Constellation Brands F1Q09 (Qtr End 5/31/08) Earnings Call Transcript

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2008-07-01 10:23:12.0

Tags: Constellation Brands Inc.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Tim Ramey of D. A. Davidson.

Timothy Ramey - D. A. Davidson & Co.

Good morning. Congratulations on a great quarter. I’m sorry, I think you said this and I missed it, but the comparable line sales excluding the impact to the inventory draw-down was what in the quarter?

Robert P. Ryder

It was around mid-single-digits in North America.

Timothy Ramey - D. A. Davidson & Co.

Okay, and there’s still some of the impact of the draw-down that will fall into the 2Q. Can you help us for our modeling purposes?

Robert P. Ryder

It will be about $30 million in Q2, because about three quarters of last year’s $110 million occurred in the first quarter, so what’s left is around $30 million of sales and about $0.04 of EPS for Q2.

Timothy Ramey - D. A. Davidson & Co.

Great. Appreciate it. And you know, there’s -- I was on CNBC this morning getting asked whether you guys would buy pieces of Foster or [Derringer]. I think you made a strong case here and on the road with me that your focus is on hunkering down. Can I get you to repeat that one more time, hunker down and pay down debt?

Robert S. Sands

Well, Tim, clearly our focus is on hunkering down and paying down debt, so it is as we have said, which is we are focused on generating internal efficiencies, improving free cash flow, improving ROIC and paying down debt. So these are key initiatives for our management team.

Robert P. Ryder

And I think you saw that in the first quarter. That’s what we did.

Timothy Ramey - D. A. Davidson & Co.

That’s terrific. Thank you.

Operator

Thank you. Our next question comes from Lauren Torres with HSBC.

Lauren Torres - HSBC

Good morning. I was hoping you could be a bit more specific with respect to the price increases that you took in the quarter -- any sense of the magnitude or give us a sense of how much of an increase you took, where you took it, and also just going forward, is there more to come or you pretty much took as much as you can, or as I said, take more going into the second quarter?

Robert P. Ryder

It varied a little bit by geography but I’d say in the U.S. in the wine business, it was probably around 3% kind of pricing, and expected at -- it had a bit of a volume hit and it will take a while to build out of that. I don’t think we’re looking at significant pricing in the balance of the year in North America for wine. Spirits also took pricing in the first quarter and I think they are looking, because they have a little bit more input cost inflation, they are looking to take some additional pricing [down into the year]. And as we talked internationally, the U.K. originally had their pricing increase. It was around again 3% to 4% but then when the duty came in, they actually increased it to match the duty, so I think they are pretty much done with their pricing for the year. And Australia also took some pretty significant pricing in the first quarter, like 5% to 7%, and I think they are looking at maybe taking some additional pricing balance of the year because as Rob had said, they had to pay a bit more for grapes this year because of farmers had to buy a lot of water, which is reflected in our cost of goods sold.

 

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