Australian Vintage Limited has reported a half-year net profit result of $6.5 million, with its branded sales up 46%. 

AVL Chief Executive Neil McGuigan said the half-year result “again reinforcing that our strategies are correct”.

“The McGuigan brand continues to perform exceptionally well in the UK with sales up 16% when compared to the prior period. McGuigan remains the third largest global wine brand in the UK,” he said.

The contribution from AVL’s UK/Europe operations increased by $1.7 million to $6.4 million due mainly
to increased sales of the McGuigan brand and improved distribution and mix.

It was also a strong result for the company in Asia, with sales increasing 51%. McGuigan sales increased by 47% while Nepenthe and Tempus sales also increased, but from a lower base.

“While the contribution from the Asian division remains relatively small when compared to other segments of our business, it is showing good growth,” McGuigan noted. “As we have previously stated, we remain confident that the long-term outlook for sales into Asia looks positive, but we must manage this growth appropriately in terms of pricing and depletions.”

Australian sales increased by 6% with bottled branded sales up 8% and cask sales up 2%.

Sales of McGuigan increased by 13% and the higher margin brand, Nepenthe, increased by 6%. Tempus Two increased by 3% on the back of promotional phasing with strong expectations following significant growth in the prior period.

Meanwhile, New Zealand sales increased by 16% with all the growth coming from the McGuigan brand.

Weather impacts current vintage 

The company revealed that this year’s vintage is underway and early indications are that the recent extreme heat and dry conditions have negatively impacted yields across most grape growing regions.

“Together with the frost that occurred on some of our vineyards in October last year, we are expecting that our vineyard yields will be at least 10% below expectation,” McGuigan added.

However, he said the company had already taken steps earlier in the year to ensure it had enough wine by entering into bulk wine supply contracts and through the long-term lease agreement on the 10,000 tonne Millewa vineyard.

The combined impact of this frost plus the recent extreme weather is expected to impact the company’s full-year SGARA result by $3million to $5million (before tax) against expectation.

AVL’s premiumisation strategy reaps rewards

AVL noted that it is continuing its “transformation from a bulk wine company to a quality respected branded wine business”.

“The transformation is supported by the fact that our three key brands, McGuigan, Tempus Two and Nepenthe, have grown by 64% over the last five financial years. As evidenced by our six month result to December 2018, this transformation is continuing and gathering pace.”