Molson Coors Beverage Co (TAP) 2012 Q4 法說會逐字稿

Welcome to the Molson Coors Brewing Company fourth-quarter 2012 follow-up conference call. Before we begin, I will paraphrase the Company's Safe Harbor language. Some of the discussion today may include forward-looking statements. Actual results could differ materially from what the Company projects today, so please refer to its most recent 10-K and 10-Q filings for a more complete description of factors that could affect these projections.

The Company does not undertake to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Regarding any non-US GAAP measures that may be discussed during the call, and from time to time by the Company's executives in discussing the Company's performance, please visit the Company's website, www.MolsonCoors.com, and click on the financial reporting tab of the Investor Relations page for a reconciliation of these measures to the nearest US GAAP results.

Also unless otherwise indicated, all financial results the Company discusses are versus the comparable prior-year period and in US dollars. I would now like to turn the call over to Dave Dunnewald, Vice President - Investor Relations.

Thanks, Candace. Hello, and welcome everybody. On behalf of Molson Coors Brewing Company, thank you for joining us today for our fourth-quarter 2012 follow-up earnings conference call. Our goal on this call is to address as many additional earnings-related questions as possible following our regular earnings conference call with Peter Swinburn, Gavin Hattersley, and our business unit CEOs earlier today. We will use the standard question-and-answer format and we anticipate that the call will last less than an hour.

So let's get started. With me on the call are Heather Pollard, Investor Relations Manager, Spencer Schurr, Finance Forecasting Manager, Erik Mickelson, Manager of SEC Reporting, Mark Sax, Senior Director of Tax, and Zahir Ibrahim, Global Controller. Now as Peter Swinburn mentioned on our regular earnings call earlier today, lower fourth-quarter underlying earnings were driven by a higher tax rate and cycling strong quarterly results the year before, including the 53rd week in our fiscal 2011, and some other one-time factors. Full-year results included higher underlying earnings and $865 million of underlying free cash flow generation. Our central Europe business is being integrated very effectively, and in a difficult retail environment, and is performing very well.

In 2013, our focus will continue to be on the three pillars of our growth strategy, and particularly the first one, which is to grow profitably in our core businesses through brands and innovation. We also intend to pay down debt. In combination with disciplined high-return cash use, our growth strategy is designed to drive long-term profit, cash flow and total return for our shareholders. So with that, we've now like to open it up for your questions. Over to you, Candace.

(Operator Instructions)

Your first question comes from John Faucher with JPMorgan. Your line is now open. We'll move to our next question. Your next question comes from Ian Shackleton from Nomura. Your line is now open.

Good morning, Dave. Just a few questions. You gave us earlier some cost per hectoliter guidance, and the one that was slightly higher was Canada. Just thinking that through a little bit. Is that really a comment on pack mix really? I know you have this move to towards cans from returnable bottles. Is that the major factor there?

Yes. So our cost of goods guidance in Canada was mid-single digits for the year. That does include a component of innovation. That does include the aluminum planks bottle, which we plan to roll out this year. It also includes some high-end, or call it top of the category introductions as well.

Perhaps just a follow-up here, in terms of talking about further, or giving guidance on further cost savings, I think as Peter implied, you might be able to come back with Q1 in terms of the Central Europe-UK management merger. Is that realistic, we should expect something then, and I guess we're thinking more about getting new of the investor day in June on such things?

Yes. I think Peter mentioned something about our New York investor day, that we would have more information on our cost savings programs, and that's really when we plan to, as you say, provide a bit more texture around that.

So not with Q1? It's going to be June, really, when we get that?

Yes, that's right. The meeting this year is in June. The reason we moved it out is so that we would have more specifics we can provide you around peak season programming. For example, we had feedback that if we moved it from March to sometime around May or June, we could show more of the peak season advertising and retail promotions, and those types of things. So that's why the timing changed this year, and along with that comes the strategic view, including things like cost reductions.

Okay. Final question from me, obviously you are indicating that the low tax rates of 20% could last for a few more years. It's a difficult thing for us to analyze. Is there any way you could help us as to what is really helping hold that down, a bit longer than perhaps was expected?

