Aust Vintage underlying profit to rise

Australian Vintage says wine sales at the start of the financial year have been stronger, but the full benefits of a weaker $A have not flowed through.

Profits are on the rise at the wine maker behind the McGuigan and Tempus Two labels thanks to stronger sales both within Australia and overseas.

Australian Vintage is forecasting net profit this financial year to come in about 10 per cent above the $7.1 million, before one off items, it made in 2013/14.

The wine maker's chairman, Richard Davis, told shareholders at the company's annual general meeting on Tuesday that in the four months to October 2015, sales to both domestic and export markets were stronger.

Sales in Asia were up slightly compared to a year earlier.

Australian Vintage was confident that its long-term distribution agreement with China's largest food company, COFCO, would result in ongoing improved sales.

Mr Davis said global industry conditions were very challenging.

Global wine production in 2015 had increased by two per cent compared to 2014.

Australian exports had benefited from the weaker Australian dollar; recently-signed free trade agreements with China, Japan and South Korea; a rebound from austerity measures in China, and stronger economies in the UK and US.

Although the lower Australian dollar had helped improve profit margins, the full benefits had not flowed through because of intense pressure in key overseas markets to keep prices down.

Last week, Australian Vintage said it would terminate its lease of the Belvino of Del Rios vineyard at Kenley in Victoria, resulting in a termination payment of $4.9 million and the write-off of vineyard running costs and other costs totalling $8.9 million.

Shares in Australian Vintage, which also owns the Nepenthe label, closed steady at 41.5 cents.

Source: AAP