Constellation Brands Reports Second Quarter Fiscal 2013 Results

Wine and spirits net sales on an organic constant currency basis were even with the prior year second quarter and reflected an increase in volume, primarily offset by higher promotional costs.

8 Oct 2012 --- Constellation Brands, Inc., the world's leading premium wine company, has reported its second quarter 2013 results.

"As we execute our profitable, organic growth strategy, we are encouraged by the strength of our core beer, wine and spirits businesses including the success of our new product introductions and innovation pipeline across our entire portfolio of outstanding brands," said Rob Sands, president and chief executive officer, CBI.  "We remain excited about the prospect of owning 100 percent of Crown Imports, which represents a transformational step for our company as it will solidify Constellation's position in the U.S. beer industry for the long term. This transaction is still targeted to close during the first quarter of calendar 2013."

Wine and spirits net sales on an organic constant currency basis were even with the prior year second quarter and reflected an increase in volume, primarily offset by higher promotional costs.

"I am pleased with our strong marketplace performance during the quarter especially in the SymphonyIRI channels where our excellent brand portfolio is currently outperforming the market," said Sands.  "As expected, our enhanced, yet disciplined marketing and promotional efforts are paying off. Some of our new brands including Simply Naked, Primal Roots and The Dreaming Tree, recently received Impact Hot Prospect Awards and on the spirits side, we are seeing excellent consumer response to the launches of SVEDKA Colada flavored vodka and Black Velvet Toasted Caramel whisky." 

The decrease in consolidated comparable basis operating income was driven primarily by increased SG&A expenses and a planned increase in promotional spending for the company's U.S. wine and spirits business, due in part to support innovation initiatives. 

The company's equity earnings from its 50 percent interest in the Crown joint venture totaled $71 million compared to $63 million from the prior year second quarter. For second quarter 2013, Crown generated net sales of $788 million, an increase of eight percent, and operating income of $143 million, an increase of 14 percent.  The increase in net sales and operating income was primarily driven by volume growth.

"The second quarter marks the tenth consecutive quarter that Crown has outperformed the U.S. beer industry and the import category driven by strong portfolio performance led by Modelo Especial," said Sands. "Crown's marketplace execution is also being fueled by creative advertising and retail programs including the 'Win Your Beach' sweepstakes promotion, Corona's 'Find Your Beach' campaign and Corona Light's new 'Refreshing Change of Beer' ads." 

Interest expense totaled $55 million, an increase of 28 percent. The increase was primarily due to higher average borrowings and an increase in average interest rates.

The comparable basis effective tax rate for second quarter 2013 was 16.3 percent compared to a 3.1 percent rate for the prior year second quarter. Both periods reflect favorable benefits from various tax items. The company now anticipates the full year effective tax rate for fiscal 2013 to approximate 30 percent, which is the primary driver of the improved comparable basis diluted EPS guidance for the year.