By Ian Neubauer
Australian Vintage, the company formerly known as McGuigan Simeon, has announced a write down in the value of its assets of $120 million following the conclusion of its strategic review.
Australian Vintage attributed the write down to “dramatic shifts in the valuation of every aspect” of the wine industry, the oversupply of Australian wine grapes, the global economic slowdown and the heatwave that is shrinking summer harvests in South Australia, where the company owns the Nepenthe and Yaldara vineyards.
“With the ongoing challenges in the Australian wine industry, the global economic slowdowns and price pressure from overseas customers, we began a comprehensive review of our brands, strategies, costs and assets to position the company for the new reality in the market,” said Australian Vintage CEO, Dane Hudson.
“Put simply, in Australia the industry remains structurally imbalanced with over production and excess capacity. In 2008 we saw Australian wine companies write down the value of assets by more than $1 billion.”
The write down was somewhat reconciled by better than expected half-year sales result, with total branded sales increasing 8 per cent compared to the same period in 2007.
Hudson said the result was pleasing given the lacklustre state of the UK market – the second largest importer of Australian wine after the US, where demand has also flattened.
“It is a credit to our workforce that we have maintained positive sales momentum despite the headwinds in our major markets,” he said. “We are determined to continue to work in the industry, with our suppliers and our customers to deliver sustainable, profitable wines and return value to our shareholders.”
Australian Vintage shares were trading for 36 cents at 3:00pm today (Feb 4) compared to 40 cents seven days ago.