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New Zealand dollar hits wine company profits

Published:  23 July, 2008

Financial: The high New Zealand dollar has forced the New Zealand Wine Company's (NZWC) profits to fall by more than 6%, despite record sales boosted by the winery's carbon neutral status.

The company had forecast an after-tax net profit of NZ$1.6million for the year, and said it would have met that result had it not been for the currency.

The unexpectedly strong, and continually increasing value of the New Zealand dollar throughout the past financial year had turned what would have been a record result into an average year for earnings.

The net tax paid profit of $961,000 was 6.3% lower than last year's profit.

The company was formally accredited last year as carbon neutral, which Mark Peters, chairman of NZWC said was a "definite factor in sales growth".

"While we cannot, and do not, claim to have greened our full supply chain, we have been able to make our own operation, including freight to foreign ports, a carbon neutral operation.

"Management is working to expand such carbon neutrality further."

Revenue for the NZWC, which produces Grove Mill and Sanctuary wines, increased 13.8% on the previous year to $10.716 million, and a 12.9% rise in comprehensive income to $1.903m.

Peters, who steps down soon, said he would retire "in some disappointment" that the company had not delivered a return on shareholders investments that the board considered satisfactory.

The company's outlook was still "very sound", but strong concerns remained about the dollar's "very unrealistic value".

Chief executive Rob White said reducing the company's carbon emissions had not only brought down costs, but secured listings with Tesco, Britain's main supermarket chain, and a house-brand contract with Sainsbury's.

As a result its UK business grew 27% for the year. Sales in Australia grew 200%.

As well as the dollar, White said the wine industry faced the challenges of overvalued land and grape prices, and the introduction of new financial reporting standards.