Yes. Actually we've been expecting it to take us a few years to get to our long-term tax rate. That expectation is not new. It's been -- we've been providing that texture around the long-term rate for over a year, maybe 1.5 years, so that's not new. What is new is the level of the long-term tax rate, which did move down with the Central Europe acquisition. And then the individual annual tax rates have been lower because of one-time benefits, certainly in 2012 and as I recall also in 2011. We had some one-time tax benefits that we did not expect to continue, and that's another reason that we are in those specific years, below the long-term tax rate.

And I don't know if you're able to define it for years, but sounds like this is certainly three, four years but probably not 10, 15 years.

Yes. In my vernacular, a few tends to be three to five. And so yes, we're not talking 10 years here, we're just talking a moderate progression over, as I say, three to five years. By the way, the progression -- just to be sure, to be clear again, the progression to get to the long-term tax rate, we suggest that's gradual, that would be assuming that there are no additional changes in tax laws or other one-time types of events, as we did actually see in the fourth quarter, with the change in this in the Serbian tax rate.

Understood. Thanks for that, Dave.

(Operator Instructions)

We have another question from Ian Shackleton with Nomura. Your line is now open.

If there's nobody else, I've got a few more as well. Obviously the CapEx, you've raised giving guidance for fiscal year 2013, now at my calculation, that's still running a reasonable amount ahead of depreciation. I guess really trying to think a bit further forward, should we expect to be moving towards more towards depreciation again in a couple years' time?

Yes. The CapEx, we are not going to provide forward guidance on that, but as you know, broadly speaking, CapEx and depreciation will tend to align over time, just by their very nature. The amortization piece may or may not. Anyway, I guess I won't provide specific guidance, but I guess you probably understand the philosophical interaction between the two.

Sure. Just really trying to track it in the $330 million really, obviously you've just bought Central Europe, there's clearly probably some things you are doing has a bit of a one-off. I was just going to get a sense of, should we rather be using $330 million as a base going forward, or is it a little bit of a one-off because of that first-time element?

Based on some of the capital activity that we had in 2012, specifically what we call master plan in the UK, where we have some ROI projects, call it the brewing footprint there, that's a bit higher than it might normally be. I can't really predict for you or forecast for you what we will need to do in the years ahead, but I would say that those are increasing, for example the CapEx run rate in the last 12 months, and we're not done with that yet, in the UK. And then in central Europe, yes, I would say we do have a bit of extra capital that we need to put in from a systems standpoint, in the central Europe business as well. In the near-term.

Great. Thank you. And another one on the international side, Peter obviously indicated that we should see it coming down this year. Just remind me, do you have actually a target for getting to breakeven? Is there a date why which you are targeting that?

We're not providing a specific target date. What we are saying is that the business currently is in investment mode. And the fourth-quarter profit notwithstanding, those businesses are still in investment mode. And at the same time, though, the strategy is to grow the top line faster than the rate of investment, because we've been investing extra dollars behind the brands in those markets. Relatively little in bricks and mortar. And as we grow the top line faster than the investment rate, then our intent is to bring those businesses to profitability over the medium term, but we'll see what that looks like.

And just to be clear, medium-term here is different to near-term as we're defining earlier on?

Yes. What I don't want to -- when I say medium term, I mainly don't want you to come away with the impression that it's short-term, which generally is considered in a year, so we're not talking about that sort of timeframe.

Great. Thanks for that. Thank you.

Sure.

(Operator Instructions)

We have no further questions at this time. I'll turn the call back to our presenters.

Great. Thank you, Candace. In closing, I'd like to thank you all for your interest in Molson Coors and for joining us today. If you have additional questions that we did not cover during our time this afternoon, please call me on my direct line, or at the main number here at Molson Coors, which is 303-927-BEER or 927-2337. Thank you again, and have a great day, and happy Valentine's Day for those of you who celebrate it.

This concludes today's conference call. You may now disconnect.