By Andrew Starke
Australian Vintage (AVG), Australia’s largest listed pure wine company, continued its turnaround with growth in both profits and earnings for the year ended June 30 2010.
The company said the result had been driven by higher branded sales and the ongoing benefits of cost reductions over the past few years.
Export branded sales were up 22 percent by volume and 9 percent in net dollar terms.
Total reported sales were in line with expectation taking into account the reclassification of rebates from cost of sales and the planned reductions of bulk wine sales.
The company did not pay a dividend to shareholders.
AVG CEO, Neil McGuigan, who took over the role of CEO earlier this year, said the results demonstrated the company was ‘successfully facing up to a wine industry still undergoing serious structural change’.
“What is especially pleasing is that the actions we have taken over the past three years have transformed our asset and cost base and we are still making progress on the cost side,” he said.
“The number of international and local awards we won during the year shows that we are over delivering on quality at all price points. Australian Vintage is committed to putting the ‘wine’ back into the wine business.”
“We did not sell as much bulk wine and we have seen a switch from branded cask wine to private label cask wine,” he said in a statement to the Australian Stock Exchange.
“Our international sales relationships continued to strengthen and notwithstanding the very depressed conditions in the UK we expect to further expand our sales volumes in this market and in the US.
“Industry wine stocks are slowly moving into balance with a smaller 2010 vintage and some growers exiting the industry. But Australian winemakers compete against global winemakers overseas and domestically with pricing power concentrated in a consolidating retail market so a world leading cost base is critical.”
Australian Vintage Chairman, Ian Ferrier, said there were signs that the wine industry is moving toward a balance in supply and demand.
“The market will continue to be volatile as we believe there is still excess stock from previous vintages that is yet to wash through the market. Furthermore, the economic conditions in the UK, in particular, and in the US could impact future margins and sales.”
“We expect that the Australian dollar will remain high against Australian Vintage’s major trading partners,” he said. “Given this volatility the Board have decided to take a conservative position on 2011 cash requirements and no final dividend for 2010 will be issued.”
AVG’s share price rallied on the news, climbing to 30 cents per share at midday today, up from 27 cents seven days ago.