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Australia Vintage Revenue Up, Downgrades Guidance

Australia Vintage Revenue Up, Downgrades Guidance
May 27, 2015 By Simon Herrmann

McGuigan wines owner Australian Vintage (ASX:AVG) reported a jump in revenue but expects net profit to be down for the year. For the year ending in April 2015, total revenue was up 6 per cent, according to the company’s report released on Wednesday. The rise in revenue was attributed to higher UK, European, Australasia and North American sales. However, the company believes net profit for the full year will fall about 10 per cent.

The drop in profit guidance was attributed to lower than expected yields from owned vineyards. Australia Vintage crushed 113,771 tonnes of grapes from the 2015 vintage, an 8.41 per cent decrease compared to the previous year. The lower than expected crop yield was blamed on last year’s frost on the vineyards. As a result, the 2015 Self Generating and Regenerating Assets (SGARA) expected profit contribution of $3.6m has been lowered to $2.6m. Although crop yields were lower, sales increased over the same period. However, sales revenue was partially offset by lower bulk and processing sales.

The quality of the 2015 vintage has created some “outstanding wines”, the report said. Despite the lower crop yield, the growing conditions in terms of quality were generally favourable. Although sales in the UK and Europe rose 11 per cent, it has not lead to a significantly improved contribution to revenue due to losses from making bulk wine in the beginning of the year. The company said it would continue to focus on its well performing key brands for future growth. Shares of Australian Vintage are down 2c, or 5 per cent, at 38c per share near the end of trading on Wednesday. AVG has advanced 10.15 per cent in the last 12 months but has fallen 5 per cent so far this year.

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Simon Herrmann Author: Simon Herrmann May 27, 2015

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.

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