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Winemaker Constellation Brands Loses $23M |
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Thursday, 02 October 2008 |
FAIRPORT, N.Y.: Constellation Brands Inc. said Thursday it lost nearly $23 million in its fiscal second quarter as strong sales of vodka and premium wines were more than offset by charges to shrink its operations in Australia.
Constellation is the world's biggest wine company by volume with 300-plus brands that run from jug wines to coveted California reds, including the Clos du Bois, Geyser Peak and Woodbridge by Robert Mondavi labels. It also imports Corona and St. Pauli Girl beer and owns liquors such as Fleischmann's vodka and Black Velvet Canadian whiskey.
The company lost $22.7 million, or 11 cents per Class A share, in the quarter ended Aug. 31. That compared with a profit of $72 million, or 33 cents a share, a year earlier.
Excluding one-time costs, its net income rose 28 percent to $99 million, or 45 cents a share—beating Wall Street's expectations by a penny. Net sales rose 7 percent to $956.5 million after excise taxes.
Analysts surveyed by Thomson Reuters expected earnings of 44 cents a share on net sales of $964.5 million.
Branded wine sales rose 6 percent to $782 million, driven by U.S. brands such as Estancia, Toasted Head and Woodbridge. Sales of spirits rose 4 percent to $109 million, propelled by double-digit growth of the Svedka premium vodka produced in Sweden that it acquired in March 2007.
Its net loss was driven by $129 million of charges and writedowns associated mainly with a move in August to restructure its Australian operations.
Constellation Brands acquired Australian vintner BRL Hardy Ltd. in 2003 in a $1.1 billion cash-and-stock deal that made it the world's largest wine business.
To trim its debts and place greater emphasis on more profitable wines priced at upwards of $8 a bottle, it is selling three wineries, 23 vineyards and three wine production centers, ditching more than 30 percent of product lines and eliminating 350 jobs in Australia.
The overhaul was triggered by various setbacks: a drought that undercut the last two Australian wine harvests, a strong Australian dollar and heightened competition in Britain, the largest export market for Australian wines.
In recent years, Constellation has also been staking a bigger claim in the more profitable end of the U.S. wine market. It bought the U.S. wine business of Fortune Brands Inc. for $885 million last December, boosting its collection of $8-to-$11 wines with popular brands such as Wild Horse.
Its best-known Australian brands include Hardys and Banrock Station.
Based in the Rochester suburb of Fairport, it employs 8,200 people worldwide, including more than 1,400 in Australia.
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