Discounted wines affect Cooks

Press, 13 November 1985, Page 52

Discounted wines affect Cooks

If heavy wine discounting continues, there is little prospect of Cooks New Zealand Wine Company, Ltd, returning to immediate profitability, the directors say in the annual report.

Increased interest costs and discounting eliminated any possible profit in the final six months last year, and heavy discounting had continued in the first three months of the new financial year.

“While the significant (wine) surplus exists in the New Zealand industry, there can be no guarantee of anay realistic level of profitability in the short term.” The merger of Cooks and McWilliam’s Industries, Ltd, last year has given the group the efficiency to com-

pete and ride out the industry’s present problems.

The directors accept a lack of profit in the short term in the belief that once the surplus disappears and prices return to normal the group will regain strong profitability. The chairman, Mr B. P. Hopkins, says that, because of the need to match grape supplies with requirements, many of the company’s own vineyards have been put up for sale.

Because of the substantial over-supply and the contractual obligations to growers to take crops, the only “safety valve” available to the company is the decapitation and sale-of the vineyards. The directors are confident that the assets will realise more than the book

value of $3.5 million, he says. As reported, Cook’s incurred a total net loss of $4,568,874 in the year to June 30, compared with $2,199,825 in the previous corresponding period. The loss was after including an export tax credit of $283,255 ($153,804 previously), loss on wine stock revaluations of $5,486,401 (nil), tax credit of $2,267,320 from McWilliam’s (nil) which was carried by that firm for future tax purposes, extraordinary profits of $352,996 ($747,996), and $619,046 (nil) from unrealised exchange losses. In the previous year there were vineyard development costs of $544,863. Turnover more than doubled from $8,487,327 to $19,666,127. The loss was after providing $660,718 more for depreciation at $1,453,397. The company now has accumulated tax losses of $12,636,389 to carry forward. No final dividend has been recommended by the directors, which means that the company has not paid a dividend for two consecutive years. Shareholders’ funds rose $9,891,126 to $16,804,518, including ordinary capital up SB.7M to $14,127,955 because of the issue of shares to acquire the capital of McWilliam’s Industries.

Working capital increased $4,171,629 to $8,311,529, and the ratio firmed from 1.5 to 1.8 to one.