Tariffs on Mexican imports could leave a bad hangover for Constellation

Becle SAB de CV

31/05/2019 13:40

(Updates)
    ** Corona beer maker Constellation Brands  STZ.N  down 6.1%
at $175.88 in premarket trading, after Washington says it will
impose a 5% tariff, rapidly ratcheting higher, on all goods
coming from Mexico unless the flow of illegal immigrants across
the southern U.S. border was stanched
    ** J.P. Morgan analysts point to potential trouble for U.S.
brewers and distillers with exposure to a Mexican portfolio from
latest Trump move on tariffs, likely to hit Constellation's
Mexican import portfolio and Jack Daniels-maker Brown-Forman's
 BFb.N  tequila brands  
    ** JPM says ~73% of Constellation revenue comes from Mexican
imports
    ** Bernstein analysts estimate that the impact of a 5%
tariff would reduce STZ's imported Mexican beer profits by 7% 
    ** "It is plausible that STZ could increase shipments across
the U.S. border over the next 10 days and ahead of subsequent
increases in order to lessen the impact" - JPM
    ** STZ set for its second worst day this year and likely to
open at over a two-month low
    ** Mexican tequila producers, including Jose Cuervo
 CUERVO.MX , also likely to see disruption - JPM 

IMPACT FELT AT EUROPEAN BREWERS AS WELL    
    ** Dutch brewer Heineken  HEIN.AS  has a substantial import
business of Mexican beer in to the United States with Dos Equis
and Tecate (Light), Bernstein analysts say 
    ** "We estimate that a 5% tariff (if fully absorbed by
Heineken), would reduce the profitability of this business by
about 17%" - Bernstein
    ** Brokerage says tariffs could damage Mexico's economy,
lower demand for beer and hurt profits for Heineken and Anheuser
Busch Inbev  ABI.BR   

 (Reporting by Karina Dsouza and Uday Sampath in Bengaluru)
 ((Karina.Dsouza@thomsonreuters.com))