US: Constellation sees Q3 profits climb
Constellation Brands has posted a healthy lift in quarter three net income, despite a marked drop in reported net sales.
The US-based company said today (8 January) that net income in the three months to the end of November leapt by 11% on the corresponding period a year earlier to US$120m or US$0.55 per share.
Constellation reported net sales for the quarter fell by 27% year-on-year to $1.09bn, due primarily to a change in reporting methods for its Crown Imports and Matthew Clark joint ventures in the US and UK respectively. Organic net sales, however, were up by 11% to $1.08bn.
While branded wine sales were up by 4% on an organic constant currency basis, driven by a "solid" performance by its US branded wine business, operating income from the wine segment fell by $12m on Q3 a year earlier, due to "the impact of the UK and Australia business performance".
Constellation saw spirits sales leap by 31%, thanks mainly to last year's acquisition of Svedka vodka.
Acquisition-related integration costs, restructuring and related charges were down markedly on the same period a year earlier at $3m from $45m.
"The company's third quarter performance was in line with our expectations, and we are especially pleased with the performances from our North American wine business and our spirits business," said Rob Sands, Constellation's president and CEO. "We're also delighted with the addition of the Fortune Brands US wine portfolio to Constellation's US wine business and the benefits we expect from our expanded super-premium-plus offerings.
"We are continuing our efforts in the UK to mitigate the impact of the lingering Australian wine surplus in the marketplace and to maximise profitability."
Constellation also said it is planning to integrate the Fortune wine portfolio, acquired last month, into its Constellation Wines US business."The company intends to consolidate activities wherever it makes business sense to do so, while maintaining an appropriate level of expertise to maintain and grow the acquired business," the company said.
Looking forward, the company said it expects full-year 2008 earnings to come in between $1.06 and $1.11 per share, lower than the previously forecast $1.16 - $1.24 range. The revised estimate is based on an assumed net sales fall of between 29% and 31%, again based on the revised reporting methods.
Separately, Constellation said its Barton Brands unit has acquired the other half of its Planet 10 Spirits joint venture. The company was created in 2004 with privately-held Jstar Brands to develop and market luxury spirits, including flagship brand Effen vodka. Financial terms of the purchase were not disclosed.
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