Molson Coors Continues Focus On Brand-Building To Build Shareholder Value
DENVER, COLORADO AND MONTREAL, QUEBEC -- Molson Coors Brewing Company (TSX: TAP.A) (TSX: TAP.B) (NYSE: TAP) announced yesterday at its Annual Investor Day, held in New York City, New York, that the Company will continue to focus on brand-building as the principal source of building shareholder value.
Branding is the priority
Leo Kiely, Molson Coors President and Chief Executive Officer, said to more than 150 financial analysts and investors, "The Molson Coors merger is now behind us, and we’re confident that our teams can build on the sales momentum and revenue-generating potential of our brands, continue to improve our costs, and further strengthen the fundamentals of our business worldwide. In fact, building on that momentum will be the key to our long-term success. In the first two years of the Molson Coors Brewing Company, we have been consistently, in fact relentlessly, focused on strengthening our base in the belief that a strong core business is the key to all future opportunities.
“Yes, building our brands and growing the top line are clearly job one - no doubt about it,” he continued. “But you need fuel to grow. So the other critical piece of our strategy is to make more money and generate more cash by reducing our costs.”
Next-generation cost initiatives will generate $250 million of savings - resources for growth
Tim Wolf, Global Chief Financial Officer, said, "This year, we’re closing out our three-year $175 million merger synergies above our commitment and at a faster pace than at the beginning of the merger. We’re also increasing our momentum on cost reductions and our ability to generate earnings and cash with our next-generation cost initiatives, totaling $250 million across the company by 2009. These are separate and incremental to the merger synergies.
To put the $250 million, three-year goal into perspective,“ Wolf continued, ”this amount equals about 45% of our 2006 pre-tax income. These cost reductions will provide ongoing resources for growth or to drop to the bottom line. How much we reinvest will depend on several factors, not the least of which is our commodity costs. If we assume that inflation is generally offset by beer pricing and volume growth, our next generation of cost savings will provide strong resources to build brands and grow profits"
Investing cash to build profits and shareholder returns
“In the past two years, we have exceeded all of our cash generation and debt repayment goals because of improved cash and capital disciplines across the company,” said Tim Wolf. “Our objective now is to ensure that our cash performance enhances the returns to shareholders from our base earnings growth. Our goal for 2007 is to exceed $350 million of free cash flow, defined as cash flow from operations, minus capital spending, plus non-strategic asset sales. This free cash goal is after approximately $175 million of pension contributions in excess of expense and about $50 million of working capital timing differences, both of which we expect to be less significant in future years.”
With a wider range of possible cash uses in 2007 than in previous years, the company has changed its cash generation target to “free cash flow,” which is defined as cash flow from operations, minus capital spending, plus non-strategic asset sales (that is, cash flow before the payment of dividends and the receipt of cash from stock option exercises). In previous years, the company focused cash use solely on debt repayment and targeted “cash flow available for debt repayment,” which is cash generation from all sources (including stock option proceeds) and after all uses (including dividends) except debt repayment.
Wolf continued, “As we consider potential uses for our substantial cash flows, all our cash decisions will be guided by their ability to drive profit, competitiveness and shareholder returns.”
Mr. Kiely concluded, “We’ve come a long way and achieved a great deal since the Molson and Coors organizations came together in 2005 to form a bigger, more capable, and more competitive brewing company. Our performance in the last year demonstrated the progress we’ve made and the benefits that the merger can deliver to our shareholders. And it’s just the beginning. Looking ahead, we feel really good about the underlying strength of our company, and we’re focused on making even more progress in 2007 and beyond.”
This press release includes “forward-looking statements” within the meaning of the federal securities laws, and language indicating trends, such as “trend improvements,” “progress,” “anticipated,” “expected,” “improving sales trends” and “on track.” It also includes financial information, of which, as of the date of this press release, the Company’s independent auditors have not completed their review. Although the Company believes that the assumptions upon which the financial information and its forward-looking statements are based are reasonable, it can give no assurance that these assumptions will prove to be correct. Important factors that could cause actual results to differ materially from the Company’s projections and expectations are disclosed in the Company’s filings with the Securities and Exchange Commission. These factors include, among others, changes in consumer preferences and product trends; price discounting by major competitors; unanticipated expenses, margin impact and other factors resulting from the recent merger; failure to realize anticipated results from synergy initiatives; and increases in costs generally. All forward-looking statements in this press release are expressly qualified by such cautionary statements and by reference to the underlying assumptions. We do not undertake to update forward-looking statements, whether as a result of new information, future events or otherwise.
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