Inflation, high rates challenge Corby’s outlook

 Corby Spirit and Wine Ltd.  (TSX: CSW.A, CSW.B) has been a Canadian distiller for 160 years. Since 2005 it has been majority owned by Paris-based Pernod Ricard SA, the second largest global wine and spirits company.  

Corby has about a 21% per cent share of Canada’s spirits markets with its flagship J.P. Wiser’s Canadian whiskey providing 80 per cent of its revenue. Other brands include Lamb’s rum, Polar Ice vodka and McGuinness liqueurs.

The remaining 20% of revenues come from Pernod Ricard’s international brands which Corby represents here. They include: Absolut vodka, Chivas Regal, Glenlivet and Ballantine’s Scotch whiskeys, Jameson Irish whiskey, Beefeater gin,  Kahlúa liqueur, Mumm Champagne, and Jacob’s Creek and Viejo wines.

Corby’s shares are down 21% year-to-date and 25% in the last 52 weeks at the recent price of $12.90.

Corby’s fourth quarter revenue was up 7% and for the full year rose 2%. Adjusted net earnings in the quarter fell 6% and were down 1% for the year. The company attributed the decline to the rising costs of inputs and increases in the cost of shipping and packaging.

Rising interest rates have made dividend paying stocks relatively less attractive than fixed income investments. Corby falls into that category, but it is benefiting from growing demand for hard spirits, including flavoured gins, bourbons and whiskeys. It is also able to pass along inflationary costs because the purchases are made less often than beer and wine and so are less noticeable. Demand is fairly stable. Corby does not have any long-term debt, so rising rates have had less of an impact on its operations.

Corby’s $0.21 quarterly dividend, or $0.84 annually, yields a high 6.5% at current prices, but appears safe. Its dividend policy is to pay either 90 per cent of trailing 12-month net income, or 60 cents a share annually, whichever is larger.

This article appeared in the Internet Wealth Builder on Oct. 16, 2023.  For information on how to reprint this article please view this page.