In the Spotlight - Constellation Brands' Full-Year Results
There was some concern over Constellation's lower profits.
There was much to like in Constellation Brands' full-year results, released yesterday, not least further confirmation of the firm's intention to take full control of its US JV with Grupo Modelo, Crown Imports.
“Investors have cheered Constellation's acquisition plan, as they have pushed the company's stock price higher since the deals were announced last June,” the Wall Street Journal said.
It also highlighted the deal's likely completion following Anheuser-Busch InBev's agreement last week with the US Department of Justice over an outstanding anti-trust lawsuit. The WSJ said that Constellation has become a bigger player in A-B InBev's US$20bn Modelo takeover since the DoJ's intervention, because A-B InBev has been forced to transfer Modelo's Piedras Negras brewery in Mexico and perpetual licensing rights in the US to five Modelo brands to keep competition authorities happy.
The brewery was another reason for cheer in Constellation's results, with company CEO & president Rob Sands leading the applause.
In a call with analysts, Sands described the north Mexico brewery as “the crown jewel of production for Modelo” and announced plans to double its capacity.
Later, an analyst said the brewery will help Constellation reduce overhead costs that bit into full-year profits, dragging the results into the red.
It was that red ink that caused concern for market watchers. The WSJ noted that fourth-quarter net profits also suffered from increased expenses, and although Reuters said Q4 profits were higher than expected, they were still down on 2011.
Executives were curiously silent on the higher costs, perhaps thinking that the brewery announcement would calm fears that expenses were getting out of control. Judging from a share price jump yesterday, it did. After all, the new brewery is just 13 miles from the US border, and will give Constellation complete control over its beer supply to the US after it weans itself off a dependence on A-B InBev for a roughly 5m-hectolitres-a-year capacity shortfall.
Constellation's profits may have been damp last year, but its future is looking bright.
Tom Vierhile considers the rise of cider - specifically, hard cider - in many markets around the world....
- Are we kidding ourselves over craft spirits?
- Is Brown-Forman doing a Jack Daniel's in Ireland?
- Is Brown-Forman at the end of the SoCo road?
- What's behind Brown-Forman's Irish whiskey plans?
- Interview - Heineken global activation director
- Diageo, Treasury Wine Estates quiet on wine sale
- Diageo secures Xerox Corp CFO as finance head
- Tesco pulls several Carlsberg SKUs in UK
- Scotch whisky sees sales turn corner - SWA head
- Former Pernod Ricard exec joins Wakefield Wines
- The IWSR Duty Free/Travel Retail Report 2015
- Future growth opportunities for global spirits
- Global gin insights - market data, product innovation and consumer trends research
- Global non-Scotch whiskies insights - market forecasts, product innovation and consumer trends research
- Global Scotch whisky insights - market forecasts, product innovation and consumer trends research