Constellation Cuts View, Cites International; To Cut Costs

   DOW JONES NEWSWIRES 
 

Constellation Brands Inc. (STZ) lowered its fiscal-year earnings outlook as woes worsened at the wine maker's U.K. and Australian businesses, which will bare the brunt of an estimated $430 million in charges for the just-ended quarter.

The company also projected lower earnings for the new fiscal year, not the increase analysts had expected, and plans to cut an undisclosed amount of costs. Details will be announced April 8, when the company releases its fiscal fourth-quarter results.

The disclosures come as the world's largest wine maker by volume said it completed the sale of its so-called value-spirits business to Sazerac Co. for $334 million. The divestiture is part of a plan to focus on higher-margin premium brands and reduce some of its acquisition-fueled debt. Borrowings fell more than $800 million during the latest year, with an additional $210 million to be shed from the Sazerac deal proceeds.

Amid "an increasingly challenging global economic environment," Constellation expects fiscal-year earnings, excluding items, of $1.60 to $1.62 a share, not January's narrowed view of $1.68 to $1.72. That excluding the fourth-quarter charges, which will largely consist of goodwill write-downs and other effects from the company's international operations.

President and Chief Executive Rob Sands said the most significant decline in demand during the holiday season occurred in the U.K., amid a weaker economy and intensified competition. Constellation also said it chose not to emulate rivals by engaging in aggressive discounting because it had increased prices earlier in the year.

The economic difficulties are expected to continue weighing on results, prompting the company to say per-share earnings for the new fiscal year should fall by the low- to mid-single digits on a percentage basis. Analysts surveyed by Thomson Reuters, on average, had projected increased earnings to $1.81 a share.

North America, said Sands, continues to generate growth for the wine industry as consumers are still trading up, though not at the rate of prior growth. The U.S. spirits business is being driven by the premium Svedka vodka.

Constellation shares closed Tuesday at $13.26 and were inactive premarket.

-By Mike Barris, Dow Jones Newswires; 201-938-5658; [e-mail]