Rioja wine bottler, Compañia Vinícola de España has announced first half profits of € 2.96m (US$2.58m), down 8.9% on the corresponding six months of last year.

Sales were marginally up by 1.6% at € 14.27m as against € 14.05m the previous year.

The company stated that the fall in profits was in line with expectations as selling prices fell in the first few months of the year following a stronger harvest in the autumn of 2000. Observers indicated that the lower grape price affected directly the cost base of producers of young wines but producers of crianzas and reservas such as CVNE had to respond to market pressures as sales fell.

The company also had to account for some start up costs of its new bodega in Laguardia, which will be used partially later this autumn but will come into full production in the spring of 2001. The company expects a stronger H2 as export orders begin to return to previous levels.

Sales of Rioja have been falling both in Spain and in export markets as smaller harvests in 1998 and 1999 have led to increasing grape prices. Grape prices reached 375 pesetas per kilo in 1999 but have fallen since then and observers expect that this year's average price will be below 100 pesetas per kilo.