When a company is under pressure, as Treasury Wine Estates has been since a shock earnings downgrade in January, trouble seems to follow.
And so it was yesterday with a second downgrade, so down went the shares.
Treasury Wine shares dropped to a three-year low of $10.85 around after downgrading its profit guidance for a second time this year and driving this statement was confirmation for the first time that the coronavirus was having a significant impact on its Chinese business.
The shares then bounced a little and ended the day down almost 4% at $11.17.
In a surprise statement to the ASX, Treasury said its staff in China had not been able to return to work because of infection containment controls and were still working from home.
While the full operating and financial impacts of the coronavirus outbreak were not yet known, TWE said it was aware that “consumption across discretionary categories in China has been significantly impacted through February, and that this impact on consumption is expected to be sustained to at least through March.”
As a result, TWE said it no longer believes that it will achieve the previously provided guidance for fiscal 2020 reported EBITS (earnings before interest, tax and the accounting treatment SGARA) growth of between 5% and 10%,” Treasury said.
Treasury also said that while the virus may affect performance in other markets outside of China, “at this stage this is not expected to have a material impact”.
In its first surprise downgrade in late January, Treasury told the market that it expected growth in reported EBITS (earnings before interest, tax, and an agricultural accounting standard) for 2019-20 to be between 5% to 10%, down from the earlier guidance of 15% 20%.
TWE assured investors that “Should the impacts of COVID-19 be resolved in F20, it does not expect its F21 plans to be impacted.”
“TWE remains committed to the health and safety of its employees and to being a supportive long-term partner to its customers in China, and will actively support them through this period.
“TWE’s advantaged business model and strong portfolio of brands means it is well placed to capitalise on the long-term opportunities in the Asia region, and globally,” the company said in yesterday’s statement.
This will not be the last update from the company this year.
