Wine-maker rules out final dividend

MELBOURNE - McGuigan Simeon Wines says it is writing down the value of its wine inventory after a big 2006 vintage and will not pay a final dividend this year.

Chief executive Dane Hudson said export and bulk wine prices had continued to decline and the US vintage had also come in 20 per cent above forecast.

"While we were comfortable with stock levels at December half-year, another substantial Australian vintage has significantly increased excess stocks and will put further pressure on bulk wine prices," Hudson said on Wednesday.

McGuigan Simeon is writing down its inventory by between A$15 million and A$20 million ($17.4 million and $23.7 million).

It forecast a fiscal 2006 net profit before the write-down of between A$17.5 million and A$22.5 million.

That compares with market forecasts of a profit of A$18.5 million, according to Reuters Estimates, and a profit of A$35.9 million in the year to June 30 last year, although new accounting rules have been brought in since then.

McGuigan Simeon shares initially fell more than 7 per cent after a trading halt was lifted but recovered ground and were down 1.9 per cent to A$2.65 by the close.

Hudson, a former executive at US fast-food restaurant company Yum Brands, took the helm at McGuigan Simeon in March and has the task of reversing a profit slide caused by record Australian grape harvests that have depressed wine prices.

He said the write-down was on about 9 per cent of total inventory and was on high-priced older stock. The company did not expect to make further write-downs.

Hudson said bulk wine prices had dropped by between A30c and A40c a litre in the past six months.

"There is potential for the bulk wine market to become even more competitive, but we have taken that into account as we have looked at our bulk wine stock," he said.

McGuigan Simeon's own brands include McGuigan Black Label, Tempus Two and Miranda Wines.

It also makes wine for other companies, such as the Black Swan wine which it ships in bulk for US company E & J Gallo, and wine for supermarket brands.

Hudson said the Australian industry faced another couple of years of oversupply, depending on the 2007 and 2008 vintages.

McGuigan Simeon said total sales were running slightly above year-ago levels and export volumes were up 8 per cent.

Domestic sales were down marginally because of a reduction in average case prices, but its contract wine-making business was growing.

Bulk domestic volume sales were down 11 per cent on last year, reflecting a focus on profitable or at least break-even sales.

- REUTERS