The troubles of Australian winemaker Evans & Tate are increasing, with news today (16 August) that the company now expects to make write-downs of not less than A$16.5m for the 2004/05 financial year.

On 28 June, Evans & Tate announced that it expected write-downs in the carrying value of its wine inventory in the order of A$8m to A$10m, subject to the final outcome of an independent wine valuation.

A statement from E&T, however, said that since the initial announcement, the board and independent valuer had recognised a deterioration in spot prices for some wine categories due to an oversupply of bulk wine.

"The preliminary valuation has indicated that on the current inventory costing, writedowns of not less than A$16.5m are required for the year ended 30 June 2005," the statement said.

In addition, the company is also considering the appropriateness of its current accounting policy regarding capitalisation of some overhead costs into inventory and the apportionment of inventory between allocated and unallocated inventory.

The company said that the total level of inventory write-down for the year will be finalised once the company's internal review is concluded.

On 28 June, E&T said that it expected to make a write-down of A$4.3m in goodwill related to Oakridge Vineyards.

However, today the company said that, in conjunction with consultants 333 Performance Management, it was currently finalising a review of the carrying value of its intangible assets and any provisions that may be required for the year to 30 June.

"The results of those reviews are incomplete, however 333 Performance Management has advised the board today that further write-downs in intangible assets and likely provisions will be required for the year ended 30 June 2005," the statement said.

As a consequence, the board of Evans & Tate has resolved that the company will not be in a position to declare and pay a final dividend to its preference shareholders and its ordinary shareholders, the company said.

Lead director John Hopkins said: "Based on the latest advice, the board has today decided that the company will not have retained earnings from which to pay a final dividend to preference or ordinary shareholders."

Evans & Tate said it had informed its bank, ANZ, of the latest position and that the bank has indicated it understands the reasons for the additional write-downs and is fully supportive of the company.

"Given the recently announced A$10m short-term working capital facility, the company has sufficient working capital to implement its planned debt and inventory reduction programmes," said Hopkins.

Evans & Tate expects to announce its full year results on 13 September.