Molson Coors Beverage Company

Good morning and welcome to the Molson Coors Brewing Company second quarter 2019 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Mark Schwartzberg, Vice President of Investor Relations. Please go ahead.

Thank you, Gary, and hello, everyone. Following prepared remarks this morning, we will turn the call over for your questions, as Gary said. Please limit yourself to one question. If you have more than one question, please ask your most pressing question first. and then re-enter the queue to follow up. In terms of safe harbor, today's discussion includes forward-looking statements within the meaning of applicable securities laws. Important factors that could cause actual results to differ materially from the expectations and projections contained in such statements are disclosed in the company's filings with the SEC. The company does not undertake to update forward-looking statements, whether results of new information, future events or otherwise. Gap reconciliations for any non-U.S. gap measures are included in our news release or otherwise available on the company's website at moltencoors.com. Also, unless otherwise indicated, all financial results the company discusses are versus the comparable prior year period and in U.S. dollars. So with that, I'll turn the call over to our CEO, Mark Hunter.

Thank you, Mark, and hello and welcome, everybody. With me on the call this morning are Tracey Joubert, the CEOs of our business units, Lee Ryker, our Chief Legal and Corporate Affairs Officer, and Brian Table, our Global Controller. Now, before we begin, I'm sure you all saw the press release that went out earlier this morning announcing my retirement on September the 27th. It's been a privilege to serve as the Molson Coors CEO for the past five years, and I've thoroughly enjoyed engaging with our investors and analysts throughout our journey. This leadership change has been worked through with our board as part of our ongoing succession planning at the executive level. I'm genuinely excited about the future for Molson Coors and proud of what we've accomplished over the past five years. Our goal with the acquisition of Miller Coors and the Miller International business was to create a bigger and better company. In 2015 and 2016 we planned for and executed on this step change and transformed our scale. From 2017 through to today we've delivered on the integration, initial deleverage and synergy commitments made at the time of the acquisition. Despite higher inflation and softer industry demand than anticipated. Along the way we've also strengthened our culture with the introduction of our first choice ambition and bolstered the leadership and capabilities of our people through our commercial excellence and world-class supply chain programs. As we now shift the emphasis to greater focus on top-line growth while remaining financially disciplined, it's an appropriate time for me to pass the baton on to Gavin to lead the company through our next chapter of continuing to energize, premiumize, and modernize our portfolio and to move beyond beer with disruptive thinking. And you're already seeing some of the fruits of this work. Now, while I'm happy to be able to move on to my next phase after a 36-year career and spend more time with my family in the UK, along with the rest of the board, I'm also very excited to see Gavin take over the reins and help successfully drive the company forward in its next chapter. Gavin's been on the executive team for the past seven years and is well known to many of you as the former Molson Coors Global CFO and as the leader of our US business unit for the past four years. He knows our business, he knows you, and he shares my absolute passion for our people, our brands, and our success. Now our time today is focused on earnings. So for the balance of the call today, Tracey and I will take you through highlights of our second quarter 2019 results for our company, along with some perspective on the second half of 2019. And related slides can be found on the investor relations page of our website. After a solid start in the first four months of the year, May and June were challenging, reflecting unfavorable weather and weak industry demand across our major geographies, resulting in a disappointing volume performance in the quarter. Despite this backdrop, we executed our plans for incremental brand investment to drive accelerated portfolio premiumization and innovation impact across our business. Encouragingly, we delivered strong constant currency net sales per hectolitre growth of 3.7% and our share trends improved in the US and were stable in Europe. We also saw strong premium light share growth in the US as Miller Lite and Coors Lite each gained segment share. And this was ahead of the newly launched Coors Lite made to chill advertising which is focused on new drinker recruitment by dramatizing Coors Light's purpose to refresh the spirit through its mountain cold refreshment credentials. We believe this creative platform is distinctive, disruptive and breakthrough. We also through the quarter maintained our focus on cash flow through ongoing cost savings, productivity improvements and improving our working capital. We remain resolute on the ambition to improve our top line through increased investments in our brands, portfolio premiumization, and innovation initiatives, including the launch of our Trust Cannabis infused non-alcoholic beverage portfolio in Canada later this year. We're committed to doing this while maintaining our investment grade credit rating and strengthening our quarterly dividend, which increased by 39% to 57 cents per share in line with our target of 20% to 25% of prior fiscal year underlying EBITDA and is payable for the first time in September. As you know, our first choice strategy has three major components focused on top line, bottom line and use of cash, allowing us to improve shareholder returns. Earn More is focused on improving top line growth and we know our top line performance can improve. Encouragingly, the quarter showed our disciplined pricing across our brands and regions, positive global mix, improved share trends in the US, maintenance of share in Europe, our focus on reshaping and premiumizing our portfolio, and our readiness to spend against this focus. Our US-less discipline is demonstrated by enterprise productivity and cost savings initiatives, all of which remain on track. This includes our work in Canada where we have begun brewing trials in our new British Columbia brewery and recently completed the sale of our Montreal property and are in the early stages of building a state-of-the-art brewery in Long Eel, Quebec. I'm pleased with our progress monetizing and modernizing our brewery footprint in Canada and expect significant benefits from the upgrades we are making to our network including more flexible capacity to meet demand, lower unit operating costs and increased supply chain efficiency. Please remember that the one-off startup costs for the new brewery in British Columbia impacted the Q2 results in Canada. Now more broadly in relation to using less, and as former Coors Brewing Chairman Bill Coors once said, waste is a resource that's out of place. Molson Coors helped pioneer the recyclable aluminum can revolution 60 years ago. and this year we're stepping up our efforts to tackle the global plastic waste crisis. Over the next two weeks we will launch our beer print report 2019 outlining the progress made against our 2025 sustainability goals. With the release of the report we'll also launch a set of additional ambitious commitments to minimize the impact of our packaging alongside the great work that's already underway across our responsibility, sustainability and inclusiveness agenda. and finally, alongside earning more and using less, we continue to invest wisely. As you saw in the quarter, we are investing more behind our commercial agenda, increasing marketing and sales spend on a per hectolitre basis and in absolute dollars in the quarter and first half. You should look for us to increase spending against attractive consumer segments and brands without sacrificing our deleverage and cash return objectives. In other words, we intend to use multiple tools to deliver improving top line performance, namely higher return commercial spend, targeted increases in brand investment and innovation, and a more effective supply chain and minimizing out of stocks. In terms of B leverage, we recently completed the sale of our Montreal brewery for 126 million Canadian dollars, providing us with additional funds for debt pay down. And on July the 15th, we repaid $500 million of senior notes through a combination of cash and new commercial paper. And we expect to continue to de-lever, thereby maintaining and strengthening our investment grade credit rating. So with that context, let me pass over to Tracey.