Alcoholic beverages maker Constellation Brands, Inc. (STZ: News ,STZ-B: News ) Thursday reported a surge in third-quarter profit, driven by lower restructuring costs as well as a reduction in interest expense and effective tax rate. On a comparable basis, earnings rose from the prior-year period and topped Wall Street forecast. However, net sales were down 2% from last year, reflecting a decrease in Australia and Europe wine sales and the divestiture of the company's UK cider business. Constellation also lifted its earnings outlook for fiscal 2011.
The company's third-quarter net income was $139.3 million or $0.65 per share, compared with $44.1 million or $0.20 per share last year. Comparable net income rose to $141.5 million from $120.4 million in the prior-year quarter. Comparable earnings per share were $0.66, up from $0.54 in the same quarter last year.
On average, 11 analysts polled by Thomson Reuters expected the company to report earnings of $0.62 per share. Analysts' estimates typically exclude special items. Constellation's quarterly net sales declined 2% to $966.4 million from $987.7 million in the comparable period last year, mainly due to the divestiture of the UK cider business Gaymer Cider Co. to C&C Group Plc of Dublin, Ireland last year.
Nine analysts had a revenue estimate consensus of $992.83 million. Organic net sales on a constant currency basis were in line with the prior year third quarter.
Commenting on the third-quarter results, Rob Sands, president and chief executive officer of Constellation Brands, stated, "Our third quarter results demonstrate that our strategy is working. We are experiencing continued momentum from our U.S. distributor transition with positive depletion trends recorded during the quarter and we continue to reap the benefits from our diligent focus on free cash flow."
The company's wine sales, which is the cash cow among its businesses, totaled $911 million, a decline of 3% from the previous year, with North America wine net sales rising 1% to $676 million and Australia and Europe wine net sales dropping 12% to $235 million. North America wine net sales showed a favorable product mix, offset by a decrease in U.S. volume, the company said.
Net sales of spirits grew 8% in the quarter to $55 million, driven a 34% gain for SVEDKA Vodka on the back of continued investment in television advertising and events like the New York City Fashion Week.
Constellation also stated that equity earnings from its 50% interest in the Crown Imports joint venture totaled $58 million, an increase of 27% from the third quarter of last year. Crown, which imports, distributes and markets beer brands across the U.S., generated net sales of $612 million, up 22% from last year, primarily due to volume growth. In the third quarter, pre-tax restructuring charges and unusual items declined to $6 million from $81 million last year. Interest expense also decreased 25% to $49 million on lower average interest rates and borrowings during the quarter. On a comparable basis, effective tax rate was 29%, compared with 35% in the prior-year quarter.
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