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Vintner Constellation Brands' 2Q profit climbs
BEN DOBBIN
(The Associated Press)



05:07:44PM (DST) Thursday,October 6,2011.

ROCHESTER, N.Y. (AP) — Constellation Brands Inc. said Thursday its fiscal second-quarter profit jumped 78 percent on improved wine and spirits sales in North America, a lower tax rate and a drop-off in charges after four years of cost-cutting.

Its stock rose more than 7 percent in afternoon trading.

The world's No. 2 vintner raised its full-year guidance, acquired the rest of Italy's Ruffino wines that it didn't already own and said it had bought back $251 million worth of its own shares.

Constellation has been pruning methodically to solidify its supremacy in higher-margin wines priced from $5 to $20 a bottle and revive profits and revenue in a choppy economy.

Its brands range from Robert Mondavi, Clos du Bois and Ravenswood wines to Svedka vodka and Black Velvet Canadian whiskey. Through a joint venture, it also imports moderately priced beers such as Corona Extra, Tsingtao and St. Pauli Girl.

"We continue to make significant progress in a number of areas despite the prospects of an unsettled consumer environment," Chief Executive Rob Sands said in a conference call with analysts.

The June-to-August results exceeded Wall Street expectations, and its shares surged $1.46, or 7.8 percent, to $20.18 in afternoon trading. The stock is trading near the upper end of a 52-week range of $16.42 to $23.19.

Its net income climbed to $162.7 million, or 76 cents per share, in the three months ended Aug. 31 from $91.3 million, or 43 cents per share, a year earlier. Its effective tax rate dropped to 3 percent in the quarter, down from 35 percent a year earlier.

Revenue after deducting excise taxes fell 20 percent to $690.2 million from $862.8 million a year ago, largely because it sold 80 percent of its struggling Australian and British wine business in January.

Excluding $4 million in restructuring and other one-time items, Constellation earned 77 cents per share. Wall Street expected 65 cents per share, according to a survey by FactSet. A year ago, the company recorded $17 million in one-time charges.

Operating income in its beer business fell 4 percent on higher marketing costs despite a 7 percent rise in sales by its Crown Imports joint venture with Mexican brewer Grupo Modelo.

Its wine and spirits sales in North America rose 5 percent. After a sharp drop in wine sales in 2009, especially in bars and restaurants, industry volumes have rebounded this year as Americans take advantage of more discounts to trade up to higher-priced brands.

Constellation jumped into California's coveted wine market by netting Franciscan in 1999, Turner Road and Ravenswood wineries in 2001 and Robert Mondavi Corp. in 2004. Its 21 acquisitions over 21 years ran through 2007 when it bought Fortune Brands' U.S. wine business, maker of Wild Horse and Clos Du Bois. Then came the cost-cutting.

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