Treasury Wine Estates has lifted interim dividend two cents to 15 cents a share after reporting a 37% surge in half year earnings to $187.2 million.
And the company told the market that it is targeting “accelerated growth” for the next two years and beyond as it gets more revenue and profits from Asia and the US.
Revenue for the six months to December 31 fell 2.3% to $1.33 billion, but earnings jumped 24.9% as TWE completed the integration of its Diageo wine acquisitions and cut supply chain costs.
That indicates the company managed to fatten profit margins very nicely thank you in the half year as it sold more expensive wines and cut its concentration on cheaper brands.
Treasury is the owner of big wine brands including Penfolds, Wolf Blass and Wynns and reported a 25% rise in earnings before interest tax and self-generating and regenerating assets (EBITS, its preferred profit measure) to $283.3 million, well ahead of market consensus forecasts of EBITS of $265 million.
Earnings in the Asian region boomed, jumping 48%, thanks to widening margins.
But the company has stuck with consensus earnings for the full year of $524 million, warning that earnings would be weighted to the first half due to a bias towards big sales events in December half year, such as Christmas and Singles Day in China.
Chief executive Mike Clarke said it was pleasing to see growth from all of Treasury’s geographic regions.
“Fixed regions of Asia, Europe and ANZ, are outperforming expectations, and we are now taking some exciting steps to really transform our route-to-market in the United States, and further strengthen the long-term outlook for the Americas region,” he said in yesterday’s statement.
He said Treasury had signed deals to overhaul its distribution and sales in the US – mirroring its approach elsewhere – which would increase efficiency and drive portfolio growth.
“I am very excited about the outlook for the company, and I am confident that the business model changes we are making this year, along with an increased availability of high-end wine, will set TWE up for accelerated growth in FY19, FY20 and beyond," Mr Clarke said. Earnings growth of 25% is expected in 2019.
Treasury Wine is reducing its exposure to the lower margin commercial wine market, which is declining in the US and UK, and is increasing its focus on higher end products. The shares rose 11 cents to $17.11.
