Exhibit 1: Key operating milestones and quarterly performance
|
Q117 |
Q217 |
Q317 |
Ytd FY17 |
KOM FY17 |
Gross harvest (tonnes) |
- |
- |
- |
- |
1,544 |
Bulk grape sales (tonnes) |
- |
- |
- |
- |
1,144 |
International bottled wine sales revenue (NZ$) |
170,169 |
651,910 |
- |
822,079 |
1,300,000 |
New Zealand bottled wine sales revenue (NZ$) |
41,104 |
48,093 |
36,017 |
125,214 |
205,940 |
We do not expect to see any data here until the last quarter of the financial year (April to June) since that is when the annual grape harvest is completed.
Actual sales and delivery of bulk grapes are made after the grapes are harvested, so this is normally also in the period of April to June. Therefore, the nil bulk grape sales revenue in the third quarter is in line with expectations.
International bottled wine sales revenue
The company reports that there were no international bottled wine sales in the quarter. MWE announced in April 2017 that it was unlikely its Chinese distributor GEL would be able to meet its NZ$3m minimum annual commitment to purchase bottled wine for FY17. Consequently, the company had to inform the market that its KOM target of NZ$3.2m for international bottled wine sales revenue would be missed by more than 10%.
MWE is now resetting its KOM for international bottled wine sales revenue at NZ$1.3m.
The company gives more background on the issues faced by GEL. The distributor is dealing with more challenging trading conditions in China, which is MWE’s main export market. In particular:
■
there is a general slowdown of the Chinese economy and consumer spending, which adversely affects the spend on premium New Zealand wines; and
■
the Chinese New Year shopping period has been slower than expected, resulting in the distributor selling less wine than expected. This is having a knock-on effect and delaying further orders.
Talks are continuing with GEL about the shortfall. As we mentioned in our initiation in June 2016, Great Esprit is considered to be a related party, as it is owned by an associate of MWE’s executive chairman, Min (James) Jia.
New Zealand bottled wine sales revenue
MWE reports that New Zealand bottled wine sales revenue has been growing strongly this year and in line with expectations. MWE remains confident that the New Zealand bottled wine sales revenue will continue to grow and that the annual KOM target will be met.
New developments – products
The company has launched two products in the third quarter, including a Hawke’s Bay Merlot Rosé and Hawke’s Bay Organic Syrah. Management indicates that these were created due to strong market demand and will further broaden the company’s product range and variety.
New developments – markets
MWE has started selling bulk wine to a large US-based importer and distributor. Year to date sales as at the end of the third quarter were $288,000. This is of particular interest as such sales may help to provide some support to revenue for the year at a time when the KOM relating to international bottled wine sales has been downgraded.
No change on other matters
On two issues that were present at IPO there has been no change:
The dispute between the Ministry for Primary Industries (MPI) and MWE’s former wine processor remains unresolved. As a result, $1.2m of MWE’s bottled wine stock still cannot be released for sale. MWE considers that it has a strong basis for claiming damages from its former processor, based on its legal advice.
MWE continues to work with the Overseas Investment Office (OIO) regarding a retrospective consent application that would effectively cure technical breaches of the Overseas Investment Act 2005 that occurred as part of MWE’s internal restructuring to prepare for listing on the NXT Market. The timing for a final decision from the OIO remains uncertain, although there is no indication from the OIO that in the case consent were declined, it would seek any materially adverse remedies.
