When you have numerous easy comparisons (TAP)
Molson Coors reported Q1 EPS of $.29 vs. $.19 consensus. Overall sales increased 17.6% in constant currencies with financial volumes up 5.1% and price/mix up 12.5%. Sales per hectoliter was up 10.2% due to price and mix. In the Americas, sales grew 8.6% in constant currencies. U.S. volumes decreased 4.3% while Canadian volumes decreased 4.5%, and Latin American volumes grew 13.8%. U.S. volumes benefited from lapping the winter storms last year as well as the cybersecurity incident. In the EMEA & APAC segments sales grew 92.3% YOY driven mostly by Europe’s on-premise recovery with financial volumes up 29.4% and price/mix up 62.9%. Total worldwide brand volume increased 1.7% with financial volume up 5.1% while contract brewing and wholesale/factored volume up 21.3%.
Better margin performance was driven by the top-line. Cost per hectoliter increased 8.6%. The company currently has pricing of 3-5%. The company’s commodity hedges had a $170M increase in unrealized value in the quarter. Share-based compensation was up $.2M YOY to $8.5M for the quarter despite the better results. MG&A expenses increased 15.7% excluding the Keystone accrued liability due to lapping lower marketing spend last year. Inventories were up 16.3% sequentially with finished goods up 20.4% and packaging materials up 63.5%. Management said their inventory position in the U.S. heading into the peak season is the best it has been since before the pandemic, which limits shipments in Q2.
Management reaffirmed guidance for the year including MSD% revenue growth and HSD% operating profit growth. Q1 represents less than 10% of the year’s projected EPS. Q2 operating profit is expected to be down 20-50% due to increased marketing spend against a period last year when it was reduced. The company also has an ongoing strike at a plant that will negatively impact Q2. The 2H will have stronger YOY performance. Q1 was the easiest comparison for the year, but also the smallest quarter. Management reset expectations lower for Q2, with all of the YOY growth now coming in Q4 with the easier comparisons when Europe added back pandemic on-premise restrictions.
Wine sales (VWE)
Domestic wine sales grew 11% to $5B in March, decelerating slightly from 12% in February as seen in the chart below. Off-premise wine sales decreased 5% in March while DTC shipments increased 4% in the month. In 2022, the on-premise, tasting room, and DTC will be the strongest channels while off-premise faces difficult comparisons.
You say tomato, I say cash burn (APPH)
AppHarvest reported Q1 sales of $5.2M, up 125% YOY. The company sold 6.9 million pounds at $.75 per pound, up from 61 cents last year. In Q4 revenue was $3.1M on 4.4 million pounds at a sales price of $.69 per pound. Management reiterated sales guidance for the year of $24 to $32M and EBITDA loss between $70-80M. In comparison, the original guidance for 2021 was revenue of $20-25M and an EBITDA loss of $43-45M. The company has $98M in cash and credit availability of $58M. The cash usage in Q1 was $66.5M. To complete the construction of the next three plants management anticipates using $40M of cash in addition to external financing.
It is progress for the company to not have missed, lowered, or encountered production problems for a couple of quarters in a row. That does not mean the company’s strategy, business model, or plant economics have any visibility in working. The next test will be ramping up the new plants, which will take time. The company’s revenue projection of ~$30M does not support a market capitalization of $350M. Nor does revenue being exceeded by stock-based compensation of $41M. AppHarvest remains on our short list.
