Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Wine industry profitability continues to show improvements

Media release

28 November 2012

Wine industry profitability continues to show improvements in 2012

Seventh annual financial benchmarking survey confirms gradual turnaround, but industry still has a long way to go

All but the largest New Zealand wineries have improved their profitability during the past financial year compared with results in 2011, according to a new survey.

Vintage 2012, the seventh annual financial benchmarking survey for the New Zealand wine industry, was released today by Deloitte and New Zealand Winegrowers. It tracks the results of survey respondents accounting for a third of the industry’s export sales revenue for the 2012 financial year.

Deloitte partner Paul Munro says wineries in all but the highest revenue band (more than $20 million) have improved profitability on their 2011 results and all but the smallest wineries ($0-$1.25m revenue) are turning a profit in 2012.

“It’s very pleasing to see that the Vintage 2012 survey results continue to support the signs of a turnaround within the industry which began last year. But there is still some way to go to be at a point where the financial returns are appropriate to the capital invested,” Mr Munro says.

Another positive sign is that the issue of high levels of external debt does not seem as prominent as in past years, with debt reducing to more acceptable levels. It appears that the industry has responded to pressure from lenders for wineries to reduce debt levels.

“However with over 50% of total sales in export markets, the high New Zealand dollar continues to be the number one issue facing the industry according to the survey,” he adds.

Philip Gregan, CEO of New Zealand Winegrowers, says 2012 saw a markedly smaller grape harvest than the previous year and with this reduction has come a changed supply and demand balance.

“After enduring the global financial crisis and recent years of supply demand imbalance, there are signs of a new optimism emerging as we see another year of generally positive movements in winery profitability,” Mr Gregan says.

“With wine exports now worth in excess of $1.2 billion per year, strong and growing demand for our branded products and reduced supply from the 2012 vintage, this should provide further opportunity for improvement in winery margins in the year ahead.”

The most profitable category in this year’s survey was wineries earning $10m-$20m in revenue, with an average profit of 17%. This marks a return to historical levels of profit for this category prior to a dip in 2010, and is partly due to having the lowest overhead and interest costs.

The next most profitable category was the largest wineries, earning more than $20m in revenue. The group’s average profit was 11.1%, down from 15.3% in last year’s survey, due partly to reporting a change in the mix of case sales to bulk wine sales.

Mr Munro says the 2012 survey indicates that profitability generally increases with size ranging from a loss of 5.5% for the smallest category to double digit profits for the largest categories.

With the reduced harvest in 2012, primarily attributed to seasonal conditions, the supply and demand balance has shifted markedly from the bumper crops of previous years, causing some industry nervousness of too little grape supply rather than previous years’ worries of too much.

“It is important for the sector to continue to focus on the growth in value, rather than the volume, of sales. With the supply shortage from vintage 2012 it is apparent from anecdotal reports that new vineyard investments are being considered. Such investments need to be carefully assessed to ensure they are strongly market led and there is no repeat of the supply demand imbalance seen in recent years,” concludes Mr Munro.

ends

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Scoop Business: Govt Resisting Pressure To Pump More Cash Into Solid Energy

Prime Minister John Key says it is “not the government’s preferred option” to make a fresh capital injection into the troubled state-owned coal miner, Solid Energy, but dodged journalists’ questions at his weekly press conference on whether that might prove necessary... More>>

ALSO:

Lagest Ever Privacy Breach Award: NZCU Baywide Accepts “Severe” Censure In Cake Case

NZCU Baywide says that once it was found to have committed a breach of a former staff member’s privacy, it had attempted to resolve the matter... the censure and remedies for its actions taken almost three years ago are “severe” but accepted, and will hopefully draw a line under the matter. More>>

ALSO:

Scoop Business: PayPal Stops Processing Mega Payments; NZX Listing Still On

PayPal has ceased processing payments for Mega, the file storage and encryption firm looking to join the New Zealand stock market via a reverse listing of TRS Investments, amid claims it is not a legitimate cloud storage service. More>>

ALSO:

Housing Policy: Auckland Densification As Popular As Ebola, English Says

Finance Minister Bill English said calls by the Reserve Bank Governor for more densification in Auckland’s housing were “about as popular in parts of Auckland as Ebola” would be. More>>

ALSO:

Crown Accounts: NZ Government Deficit Smaller Than Expected In First Half

The New Zealand government's operating deficit was smaller than expected in the first six months of the financial year, as the consumption and corporate tax take rose ahead of forecast in December, having lagged estimates in previous months. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news