Archive for August, 2011

Brown-Forman posts higher 1Q profit

Wednesday, August 31st, 2011 | Finance News

LOUISVILLE, Ky. – Brown-Forman Corp. said Wednesday its first-quarter profit rose 6 percent as its flagship Jack Daniel's lineup posted double-digit revenue growth and the liquor company posted strong sales overseas.

The company reaffirmed its full-year earnings projection and said it expects to benefit from brand development and wider distribution to help fuel improved net sales growth.

Louisville-based Brown-Forman reported a double-digit increase in advertising spending in the latest quarter, much of it to back the introduction of its Jack Daniel's Tennessee Honey product — its latest entry in an industrywide trend toward infusing new flavors into liquor.

The company's brands had a mixed performance in the three-month period.

Its leading Jack Daniel's brand lineup had a 15 percent revenue gain for the quarter, on a constant currency basis. The company reported higher volumes for its Chambord vodka, Herradura, Sonoma-Cutrer and Woodford Reserve brands.

Overall Finlandia vodka revenue was flat for the period on the same constant currency basis, while several other brands had declines.

Southern Comfort continued to struggle with an 11 percent drop in revenue for the overall brand. The company also reported revenue declines for its el Jimador, Canadian Mist and Korbel Champagne brands.

The company said it got a lift from a weaker U.S. dollar in its increasingly important international markets. It reported gains in Germany, Turkey, the United Kingdom, Russia and Brazil, which more than offset declines in Poland, Spain and Australia.

"In this quarter, we continued to enjoy widespread international growth," said company CEO Paul Varga. "We also saw an important acceleration of our U.S. business, driven by the continued growth of the Jack Daniel's trademark and super-premium brands."

The recession made U.S. consumers less inclined to venture out for out-on-the-town drinking at bars and restaurants, which the industry calls "on premise" consumption.

For the three months ended July 31, the company reported net income of $118.1 million, or 81 cents per share. That's up from $111.4 million, or 76 cents per share, a year ago.

Net sales rose 13 percent to $840.3 million from $744.9 million a year ago.

Analysts expected earnings of 83 cents per share on revenue of $767.2 million.

Its Class B shares rose 5 cents to $73.53 in morning trading.

For the full year, Brown-Forman expects to earn $3.45 to $3.85 per share. Analysts on average expect $3.70 a share for the year.

The company recently introduced new packaging for Jack Daniel's Tennessee Whiskey and Finlandia, following up on packaging remakes for Southern Comfort, Herradura and Chambord. Varga said the investments in packaging and advertising will pay dividends.

"We believe that product, packaging and marketing innovation will continue to be important contributors to sustainable sales and profit growth in our industry," Varga said.

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Exclusive: Collateral fees may end Greek row: Austrian finmin

Wednesday, August 31st, 2011 | Finance News

ALPBACH, Austria (Reuters) – Euro zone countries are discussing ways to charge fees on any collateral Greece would use to back bailout loans, an approach that could resolve a nasty row over a second rescue package, Austrian Finance Minister Maria Fekter told Reuters.

"I believe we will get a solution that is acceptable," she said in an interview at the Alpbach economic forum on Wednesday.

"If collateral is linked to fees -- if they cost something just as a bank guarantee costs something -- then everyone's desire for it will immediately be limited. These kinds of market-conforming models are under discussion now," she said.

She reiterated Austria's demand for equal treatment if Finland gets its wish for cash collateral to back loans to Greece under a new 109 billion euro ($157 billion) rescue package.

"Just to say we (Finland) get 20 percent in cash and the others should pay for it, as the Finns negotiated with Greece to the detriment of the community of nations, that doesn't pass muster," she said.

She also said Austria was on track to cut its budget deficit to around 3.3 percent of gross domestic product this year and might get the shortfall below 3 percent in 2012, both a year ahead of schedule. ($1 = 0.693 Euros)

(Reporting by Michael Shields and Angelika Gruber; editing by Noah Barkin)

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Carrefour warns on 2011 profit as Europe struggles

Wednesday, August 31st, 2011 | Finance News

PARIS (Reuters) – Carrefour (CARR.PA), Europe's No.1 retailer, warned 2011 profits would slump 15 percent as it cuts prices in a bid to reverse falling market share and tackle an increasingly tough economic environment.

