Marlborough Wine Estates Announces FY24 Results

MARLBOROUGH WINE ESTATES ANNOUNCES FY24 RESULTS For the year ended 30 June 2024 (FY24) CONTINUED FOCUS ON DISTRIBUTION AND BRANDED SALES MWE’s continued focus on growing its distribution and premium branded wines saw branded sales revenues and volumes increase by 5% and 2.8% in FY24 respectively. This pleasing outcome was driven by broader distribution in New Zealand, which resulted in an increase of 16.8% in branded sales revenue, offset by lower shipments to international markets. INTERNATIONAL MARKETS This has been a challenging year for the New Zealand wine industry, as global customers reduced inventory levels and adjusted purchasing patterns as global shipping patterns have normalised, which led to a decline in packaged wine export volumes compared to the previous year. Export volumes during the second half of FY24 have grown on the prior year reflecting continued consumer demand in key markets, which position the industry well for a stronger export performance in FY25. The US market remains the largest export wine market for New Zealand wine at 100m litres, a reduction of 6% on the prior year. The OTU brand has been imported into the US market for just over two years and has continued to expand its distribution, now sold in over 30 states. The on-premise segment of the US market has slowed down during FY24 and we are working with our importer to broaden our in-market distribution into retail and grocery markets now the OTU brand has established a distribution base. In Canada, the OTU brand was selected for releases across two varieties by the Liquor Control Board of Ontario, and further two more releases have been selected for FY25. OTU Sauvignon Blanc is also now distributed in Manitoba. In the UK market, there were significant in-market headwinds due to excise tax increases and recessionary pressures, which led the overall UK market to a 12% volume decrease. Despite this OTU’s exported volume to UK has increased slightly by 4% compared to the prior year. We are working with our distributor on programmes to drive broader distribution, as the reduced vintage from 2024 harvest will present more opportunities for OTU to grow in UK, despite being a more mature market. NEW ZEALAND MARKET REMAINS STRONG The OTU wine brand is continuing its growth in the premium price segment in the New Zealand grocery market , where our wines are consistently ranked inside the top 10 in both revenue and volume. During FY24, New Zealand's total wine consumption volume decreased by 7.9%, primarily due to challenging market conditions and rising prices. Despite these headwinds, OTU wines continued to find favour with consumers of premium wines, with MWE’s New Zealand sales volume growing by 14% compared to the last financial year, showcasing the resilience and growth potential of MWE’s brands. A SMALL 2024 VINTAGE The 2024 harvest has delivered grapes of exceptional quality, with the warm and dry conditions leading to an earlier harvest in fully ripe and excellent condition. However, as previously reported, the Marlborough region experienced extremely dry conditions across the growing season and recorded its lowest rainfall for the 9 months to February in 94 years, with the conditions continuing throughout March. The dry conditions and variable weather conditions during flowering last year slowed vine growth and impacted bunch and berry size and weight. Given global export volumes slowed in the first six months of the year for the industry, there was a reduction in grape sales prices in Marlborough for Vintage 2024. As a result of these growing conditions the harvest from MWE's vineyards reduced 32% on long term average yields and 36% on last year. The lower yield and reduced grape prices had a significant impact on MWE's profitability in this financial year. Consequently, MWE reduced its bulk wine sales in FY24 and this, together with the harvested grapes will enable the group to pursue growth of its branded wine sales in domestic and international markets for the year ahead. We remain positive about the future for our brands. The long term demand and supply equations remains favourable, as New Zealand wine remains one of the only categories showing growth in many major export markets. FINANCIAL PERFORMANCE For the year ending 30 June 2024, MWE reported revenue of $8.35 million, marking a 11.4% decrease from the previous year. This decline was primarily driven by reduced bulk wine sales and slower international shipments, with external grape sales slightly lower than in the previous year. As noted above, the smaller vintage yields had a significant impact on profitability, reflected in gross profit falling from $3.63 million to $0.64 million, as lower yields are recorded as higher costs of sales. As a result, the Group posted a net loss of $3.29 million after tax, compared to a profit of $295,000 in FY23. A tax asset of $0.72m, has not been recorded, however will be available to offset against future profits. The Group also experienced a net cash outflow of $2 million from operating activities given the lower revenues, compared to an inflow of $619,000 in FY23. As in prior years, the group commissioned an updated vineyard holdings valuation, which resulted in a decrease of $2.82 million being recorded in the financial statements, compared to an increase of $1.05 million in the previous year, and $13.09m in the past three years. LOOKING AHEAD The MWE team remains focused on building a robust branded wine business, expanding its international distribution network, and enhancing profitability in the coming years. The OTU brand continues to be well received in domestic and global markets, and our team are focussed on our market development strategies. The reduced yield in the 2024 vintage presents additional growth opportunities in key export markets for New Zealand wine, as New Zealand maintains a strong presence and momentum with sales to consumers in most key international markets increasing year on year. MWE continues to focus on growing premium branded wine revenue in both New Zealand and overseas markets and is working closely with its importing and distribution partners to drive continued growth in these critical markets. The Board would like to thank our team, suppliers, business partners and shareholders for their continued support over the last year. We look forward to a stronger and improved FY25. Min Jia, Chairman & Conan Wang, Acting Group Chief Executive Officer For media assistance and enquiries, please contact: Jackie Ellis on 027 246 2505 or email jackie@ellisandco.co.nz.