E-Malt.com News article: 2061

Canada: Molson Inc. has slashed its profit forecast for the financial year ending March 31, citing "slower growth in revenue and earnings in certain regions of Canada and a 23 % volume shortfall in Brazil," according to Canadian press. The brewer now expects earnings before interest and taxes, or EBIT, for the year to grow zero to 2 % over the previous year, to between $512 million and $520 million, the company reported on January 15. Molson had previously targeted a 14.5 % rise in that measure of profit.

For the third quarter ended Dec. 31, Molson expects to report a decline of 7 to 9 % in earnings before interest and taxes compared with a year earlier, to a range of $112 million to $115 million. The company said that measure of profit in Canada, where Molson is the largest brewer with 44.9 % of the market as of last summer, is expected to be up at least 10 per cent for the full year.

Molson has encountered a quagmire in Brazil, however, where the company bought Kaiser, the South American country's second-largest brewer, for $765 million (U.S.) in the spring of 2002. The acquisition was worth about $991 million (Canadian) at yesterday's exchange rate. The volume of Brazilian sales in the October-December quarter was down 23 per cent from a year earlier, Molson said.

"To deliver the 14.5 per cent EBIT growth commitment in fiscal 2004, Molson required Brazil to contribute to over-all EBIT in the second half of the year," said Daniel O'Neill, Molson's president and chief executive officer. "The time needed to revamp the sales force has taken much longer than expected, delaying Brazil's profit contribution by six months."

He said costs in Brazil will continue to hurt results in the current quarter, and details will be provided Jan. 28 during Molson's conference call on third-quarter earnings. Yesterday's statement added that, for the 2005 financial year starting April 1 and for following years, "the corporation expects to continue to deliver double-digit annual EBIT growth."

In releasing second-quarter results in November — a 17 % climb in net profit to $96.5 million as sales rose 4.4 per cent to $715.6 million — O'Neill noted the improvement was concentrated in Quebec, while market share declined in the Ontario-West region. In Brazil, second-quarter volumes declined 8.2 % after a 27 % drop in the first quarter, as disposable incomes fell sharply in South America's biggest economy.



20 January, 2004