InDaily

Adelaide's independent news

Support

Treasury Wine Estates raises a glass to 40pc profit increase

Business

UPDATED: The winemaker behind South Australia’s Penfolds range Treasury Wine Estates (TWE) is ready to fire up in the US, the biggest wine market in the world.

Comments
Comments Print article

TWE, whose Australian brands include Penfolds, Wolf Blass, Lindeman’s and Rosemount, already owns US wine brands, such as Beringer, Chateau St Jean and Stag’s Leap.

But TWE says the recent $US552 million acquisition of Diageo Wine – completed on January 1, 2016 – is set to be a game-changer in the US.

The acquisition of Diageo’s flagship brands – Beaulieu Vineyards, Sterling Vineyards, Acacia and Hewitt – will give TWE’s portfolio more weight towards premium wines as consumer tastes move upmarket, and access to more grapes.

“North America is a crucial growth platform for our business,” TWE chief executive Michael Clarke said on Thursday.

“As we look at the second half of this fiscal year, our immediate priority is the resetting of the Diageo Wine business.

“I’m looking for our US business now to really be a significant contributor to the profit growth of our business, much like we’re seeing the profit growth in Asia.”

Clarke said Diageo Wine was an outstanding asset but it needed a little renovation.

He said TWE failed to make a big impact in the US in past years because it overpaid for assets, didn’t have adequate plans in place, and failed to deliver on cost savings and benefits.

In contrast, TWE had acquired Diageo Wine at a good price, TWE knew what it wants to get from the business, and is focused on getting costs down and generating benefits.

TWE on Thursday reported a 42 per cent lift in its first-half net profit to $60.6 million in the six months to December 31, up from $42.6 million a year earlier.

Profit was boosted by a strong performance from TWE’s operations in Australia and overseas, combined with a lower Australian dollar.

Australia and New Zealand lifted earnings by six per cent to $46.7 million despite a flat overall wine market in Australia.

Earnings soared 67 per cent to $56.2 million in the America’s division, reflecting the ongoing move to more profitable luxury and masstige (mass prestige) wines, and favourable foreign currency movements.

TWE said Asia reported an outstanding result, lifting earnings by $26 million to $46.5 million on the back of increasing consumer demand for imported wine.

Clarke said that over the past two years, TWE had made key decisions that were now delivering a more balanced, stable business globally.

Those initiatives included changing the release date of the Penfolds portfolio of wines, investing in priority brands globally, strengthening supply chains, increasing access to high-quality grapes, improving routes to market in China, and now, stepping up momentum in the US business.

Shares in TWE were 27 cents, or 3.1 per cent, higher at $9.02 at 1449 AEDT.

AAP

We value local independent journalism. We hope you do too.

InDaily provides valuable, local independent journalism in South Australia. As a news organisation it offers an alternative to The Advertiser, a different voice and a closer look at what is happening in our city and state for free. Any contribution to help fund our work is appreciated. Please click below to become an InDaily supporter.

Powered by PressPatron

Comments

Show comments Hide comments
Will my comment be published? Read the guidelines.

More Business stories

Loading next article