rman Corporation (NYSE:BFA, BFB) today reported financial results for its fourth quarter and fiscal year ended April 30, 2013. For the quarter, reported net sales1 increased 8% to $866 million (+7% on an underlying basis2) and reported operating income increased 18% to $177 million (+15% on an underlying basis). Diluted earnings per share in the quarter increased 8% to $0.52, compared to $0.49 in the prior year period, including approximately $0.07 cents of benefits due to the timing of shipments and discrete tax items.For the full year, reported net sales increased 5% to $3,784 million (+8% on an underlying basis), reported operating income increased 14% to $898 million (+13% on an underlying basis), and diluted earnings per share increased 16% to $2.75 compared to $2.37 in the prior year period. Reported earnings per share were negatively impacted by the absence of Hopland-based wines and adverse foreign exchange, but benefited from the aforementioned items in the fourth quarter of 2013.
Paul Varga, the company’s chief executive officer, said, “We are pleased to have delivered another year of top-tier industry results, with underlying sales growth of 8% and underlying operating income growth of 13%. The company achieved solid price increases, which helped drive margin expansion. Due to continued global interest in North American whiskey and favorable trends in premiumization, we remain cautiously optimistic that Brown-Forman’s strong and balanced organic growth will continue in fiscal 2014."
Fiscal 2013 Highlights
- Underlying net sales increased 8%, driven by broad-based geographic gains and brand strength, with constant currency net sales3 up 6%
- Price/mix contributed over three points to net sales growth
- Jack Daniel’s family of brands grew net sales 11%
- The company’s super and ultra-premium whiskey brands grew net sales 19%
- Casa Herradura’s family of tequila brands grew net sales 9%
- Finlandia’s family of brands grew net sales 6%
- Underlying operating income increased 13%, driven by top-line growth, gross margin expansion, and operating expense leverage
- As of April 30, 2013, Brown-Forman generated an industry-leading ROIC4 of 22%
Fiscal 2013 Performance
The company’s underlying sales growth of 8% was driven by strong brand performance from its focused portfolio. The company’s outperformance was also fueled by the strength of the North American whiskey category, continued growth of Jack Daniel’s Tennessee Honey, and growth from premium and above brands. Company-wide price/mix contributed approximately three points to full year sales growth and drove the company’s global value share, while depletions grew at a mid single-digit rate. This balanced revenue growth helped deliver gross margin expansion of 200bps. Approximately half of the increase was driven by improved price/mix and reductions in costs associated with value-added packaging, while the other half was due to the absence of Hopland-based wines.
In the emerging markets, net sales growth was widespread. Turkey’s net sales jumped 38% as route-to-market changes implemented two years ago have dramatically improved distribution as well as accelerated the success of brand-building efforts among consumers in a rapidly growing distilled spirits market. Russia enjoyed similarly strong year-over-year growth, increasing net sales by 36%.
