AUSTRALIA: E&T to record loss after write-down
Evans & Tate Ltd is to accelerate the reduction of its unallocated wine inventory in a move that will result in a one-off writedown in the value of its inventory. The company said it expected the writedown to be in the order of A$8m to A$10m, approximately 7-9% of total inventory levels.
As a consequence, the Western Australian winemaker will post its first net loss since listing on the Australian Stock Exchange.
In a statement to shareholders today (28 June), E&T said that it had also considered the carrying value of its Yarra Valley subsidiary Oakridge Vineyards. The board said it believes it is likely that a writedown of the A$4.3m goodwill relating to Oakridge will be required in the current financial year.
E&T said that the company's revenues and EBITDA earnings are expected to increase for the year ending tomorrow (30 June). However, as a result of the writedowns, the company expects to report a net loss of between A$4.8m and A$7.5m for the year.
The company said, however, that the loss will not restrict its ability to pay a final dividend.
Chairman Franklin Tate said: "These strategies are expected to reduce inventories with the aim of moving the company into positive cashflow during the 2006 financial year.
"As part of our planning process and in conjunction with ANZ, 333 Performance Management, a consulting firm associated with Korda Mentha, was appointed to assist us in forecasting, planning and business efficiency issues."
He continued: "ANZ Bank is currently awaiting a 333 Performance Management review of the company's 2006 financial year budgets, with a view to providing short term-working capital of approximately A$8.5m in July 2005 and, in the meantime, has agreed to defer an upcoming interest payment of A$2.5m on the company's existing facility."
Tate concluded: The company is confident that this short-term working capital will be made available. The board is confident that the company' inventory reduction strategy will be successful and will secure the company's long-term prospects."
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