Australian Vintage profit crushed by Brexit

The winemaker responsible for McGuigan Black Label has blamed Brexit for soaring foreign exchange losses.

Australian Vintage, maker of wines such as McGuigan, Tempus Two and Nepenthe, is the latest corporate victim of Britain’s decision to exit the European Union, after it issued a profit warning this afternoon blaming ‘Brexit’ for a $1 million foreign exchange loss for the company.

Australian Vintage — whose McGuigan Black Label is Australia’s No 1-selling bottled red wine and the fourth-biggest wine brand by volume and value in Britain — said before the Brexit vote took place that the company was on track to record net profit growth of 10 to 15 per cent for fiscal 2016.

The trading picture had been rosy to date, with sales for the end of May up 8 per cent on last year and sales of its flagship McGuigan brand up 22 per cent globally.

In May the company informed the market that subject to no material changes to the current exchange rates, Australian Vintage expected its 2016 net profit after tax (and before one-off items) to be up 10 to 15 per cent on last year’s $7.1 million profit.

But Brexit looks to have now crashed those dreams.

“The recent significant unfavourable movement in the British pound has meant Australian Vintage will need to account for an unforeseen unrealised foreign exchange loss of approximately $1 million after tax as at June 30 2016,’’ the company said in a statement to the ASX today.

“This unrealised loss is based on the exchange rate impact on our UK based working capital.”

The British pound slumped after the Brexit vote was won by the ‘Leave’ campaign, falling to a 30 year low.

“It is unfortunate that the recent events surrounding the Brexit vote has led to Australian Vintage’s profit being adversely affected,’’ Australian Vintage chief executive Neil McGuigan said.

“This event was outside of our control and is disappointing as our company was on track to achieve a 10 per cent to 15 per cent profit growth on last year.

“We expect the uncertainty in the UK to settle down in the short to medium term and are continuing to execute the growth plans for our branded business which we expect will drive an improved cash flow in the near term.’’

On Monday Treasury Wine Estates issued an upbeat assessment of its own financial forecasts, raising guidance and commenting that it did not expect any major financial impact from the Brexit result.

Australian Vintage also said today the cost of terminating the lease on a vineyard would be $500,000 less than the $9.7 million originally estimated.