Molson Coors takes US$495-million charge on its Molson brands in Canada
MONTREAL — Molson Coors took a US$495.2-million impairment charge in the fourth quarter to reflect a lower value of the brewing giant’s core Molson brands in Canada.
The company said it determined last fall that the fair value of the Molson products was lower than its book value as it faced a weaker performance last year, difficult market conditions and intensified competition not expected to subside.
Molson Coors is Canada’s second-largest brewer but has seen its share of the market slide, having lost ground to its largest rival, smaller competitors and craft beers.
Since 2012, its market share has dropped to 34 per cent from 40 per cent, while Anheuser-Busch’s Labatt has grown two percentage points to 43 per cent. Other brewers account for almost a quarter of the Canadian market, up from 19 per cent five year ago.
Molson Coors (TSX:TPX.B, NYSE:TAP) posted a US$460.9 million pre-tax loss from its operations in Canada for the three months ended Dec. 31, down from a $48.5 million profit a year earlier.
Adjusting for one-time items, underlying profits for the company’s Canadian operations fell to US$48.5 million from US$51.8 million a year earlier.
Net sales fell 3.6 per cent to US$329.6 million, driven by lower consumer demand caused by intense competition in Quebec and an economic slowdown in Western Canada’s oilpatch.
For the full year, it swung to a US$135.5-million pre-tax loss as Canadian sales volumes fell almost three per cent despite growth in premium brands such as Coors Banquet, Mad Jack, Belgian Moon, Creemore and Heineken imports. It earned US$267.3 million in underlying pre-tax profits, down from US$304.5 million in 2015.
Analyst Brittany Weissman of Edward Jones said the Canadian operations have struggled, but the company appears to be trying to turn things around.
“It does seem like these oil markets are starting to rebound and that economic weakness is getting better,” she said in an interview.
Molson Coors chief executive Mark Hunter told analysts Tuesday that it plans to launch a new Molson Canadian campaign tied to the country’s 150th birthday.
Canada is an important but smaller part of the company following last fall’s US$12-billion acquisition of Miller brands and SABMiller’s 58 per cent stake in MillerCoors, a joint venture formed in 2008. The transaction stemmed from the US$107-billion takeover of SABMiller by Anheuser-Busch InBev.
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Ross Marowits, The Canadian Pres
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