Silver pillow here to stay despite deflating sales, says Neil McGuigan
Health & Biotech
Health & Biotech
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Neil McGuigan’s Australian Vintage has returned to profit despite a drop in local sales due to lower interest in cask wine.
“Australian sales decreased by 2 per cent due to a 6 per cent decline in cask sales,” the winemaker reported.
“This decline is in line with the consumption trend of casks in the Australian domestic market.”
Sales of the legendary silver pillow — invented 52 years ago by South Australian winemaker Tom Angove — have been in decline for years.
But the goon sack was going nowhere said Mr McGuigan, a 37-year veteran of the industry.
“In the long term cask wine will have a good future because wine prices for 750ml bottles will increase,” he told Stockhead.
“The value pack will have a resurgence simply due to its value equation.”
Australian Vintage (ASX: AVG) — owner of wine brands such as McGuigans, Tempus Two and Passion Pop — posted a $4.3 million full-year profit compared to last year’s $2.2 million loss.
Revenue was 7 per cent lower at $226.5 million, which the company blamed on a post-Brexit fall in the pound.
“Based on the average exchange rate that was present in the 2016 financial year, our 2017 cash flow would have been $4.7 million higher and our net profit after tax would also have been $3.3 million higher,” Mr McGuigan said.
“This clearly demonstrates that our long-term strategies are correct.”
Australian Vintage has diversified its export strategy in recent years, tapping into the growing demand for Australian wine in both China and the US.
But it’s not a one-fits-all approach.
The Australian palette was still one of the most discerning when compared to markets such as the UK, China and the US.
Teaching the finesse of a fine wine to China was a slow process, Mr McGuigan said.
“They are only now learning how to appreciate a good wine after coming from apple juice and liquid yoghurt,” he said.
“Our black label is going gangbusters because the Chinese market just wants soft, fleshy and easy-drinking wines in the beginning.”
Australian Vintage had $2.6 million in the bank at the end of June, compared with $6 million at the end of the same period last year.
The winemaker’s shares fell 9 per cent on Wednesday to close at 43c. Shares have traded between 40.5c and 58.5c over the past year.