Challenger Wine Trust withers on the vine
VINEYARD owner Challenger Wine Trust (CWT) says it is planning to sell assets and it has put its distribution guidance on hold.
The moves are a result of the wine sector struggling with global economic conditions.
CWT owns 23 vineyards and two wineries in Australia and New Zealand that are primarily leased to wine companies on long-term leases.
On Thursday CWT booked a 77.3 per cent fall in net profit for the first half of the 2008-09 financial year to $2.87 million.
The result included a fall in property values of $5.6 million. Operating profit was up 5.6 per cent at $8.4 million, driven by a lift of 5.3 per cent in net property income.
CWT said the wine industry was not immune to the global economic conditions, and most large wine companies had consequently booked write-downs.
CWT said that at December 31, 2008, it had total drawn borrowings of $159 million, up from $155 million at June 30, 2008, with the increase due to exchange rate movements in New Zealand-dollar-denominated debt.
CWT fund manager Nick Gill said CWT's core business had held up well in the first half. But the recent steep fall in interest rates had resulted in a net liability of $21.7 million on CWT's interest rate swaps and narrower headroom on bank covenants. The bank lending margins had also risen.
CWT said demand for grapes was likely to be reduced in the coming 2009 harvest, following an oversupply of mainly Chardonnay grapes in the 2008 harvest.
Subject to the impact of the current heatwave in southeastern Australia, with reports of grape yield losses in some regions of around 20 per cent, the 2009 harvest was expected to be in oversupply, which would put pressure on grape prices.
CWT also said that in the current half-year, a heatwave and continued drought in the Barossa Valley in South Australia had resulted in bore water drawn from the Bethany Creek and Vine Vale Vineyards becoming temporarily unsuitable for vineyard irrigation, which may materially impact the carrying value.
AAP