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Concha y Toro profits hit hard by currency movement

Published:  23 July, 2008

Chile's biggest wine exporter, Concha y Toro, has seen its profits hit hard by the continuing strength of the Chilean peso.

First quarter profits slumped dramatically to $2.6 million, (1.4m) - less than a third of the corresponding figure from 2005 ($9.2 million/5m).

The peso, which was already reaching record highs a year ago, ended the year to March 2006 almost 15% up against the US dollar. High copper prices, which account for 50% of Chile's exports, are driving the appreciation.

A spokesman for the company said: 'Operating margin decreased from 14.3% to 5.5%.

'This contraction is explained by the impact of the sharp appreciation of the Chilean peso on dollar-denominated revenues and the increase on average wine costs as a result of the higher grape prices for the 2005 vintage.'

Despite export growth of 5.5% by volume, revenues fell 6% to $74 million (40m). Domestic sales crashed 17%.

The strength of the peso forced Concha y Toro to rise prices in the UK last year, leading to a 5.7% drop in sales.

The company also announced it would decrease its investment this year by a third to $60 million (33m).