Molson Coors (TAP; Baa2 Pos/BBB S) Roadshow

First bond issuance in 7 years after it undertook deleveraging post $12b acquisition of the 58% MillerCoors stake held by SABMiller (SAB now owned by AB InBev). It says its "highly cash generative" in its deck - we wouldn't go that far with margins at middle of the pack & flat headline growth; pricing offsetting volume declines. No net supply with the single local line, a €800m July '24, rolling off soon. FV to follow.

• 4th largest brewer, Americas heavy (80%), targeting premium brand growth (from 27% now to 33% of revenues). For reference, Carling is no. 1 beer in UK by volume it says. FY23 revenue was $11.7b with pricing doing the legwork for growth over recent years; volume has been flat to declining. EBITDA was $2.4b at margin of 20% & has been flat over last few years. For comparison AB-Inbev & Diageo run margins at 33%, Heineken 25%, Carlsberg 21% & Asahi 14%.
• Gross debt is $6.2b with ~$460m cash on hand. BS has moved from carrying gross $11b/net 4.4x leveraged in '17 to 2.3x. Target is net <2.5x & "desire to maintain & upgrade our IG rating over time". $2.5b maturity wall in '26 on mostly dollar & some CAD debt.
• Shareholder returns will use up most of FCF in coming years; FY23 dividend pay-out was at 30%/$360m but it does flag desire to increase that & payout ratio has been higher in past. Buyback programme is $2b over next 5years (~$400m/yr avg.). Company guidance is for LSD organic sales growth, underlying EBT up MSD (cc), Capex of ~$750m & underling FCF ~$1.2b. Any M&A would be the mover for BS.

An aside; 1Q results at end of April caused a -10% slide in equities (that its held onto since). Headline results were strong beat with sales up 10.7% vs. c6.5% helped up by both volumes +5.7% (c3.6%) & pricing +4.4% (c3.2%). Latter seems to have supported margins beats; EBTIDA at 18.2% vs. c16.5%. Disappointment was around 1) unch FY guidance (see last bullet above) despite strong qtr and 2) weak April trading conditions disclosed in earnings call. It did note some of April may have been on Easter impacts/messy read-through & that it is being cautious for now. We don't see much read-through/concern for credit on this (for now).