are working. In 2018, our First Choice focus across regions will continue to strengthen and premiumize our brand portfolio, while deepening our customer relationships. We will also continue to retain flexibility in our P&L, deliver on our cost savings and remain laser-focused on delivering against our cash targets and strengthening our balance sheet.”

Quarterly Highlights (versus Fourth Quarter 2016 Pro Forma Results, unless otherwise noted)

• Net sales: $2.580 billion, increased 4.5 percent, due to positive global pricing, royalty volume and foreign currency, along with cycling a $50 million indirect tax provision from a year ago. These factors were partially offset by lower financial volumes. Net sales in constant currency grew 2.4 percent.
  

• Net sales per HL: $111.89, increased 5.8 percent, and 3.7 percent in constant currency, driven by positive global pricing, higher royalty revenue, favorable foreign currency movements and cycling an indirect tax provision from a year ago.
  

• Volume: Worldwide brand volume of 22.4 million hectoliters decreased 1.1 percent due to lower volume in the U.S. and International, partially offset by growth in Europe and Canada. Global priority brand volume decreased 1.9 percent. Financial volume of 23.1 million hectoliters decreased 1.2 percent, driven by lower U.S. volume.
  

• U.S. GAAP net income from continuing operations attributable to MCBC was $588.1 million, improved from a loss of $607.2 million last year, driven by a discrete tax benefit related to the revaluation of our deferred tax balances, which resulted from the recent U.S. tax reform, along with favorable underlying performance and cycling an impairment charge for the Molson brands in Canada and an indirect tax provision in Europe recorded a year ago.
  

• Underlying net income (non-GAAP) increased 32.1 percent, driven by positive global pricing, cost savings, MG&A efficiencies and net pension benefit, as well as cycling the indirect tax provision a year ago, partially offset by inflation, impacts of lower volume, investments behind global business capabilities, and a higher underlying tax rate.
  

• The company looks at value creation from the MillerCoors transaction through the lens of the sum of three numbers. In the fourth quarter, these three numbers were:
  
  • Underlying net earnings of $133.6 million, plus…
    

  • $103 million of transaction-related cash tax benefits and…
    

  • $11 million of transaction-related after-tax book amortization.
    

  • To calculate this measure on a per-share basis, the company had 216.5 million weighted average diluted shares outstanding in the fourth quarter.
• Underlying EBITDA: Increased 17.0 percent on a reported basis, and increased 14.3 percent on a constant currency basis.
  

• U.S. GAAP cash from operations: Net cash from operating activities for full year 2017 was $1.866 billion, which represents an increase of $739.4 million from actual prior year results, driven by the addition of the other 58 percent of MillerCoors cash flows, as well as lower cash paid for taxes and working capital efficiencies, which were partially offset by higher cash paid for pension funding and interest.
  

• Underlying free cash flow: $1.449 billion for full year 2017, a 67.8 percent increase from actual prior year results of $863.7 million, driven by the same factors as cash from operations, partially offset by higher capital expenditures.
  

• Debt: Total debt at the end of 2017 was $11.314 billion, and cash and cash equivalents totaled $418.6 million, resulting in net debt of $10.895 billion. This net debt is more than $600 million lower than at the beginning of the year, despite $280 million of unfavorable foreign currency. Additionally, we made $310 million of contributions to our defined-benefit pension plans during 2017 as part of our deleveraging goals.