US: Brown-Forman full year led by JD again
The US-based producer of Jack Daniel's Brown-Forman Corporation yesterday reported earnings per share for the full year of $2.11, up 16% over the prior year.
The company once more benefited from solid profit growth for both Jack Daniel's and Southern Comfort. But it was also boosted by the benefits from a weaker US dollar, the effects of the March 2003 share repurchase, and a modest increase in profits from the company's wine brands.
However the gains had offset a significant drop in profits from the consumer durables segment.
And overall fiscal 2004 earnings were also reduced by $0.06 per share due to the settlement of a lawsuit with Diageo involving the distribution of Jack Daniel's in the UK.
Fourth quarter earnings per share were $0.47, up 5% from the $0.45 earned in the previous year.
Sales and gross profit growth for the Beverage segment remained strong in the fourth quarter. However, fourth quarter earnings growth was suppressed by a significant increase in advertising and promotional investments designed to accelerate the future growth of the spirits brands.
In addition, fourth quarter results were moderated by a reduction in global trade inventories for beverages and lower operating income from consumer durables. These factors, combined with continued higher pension costs, tempered earnings growth for the quarter.
Revenue and gross profit for the beverage segment were up 11% and 14%, respectively, in the full year, boosted by the addition of new markets to Brown-Forman's distribution arrangement for Finlandia Vodka, and the increased profitability of the company's new distribution arrangement in the UK. However, gross profit from the company's wine brands declined due to a drop in volumes for both Fetzer and Bolla.
However, the company said that gross margin percentage for the company's wine brands increased slightly this year, caused by selected price increases and a favorable shift in mix.
Beverage advertising investments were up over 15% in fiscal 2004, as the company significantly increased brand building efforts behind its premium spirits brands.
Jack Daniel's and Southern Comfort both achieved record profit levels in the year, with double-digit profit growth for the brands.
Jack Daniel's Tennessee Whiskey US volumes were up in the mid-single digits. Volume growth was also strong in the UK, Canada, South Africa and China. Volumes in Korea, Japan and most of Continental Europe were sluggish, however, as mixed economic conditions and unfavourable trends for premium spirits moderated volume growth.
Volumes for Southern Comfort were positive in the US, UK and South Africa, but weak in most of the brand's other major markets.
Brown-Forman volumes for Finlandia were also up, reflecting the new markets of distribution added late last fiscal year. Sales for Finlandia in the US improved in the second half of the fiscal year, as the introduction of a new package and increased promotional investments stimulated demand for the brand.
Profits for the company's wine brands improved slightly in fiscal 2004 as volume declines for Fetzer and Bolla were more than offset by lower brand and SG&A spending.
"Continued competitive pressure from both imported and domestic wine brands, lower industry pricing, and above-market contract grape costs created a difficult environment for the company's California wines," the company said.
Owsley Brown II, chairman and chief executive officer said: "Brown-Forman is optimistic about its earnings outlook for fiscal 2005, due to expected growth for Jack Daniel's and Southern Comfort, improved profitability for the wine brands, and benefits from the recent initiatives in the Consumer Durables segment."
As a result, the company currently expects fiscal 2005 earnings to grow approximately 10-15%, to a range of US$2.32 to US$2.42 per share.
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