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CANADA: Molson confirms growth targets, but mulls rationalisation

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Molson, the Canadian brewer has reiterated its profit growth target for the year. Molson said it would post earnings per share of between C$1.95 and C$2 in the fiscal year started in April. Molson generated a profit from continuing operations of C$1.62 a share in the previous year.

However, the company also announced that it would be focusing on increased profitability rather than market share gains in the future. As a consequence it was considering plant closures in Brazil to improve profitability at its recently expanded subsidiary there.
 
Following its joint acquisition with Heineken of the Kaiser beer business in March, Molson became the second largest beer operator in Brazil behind Ambev. The deal increased its breweries in the country from five to 13. The move means that Molson now brews more beer abroad than in its domestic market.

Daniel O'Neill, Molson's president and chief executive, said it was being careful to avoing a battle with the giant Ambev and instead  the new head of Brazilian operations and former Molson chief financial officer, Robert Coallier, will look at production sites, distribution networks and marketing strategies to squeeze more profit out of each bottle sold.

O'Neill said: "We want to make sure profitability is there. It's much more important than growing market share." The Canadian brewer hinted at its targets by saying that its profitability in Brazil was only about half of that of Ambev's.

The company wants to see the ratio between earnings before interest, taxes, depreciation and amortization and net sales climb to 23% from 18% over the next three years. On average Molson's Brazilian breweries are operating at half capacity, prompting the rethink on the Molson's organization there. However no decision has been made yet as to what will be closed.

"We did not buy Brazil for today," O'Neill told reporters after the meeting. "This is a long-term play."

On its domestic market Molson said it was disappointed with the marginal growth of its brands and would have to work harder to improve its sales there.

"We have not yet been able to set a target [for growth in Canada], and that's a disappointment," he said. A 10-year downward slide has been stopped, but year-over-year growth is almost negligible at one-10th of 1 per cent, he said after the meeting.


Companies: Molson Coors, Heineken

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