McGuigan Simeon has warned that the "rapid weakening" in the Australian wine market in recent months could hit the company's earnings in 2007 after it posted annual losses of over A$10m.

The company today (23 August) reported a net loss of A$11.55m (US$8.8m) after writing off almost A$30m in stocks amid a glut of Australian wine. Almost a billion litres of wine is believed to built up in the Australian market after three years of record vintages.

Before the writedowns, net profit was A$17.5m, a fall of 54%. Revenues were flat, down 1% to A$360.8m as the oversupply drove down prices.

Chairman David Clarke said prices had moved "further downward in the past six weeks" and warned that supply and demand throughout the industry would not balance until 2009.

He said: "In the 2007 financial year, we are targeting net profit to be similar to the 2006 year, before significant items. But, we are very cautious given the rapid weakening in market conditions that has occurred in the past four to six months."

However, Clarke insisted the company was in "sound financial shape" after seeing export volumes rise 21% on the back of growing shipments to the UK.

He said: "There are some significant opportunities opening up for companies like McGuigan that are low-cost producers by international standards."

Exports to the US slumped 50% while sales to the whole of Europe and Asia were down due to reduced bulk wine shipments, the company said.