Fitch Affirms Molson Coors at ‘BBB-‘ in 2021

Fitch Affirms Molson Coors at ‘BBB-‘, Revises Outlook to Stable; Withdraws All Ratings:

Fitch Ratings confirmed the rating of Molson Coors Beverage Company (Molson Coors), including the long-term issuer (BBB), and revised its outlook from negative to stable, with an appreciation. Molson Coors International’s LP ratings have also been confirmed and revoked at ‘BBB-‘.

Stable’s outlook reflects Molson Coors’ improved credit profile with greater confidence in the company to successfully capitalize on the pressures associated with the coronavirus pandemic and improved leverage. These factors balance the long-term challenges in the main portfolio and increase uncertainty about the company’s efforts to improve its best performance. Fitch expects Molson Coors to generate EBITDA of approximately $2.1 billion in 2021 with leverage (total debt/operating EBITDA) of approximately 3.5 times compared to 3.7 times in 2020.

Fitch withdrew the commercial value from Molson Coors for commercial purposes. Fitch reserves the right, in its sole discretion, to withdraw or withhold at any time for any reason it deems appropriate.

Dear drivers

Coronavirus disrupts sales channels: Alcoholic beverage companies, including Molson Coors, have experienced significant disruption from the coronavirus pandemic due to significant restrictions with the local sales channel. For Molson Coors, approximately 23% of consolidated net sales in 2019 will come from domestic consumption, of which approximately 17% of North American net sales and approximately 50%-55% of European net sales. As a result, Molson Coors net sales declined approximately 9% to $9.7 billion from its 2019 level of $10.6 billion.

Europe accounted for the bulk of Molson Coors’ sales and pressure on EBITDA as the US external channel experienced a strong shift in demand and a stabilizing cash flow advantage, supported by a wide range of pricing brands, different and different packaging features. Fitch’s calculated EBITDA declined approximately 7% to $2.2 billion, with sharp declines in MG&A costs and positive pricing in North America and Europe partially offsetting volumes below 8%.

The portfolio has been under pressure for centuries: The Molson Coors rating recognizes the reach and strength of its global and local brands with strong market positions in key markets, offset by years of challenges in the traditional beers category. These challenges, due to changing consumer preferences and the competitive environment, have put pressure on business performance in recent years. The US segment, which accounts for approximately 60% of Molson Coors’ total volume and nearly 70% of coronavirus sales, has a portfolio heavily focused on premium categories for light and low-cost beer.

In late 2019, Molson Coors announced a revised business strategy focused on improving world-class operational performance by investing more in essential products and innovating above price, while expanding into the fastest-growing categories abroad. internal processes (innovation, marketing, faster decision-making) to drive key trends. Molson Coors partially withdrew its renewal strategy during the coronavirus pandemic, including capital expenditures to maintain liquidity and delay the launch of new product innovations. The company will accelerate initiatives in 2021, including investments in a revamped seltzer portfolio by Topo Chico, Vizzy, and Coors.

BLOCK SUMMARY

Molson Coors’ company profile benefits from the size and strength of its beer portfolio with well-known global and local brands, including Coors Light, Miller Lite, Canadian Molson, and Carling, along with the premium brands mentioned above, including Blue Moon, Staropramen, and many other smaller ones. , the fastest growing brands helping to maintain strong positions in their core markets. Molson Coors has two market positions in the United States, Canada, and the United Kingdom and three market positions in most of its Central and Eastern European markets. These strengths are offset by longstanding challenges in the conventional beers category, where Molson has significant portfolio exposure and has experienced a steady decline in volumes in the past due to a lack of innovation and successful products in adjacent categories.

Molson Coors is significantly smaller and less geographically diverse than Anheuser Busch InBev NV/SA (ABI, “BBB”/Stable), the world’s largest high-profile brewery.

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