Constellation Reports Profit Jump, Acquires 100% Of RuffinoOctober 6, 2011
Constellation Brands announced a 78% increase in profits for its second quarter, exceeding estimates as the company’s cost-saving initiatives offset lower sales. Net income rose to $163 million—up from last year’s $91.3 million—and contributed to a 69% profit jump for the first half, to $237 million. The encouraging results propelled Constellation’s share price up by around 10% in recent trading.
In related news, Constellation also announced the purchase of the remaining 50.1% of Ruffino S.r.l. from MPF International S.r.l. for approximately $69 million. As part of the deal, Constellation will assume roughly $73 million in debt. The group’s equity interest in Ruffino began in 2004 with a 40% stake in the company and increased to 49.9% last year. Since the investment, Ruffino has emerged as a “focus brand” for the company. Ruffino reportedly produces 1.3 million cases annually, around 50% of which are sold in the U.S, where the brand advanced by 5.7% to 648,000 cases in 2010, according to Impact Databank.
Due primarily to the recent sell-off of its Australian and U.K. wine businesses, Constellation’s second quarter revenue fell 20%, to $690 million, but the group’s North American unit eked out a 5% revenue increase. President and CEO Rob Sands claimed that the U.S. wine and spirits market remained “healthy,” despite “a decrease in volume and higher promotion costs” within the market. Meanwhile, wine offerings such as Simply Naked, Primal Roots, Dreaming Tree, Rex Goliath Moscato, Woodbridge Malbec and Ruffino Prosecco showed particular promise in the U.S., according to the company. On the spirits side, Svedka remains one of the hottest brands in the business. The vodka brand’s sales in the food, drug and convenience store channel jumped by 22.4% in the 52 weeks ending September 4, 2011, according to Symphony IRI.
Constellation’s Crown Imports joint venture with Grupo Modelo continued to perform well in the quarter, with revenue rising 7% to $727 million, boosted by volume growth of Modelo Especial and recent product launches, including the rollouts of Corona Familiar and Modelo’s Victoria. Net sales also benefited from an improvement in net pricing and product mix. Operating income for the quarter, however, slid 4% to $126 million, due primarily to higher marketing spend.
|Constellation – Leading Brands in Food, Drug & Convenience Stores
(52 weeks ending September 4, 2011)
|Clos du Bois||719||2.1%||$89.0||0.0%||$123.86|
|Robert Mondavi Private Selection||828||1.7%||$88.1||0.6%||$106.44|
|Total Crown Imports*||54,355||4.8%||$1,536.6||5.1%||$28.27|
|* joint venture with Grupo Modelo