Pressure on NZ Wine Company following harvest boom

The New Zealand Wine Company (NZWC) celebrated its 20th birthday with a record harvest and revenue figures; a problem as the company’s infrastructure was not prepared for huge increase in grape tonnage.

The company’s posted revenue $11.986 million and profit was $1,351,000 before biological bearer-asset adjustments for the year to June 30. This is an increase of 41 per cent and 6 per cent respectively on 2007.

NZWC’s 2008 harvest was its largest ever; it crushed 3,243 tonnes from its company owned and leased vineyards as well as contract growers, a 44 per cent increase on the 2,251 tonnes crushed last year and 27 per cent above projections.

“[The company’s] winery capacity and infrastructure was severely stretched over a shortened harvest period in 2008 and temporary tanks were brought in to handle this bumper vintage which produced good quality wine,” Chairman Alton Jamieson said.

As a result, the company didn’t process grapes for other wineries this year.

Although NZWC produced record sales, margins were shrunk by the strength of the New Zealand dollar for the majority of the 2007/2008 financial year.

Mr Jamieson said in his director’s report that this year’s harvest may cause a speed up in consolidation and rationalisation to take place amongst wineries and grape growers; and NZWC may look at further merger or acquisition opportunities.

The company’s limited guidance for the year ahead shows optimism, noting that 2008’s excellent harvest will flow on through 2009, and further weakening of the dollar should see profits improve.

“The New Zealand economy is technically in a recession and the flow on impacts from the worldwide credit crisis are still being experienced. The positives are that there is now the prospect of the Reserve Bank continuing to reduce the OCR and when coupled with a weakening NZD, directors are cautiously optimistic about the future,” Mr Jamieson said.

The company continues to push its Carbonzero certification in overseas markets.

NZWC has budgeted for a 2009 vintage harvest of 2,900 tonnes and management is ensuring that the intakes are controlled to about this level to ensure the infrastructure capacity isn’t overloaded again.

NZWC incorporates wine growing, winemaking, bottling and marketing. Distribution is handled through Independent Liquor.
The company AGM is on 31 October 2008, but more detailed guidance will be offered at the 2009 Interim Results in February 2009.

The fully imputed final dividend will be 5 cents per share a 25 per cent increase on 2007. This will be paid on 26 September.