The New Zealand Wine Company

The New Zealand Wine Company Limited Media Release

An update is being provided by The New Zealand Wine Company Limited (NZWC) prior to the release of the December 2011 Half Year Earnings Report on 2 March 2012, as follows:
 
1)       NZWC Restructuring
During the second six months of 2011, recognising the difficult trading conditions, the Company implemented a number of restructuring initiatives targeted at reducing costs. The Board believe that the Company is now structured to be able to compete effectively and progressively return underlying earnings to profitability.  
 
2)       Half Year Results to 31 December 2011
The underlying operating loss before for the half year to 31 December 2011 will be higher than the comparative 2010 year loss of ($97k). One off restructuring costs of ($257k) to cover staff, legal and independent advisors costs make up the largest component of the increased loss. There is also a potential doubtful debt provision that is currently being considered. The six monthly non cash ‘unrealised loss on changes in the fair value of financial assets/liabilities’ due to ‘mark to market’ adjustments at balance date is ($1,385k).
 
3)       Foreign Exchange
The strength of the NZD against the USD and GBP continues to impact on wine sales and margins. After considering the significant margin challenges faced in the UK market Directors elected to crystalize a gain from the high NZD/GBP FX rate to close out GBP400k of forward exchange contracts to realise a cash profit of NZ$515k, which will be taken up in the second half of the year.
 
4)       2012 Harvest Yields and Vineyard Operating Costs
The 2012 Harvest yields in Marlborough will be lower due to cool and rainy weather conditions during flowering. Not all NZWC vineyard forecast harvest yields have been impacted but it is expected that the overall NZWC harvest yield will be lower than the initial forecast. Grape prices are expected to be higher than the 2011 ‘valley average’ but it would be speculation if the Company tried to estimate the NZIFRS financial reporting impact from the market ‘per tonne’ prices of grapes that will be paid in 2012.
 
5)       Lineage Imports LLC
Lineage has entered into a non-binding agreement to introduce new capital which would enable it to settle its debts to NZWC. Lineage and NZWC will be working through the restructure of Lineage over the next few weeks.
 
6)       Capital Restructuring
Grant Samuel was appointed in December 2011 to advise NZWC on restructuring and strengthening its balance sheet and to work with the Company to implement an equity raising plan that would satisfy the agreement reached with the ANZ National Bank (Bank) in December 2011 to raise a minimum of $5m prior to 30 June 2012 and to reduce Bank debt by a minimum of $5m.
 
Grant Samuel has made good progress with identifying interested investors and has produced an Information Memorandum which has recently been released to a limited number of interested trade investors. Grant Samuel’s brief is to consider all capital restructuring options that range from securing a strong cornerstone shareholder through to selling 100% of the business.
 
7)       Directors    
At the 2011 AGM the prospect of reducing the size of the Board was raised by shareholders. Given the Capital Restructuring initiatives being undertaken and the need for a small responsive unit to manage the process, NZWC Directors have decided that the size of the Board should be reduced. John Albertson and Steve Riley will retire immediately as Directors to enable the NZWC Board to be reduced in size to the three remaining Directors - Alton Jamieson, Bill Wallace and David Appleby.    
 
The December 2011 Half Year Results will be released on 2 March 2012.
 
Authorised for public release.
 
For further information please contact:
 
Alton Jamieson
Chairman
The New Zealand Wine Company Limited
PO Box 67, Renwick, Marlborough
Telephone number: 021 964 995
E Mail address: alton_jamieson@xtra.co.nz
Web site address: www.nzwineco.co.nz