Fortune Brands profit falls but tops lowered view
NEW YORK (Reuters) - Fortune Brands Inc (FO.N) reported a quarterly profit that topped Wall Street's lowered expectations on Friday, after the consumer products maker had warned that weak consumer sentiment, the U.S. housing slump and higher taxes would depress earnings more than expected.
The maker of Jim Beam bourbon, Moen faucets and Titleist golf equipment said second-quarter net profit fell 41 percent to $136 million, or 88 cents per share, from $232 million, or $1.48 per share, a year earlier.
The results include a $60 million charge for items such as a write-down of the company's door business due to the housing slowdown.
Excluding special items, earnings were $1.25 per share, beating the analysts' average forecast of $1.20, according to Reuters Estimates.
Fortune also affirmed its full-year earnings outlook, raised its divided 5 percent and said it bought back a 10 percent stake in its spirits business owned by Sweden's Vin & Sprit VSG.UL for $464 million.
Its shares, which at Thursday's close were down 19 percent this year, were little changed on Friday.
Investor enthusiasm was probably muted as weakness across the company's portfolio drove operating earnings down 24 percent, according to Goldman Sachs analyst Judy Hong.
"We are neutral on the stock as we expect continued housing weakness and soft spirits results will be overhangs, but valuation is undemanding here," Hong wrote in a research note, adding that commodity cost inflation and debt reduction were also ongoing challenges.
Fortune Brands warned last month that quarterly earnings from continuing operations would probably decline at a steeper-than-expected percentage rate in the high teens to mid-20s. Among the reasons cited was an unexpected Australian tax increase on ready-to-drink spirits products, which raised the price of its popular Beam and Cola drinks by about 25 percent, causing sales to drop.
Quarterly net sales fell 8.6 percent to $2.10 billion as higher U.S. spirits shipments and strong golf and home products sales in Asia could not fully offset the impact of the U.S. housing slump and the softening consumer environment.
Excluding the impact of excise taxes and foreign exchange rates, net sales fell 10 percent.
Chief Executive Bruce Carbonari said the environment in the second quarter was tougher than expected.
"Clearly the U.S. housing market has been the biggest headwind we faced and it's been more challenging than we anticipated three months ago," Carbonari said on a conference call.
Sales at the home and hardware unit fell 14 percent while operating income fell 30 percent. Fortune said it now sees that unit's operating margins falling 2.5 percentage points this year.
SPIRITS, GOLF ALSO WEAK Continued...
