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Hunter heads regional survey findings
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The Deloitte/Winemakers’ Federation of Australia (WFA) regional financial benchmarking survey released early in November has found that wineries from the Hunter Valley region reported the strongest earnings, with earnings before interest and tax (EBIT) of 23.2%. The 2004 regional analysis of the annual financial benchmarking survey included separate results for the Fleurieu Peninsula (SA), Barossa Valley (SA), Mt Lofty Ranges (SA) and Hunter Valley (NSW) wine regions. Although the full 2004 Deloitte/Winemakers Federation of Australia Annual Financial Benchmarking Survey, which was released in June 2005, indicated overall poor performance from many Australian wineries, those from the Fleurieu and Barossa regions also reported strong margins. These results also indicated that wineries surveyed from the Mt Lofty Ranges region had the lowest earnings result, generating an EBIT to sales ratio of less than 8%. Deloitte partner and leader of the Deloitte Wine Industry Group Stephen Harvey said the survey was conducted against the backdrop of a very difficult operating environment. “After a second consecutive year of reported losses, with many wineries feeling the strain, it was encouraging to see such results posted by a number of wineries in key Australian wine regions. “Winery profitability will vary across regions according to factors such as the level of inventory, asset values and strength of export revenue. “The Hunter Valley region’s gross margin percentage of around 48 % underpinned its stronger profitability, compared to the other surveyed regions which all had gross margin percentages closer to 40%,” said Harvey. “Cellar door sales, at around 8 % continued to contribute significantly in the Hunter Valley,” he added. “Cellar door revenue has been a significant contributor to the Hunter Valley revenue, due to the region’s proximity to Sydney and its access to international and domestic tourists.” Stephen Strachan, chief executive officer of the WFA, said the survey results provided useful indicators of the different business environments currently facing wineries in these regions. “As such it should help wineries to more effectively manage their business and identify their points of difference”. Other significant findings of the survey were: • wineries in the Fleurieu region reported around 16 % of sales relating to bulk wine, higher than any of the other regions • while all wineries had high stock levels, the Mt Lofty Ranges region currently holds the highest, approaching 50% of total assets • grape cost per tonne, at around the $1,000 mark, was almost 40% below that of the previous year • Mt Lofty Ranges wineries reported a much lower packaging cost per case, almost half that of the wineries from the Fleurieu and Hunter Valley regions • wineries from the Hunter Valley recorded the lowest overall inventory holding in terms of litres • only wineries from Mt Lofty Ranges and Fleurieu reported selling products in the below $7 per bottle market segment, and • the Hunter Valley wineries sold about 60 % of their wine in the $20–50 price range.