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Brown-Forman Reports Full Year 2012 Results – Anticipates Another Strong Year Of High Single-Digit Underlying Operating Income Growth In Fiscal 2013

Stocks in this article: BFB

Brown-Forman Corporation (NYSE:BFA) (NYSE:BFB) today reported fourth quarter and fiscal year 2012 financial results. Reported net sales grew 6% to $3.6 billion in fiscal 2012, or 9% on an underlying 1 basis. Reported operating income decreased 8% to $788 million, but increased 9% on an underlying basis. Diluted earnings per share were $3.56 compared to $3.90 in the prior year. As expected, reported year-over-year comparisons were negatively impacted by the absence of the gain on sale and associated profits from the Hopland-based wine business 2, as well as foreign exchange for a combined net impact of $0.54 per share.

Looking ahead to fiscal 2013, the Company expects a continuation of fiscal 2012’s strong underlying trends, with net sales and operating income growth in the high single digits, and earnings per share of $3.60 to $4.00.

Fiscal 2012 Highlights

  • Underlying net sales increased 9%, an acceleration from fiscal 2011’s growth rate of 4%
    • Each of the Company’s twelve largest markets grew underlying sales, including market share gains in the U.S.
    • Underlying sales outside of the U.S. grew 12% in fiscal 2012, and now comprise 58% of total sales. Emerging markets drove nearly 45% of incremental growth
    • Sales growth was led by the Jack Daniel’s trademark, up 12%
    • Product innovation and line extensions, including the successful launch of Tennessee Honey, contributed roughly two points of the Company’s 9% sales growth
    • Finlandia’s family of brands grew sales 10%, with record depletions 3
  • Underlying operating income increased 9%, an acceleration from 2011’s growth rate of 6%
  • $408 million was returned to shareholders, including $216 million in share repurchases and $192 million in dividends
  • Brown-Forman’s one-year TSR 4 of 22% outpaced the S&P 500’s 5%
  • The Company generated an industry-leading ROIC 5 of 19%

Fiscal 2012 underlying results accelerated as shown below:

    Growth in Underlying   Change in Reported
  Net Sales   Operating Income   Net Sales   Operating Income
Fiscal Year 2012   9%   9%   6%   -8%
Fiscal Year 2011   4%   6%   6%   20%
Fiscal Year 2010   1%   6%   1%   7%

Paul Varga, the Company’s Chief Executive Officer, said, “Underlying net sales and operating income accelerated in fiscal 2012 to pre-2008 levels. We believe this is due to the strength of the Jack Daniel’s trademark and our portfolio of premium brands, our heightened focus on innovation, continued route-to-consumer investments, and the hard work and creativity of our people. While the economic backdrop remains uncertain, we expect that this strength in underlying sales will continue into fiscal 2013, with anticipated growth in the high single-digits. After several years of partially absorbing cost increases, we are planning for price increases to be a larger contributor to our total revenue growth, covering cost inflation and improving our relative price positions in the marketplace.”

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