Molson Coors Brewing Co.’s net income plunged nearly 60 percent last quarter from the same period one year ago as costs rose, beer prices tumbled in some markets and the company took charges for closing a brewery.
Net income plunged from $55.7 million in the fourth quarter of 2004 to $22.3 million in the 2005 quarter.
Investors were initially shaken by the earnings report Thursday, but after falling to $60.75 per share, the stock closed at $63, down 47 cents, or less than 1 percent from the previous day.
Investors quickly realized that although the report’s bottom line was grim, sales volumes in Canada and the U.S. were higher than they had been in more than two years, said UBS analyst Caroline Levy.
“Some of the underlying trends were actually quite pleasing,” Levy said.
Fourth-quarter sales from continuing operations totaled $1.38 billion.
Year-ago numbers are expressed on a pro-forma basis to account for the merger of Adolph Coors and Molson last February. The most recent quarter’s per-share earnings were disproportionately lower because the merger resulted in a large increase in outstanding shares.
The brewer closed a Memphis, Tenn., brewery to help reduce costs. Molson Coors recorded $30.2 million in costs from shutting the brewery and for restructuring in Europe and Canada.
Molson Coors performed especially badly in Europe, with discounting and retailer consolidation cutting margins and trimming sales volume.
Anheuser-Busch began discounting prices heavily in the third quarter and continued through the end of last year. Anheuser-Busch’s prices aren’t expected to decline further, Levy said.
Better days are around the corner, said Leo Kiely, Molson Coors chief executive, on a conference call with investors.
The current quarter should see an improved bottom line, thanks to last month’s sale of a 68 percent share in its money-losing Brazilian unit, he said. And Molson Coors expects discounting to slow in the U.S. and Canada this year.
The company, which has headquarters in Denver and Montreal, is on track to reap $175 million in synergies from its merger by 2007, Kiely said. But the brewer still faces a challenging business environment with beer sales losing ground to spirits and wine. Some analysts expressed concern about its ability to thrive.
Denver Post wire services contributed to this report.
Staff writer Tom McGhee can be reached at 303-820-1671 or tmcghee@denverpost.com.
