Winemaker spurns high Kiwi for record net profit

Although the strong Kiwi dollar is hurting wine exports, winemaking group Delegat’s has earned its largest annual profit to date of $32.7 million – almost 20% more than last year.

Revenue grew 9% to $235.4 million, beating the guidance given in February by $7.9 million, with close to 2 million cases of wine sold in the year to June 30.

That’s 19 thousand more cases than last year with case price realisation 4% higher at $116.72 a case.

Managing director Jim Delegat said a focus on growing its super premium brand Oyster Bay in key export markets Australia, the UK and Ireland had helped the group rise above challenges facing the industry.

The Oyster Bay brand continues to gain momentum in the important growth markets of the United States and Canada, where sales volumes grew  27% to 452,000 cases.

The proliferation of cheaper New Zealand wine labels and competitive price discounting from rivals, activities to build brand awareness had been important to ensure Oyster Bay remained top-of-mind for customers and continued to lead growth in the group’s key markets, said Mr Delegat.

The group now had 109 members of its sales and marketing team based offshore in Australia, the UK, the US and Canada.

New sales teams would be introduced to Ireland (where Oyster Bay is a top-20 wine brand) and Hong Kong to accelerate growth in China and the UK.

Delegat’s expects to sales volumes to fall by 1.8 million cases in the year ahead as sales were forecast to fall in European markets as price increases there kicked in.

However, sales were forecast to exceed $2 million cases in 2014 as the UK, Ireland and Europe region stabilised and sales across Asia Pacific and North America continued to grow.

On the balance sheet, Delegat’s has net debt of $121.3 million, 6% lower than at the same time last year.

Mr Delegat warned unfavorable exchange rates, particularly against the pound, US dollar and the Euro, would impact profits in the year ahead.

“The consensus forecast is for exchange rates to improve over the coming three years and the group will closely monitor exchange rates and price realization with a view to optimising pricing and profitability whilst achieving forecast case sales.”

Delegat’s will pay a final dividend of 8c on October 14

The company’s share price remains unchanged today at $2.