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Issues still to be resolved in Australian Vintage merger
Australian Vintage chairman Ian Ferrier told the company’s annual general meeting that there are still several issues to resolve with Constellation Brands before they can move forward with the merger of their Australian and UK wine operations.
Ferrier pledged to update shareholders on the merger talks next month as he revealed the company would meet its forecast for 100% growth in net profits for 2009/10 despite posting an annual loss of AUS$123.6 million.
After a difficult year for Australian wine growers, Ferrier said that the immediate focus for Australian Vintage was on returning the business to sustainable growth and shareholder returns.
Ferrier said in a statement: “We are confident that despite the conditions, we have production at the right volume and cost and we have flexible supply arrangements.
“We remain confident that we can meet our profit forecast and are targeting a 100% growth in net profit after tax, assuming no further strengthening of the Australian dollar.
“Trading in the first four months is in line with our expectations. And we intend to continue to build our brands and deliver quality wine to Australian and international consumers."
In discussing the deal with Constellation, Ferrier said that while discussions are going well there are still a number of material issues to be worked out.
He said: “We do see significant benefits, particularly given the structural imbalance in the industry in Australia, of reduced costs and other synergies from the combined operation.”
Ferrier went on to admit the Australian wine industry is heading for disaster by continuing to produce 30% more than demand, coupled with a tailing-off of domestic sales and a drop in volume of exports.
“The bottom line is that in terms of supply and demand, Australia is producing 20 to 40 million cases more than it is selling,” he said.
“The surplus already exceeds 100 million cases. And at the current rates of production, surplus will double in two years.”
Alan Lodge, 25.11.2009