US: Q3 reported net profit tumbles at Constellation

Constellation Brands has posted a 30% plunge in reported net profit for its third quarter, as sales in Europe struggled.

The US-based drinks company said today (7 January) that net profit for the three months to the end of November fell to US$84m. In comparable terms, however, net profit in the period registered a lift of 9% year-on-year to $132m.

Consolidated reported sales in the quarter were down by 6%, coming in at $1.03bn, while in organic terms, sales slid by 6% to $977m. Operating profit was flat in reported terms, at $198m, and up by 9% in organic terms, at $219m.

While branded wine sales registered a 7% slide, sales of spirits, which include Svedka vodka, also headed south, down by 5%, both in reported terms. In organic terms, however, the spirits division delivered a 5% lift, hitting $111m.

The company blamed the impact of year-over-year currency exchange rate fluctuations for the drop in reported sales.

In Europe, the company saw branded wine sales tumble by 27% in value terms to $133.8m, while consolidated sales in the region fell by 24% to $163.3m. In North America, sales rose by 2% to $780m, although sales in Australia and New Zealand came in down 22% to $87.9m.

"We are pleased with our performance especially given the challenging economic conditions that evolved over the course of the year," said Rob Sands, Constellation's president and CEO. "We have significantly improved margins, grown free cash flow, monetised assets and rapidly reduced debt.

"We believe that prioritising profit margin, free cash flow and ROIC is paramount in this environment and, on balance, an appropriate trade-off."

In the nine months to the end of November, sales rose to $2.92bn from $2.89bn a year earlier, with net income halving, to $105.4m from $221.5m. Operating profit slipped to $309.9m from $383.7m.

Going forward, Constellation said it was trimming its comparable diluted EPS range for the full year to between $1.68 and $1.72, down from the previous target of between $1.68 and $1.76.