Delegat to invest $33M to support global growth aspirations

Tuesday 4th December 2018

Delegat Group will spend $33 million developing its vineyards in the current financial year to support an expected 23 percent lift in global sales by 2021.

The country's biggest listed winemaker spent $46 million in the year ended June 30 as it planted 200 hectares of new vineyard. It projects capital expenditure of $33 million in the June 2019 year while it develops another 136 hectares, executive chair Jim Delegat said.

That will step up the following year with another 575 hectares of land set to be planted from the 2020 financial year onwards, he said. Available bank facilities and retained earnings are enough to fund that programme, he said.

Delegat currently has 4,145 net hectares of vineyards, of which 3,631 ha are in New Zealand and 514 ha in Australia.

The company has targeted North America as a centre for global growth, with a growing taste for premium wine in the US underpinning sales in the world's biggest economy. Meanwhile, the Comprehensive and Progressive Trans-Pacific Partnership eliminates Canadian tariffs on New Zealand wine and is seen as extremely beneficial for exporters such as Delegat.

Managing director John Freeman told shareholders at today's annual meeting that capital spending coupled with developing in-market sales teams underpins its expectations to add another 640,000 case sales to 3.38 million cases in the 2021 financial year.

He affirmed Delegat's forecast case sales of 2.95 million in the year ending June 30, up 8 percent from a year earlier. Freeman said operating profit will be in line with market consensus of $50.3 million, up 12 percent from $44.9 million in the June 2018 year.

"We will continue to focus on the significant and immediate opportunity in North America, and that we will continue to learn and grow in new markets such as Asia," Freeman said.

Unfortunately for shareholders, a late venue change meant they weren't able to sup on the winemaker's Delegat, Oyster Bay or Barossa Valley brands alongside canapes as in previous years.

"Instead at the conclusion of the meeting the board invites you all to mix and mingle with your fellow shareholders, board members and senior management where a tea service will be provided," Jim Delegat said.

Delegat shares were unchanged at $9.76. They have gained 21 percent so far this year, outpacing a 2.3 percent increase in the S&P/NZX All Index during the same period.

(BusinessDesk)

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