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CANADA: Vincor brands drive Q2 income growth

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Vincor International said yesterday (3 November) that it had seen a rise in net sales and net income for its second quarter on the back of good growth across its core brands.

Net sales for the second quarter of fiscal 2006 grew by 10% to C$182.6m from C$165.7m for the corresponding quarter of the last fiscal year. The increase was driven by higher demand for the company's core branded products, as well as the acquisition of Western Wines, which closed during the second quarter of the prior fiscal year. Organic sales growth, excluding the effects of currency translation, was 6%.

Net income for the second quarter was C$14.0m, or C$0.42 per diluted share, compared with C$10.9m, or C$0.32 per diluted share, in the corresponding period in the prior year.

However, the company said that net income for the second quarters of fiscal 2006 and 2005 had been impacted by charges associated with the Western Wines acquisition and related refinancing of the company's banking and credit facilities.

Excluding these items, adjusted net income for the second quarter of 2006 was C$15.5m compared with C$16.6m for the prior year period.

"The decrease was due primarily to the impact of the Australian wine surplus on the Australian and UK operations, as well as the advancement of several promotional spending programs in Canada to the first half of fiscal 2006," a statement said.

Promotional spending in Canada for fiscal 2006 is not expected to exceed historical and planned levels, the company added. The advancement of this spending impacted the quarter by C$1.5m and the first six months of the year by C$3.0m, which will be reversed in the second half of the year.

During the second quarter of fiscal 2006, Vincor's core brands performed well. Sales of Kim Crawford increased by 59%, Jackson-Triggs by 14%, Kumala by 62%, Toasted Head by 19% and Inniskillin Icewine by 25% compared with the second quarter of fiscal 2005.

"As expected, our US operations showed a strong recovery in the second quarter," said Donald Triggs, president and CEO. "Our Canadian business continued to grow with strong demand for our core brands and gains in premium wine market share. Market conditions in Australia and the United Kingdom continue to be challenging, the result of an excess supply of Australian wine. Early in the quarter, we finalized initiatives designed to reduce costs and improve efficiencies to restore our business to targeted levels of profitability. These initiatives, which do not impact marketing or promotional programs, are now well under way and will contribute C$16m annually to operating profit, C$5m of which we expect to realize in the second half of this fiscal year. This will restore our profitability to levels that we and our shareholders expect."


Sectors: Wine

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