Magnotta Winery Corporation
TSX : MGN

Magnotta Winery Corporation

April 30, 2009 11:53 ET

Magnotta Winery Corporation Announces January 31, 2009 Annual Results

VAUGHAN, ONTARIO--(Marketwire - April 30, 2009) - Magnotta Winery Corporation (TSX:MGN), is pleased to announce the release of its financial results for the year ended January 31, 2009.

Net sales for the year increased 2.8% to $24,046,671 from $23,391,225, and for the fourth quarter, net sales increased to $4,837,110 from $4,599,147. Net earnings decreased to $2,643,929 from $2,657,259 for the year and for the fourth quarter decreased to $66,466 from $140,719 for the corresponding period of the prior year. The Company has been expanding its branding campaign through its marketing, advertising and point of sale materials, through a radio media campaign, as well as with its print, television and in-store newsletters, product sampling exhibits and trade shows, and contests. This has created more brand awareness and greater volumes. However, due to cost pressures and customers shifting to lower priced "value" products which have lower margins, net earnings decreased.

Overall gross profit margin for the year decreased to 38.9% in fiscal 2009 from 41.0% in fiscal 2008. For the fourth quarter, the gross profit margin decreased to 21.6% from 32.2% in the previous year. The change in the gross profit margin is due to increased cost pressures for raw and packaging materials, energy costs, as well as higher Ontario grape prices. The gradual weakening of the Canadian dollar especially against the U.S. dollar in fiscal 2009, also provided for increased costs as U.S. denominated raw inputs became more expensive. Furthermore, the "softening" of the general economic environment especially during the end of fiscal 2009 has caused customers to shift to lower priced "value" products which have lower margins.

Selling, administration and other expenses were $4,400,094 for the year ended January 31, 2009 compared to $3,949,054 for the year ended January 31, 2008. For the fourth quarter, selling, administration and other expenses were $1,379,446 compared to $1,185,335 in the same period of the prior year. The Company has been expanding its marketing so to increase brand awareness. This resulted in an increase in selling, administration and other expenses.

Total overall amortization of property, plant and equipment of which a substantial portion is now included as part of cost of goods sold as per the new CICA Handbook Section 3031 on Inventories since it pertains to the production of goods, decreased in fiscal 2009 to $1,210,440 from $1,296,786 in fiscal 2008, and for the fourth quarter it was $408,465 compared to $344,675 in the same period the prior year. The change resulted from fluctuations in capital asset investments, made over prior years, in the Company's production equipment, vineyards and retail locations as well as the timing of the purchases of depreciable capital asset investments.

Interest expense for the year ended January 31, 2009 decreased to $634,414 from $862,380 in fiscal 2008. During the fourth quarter, interest expense was $23,720 compared to $157,368 for the same quarter last year. The decrease is due to lower long-term debt in fiscal 2009 compared to fiscal 2008, and lower overall interest rates on the Company's operating line facility and long-term debt.

Additional details and information are included in the Management Discussion and Analysis and consolidated financial statements for January 31, 2009.

The common shares of Magnotta trade on the TSX under the symbol "MGN".

Readers are cautioned that some of the statements contained in this release may be forward-looking statements, such as expectations, estimates and statements that describe the Company's future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition to exist or occur. Generally, these forward-looking statements can be identified by the use of terminology such as "outlook", "anticipate", "believe", "estimate", "expect", "intend", "should", and similar expressions. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Actual results in each case could differ from those currently anticipated in such statements by reason of factors such as, but not limited to, changes in general economic and market conditions. Magnotta disclaims any intention or obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or results, or otherwise.

To view the Management's Discussion and Analysis, please visit the following link: http://media3.marketwire.com/docs/magmda0430.pdf.

To view the Financial Statements, please visit the following link: http://media3.marketwire.com/docs/magfs0430.pdf.

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