US: UK wine market weighs on Constellation
A tough UK wine market has forced Constellation Brands to cut its earnings guidance for the full year.
The US drinks giant yesterday (5 October) reduced its forecast on earnings per share to US$1.72-1.76 from US$1.72-1.80. Constellation blamed "continued intense competition in the UK", a market blighted by fierce price competition among wine producers, particularly in the off-trade.
The company posted an 18% slump in second-quarter net profit to US$68m due to restructuring charges related to its acquisition of Vincor International earlier this year. Operating profit was up 4% to US$181m as net sales rose 19% to US$1.4bn.
Wine sales in the US gave a boost to the figures, leaping 34% on the back of rising sales across Constellation's portfolio, which includes Robert Mondavi and Kumala.
Constellation also benefited from continued demand for imported beer in the US. The company distributes Mexican beer brand Corona in the US and saw sales from its wider import stable rise 9%. From next January, Constellation will handle Corona across the US under a joint venture with the brand's owner, Grupo Modelo.
The company saw sales from its spirits portfolio, which includes Effen vodka and Meukow Cognac, rise 8% on the back of higher marketing investment.
Constellation chairman and CEO Richard Sands said the company was "on track" to deliver "solid earnings growth" despite "challenges" in the UK.
He added: "We will continue to build upon our leadership position in beverage alcohol and complement our organic growth with strategic acquisitions while maintaining our focus on value creation and improving return on invested capital."
"We are on track to deliver solid earnings growth for the year on a comparable basis while taking into account year-over-year challenges for increased UK duty, stock compensation expense, as well as higher interest and taxes," said Sands.
"We will continue to build upon our leadership position in beverage alcohol and complement our organic growth with strategic acquisitions while maintaining our focus on value creation and improving return on invested capital."
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