Which 2 NZX wine stocks can be considered in 2022?

Highlights

• New Zealand produces 1% of the world’s total wine in terms of volume.
• Delegat Group expects its 2022 operating profit result to be in the range of $57 million-$61 million.
• Foley Wines expects its operating earnings before tax to be $8 million for FY22.

A long growing season and cool maritime climate in NZ make an ideal environment for growing grapes and producing some premium wines. Sauvignon Blanc is the country’s most commonly planted grape, accounting for over two-thirds of all NZ wines, and Chardonnay is its most widely grown variety.

New Zealand produces 1% of the world’s total wine in volume terms and has over 700 wineries, over 80% of which exports globally. NZ wines are exported to over 100 countries and had been struggling with distinction.

NZ growers and wineries had to bear the impact of the COVID-19 pandemic on markets, borders and supply chains. NZ wineries had been facing supply chain issues due to increased transport costs and tumbled shipping.

Let’s skim through the performance of 2 NZX wine stocks till date.

Image source: © 2021 Kalkine Media®, Data source- EODHD/Others

Delegat Group Limited (NZX:DGL)  

Delegat Group witnessed a tough but successful FY21. The Group attained global case sales of 3178K, down 3% on prior year and delivered an operating NPAT of $65.5 million, up 8% on previous year in 2021.

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The Group generated cash flows from operations of $74.7 million that financed over $62.2 million invested in growth assets. It plans to invest an extra $29.7 million in FY22 to provide earnings growth and is on track to increase sales by 8% to 3419K cases.

Delegat plans to grow sales by 25% by FY24 and expects its 2022 operating profit result to be in the range of $57 million-$61 million.

DGL ended the day flat to close at $3.

Foley Wines Limited (NZX:FWL) 

Foley Wines attained a 3.7% rise in operating earnings to $8 million and a 6.6% rise in bottled sales revenue in FY21 despite supply chain disruptions and shipping constraints. It attained a 6% rise in case sales to 565K in the period.

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Nevertheless, Foley’s total harvest was down 28% on the previous year to 5,582 tonnes because of unfavourable weather situations. FWL has invested $11 million in the development of the Martinborough facility, which is scheduled to open in the second half of the year. It will also begin building Mt Difficulty in 2022.

The Group expects its operating earnings before tax to be $8 million for FY22.

FWL ended the day 1.96% in red to close at $1.5.

Bottom Line

Rising cases of Omicron and shipping and supply chain constraints can materially impact earnings of wineries.

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)