US. Leading liquor producer Constellation Brands Inc, which acquired Vincor International Inc for C$1.227 billion in June, has reported record first-quarter net sales.
Net sales rose +5% year-on-year, or +7% on a constant currency basis, to US$1.2 billion for the quarter ended 31 May, 2006. Branded business net sales grew +8%, or +9% on a constant currency basis, driven by imported beers and branded wine in North America.
Regarding the Vincor acquisition, Constellation said the development of integration plans was progressing on schedule. It expects to incur one-time cash and non-cash charges relating to Vincor’s integration and during mid-July expects to announce its plans.
The company said it continues to expect the impact of the Vincor acquisition to be “modestly accretive” to comparable-basis diluted earnings per share for fiscal 2007.
Commenting on the first quarter results, Richard Sands, Constellation Brands Chairman and Chief Executive Officer, said: “We sprinted out of the starting gate this year with solid performance in our branded businesses. These results demonstrate the strength of our unsurpassed portfolio breadth, geographic diversity, distribution scale and innovation. With Vincor joining the Constellation family, Canada becomes our fifth core market and one which complements our existing geographic diversity while providing additional growth potential from a very stable and profitable market.”
Double-digit net sales growth of branded wine for North America (primarily in the US), drove an overall +6% upswing in branded wine net sales on a constant currency basis.
“We’re meeting consumer wine expectations around the world through a combination of new product introductions, innovations in wine and packaging and line and varietal extensions resulting from our extensive base of consumer, distributor and retailer insights,” said Sands. “Recently introduced wines including Twin Fin, Monkey Bay, Four Emus and 3 blind moose, have captured the imagination and sense of adventure within consumers and illustrate a desire on their part to try new and different wines with brand appeal, while varietal extensions such as Woodbridge Pinot Noir allow us to build on the momentum and strength of established brands to satisfy consumer demand for a greater variety of wines from around the world.”
Net sales of branded wine for Europe and for Australia/New Zealand declined in the first quarter. Constellation is leveraging its strong leadership position in these markets to grow market share over the long-term and is focusing on opportunities to maximise profitability, the company said.
Net sales of the company’s wholesale and other business increased slightly on a constant currency basis, including a slight increase in UK wholesale net sales.
Total spirits net sales decreased -3% for the first quarter. Investments behind the company’s premium spirits brands, including Meukow Cognac, Effen Vodka, Cocktails by Jenn, Ridgemont Reserve 1792 Bourbon, the 99 cordials line and Black Velvet Canadian Whisky, contributed to a +3% pick-up in branded spirits, which was more than offset by a -23% decrease in contract production services.
“We are engaged in a long-term premium spirits portfolio brand-building effort illustrated by the addition of six new brands in the past 18 months, and the current roll-out of the black cherry flavour 99 schnapps,” explained Sands. “We will continue to look for additional opportunities to expand our premium spirits business while maintaining our leadership role in value spirits.”
In summary, Sands said: “We’re confident in our ability to deliver solid earnings per share growth for the year on a comparable basis, despite comparison challenges for stock compensation expense, increased UK duty, interest and taxes that we planned at the outset of the year. We are going to continue to build upon our leadership position in beverage alcohol and complement our organic growth with strategic acquisitions, improve our return on invested capital and create value.”
MORE STORIES ON CONSTELLATION BRANDS/VINCOR
Vincor shareholders approve acquisition by Constellation Brands – 02/02/06
Vincor’s Jackson-Triggs named Best Canadian Winery – 13/04/06
Inniskillin parent company Vincor sold to Constellation in C$1.5 billion deal – 03/04/06
