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Treasury Wine uncorks record profit

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The world's largest standalone winemaker reported a 17% spike in net profit to A$219m for the six months to Dec 31, its highest ever. Its pre-tax profit for the period came in at A$338.3m.

Sydney

AUSTRALIA'S Treasury Wine Estates Ltd toasted yet another record half-year profit, as a self-distribution model in China helped the winemaker defy weaker consumer spending in the world's second-largest economy.

The owner of the Penfolds, Beringer and Wolf Blass labels also said it was counting on more growth in China, sending its shares up as much as 4 per cent.

"We are not seeing a slowdown in demand for our brands," Treasury Wine CEO Mike Clarke said on an analyst call, referring to the company's biggest export destination, China.

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The world's largest standalone winemaker plans to grow its footprint in China by 50 per cent in three years by number of potential customers, and buy assets in France to capitalise on Chinese appetite for the European country's product, he added.

The sparkling update comes despite a broader concern about weaker demand in China for products ranging from high-end fashion to milk powder as its economy slows, exacerbated by a bitter trade war with the United States.

Apple has issued a rare revenue warning, citing weaker iPhone sales in China. Australian wine exports to the country are also feeling the heat, with growth hitting its slowest pace in four years.

Against the odds, Treasury Wine reported a 17 per cent spike in net profit to A$219 million (S$211 million) for the six months to Dec 31, its highest ever. Its pre-tax profit for the period came in at A$338.3 million, within a company-provided guidance.

The Melbourne-headquartered company, which has been skirting the China weakness by using a direct-delivery model to push product straight to buyers, expects its pre-tax profit to grow 25 per cent in the year to June and 15-20 per cent in fiscal 2020.

Treasury Wine ships globally, but its sales to China have become closely watched since it is one of Australia's most exposed companies to Chinese consumer appetites.

Its Asia sales, which include China, surged 32.4 per cent to A$393.9 million from the same period a year earlier. US sales rose 20 per cent while Europe sales grew 9 per cent.

The company declared an interim dividend of 18 cents per share, up from 15 cents a year earlier.

Shares of the A$12 billion winemaker rose as much as 4 per cent as investors cheered the results, but gains were capped by worries about its smaller-than-usual "cash conversion" rate, a measure of how quickly it is being paid for sales.

The company said it received less cash than its reported profit implied because Chinese customers had delayed deliveries until after Jan 1, when tariffs fell to zero under a free trade agreement between the two countries. REUTERS