just On Call - Price pressures temper harvest joy - Constellation CEO
Constellation Brands released its Q3 results yesterday
Constellation Brands' boss has said last year's California harvest will produce “fantastic wines”, but a rise in grape prices is set to hit the whole industry.
In an investor conference call yesterday (9 January), president & CEO Rob Sands said he has “never seen the winemakers so happy” about a crop. “We're going to have some fantastic wines when these come out,” he added.
However, a price increase caused by a supply squeeze will play a factor in future results, Sands claimed.
“It's a competitive market place,” he said. “The price per tonne did go up for everybody and we we're just as impacted as everyone else. We're a little bit more broad so it depends on what geography you're buying your wine from. But our cost per tonne of wine in our tank will be higher year-over-year when that wine comes out and hits cost of sales.”
Sands also said recent bush fires in Australia will not affect Constellation but could help reduce oversupply.
“Australia remains oversupplied as a general proposition, so anything that impacts supply is probably good,” he said. Constellation retains a 20% stake in Accolade Wines, which was formed when Constellation sold its Australian wine operations in 2011.
The conference call followed the release of Constellation's year-to-date results that saw losses narrow thanks to a healthy Q3. The company said it expects to meet full-year targets.
Meanwhile, analysts Stifel Nicolaus said Sands' affirmation yesterday that Constellation's deal to buy Crown Imports will complete in the first quarter of this year “is not a hollow reiteration”. Stifel said that US regulatory opposition to the Crown transaction, agreed in June, is not likely.
The company faced a period of uncertainty at the end of 2012 regarding its future in the midst of A-B InBev and Constellation Brands’ merger discussions. Eventually, in February 2013, all parties reac...
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