Higher Net Income (U.S. GAAP) Driven by One-Time Purchase Price Settlement Gain
Lower Net Sales and Underlying Net Income (Non-GAAP) Driven Primarily By Weak U.S. Industry Conditions, Quarterly Timing of Wholesale Inventories, and Cycling Europe Indirect Tax Provision Benefit
Management Remains Committed to Delivering Full-Year Business Plans, Free Cash Flow and Cost Savings Targets, As Well As Medium-Term EBITDA Margin Targets
Worldwide Brand Volume Decreased 3.1%; Global Priority Brand Volume Decreased 5.6%
EPS (U.S. GAAP) of $1.28 Increased 33.3%, and Underlying EPS (Non-GAAP) of $0.48 Decreased 40.0%
DENVER, Colo., and MONTREAL, Quebec – May 2, 2018 – Molson Coors Brewing Company (NYSE: TAP; TSX: TPX) today reported results for the 2018 first quarter. Molson Coors president and chief executive officer Mark Hunter said:
"In the first quarter, which is seasonally the smallest profit quarter of the year for us, our Canadian, European and International businesses maintained their underlying progress from 2017. The U.S. beer industry had a softer-than-anticipated start to the year, which impacted both top- and bottom-line performance and which, when coupled with the U.S. distributor inventory destocking and the anticipated cycling of the indirect tax provision benefit in Europe last year, led to an underlying EBITDA reduction of 18.5 percent for our company in the first quarter. We do not see these results as indicative of our full-year performance versus our plan, and we remain committed to delivering our 2018 guidance."
Mark continued, "Looking more closely at Q1, there are three specific negative performance drivers, one of which is already behind us and another which we expect to fully reverse by year end:
• The first relates to cycling the reversal of the indirect tax provision benefit in Europe, which negatively impacted net sales and pretax income by approximately $50 million -- and is now behind us.
• The second relates to a reduction in U.S. sales to wholesalers (STWs), which declined by 6.7 percent as we under-shipped versus last year. U.S. distributor inventory levels were lower than planned, compounded by the roll out of our new ordering system at the Golden brewery, which has taken longer to ramp up than expected. Compared to last year, we under-shipped by approximately 450,000 hectoliters, which represents approximately $30 million of gross profit, and we expect this to reverse on a full-year basis, with the negative first quarter profit impact reversing primarily in the second half of this year.
• The third performance driver relates to overall industry softness with our U.S. brand volume down by 3.8 percent, as poor weather dampened overall industry demand. Our market share trends, however, remained consistent with 2017.
"Across Molson Coors, our teams are focused on our first priority, which is to drive margin expansion, bottom-line growth and strong free cash flow to enable deleverage. Our second priority remains to deliver an improved top line through our First Choice commercial excellence approach, which provides the most sustainable source of profit growth over the medium to long term. Capital allocation within our business continues to be guided by our Profit after Capital Charge, or PACC approach, as we seek to deliver Total Shareholder Returns. Our regional business plans are clear and consistent with these priorities, and we remain committed to delivering our full-year 2018 plans."