Delegat's sees 10 percent lift in 2014 profit, warns strong currency may hit bottom line

Thursday 5th December 2013

Delegat's Group, the winemaker which this year bought Australia's Barossa Valley Estate brand, expects operating profit to rise by about 10 percent in 2014, though it warns a high kiwi dollar may hurt earnings.

Net operating earnings are expected to rise to $29 million in the 12 months ending June 30, 2014, from $26.3 million a year earlier, managing director Jim Delegat told shareholders at today's annual meeting in Auckland.

Still, the kiwi dollar, which recently traded at 82.05 US cents, has been at higher than expected levels for the first five months of the year, and has "the potential to impact on earnings," he said.

The winemaker is embarking on a plan to boost global sales to 3.07 million cases of wine of the next six years from the current 1.95, establishing its Oyster Bay and Barossa Valley Estate varieties as super-premium brands.

"This planned growth will be primarily driven by continuing to drive sales growth in North America and through development of the Barossa Valley Estate brands," Delegat said. "North America will be the key growth region for the group over the next six years, with strong growth projected to continue in both the United States and Canada."

To support that, Delegat's plans to spend $132 million in capital expenditure over three years, including the construction of a 10,000 tonne capacity winery in Hawke's Bay and expanding its Marlborough winery and vineyard development. It expects to fund the investment by retaining earnings, and using debt.

Delegat said sales in New Zealand, Australia and the Asia Pacific are expected to fall 8 percent in 2014 as Australia's economy slows, with a return to growth tipped in the two following years.

European sales over the next three years are expected to be stable, while North America is expected to become the group's biggest region by sales volume in 2014.

The shares were unchanged at $3.70, and have climbed 25 percent this year.

BusinessDesk.co.nz

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