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Treasury’s Profits Slide On U.S. Writedown, But Asia, Aussie Bounce Spur Sales Growth

August 22, 2013

Treasury Wine Estates decision to slash its inventory in the U.S. market caused a sharp drop in company profits in its recently completed fiscal year, but improvements in Asia and Australia led to overall net sales growth. TWE’s net profit after tax fell by 53% to A$42.3 million ($38.2m) for the 12 months ended June 30, 2013. The marked decline was primarily due to the A$155 million ($140m) writedown the company absorbed when it moved to eliminate its old stock in the U.S. last month. However, the picture was much brighter on both the sales and volume fronts. TWE’s total volume grew by 0.9% to 32.1 million cases, while its net sales advanced by 2.9% to A$1.76 billion ($1.59b).

Despite the inventory reduction, TWE has had its bright spots in the U.S. of late. Although its overall depletions in the Americas declined by 2.7% to 15 million cases, its top two brands—Beringer and Lindeman’s—both returned to growth in the U.S. in calendar 2012, increasing depletions by 0.7% and 1.2%, respectively. Those two brands account for over 60% of TWE’s U.S. sales. The Americas remains TWE’s biggest market, comprising roughly 40% of its global business.

TWE enjoyed strong growth in Asia, where its net sales jumped by 27.5% to A$135.4 million ($122.2m) on a volume increase of 20.8%, to 1.4 million cases. Growth was driven by expanded distribution and increased availability of the 2013 Penfolds release. Asia now accounts for nearly 8% of TWE’s global sales, up from slightly over 6% in the previous fiscal year.

In Australia and New Zealand, meanwhile, TWE’s net sales rose by 4.7% to A$600.8 million ($542.5m) on volume growth of 6.5% to 8.6 million cases. Wolf Blass, Matua and Annie’s Lane did particularly well in the region, but intense pricing pressure driven by Australia’s large retailers led to a 1.7% drop-off in per-case revenue.

TWE has struggled in Europe, where volume and sales fell by 3.1% and 1.8%, respectively, but its results in the market improved considerably in first six months of calendar 2013, as Wolf Blass and Lindeman’s performed well in the U.K.

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