Treasury Wine Estates Ltd. sees 37% profit growth in first half
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Treasury Wine Estates Ltd. sees 37% profit growth in first half

Treasury Wine Estates Ltd., the Australian winemaking and distribution company, delivered strong results for the first half of the year last week, seeing its profit increase by 37%. The company said that earnings had risen by 25% against the same period in the previous year to $283.3 million, while revenue fell very slightly (by 2%) over the same time frame to a still-considerable $1.3 billion.

Treasury Wine Estates share price has appreciated by almost 60% in the last 12 months

graph 0602 treasury wine estate

SOURCE: Yahoo Finance

Treasury Wine Estates’ stand out performer was undoubtedly its Asian division, which reported an increase in earnings before interest and taxes (EBIT) of 48% to $117 million. Its EBIT margin also increased by 3.1% to 39.3% - much better than any of the company’s other segments.

The company’s CEO, Michael Clarke, said changes were coming to the business, and that they were the focus ahead of “executing further M&A activity.” Those changes include moving to a “direct sales and distribution” model in California and Washington, where they currently use a go-between distributor. The company will also update their distribution model elsewhere, switching to a “hybrid sales and distribution model” in Florida (collaborating with Breakthru Beverage Group), and securing new distribution partners in a number of other states.

Clarke said: "Similar to business model changes we implemented in China, Canada and New Zealand, as well as the change in global Penfolds release date, route-to-market transformation in the US demonstrates the relentless focus we have at TWE to continue improving our regional business models. These important changes will also strengthen our ability to deliver value from any future acquisitions in the region".

Disclosure

Dominion holds Treasury Wine Estates in its Global Trends Luxury Fund.


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