US: Constellation Brands H1 dragged down by innovations spend

• H1 net profits fall by 17.1% to US$196.6m
• Net sales inch up by 0.6% to $1.33bn
• Operating profits drop by 4.1% to $236.7m
• Crown Imports acquisition due to complete first quarter of next year 

Constellation Brands has reported a drop in first-half profits, but says it remains "excited" by the prospect of taking full ownership of Crown Imports. 

Net profits in the six months to the end of August fell by 17.1% year-on-year to US$196.6m, the group announced earlier today (5 October). Sales edged up by 0.6% to $1.33bn.

Operating profits dropped by 4.1% in the same period to $236.7m.

In Q2, net profits fell by 23% to $124.6m, while sales rose slightly by 1.2% to $698.5m between June and August this year. Operating profits in the period fell 10% to $130.6m.

The group said the drop in profits was driven "primarily" by a rise in SG&A expenses and a planned increase in promotional spending for the company’s US wine and spirits business, intended to "support innovation initiatives".

Interest expenses also rose by 28% to $55m in Q2, "primarily due to higher average borrowings and an increase in average interest rates," the group said.

Rob Sands, Constellation's CEO said he was "encouraged" by the strength of the group's core beer wine and spirits business, including the "success" of new product innovations. 

On the company's plans to fully acquire Crown Imports, following Anheuser-Busch InBev's buy-out of Grupo Modelo, he said: “We remain excited about the prospect of owning 100% of Crown Imports, which represents a transformational step for our company as it will solidify Constellation’s position in the US beer industry for the long term." The deal is expected to close by next March. 

Looking ahead for the full-year, the group said it expects reported EPS to come in between $1.87 and $1.97, compared to $2.13 at the end of fiscal 2012.

Shares in Constellation were up 0.86% at $34.72 this morning.

To view the group's announcement, click here.