Overheads dent Constellation Brands' Q2 profits

Constellation Brands has reported a 23% slump in second-quarter profits after the US beverage firm was hit by higher tax provisions and overhead costs. 

Constellation posted a profit of $124.6 million in the quarter ending 31 August. Net sales were up 1.2% to $698.5 million.  

The wine and beer firm’s income tax bill increased to $21.9 million, up from $3.9 million during the same period last year. Selling, general and administrative expenses rose by 12%. 

Nontheless, Constellation said that it was pleased with the performance of its core business and growth prospects.

“As we execute our profitable, organic growth strategy, we are encouraged by the strength of our core beer, wine and spirits businesses including the success of our new product introductions and innovation pipeline across our entire portfolio of outstanding brands," said Rob Sands, Constellation Brands’ president and chief executive.

"We remain excited about the prospect of owning 100% of Crown Imports, which represents a transformational step for our company as it will solidify Constellation's position in the US beer industry for the long-term. This transaction is still targeted to close during the first quarter of calendar 2013."

Constellation struck a deal to fully acquire Crown Imports LLC for $1.85 million in late June following partners Grupo Modelo’s decision to offload its share of the joint venture. The sale was designed to allay antitrust fears after ABInBev reached an agreement to buy Grupo Modelo for $20 billion in the summer.

Corona distributor Crown Imports is the US’ third largest supplier by volume and is expected to enable Constellation to double its annual sales.