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TWE profits drop on back of Penfolds' China tariff hit

Business

Treasury Wine Estates has reported a 24 per cent fall in net profit after tax to $175.3 million for the first half of the financial year, citing ongoing impacts of the coronavirus and Chines tariffs for the result.

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The producer of Penfolds, Wolf Blass and Wynns wine brands has declared an interim dividend of 15 cents per share.

The company’s earnings before interest and taxes (EBITS) for the six months to December 31 fell 23 per cent to $284.1 million.

The company has also announced it will operate under a new divisional operating model from the 2022 financial year with three new internal divisions: Penfolds, Treasury Premium Brands and Treasury Americas.

CEO Tim Ford said while TWE expected disruptions to continue until the new financial year, the company was well placed for further recovery once conditions improved in key channels for luxury wine.

“The fundamentals of our diversified global business remain strong and I am confident they will continue to support our execution into the future,” he said in a statement.

“Further, the momentum behind our strategic agenda continues to build, and the changes we have announced today, particularly in relation to our future operating model, are key foundational milestones towards the ongoing delivery of our TWE 2025 strategy.”

It follows an announcement in November that the company’s wines in containers of two-litres or less would be subject to a ‘Provisional Measure’ deposit rate of 169.3 per cent until August 28, 2021 at the latest.

TWE expected demand for its portfolio in China would be ‘extremely limited’ while the measure remains in place.

Australia’s largest listed wine company said it would also reallocate its Penfolds Bin and Icon range, which includes top-shelf products such as Bin 389 and Grange, to other luxury growth markets including Europe, the US, Australia and Asian markets outside China.

It also planned to fast track investment into sales and marketing resources in these other markets.

Chinese demand previously accounted for 25 per cent of Penfolds’ global allocation by volume and 39 per cent by value.

Treasury Wine Estates was this afternoon trading at $9.98AU.

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