The Australian Vintage Limited (ASX: AVG) share price jumped 3% higher before paring back those gains after a trading update from the Aussie winemaker.
Why is the Australian Vintage share price on the move?
This afternoon's vintage and trading update has been the big factor behind today's movements. Australian Vintage reported 116,600 tonnes of grapes were crushed in Vintage 2021, up 15% from last year's 101,400 tonnes.
CEO Craig Garvin said, "This year's improved total crush of 116,000 tonnes is very pleasing with favourable seasonal conditions contributing to a very high quality and improved yielding vintage".
Grape yields from owned and leased vineyards climbed 11% on last year's with premium vineyard yields up 97% from 2020. Mr Garvin reported the Adelaide Hills and Barossa vineyards were recovering well from fires and droughts affecting the prior vintage.
Higher production numbers haven't been enough to boost the Australian Vintage share price this afternoon. UK/Europe/America sales to the end of March 2021 were up 12% with Australia and New Zealand sales up 4%.
Increased yields will improve self generating and regenerating assets (SGARA) income by about $1.3 million after tax against 2020. "This improvement in SGARA income is below expectation due to the decline in market price of red grapes", added Mr Garvin.
The 15% increase in tonnes crushed has reportedly increased winery efficiency. Australian Vintage expects lower processing costs for all wine made from this year's vintage as a result.
The Australian Vintage share price climbed as much as 3.5% before paring back gains. That's despite the company remaining on track to achieve its FY2021 profit target. The target range of $18.2 million to $19.2 million would be a significant jump on last year's $11.0 million results.
Results to March 31 are "in line with expectations" with hopes that China sales will resume in the medium term. Mr Garvin said, "Cash flow from operating activities is forecast to be significantly up on last year" with a forecast capital expenditure of $8.9 million.
Foolish takeaway
The Australian Vintage share price has been tumbling early in the afternoon following the trading update. Sales in the company's four core brands – McGuigan, Tempus Two, Nepenthe and Barossa Valley Wine Company – climbed 17% during the quarter.
That has helped offset lower Asia sales, with China sales down 88% amid ongoing trade tensions and tariffs.
