Treasury Wine Estates (ASX:TWE) is aiming for a stronger performance in 2024, as the year leading up to June 30 proved to be less dire than initially anticipated.
Benefiting from its luxury Penfolds division, TWE managed to weather the challenging landscape of 2022-23, positioning itself for a more promising year. The company is reinvigorating its brand lineup and pushing towards higher price points, transitioning toward a premium wine-focused business.
"In F24, TWE is strategically positioned for growth, leveraging Luxury portfolio expansion, the resilience of its global brand portfolio, its diversified business model, and the advantages of key assets and cost optimisation initiatives," stated the company in its 2022-23 results release on Tuesday.
EBITS (a measure of earnings employed by sustainable businesses) experienced an 11.4% rise, reaching $583.5 million. This growth was attributed to robust top-line growth in the Luxury segment driven by Penfolds, successful price adjustments across multiple brands, and cost savings resulting from the global supply chain optimisation program.
"The trend towards premiumisation persists across the wine sector. Demand for Luxury wine remains robust in TWE's primary global markets, and the Premium wine segment remains resilient despite the tightening economic climate."
TWE indicated "significant progress" in implementing the new Treasury Premium Brands operating model and restructuring the Australian Commercial wine supply chain.
"The total net program cost, amounting to $90 million (including $30 million in cash costs), will be incurred throughout F23 and F24. The ongoing benefits from this program will surpass the cash cost, mitigating the impact of rising cost of goods due to lower portfolio volumes," the company forecasted on Tuesday.
In the year until June, sales revenue declined by 4.4% on a constant currency basis, totaling $2.423 billion. Net profit after tax similarly fell by 5.1% (in constant currency terms), reaching $254.5 million.
Net earnings before material items and SAGRA (Sustainable Asset and Goodwill Reinstatement Adjustment) saw a significant rise of 13.8%, reaching $376.1 million on a constant currency basis.
Shareholders will reap benefits, as the final dividend of 17 cents per share is an increase of one cent per share from the previous year. This brings the total dividend for the year to 35 cents per share, marking an almost 13% rise from 2021-22 and aligning with the upper range of the company's long-term dividend policy.
Following these better-than-expected results, CEO Tim Ford expressed optimism in the earnings release.
"In F23, we've once again achieved margin-accretive earnings growth while effectively navigating the tightening economic environment across key markets. Simultaneously, we've made significant strides in strengthening our operational models for the future.
"The standout performance was the Penfolds division, with robust top-line Luxury growth reflecting the exceptional strength of this brand and the outstanding execution by our team. Treasury Americas Luxury portfolio execution was remarkable, with successful price hikes and distribution growth despite notable volume availability constraints, setting a robust foundation for future growth.
"Treasury Premium Brands also made significant progress in its new operating model, optimising the cost base for the future while enhancing both operational and strategic flexibility. We will continually assess additional optimisation initiatives."
"As we enter F24, we are confident that the execution of our premiumisation strategy will continue to drive our long-term growth ambitions through various cycles. We are a stronger business today and well poised for success in the current macro-environment, where consumer demand for Luxury wine remains strong, and Premium wine maintains its resilience."
