- New Mexicali brewery expected to
cost approximately $1.5 billion with completion in 4 - 5
years
- Additional investments in land,
water rights, infrastructure and other site requirements at
Mexicali location expected to approximate $500 million to
accommodate scalability to 20 million hectoliters
- Incremental Nava brewery
expansion currently underway to increase production capacity from
25 to 27.5 million hectoliters; expected to be completed by early
calendar year 2018 at a cost of approximately $250 million
VICTOR, N.Y., Jan. 7,
2016 - Constellation Brands, Inc. (NYSE: STZ and STZ.B), a
leading beverage alcohol company, announced today details related
to the construction of a new, state-of-the-art brewery to be
located in Mexicali, Mexico, which is ideally located near the U.S.
state of California, Constellation's largest beer market.
Initially, the brewery will be built to provide 10 million
hectoliters of production capacity with the ability to scale to 20
million hectoliters in the future. The first 5 million hectoliters
is scheduled to be completed by calendar year-end 2019.
"We are investing in infrastructure that will
provide long-term flexibility and capacity needed to support the
expected future growth of our high-end Mexican beer portfolio,"
said Rob Sands, president and chief executive officer,
Constellation Brands. "Our Mexican beer business continues to
significantly outperform the U.S. beer market and is exceeding our
sales volume and depletion expectations, driven by strong consumer
demand. We anticipate these capacity investments will equip us with
the production necessary to continue to be a leader in the high-end
segment of the U.S. beer market, which has consistently grown in
the mid to high single digit range and is expected to continue to
grow at these levels into the foreseeable future. We are absolutely
committed to satisfying growing consumer demand for our iconic
brands, including Corona, Modelo, Pacifico and Victoria, by
increasing supply for the U.S. market, and we are pleased to be in
a position to continue investing in Mexico and enhancing our
operational platform."
The Mexicali location is ideal given its close
proximity to California, providing a new avenue to better service
the western U.S., a fast-growing region for Constellation. The
facility will boast similar technological and operational
advancements as the company's brewery in Nava, Mexico, designed to
ensure consistency in brewing and production processes and the
highest level of product quality between the two facilities.
In addition to the company's plans to build the
Mexicali brewery, the company has plans to further expand the Nava
brewery with a 2.5 million hectoliter capacity expansion that will
bring production capacity from 25 to 27.5 million hectoliters when
completed. The estimated cost of this project is expected to
approximate $250 million and to be completed by early calendar year
2018. As previously discussed, the company is currently in the
process of expanding the Nava brewery from 10 million to 20 million
hectoliters by June of calendar 2016 and from 20 to 25 million
hectoliters by summer of calendar 2017.
While Constellation remains on track with all
expansion activity, the company has worked with ABI to extend the
Interim Supply Agreement currently in place in order to support the
robust growth levels of the beer business and continue a smooth
transition as incremental capacity ramps up. This agreement is
expected to continue through June 2017. During this time, the
company will utilize ABI to supply a select number of products that
are expected to represent approximately 15% to 20% of the company's
requirements for the U.S. marketplace.
"These investments are expected to generate very
high returns, as our beer business has a strong, best-in-class
margin profile and a high operating ROIC," said David Klein,
executive vice president and chief financial officer, Constellation
Brands. "Even with the capital expenditures associated with these
initiatives, our strong projected earnings and operating cash flow
growth allow us to remain focused on operating below our targeted
4x leverage range and continue to provide us with significant
capital allocation flexibility."
Given these collective investments, the company is
targeting the following:
Beer Expansion Capital
Expenditures (1) |
FY 2014 |
FY 2015 |
FY 2016 |
FY 2017
-
2018 |
FY 2019 -
2021 |
Total |
(in millions) |
|
|
|
|
|
|
Nava Projects |
|
|
|
|
|
|
Nava Brewery Expansion |
|
|
|
|
|
|
from
10M to 25M HL capacity |
$125 |
$550 |
$450 |
$525 |
|
$1,650 |
from
25M to 27.5M HL capacity |
|
|
$25 |
$200 |
$25 |
$250 |
Glass Plant - Warehouse and Rail (Investments outside of the Glass
JV) |
|
$25 |
$50 |
$125 |
|
$200 |
Glass Plant JV With Owens-Illinois (2)
(Furnace expansion) |
|
$25 |
$125 |
$250 |
|
$400 |
Total
Nava Capital Expenditures |
$125 |
$600 |
$650 |
$1,100 |
$25 |
$2,500 |
|
|
|
|
|
|
|
Mexicali Brewery Build
(Includes 10M HL capacity and
land, water rights, infrastructure
and other site requirements to
accommodate scalability to
20M HL capacity) |
|
|
$150 |
$1,100 |
$750 |
$2,000 |
(1) Some
rounding for presentation purposes.
