Australian Wine Holdings (AWH) plans to become a "virtual" winemaker after agreeing to sell its two big assets for a combined A$11m (US$8.3m).

The Perth-based company will offload its Alexandra Bridge winery, as well as its Hay Shed Hill vineyard, to clear debts and focus on selling and marketing its stable of brands.

Mike Calneggia, the company's managing director, declined to disclose the names of the buyers telling just-drinks this month that he was bound by confidentiality agreements.

However, reports in Western Australia have named local wine producer West Cape Howe as the buyer of the Hay Shed Hill vineyard.

The deal remains subject to approval from AWH's lenders and whether the buyer can attain "clear title" to the Hay Shed Hill and Pitchfork trademarks. McWilliam's Wines owns a 50% stake in the two brands.

Calneggia admitted it had been "painful" to sell the assets but said the sales were necessary to clear the company's debts.

He said: "Margins in the market are so paper thin at the moment that there is no room for any debt at all. It has been painful to sell assets which will be worth a lot more money in four to five years time."

AWH will retain the Alexandra Bridge brand, buy in its grapes and use third-party winemaking facilities to produce labels including Chestnut Grove and Bunker Bay. Calneggia said the company would focus on the sales and marketing of its wines.

"Consumers are less concerned about where the stuff is from and where it's made, they want to know how cheap it is," he said, adding: "The volume model is not sustainable because there is no loyalty to brand from consumers and no loyalty from purchasers. If a brand's on promotion it sells, if it's not on promotion, it doesn't. So, you've got to work out ways to get the wine into bottle cheaper."

Yesterday, AWH posted narrowing full-year losses on the back of rising sales for the 12 months to 30 June.

Net losses stood at A$3.4m (US$2.6m), down from A$5.6m a year earlier. Revenues, meanwhile, rose 10.7% to A$6.3m.

The losses stemmed from inventory write-downs of A$2.5m, increased costs from the 2006 vintage and the settlement of a legal dispute, which cost the company A$372,000.