NZWC hits rocky ground

NZWC hits rocky ground

New Zealand Wine Company has said that oversupply problems will cause the company to post net losses for its current fiscal year.

New Zealand Wine Co (NZWC) said today (24 May) that it expects to report net losses and a decline in net wine sales of up to 10% for the 12 months to the end of June, compared with the previous year.

"The sheer volume of surplus bulk wine sales, currently running at 28% of New Zealand’s total export sales volume, is testing the financial sustainability of the NZ wine industry," said NZWC's chairman, Alton Jamieson.

"A high proportion of the surplus wine has been sold at less than the cost of production to be bottled and sold in direct competition to New Zealand branded wine sales," he added. 

The firm declined to give a guidance range for net losses, primarily due to potential changes in the value of grape purchasing contracts and to possible fluctuations in foreign exchange rates.

NZWC said that its 2010 grape harvest is 10% lower than that of 2009, at 2,250 tonnes.

“While there is still a lot of uncertainty in the NZ wine industry, NZWC's directors are comfortable that the company’s cash-based underlying earnings can bounce back when wine supply and sales demand comes back into balance," said Jamieson.

Last week, the CEO of trade body New Zealand Winegrowers told just-drinks that there was "light at the end of the tunnel" for New Zealand's wineries.

NZWC reported net losses of NZD646,000 (US$447,000) for the six months to the end of December, compared to profits of NZD1.28m in the same period of 2008.