The Magnotta Winery has posted a drop in half-year earnings, hurt by a retirement allowance to be paid over five years.

The Ontario, Canada-based winery posted net earnings of C$660,030 (US$617,997) for the six months to 31 July, compared to C$1.6m in the corresponding period of 2008.

The drop was due to a retirement allowance of C$1.6m for executive chairman Gabe Magnotta, who retired during the second quarter.

Net sales increased 2.4% to C$12.2m, the overall growth resulting from the company expanding its branding campaign through targeted marketing and advertising. This has created more brand awareness and greater volumes, the company said.

Overall gross profit margin for the six month period decreased to 41.2% from 43.5%. The change, Magnotta said, is due to increased cost pressures for raw and packaging material costs, and energy costs.

The "softening" of the general economic environment which started at the end of fiscal 2009 continued into the second quarter of fiscal 2010 and resulted in customers shifting to lower priced "value" products.

The company said it is difficult to determine how the "softening" of the general economic environment and its effects on people's purchasing habits will impact the Magnotta in the coming quarters.