Falling sterling prompts Australian Vintage profit warning

Australian Vintage has issued a second profit warning on the back of Brexit currency woes.

The global wine company lowered its profit expectations to AUS $3m today, down from AUS$7.2m in 2015, which a statement from the company said was due to the falling Sterling’s impact on sales.

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This was likely to hit profits by around AUS $3.5 – AUS$4m, it said, provided the pound remained at its current level.

It noted the continued fall of sterling since the Brexit vote on 23 June, pointing out that the exchange rage had moved from 49 pence against the AUD in May to 62.8 pence today.

“Every global wine company that sells wine to the UK has experienced similar falls with the GBP declining between 18% and 34% against the various currencies,” the statement said.

It is the second warning issued by the Australian company since June, and comes after a statement in August that it was taking action to minimize the impact. However today it said these strategies were taking “longer than expected”

“The UK remains a very tough market and we expect conditions to remain challenging for at least the next 12 months,” it said, before adding that it remained “committed to the UK”, despite the unfavourable movement in Sterling.

The statement added that key McGuigan brands continued to see volume sales and it would continue to work with its retailer and distributor partners to grow its brands. Furthermore, it said it remained confident that its cash flow would be boosted by its decision last year to extricate itself from “onerous grape contracts” and to terminate a vineyard lease.

The news follows a spate of warnings over the rising price of wine in the wake of the Brexit vote. Yesterday the WSTA warned the price of wine from Europe was set to rise as the value of the pound dropped to a six-year low against the Euro.