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SYDNEY - McGuigan Simeon Wines says the Australian wine industry is showing signs of recovery and it has estimated a 2008 vintage of between 800,000 and 1.3 million tonnes.
The company said it was well placed to manage the current difficult market conditions and was experiencing an improvement
in its margins.
"The industry is returning to balance," chairman David Clarke said.
"As a result, the overhang of wine stocks is clearing and we are seeing improvement in margins at McGuigan Simeon."
Export sales of branded wine increased by 20 per cent in the first quarter at the highest margin the group has achieved "in some time", Clarke said.
"Additionally, we are capturing higher margins in Australia, although there is still very aggressive pricing from some winemakers, particularly at lower price points."
The company said it expected to report a "small profit" in the current financial year.
"We will not see the full benefits from our strategies and from the industry returning to balance until 2009," Clarke said.
"We still need to work through the 2008 vintage but McGuigan Simeon is trading profitably and we expect to generate a small profit in the current financial year.
Clarke said although the group was estimating the 2008 vintage to come in between 800,000 and 1.3 million tonnes, the company's view was that it would be closer to 1.1 million tonnes.
The small 2008 vintage, hit by the ongoing drought, would create some challenges, which the group said it would attempt to minimise through cost reduction and other measures.
"We continue to focus on being the lowest cost producer of quality wines," chief executive Dane Hudson said.
Branded sales had got strong momentum in the UK, but the strong Australian dollar would slow the company's growth rate in the United States, Clarke said. But the rate of appreciation had been smaller against other currencies.
"We remain confident of our export growth, particularly with new distributors in place in the UK and Europe," Clarke said.
McGuigan had previously forecast fiscal 2008 to be a challenging year for the group.
"This is still the case, but, we are pleased with our progress and trading for the first quarter gives us confidence in our long term prospects."
McGuigan, which is Australia's third largest winemaker, said in August that it expected to return to profitability this year.
The winemaker delivered a loss of A$5.9 million for 2006/07, compared to an A$11.5 million loss in the previous year.
- AAP