XANADU Normans Wine Group has successfully raised $7.02 million from shareholders, allowing it to exit its crippling managed investment scheme.
The Margaret River and Adelaide hills wine group announced its intention to pay growers of its MIS $14,200 per vinelot earlier this year in order to exit price contracts that were double the market’s current contract rates.
In a prospectus dated May 14 1999, the purchase price for grapes was based on $2,450 a tonne for all varieties other than cabernet sauvignon, which was priced at $3,000/t. With CPI adjustments, this meant Xanadu would be paying $3,203/t of fruit this vintage.
Sources told WA Business News market rates currently stood between $1,200 and $1,700/t.
Xanadu managing director Sam Atkins said the company was now moving on with the challenge of boosting its performance.
“We’re very pleased with the result,” he said.
“It allows us to complete the next stage of our strategy and to further develop our sales, marketing and distribution strategies around the world.”
Exiting its MIS was just one component of reducing its costs of acquiring fruit for future vintages.
Mr Atkins said Xanadu had renegotiated rates with all of its growers, which were now at current market levels.
He said speculation that Xanadu had failed to pay growers was misguided.
“We renegotiated payment terms in line with industry standard because they were outside of industry standard,” Mr Atkins said.
“All our growers will be paid.”
Xanadu posted a $6.2 million loss in 2001-02, which involved the write-downs of inventory of $4.2 million and goodwill at $1.6 million and restructuring costs of $1.5 million.
Mr Atkins said more restructuring was taking place this year, including the current downsizing of the Perth office.
Mr Atkins said the recent fire at its Margaret River vineyard had not affected any 2004 stock and the wine group’s future was positive.
“The whites look exceptional and the reds are above average and from a volume point of view we really hit the target, we didn’t go over,” he said.
The May fire only affected non-current assets.
In a release to the Australian Stock Exchange two days after the blaze Mr Atkins said the damage would not affect future production levels.
“Most damage has been caused to non-current assets and the business has sufficient inventory in the system to cover this loss of stock via strong sales, brand and marketing management,” he said.