Constellation Brands Profit Tops Forecasts

Constellation Brands posted better-than-expected quarterly earnings Tuesday on price increases and strong sales of higher-profit products such as Clos du Bois wine, sending its shares up more than 5 percent.

Rob Sands, chairman and CEO of Constellation Brands, said the quarterly earnings were highlighted by a surge in North American sales growth and good profit recoveries in international markets.

Despite global economic troubles, however, the wine industry has remained a pretty stable venture, Sands said.

“I think that the wine industry growth has been fairly consistent for a relatively long time," he said. "In general, the business is what I would call non-cyclical."

Although wine sales have not suffered, he said he has seen a change in where people are buying their wine. He said consumers are purchasing wine more from mass merchants and less from grocers and restaurants.

The company, which also makes beer and spirits, affirmed its profit outlook for fiscal 2009. (Learn more in the accompanying CNBC video.)

Net income rose to $44.6 million, or 20 cents per share, in the first quarter ended on May 31 from $29.8 million, or 13 cents per share, a year earlier.

Excluding restructuring costs, acquisition-related expenses and other items, the maker of Robert Mondavi wine and Svedka vodka said it had earned 34 cents per share, beating the analysts' average forecast of 31 cents, according to Reuters Estimates.

Net sales rose to $931.8 million from $901.2 million.

Sales rose 24 percent in the branded wine unit, boosted by double-digit market growth in the United States for lines such as Simi and Kim Crawford. Driven primarily by Svedka, sales in the spirits unit increased 9 percent.

Constellation has been trying to realign its wine business, which is the largest in the world. It recently sold value brands like Inglenook and Almaden and bought more expensive ones like Clos du Bois.

The company also imports Corona and Negra Modelo beers through a joint venture with Grupo Modelo. The Mexican brewer is 50 percent-owned by Anheuser-Busch , which is fighting a takeover bid by InBev.

Constellation stood by its earnings forecast for fiscal 2009, which ends in February. In June it had forecast profit of $1.68 to $1.76 a share, excluding special items.

The company expects net sales for the year to increase in the mid-single-digit percentage range.

Constellation shares were up $1.07, or 5.4 percent, at $20.93 in morning New York Stock Exchange trade. The stock has traded as high as $26.46 and as low as $17.21 in the past year.

Copyright 2009 Reuters. Click for restrictions.