Molson Coors to restate earnings following accounting errors

(source)

Dive Brief:

  • Molson Coors will restate results for 2016 and 2017 that originated from the acquisition of the remaining 58% stake in MillerCoors three years ago. The restatement, which will not be material, will increase the company’s deferred tax liabilities and deferred tax expenses by $399.1 million, pulling down its net income and earnings per share.
  • Sales during the fourth quarter fell 6.2% to $2.42 billion, falling short of analysts’ estimates of $2.54 billion cited by Bloomberg.
  • In the U.S., sales declined 7% to $1.6 billion due to lower volumes in its premium light segment, led by Coors Light and Miller Lite. U.S. brand volumes fell 5.1% during the fourth quarter.

Dive Insight:

Molson Coors posted another disappointing quarter as financial irregularities further tarnished an already difficult market for the beer giant. While the restatement of results for 2016 and 2017 will not have a material impact on the company, it’s one more headache for the maker of Blue Moon, Milwaukee’s Best and Miller Genuine Draft as it struggles to right sales in the challenging U.S. market.

The news hit the company’s stock with Molson Coors shares down 7.7% in early morning trading.

Beer sales have been slumping domestically. New brews, including low-calorie options, as well as a push to expand into alternative beverages like hard cider and cannibis-infused drinks, have not been enough to offset the decline. Molson Coors has a joint venture with HEXO (formerly Hydropothecary Corp.) to develop non-alcoholic, cannabis-infused beverages. It also expanded its reach into other beverages after purchasing Aspall Cider, a nearly 300-year-old maker of premium ciders and specialty vinegars.

But these ventures are not big enough to meaningfully contribute to the bottom line or, in the case of cannabis, could be several years from impacting their balance sheets. This means beer markers will have to continue to resurrect their classic drinks, a move that has shown to be increasingly difficult as consumers shift to craft brews, wine and spirits. Efforts to introduce new beers haven’t proven to be enough. Last summer, Molson Coors pulled a light beer brand aimed at millennials just six months after launching it.

While the U.S. remains a core market, at least for now, it can’t be counted on for growth. To be sure, the problems facing Molson Coors are not unique. In October, AB InBev cut its dividend in half to help address its burgeoning debt load amid weaker profit and lower volumes in several key markets, including the U.S.

Increasingly, brewers will inevitably look to consolidation to mine synergies or tap into regions around the world where beer consumption is increasing. During the most recent quarter, Molson Coors posted strong results in its fast-growing international business and strengthening European operations. 

Molson Coors, AB InBev and other brewers also have purchased craft breweries to boost results. However, that segment, while still growing, is hyper-competitive and not expanding as fast as it had been during the previous decade.

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