Brown-Forman Delivers Solid Underlying Growth
US-based drinks group Brown-Forman has reported a 2% drop in net sales to $4.01 billion but a 5% rose on an underlying basis for the year ended April 30 2016 as foreign exchange negatively impacted reported net sales growth by six points.
Reported operating income grew 49% to $1.53 billion, or 3% excluding the impact from the sale of Southern Comfort and Tuaca for $543 million. On an underlying basis, operating income increased by 8%.
The company’s brands delivered another solid year of growth in developed markets, which helped offset the economic slowdown in the emerging markets and Global Travel Retail. Underlying net sales grew 6% (3% reported) in the United States, 6% (-3% reported) in developed markets outside of the United States, and 4% (-10% reported) in the emerging markets.
Paul Varga, chief executive of Brown-Forman, comments: “Fiscal 2016 was another successful year at Brown-Forman. We delivered solid underlying growth in sales and operating income, led by the Jack Daniel’s family of brands. We also made important changes to our portfolio of brands that we believe position us well for the long-term. Against a favorable backdrop of global interest in American whiskey, we invested capital to expand our capacity and we returned approximately $1.4 billion to our shareholders during the year. We believe that our strong free cash flow and capital efficiency positions us to deliver top-tier returns for our shareholders.”
Since the year end, Brown-Forman has completed the acquisition of the GlenDronach, BenRiach, and Glenglassaugh single malt Scotch brands for $408 million.
According to Brown-Forman, significant uncertainty around the global economic environment and its potential impact on the business makes it difficult to predict future results. However, assuming no further deterioration in the global economy in fiscal 2017, particularly in the emerging markets, the company anticipates underlying net sales growth of 4% to 6%, led by its premium American whiskey brands, and underlying operating income growth of 7% to 9%.
