Listed grapegrower Oyster Bay Vineyards has seen the price of its grapes drop by a fifth in its latest deal with sole customer Delegat’s as the oversupply issue continues to push prices down around the country.
The Marlborough grape grower confirmed today that it had completed negotiations with Delegat’s Wine Estate, which had achieved an average price of $1469 per tonne.
That figure was down 20.3% on the previous year, when an average of $1843 a tonne was paid.
This drop saw total revenue drop 28% to $8.3 million, continuing a fall that resulted in a 27% cut in revenues in the previous year.
Total production was more than 5600 tonnes and while this was down 9% on the previous year, it was in line with the entire industry’s goal of a smaller harvest to help deal with current oversupply issues.
The drop in revenue is expected to result in an annual after tax operating loss of $900,000, without including vineyard fair value adjustments.
In today’s release, the directors said they were awaiting a report from the company’s valuers, but the supply imbalance meant any fair value write-down could be material.
The directors have also commissioned an investment bank to advise on the company’s capital restructure, with the company already seeking bank covenant waivers.
The nature of the deal between Oyster Bay and Delegat’s has been the source of a long-running battle between Oyster Bay minority shareholder Peter Yealands and Delegat’s.
Oyster Bay said today its independent directors were certifying to NZX that they considered the prices received to be “commercially fair to the minority shareholders,” with its independent viticultural consultant, Dr David Jordan, providing a report to NZX that supported this view.
Mr Yealands has also cast doubts on the independent directors' objectivity in the past, but Oyster Bay said today those directors were satisfied that their procedures were robust and met the requirement for independence on their part.