E-Malt.com News article: USA: Constellation Brands Inc.

Constellation Brands Inc.'s fiscal fourth-quarter profit shrank 21% as the wine and spirits maker's sharply higher tax rate and increased expenses offset its stronger revenue, MarketWatch reported on April, 10.

Constellation has become a bigger player in Anheuser-Busch InBev N.V.'s $20.1 billion bid to buy out Mexican brewer Grupo Modelo SAB de CV, after the Justice Department filed an antitrust lawsuit in late January to stop the tie-up.

Constellation had been set to take Modelo's stake in U.S. beer supplier Crown Imports LLC for $1.85 billion. But, in an effort to get the Justice Department to approve the deal, AB InBev agreed to sell an additional $2.9 billion of assets to Constellation - including the transfer of Modelo's Piedras Negras brewery in Mexico and perpetual licensing rights in the U.S. to five Modelo brands - to help preserve Modelo as an important U.S. competitor to AB InBev.

AB InBev, the world's largest brewer by revenue, said on April, 5 it reached an agreement in principle with the Justice Department to resolve the suit, saying the proposed settlement would be "substantially in line" with the revised merger terms.

Investors have cheered Constellation's acquisition plan, as they have pushed the company's stock price higher since the deals were announced last June.

For the quarter ended Feb. 28, Constellation reported a profit of $81.7 million, or 43 cents a Class A share, down from $103 million, or 51 cents a share, a year ago. Excluding restructuring, acquisition and related charges, earnings fell to 47 cents a share from 69 cents.

Net sales, which exclude excises taxes, were up 11% at $695.9 million.

Analysts polled by Thomson Reuters expected earnings of 45 cents a share and $667 million in sales.

Gross margin narrowed to 37.6% from 39%, as input costs rose 13%.

Constellation said its comparable basis effective tax rate for the quarter was 27%, compared with a negative 11% rate in the prior-year period, which stemmed from "the favorable outcome of various tax items." The drastically different rates resulted in the company recording $25.1 million in provisions for taxes in the latest quarter, compared with a tax benefit of $22.5 million a year ago.

The company forecast adjusted income of $2.55 to $2.85 a share for the new fiscal year, compared with analysts' estimates of $2.78.

12 April, 2013