Constellation Brands, Inc. — FY2024 Form 10-K
Business context and reporting period. Constellation produces and markets beer, wine, and spirits, principally in the U.S. This annual report covers the fiscal year ended February 29, 2024; the filing also reports selected fourth-quarter results. Its operating segments are Beer, Wine and Spirits, and Corporate Operations and Other.
Financial performance and liquidity
| Metric | FY2024 | FY2023 |
|---|---|---|
| Net sales | $9.962 billion | $9.453 billion |
| Gross profit / gross margin | $5.018 billion / 50.4% | $4.769 billion / 50.5% |
| Operating income | $3.170 billion | $2.843 billion |
| Net income (loss) attributable to CBI | $1.727 billion | $(71) million |
| Diluted EPS attributable to CBI | $9.39 | $(0.11) |
| Cash from operating activities | $2.780 billion | $2.757 billion |
| Capital expenditures | $1.269 billion | $1.035 billion |
Operating cash flow less capital expenditures was approximately $1.511 billion in FY2024, calculated from reported figures. Cash and cash equivalents were $152 million at year-end. Total debt was approximately $11.879 billion, down $582 million year over year; the company reported covenant compliance. Available revolving-credit capacity was $1.997 billion at year-end. Interest expense increased 9% to $435 million.
Material changes versus the prior year
- Beer net sales rose 9% to $8.163 billion. Shipments increased 7.4%, and favorable pricing contributed $148 million. Beer segment operating income grew 8% to $3.094 billion.
- Wine and Spirits net sales declined 9% to $1.799 billion; branded shipments fell 12.2%. Segment operating income declined 12% to $399 million. Management attributed the weakness mainly to lower volume, including softness in U.S. wholesale wine markets.
- Consolidated operating income increased 11%. Net income swung to a profit from a loss, principally reflecting substantially lower losses and impairments related to Canopy than in FY2023, as well as stronger Beer results. FY2024 still included $512 million of losses from unconsolidated investments.
- Fourth-quarter net sales were $2.139 billion versus $1.998 billion; net income attributable to CBI was $392 million versus $223 million.
Outlook, commentary, risks, and unusual items
- Management expects approximately $3 billion of Mexico brewery expansion, optimization, and construction spending over FY2025–FY2028. Planned FY2025 capital expenditures are $1.4–$1.5 billion, including about $1.2 billion for Beer projects. Mexico capacity was approximately 48 million hectoliters at year-end; management expects about 65 million by FY2028.
- Management expects FY2025 reported effective tax rate of 17.5%–19.5%, excluding tax impacts associated with Canopy. The supplied filing text does not state a clear FY2025 revenue or EPS forecast.
- Management expects unfavorable U.S. wholesale wine-market trends to continue in FY2025, while citing planned actions to improve marketing execution and sales. It expects some inflationary, consumer-spending, supply-chain, and geopolitical pressures to continue.
- Unusual FY2024 items included $56.3 million of insurance recoveries related to a past Nava Brewery weather outage; $136.1 million of equity-method investment impairments, including a $123.5 million Canopy impairment; and a $21.6 million write-off of a Beer-segment value-added-tax receivable. Canopy-related losses remain material despite being far below FY2023.
- In April 2024, after year-end, CBI converted 17.1 million Canopy common shares and exchanged its promissory note for a total of 26.3 million non-voting Exchangeable Shares. CBI said it expected to recognize a gain based on their fair value; the amount is not stated here.
- Key risks include reliance on Mexican beer production and major distributors, water and agricultural supply, packaging availability and supplier concentration, planned brewery-project execution and cost overruns, consumer and wine-market trends, leverage and interest rates, and potential goodwill impairment. Wine and Spirits goodwill had approximately 11% fair-value headroom in the annual test.
- The company reported that the Second Circuit affirmed the favorable judgment in the Modelo trademark case on March 25, 2024. Other legal and regulatory matters remain, but management did not expect pending matters to have a material adverse effect; outcomes are uncertain.
- CBI declared a quarterly dividend of $1.01 per Class A share and $0.91 per Class 1 share in April 2024 and expects to return approximately $740 million through FY2025 dividends. FY2024 repurchases totaled $250 million.
Most important facts for investors to verify
- Whether Beer shipment and depletions growth continues, and whether planned capacity additions remain aligned with demand and project budgets.
- Whether Wine and Spirits volumes and margins stabilize, particularly in U.S. wholesale channels and major brands.
- How much of reported earnings and future results is affected by Canopy valuation, the post-year-end share exchange, and other investment losses.
- Cash generation after the elevated capital program, debt maturities and interest costs, and the company’s ability to sustain dividends and repurchases.
- Progress on Mexico brewery construction, water availability, and glass and other packaging supply; confirm the remaining Mexicali asset recovery and potential write-down exposure.
- Potential movement in Wine and Spirits goodwill headroom, tax contingencies, and the concentration of sales among major distributors.