Treasury Wine Estates jumped nearly 5% yesterday after it reaffirmed earnings guidance for the second half of the 2017 financial year and said growth prospects in the increasingly lucrative China market remained intact.
The shares rose 4.7% to $12.76 after the company’s statement which was issued to reply to a downgrade from US broker, Goldman Sachs which has a very negative view on TWE’s prospects in the China market (https://www.tweglobal.com/~/media/Files/Global/ASX-Announcements/2017/ASX_TWE-reaffirms-positive-growth.pdf).
Goldman Sachs downgraded the company to “sell” with the investment bank warning that expectations for growth in Asia were unrealistic amid a slowdown in the Chinese market.
But TWE said in its statement its volume growth in Asia has been driven by significant investment and outstanding brand building, supported by favourable imported wine market fundamentals in China.
“Significant opportunity for continued, sustainable growth exists in China as TWE expands into new, strategically important cities and provinces,” the company said in a statement late yesterday.
It is also driving further growth in the biggest cities, in part by penetrating retail, wholesale, e-commerce, on-premise, convenience and global travel retail channels.
Treasury Wine is the biggest supplier of imported wine by value in China, according to the IWSR global database.
Treasury said it expects the Asia region to deliver an earnings margin of 30-35% on a sustainable basis, helped by a disciplined approach to driving luxury and masstige volume growth in North Asia, margin rises across established brand portfolios and execution across all channels.
"TWE reiterates guidance provided at its interim 2017 result in February 2017, that 2H17 EBITS is expected to be broadly in line with 1H17. TWE remains in blackout until the Company announces its annual 2017 financial results to the market on 17 August 2017,” the company said yesterday.
