Australian Vintage has reported a 5% drop in net sales, a fall in operating profit (EBIT) by 15% to AUD22.6m and a 27% reduction in net profit to AUD6.6m. The company’s net sales were undoubtedly hindered by exchange rate-related issues, responsible for taking AUD14.4m from net sales and AUD9.98 million from EBIT. Of the company’s net sales of AUD225m, branded wine exports represented AUD77.4m (an increase of 4%) and domestic sales of branded wine increased by 5% to AUD42.2m, leaving AUD105.4m of non-branded sales as private label and bulk sales. Australian Vintage will shortly join companies like Jacob’s Creek, who have already commenced bottling wines destined for export to the UK on arrival. While this is clearly one means to hedge against the currently rampant Australian dollar, it also reduces transport costs and leaves a smaller environmental footprint. European wine markets are significantly more aware than the Australian market over environmental concerns over the wines they drink, and can be expected to respond favourably towards bottling closer to market. As part of its restructuring program, Australian Vintage recently sold its 90,000 tonne Loxton winery to TWG Australia II, the Australian subsidiary of Californian-based The Wine Group for AUD27m. According to the company, a AUD3m charge on the sale of this winery prevented its profits from increasing during the year. Group CEO Neil McGuigan says the deal is ‘the most important step in executing our strategy to be the lowest cost premium wine producer.’ Proceeds from this sale, along with that from the sale of the Lenswood Winery (formerly Nepenthe), Griffith Winery and Hunter Ridge Winery, will be used to pay down debt. The company has signed a three-year storage deal with The Wine Group at Loxton and will lease the Austflavour area of winery until next January. While selling the Austflavour assets, it has retained its business and staff.
