Earlier this morning, winemaker Australian Vintage [ASX:AVG] was rising in shares after posting a trading update. It also cast its outlook on the business going ahead with the rest of FY2023, into 2024, and with its strategic plan on track.
Australian Vintage is focused on reducing its cost and maximising its profit margins even despite the current ongoing challenging environment.
AVG was rising by more than 1% in the mid-morning just shortly after releasing its update to the market, trading for 46 cents a share at the time of writing.
However, this small upwards movement today is one of many small incremental increases over the past three months, whereby the winemaker’s stock has been notably falling at a much higher rate.
AVG is currently down by 27% in the last 12 months and 36% down on the ASX:
Source: TradingView
Australian Vintage says business is down, but this is expected
Australian Vintage says that despite some growth in its overall market share more recently and across AVG’s main key geographies, it still addressed the overarching business environment, which is a challenging one.
The group acknowledged the ongoing inflationary environment. It said that while it was down in financials and operations due to some adverse weather impacts, it still performed better compared with the overall industry.
Another issue flagged was ongoing inflationary pressures across core geographies such as over the UK and in Australia, which remain sticky and persistent.
Consumption trends in the value segment have been pressurized. Even with the company deciding to aim to shuffle pricing across FY2023, this progress has not been enough to overcome the inflationary pressures and price impacts when compared with broader market competition.
Australian Vintage says that considering the current conditions, it is committed to improving its overall business performance with a particular focus on cost reduction, growth in higher margins, innovation and reduction of debt.
The way the company has decided to do this is by removing $9 million of business costs, hoping to offset inflationary pressure, as well as more calculated management of freight expenses, supply contract negotiations and other such efficiencies.
AVG is also committed to reviewing further asset sales and other operations, as well as knuckling down on its marketing discipline and supporting its innovation for the strategic plan.
The wine group has visions of expanding its growth regions for all its pillar brands beyond core markets, and in order to help it get there, it will be suspending any potential final dividend for FY23 until its net debt and earnings reach their desired range.
All considered, the group expects underlying EBITDA and NPAT to improve into FY24.
AVG’s Chief Executive, Greg Garvin stated:
‘We remain confident in our strategic plan and are highly enthused by the performance of our innovative and premium brands. We continue to gain market share across all key geographies despite the tough trading environment. We are making proactive decisions today to both improve our financial performance as well as our ability to operate with agility to our strategic plan.’
The group intends to release further guidance for FY24 with its end-of-year results.
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Regards,
Mahlia Stewart
For Money Morning
