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Treasury Wine Estates annual results show net loss of over AUD$100m for 2014

Published:  21 August, 2014

Treasury Wine Estates posted a net loss of AUD$100.9 million with net profits tanking, down by 33% for the year to June 30, 2014.

Treasury Wine Estates posted a net loss of AUD$100.9 million with net profits tanking, down by 33% for the year to June 30, 2014.

The loss was a result of a AUD$280.6 million one-time material item write down in 2014. However, both sales and volume both declined for the same period. Net sales dropped 6.4% over 2014 to to 30 million 9 litre cases and net sales revenue also declined 5.3% to AUD$1.7 billion.

Recently appointed chief executive Michael Clarke said: "TWE has delivered this result despite a number of operational and trading headwinds during the year. Having taken the necessary steps in the final quarter for fiscal 2014 to drive improved performance, including increasing consumer marketing, reducing TWE's cost base and addressing structural challenges within the business."

The AUD$280.6 million write down was a combination of an asset related adjustment due to the oversupply in commercial wine and the consequent reduction program TWE implemented. Additonally the company had overpaid for assets when it was part of the Foster Group.

The volume declines in sales, particularly in the US, was also as a result of the oversupply of wine that the company is still trying to work through.

Regionally, Australia and New Zealand's were the worst performing regions, with earnings before interest and taxes (EBIT) declining by 31.5% for 2014.

The investments made in its premium wine products do however appear to be paying off; luxury volume grew by 40% in the second half of fiscal 2014. 

Michael Clarke is optimistic about 2015 and is hoping to invest in more consumer marketing initiatives. He said: "Fiscal 2015 is a reset year for the company and I am delighted that we are already seeing the benefits of the increased consumer marketing investment, with the Penfolds wine fridge promotion in Australia, the most successful brand activation program in TWE's history; well surpassing expectations."

The first half of 2015 will also see the releases of the 2015 Penfolds Bins Series and Icon and Luxury wines, including the anticipated release of the 2010 Penfolds Grange.

TWE will be focusing more on the fine wine for the UK.  Clarke said: "In the UK, we will continue to execute strong brand building programs to support our brands and penetration of the fine wine market."

TWE has recently been caught up in a bidding war between two competing offers from Kohlberg Kravis Roberts & Co (KKR) and junior partner Rhône Capital which made a combined offer of AUD$5.20 per share, while TPG Capital is reported to be the bidder behind a second matching offer made one week later.