Constellation Brands benefits from currency gains

Constellation Brands says it'll realize $50M in foreign currency hedge gains

NEW YORK (Associated Press) - Wine and spirits maker Constellation Brands Inc. said on Tuesday it expects to realize about $50 million in after-tax cash proceeds from the settlement of foreign currency hedge transactions.

The company, known for brands like Corona, Clos du Bois and Woodbridge by Robert Mondavi, said it would boost cash inflow now that it has closed out certain foreign currency hedges to take advantage of the strengthening U.S. dollar.

It said in a statement after the market closed it plans to use the net proceeds to reduce borrowings.

Constellation raised its free cash flow guidance and lowered its earnings per share guidance due to a charge of 20 cents a share because the company will pay taxes on hedge gains.

Constellation increased its fiscal 2009 free cash flow guidance from to a range of $360 million to $390 million, from $310 million to $340 million.

It expects its reported earnings per share in fiscal 2009 will range from 63 cents to 71 cents, when it includes the 20-cent a share charge. But the company left intact its earnings per share estimate on a comparable basis, excluding the one-time charge, saying earnings per share for the year will range from $1.68 to $1.76.

Analysts are predicting the company earns $1.69 a share in fiscal 2009, according to Thomson Reuters. They typically exclude certain items from their estimates.

Constellation Brands Chief Financial Officer Bob Ryder said the company has been reducing its foreign exchange exposure by adjusting the amount of corporate parent loans to its operating companies around the world. He said the company accelerated that effort due to the rising strength of the U.S. dollar.

In after-hours trading, when the proceeds from the hedges were announced, shares of Constellation Brands gained 19 cents to $12.36 after rising 37 cents, or 3.1 percent, in the regular session to $12.17.