Constellation Posts Lower Profit

Constellation Brands Inc., the world’s largest winemaker, said Thursday that its fourth-quarter profit fell 24% on costs related to its purchase of Napa, Calif., vintner Robert Mondavi Corp. The company raised its profit forecast for its fiscal year.

Net income fell to $47.6 million, or 40 cents a share, from $62.8 million, or 55 cents, a year earlier, Fairport, N.Y.-based Constellation said. Sales in its quarter ended Feb. 28 rose to 17% to $1.3 billion, helped by the December addition of Mondavi luxury wines such as Opus One.

Results included refinancing costs after Constellation enlarged its credit line to pay for the $1.35-billion Mondavi purchase. Constellation, which sells Corona beer and Kentucky Gentleman bourbon among 200 brands of alcoholic drinks, also spent more on advertising to boost sales of wine, which are outpacing beer as the U.S. population ages.

“Increasing high-end wine sales are a trend we’ve been seeing for the last couple of years, and it has a lot to do with demographics,” said Dan Ahrens, who manages shares of Constellation in the $32-million Vice Fund based in Dallas. “Constellation does a great job of covering the market segments because they sell the high-volume wines as well.”

The company repaid a $1-billion bank loan and funded its purchase of Mondavi with a $2.9-billion line of credit arranged at the end of December. Constellation has $3.4 billion in debt, including $1 billion in bonds. In 2003 the company bought winemaker BRL Hardy Ltd. for $1.4 billion in cash and debt, to add faster-growing Australian brands.

Constellation forecast that its first-quarter earnings would rise to 56 cents to 60 cents a share. The company increased its forecast for its fiscal year to $3.09 to $3.21 a share from an earlier estimate of $3.04 to $3.20.

Constellation also announced a 2-for-1 stock split of both its class A and Class B shares to be distributed May 13 to shareholders of record April 29.

Shares of Constellation, which collects about two-thirds of its revenue from selling and distributing wine, rose $1.43 on Thursday to $54.47 on the New York Stock Exchange. The company’s results were released after the close of regular U.S. trading.