Fortune Brands (FO) is spinning off business units and spinning up revenue. The maker of Jim Beam, FootJoy, Titleist, Moen, Master Lock, and other varied brands is restructuring to split up into separate business units, one for alcoholic beverages, one for home products, and another just for golf products. During the first quarter of 2011, sales at all three units of Fortune Brands were up, pushing overall net sales up 8 percent to $1.76 billion and beating some estimates.
Diluted earnings per share were 52 cents and diluted earnings per share before charges or gains reached 59 cents, up 20 percent from 49 cents in the year-ago quarter.
The startup of a new spirits distribution agreement in Australia as well as higher volumes and favorable foreign exchange-rate conditions across the businesses helped results. Higher commodity costs, divestitures, and increased investments in brand creation offset those positives.
"Fortune Brands continued to deliver strong growth in sales and earnings as each of our three businesses outperformed their respective markets in the quarter," says company chairman and CEO Bruce Carbonari. "Our businesses are pursuing strategies designed to outperform their markets, and they're executing at a high level. As a result, we're on track to deliver another year of strong earnings growth in 2011."
Fortune Brands expects growth for each business unit to hover around "a low-single-digit rate," although the fallout from the Japanese earthquake and tsunamis as well as from other events will show up in the company's upcoming earnings reports.
"We expect second quarter results will also be impacted by approximately 5 cents due to the natural disaster in Japan and the sale of (golf brand) Cobra in 2010," Carbonari says.
Ratings agencies, meanwhile, applaud the company's recent business decisions.
Fortune Brands recently announced plans to sell its Acushnet Company golf business for $1.23 billion. The sale, to Fila Korea, should produce net proceeds of approximately $1.1 billion after tax and expenses, and will likely close in the summer, according to ratings agency Moody's, which has a Baa3 rating for the company. The sale should make it easier for Fortune Brands to financially manage its remaining business units.
"We believe that there is upward potential for the rating assuming that the survivor company has a more modest leverage profile than the current company," says Linda Montag, Moody's Senior Vice President, in a statement.
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