The study examined the financial performance of wineries across Australia and is based on individual financial results and information provided by individual wineries.
Deloitte Wine Industry Group leader, Stephen Harvey, said the low yielding 2007 vintage placed pressure on the industry due to the expected rise in overhead costs per litre produced.
“During 2007, wineries experienced volatile market conditions, due mainly to climatic conditions that resulted in lower levels of supply. However, improved weather conditions in early 2008 increased production to a higher level for the industry overall,” he said.
“Wineries with revenues greater than $20 million responded well to 2007 market conditions and recorded earnings just below 20 per cent of revenue, while wineries with revenues less than $1 million continued to record low earnings before tax.“
The key findings of the report are as follows:
$0-$1m wineries
Wineries in this group fought back from an average Earning before Tax (EBT) of -18.6 per cent of revenue in 2006 to an EBT of 1.9 per cent attributable to gross margin increasing by 17.9 per cent.
$1m – $5m wineries
Reporting gross margins of 35 per cent, the lowest of all categories in the survey, wineries within this group recorded a sharp decline in EBT to -8.7 per cent in 2007, compared to -0.7 per cent in 2006. Overall, this group performed least profitably of all categories in the survey.
$5m – $10m wineries
This group recorded an EBT of 9.8 per cent of revenue, compared to 12.2 per cent in 2006. The drop can be attributed to an increase in general administration cost from 22 to 23.4 per cent.
$10m – $20m wineries
The average EBT for the $10-20 million wineries was 7.4 per cent compared to 10 per cent of revenue in 2006. This category has the highest gross margin of 47.4 per cent, however average EBT was brought down because selling and general administration costs increased.
$20m+ wineries
Wineries with revenue in excess of $20 million have had positive EBT growth, up from 17.3 per cent in 2006 to 18.8 per cent in 2007, driven by an increase in average gross margin of 2.5 per cent over to prior year, to 39 per cent gross margin.