By James Atkinson
ASX-listed winemaker Australian Vintage’s current profit margin is unacceptable but the company has the correct strategies in place to ensure its performance improves in the long term, says CEO Neil McGuigan.
In an interview to mark the launch of the super premium McGuigan Wines 2010 The Philosophy, McGuigan said AVL had recently advised the market that it will make $11 million dollars off the back of $210 million-plus revenue this financial year.
“That’s embarrassing, but we’re making money. And what are we doing with that money, we’re pouring it back into our business, back into vineyards. We are confident that the Australian wine industry will come through this,” he said.
Asked to benchmark what would be an acceptable return, McGuigan deferred to one of the liquor industry’s elder statesmen.
“My old boss Terry Davis used to say, if you aren’t making a 15 per cent return on capital employed, you’re not good enough,” he said.
McGuigan said his namesake brand has made significant inroads into the UK market, where it recently surpassed Jacobs Creek to become the number five global brand by volume.
“That’s outstanding. We have done that in a short period of time,” McGuigan said.
“We are establishing our brand and when the dollar turns, which it will, we will make more money in the UK and at the same time it will give us opportunity to springboard that around the world.”
McGuigan stressed that AVL is in agriculture and “the decision we make today will manifest itself in three years’ time”.
“I am not making a decision for the next six months. If that’s what the market wants from a CEO they can fire me,” he said.
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