Molson Coors Brewing Company’s (TAP) shares dropped 6.6% in morning hours on Tuesday after the company reported better-than-expected earnings for the fourth quarter of 2018 but missed the mark on revenues. The beer brewer also announced that it was restating its 2016 and 2017 financial statements due to income tax-related accounting errors.
Net sales totaled $2.41 billion, down 6.2% year-over-year on a reported basis, and 5% in constant currency, due to lower volume in the US and Canada. Net sales per hectoliter, on a reported financial-volume basis, rose 0.3% to $112.21.
GAAP net income fell 89% to $76 million, or $0.35 per share, from the prior-year quarter, as last year’s fourth-quarter results included a one-time tax benefit. Adjusted net income grew over 35% to $182.3 million, or $0.84 per share, driven by factors such as positive global net pricing and brand volume growth.
Worldwide brand volume fell 1.5% to 22 million hectoliters, as volume declines in the US and Canada offset growth in Europe and International. Financial volume dropped 6.5%, due to lower volume in the US, Canada and International. Global priority brand volume fell 1.7%.
During the quarter, Molson Coors saw net sales declines across all its major geographies. In the US, net sales fell 7% while brand volume dropped 5.1%, due to lower volume in the premium light and economy segments.
In Canada, sales decreased 8.8% and brand volume fell 2%, mainly due to lower volumes in the West and Ontario. In Europe, net sales dropped 1.9% but brand volume increased 3.3% helped by improved above premium and core brand performance. International sales fell 19.2% but brand volume grew 1.1%, driven by organic growth in focus markets.
During the quarter, Molson Coors delivered $240 million in cost savings, bringing the total to $495 million delivered to date within the current program. For 2019, savings are expected to be around $205 million. This will bring the total amount over the period from 2017 to 2019 to $700 million, which is higher than the original estimate of $550 million.
For the full year of 2019, the company expects to achieve underlying free cash flow of $1.4 billion, plus or minus 10%. Capital spending is expected to be around $700 million, plus or minus 10%.
Molson Coors said it will restate its financial statements for 2017 and 2016 and will report ineffective internal control over financial reporting as of December 31, 2018, due to the existence of a material weakness associated with such restatement.
The company also found an error in its 2016 income tax accounting related to its partnership with MillerCoors which resulted in an understatement of its deferred tax liability and income tax expense and an overstatement of net income for 2016.