Marlborough still plagued by oversupply

The latest statistics from Delegat’s show a 99% fall in profits for the last fiscal year to June 2010, with its biggest brand Oyster Bay leading the plunge.

Delegat’s net profits dipped to a lowly NZ$177,000 (£80,054) with the group blaming oversupply and charges on the value of grapes and vineyard prices.

The company said that the “supply imbalance” forced grape prices down, a move that had an adverse effect on the value of vineyards which led to Delegat’s making “significant non-cash accounting adjustments in the year to account for lower values for land, vineyard improvements and biological assets.”

Falling grape prices meant a NZ$6.5 million impairment charge was levied on the company, whose sales fell 6% on 2009 to NZ$215.8 million.

Oyster Bay recorded net losses of NZ$13.8m, having only made profits of NZ$1.5m in 2009.

Although losses were offset by NZ$4.3m worth of income tax credits, the company was hit particularly hard by grape and land prices, paying NZ$6.9m and NZ$9.9m for each respectively.

Net sales for the brand dropped 90% on 2009 to NZ$1.2m.

Oyster Bay said: “The New Zealand wine industry continues to forecast a supply imbalance for the foreseeable future.

“While the relationship with Delegat’s Wine Estate means our crop will be acquired, the change in average market grape prices has left the company exposed.”

Despite the disappointing results, Delegat’s posted strong sales growth for Oyster Bay in the emerging markets of the US and Canada, where volume sales grew by 76% to 357,000.

The strong showing of the brand in these foreign markets also saw Delegat’s share prices rise 2% on the New Zealand stock exchange.

The company also added it had cut net debt by 7% during the year.

Rupert Millar, 27.08.2010