The US drinks group Constellation Brands has reported record net sales and net income for its first quarter.
The company said that it had already begun to see the benefits of its acquisition of Australia’s BRL Hardy, but that increased beer sales and lower average spirits costs had also contributed to increased net income of US$39m, up 5% on the same period last year. Reported diluted earnings per share increased 3% to reach US$0.41.
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On a comparable basis, net income reached US$47m, on a comparable basis, up US$10m, or 26%.Diluted earnings per share on a comparable basis increased 23% to reach US$0.49.
Net income on a comparable basis and diluted earnings per share on a comparable basis exclude the after-tax impact of: an increase in cost of goods sold resulting from the step up of inventory associated with the Hardy acquisition; financing costs and the imputed interest charge associated with the Hardy acquisition; restructuring charges; and a gain on change in fair value of derivative instruments.
Richard Sands, chairman and chief executive officer, said: “We are pleased with our strong comparable earnings growth this quarter, which was enhanced by our recent acquisition. The integration of Hardy has gone very well and it is clear that Constellation has already begun to experience tangible benefits from the acquisition, particularly in the enhancement of our scale, breadth and growth. Our company-wide business model of independent sales, marketing and production teams has once again demonstrated its flexibility, allowing us to adapt to changes in the marketplace while maintaining close contact with our customers.”
Sands added: “We remain focused on building long-term brand equity and we continue to invest behind brands and sectors that have the greatest potential for growth, while maintaining profitability on more established brands. This approach to the market enabled us to maintain a strong bottom line and we are on track to deliver our fiscal year earnings goals.”
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By GlobalData
Net sales grew 19% , reaching US$772m.
“Net sales growth was driven primarily by the addition of wine sales from the Hardy acquisition completed during the quarter. Increases in UK wholesale sales and imported beer sales also contributed to the growth,” the company said. Net sales for the quarter on an equivalent basis, including April and May sales from Hardy in the prior year period of US$85m, increased 5%, including a positive 4% impact from foreign exchange.
Looking forward the company said it expected the second quarter to deliver operating income on a comparable basis within a range of US$138m to US$145m versus US$105m for second quarter last year.
For the full year operating income on a comparable basis is expected to be within a range of US$560m to US$580m versus US$410m last year.
The drinks company also said it is planning an number of job losses through the closure of a grape concentrate producing unit.
Constellation will take a charge of US$56m over the next 18 months as it exits the business of making grape concentrate, used to make juice, because of declining sales and profits.
In the current quarter this will include a US$40m charge.
Constellation will lay off 50 employees as it shuts down the Madera, California plant, the company said.
