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Delegat's Group [NZX: DGL], the winemaker which last year bought Australia's Barossa Valley Estate, said first-half profit fell 7.6 percent as sales fell in the UK and Europe and costs rose.
Net profit was $17.8 million for the six months ended Dec. 31, down from $19.3 million a year earlier, the company said in a statement. Sales slipped 1.8 percent to $121 million, although overall revenue rose to $130 million from $129 million including fair value adjustments on biological assets and currency hedging.
The Auckland-based winemaker reported a record operating profit, which doesn't reflect fair value adjustments, of $20.2 million, up from $19.2 million.
Delegat's, which counts Oyster Bay among its brands, spent $73.7 million over the 2013 financial year on Kaituna Vineyard in Marlborough, Matariki Vineyard in Hawkes Bay, Barossa Valley Estate in South Australia, while expanding existing facilities. The winemaker pitches its Oyster Bay and Barossa Valley Estate wines as super-premium brands and plans to spend a further $132 million over the next three years to support sales growth, especially in the North American market.
The company said global cases sales were down 1 percent to 1.083 million sold in the first half, as a strong kiwi dollar impacted on income.
"It's a credible result given the difficult conditions the wine industry is in at the moment," said Grant Williamson, director at Hamilton Hindin Greene. "The North American market has offset what you'd call slightly weaker sales in New Zealand and a reasonable drop in the UK market."
Sales in the UK, Ireland and Europe fell 14 percent to 348,000 cases, while North American sales gained 15 percent to 356,000 cases and Australia, New Zealand and Asia Pacific sales were unchanged at 379,000. The case price, which is sensitive to currency movements and product mix, fell 1 percent to $111.9.
New Zealand sales for its Delegat's Wine Estate unit fell 9.1 percent to $106 million. Oyster Bay Wines Australia dropped 13 percent to $36.5 million, Delegat's Wines UK slipped 0.5 percent to $33.7 million and Oyster Bay Wines USA sales grew 19 percent to $23.4 million.
Expenses rose 8.3 percent to $49.96 million, reflecting increases in administration, marketing and finance costs, it said.
"Overall it is a fair result, but we've really come to expect that from Delegat's as they continue to do well in difficult market conditions," Williamson said.
The company affirmed guidance given at its December annual meeting for operating earnings to be $29 million for the full-year, up from $26.3 million a year earlier.
The shares fell 6.6 percent to $3.55 on three trades and have gained 1.3 percent this year. Williamson said the shares trade infrequently, and in large part the drop is because "if anyone wants to sell they sometimes have to sell it down a reasonable amount to move a bit of stock."