US: B-F earnings slip, but Jack Daniel's still firing

By | 7 March 2007

Jack Daniel's owner Brown-Forman Corporation has reported a slip in its earnings per share for the third quarter, down 8% compared to the same period last year to US$0.90.

However, the US based wine and spirits group said yesterday (6 March) that the decline was driven by the absence of a net $0.14 per share benefit related to changes in its Australian distribution joint venture and a $0.04 per share gain on the sale of winery property, both recorded in the third quarter a year earlier.

Excluding these and other items, underlying earnings per share in the three months to 31 January were $0.89, up 12% from the $0.80 per share earned in the same prior year period. These results were driven by solid profit growth for Jack Daniel's Tennessee Whiskey, Southern Comfort, Finlandia, and the Jack Daniel's & Cola ready-to-drink product sold primarily in Australia, the company said.

Third quarter revenues grew 20% year-on-year to $755m. Gross profit was up 17% to $387m with growth coming from all of the company's premium brands. The company said that revenue comparisons to the prior year period also benefited from the changes to the company's distribution arrangements in Australia and a weaker US dollar, which accounted for approximately half the reported growth.

Brown-Forman said advertising expenses increased 11% to $94m in the quarter as a result of additional investments primarily behind Jack Daniel's, Finlandia, and Chambord, as well as a weaker US dollar.

It was another good quarter for the company's flagship brand Jack Daniel's. Global depletions of the Tennessee whiskey grew at a mid-single digit rate in the quarter, with volumes growing in the low-single digits in the US and at a double-digit rate internationally. Notable double-digit volume gains were recorded in several of the brand's key international markets such as the UK, Germany, South Africa, France, Australia, and Japan.

Global volumes for Southern Comfort grew at a mid-single digit rate in the quarter led by strong growth in the UK and South Africa, while the US advanced at a low single-digit rate. Finlandia volumes grew at a double-digit rate, fuelled by continued strong growth in Eastern Europe.

For the first nine months of the fiscal year, reported earnings per share were $2.66, up 3% from the $2.59 earned in the same period a year earlier. Underlying earnings per share, when adjusted for certain items, increased 10%.

"Year-to-date growth is being driven by strong performance from Jack Daniel's, Southern Comfort, Finlandia and Jack Daniel's & Cola in Australia, as well as the benefit of a weaker US dollar," a statement said.

Looking forward, the company said that, excluding the recent acquisition of Casa Herradura, and on a comparable basis with prior guidance for this year, it is narrowing the range of its full-year earnings outlook to $3.20 to $3.30 per share. This compares to the $3.14 to $3.30 per share guidance provided at the end of the second quarter.

This updated outlook, the company said, continues to include an $0.08 per share gain from the sale of the company's Italian winery and represents forecasted growth of 10% to 14% over adjusted prior-year earnings of $2.90 per share.

Brown-Forman said: "The revised outlook anticipates, in the fourth quarter of the fiscal year, an expected higher tax rate versus the prior year period, further increases in spending behind the company's premium global brands, higher grain costs, and expected further reductions in global distributor inventory levels."

Sectors: Spirits, Wine

Companies: Finlandia, Jack Daniel’s, Brown-Forman, Southern Comfort

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