Brown Forman Corporation (BFA) has reported an 1.50 percent fall in profit for the quarter ended Oct. 31, 2016. The company has earned $197 million, or $0.50 a share in the quarter, compared with $200 million, or $0.49 a share for the same period last year.
Revenue during the quarter went down marginally by 2.81 percent to $830 million from $854 million in the previous year period. Gross margin for the quarter contracted 211 basis points over the previous year period to 66.51 percent. Total expenses were 64.94 percent of quarterly revenues, up from 64.64 percent for the same period last year. That has resulted in a contraction of 30 basis points in operating margin to 35.06 percent.
Operating income for the quarter was $291 million, compared with $302 million in the previous year period.
Paul Varga, the company's chief executive officer said, "As anticipated, our reported earnings were impacted noticeably in the first half by the absence of the brands we sold in late fiscal year 2016, as well as by adverse foreign exchange. Underlying growth in net sales and operating income was solid considering the strength of last year's first half."
For fiscal year 2017, Brown Forman Corporation projects revenue to grow in the range of 4 percent to 5 percent for the financial year 2017. The company projects operating income to grow in the range of 6 percent to 8 percent. The company forecasts diluted earnings per share to be in the range of $1.71 to $1.81.
Operating cash flow improves marginally
Brown Forman Corporation has generated cash of $169 million from operating activities during the first half, up 4.97 percent or $8 million, when compared with the last year period.
The company has spent $344 million cash to meet investing activities during the first six months as against cash outgo of $66 million in the last year period.
Cash flow from financing activities was $137 million for the first six months as against cash outgo of $264 million in the last year period.
Cash and cash equivalents stood at $211 million as on Oct. 31, 2016, up 8.21 percent or $16 million from $195 million on Oct. 31, 2015.
Working capital increases sharply
Brown Forman Corporation has recorded an increase in the working capital over the last year. It stood at $1,626 million as at Oct. 31, 2016, up 33.50 percent or $408 million from $1,218 million on Oct. 31, 2015. Current ratio was at 2.80 as on Oct. 31, 2016, up from 2.08 on Oct. 31, 2015.
Days sales outstanding went down to 65 days for the quarter compared with 66 days for the same period last year.
Days inventory outstanding has decreased to 213 days for the quarter compared with 361 days for the previous year period.
Debt increases substantially
Brown Forman Corporation has witnessed an increase in total debt over the last one year. It stood at $2,254 million as on Oct. 31, 2016, up 26.49 percent or $472 million from $1,782 million on Oct. 31, 2015. Total debt was 47.75 percent of total assets as on Oct. 31, 2016, compared with 41.26 percent on Oct. 31, 2015. Debt to equity ratio was at 1.76 as on Oct. 31, 2016, up from 1.27 as on Oct. 31, 2015. Interest coverage ratio deteriorated to 19.40 for the quarter from 25.17 for the same period last year.
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