Australian Treasury wine shows higher profits on US sales and price increases

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Bottles of Penfolds Grange, a Treasury Wine Estates brand, for sale at a wine store in Sydney, Australia August 4, 2014. REUTERS/David Gray

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Aug 18 (Reuters) – Treasury Wine Estates Ltd (TWE.AX) posted a 5.3% rise in annual profit on Thursday as strong U.S. sales and rising prices more than offset the hit from heavy Chinese tariffs on Australian wine.

The world’s largest self-contained winemaker has shifted sourcing of its prized Penfolds-branded wines to the United States, Europe and the country since China imposed an anti-dumping duty on certain Australian wines at the end of 2020.

The company, which also owns the Wolf Blass and Wynns brands, among others, said its Americas unit net sales increased 2.5%, benefiting from efforts to expand its market presence, including including working with rapper Snoop Dogg.

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Demand for Penfolds-branded wines, the company’s most premium offering, remained strong despite soaring inflation in the United States and Europe. While total segment net sales fell 9.1%, sales in markets outside of China more than doubled.

The winemaker said it was raising prices across all divisions to offset the impact of rising input costs and plans to further improve margins in 2023.

Treasury Wine’s global supply chain optimization program, which rolled out in 2021, helped the company save A$90 million ($62.47 million), more than a previous estimate A$75 million, and to offset the impact of rising input costs.

“We expect TWE to post strong earnings growth in FY23, reflecting a COVID recovery in its higher-margin channels,” Morgans analysts said.

The Treasury recorded an attributable profit of A$263.2 million for the year ended June 30, higher than the A$250.0 million reported a year ago but below the estimate of A$282 million. Australian dollars from Morgan Stanley. Overall revenue fell 3.6%.

Shares of Treasury Wine fell around 1.5% in early trading, while the broader marker (.AXJO) was down 0.5%.

The company said its long-term financial goal remains to deliver sustainable top line growth, high mid-single-digit profit growth and a group operating margin of over 25%.

($1 = 1.4407 Australian dollars)

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Reporting by Harshita Swaminathan; Editing by Aditya Soni and Subhranshu Sahu

Our standards: The Thomson Reuters Trust Principles.

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