Profits up at TWE as premiumisation drive pays off

By Mathew Lyons

Published: 15 August, 2019

Profits at Treasury Wine Estates leapt 16% over the last year, driven by the group’s focus on premiumisation.

Net profits hit AU$419.5 million for the year ending 30 June 2019 on sales of AU$2.83 billion.

Sales were up 12.4% on a constant currency basis, with the luxury and masstige segments posting 27% growth and contributing 69% of turnover.

Earnings before interest and tax rose 21.5% on a constant currency basis to reach AU$662.7 million.

Sales growth was particularly strong in Asia, with turnover growing by 35.6% year on year to reach to AU$748.9 million. The success of the group’s premiumisation strategy in the region was reflected in sales-per-case rising 26.9%.

The group has announced it is to invest some AU$215 in its Wolf Blass Bilyara winery in the Barossa over the next two years to expand its premium wine-making capacity for the burgeoning Chinese market in particular.

In the Americas sales grew 9.4% to AU$1.13 billion year on year with particularly strong growth in Canada and Latin America. Key brands for TWE in the region include Stags’ Leap, Beringer Luxury, BV, Penfolds, 19 Crimes, Matua, The Stag and Beringer Brothers.

Turnover in Europe hit AU$346 million, up 4.4% year on year, with sales-per-case up 1.5%. In the UK masstige growth of 9% offset commercial a fall back of 7%.

In TWE’s home market of Australia and New Zealand earnings before interest and tax and other items rose 17% to AU$156.5 million on the back of sales of AU$602.3 million, up 0.6%.

Michael Clarke, chief executive of TWE, said: “The results announced today demonstrate the exceptional returns we are delivering for our shareholders, and they are a direct result of the investments and structural change our team has made in our global business over the past five years.

“Sustainability is at the heart of everything we do at TWE, and we will continue to pursue opportunities to enhance the fundamentals of our business with a mindset of prioritising long-term success over short-term outcomes.

“We look to the future with confidence, knowing that we have the people, the brands, the wine, the business models and the customer partnerships to continue delivering sustainable, margin accretive growth.”

TWE is targeting minimum global margins of 25% before interest and tax. Currently, high margins in Asia and Australia and New Zealand – 39.2% and 26% respectively – are being offset by margins of 19.3% in the Americas and 14.9% in Europe.

Margins were down 1.4% in the Americas on a constant currency basis and 1% in Europe for the year.

Globally, margins at the group were up 1.8% to 23.4%.

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