(Australian Associated Press)
The maker of McGuigan wines has raised a glass to the falling Australian dollar.
Australian Vintage says it is looking to increase sales in the United Kingdom, the United States and Asia in the year ahead.
The push to expand further overseas comes as the company tries to cope with increased pressure on its margins, or the money it makes on its wines.
A 16 per cent fall in bulk wine sales in the UK and Europe during 2014/15 resulted in a margin loss of $1.8 million for the company as major customers demanded below-cost pricing.
But Australian Vintage hopes that the lower Aussie dollar, which has fallen about 20 per cent against the US dollar in the past year, should help its bottom line in the year ahead.
“The recent reduction in the Australian dollar has had a positive impact and will assist in margin improvement,” chairman Richard Davis said on Wednesday.
His comments came as the company reported its net profit had fallen 11.1 per cent to $9.4 million for the year to June 30.
The drop had been flagged in May when the winemaker said it had not produced as many grapes as expected.
Excluding one-off items, net profit fell by half a million dollars to $7.1 million.
Revenues rose 7.5 per cent to $230.896 million thanks to higher sales of its branded wines – McGuigan, Nepenthe and Tempus Two – offsetting lower bulk and processing sales.
Sales of those three key brands have jumped 43 per cent in the past three years and now make up nearly three quarters of total sales compared to about two thirds in 2012.
In the same period, the company has reduced its reliance on bulk wine sales and processing, resulting in those sales falling by $29 million.
Chief executive Neil McGuigan said industry conditions remained tough due to ongoing margin pressure and the widespread use of the wine equalisation tax (WET) rebate by smaller companies so they can buy bulk wine below cost.
“The sooner the WET rebate is removed on bulk wine, the better and more sustainable the Australian wine industry will be,” he said.
Several Australian wine producers have called on the federal government to dump the WET, saying it allows makers of unbranded wines to exploit the rebate.