McGuigan Simeon has today (27 February) announced the acquisition of Australian wine producer Nepenthe Group as it turns to premium labels to revive flagging earnings.

The announcement came as McGuigan Simeon blamed "bitter competition" in the Australian wine industry for plunging first-half profits.

The company saw operating profit slump by 62% year-on-year to A$4.9m (US$3.9m) for the six months to 31 December. Moreover, the company admitted there are "operational and market risks" that could hit its outlook.

"The purchase of Nepenthe fills an important gap in our product range at a price point where we have been traditionally weak," said McGuigan Simeon chairman David Clarke.

CEO Dane Hudson added: "The purchase will strengthen our brand offering in the key premium category range."

The A$25m acquisition of the Adelaide Hills-based producer could be a vital acquisition for McGuigan Simeon, which has seen its first-half revenues hit by lower margins.

In spite of rising volumes in Australia, sales fell 3% to A$156.6m due to a shift to wines with lower margins.

Exports to the UK and Europe were up 2% while sales in North America rose 8%. Clarke said: "The strategy we have in place is positioning us well for the new reality of the wine industry. We have focused on exports, particularly to the UK, US and Asia and on building our branded portfolio."

However, Clarke cautioned that there may be clouds on the horizon over the next 12 months. He said: "This year's vintage will challenge McGuigan Simeon with higher costs and margin pressure into next year. Unless there is good rain, 2008 will be difficult for everyone in the industry."