Loss prompts wine company to seek cash

Photo / APN

The New Zealand Wine Company is likely to seek fresh capital after its loss for the June year swelled by 67.4 per cent to $3.18 million.

The company, which is in talks with its bankers after breaching its banking covenants, said the combination of an oversupply of grapes, a strong dollar and the aftermath of the global financial crisis drove it further into loss from a $1.89 million shortfall in the 2009-10 year.

The company said these factors had put intense pressure on revenue, margin, net earnings and cash flow management for all wineries and grape growers, but it had taken measures to stem losses, controlling costs and monitoring cash flow.

"In our key markets we're reviewing existing distribution partnerships to ensure we can deliver sales at sustainable margins," said outgoing chief executive Rob White.

The company was continuing in the British market despite very low market pricing and the weak pound . "But we'll need to constantly review our position and look to redirect volume out of the UK if the pricing and/or FX doesn't move favourably over the next 12 months," said White, who'll be replaced by former Montana marketing executive, Peter Scutts.

Northern Hemisphere markets had been tough but Australian markets looked more promising.

The company's revenue fell to $11.16 million from $13.05 million in the previous year. Net cashflow from operating activities was negative at $1.46 million for the year due to increased inventory from lower than expected sales. Total shareholders equity at June 30 was $14.9 million, down from $18.63 million the previous year.

In June, the company said ANZ National Bank had conditionally agreed to waive a breach of a financial covenant ratio subject to an independent review of its financial forecasts and a business model satisfactory to the bank. PricewaterhouseCoopers was commissioned to do the review.

The report included a review of equity raising initiatives that would improve the Wine Company's balance sheet and enable the repayment of bank debt.

"The board agrees with the bank that new equity needs to be introduced and the company is working with PricewaterhouseCoopers to develop an equity raising plan that would cover a full range of options that could include an underwritten discounted rights issue to existing shareholders, the introduction of a strong cornerstone shareholder, and a merger with another wine company that would add value for all shareholders," the company said.

New Zealand Wine Company shares, which trade on the NZX alternative market, were last quoted at $1.10, down from $1.62 at the start of this year.