The speculation emerging last Friday that leading Australian winemaker, Southcorp, was about to lower its profit forecast proved founded, as the company issued a reduced earnings guidance for the coming year on Tuesday.

Southcorp said it is now expecting earnings before interest tax and amortisation of A$287.1m for the fiscal year to the end of June 2003, some 14.3% below the A$335m it forecast in April 2002. The revised forecast would put full-year earnings roughly on a par with last year's result. The company also said it expected first-half EBITA to come in at A$115m.

"Competitive market and trading conditions, structural changes in some parts of the industry, as well as less favourable customer and product mix factors, have adversely affected revenue growth," Southcorp said in a statement.

Southcorp also announced that it was planning to divest itself of its holding in the US wine company, Independence Wine Co., following a dispute over funding.

Southcorp's shares fell by 6.6% following the announcement of the revised earnings forecast but recovered to close 2% down at A$4.73.