MillerCoors 2Q Net Up 75% On 2008 Charges; Volume Down

   DOW JONES NEWSWIRES 
 

MillerCoors LLC. posted a 75% surge in second-quarter profit on prior-year charges, while the company noted soft sales of premium brands helped drive down profit margins.

Miller Lite's woes also continued in the latest quarter, as sales to retailers fell by mid-single digits on a percentage basis. An ad campaign was launched by the company in the spring to revitalize the brand.

The joint venture has finished its first year of operations, and core earnings grew by a double-digit percentage each quarter, noted Chief Executive Leo Kiely. The operations are made up of the U.S. businesses of Molson Coors Brewing Co. (TAP) and SABMiller PLC (SAB.JO).

Sales of major U.S. beer brands are struggling as some recession-weary consumers drink less or switch to cheaper brews. MillerCoors recently began testing the sale of $20 draft-beer systems for consumers to drink at home, part of a string of new products and package innovation from major players grappling for market share in a crowded, slow-growing industry.

MillerCoors' profit rose to $304.9 million from $174.6 million a year earlier. The prior-year figure assumes the joint venture was already in effect. Excluding items such as integration costs, earnings rose 16% to $325.3 million.

Net sales rose 1.6% to $2.14 billion despite a 1.7% volume drop. But higher costs from production more that offset price hikes and helped push gross margin down to 39.1% from 40.1%. Overhead expenses, though, fell 11%.

Meanwhile, Miller said it achieved $60 million in cost savings, pushing its year-to-date total to $110 million. The company said it now expects to save $260 million by the end of this year, beating its original goal of $225 million. In May, MillerCoors said it expected to achieve cost savings faster than planned. Nevertheless, it again reaffirmed its three-year $500 million target for savings from the venture.

Domestic sales to retailers fell 0.8%, reflecting Miller Lite and softness in the company's premium brands. Domestic sales to wholesalers dropped 1.1%.

Molson Coors will release its second-quarter results later Monday morning.

-By Mike Barris, Dow Jones Newswires; 212-416-2330; [e-mail];