Canadian winery expands with Wayne Gretzy, China and Dubai

ANDREW PELLER LTD. (Toronto symbol ADW.A; www.andrewpeller.com) is Canada’s second-largest wine producer, after Vincor Canada. Peller operates wineries in B.C., Ontario and Nova Scotia. It also imports wines and sells home-winemaking kits. In its 2012 fiscal year, which ended March 31, 2012, Peller’s sales rose 4.3%, to $276.9 million from $265.4 million in fiscal 2011. That’s because the company continues to launch new wines, particularly higher-priced premium wines. Its sales also benefited from a new joint venture with Wayne Gretzky Estate Winery and a recently purchased home-winemaking business. These gains helped offset new taxes on certain wines sold through company-owned stores in Ontario. These taxes lowered sales by $2.4 million in fiscal 2012, and by $2.0 million in fiscal 2011. [ofie_ad]

Canadian investing: Peller signs new deals to distribute wine in China, Dubai

The company earned $13.0 million, or $0.93 a share, in fiscal 2012. That’s up 15.8% from $11.2 million, or $0.78 a share, in fiscal 2011. If you exclude gains in the prior year on hedging contracts that Peller uses to lock in foreign exchange rates, earnings rose 16.9%. The company’s gross margin (gross profits as a percentage of sales) fell slightly, to 38.7% in fiscal 2012 from 38.9% in fiscal 2011. That’s largely because it paid more for the wines that it imported. The company recently signed a new deal to distribute its premium wines in China. It has also agreed to supply wine to the Burj Al Arab Hotel in Dubai. Peller’s earnings could reach $1.00 a share in fiscal 2013. The stock trades at 9.9 times that estimate. The $0.36 dividend yields 3.6%. In the latest edition of The Successful Investor, we look at whether international expansion will cut the company’s risk and whether its high dividend yield is sustainable. We conclude with our clear buy-sell-hold advice on the stock. (Note: If you are a current subscriber to the The Successful Investor, please click here to view Pat’s recommendation. Be sure to log in first.) COMMENTS PLEASE: Based on the social habits you see around you, if you were to invest in one alcoholic beverage maker, would it be beer or wine? Would you have given the same answer 20 years ago? Let us know what you think in the comments section below. Click here.

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