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Treasury Wine Estates reports 8% rise in profit
Australia’s Treasury Wine Estates is feeling optimistic, a rare sentiment among the country’s producers. Ron Emler reports.
It is targeting stronger growth in the financial year that has just started.
It has also done something that none of its rival global drinks producers has been willing to do during this results season; it has put numbers to its predictions rather than issue unquantifiable statements about returning to growth as the global economy picks up.
Treasury is confident of robust demand for its premium and luxury brands, with the reopening of China and it expects a stronger financial performance once it has sold off commodity brands such as Wolf Blass.
As a result, it has forecast operating earnings between AU$780 million (US$514.57 million) and AU$810 million for fiscal 2025, compared with the AU$658.1 million it achieved in the 12 months to the end of July.
The underlying net profit was AU$407.5 million a 8% increase on 2023.
Divestment
There was 61.1% drop in statutory net profit after tax to AU$98.9 million due to largely to one-off impairment charges as it prepares to divest its commodity wines portfolio.
Treasury said that its forecast reflects “continued strong top-line luxury portfolio growth in Penfolds and Treasury Americas, with stability expected across the remainder of TWE’s global brand portfolios”.
“Re-establishment of Penfolds Australian COO [country of origin] portfolio in China is on track, with strong shipment demand from customers and initial depletions in line with expectations,” the winemaker said.
Strong consumption
Treasury also said consumption has been strong in Hong Kong, Thailand, Taiwan and the US.
That is encouraging news for shareholders who have seen the value of their shares fall by 30% in the past five years, but Treasury is continuing to reshape its business model.
It is looking to offload its commodity wine interests into a buyers’ market as Australia’s wine industry works through its overproduction crisis.
Premium
On the plus side, it is creating a “Global Premium” division within the next 12 months by uniting its Australian and American premium portfolios under one umbrella.
It believes that will release further margins as demand outstrips supply for luxury brands such as Penfolds. They generated more than half its operating earnings in the past year.
Chief executive Tim Ford says that more than 75% of TWE’s earnings are already derived from its luxury brands.
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