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The increase was driven by the strength of Vincor’s key brands with Jackson-Triggs and Inniskillin (pictured) growing +12% and +7%, respectively |
CANADA. Vincor International Inc, the world’s eighth-largest wine producer and distributor, has reported +10% growth in net income for the third quarter ended 31 December 2005.
President and Chief Executive Officer Donald Triggs said the results were achieved despite a challenging business environment and the distraction of defending an unsolicited takeover bid.
In December, the Canadian winemaker finally saw off a hostile takeover bid by its rival Constellation Brands.
Commenting on the third-quarter results, Triggs said: “Our performance for the third quarter was in line with our expectations and the overall health of our business is very strong. Our UK and Australia operations, however, continue to be impacted by the wine surplus in Australia, a situation that we believe could persist for two years or more.
“In response, we initiated a company-wide programme to reduce costs and improve efficiencies, which will contribute C$5 (US$4.4 million) million to profitability in the current fiscal year and approximately C$16 million annually thereafter. During the quarter, we realised C$2 million of profitability improvement and are on track to achieve our target for fiscal 2006.”
Net sales for the third quarter edged up C$1.0 million to C$207.2 million against the prior-year period as higher sales at the company’s Canadian, US and New Zealand operations were offset by lower sales, after currency translation, at its UK and Australian operations.
Revenue before the impact of currency translation increased by +4% with positive growth at all the operations.
During the quarter, Vincor’s core brands continued to achieve strong sales and market share growth in all of its key markets. Worldwide sales of Kim Crawford increased by +53%, Jackson-Triggs by +13%, Kumala by +22%, and Inniskillin Icewine by +17%.
Net income – at C$14.4 million compared with C$19.2 million last time – was impacted by charges associated with the Western Wines acquisition, as well as costs associated with the takeover bid. Excluding these items, adjusted net income for the third quarter of 2006 climbed +10% to C$22.0 million. This growth was reduced by the strengthening of the Canadian dollar. Excluding the impact of currency translation, net income would have been higher by C$0.7 million.
Performance by region
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“Our performance for the third quarter was in line with our expectations and the overall health of our business is very strong,” said President and CEO Donald Triggs |
Canada: Third-quarter revenue was up +4% compared to the corresponding quarter of fiscal 2005. The increase was driven by the strength of Vincor’s key brands with Jackson-Triggs and Inniskillin growing +12% and +7%, respectively. Sales of the premium wine portfolio jumped by more than +10% during the quarter, compared to an overall market growth of +5%.
US Revenue, excluding the impact of currency translation, increased +11%, primarily the result of strong demand for the company’s core brands. Consumer purchases of these brands (as measured by ACNielsen), continued to show significant growth with the Toasted Head brand growing by +23%, and Hogue, up +8%. In addition, sales of Kumala, which was launched in the second quarter, continued to be strong and in line with expectations.
UK Revenue for the quarter, excluding the impact of currency translation, edged up +1% despite slightly lower sales volumes. The UK operations continued to be impacted by challenging market conditions created by an excess supply of Australian wine. This resulted in continued higher price discounting which impacted the sales of the company’s private-label and agency wines. Kumala continued to grow, with revenue and volume increasing by +14% and +17%, respectively.
Australia Revenue rose by +2%, despite the challenging market conditions. Revenue was impacted by lower sales volumes compared to fiscal 2005 as significant consolidation in the retail sector continued to affect trade inventory levels. Consumer purchases of the key brands, as measured by ACNielsen, grew +6%. Goundrey Homestead Chardonnay is now the second best-selling wine in the key C$10 to C$15 category, the firm reported.
Results for the nine months
For the nine-month period ended 31 December 2005, net sales climbed +15% to C$555.5 million, primarily the result of the acquisition of Western Wines during the second quarter. Excluding the impact of translation, organic growth in net sales was +6%. Net income was C$36.8 million compared to C$40.4 million last time. Adjusted for the impact of charges associated with the Western Wines acquisition, as well as the costs associated with the takeover bid, net income stood at C$47.2 million, against C$46.7 million last time. Excluding the impact of currency translation, net income would have been higher by C$1.0 million.
Triggs said he was optimistic about future growth. “Our brands have significant momentum in their national markets and we will invest toward their continued growth,” he said. “We have exceptional growth opportunities through cross-border sales by leveraging our existing distribution infrastructure throughout the New World wine markets. Moreover, we are pleased with the initial progress in our cost reduction and efficiency improvement programme designed to return our business to targeted levels of profitability.”
Company awards
Among the honours that Vincor’s products received during the third quarter, Kim Crawford Small Parcels Malborough Sauvignon Blanc won the Spitfire 2005 Gold Medal, Trophy Champion Sauvignon Blanc and Trophy Champion Wine of Show at the Air New Zealand Wine Awards.
MORE STORIES ON VINCOR INTERNATIONAL INC
Constellation bid for Vincor unsuccessful – 12/12/05
Hostile bid battle for Vincor heats up – 29/11/05
China Duty Free Group to represent Inniskillin in China – 16/11/05
