Listed grape grower Oyster Bay Vineyards is expecting a loss for the current financial year and may be in danger of breaching its bank covenants as the wine glut pushes grape prices down.
With the 2010 harvest now under way around the country, yields are
Listed grape grower Oyster Bay Vineyards is expecting a loss for the current financial year and may be in danger of breaching its bank covenants as the wine glut pushes grape prices down.
With the 2010 harvest now under way around the country, yields are expected to be close to the record hauls recorded in the past two years.
Banking covenants - and the disclosure of possible breaches - have been in the spotlight again this week, with Nuplex facing prosecution from the Securities Commission for failing to divulge it was in danger of breaching its covenants in late 2008.
Oyster Bay – which supplies all of its grapes to Delegat’s Wine Estate – has not yet started its harvest and is still negotiating a price with Delegat’s for its 2010 harvest.
But in a statement issued today, the NZAX-listed vineyard company said that based on likely harvest volumes and current market prices for grapes, it was anticipated that Oyster Bay will operate at a loss for the 2010 financial year.
Delegat's has already warned that its net profit could be as much as 40% down on last year.
In February, it recorded a net loss of $599,000 for the six months ending December, an improvement on the $830,000 loss for the same period in 2008.
The company told shareholders at December’s annual meeting it planned to maintain its grape harvest level in 2010 due to its purchase agreement with Delegat’s but warned at that time that grape prices were being hit by the supply imbalance of some varietals.
While it did have the benefit of the long-term grape purchase arrangements between the two companies, Oyster Bay said today that it was being affected by the low grape prices “as much as any other grape grower.”
If it does post a loss for the full year, the company may fail to meet its banking covenants.
The directors are now in the process of seeking a waiver, with further announcements on this issue due as they develop.
Oyster Bay’s stock remained unchanged in the wake of the news, with no trading in it during the morning.
