• Cost savings sees firm return to profits
  • Sales fall on bulk wine exit and pricing pressure
  • Signs of improvement in Australian wine industry
Australian Vintage warns on pricing pressure

Australian Vintage warns on pricing pressure

Australian Vintage has climbed out of the red for its fiscal full-year, but wine sales continued to struggle amid unfavourable currency rates and pricing pressure in key markets.

Australian Vintage said today (12 August) that net profits for the year to the end of June reached AUD9.1m (US$8.1m). The result marks a return to the black for the McGuigan wine producer after impairment charges dragged it to losses of AUD123.6m in the previous year.
The news will bring some cheer to Australia's wine sector, which has faced a torrid couple of years of overproduction, falling export demand and volatile currency rates.

The firm said that it had seen signs of a better balanc e in supply and demand of Australian wines, despite reporting company net sales down by 18% for the 12 months, to AUD237.7m.

Exports of branded wine, driven largely by the McGuigan range, rose by 9% in value for the year to AUD72.6m. Private label exports also rose by 22% to AUD24.4m.

However, the company warned that pricing pressure in several key markets was "unsustainable". Branded wine exports increased by 22% in volume for the year, more than twice as fast as the rate of value growth.

"The market will continue to be volatile as believe there is still excess stock from previous vintages that is yet to wash through the market," said Australian Vintage chairman, Ian Ferrier. "Furthermore, the economic conditions in the UK, in particular, and in the US could impact future margins and sales."

Ferrier added that the company will not pay a dividend for the full-year, in order to conserve cash.

Group CEO Neil McGuigan said that Australian Vintage was "successfully facing up to a wine industry still undergoing serious structural change".

He said that the firm expects more volume sales growth in the UK and US, with profits also expected to rise in the coming year. But, he added that "with pricing power concentrated in a consolidating retail market, [a] world leading cost base is critical".