Sharechat Logo

Foley Wines sees significant lift in operating earnings

Wednesday 27th February 2019

Text too small?

Foley Wines reported a significant lift in operating earnings as sales continued to improve and the company is upbeat about the full year. 

The company said first-half net profit was $1.67 million more than five fold, while its operating earnings jumped 146 percent to $2.39 million. Profit in the prior period had been hit by $66 million of impairment of inventory while the six months to December saw a $30 million gain.  

Bottled sales revenue lifted 14 percent to $21.1 million. Export cases shipped lifted 47 percent in the period.

“It’s satisfying to have delivered on our promises; the purchase of Mt Difficulty, entering into a long term strategic partnership with Lion, and moving to the NZX main board," said chief executive Mark Turnbull. 

Foley Wines agreed the purchase of Central Otago-based Mt Difficulty in November 2017 as part of a strategy to increase returns by building scale, reducing costs and getting more from its premium brands. The original $55 million sale price was reduced to $52 million in exchange for Foley investing up to $3 million to expand Mt Difficulty’s cellar door operation and restaurant. The purchase was completed on Jan. 3. 

At the time of due diligence, it was estimated that Mt Difficulty would generate earnings before interest, tax, depreciation and amortisation in the range of $5 million to $6 million. "While some time has elapsed since this work was completed, we do not have any reason to think that this isn’t achievable for the year ended 30 June 2020," it said. 

As a result of the completion of the Mt Difficulty deal, Lion had agreed to enter a strategic partnership with Foley from Oct. 1, 2018, with Lion taking 3.7 percent stake. 

The initial period of the partnership is 10 years which "enables us to work together to formulate a long term strategy of building our brands in New Zealand." it said. 

Looking ahead, Foley Wines said its wineries are empty going into harvest with no holdover wines as a result of strong sales. "This means we have the ability to maximise the winery capacity, which will have a positive impact on cost of goods."

It said its teams in all regions are expecting high-quality future at volumes which will allow it to fill its wineries. "While there are some reports of concerns in the industry regarding a lack of water having a bearing on yields, we are in a good position in terms of water management," it said. 

"In terms of earnings guidance, we have already achieved 87 percent of the full year underlying earnings of the previous year of $2.752 million. On this basis we are working hard to achieve approximately $5 million of operating earnings in the full year, inclusive of all costs associated with the Mt Difficulty transaction," it said. 

The shares rose 3.2 percent to $1.60, and are up 8.8 percent so far this year. 


  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

MARKET CLOSE: NZ shares rise; trading quiet ahead of upcoming earnings
NZ dollar firms against the Aussie heading into federal election
Fletcher-commissioned Deloitte report shows building material costs are low
RBNZ censures ANZ, prescribes risk capital calculation
RBNZ censures ANZ, prescribes risk capital calculation
SeaDragon shareholders back $4M injection to stave off liquidation
SeaDragon shareholders back $4M injection to stave off liquidation
Businesses get some reprieve in March quarter on cheaper prices
NZ manufacturing activity expands on month in April but down on year
Xero's CEO says it still has a cautious future in the US

IRG See IRG research reports