Magnotta Winery Corporation
TSX : MGN

Magnotta Winery Corporation

September 14, 2011 10:22 ET

Magnotta Winery Corporation Announces July 31, 2011 Quarterly Results

VAUGHAN, ONTARIO--(Marketwire - Sept. 14, 2011) - Magnotta Winery Corporation (TSX:MGN), announces the release of its financial results for the second quarter ended July 31, 2011.

Gross sales for the quarter ended July 31, 2011 increased slightly to $8,674,117 compared to $8,647,972 for the corresponding period of the prior year and for the six month period increased to $17,134,326 from $16,891,023 for the corresponding period of the prior year. However, net sales (sales retained by the Company after alcohol consumption taxes are paid) for the quarter ended July 31, 2011 decreased to $6,060,581 from $6,126,302 for the corresponding period of the prior year and for the six month period decreased to $12,171,004 from $12,383,021 for the corresponding period of the prior year. The Company experienced a net earnings decrease to $528,936 compared to $621,064 for the three month period and net earnings of $1,318,353 compared to $1,561,715 for the six month period ended July 31, 2010. The decrease in net sales and net earnings is a direct result of the 10% Cellared in Canada (CIC) consumption tax introduced by the Ontario government on July 1, 2010. It is payable only on CIC wine product sold outside of the Liquor Control Board of Ontario (LCBO) in all Ontario winery retail stores.

Overall gross profit margin for the quarter ended July 31, 2011 decreased to 37.7% from 40.1% for the corresponding period of the prior year and for the six month period ended July 31, 2011, decreased to 39.1% from 41.7%. The change in the gross profit margin is due to the Company experiencing increased cost pressures for raw inputs, as well as the impact of the new 10% Cellared in Canada (CIC) wine tax even though it is developing new products and ways to mitigate the impact of the tax.

Selling, administration and other expenses were $1,212,435 for the three months ended July 31, 2011 compared to $1,164,844 for the corresponding period of the prior year. For the six month period ended July 31, 2011, selling, administration and other expenses were $2,068,887 compared to $2,030,264 for the corresponding period of the prior year. The increase is due to increased marketing and advertising costs, energy as well as compensation costs.

Finance costs for the three months ended July 31, 2011 increased slightly to $145,051 compared to $141,772 and for the six month period ended July 31, 2011 was $296,506 compared to $275,239 for the corresponding period of the prior year. The change is primarily due to a higher average Canadian prime rate during the period compared to the corresponding period of the previous year. Total debt including both long-term debt and bank indebtedness decreased by $124,834 from April 30, 2011 and decreased by $359,414 from January 31, 2011.

Additional details and information are found in the Interim Unaudited Consolidated Financial Statements, the Management Discussion and Analysis for July 31, 2011 as well as on www.sedar.com.

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 Financial Statements, please visit the following link: http://media3.marketwire.com/docs/mgn914fs.pdf

To view the Management Discussion and Analysis, please visit the following link: http://media3.marketwire.com/docs/mgn914mda.pdf

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