Penfold bounces back

Press, 8 September 1982, Page 30

Penfold bounces back

PA Auckland Penfolds Wines (N.Z.). Ltd. has recovered from the flavoured wine controversy, which had cut its trading profit almost 66 per cent in the year to June 30. Because of restructuring sales were up 88 per cent in the first two months of the new financial year, said marketing manager. Mr R. Porter. Difficult trading because of the flavoured wine incident last year and the high costs of a withdrawn public equity issue, cut the trading profit 65.4 per cent to $390,672 in the year to June 30, the annual report shows. Mr Porter, said that a new marketing strategy which was fairly successful last summer had produced continued growth and was paying off. The company was delighted with the first two months of this year, and the profit was close to budget. New wines brought on to the market since July 1 had shown ‘'remarkable acceptance," along with Penfolds' new branding policy. The corresponding period last year was before the wine controversy, when Penfolds’ sales were following "a normal course." he said.

The managing director. Mr Frank I. Yukich. said in the annual report that the most significant factor contributing to the poor performance was the Health Department’s seizure of the company catering kegs. "This resulted in an initial severe drop in sales, a heavycredit situation, and costly expenditure to regain market confidence for the company's entire product range, which were all affected by the controversy. “Further, as the directors could no longer support the $1,500,000 profit projection for the year, the company's prospectus containing this projection for the public issue of shares was withdrawn” he said. This left the company with a significant loss, and there were additional costs to privately place the withdrawn equity issue, additional interest costs, and the loss of bulk wine purchase options. The loss on the options had resulted in product shortages in the second six months. Capital profits of $423,844 from the sale of surplus land, and the rationalisation of the wholesale and retail division gave a total profit of $814,516, still 28 per cent

down on 1981. The consolidated profit statement showed' the company incurred costs of $176,376 on its abortive public issue. Mr Yukich said a major financial review included an equity issue after the withdrawal of the public issue, which involved placing 2.750,000 ordinary 50 cent shares at a 41 cents premium with Lion Breweries. Ltd. Although group sales at $9,633,094 were 17 per cent down on last year, the figures are not strictly comparable, as 1981 results in- ' eluded sales of $3,976,497 from the wholesale and retail division which had been sold. Excluding this, group sales were 24 per cent ahead. On marketing, Mr Yukich said the industry had until recently been selling under conditions of prosperity. But the recession and inflation at the same time was now making an impact on wine producers, “revealed in the often contradictory statements from wine companies as to the present state and future direction of the industry.” The company had not completely settled its differences over thd trade mark "Pen-

folds" with Penfolds Wines Australia. Ltd. but "it now appears that this will be amicably settled in the near future to the satisfaction of both parties."

Plans were well advanced for construction of a winery in Blenheim. The new Rhinesdale Winery has enabled the company to develop a number of new wine styles as well as to extend 'its premium white varietal range. The planting programme produced 376 hectares of varietal grapes. The Blenheim region would have plantings of more than 526 hectares at the end of the season, he said. Export growth rates forecast for several potential overseas markets are "far in excess of" the projection for the local market., The chairman. Mr B. G. Cathie, said 1982 was the most "trying year ever” for the company. Under present tax legislation, no tax is payable on profits and barring any change, the company does not expect to pay income tax until 1986. The consolidated balance sheet shows shareholders' funds rose $3,190,332 to $9,060,684.