Canada's oldest and largest brewer, Molson Inc., posted a lower first-quarter net profit because of a drop in sales and volumes in Brazil, where it also took a charge for the closure of a plant, announced the company on July 31, according to Reuters. The company said it was confident sales at its Brazilian beer subsidiary Kaiser would turn around. They were up dramatically in July, Molson said, and were expected to remain strong in the upcoming months.

"We knew it was coming, but I am feeling very good about Brazil. I expect we will improve in Brazil and the steps taken were required," said Daniel J. O'Neill, Molson president and chief executive. "The original profit, market and volume share targets for Kaiser will be met or surpassed for the year," he told analysts. Molson shares fell C$1.80, or 4.9 %, to C$35.35 on July 31 on the Toronto Stock Exchange. The stock has gained more than 5.4 percent since the beginning of the year.

Molson, which is the world's 15th largest brewer and owns Brazil's Kaiser brewery, said it earned C$54.7 million ($39.6 million), or 42 Canadian cents a share, for the quarter ended June 30, down from C$100.7 million, or 77 Canadian cents a share, in the year-earlier period. The quarterly results included a C$43.3 million charge for a plant closure last June in Ribeirao Preto, Brazil, as well as a pretax gain of C$7.0 million from the sale of a property close to its Barrie, Ontario, brewery. The company said comparable earnings per share rose to 67 Canadian cents a share from 55 Canadian cents. Twelve analysts polled by Reuters Research were expecting comparable earnings of 68 Canadian cents per share.

Revenue fell 3.6 % to C$662 million from C$687 million and overall brewing volumes were down 12 % from last year, the Montreal-based company said. While sales increased in Canada and the United States, they fell 27 % in Brazil because of distribution disruptions caused by Kaiser's recent restructuring.

Kaiser is Brazil's second-largest brewer and competes in its home market with Ambev, the world's fifth-largest brewery. "We can't win a battle (against Ambev) with half of the army," O'Neill said, referring to Kaiser's recent distribution problems. Analysts said they expected Molson to perform better in the future.

"The stock is expected to appreciate and produce a total return of at least 15 % and outperform the S&P/TSX composite index over the next six months," said Raymond Lai, analyst at Raymond James. He said his target price for Molson is C$45.00 a share. Molson said its total market share in Canada dipped to 44.1 % from 44.7 %, but said its Bavaria and Molson Export Light sales were above expectations. Molson brands include Molson Export, Black Label, Kaiser, Bavaria and Molson Dry. It also imports Heineken, Corona, MGD Clear and Marca Bavaria to Canada.

01 August, 2003