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Delegat's expects $20m to $24m annual operating profit

Tuesday 6th December 2011

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Winemaker Delegat's Group expects 2012 annual operating profit to be at the upper end of analysts' forecasts.

The Auckland-based company forecasts operating earnings will be between $20 million and $24 million in the year ended June 30.

Delegat's' net profit before one-off non-cash adjustments in the year ended June this year was $23.9 million, up 10 percent on the previous year, while non-cash adjustments pushed its bottom line profit up to $32.7 million from just $200,000 the previous year.

Sales for the first five months of the current year are running in line with forecast and below the previous year because of lower volumes sold in Britain, as previously outlined, managing director Jim Delegat told shareholders at their annual meeting.

While Delegat's actively manages its currency exposure, the higher than forecast New Zealand dollar has had an unfavourable impact on profitability which has been offset by operating cost savings and the benefits of scale, Delegat said.

The winemaker is forecasting total cases of wine sold this year will drop from 1.97 million in the year ended June to 1.84 million in the year ending June 2012 before rising to 2.06 million in 2013.

That reflects its expectation that sales in Britain, Ireland and Europe will drop from 820,000 cases last year to 598,000 this year.

Still, it expects prices per case to rise from $116.7 million last year to $121.2 million this year and to $124.3 million in the year ending June 2014.

Delegat said the company is primarily focusing on increasing profitability rather than on sales growth in Britain but is aiming to grow sales in North America, New Zealand and Asia Pacific.

The company's Oyster Bay branded Sauvignon Blanc, Chardonnay, Pinot Noir and Merlot are the top selling wines above 6 British pounds in their respective categories in Britain, he said.

“I am pleased to report that Oyster Bay Sauvignon Blanc is the number one selling bottled white wine in Australia. Furthermore, Oyster Bay Chardonnay, Pinot Noir and Merlot are the top selling wines in Australia above A$15 by value in their respective varietal categories,” Delegat said.

The wine industry has been suffering from an over-supply of grapes since the 2008 harvest and Delegat said he expects the record 2011 harvest means the glut is likely to continue for at least another two years.

Delegat's shares are untraded today after closing at $2.25 yesterday. That's not far from its year-high in April at $2.30 and well up from $1.80 a year ago.

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