Constellation Brands, the US distributor of Corona and Modelo beer, has published first-quarter net sales of $2.05 billion – 6% stronger than the same period last year.
Operating income stood at $625 million, which was an 11% improvement on last year, while gross profit rose 6% to $1.05 billion.
The company has affirmed its full-year cash flow target of approximately $2.45 billion and free cash flow projection of between $1.2 billion and $1.3 billion.
Rob Sands, chief executive of Constellation Brands, said: “Our first-quarter results are consistent with our expectations for the business and reflect planned investments in innovation for key brands, digital enablement, emerging opportunities, and operational efficiencies.”
They include Constellation’s decision to invest $190 million in Canopy Growth Corporation, a Canadian supplier of medicinal marijuana, ahead of the country’s change of law on recreational cannabis use this month; as well as the sale of its remaining interest in Accolade Wine.
“We expect these investments to yield excellent returns well into the future,” Sands said. “I am especially pleased with the successful execution and momentum of our new product introductions, including Corona Premier and Familiar, which drove industry-leading depletion growth of 9% for our beer business for the quarter.”
In Constellation’s beer portfolio, volume increased by 8.6% and net sales increased by 11%. The Modelo and Corona brand families drove strong portfolio performance and market share gains with depletion growth of approximately 9%.
The beer business continues to target high-single digit volume growth and 9-11% net sales and operating income growth for fiscal 2019.
The wine business gained IRI market share in the first quarter, as marketing investments are paying off and driving strong marketplace performance of higher-priced Focus Brands, including Meiomi and Kim Crawford. Overall depletion performance was muted following strong fourth-quarter fiscal 2018 results.
Net sales were impacted by the overlap of strong shipment volume in the first quarter of 2018, driven by replenishment of Meiomi supply, which was constrained coming out of the fourth quarter of 2017. The wine and spirits business continues to target net sales and operating income growth in the 2-4% range for fiscal 2019.
Constellation chief financial officer David Klein said: “We remain committed to achieving our guidance targets for the year, as the growth prospects for our business remain solid. The strong operating cash flow we delivered in the first quarter enabled flexibility for venture and growth investments, as well as continued share repurchases and debt repayment.”
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