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Poor results for Constellation

Published:  23 July, 2008

Constellation Brands, which claims to be the world's largest producer of branded wines, has blamed poor performance in the UK for its disappointing third-quarter financial results.

The company, which owns brands such as Hardy's, Robert Mondavi and Kumala, as well as the Blackthorn and Gaymer's cider marques, said that the 16% decline in its net sales in Europe, compared with the same period last year, was largely due to a decline in UK volumes. It said supermarkets were benefiting from a highly competitive environment, given the availability of low-cost Australian wine'.

It also said that the UK market was so price competitive that it had not been able to pass on the duty increases imposed in last April's government budget.

Constellation added that the situation was unlikely to change and that it would focus further on cost-saving measures. The company said it hoped the availability of very low-cost wines for supermarket own-label lines would be reduced by the drought in Australia this year.

More positively, comparable sales for its UK wholesale business, Matthew Clark, rose by about 6%, but that did not stop the US group from missing its profit forecast for the three months to the end of November 2006. Earnings per share rose by $0.58 compared with the $0.60 analysts were expecting. The news sent Constellation's shares down 11% on Wall Street, despite buoyant sales in the beers and spirits divisions.