Profits drop 56% but sales are up

Molson Coors Brewing Co. announced today that its second-quarter profit dropped 56 percent due to higher costs and charges associated with combining the company's U.S. arm with the maker of Miller beers. Increased energy and commodity costs and a higher tax rate also cut into profit, the company said.

Its shares tumbled as the results missed Wall Street's expectations. Shares fell $6.03, or 11 percent, to $48.40 in heavy trading.

But revenue rose 5 percent to $1.76 billion from $1.68 billion in the quarter. Volume grew both overall and in the U.S. Net sales increased 4.8 percent to $1.76 billion.

On July 1, Molson Coors combined its U.S. operations with SABMiller's Miller Brewing Co., the country's second-largest brewer. The joint venture, called MillerCoors LLC, aims to combine resources like marketing and distribution and trim costs.

The company's sales to retailers in the U.S. improved 5.1 percent in the quarter, at a time when the industry's sales are relatively flat. Molson Coors said Coors Light, its best-selling beer, was up in the mid-single digits, while Coors Banquet grew in the high single digits, and craft-style Blue Moon and Keystone Light were up in the double digits.

But rising production and distribution costs are hurting the company, and others in the industry. Molson Coors said the cost of goods sold per barrel in the U.S. was up 4.9 percent in the quarter, due primarily to increased fuel prices and packaging material costs.