Labelling trading conditions as the worst in 15 years, the Barossa Valley group said the national production potential was more than 2 million tonnes but the sales requirement was only 1.5 million tonnes.

Managing director Doug Lehmann said the wine glut was compounded by the inflow of New Zealand sauvignon blanc, which was having a deleterious impact on the volume and value of all Australian white wines.

The global financial crisis had also created greater uncertainty among distributors and retailers, who were reducing stock levels.

Peter Lehmann Wines suffered a 40.3 per cent slide in net profit from $9.6 million to $5.74 million in the year to June 30. Revenue fell to $52.6 million from $62 million, a drop of 15 per cent.

Other big Australian wine groups have reported similar profit slumps. De Bortoli Wines posted a $1.6 million loss last financial year, and d'Arenberg and Casella Wines' full-year earnings were cut in half.

Australian winemakers are in the grip of a global oversupply of wine that has driven prices lower and squeezed margins. The higher Australian dollar has made local wine less competitive overseas.

A recent industry report said Australia was producing 20-40 million cases a year more than it was selling. This is equivalent to 270,000 to 500,000 tonnes of grapes, or 20,000 to 40,000 hectares of vines.

Writing to shareholders, Doug Lehmann said that compared with the previous record year the company's total branded sales were down 19 per cent in volume and 13 per cent in value. Domestic sales were down 20 per cent in volume and 16 per cent in value.

Swiss company Hess Group bought Peter Lehmann Wines in 2004, although it remains an unlisted public company with 448 shareholders.

Mr Lehmann said wine groups needed to rely more on advertising and promotional support to counter the downturn and a highly competitive market, but this would affect profitability.