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The Globe and Mail

Molson Coors sees strong demand overseas, flat sales in Canada

Coors Light and Molson Canadian beers are shown on sale in Denver, Colo., in this 2010 file photo. Molson Coors Brewing Co. said Aug. 6, 2014, its earnings had increased by nearly 10 per cent in the second quarter.

Ed Andrieski/AP

International growth in Eastern Europe and Latin America helped Molson Coors Brewing Co. beat analyst expectations in the second quarter, despite declining global beer sales and flat results in Canada.

Molson Coors chief executive officer Peter Swinburn attributed the results to growth in overseas markets and an emphasis on "above premium" beer brands. The company saw sales for Coors Light rise more than 30 per cent in Britain and Chile, and Mr. Swinburn cited continued development for the brand in Eastern Europe and other regions.

"We grew share in Czech Republic, Romania and Hungary in the quarter," he said in a conference call with analysts, noting that some of these gains were offset by flooding in Serbia and the political turmoil in Russia and Ukraine.

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"Coors Light more than doubled in Mexico and Latin America on top of strong growth last year, and volume grew significantly in India," he added, highlighting what he called the "increasingly important role" of international sales to the business.

The company reported a 9.5-per-cent increase in net income in the second quarter, growing to $290.7-million, up from $271.3-million a year ago. Earnings per share were $1.57 (U.S.), beating analyst estimates of $1.47. Revenue grew nearly 1 per cent, and investors sent the company's stock up 5.8 per cent.

Mr. Swinburn will leave the company at year's end after serving as CEO since 2008. He will be replaced by the CEO of Molson Coors Europe, Mark Hunter.

April Scee, an analyst for New York-based financial firm BTIG, said the company appears to be meeting its targets when it comes to cost cutting and offering a new product mix.

"Molson Coors' strategy remains on track despite a very difficult macro backdrop," she wrote in an email to The Globe, referring to flooding in Europe, political turmoil in Ukraine and Russia, and a soft North American consumer market. "We expect Molson Coors to increase marketing investment in the second half and think market share performance should be positive as a result."

While the company saw strong international sales, results were not as good in North America, and Canada in particular.

Sales in Canada were flat, although this was partly due to Molson Coors's decision to end its contract to distribute Mexican beer Modelo four years early. Molson Coors received a one-time payment for the termination of the contract, but forgoes the sales generated by the beer for its bottom line. The impact of the unrealized Modelo profit in Canada was $6.6-million for the quarter.

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Stewart Glendinning, CEO for Molson Coors Canada, said other trends in North America hold back beer sales. "We have seen wine growing at the expense of beer," he said in an interview. He said the company has been offering more diversified products to respond to demand, including craft brews Creemore and Granville Island, the premium beer Coors Banquet, and cider.

Molson Coors is also the official beer of the National Hockey League, and the second quarter only saw one Canadian team make the playoffs, instead of four last year. Mr. Glendinning said the lack of Canadian NHL participation did not have a significant impact on sales.

But there will be some future challenges for the company, which is headquartered in Denver, Colo., and Montreal. Mr. Glendinning said the recently introduced excise tax imposed in Quebec, which will add five cents to the cost of bottled beer in the province, will affect beer prices. "These sorts of taxes ultimately have to be passed on to the consumer," he said.

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