Follow the difficulties faced by Australian Vintage with this investigative review of the business’ performance and its key announcements over the last 12 months, including the failed Loxton winery sale, its strategic review due to the global financial crisis, its $120 million write down and the impact of excess capacity due to the ongoing wine glut.
– In late October 2008, Australian Vintage announced the $60 million sale of its Loxton Winery to Champagne Indage had fallen through. The deal, originally announced in February 2008, would see Australian Vintage sell the winery to Indage who were looking for additional capacity for its 32 wine brands and the largest wine production facility in India. The purchase of the 90,000 litre capacity winery fell through as Indage suffered a liquid capital shortfall brought on by the global financial crisis.
– A month later in November 2008, Australian Vintage announced a strategic review in light of the global economic downturn, with the company’s deputy chairman Ian Ferrier claiming at its AGM that the business faced “an uncertain 12 months and 2009 and is likely to be even more difficult than 2008”.
Ferrier also added: “the industry cannot go on as it has over the past five years and will have to undergo structural change. With the issues in the Australian wine industry, combined with [the] global economic slow down, Australian Vintage has begun a comprehensive review of our brands, strategies, costs and assets to position the company for the new reality in the markets”.
– In early February 2009, Australian Vintage announced an eight per cent half year increase in sales and a write-down in the value of its assets of $120 million following the strategic review, blaming dramatic shifts in the valuation of every aspect of the wine industry, the oversupply of Australian wine grapes, the global economic slowdown and a heatwave that shrunk its summer harvests in South Australia.
– On 24 June 2009, the company reported a sales volume increase of 10 per cent and a 7 per cent rise in net dollar sales for the 2008-9 financial year. The company processed 163,000 tonnes in the 2009 harvest, down from 183,000 tonnes the previous year.
– Less than a week later, and two days before the end of the 2008-9 financial year, company director Chris Harris retired after serving the business for 15 years since his appointment as deputy chairman of Simeon Wines in 1994. Harris continued his directorship during the merger with Brian McGuigan Wines in 2002 and when the business changed its name from McGuigan Simeon Wines to Australian Vintage in 2008.
– In mid August 2009, Australian Vintage reported annual sales rose by nine per cent in the financial year ending 30 June 2009. AVG CEO Dane Hudson claimed sales were significantly ahead of the industry in both volume and value boasting that the McGuigan brand recorded 32 per cent growth in the UK. The company also reached an agreement to extend a debt facility after reducing debt from $169 million as at 31 December 2008 down to $145 million at the end of June this year.
– On 10 September 2009, Australian Vintage announced it has agreed to a settlement with Indage Vintners relating to proceedings resulting from the failure to purchase the Loxton Winery. As part of the settlement, Australian Vintage received a settlement amount that has been applied towards the purchase of wine from Thachi Wines – a subsidiary of Indage over and above the $6 million non-refundable deposit. Litigation in the Federal Court between the two companies has ceased with each party paying its own costs. Australian Vintage has retained the Loxton Winery and will continue to find alternative buyers.
– Over the last 18 months, Australian Vintage shares have fallen from $1.82 in May 2008, to 65 cents in late October 2008 and to 49 cents in late November 2008. In early February 2009, shares were trading at 36 cents and today (Nov 4) they are trading down 3 per cent to 31.5 cents.