Tempus Two and McGuigan parent, Australian Vintage, has cancelled its final dividend, announced cost-cutting measures, and a $9 million write down after what it described as one of the toughest vintages in many years.
The trading environment throughout FY23 has been challenging, with the company absorbing around $26 million of hyper-inflationary costs over the last two years with limited ability to pass on due to market discounting at the top-line.
Freight costs did recede, but a portion continues to adversely affect the cost base, the company said.
As Treasury Wine Estates reported, the group has experienced declines in the value segment, but it expects its pillar brand revenue to be in-line with the 78 per cent contribution of FY22.
Adverse weather events and flooding at the beginning of 2023 resulted in a 20 per cent fall in the vintage intake amount, from 102,000 tonnes in 2022, to 80,000 this year.
“The magnitude of the decline in throughput and lower than anticipated vintage necessitated a non-cash winery production fixed cost write off amounting to roughly $9 million. This will impact FY23 results and benefit cost of goods sold in future years.
“In one of the toughest vintages in Australia in many years, AVG has outperformed the overall industry decline of 40 per cent,” it said.
FY23 expectations
- Group revenue: ~$255-260m, vs FY22 $260.1m
- Reported EBITDAS: ~$34-36m, vs FY22 $43.7m
- Net debt: ~$52-57m, vs FY22 $74.5m
The group said it was reviewing the potential of selling future assets that are surplus to operational requirements while maintaining a “disciplined marketing and capital spend” to support innovation and premium brands.
It said it would commit to not undertaking any debt-funded acquisitions in the near term and suspended paying a final dividend for FY23.
AVG CEO Craig Garvin said the company remained confident in its strategic plan and is pleased with the performance of its innovative and premium brands.
“We continue to gain market share across all key geographies despite the tough trading environment,” Garvin said.
