Vineyard sale boosts Brown-Forman 4Q earnings

Brown-Forman Corp.'s fourth-quarter profit spiked from the sale of its California-based Fetzer Vineyards, capping a year that showed strong growth for its flagship Jack Daniel's brand and el Jimador tequila.
The company, whose brands include Southern Comfort and Finlandia vodka, on Thursday reported a 26-cent-per-share gain from the sale of Fetzer to Chilean wine producer Vina Concha y Toro S.A. The $238 million deal closed in April.

Brown-Forman, based in Louisville, Ky., also reported strong yearlong sales for its super-premium brands. For the three months ended April 30, the company reported net income of $165.4 million, or $1.13 per share. That's up from $72.7 million, or 49 cents per share, from a year ago. Excluding gains from the Fetzer sale along with certain one-time tax benefits, the company said its earnings were 80 cents per share.

Revenue rose 8 percent to $791.3 million. Analysts expected earnings of 64 cents a share on revenue of $757 million. The earnings estimates exclude one-time items. For the full year, Brown-Forman reported net income of $571.6 million, or $3.90 per share. That compares with $449.2 million, or $3.02 per share, the year before. Revenue for the year rose 6 percent to $3.4 billion. Excluding the Fetzer sale and tax benefits, the company reported earnings per share of $3.57 for the year, up 18 percent. The company said it expects the Fetzer sale to reduce its earnings by 16 cents per share in the coming year. "I expect us, starting with this fiscal year, to start to recoup some of that lost profitability and then in future years to surpass it," Brown-Forman CEO Paul Varga said in a conference call with industry analysts.

Analysts expected earnings of 64 cents a share on revenue of $757 million. The earnings estimates exclude one-time items. For the full year, Brown-Forman reported net income of $571.6 million, or $3.90 per share. That compares with $449.2 million, or $3.02 per share, the year before. Revenue for the year rose 6 percent to $3.4 billion. Excluding the Fetzer sale and tax benefits, the company reported earnings per share of $3.57 for the year, up 18 percent. The company said it expects the Fetzer sale to reduce its earnings by 16 cents per share in the coming year. "I expect us, starting with this fiscal year, to start to recoup some of that lost profitability and then in future years to surpass it," Brown-Forman CEO Paul Varga said in a conference call with industry analysts.

Brown-Forman said it hopes to build on sales momentum from the last half of the just-ended fiscal year.
The company said it expects strong international growth in the coming year and a better performance in the U.S., where the recession made consumers less inclined to venture out to drink at bars and restaurants. Leading international markets included Australia, the United Kingdom, Mexico, Turkey, Germany and France, Brown-Forman said.

Brown-Forman Chief Financial Officer Don Berg predicted a "slightly improved pricing environment" in the coming year but said the company also will absorb higher costs, including for grain. "We will continue to seek opportunities to increase prices when and where appropriate," he said. The company also is looking to recent brand and packaging introductions to fuel continued growth. Such brand extensions as Jack Daniel's Tennessee Honey, Chambord Vodka and Southern Comfort Lime contributed to sales growth, it said.

The company rolled out new packaging for Southern Comfort, Herradura and Chambord in the past year and recently announced packaging changes for Jack Daniel's Tennessee Whiskey and Finlandia.
The company predicted it will earn between $3.45 and $3.85 per share in the coming year. The company said it expects underlying operating income growth in the mid- to high-single digits in the next year.
Brown-Forman said its Jack Daniel's brands had an 8 percent gain in revenue for the year, on a constant currency basis.

"The broad-based performance of the Jack Daniel's trademark drove the company, most notably in the second half of the year," Varga said. The company's el Jimador products posted a 9 percent gain. Its super-premium brands, which include Chambord, Herradura, Sonoma-Cutrer and Woodford Reserve, had a 13 percent upswing in revenue for the year.

Meanwhile, the company's Finlandia products had a 2 percent revenue drop for the year, while Southern Comfort had a 3 percent drop. Canadian Mist revenue fell 8 percent, while revenue for Korbel Champagne were flat. The company's Class B shares rose $1.40, or 2 percent, to close Thursday at $71.75.