Treasury hit by 2011 harvest

Treasury Wine Estates has warned shareholders that the challenging 2011 harvest is set to contribute to a decline of up to 20% in the company’s first half earnings for 2013.

Despite assuring shareholders at this week’s Annual General Meeting that “the immediate and long term fundamentals of the wine sector remain solid”, Treasury CEO David Dearie warned that difficult 2011 vintages in California and much of Australia had the effect of “ultimately reducing the quantity of wine available for sale in this fiscal year and increasing our costs.”

Other contributors to Treasury’s diminished growth outlook come from ongoing IT costs following its split from Fosters 16 months ago and efforts to reduce inventories carried by the firm’s distribution partners in the US.

In its trading update to the Australian Stock Exchange, the company predicted “mid-single” digit growth for 2013, followed by “above average” pre-tax growth in 2014.

The trading update caught the market by surprise, with shares in the company experiencing their largest fall in a single day since the company’s demerger.

However, Dearie pointed to a more promising outlook with the arrival of wines from the 2012 harvest, which saw “near-perfect growing conditions in Australia”, with California looking “likely to produce an excellent vintage too.”

Dearie outlined three key priorities for the year ahead: to drive growth in the “huge growth opportunity” represented by the Americas, realise the “immense” potential of Asia, especially China, and strengthen the Treasury team with the help of newly appointed chief human resources officer Megan Collins.