Delegat's buys vineyard to meet earnings goals

Listed winemaker Delegat's has confirmed it is buying a 110 hectare Marlborough vineyard for $12.5 million.

Managing director Jim Delegat said the vineyard was needed to meet volume demand and long- term earnings targets.

Forsyth Barr analyst Rob Mercer also suggested the group was considering investing $50m in building a Hawke's Bay winery.

Mercer said the group was in a strong position for expansion as it had slashed net debt to $91.9m from $162m in 2008.

But Delegat dismissed talk of a new winery as speculation and said committing that much capital would require board approval.

Delegat's yesterday reported a 22 per cent drop in net profit to $25.5m for the year to June, from $32.7m the previous year. Mercer said the group's ability to deliver earnings in line with last year - $43.5m this year against $43.8m - was "impressive" given the high kiwi dollar and weak global economy.

Group revenue fell 6 per cent to $215.1m, down from $229.8m the previous year.

The company has reiterated its frustration with New Zealand reporting rules as net profit does not provide adequate insight into the group's underlying operations performance, mainly because of several fair-value adjustments.

Stripping out those charges - which relate to vine assets and grape harvest provisions - the company reported an operating net profit of $25.6m, up 7 per cent from $23.9m.

"This was an excellent result achieved on [wine] case volumes down 6 per cent to 1.9 million cases, an average realised case price flat at $116.30 a case," Mercer said.

The group was able to manage these risks by switching volume out of the British market - where case volumes are down 24 per cent to 622,000 - in favour of North America, with case volumes in the US up 18 per cent.

Delegat said the New Zealand wine industry remained a long- term growth story. Fairfax NZ

Taranaki Daily News