Treasury Wine Estates has seen profits tumble nearly 60% - but boss Michael Clarke insists the company is making progress in "resetting" the troubled business.
Treasury Wine Estates has seen profits tumble nearly 60% - but boss Michael Clarke insists the company is making progress in "resetting" the business.
Net profits after tax fell 59.9% on a reported basis to AUD $42.6m in the six months to 31 December 2014, which the company said reflected the $80.5 million tax benefit recognised in the prior period. Volume sales also were down 1.3% to 15.1m 9L cases but net sales revenue rose 6.2% to AUD $831.07m, with EBITS also up 86.0% on a reported currency basis to AUD $85.2.
TWE boss Michael Clarke said the results were in line with expectations and insisted the company was fixing its core business and setting up a sustainable future, having taken steps to remove unprofitable business and unsustainable volumes. It remains on track to deliver the $35m overhead cuts and 50% increase on consumers marketing by the end of 2015.
"We have progressed with our overarching strategic initiatives to rest the business by significantly increasing investment in our brands," he said.
Penfolds continues to be a highlight of the portfolio and the transition of its release date to a single date was an "outstanding" success, he claimed, adding there are plans to build the luxury brand with the introduction of a new super-premium proposition.
Growth in Australia, the Americas and the key Asian markets was "solid", but EBITS in Europe, the Middle East and Africa fell "significantly" to AUD $6.3m from AUD $10.7m last year. This was driven by lower volume and increasingly competitive trading in the UK and Nordic markets, it said. This was large due to increased pressure from own label supermarket wines which had amped up pressure on branded wines and "unsustainable promotional volume". Volumes in the UK, its largest market in the region, fell 12.1%, but Clarke said the increased marketing spend was likely to filter through in the second half the year.
Clarke cautioned that resetting the business and introducing "much-needed" cultural change, sustainable trading practises, removing costs and reinvigoration brands would take time, but said he remained committed to the process.