A surplus of wine grapes in New Zealand has caused New Zealand Wine Company to report a 37% slide in full-year profits, despite a rise in sales.

Net earnings for the 12 months to the end of June fell to NZ$1.3m (US$892,000), down from $2m a year earlier, New Zealand Wine Co (NZWC) said today (28 August). Net sales rose by 4% to NZ$12.3m.

"Wine sales revenue, margins and net earnings for the past 12 months were squeezed as significant volumes of surplus bulk wine were cleared by the New Zealand wine industry," said group chairman Alton Jamieson.

"NZWC took the tough decisions to sell its surplus 2008 bulk wine stocks at low or loss-making margins to enhance cashflow and reduce its wine stock to manageable levels," he said.

Wine industry leaders in New Zealand have warned this year that the country's greatest challenge is to maintain a quality over quantity approach in the face of a grape surplus.

NZWC declined to issue specific guidance for fiscal 2010, but said it expects to improve underlying net earnings in 2010 to "around 2008 levels" by targeting bottled wine sales, which command a higher price than bulk wine shipments.

"A disciplined approach will be maintained by NZWC in 2010 to limit its harvest yields for a further year, while the New Zealand wine industry works through what may well be its most challenging period ever," said Jamieson.