AUS: Rising costs hit Australian Vintage in half-year

• Half-year net profits slide by 11.3% to AUD3.3m (US$3.4m)
• Net sales in six months to end of December dip by 5.9% to AUD109.5m

Australian Vintage has seen its first-half sales and profits struggle as a fall in lower margin sales and higher costs hit the bottom line.

The company, which was previously known as McGuigan Simeon, said earlier this week that net profits in the six months to the end of December came in 11.3% down on the corresponding period a year earlier, hitting AUD3.3m (US$3.4m). Sales in the period also fell, by 5.9% to AUD109.5m.

The company blamed its slowing sales on "reduced low margin sales", particularly in the UK, and weaker demand for bulk wine from North America. Sales of the McGuigan brand, however, jumped by 29% year-on-year.

Profits before tax actually increased, by 19%, but a one-off tax gain in 2011 turned profits red. The higher cost of the 2012 vintage was also cited as dragging on performance.

"The continued growth in our core brands is very pleasing," said company chairman Ian Ferrier. "The UK market continues to remain fragile and, with the Australian dollar continuing to be at a record high, it will be challenging to profitably grow the UK market, based on current conditions."

Ferrier concluded that the firm expects full-year net profits to come in "in line" with the previous fiscal year.