Monday 24 September 2018

The Treasury triumph: from basket case to $360 million profit in four years

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Treasury Wine Estates today announced a net profit of $360.3 million – an increase of 34 percent on the previous year.

The company, benefitting from a buoyant wine market in China, has performed strongly in recent years, after posting a loss of $101 million in 2014 amid takeover bids on the table.

TWE chief executive officer Michael Clarke, who has turned the company around in spectacular fashion, said it was “another stellar financial result”.

“We have coined F18 a ‘foundation year’ for our company,” he says.

“The momentum in our business, together with the strength of our organisational talent, brand portfolios, operating models and customer partnerships, enabled us to execute transformational changes to our operating model in the US and still deliver strong profit growth.

“Over the past four years, we have delivered an EBITS CAGR of 25 percent while embedding meaningful changes that will drive continued long term, sustainable growth and value accretion for our shareholders.”

Miravis

TWE reported EBITS of $530.2 million – up 17 percent on a reported currency basis and including a planned one-off $25 million adverse EBITS impact from the route-to-market transition in the US.

“Investment over the past four years has facilitated TWE entering F19 and beyond with increased availability of Luxury wine, a strong pipeline of innovation and new product development, strengthening customer partnerships in all regions and with a number of brand portfolio initiatives that have the potential to be incremental to the company’s existing five-year expectations,” Clarke says.

TWE has commenced a ‘Simplify for Growth’ (S4G) program in F18.

“S4G is primarily targeting operational efficiency, enhanced returns on brand building investment as well as growth opportunities,” Clarke says.

“Future growth and cost outcomes are expected and TWE will update the market at the appropriate time.”

Clarke says F19 is set to be an exciting year for TWE.

“We have the wine, the brands, the business models and the organisational talent to propel our company into its next phase of growth that will see TWE become the world’s most celebrated wine company and deliver a five-year EBITS CAGR of 25 percent,” Clarke says.

TWE vintage update
California
A dry and warm winter concluded with late rainfalls and cooler conditions in March. The late winter rains and moderate growing season thereafter are expected to result in the 2018 harvest being later than 2017, with timing more aligned to long term averages. The remainder of the growing season is expected to be warm, with overall yields anticipated to be higher than 2017. Key varietals, including Cabernet in Napa; and Chardonnay and Pinot Noir in Sonoma and the Central Coast are currently benefitting most from the favourable growing conditions and continued investments in estate vineyards. The quality of the 2018 vintage will not be impacted by the California wildfires from late 2017.

Australia
The 2018 Australian harvest reflects a high quality vintage, with yields returning to long term averages. Despite seasonal challenges of early frost and then some new year heat spikes, an extended and moderate ripening period leading into harvest has produced a high quality vintage across most of TWE’s growing regions and varietals – Barossa Valley Shiraz; McLaren Vale Shiraz and Cabernet Sauvignon; Coonawarra and Robe Cabernet Sauvignon; Tasmanian Pinot Noir and Chardonnay; and Western Australian Chardonnay and Cabernet Sauvignon.

New Zealand
The 2018 vintage experienced warm to hot conditions during the early growing season, followed by late season rains. Regional variations of these conditions were evident, with the extreme growing conditions resulting in wines showing high levels of concentration and character. Overall industry yields were higher than 2017, with TWE experiencing a notable uplift in Central Otago Pinot Noir.

 

 

 

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