Bloomberg News

Baron de Ley to Miss Sales Goal on Wine Consumption Weakness

October 04, 2011

(Updates with closing share price in fourth paragraph.)

Oct. 4 (Bloomberg) -- Baron de Ley SA, the maker of Spain’s best-selling Rioja wine, will miss its full-year revenue target as the country’s economic crisis forces Spanish consumers to drink less and purchase cheaper vintages.

Sales this year will decline 4 percent to 4.5 percent from 2010, compared with a previous forecast of unchanged revenue, Eduardo Santos-Ruiz Diaz, chairman and chief executive officer of the Navarre, Spain-based company, said by telephone today.

“This is a very difficult year for the domestic market,” Santos-Ruiz, 66, said in an interview. “The expectations remain bad. Christmas is expected to be sad as companies won’t give gifts away. We forecast the last quarter to be a tough one.”

The company’s shares sank 5.1 percent to 40.80 euros at the 5:30 p.m. close in Madrid, after gaining as much as 2.1 percent earlier in the day. The stock has dropped 9.3 percent this year, valuing the company at 210.4 million euros ($279.2 million).

The winemaker, whose 2010 revenue rose 2.2 percent to 85.9 million euros, expects domestic sales this year to fall about 13 percent, the CEO said. Spanish consumption is declining as the country suffers from the euro zone’s highest unemployment rate of 21 percent. Baron de Ley plans to compensate with an increase in exports, especially to the U.K., Germany and the Nordic countries, of about 8 percent.

Falling prices for grapes are boosting margins, Santos-Ruiz said. The company may post growth of about 2 percent in both earnings before interest, taxes, depreciation and amortization and net income compared with 2010, he said. Net income in 2010 increased 14 percent to 17.6 million euros.

The outlook for next year is challenging and the situation may only start to change in two years, the CEO said.

“2012 will be similar to this year and hopefully when we reach the bottom,” Santos-Ruiz said from his office in Madrid. “Growth won’t come in 2012, but in 2013.”

--Editors: Paul Jarvis, Celeste Perri.

To contact the reporter on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net;

To contact the editors responsible for this story: Angela Cullen at acullen8@bloomberg.net


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