MEXICO CITY (Reuters) - Higher agave prices weighed on fourth quarter profits at Mexico’s Jose Cuervo which slumped 48.5 percent year-on-year even though the world’s biggest tequila maker reported a 52.4 percent spike in revenues on Tuesday.
The company, officially known as Becle SA de CV (CUERVO.MX), posted a quarterly profit of 629.1 million pesos ($30.5 million), compared with 1.221 billion in the fourth quarter of 2015.
Cuervo said the cost of sales rose 84 percent year-on-year, due to increases in the price of agave from third parties and accounting effects related to inventories. Agave is the key ingredient in making tequila.
However, the company posted revenues of 7.38 billion pesos in the fourth quarter, a 52.4 percent increase over the 4.84 billion pesos it raked in during the last quarter of 2015.
Cuervo, controlled by the Beckmann family, boasts some 30 percent of the global tequila market, with over 60 percent of its sales in the United States and Canada.
It raised 18.6 billion Mexican pesos ($933.64 million) in its initial public offering this month, the company said, after putting the IPO on hold twice last year as U.S. President Donald Trump’s march to the White House gathered strength, sending the peso to record lows.
Trump has threatened to slap a hefty tax on products Mexico sends to the United States to pay for a border wall, as well as tear up a joint trade deal with Mexico.
Started by Jose Antonio de Cuervo in 1758 before Mexican independence from Spain, Cuervo says it is North America’s oldest continuous producer of spirits.
Reporting By Alexandra Alper and Veronica Gomez; Editing by Marguerita Choy