The beer performed a little better in the second quarter but sales volumes still decreased by low single digits.
"The performance is still not satisfactory. It's still losing its share of beer so there's more work to be done," Molson Coors Canada CEO Stewart Glendinning told analysts Wednesday during a conference call to discuss second-quarter results.
In addition to unveiling new advertising, the Montreal and Denver-based brewer is focusing on promotional offers this summer at retail stores to spur sales.
Molson Coors CEO Peter Swinburn said the beer has been partially cannibalized by the introduction of Coors Banquet, which was introduced to Quebec in July.
"If you put both of those brands together, the volume actually is growing sort of low single digits," he added.
Molson Coors beat expectations as net earnings increased 9.5 per cent to US$290.7 million in the second quarter on higher revenues.
The brewer, which reports in U.S. dollars, earned $292.7 million in underlying profit during the three months ended June 30, up from $271.3 million a year earlier.
That translated into $1.57 per share, 10 cents per share above last year's results and analyst forecasts.
Revenues grew nearly one per cent to $1.2 billion even though worldwide beer volume fell to 16.6 million hectolitres.
Molson Coors (NYSE:TAP, TSX:TPX.B) said the results were driven by improved performances in the U.S. and Europe, along with lower interest expenses.
"We continued to build a bigger and stronger brand portfolio that is delivering value-added innovation, continued investment in our core brands, and increased our share in above premium (beer)," added Swinburn, who is retiring at the end of the year.
He will be replaced by Mark Hunter, 51, who has headed the European business since January 2013.
In Canada, adjusted pre-tax income decreased 6.5 per cent to $120.9 million, due to the loss of Mexican Modelo brands and a lower Canadian dollars that had a negative $6.3 million impact, partially offset by cost savings.
Sales were $516.5 million, down from $558.2 million last year, while sales volume decrease two per cent.
Molson Coors said it is concerned by a 26 per cent increase in Quebec's excise tax Aug. 1 on retail beer sales, a second increase since the end of 2012. The change adds five cents to the price of a bottle of beer, but is offset by a seven-cent reduction in tax for beer sold in bars.
"We do expect that to be negative, but we'll have to see what happens over the rest of the quarter," Glendinning added.
Molson Coors underlying share of profits from the MillerCoors joint venture in the U.S. increased 10.3 per cent to $190.3 million.
In Europe, adjusted profits were $84.5 million, up from $75.8 million, despite losing some sales due to political unrest in Russia and Ukraine, along with devastating floods in Serbia, Croatia and Bosnia in May and Bulgaria in June.
"Our Europe business was disproportionately affected by the flooding in the region in the second quarter and based on what we see today, we expect the aftermath of the floods to impact our volume and profit for at least the balance of the year," noted Swinburn.
International losses decreased to $3.7 million, from $4 million.
The company's net debt was $3.15 billion, down $612 million from the prior year.
Mark Swartzberg of Stifel Nicolaus said the results are evidence of an improving margin outlook, especially in the U.S. and in Canada, where new cost reductions are being contemplated.
"We also expect increasing discipline around costs and margins with Mark Hunter becoming CEO. This has been a hallmark of his time as chief of the company's businesses in Europe," he wrote in a report.
On the New York Stock Exchange, Molson Coors shares gained $3.86 or 5.74 per cent at $71.07 in Wednesday afternoon trading.
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