By Gareth Vaughan Alcopops maker Independent Liquor has posted an annual loss of almost NZ$44 million with finance costs on hundreds of millions of dollars worth of bank loans taking a heavy toll. The $43.9 million loss for the year to September 30, 2009, up 30% from a NZ$33.8 million loss the previous year, features in an annual report recently filed by Independent Liquor’s parent company, Flavoured Beverages Group Holdings, with the Companies Office. Independent Liquor, majority owned by Australia’s Pacific Equity Partners and Hong Kong-based Unitas Capital (formerly CCMP Capital Asia), eked out a revenue rise of NZ$6 million, or just 1.4%, to NZ$421.4 million. The two private equity groups took majority ownership of Independent Liquor through a NZ$1.26 billion deal in December 2006 following founder Michael Urceg’s death in a helicopter crash. Erceg’s widow, Lynette, retained a 13 % stake. Shareholders recently tipped in just over NZ$30 million of equity to cut debt as the group’s borrowings were restructured. Independent Liquor’s chief executive Peter Murphy recently told The Independent the equity injection was a “genuine investment for growth” rather than a necessity to keep the firm’s banks happy. He also said Independent Liquor, whose products include Woodstock Bourbon and Vodka Cruiser and operates in New Zealand, Australia and Canada, was expanding into the United States and China.
"We're now seriously looking to expand the business offshore," Murphy said. This included establishing an office in California and appointing a president of North American operations to run the new US business and existing Canadian one. While the US was a "serious strategic play", the China push was more of an opportunistic, toe in the water, export approach. "We're lining up with someone [in China] who believes there's real opportunity right now and we're developing a relationship with them to put a range of products into the market."The US and Chinese push comes after Independent Liquor was rocked by a 70% hike in excise taxes on alcopops in Australia which reduced its sales volumes and earnings in its biggest market.
AC Nielson data suggests Australian sales of Independent Liquor's ready-to-drink beverages (RTDs) fell 36% by volume in the year to April 2009.The annual report reveals that Independent Liquor faces average interest rates of 8.5% to 9% in the year to September 2010 as a result of the restructure of borrowings compared to an average variable rate of 6.5% in the September 2009 year. The company did not breach any banking covenants nor trigger any events of review during the year. Although net finance costs were nearly NZ$4 million lower than the previous year at $79.8 million, administration expenses rose NZ$10 million to NZ$24.4 million with distribution costs up more than NZ$4 million to NZ$32.9 million. As of September 30 Independent Liquor's current liabilities - those due within a year - included borrowings of NZ$23.2m, up from NZ$15.7m a year earlier, and non current borrowings of NZ$675.4 million down from NZ$713.8 million. Known as Independent Distillers in Australia and Canada, Independent Liquor had NZ$13.6 million in cash at balance date, down from NZ$15.9 million a year earlier, and total equity of NZ$501.4 million down from NZ$522 million. Meanwhile, there could be further bad news for Independent Liquor on the tax front with the Sir Geoffrey Palmer led Law Commission's final report in its Sale of Liquor Project, including law-change recommendations, due to be released by the Government. Murphy told The Independent the Australian tax increase had failed to achieve the Government's aims.
So if people believed alcohol consumption could be reduced through pricing, the only way to do that was to set prices based on alcohol content, whether the alcohol was brewed, distilled or fermented, Murphy said.
"It hasn't had any impact on binge drinking whatsoever; it hasn't had any impact on alcohol consumption. All it did was move people from RTDs into beer and spirits."This was first published this morning in our Daily Banking and Finance newsletter, which is for our paying subscribers. Find out more here.
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