Vincor International has reported a 46% increase in first quarter sales, compared to the same period last year, to C$165.8m, following its acquisition of Western Wines in July last year.

However, profits fell below expectations in the period.

The company said about 85% of its sales growth was attributable to the acquisition.

Excluding Western Wines, sales rose by approximately 7% over the corresponding period in the previous year.

However, operating income for the first quarter of 2006 was C$16.3m, 3% lower than the prior year.

Net income for the quarter was C$8.3m, or C$0.25 per diluted share, compared with C$10.2m, or C$0.30 per diluted share, in the same period last year.

A statement from Vincor said that the decrease was driven primarily by lower-than-expected results from the company's operations in the UK and Australia due to the competitive environment in these markets.

The company's first quarter results also reflect lower year-over-year volumes in the United States, as volumes in the first quarter of fiscal 2005 included the launch of the R.H. Phillips Torqued On Pilfer Proof ("TOPP") closure, which saw significantly increase shipments to distributors to clear out cork finished inventory and launch the new TOPP product.

In addition, the company advanced the timing of its marketing spend in Canada compared with the prior year. The company's total promotional spending in Canada is not expected to exceed planned levels in fiscal 2006.

"While the first quarter results were below our expectations, the long-term fundamentals of our business remain very strong, with all our key New World wine markets showing substantial growth and our core brands performing well in their main markets," said Donald Triggs, president and CEO of Vincor International.

"Our Canadian division continued to perform strongly during the first quarter, with volume and sales growth trending positively and our major brands gaining market share.

"The market environment in the United States has improved in recent months, resulting in a decline in price discounting. Overall, we believe our Canadian, US, New Zealand and export businesses will each deliver solid results this year."
"The market conditions in Australia have changed considerably over the past year," Triggs continued. "The excess supply of premium red wine is affecting volumes and margins in our Australian business and impacting our UK operations, particularly our private label products, which have been affected by aggressive price discounting of branded and private label Australian wines. We are carefully reviewing all our costs and promotional plans to ensure these divisions remain competitive and prosper in this changing environment. The impact of the Australian wine surplus on our U.K. results was partly offset by very strong sales growth for Kumala, which is gaining market share. The brand has generated a positive early response from the wine trade in the United States following its recent introduction in this important export region."