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Brown-Forman Reports Strong First Half Results

Brown-Forman Corporation (NYSE:BFA) (NYSE:BFB) today reported financial results for its second quarter and the first half of fiscal 2014 ended October 31, 2013. The company’s reported net sales grew by 6% to $1,079 million in the quarter 1, and increased 8% on an underlying basis 2. Reported operating income grew 19% to $311 million, and increased 21% on an underlying basis. Diluted earnings per share in the second quarter increased 19% to $0.96 compared to $0.80 in the prior year period. For the first six months of the year, reported net sales increased 4% (+7% on an underlying basis), reported operating income increased 9% (+13% on an underlying basis), and diluted earnings per share increased 9% to $1.62.

Paul Varga, the company’s chief executive officer said, “Fueled by the Jack Daniel’s trademark, the company’s second quarter and first half results were very strong. We continued to generate an excellent balance of geographic growth, including strong growth in the emerging markets.”

Varga added, “We are particularly pleased with Brown-Forman’s results in light of recent industry commentary around a slowdown in global spirits momentum, and we are reaffirming our expectations for excellent full year growth in underlying operating income.”

Year-to-Date Fiscal 2014 Highlights

  • Underlying net sales increased 7% year-to-date:
    • Jack Daniel’s trademark grew underlying sales 10%
    • Emerging markets underlying sales grew 7% (6% reported, 6% constant currency)
    • Price/mix contributed over 3% points to underlying sales growth, and led to a 100bps expansion in reported gross margins
    • Super-premium whiskey brands grew underlying sales by 18%, including 27% growth from Woodford Reserve
    • Herradura and el Jimador grew underlying sales by 7% and 2%, respectively
  • Underlying operating income increased 13%

Year-to-Date Fiscal 2014 Performance

The company’s underlying net sales growth of 7% in the first half of fiscal 2014 was driven by geographically balanced revenue growth. Emerging markets underlying growth rate of 7% was powered by continued strength across a wide range of countries, including China, Brazil, Russia, Thailand, Turkey and India, with each country delivering double-digit growth. Mexico and Poland were down low single-digits, dampening the overall rate of growth in the emerging markets.

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