CHILE: Peso punctures Concha y Toro profits
- Nine-month net profits fall by 18.4% to CLP26.1bn (US$52.5m)
- Net sales rise by 8.3% to CLP296.9bn
- Operating profits drop by 12.3% to CLP30.3bn
- Peso currency hits profits, but Fetzer lifts sales
Concha y Toro sees profits tumble
Chile's strong peso currency caused Concha y Toro to report a drop in profits for the first nine months of 2011, leaving the company hoping for better conditions in the months ahead.
Concha y Toro's net profits for the nine months to the end of September fell by 18.4%, to CLP26.1bn (US$52.5m), the winemaker said at the end of last week. Operating profits tumbled by 12.3% on the same period of 2010, to CLP30.3bn.
Chile's strong peso currency damaged the group, which sells three quarters of its wine outside of Chile. Higher interest charges on group debt also ate into earnings.
Despite the fall in profits, Concha y Toro's net sales rose by 8.3% to CLP296.9bn in the period, thanks to the acquisition of California's Fetzer Vineyards and stronger demand for wine in Chile. Concha y Toro's CEO, Eduardo Gilisasti, said that Fetzer represented 8.5% of the group's net sales in the first nine months of this year.
He added that the firm has continued to increase prices in export markets, at the expense of some volume. In the third quarter, Concha y Toro reported total net sales up by 5.9% to CLP111bn, even though exports of bottled wine fell by 10% in value terms, due in part to currency translation. Third-quarter operating profits dropped by 18.7% to CLP11.2bn, with net profits down by 24% to CLP10.1bn.
Looking ahead, the Casillero del Diablo brand owner hopes that the peso will weaken against the US$. Gilisasti said: "It is important to mention that, in the second half of September 2011, the Chilean peso depreciated to levels above CLP500 per US$, remaining at those levels until today. A lower Chilean Peso could improve the margins."
In January, Chile's central bank announced it would spend US$12bn to intervene in the market in order to weaken the peso. Over the last six months, there are signs that this has had a limited effect. Today (7 November), the peso began at CLP490.5 per US$, versus CLP470 per US$ at the start of May.
For the company announcement, click here.
Concha y Toro is looking to up its presence in Africa through the creation of a subsidiary in the region....
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