Delegats Group hails Oyster Bay wine sales in North America

Delegat's Group hails Oyster Bay wine sales in North America

Impairment charges wiped out the majority of Delegat's Group profits for its latest fiscal year, but the Oyster Bay wine brand owner said that it was upbeat on future sales.
Delegat's Group net profits sunk by 99% to just NZD177,000 (US$125,000) for the year to the end of June, the New Zealand firm announced today (27 August). Higher costs and impairment charges on the value of grapes and winery assets, including those held by majority-owned subsidiary Oyster Bay Marlborough Vineyards, were the main cause of the profits collapse.

An NZD6.5m charge related to falling wine grape prices also proved a drag on Delegat's sales, which fell by 6% on the year before, to NZD215.8m. The firm also faced pressure from a strong NZ Dollar currency.

However, Delegat's share price rose by 2% on the New Zealand stock exchange today after the group reported a solid performance for its Oyster Bay wine brand on international markets. Excluding charges, total group sales rose by 1% ahead of the firm's original guidance, while volume sales increased by 1% to 1.95m cases.

"The Oyster Bay brand is gaining momentum in the important growth markets of the US and Canada," said managing director Jim Delegat. "In the 2010 financial year, the group achieved sales volume growth of 76% in North America to 357,000 cases, which equates to 4.27m bottles of wine,” he added.

Delegat blamed impairment charges on New Zealand's wine oversupply problems. "The wine industry’s supply imbalance led to lower grape prices in 2010, which influenced the value of vineyard assets and accordingly Delegat’s recorded significant non-cash accounting adjustments in the year to account for lower values for land, vineyard improvements and biological assets," he said.

The firm said that it cut net debt by 7% during the year and will pay a dividend of NZD0.08 per share on 1 October.

Earlier this week, New Zealand Wine Company also blamed the country's wine glut for a swing to full-year losses.