Molson Coors volume slips, shares fall

By Jessica Wohl and Martinne Geller

CHICAGO/NEW YORK (Reuters) - Molson Coors Brewing Co <TAP.N> said beer volumes continue to decline in the current fourth quarter as consumers remain focused on value, and shares fell 8.5 percent.

The maker of Molson Canadian and Coors Light also posted a higher third-quarter profit, with a tax benefit and price increases offsetting a 2.9 percent decline in sales volume.

Molson Coors Chief Executive Peter Swinburn said there were no indications of consumer demand picking up.

"The consumer has been cautious, is cautious, and we probably expect them to remain cautious for the foreseeable future," Swinburn told Reuters during an interview.

Despite the near-term weakness, Swinburn said upcoming innovations, recent acquisitions, and improving performance in the United States and Britain made him optimistic about Molson's prospects in the medium- and long-term.

Molson's results echoed reports by MillerCoors, Molson's U.S. joint venture with SABMiller Plc <SAB.L>, and Carlsberg <CARLb.CO>, the fourth-biggest brewer.

Carlsberg beat analysts' profit estimates on Wednesday but trimmed its 2009 sales outlook and forecast an "equally challenging" 2010. Its shares fell 5.3 percent.

TOUGH CANADIAN MARKET

While beer's relatively low price has made it more resilient than other discretionary consumer products in the slowdown, early fourth-quarter results suggest that Molson Coors is feeling pressure heading into the holiday season.

The Canadian market is particularly tough, Swinburn said.

Molson Coors has been promoting its brands, such as Coors Light and Molson Canadian, while raising prices and keeping a tight lid on costs.

The company plans to spend more to promote its beers in its Canadian, U.S. and international markets. It is also launching new beers, such as a lower-calorie Molson Canadian 67.

The brewer earned $235.3 million, or $1.26 per share, in the third quarter ended September 26, up from $171.3 million, or 92 cents per share, a year earlier.

Adjusted earnings per share of $1.14 topped analysts' average forecast of 98 cents, according to Thomson Reuters I/B/E/S. Much of the growth came from a favorable tax resolution.

UBS analyst Kaumil Gajrawala said Molson Coors would have earned 97 cents per share without the tax benefit.

Margins were disappointing as consumers bought less expensive, lower margin beers, said Stifel Nicolaus analyst Mark Swartzberg.

Both analysts have "buy" ratings on Molson Coors and said investors should use the share price drop as a buying opportunity.

SALES TO RETAILERS DOWN SO FAR THIS QUARTER

Sales excluding excise taxes fell 7.3 percent to $853.7 million, ahead of analysts' forecast of $837 million. Total worldwide beer volume declined 2.9 percent.

Overall, volume dipped in Canada, the MillerCoors business in the United States and in the United Kingdom.

Sales to retailers, a better gauge of consumer demand than sales to wholesalers, are down so far in the fourth quarter.

In Canada, sales to retail fell at a high single-digit rate in the first four weeks of October, hurt by poor weather around the Canadian Thanksgiving holiday, Swinburn said.

UK sales to retail fell at a low double-digit rate in the first five weeks of the fourth quarter.

Earlier on Wednesday, MillerCoors posted a 28.1 percent increase in net income, as cost savings and price increases offset a dip in sales volume. The U.S. venture said domestic sales to wholesalers fell 0.7 percent. Sales to retailers fell 1.3 percent.

Molson Coors has a 42 percent stake in MillerCoors.

(Additional reporting by David Jones in London; Editing by Gerald E. McCormick, Gary Hill and Matthew Lewis)

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