(2) The
company has received or expects to receive 50% contribution from
Owens-Illinois for these amounts.
Conference Call
The Company's Mexicali and Nava brewery projects and related
outlook will be discussed in a conference call hosted by President
and Chief Executive Officer Rob Sands and Executive Vice President
and Chief Financial Officer David Klein on Thursday, Jan. 7,
2016 at 10:30 a.m. (eastern). The conference call can be accessed
by dialing +973-935-8505 beginning 10 minutes prior to the start of
the call. A live listen-only webcast of the conference call,
together with a copy of this news release (including the
attachments), and other financial information that may be discussed
during the call will be available on the Internet at the company's
website: www.cbrands.com under "Investors," prior to the call.
About Constellation
Brands
Constellation Brands (NYSE: STZ and STZ.B) is a leading
international producer and marketer of beer, wine and spirits with
operations in the U.S., Canada, Mexico, New Zealand and Italy. In
2015, Constellation was one of the top performing stocks in the
S&P 500 Consumer Staples Index. Constellation is the number
three beer company in the U.S. with high-end, iconic imported
brands including Corona Extra, Corona Light, Modelo Especial, Negra
Modelo and Pacifico. Constellation is also the world's leader in
premium wine, selling great brands that people love including
Robert Mondavi, Clos du Bois, Kim Crawford, Meiomi, Mark West,
Franciscan Estate, Ruffino and Jackson-Triggs. The company's
premium spirits brands include SVEDKA Vodka and Black Velvet
Canadian Whisky.
Based in Victor, N.Y., the company believes that
industry leadership involves a commitment to brand-building, our
trade partners, the environment, our investors and to consumers
around the world who choose our products when celebrating big
moments or enjoying quiet ones. Founded in 1945, Constellation has
grown to become a significant player in the beverage alcohol
industry with more than 100 brands in its portfolio, sales in
approximately 100 countries, about 40 facilities and over 8,300
talented employees. We express our company vision: to elevate life with every glass raised. To learn more,
visit www.cbrands.com.
Forward-Looking
Statements
This news release contains forward-looking statements. All
statements other than statements of historical fact are
forward-looking statements. The word "expect" and similar
expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain such
identifying words. These statements may relate to business
strategy, future operations, prospects, plans and objectives of
management, as well as information concerning expected actions of
third parties. All forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially
from those set forth in, or implied by, such forward-looking
statements.
During the current quarter, Constellation Brands
may reiterate the forward-looking statements. Prior to the start of
the company's quiet period, which will begin at the close of
business on Feb. 29, 2016, the public can continue to rely on the
forward-looking statements as still being Constellation Brands'
current expectations on the matters covered, unless the company
publishes a notice stating otherwise. During Constellation Brands'
"quiet period," the forward-looking statements should not be
considered to constitute the company's expectations and should be
considered historical, speaking as of prior to the quiet period
only and not subject to update by the company.
The forward-looking statements are based on
management's current expectations and should not be construed in
any manner as a guarantee that such results will in fact occur or
will occur on the timetables contemplated hereby.
In addition to the risks and uncertainties of
ordinary business operations, the forward-looking statements of
Constellation Brands contained in this news release are subject to
a number of risks and uncertainties, including receipt of all
required permits and regulatory approvals by the expected dates and
on the expected terms; completion of the glass plant expansions,
Nava brewery expansions and Mexicali brewery construction by the
expected completion dates and on the expected terms and costs; the
accuracy of all projections, including sales trends, glass supply
sources, and estimates of capital expenditure investments; ability
to achieve targeted volume growth, operating margin, free cash flow
generation, and debt leverage ratio may all vary due to different
financial results from those anticipated and the timeframe in which
achieved will depend on actual financial performance; and other
factors and uncertainties disclosed from time-to-time in
Constellation Brands, Inc.'s filings with the Securities and
Exchange Commission, including its Annual Report on Form 10-K for
the fiscal year ended February 28, 2015, which could cause future
performance to differ from current expectations.
CONTACTS
Media
Cheryl Gossin: 585-678-7191
Amy Martin: 585-678-7141
Investor Relations
Patty Yahn-Urlaub: 585-678-7483
Bob Czudak: 585-678-7170
2_Color_Horiz_1_Line(R)
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Constellation Brands Inc via Globenewswire
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