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Daily ShareChat: Delegat

By Jenny Ruth

Friday 10th December 2010

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 Jenny Ruth

Winemaker Delegat's reaffirming its profit guidance of between $23 million and $26 million for the year ending June, 2001 has caused Rob Mercer at Forsyth Barr to raise his forecast.

Mercer now expects a $25.5 million net profit, up from his previous $23.9 million forecast.

"We believe Delegat's is on track to achieve earnings towards the top end of its guidance," Mercer says.

That's despite trading conditions for export wine companies remaining challenging.

Delegat's 40% decline in EBIT (earnings before interest and tax) in the year ended June 2010 was mostly due to non-cash items, a 10% decline in averaged realised case price to $112.70 and a step-up in operating costs to support higher volumes, Mercer says.

Delegat's meeting his forecast $44.1 million EBIT for the current year would be well up on the $27.3 million achieved last year.

"The medium-term growth prospects remain substantial and there is further earnings upside from the current level to a global economic recovery," he says.

If the New Zealand dollar depreciates towards mean levels against the Euro and US dollar, that should further stimulate earnings.

"We believe the market has extrapolated an overly pessimistic view of Delegat's medium-term profit outlook based on perceptions of the wine industry," Mercer says.

 

Recommendation: Buy.

 



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