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TWE Facing Uphill Climb To Meet Profit Forecast, According To Analysts

February 21, 2014

After Treasury Wine Estates’ earnings fell by nearly 40% in its fiscal first half (ended December 31, 2013), analysts are skeptical about the company hitting its full-year profit forecast.In late January, TWE revised its full-year EBITS guidance down to A$190-A$210 million ($171-$189m) from its previous projection of A$230-A$250 million ($207-$225m) following weak sales during the crucial holiday season. However, after TWE reported a 38% decline in EBITS—to A$45.8 million ($41m)—for its first half, the consensus among analysts appears to be that the wine giant will be hard-pressed to reach even its revised earnings target.

For its part, TWE appears confident that it will meet its full-year projection. At yesterday’s interim results presentation, acting CEO Warwick Every-Burns admitted the revised numbers remained ambitious, but added: “I can assure you we’ve spent a lot of time on this guidance and we’re absolutely sticking by it.”

TWE also announced yesterday that Michael Clarke, a longtime food and beverage industry executive who formerly held leadership posts with Kraft Foods and The Coca-Cola Company, has been appointed CEO. Analysts have expressed concern over the selection of Clarke—who is set to replace Every-Burns on March 31—because, like Every-Burns and TWE chairman Paul Rayner, he lacks experience in the wine business. Rayner told analysts that, while several candidates for the CEO post had wine industry experience, the TWE board chose Clarke “because of his outstanding track record, his experience in all the markets in which we operate and his experience in dealing with the retailers that we need to deal with.”

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