Insight - Fortune Brands open to spirits deals, cautious on 2010
Beam Global cautious on 2010
Fortune's chief financial officer, Craig Omtvedt, said that the group is "looking" for possible purchases.
But, the producer of Jim Beam Bourbon will maintain financial discipline and targets have "got to fit right, from a financial and a strategic standpoint", he told analysts in the firm's full-year results conference call today (29 January).
Group CEO Bruce Carbonari said a strong balance sheet and protecting the firm's investment grade credit rating remain higher priorities in the near-term.
However, asked to comment on particular targets, he said: "If you look at spirits, it's going to be more things that will fill in certain product gaps [in our] portfolio. Adding a rum or more depth in vodka are things we would be very interested in."
He said the group is also keen to build its presence in emerging markets, noting that Beam Global is in the process of building a solid presence in Brazil and India in particular.
Fortune Brands' share price slipped by 2.5% to US$42.3 on the New York Stock Exchange today, based on its cautious outlook for 2010.
Worldwide spirits sales will grow by no more than 1% in volume and will likely be flat in value, at best, it said.
Pricing is likely to remain under pressure in the US spirits market. "We expect to see shift towards premiumisation in this market, we just don't see it in 2010," said the firm, adding that brand spending will significantly increase in the first half of the new year.
Like-for-like sales for Beam Global fell by 4% in the fourth quarter of 2009. Net sales for the year, including currency and tax changes, slipped by 0.5% to US$2.47bn, compared to $2.48bn in 2008.
One-off restructuring charges contributed to a fall in Beam Global's operating profits for the year, to $484.7m from $543.7m.
Bourbon performed particularly well for the group in the fourth quarter, largely driven by sales in the US of newly-launched Jim Beam Red Stag, a cherry-infused version of the group's flagship brand.
But, the rise was not enough to fully offset spirits volume declines in Mexico, Western Europe and Global Travel Retail. In other markets during the three-month period, group spirits volumes in Spain fell "slightly", while Brazil was flat, with Australia and India slightly higher.
Among the firm's brands, Cruzan rum volumes rose in double digits in travel retail, but global Courvoisier Cognac volumes fell in double digits, despite the VSOP variety growing market share in the UK.
Fortune said that it expects flat to low single-digit rises in profits across its spirits, home and golf businesses in 2010. Diluted earnings per share is set to hit a range of $2.3 to $2.8.
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