Treasury Wine Estates, the world’s second-largest listed wine company, posted a 86 per cent rise in its key profit measure as a weaker Australian dollar and the rescheduling of its Penfolds release improved profitability.
Earnings before interest, tax, changes in the value of vineyards and one-time items were A$85 million ($66 million) in the six months ended 31 December, Melbourne-based Treasury said in a regulatory statement today. Net income was A$43 million, 60 per cent down from a year earlier when Treasury received an A$81 million tax benefit.
The result is a fillip for chief executive officer Mike Clarke, a former Coca-Cola executive who’s promised to spend more on branding and sell unwanted assets to improve profitability following more than A$400 million of writedowns since 2013. Clarke’s predecessor and three other senior executives left in the 12 months before he joined last year after Treasury was forced to destroy out-of-date bottles in the US and cut its forecasts for sales in China.
“Compared to the story they were telling 12 months ago, it’s a huge improvement,” said Evan Lucas, a market strategist at IG Ltd. in Melbourne. “But there’s still a long way to go.”
Treasury rose 0.2 per cent to A$5.44 at 11:17 a.m. in Sydney, taking this year’s gains to 14 per cent. The benchmark S&P/ASX 200 index has added 9 per cent in the period.
The Australian dollar declined more than 13 per cent against the US dollar in the six months ended 31 December, boosting the value of Treasury’s overseas sales.
The winemaker announced in June it would release new vintages of the Penfolds brand in October rather than in March and May to avoid a rushed sales period before the fiscal year- end that had previously encouraged too much discounting.
“The currency is definitely moving in their favour,” Andrew McLennan, an analyst at Commonwealth Bank of Australia in Sydney, said before the results. The company is benefiting from the “luxury products’ profitability and the scale that’s provided by also producing the commercial products.”
Bloomberg News, edited by ESM
