Molson Coors Brewing Company has reported a fall in third quarter after-tax income as it continued to faced problems in the UK and Brazil.

For the 13-week third quarter ended September 25, 2005, the company reported net sales of US$1.6 billion and sales volume of 12.8m barrels. Excluding special items, the company reported after-tax income of US$129.5m, down 4.1% from 2004 on a pro forma basis.

Leo Kiely, Molson Coors president and chief executive officer, said: "Our third quarter financial results reflected encouraging volume and financial performance in Canada and the US, despite extensive competitive price discounting in some of our largest markets and significant input cost inflation. We made good progress on cost reduction initiatives across the company, which aided financial results in the quarter, and we increased investments in marketing and sales programming. At the same time, substantial market challenges in the U.K. reduced the financial performance of our Europe business. Our Brazil operation continued to report operating losses, but at a significantly reduced level."

The company said that in Canada, its year-over-year sales to retail increased 1.5% on a comparable basis during the third quarter, led by Coors Light which grew at a double-digit percentage rate versus a year ago.

In the US, sales to retail were up slightly compared to prior year, driven by low-single-digit growth of Coors Light. However, revenue per barrel was impacted negatively by a substantial increase in price discounting in several US markets in the quarter.

Kiely said: "Although third quarter volume improved in our Europe segment well ahead of the UK beer market, this business continued to be challenged by competitive price discounting and margin pressure from unfavorable changes in channel and sales mix. We were encouraged, however, by strong volume performance of our UK industry-leading brand, Carling, which grew at a mid- single-digit percentage rate in the quarter. In Brazil, cost and pricing trends improved in the third quarter, but volume declines and operating losses continued to be significant challenges."

In Brazil, net sales during the third quarter increased 27% on a pro forma basis from the third quarter of 2004, driven by favourable beer pricing and a 19.3% appreciation of the Brazilian real versus the US dollar. However, sales volume of 1.6m barrels declined 7.6% on a comparable basis versus a year ago. The Brazil business continued to improve operating trends during the third quarter, with a pro forma operating loss 26.4% smaller than a year ago.

"Molson Coors Brewing Company continues to assess the future of its Brazil operations and evaluate a full range of strategic options for the future of this business, a process that includes discussions with third parties regarding the Kaiser business," a statement from the company said.

The brewer added that since the completion of the merger of Molson and Coors in February 2005, the company has captured approximately US$37m in cost synergies, with the savings mostly in overhead and procurement costs. The company is confident that it will capture at least US$50m in merger-related cost synergies in 2005, it said.