Scheid Vineyards has posted disappointing figures for last year. The company has also commented on expected prices for this year.

In a statement issued yesterday (28 February), Scheid said that revenues in 2004 decreased by 11% to US$23.6m from US$26.4m in 2003. Net income for the 12-month period was US$1.3m, as compared to US$3.0m in 2003, with earnings per share also dropping to US$0.25 from US$0.56.

On a diluted basis, the weighted average shares outstanding were 5.4m and 5.5m for 2004 and 2003, respectively. The results include write downs of vineyard improvements in the amount of US$0.1m in 2004 and US$1.3m in 2003, Scheid said.

Commenting on the figures, Scott D. Scheid, president and CEO, said: "For the year 2004, we harvested approximately 19,700 tons of wine grapes, a 5% decrease from the 2003 harvest of 20,700 tons. This decrease was primarily due to a 5% decrease in the number of producing acres from 2003 to 2004, as approximately 260 acres of under performing vineyards were removed after the harvest of 2003. Overall yields per acre in 2004 were relatively unchanged from 2003, and the average price per ton received in 2004 decreased 3% from 2003.

"The company continues to expand the amount of grapes that it processes into bulk wine for sale under wine purchase agreements and on the spot bulk wine market. The company crushed approximately 6,400 tons of grapes into bulk wine during the 2004 harvest, as compared to 2,150 tons in 2003, an almost 200% increase. Bulk wine sales increased to US$5.65m in 2004, from US$1.275m in 2003, an over 340% increase. The company anticipates that a large portion of the grapes it converts into wine will be processed at its planned winery facility, the Scheid Winery. It is expected that the Scheid Winery will be in partial operation by the harvest season in the fall of 2005. By converting grapes into wine, the revenues from those sales are primarily recognised in the fiscal year after the grapes are harvested."

The company also commented on the recently released Preliminary Grape Crush Report which covers the 2004 harvest. The California Department of Food and Agriculture published the report on 10 February and the Final Grape Crush Report is scheduled to be published on 10 March. This report is published annually and shows prices paid during the previous year's harvest for grapes purchased for wine, concentrate, juice, vinegar and beverage brandy by California processors.

"During the past four years, the contracted prices we have received that are derived from the Crush Report have declined," Heidi M. Scheid, senior vice president, said. "Prices for approximately 47% of the company's current wine grape production are determined utilising the Final Grape Crush Report. For the harvest of 2005, these preliminary prices show both increases and decreases, depending upon the variety. The most significant changes are in Cabernet Sauvignon, showing a price decrease of 10%; Merlot, showing a decrease of 7%; and Chardonnay, showing a price increase of 3%.

"Although the market is coming more into balance, there are still several grape varieties that continue to be in oversupply. We anticipate that the prices we will receive for grapes which are currently not contracted, representing about 20% of anticipated production, could be less than the prices we will receive for contracted grapes for some varietals.

"The downward trend in pricing appears to have ceased in most varietals and, according to industry experts, the industry is on an upward trend primarily due to (i) the falling dollar slowing the pace of imports and boosting exports of California products; (ii) the US economy remaining relatively stable; (iii) increasing consumption of wine in the US and, therefore, increasing sales; and (iv) grape supply that has come more into balance with demand."

Although historically there have not been significant differences in the pricing data reported in the Preliminary and the Final Grape Crush Reports, it is possible that there may be some adjustments to the company's expected 2005 grape prices when the Final Report is published on 10 March.