Constellation Brands this morning is reporting a 45% increase in net profit to $1.54 billion, or $7.52 a share, for all of fiscal 2017 as its sales rose 12% to $7.33 billion.
It also announced a 30% increase in the quarterly cash dividend, to 52 cents a share of Class A common and 47 cents a share of Class B common, payable May 24 on stock of record May 10.
Constellation’s 12% sales gain reflects organic net sales growth on a constant currency basis of 9%, the company said.
Net sales for the beer business increased 17%. This was due to a 13% increase in organic net sales driven primarily by volume growth and favorable pricing, and the acquisition benefit from Ballast Point.
“Our beer business continues to be a powerhouse for growth. We exceeded our profit and margin goals for the year,” said Rob Sands, president/ceo. “These excellent results were driven by solid performance for every brand in our portfolio, which resulted in Constellation being the No. 1 growth contributor to the U.S. beer industry for the year. In addition, our portfolio posted industry-leading depletion growth in the 9-to-10 percent range for the first calendar quarter of 2017 after a challenging December for the U.S. beer industry,” said Sands.
Wine and spirits net sales increased 6%. This reflects a four percent increase in organic net sales on a constant currency basis driven primarily by volume growth and favorable mix, and the acquisition benefit primarily from Meiomi and Prisoner. These benefits were partially offset by the divestiture of the Canadian wine business.
“Our wine and spirits business achieved strong earnings growth and margin expansion driven by our fast-growing, high-margin Focus Brands, which collectively delivered depletion growth of nine percent for the year. We continue to gain distribution for our newly acquired High West whiskey brands, as well as the Prisoner and Charles Smith wine brands, all of which posted strong, double-digit depletion growth for the year,” said Sands.
In addition to the 30% dividend increase, Constellation expects to generate about $2 billion in operating cash flow for fiscal 2018, said David Klein, executive vice president and chief financial officer, Constellation Brands. “I am also pleased that we have completed the next phase of our expansion project to 25 million hectoliters ahead of schedule at our Nava brewery in Mexico,” he added.
For fiscal 2018, the beer business is targeting net sales growth in the range of 9 – 11 percent and operating income growth in the range of 11 – 13 percent.
For the wine and spirits business, the company expects net sales to decrease in the range of 4 – 6 percent and operating income to be flat. These projections include the estimated impact of the December 2016 divestiture of the Canadian wine business and the estimated incremental benefits from High West, Charles Smith and Prisoner acquisitions. Excluding the $311 million of net sales and $50 million of operating income from the fiscal 2017 wine and spirits segment results related to the Canadian wine business divestiture, the company expects net sales growth of 4 – 6 percent and operating income growth of 5 – 7 percent for fiscal 2018.