Winery profits fall for second year in row

Winery profits dropped for a second year running and debt levels are rising for some smaller operations, an annual survey of the industry found.

But the Deloitte survey, carried out in conjunction with New Zealand Winegrowers and published today, noted the participants were still generally profitable.

Deloitte partner Paul Munro said that despite the tough international trading conditions, export volumes did not seem to have been too adversely affected, with smaller wineries in particular experiencing a significant increase in the proportion of export sales.

The challenge for many exporters was making sure they were paid, as the financial pressures on customers and distributors along the supply chain flowed back to producers, he said.

Wineries had taken measures to limit grape intake to achieve a better balance between supply and demand, and while oversupply remained an issue the fallout was not at the same level as in Australia.

The ability of larger players to maintain increased inventories of wine, waiting for more favourable market conditions, had benefited the entire industry, Mr Munro said.

"The fact that larger wineries are bearing the cost of holding back stock shows they are acting responsibly for the overall benefit of New Zealand's premium brand."

The smaller vintage 2010 harvest should also help ease the situation.

The least profitable segment of the industry was that with 2009 revenues between $1 million and $5m, which averaged a loss before tax of 6.7 percent of total revenue.

Larger segments continued to be the most profitable, with the $10m to $20m category recording an average profit return before tax of 12.8 percent of total revenue and the over $20m category returning 17.5 percent.

All categories were several percentage points down on the previous survey.

Debt levels rose, particularly in the $1m to $5m category.

Mr Munro said consolidation in that segment was inevitable, especially as falling land values would likely lead to increasing pressure from financiers.

"It's unlikely that banks will be willing to maintain very high levels of risk, most likely requiring owners to provide additional capital."

The survey, Vintage 2009, is the fourth annual financial benchmarking survey for the wine industry, and tracks the results of 32 survey respondents.

New Zealand Winegrowers chief executive Philip Gregan said trading conditions were the toughest in the past two decades.

 

 

Add a Comment

drivesouth-pow-classic-2.png

Our journalists are your neighbours

We are the South's eyes and ears in crucial council meetings, at court hearings, on the sidelines of sporting events and on the frontline of breaking news.

As our region faces uncharted waters in the wake of a global pandemic, Otago Daily Times continues to bring you local stories that matter.

We employ local journalists and photographers to tell your stories, as other outlets cut local coverage in favour of stories told out of Auckland, Wellington and Christchurch.

You can help us continue to bring you local news you can trust by becoming a supporter.

Become a Supporter