Delegat annual profit rises 3% as increases in volumes outweighs higher currency

Jim Delegat
Delegat Group 12-month price history (NZX.com)

Delegat Group [NZX: DGL], New Zealand's largest listed wine company, increased annual profit 3 percent as record volumes muted the impact of a stronger local currency.

Profit rose to $42.6 million, or 42.12 cents a share, in the 12 months ended June 30, from $41.2 million, or 40.76 cents, a year earlier, the Auckland-based winemaker said in a statement. Revenue rose 1 percent to $231.8 million as a 4 percent increase in volumes to a record 2.031 million cases of wine was crimped by a higher New Zealand dollar, resulting in the average value per case declining 4 percent to $110, it said.

Excluding the impact of accounting adjustments on the value of its assets, Delegat's annual earnings rose 19 percent to $31.4 million, ahead of the company's forecast of $29 million. That measure includes an adverse foreign exchange impact of $6.3 million, the company said. The valuation of grapes, vines and foreign exchange instruments added a net $11.2 million to earnings in the latest year, compared with a gain of $14.9 million the year earlier, it said.

Delegat is expanding its vineyards and targeting increased exports as it seeks to build a leading global "super premium" wine company with its Oyster Bay and Barossa Valley Estate wine brands. It spent $107 million in capital expenditure the past two years investing in its New Zealand vineyards and buying Barossa Valley Estate in Australia, and plans to outlay a further $86 million in capital expenditure, funded through retained earnings and debt, in the coming year to build a 10,000 tonne capacity Hawkes's Bay winery and new vineyard development in Marlborough, Hawke's Bay and the Barossa Valley.

"Delegat Group is well positioned to pursue its strategic goal to build a leading global Super Premium wine company," executive chairman Jim Delegat said. "The board is confident that the investment in growth will deliver strong returns for shareholders and expects to achieve sales growth of 9 percent to achieve record sales of 2,205,000 cases in the 2015 year."

The North American market became Delegat's largest in the past year, with sales volumes rising 15 percent to 769,000, the company said. Sales to the US are forecast to rise to 888,000 in the coming year and reach 1.43 million by 2019.

"North America is the largest Super Premium wine market in the world and will be the key growth region for the group over the next five years, with strong growth projected to continue in both the United States and Canada," managing director Graeme Lord said. "Achieving this plan will provide in-market distribution scale benefits and sustainable earnings growth."

In the company's second-largest market, which includes Australia, New Zealand, Asia and the Pacific, sale volumes fell 1 percent to 668,000, ahead of the company's 621,000 forecast as sales in Australia were more resilient than expected. Record sales volumes were achieved in Hong Kong and Singapore and distributors were appointed in Japan, Cambodia and Thailand to position the company for future growth. Volumes in the region are forecast to edge up in the coming year to 687,000, reaching 964,000 by 2019, the company forecast.

In the coming year, Delegat will establish an in-market sales operation in China, it said.

Meanwhile, in the UK, Ireland and Europe, sale volumes slipped 2 percent to 594,000 cases, 3 percent ahead of the company's forecast following price increases in the second half of 2013. They are forecast to pick up to 630,000 in the current year and increase to 703,000 by 2019 as it develops new markets in continental Europe, it said. Duty increases imposed by the Irish government during the year are expected to constrain future growth in that market, it said.

The company will pay a dividend of 11 cents a share on Oct. 10. The company's shares rose 0.5 percent to $4.27 and have gained 13 percent so far this year.

(BusinessDesk)

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