A headache for shareholders in Australian Vintage Ltd which posted a $123.6 million annual loss yesterday.
The company (which includes brand like McGuigan, Nepenthe, Yaldara and Tempus Two) said the loss confirmed the wine industry’s best years are behind it.
But despite this pessimism, the company says it is in great shape for when conditions improve.
The company, formerly McGuigan Simeon Wines, lost money in the 2009 year after making a small profit of $1.344 million in 2008, it told the ASX yesterday.
Due to problems with water availability and costs, lower demand for Australian wines here and offshore the oversupply of grapes, 2009 turned out to be a miserable 12 months.
The annual loss came after a $127 million impairment charge following changes made when the company decided earlier in the year that the traditional wine company model was not sustainable.
“Today’s results clearly demonstrate that Australian Vintage is outperforming the industry with improved sales, strong cash flow and reduced debt,” said Mr Hudson said in the statement to the ASX.
“In February this year we announced that we would take a $127 million impairment charge following a strategic review.
"This followed other major changes we made to the company when it became apparent three years ago that the traditional wine company model was not sustainable.
“The bottom line is that the Australian wine industry is facing a new stark reality, the old golden age has well and truly gone. Our company however is now in shape for the next chapter of the industry.
We’ve re-based the business, restructured the assets, dramatically improved cash flow, created a flexible supply and operations platform and you can see the results starting to come through."
Sales revenue for the year ending 30 June, 2009 was $260.369 million compared to $233.42 in the 2008 financial year.
"Total sales for the year were up nine per cent, bucking the industry trend that saw Australian wine sales steady and export sales value down 10 per cent," Mr Hudson said.
“AVG’s export branded sales were up 8 per cent with growth in every market except New Zealand.
"Our total Australian packaged sales increased by 6 per cent in a competitive market driven by a 24 per cent improvement in sales with the major retailers. Worldwide sales of the McGuigan brand were strong with case sales growth of 15 per cent and net sales growth of 8 per cent.
“It is clear the industry’s present operating model is unsustainable as there are still too many grapes being grown and too much winery capacity. Lower demand, lower prices, the global financial crisis and a high dollar are exacerbating the issues.
"Our view is that grape supply and wine production capacity is at least 30 per cent higher than it needs to be.
“If the industry doesn’t want to change, the new reality will transform it anyway.
On the supply side all major wine companies are reducing grape supply by exiting grower contracts and selling vineyards.
The company will not pay a dividend, its share price closed down two cents or 6.67 per cent at 28 cents.
Turning to the outlook, Mr Hudson said “It is hard to predict the impact of the industry’s transformational change, particularly sales of excess stock, but we anticipate further upheaval in both supply and demand.
"We are monitoring our export sales closely given the impact of the high Australian dollar. We will continue to operate our production facilities flexibly to meet the conditions.
“The business is well placed to deliver value to shareholders as conditions improve. We have reached an agreement with our bank to extend the debt facility for a further two years.
“We do not underestimate the challenges but we are confident that we have right sized our production base and put in place flexible supply arrangements that can deliver more than 100 per cent NPAT growth for 2009/10, before significant items and assuming the Australian dollar does not strengthen further.
"We will further update the market on our profit forecast at the Annual General Meeting in November.”
Shares in Transfield Services rose a solid 9.2% yesterday as the company produced 12 month figures showing that it seems to have shaken off the wobble from midyear.
Cash flow, earnings (underlying) and business levels all seem to be better than they were at the half year mark.
Debt, a worry for the company six to eight months ago, is down by a third.
The shares ended up 32 cents at $3.80.
Transfield said it expects "flat to modest" underlying earnings growth in 2010.
The company on Wednesday reported a net loss of $55 million the June 30 year, compared to a profit of $82.17 million in the previous year, due to impairment charges.
Underlying net profit grew to 16.6% to $123.6 million.
"Transfield Services expects to deliver flat to modest net profit after tax growth during 2009-10," it said in a statement.
Transfield Services’ Board declared a fully franked final dividend of 7.25 cents a share (18 cents in 2008), bringing the full year dividend to 12 cents a share, half the 24 cents paid in 2008.
Revenue was $3.39 billion, up 13.0% on the prior comparable period and EBITA grew by 12.7% to $180.8 million, dr