Carrefour said it was downsizing its core Planet hypermarket revamp as it continued to face headwinds in Southern Europe, notably in Greece and Italy, and added that high commodity prices put at risk its purchasing gains goals.

Shares in the French group, which has spooked investors with

four profit warnings in less than a year, dropped 4 percent on Wednesday after it reported an unexpected first-half net loss, hit by 884 million euros of one-off charges, mainly linked to writedowns for its Italian business.

"We are biting the bullet in 2011 and rebuilding momentum in 2012 to deliver long-term sustainable profitable growth," Chief Executive Lars Olofsson told a new conference.

Meanwhile, its new head of France, Noel Prioux, unveiled a new stimulus plan for France, which will focus more on price cuts than on costly promotions, hand back more responsibility to hypermarket managers and accelerate expansion of Carrefour-branded products and e-commerce.

"Yet another one (profit warning) and yet another plan," said JP Morgan Cazenove analysts, referring to Carrefour's repeated attempts to reinvent itself in recent years.

"Given Carrefour's history on lack of delivery on its guidance, then a more aggressive stance could be taken by the market," RBS analyst Justin Scarborough added, predicting even deeper cuts in 2011 profit forecasts.

A string of European consumer-related companies including Ahold (AHLN.AS) and Heineken (HEIN.AS) have missed earnings forecasts recently as shoppers have cut spending amid rising prices and austerity measures.

Carrefour, the world's No.2 retailer behind U.S. group Wal-Mart (WMT.N), has conceded it has also made mistakes, such as raising prices in its main French market above rivals such as E Leclerc and Intermarche.

"We tried to do too much too quickly," Olofsson said.

The group, with more than 9,500 stores in 32 countries, reported a well-flagged 22 percent drop in first-half current operating profit to 772 million euros.

It pledged to improve its competitive position, but also indicated this would hit earnings in the short term.

"We have taken the decision to favor sustainable value creation over short-term gains," Olofsson said, adding the group would prioritize price cuts over promotions.

At the time of its previous profit warnings in July, Carrefour had said it still hoped to grow full-year operating profit, though analysts had cut their forecasts to around 2.3-2.4 billion euros, or a decline of about 11 to 15 percent.

Olofsson is under pressure after launching a three-year turnaround plan in June 2009 that has so far shown few lasting benefits.

The news conference yielded more disappointment on that front.

Carrefour said a goal to achieve cumulated cost savings of 1.9 billion euros by 2012 under the three-year plan was intact, having achieved 236 million in the first half alone.

But price competition and high commodity prices wiped out purchasing savings in the first half, putting Carrefour's goal of making cumulative purchasing gains of 850 million at risk.

Carrefour was also reducing capex in Greece and Italy amid a tough economic climate, downsizing to 464 an initial target to have revamped 503 European hypermarkets by 2013.

Carrefour's shares have plunged 40 percent this year, hitting a more than 10-year low of 16.675 euros this month.

However, Olofsson appears to retain the support of key shareholder Blue Capital, an alliance of luxury tycoon Bernard Arnault and U.S. group Colony Capital

In June he was handed the role of chairman to add to his position as CEO.

Faced with gloomy prospects in Europe, Carrefour reiterated it was keen to accelerate its expansion in fast-growing emerging markets, notably China and Latin America.

Analysts have been keen for Olofsson to spell out his plans for Carrefour's emerging market businesses after a failed attempt last month to merge its Brazilian operations with that of a local rival.

Olofsson reiterated that its Brazilian operations, which contribute 14 percent of group revenue, were not for sale and that it did not need partners in Brazil, where it is the top food retailer.

Olofsson said, however, that Carrefour was reviewing all opportunities to grow in Brazil, the group's second-largest market after France.

First-half underlying operating profits dropped 40 percent in France, where Carrefour makes over 40 percent of its sales, and were down 33 percent elsewhere in Europe. They were up 27 percent in Latin America and 11 percent in Asia.

At 1133 GMT, Carrefour shares were down 3.2 percent at 18.04 euros, lagging a 1.5 percent rise in the STOXX Europe 600 retail index (.SXRP).

($1=.6897 Euro)

(Additional reporting by Mark Potter in London; Editing by Helen Massy-Beresford and Will Waterman)

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