Bankers say they want to take a closer look at the finances of the New Zealand Wine Company (NZWC) after it warned today financial loss for 2011 and a failure to comply with one of its three financial covenants.
Bankers say they want to take a closer look at the finances of the New Zealand Wine Company (NZWC) after it warned today financial loss for 2011 and a failure to comply with one of its three financial covenants.
The Renwick-based wine company will said today that it would fall short "by a significant margin" of a covenant which requires its earnings before interest, tax, depreciation and amortisation (ebitda) to be not less than a ratio of 1.3 to 1 for the year ending June 30. The producer of Grove Mill and Sanctuary branded wines said its bankers had agreed to waive that breach, as long as they were satisfied by an independent review of its financial forecasts and business model.
If the bank was not satisfied with the results of that process, it could trigger an "event of review" -- meaning there would be discussions between the company and its bankers for 10 days to seek a way forward, after which the bank could call in its loans.
NZWC chairman Alton Jamieson said that the oversupply of New Zealand wine had pushed the proportion of bulk wine in export sales to about 30 percent.
"When coupled with a very strong NZ dollar against the pound sterling and the US dollar -- plus aggressive competition -- NZWC revenues and margins available from branded wine sales have reduced, which will result in an underlying operating loss being reported for the full June 2011 financial year."
The wine company said its bankers were developing and implementing a recovery plan to turn around the current financial year operating loss and the independent review of the company's plans would be carried out over the next few weeks.
NZWC would provide earnings guidance for the full financial year to June 30 early next month.
It previously reported a loss of $1.898 million in the year to June 30, 2010, compared with a profit of $1.283 million the previous year, on revenue of $13m in 2010, compared with $12.5m (2009).
Shareholders' equity reduced by $3.3m to $18.63m at June 30, 2010, and market valuations of vineyard and winery assets reduced by 13 percent to $16.9m.
In 2008 it reported a net profit after tax of $2.04m in 2008.
It sold surplus 2008 bulk wine stocks at low or loss-making margins to enhance cashflow and reduce its wine stock to manageable levels, and later complained that the nation's wine surplus had resulted in severe price erosion in the marketplace.
