Magnotta Winery Corporation has seen its profit margin drop as a result of increased cost pressures and higher grape prices.

The company saw its profit margin for the quarter ended 30 April decrease to 48.6% from 49.9% for the corresponding period of the prior year. These cost pressures were mitigated somewhat by the strength of the Canadian dollar.

Net sales increased 1.9% to $6.06m from $5.95m for the same period last year, and net earnings increased 2.9% to $867,790 from $843,295 and the basic and diluted earnings per share remained constant at $0.06.

The overall growth in net sales for the quarter resulted from greater volumes due to an expanded customer base and a continued emphasis on branding through its marketing campaign.

The company also sold more of its Chilean grapes to third parties in the first quarter as it was able to negotiate higher prices. However, due to the snowstorms and inclement weather during February and March in Southern Ontario, overall growth was tempered.

Earnings before interest, income taxes and depreciation decreased marginally to $1.92m from $1.96m. These changes were principally impacted by a small increase in selling, administration and other expenses and by a reduction in gross margin, the company said.