2 Jul 2010

More insolvencies predicted in wine industry

6:05 am on 2 July 2010

A wine industry analyst says more consolidation in the industry is inevitable as profits slip and pressure from banks mounts.

Consultancy firm Deloitte's financial benchmarking survey analyses the wine sector's financial performance during the 2010 financial year - which encompassed the 2009 vintage.

Deloitte corporate finance partner Paul Munro says profitability has declined in the last two surveys and oversupply continues to create problems for the industry.

There are likely to be more insolvencies in the short term and this will lead to more consolidation, he says.

Debt always plays a significant role in funding asset-intensive businesses, Mr Munro says, but there's a worrying trend of growing debt levels, particularly in smaller-scale operations.

He says this year's smaller vintage should help to ease pressures on the sector.