Alcoholic beverage maker Brown-Forman Corp. (BFA, BFB) on Wednesday reported a 37 percent decline in profit for the fourth quarter from last year, when results benefited from a gain on sale of the Hopland-based wine business. Both earnings and revenue for the quarter missed analysts' estimates.
Looking ahead to fiscal 2013, the company said it expects a continuation of fiscal 2012's strong underlying trends, with net sales and operating income growth in the high single digits.
Paul Varga, Chief Executive Officer of Brown-Forman, said, "After several years of partially absorbing cost increases, we are planning for price increases to be a larger contributor to our total revenue growth, covering cost inflation and improving our relative price positions in the marketplace."
Louisville, Kentucky-based Brown-Forman noted that year-on-year comparisons for the fourth quarter were negatively impacted by the absence of the gain on sale and associated profits from the Hopland-based wine business, as well as foreign exchange, for a combined net impact of about $0.36 per share.
Operating income declined 32 percent on a reported basis, but increased 13 percent on an underlying basis.
The company's fourth-quarter net income was $104.5 million or $0.73 per share, down from $165.4 million or $1.13 per share in the prior-year period.
On average, nine analysts polled by Thomson Reuters expected the company to report earnings of $0.76 per share for the quarter. Analysts' estimates typically exclude one-time items.
However, net sales for the quarter grew 1 percent to $801.3 million from $791.3 million in the year-ago period, with underlying sales growth of 10 percent. Analysts had a consensus estimate of $804.94 million.
For fiscal 2012, Brown-Forman's net income declined to $513.2 million or $3.56 per share from $571.6 million or $3.92 per share in the previous year. Net sales for the year grew 6 percent to $3.61 billion from $3.40 billion in the prior year.
Analysts expected the company to earn $3.60 per share for the year on revenues of $3.50 billion.
Underlying sales for the year rose 9 percent, with each of the company's twelve largest markets growing underlying sales. Sales growth was led by a 12 percent increase in the Jack Daniel's trademark.
Varga said, "Underlying net sales and operating income accelerated in fiscal 2012 to pre-2008 levels. We believe this is due to the strength of the Jack Daniel's trademark and our portfolio of premium brands, our heightened focus on innovation, continued route-to-consumer investments, and the hard work and creativity of our people."
Looking ahead to fiscal 2013, Brown-Forman expects a continuation of fiscal 2012's strong underlying trends, with net sales and operating income growth in the high single digits, and earnings per share of $3.60 to $4.00. The earnings outlook includes an anticipated negative impact from foreign exchange of $0.11 per share.
Analysts expect the company to earn $3.98 per share for the year.
BFB closed Tuesday's trading at $84.74, up $0.74 on a volume of 180,900 shares.
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