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World's biggest investment firm buys into Penfolds' owner


Investment giant BlackRock has bought up more than $250 million worth of shares in Australia’s largest wine company in recent weeks.

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Treasury Wine Estates, which owns iconic brands Penfolds, Wolf Blass, Rosemount and Wynns, announced to the Australian Securities Exchange (ASX) this morning that BlackRock had increased its stake in the company to 8.32 per cent, with shares valued at more than $AU1 billion.

This followed a buy up of 7.3 million TWE shares by BlackRock in December, taking its stake from 6.21 per cent to 7.22.

US-based BlackRock is the world’s largest investment manager and manages about $7 trillion for its investors around the globe.

It initially purchased almost 38 million TWE shares – 5.14 per cent of the company – in March 2017 when the share price was a little over $12 before increasing its holdings to 6.21 per cent in April 2019.

TWE’s share price has rallied in recent weeks from $16.13 on January 3 to $17.47 this morning but is still well down on its six-month high of $19.17 on September 20.

The BlackRock investment announcement follows news that it would back away from coal investments and shift its focus towards sustainability-focused companies in 2020.

In his 2020 letter to CEOs, BlackRock CEO Laurence Fink said his firm would make a series of moves to place sustainability at the centre of its sustainability approach.

The bulk of Treasury Wine Estates’ premium Australian brands produce wine in South Australia, which has a global reputation for sustainable viticulture and winemaking practises.

The state of South Australia produces about half of Australia’s wine and 80 per cent of its premium wine, much of which is produced in the Barossa Valley.

TWE announced a $419.5 million profit for the financial year to June 2019, up 16 per cent on the previous year.

The company also announced in August it would spend up to $215 million at its Wolf Blass Bilyara winery in the Barossa over the next 24 months to expand production, processing and storage infrastructure.

The investment is part of TWE’s “premiumisation strategy”, which also includes buying production and vineyard assets in the Bordeaux region of France.

The company’s total revenue rose 15.5 per cent to $2.88 billion for the 12 months to June 30 and the lifted its fully franked final dividend by 3 cents to 20 cents.

Australian wine exports for the 12 months to June 2019 increased by 4 per cent in value to $2.86 billion over the 12 months, driven by the Chinese exports and a return to growth in the United States.

Exports to China (including Hong Kong and Macau) reached a financial year record, increasing 7 per cent in value to $1.2 billion.

TWE’s earnings in Asia jumped 43 per cent to $293.5 million for the year.

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