Spirits suffer in Constellation Brands’ Q1 results

Constellation Brands’ first quarter sales increased 6% to US$2 billion, but the US group’s wine and spirits sales declined.

Constellation makes the Paul Masson brandy brand

Reported operating income for the beer, wine and spirits maker grew 11% to US$625m in the three months to 31 March 2018.

The group’s acquisition of a minority stake in Canadian cannabis producer Canopy Growth Corporation was reported to offer a US$258m “unrealised gain”.

Rob Sands, CEO of Constellation Brands, said: “Our first quarter results are consistent with our expectations for the business and reflect planned investments in innovation for key brands, digital enablement, emerging opportunities, and operational efficiencies.

“We expect these investments to yield excellent returns well into the future.

Net sales for Constellation’s beer business increased 11% to US$1.38bn, but its wine and spirits unit declined by 2.5% to US$672m.

The group said net sales were impacted by the “overlap of strong shipment volume in first quarter fiscal 2018”, driven by replenishment of Pinot Noir Meiomi.

Wine performed better than spirits, with a decline of 2% to US$591m. Net sales of spirits dropped 8% to US$80.2m.

However, Constellation confirmed it is targeting growth of between 2% and 4% for its combined wine and spirits unit in the full financial year.

“We remain committed to achieving our guidance targets for the year, as the growth prospects for our business remain solid,” said David Klein, chief financial officer.

“The strong operating cash flow we delivered in the first quarter enabled flexibility for venture and growth investments, as well as continued share repurchases and debt repayment.”