Brown-Forman Corp. has posted a healthy 67% rise in earnings for its first quarter. The company today reported diluted earnings per share for the quarter to 31 July of US$0.42, up from the US$0.26 earned in the same period last year.

The company credited its earnings growth primarily to continued volume and margin improvement from its premium spirits portfolio and profits from its introductory shipments of its new low-carbohydrate wine brands, One.6 Chardonnay and One.9 Merlot.

Partially offsetting this first quarter earnings growth was continued softness within the consumer durables segment, higher pension and post-retirement expenses, volume declines for Fetzer Premium Varietals, and a decline in profits from Jack Daniel's Country Cocktails.
After adjustments, the company's operating income grew by 15%.

The beverage segment benefited from a healthy environment for premium spirits, particularly in the US, Brown-Forman said. Global depletion trends for the company's most important brand, Jack Daniel's Tennessee Whiskey, accelerated in the first quarter. Jack Daniel's volumes increased at a double-digit rate in the US and in half the brand's ten largest international markets.

Southern Comfort depletions grew in the mid-single digits globally as Continental Europe improved over its weak performance last year. Finlandia depletions continued to increase in the US and Poland, but were sluggish in other global markets.

Results for the company's core wine brands, Fetzer Premium Varietals and Bolla, remained soft due to the intensely competitive retail price environment in the US. However, Korbel Champagne grew its volume in the mid-single digits and strengthened its market share leadership in the sparkling wine category.

Beverage revenue and gross profit increased by 12% and 13%, respectively, for the quarter. Growth was driven primarily by higher global volumes and improved pricing for both Jack Daniel's and Southern Comfort, the establishment of initial trade inventories for One.6 Chardonnay and One.9 Merlot, and a modest benefit from a weaker US dollar.

First quarter financial results were very strong, even after excluding the benefit from the company's new low-carbohydrate wine product introduction, the absence of last year's legal settlement and restructuring charges, and the modest benefit from favourable foreign exchange earnings, the company said. Earnings expectations for the full fiscal year, however, are tempered by the competitive pressures within the US table wine category and the difficult environment for key pieces of the consumer durables segment. Additionally, the company is contemplating a reduction in field inventories resulting from a continuing evolution of its worldwide distribution system.

As a result of its strong first quarter performance, and the underlying strength in its premium spirits portfolio, the company is raising previously provided earnings guidance, and now expects earnings in the range of US$2.35 to US$2.43 per share for fiscal 2005.