Falling dollar has Casella - and its bankers - jumping for joy
The retreat by the Australian dollar since May has provided comfort to Casella Wines' bank lender, National Australia Bank, with a deal to restructure the winemakers' debt facilities expected to be signed by the end of the financial year.
Speaking from California's Napa Valley where he is investigating an emerging trend of US drinkers increasingly switching to domestic wines over overseas labels, Casella managing director John Casella said the near 9 per cent slide in the dollar would ease margin pressures for the family owned Griffith-based winemaker.
"There was a concern going forward the Australian dollar might get to $US1.20, and that's not even being discussed any more; if anything it's likely to go down more," Mr Casella said.
"Our bankers are reasonably comfortable and the exchange movement makes them even more comfortable."
In February NAB extended its debt facilities with Casella Wines, owner of juggernaut wine label Yellow Tail, as the high dollar and falling revenue contributed to the winemaker posting a loss of $30 million - its first reported loss in 20 years.
"Our aim is to secure a deal with our lender at the end of the financial year [June 30]," Mr Casella said.
Casella Wines was founded by Sicilian immigrants in 1965. It took Yellow Tail from an idea on a drawing board to a few years later the biggest imported wine in the US, with more than 8 million cases a year, carrying its distinctive leaping yellow kangaroo on the bottle, sold into North America.
Mr Casella said the winemaker remained hedged to movements in the Australian dollar but the falling currency had supplied a psychological boost at least to the business, with sales upbeat.
"In terms of sales, the last nine months has been the best nine months we have ever had."
He had also begun to restructure its overseas operation, rationalising distribution in Canada to a single national distributor.
Mr Casella said he had spent two weeks in the Napa Valley, a key growing region in the US, and had detected a swing by local drinkers back to domestic wines.
"There has been a really strong movement towards domestic wines in the US so it's good to visit producers to see what they are doing and what we could be doing, so I'm gathering market information and basically seeing what the opposition is up to."