Profits jump by over 50% at Treasury Wine Estates, boosted by growth in Asia
Treasury Wine Estates, Australia's biggest wine company, has recorded a 55% increase in its annual profits, boosted by growth in Asian and US markets.
The Australian winemaking giant saw its net profits soar to A$269.1m in the 2017 financial year, up from A$173.3m last year, the company said, below forecasts of A$288.1m. The world’s largest listed stand alone winemaker also announced an on-market share buyback of A$300m.
Growth was recorded across the company’s four key regions, but performance was particularly strong in Asia, notably in China and Japan, where wine volumes increased by nearly 50% and revenues grew over a third (34.5%) to A$394.3m. Treasury described this as its "key growth engine", while U.S. markets also showed “robust” volume growth, the company said in a statement.
Revenue from sales in the Americas region grew by 7.2% on a reported currency basis, to A$1.06bn. Treasury noted that while commercial brands were declining, the luxury segement was in growth.
The UK, Sweden and the Netherlands would remain a key focus, with priority brands including Wolf Blass, Lindeman’s Blossom Hill and 19 Crimes. Meanwhile, volume growth in Australia helped boost the Australia and New Zealand region by 24% to A$111.1 million. while the acquisition of Diageo’s wine business and ‘robust underlying volume growth’ lifted the American markets, with EBIT growth of 44% to AUS$150.1 million.
Growth was weaker in Europe, where EBIT’s were up 0.6% to A$48m, largely due to the devaluation of Sterling. The UK market remained “challenging” in the wake of Brexit uncertainty, though chief executive officer Michael Clarke said he was “delighted” with the strong performance.
“This result was delivered despite continuijng to sell through short vintages of luxury and masstige wine, and highlights our continued focus on strategic customer partnerships in all our markets, significantly enhanced sales and marketing execution, and optimisation of our cost base,” he said.
However, the annual results were adversely affected by unfavourable currency movements, with a rising Australian dollar hurting its revenues in the Americas, which accounts for around 23% of revenue.
The company has announced it is to reward staff with a one off bonus payment to reward their contribution, as well as a final dividend of 13 cents per share, compared to 12 cents in the previous year. Treasury shares rose 1.4% in early trade to A$12.76 in a flat overall market.