Treasury Wine cuts profit forecast again on back of Chinese standstill
Treasury Wine has issued a profits warning, slashing its expectations for the second time in 30 days, as the Coronavirus hits key Chinese markets.
The Australian wine giant said Asia accounted for around 40% of its total profits, with the bulk of that coming from China, and had been growing strongly with sales up by 19% in the first half of the year, to $175.5 million.
It said that while the full operating and financial impacts of the Coronavirus outbreak were yet to be determined, there was sufficient information available to suggest the impact was already being felt, and was likely to continue “at least’ into March.
Sales had been strong in the run up to the Chinese New Year, according to the Melbourne-based company but since then there had been a “significant” adverse effect on depletions growth – goods being moved from the distributor’s warehouse to the end consumer.
"As a result, TWE no longer believes that it will achieve the previously provided guidance for F20 reported EBITS growth of between 5 per cent and 10 per cent,’ it said in a statement.
“Asia is a predominantly luxury wine sales region, and TWE has the flexibility to allocate luxury wines to later fiscal periods or other geographies in order to deliver sustainable earnings growth,” it said.
TWE also cautioned that the COVID-19 outbreak could hurt performance "in markets outside China; however, at this stage, this is not expected to have a material impact''.
Drinks giant Diageo has also warned that is profits could take a hit of up to £200m due to the impact of the Coronavirus. The company said that the negative impact on the group’s organic net sales in the 2020 financial year would be in the range of £225m to £325m, while the impact on the company’s organic operating profit would be between £140m and £200m.
“The CoVID-19 situation is dynamic and continues to evolve, and these ranges exclude any impact of the COVID-19 situation on other markets behind those mentioned,” it said. “We will continue to monitor the situation closely.
Diageo said it had experienced “significant disruption in the on-trade in China, which it expects to last at least into March. “Thereafter we expect a gradual improvement with consumption returning to normal levels towards the end of fiscal 2020” it said in a statement.
In other countries in Asia Pacific, Diageo said it expected to see gradual improvement throughout the fourth quarter of the 2020 financial year.