The optimists piled into struggling winemaker Evans and Tate this morning after it revealed multi-million dollar asset write-downs and a loss for the year in a statement to shareholders. E&T shares bounced 10c to 41c in the first hour of trading on 4.5 million shares.

With the write-downs and losses following a review of the company by Korda Mentha group’s 333 Performance Management, investors seem to believe all the bad news is out in the market. But the Australian wine glut won’t go away this year and Evans and Tate has its own private wine lake, so why the optimism?

Investors should read the three-page statement from the company very carefully. The report shows the same people still running the company lost control during the year and allowed a $25 million blow-out in wine stocks to occur.

The company has too much wine that it just can’t sell at current prices. So it has to sell $8-10 million dollars worth simply to give itself breathing space. The company says sales this financial year will be $95 million, up 12% or $10 million, with a small rise in earnings before interest, tax and depreciation to the range of $21 to $23 million. That’s the only good news before the write-downs.

Peter Fray

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