An increase in marketing and raw material costs has hit Cruzan International's first quarter, despite a small rise in the company's sales in the period.

The Virgin Islands-based spirits producer and marketer, said net sales for fiscal 2006's first quarter were US$28.45m, compared to US$24.19m reported in the same period last year.

However, gross profit was US$6.7m, compared to US$8.07m in the first quarter 2005, and first quarter net loss was US$3.16m, or US$0.47 per diluted share, compared with net income of US$149,090 or US$0.02 per diluted share, one year ago.

Jay S. Maltby, CEO and president said: "In 2005, we had a change in majority ownership and are in the process of a merger transaction with affiliates of V&S Vin & Sprit AB, the owners of Absolut Vodka."

Maltby continued: "Sales of Cruzan Rum in our premium branded spirits segment were up only 1.9% due to one competitive supplier's aggressive wholesaler incentive program during the quarter and a reduction of our inventories at the wholesaler level. The premium branded spirits segment sustained larger operating losses than last year due to increased marketing spending. Operating income in our bulk alcohol segment declined approximately US$1.8m due to increased citrus alcohol raw material costs as a result of the effects of hurricanes on the Florida citrus crop in 2004 and 2005.

"The performance in our bottling segment improved due to the acquisition of a large new bottling contract and profits in our vinegar and cooking wine segment decreased slightly as a result of decreased sales."