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TWE Sees Sales And Profits Improve In First Half, Despite Slightly Lower Volume

February 27, 2015

Treasury Wine Estates (TWE) is seeing some of its turnaround efforts bear fruit, with the company posting a 6% rise in net revenue to A$883 million ($690m) in the six months through December, the first half of its fiscal year. The Australia-based winemaker also flagged significant improvement in operating profit, which increased 78% at constant currency to A$85 million ($66m). Volume dipped 1.3% during the period to 15.1 million nine-liter cases.

TWE’s Australia and New Zealand, Americas and Asia regions all showed solid sales growth, the company said, noting that its luxury and masstige (roughly $10-$20) wines saw U.S. depletions grow 8% and 17% respectively. As SND reported February 13, TWE has been outpacing the $10-$20 category in the States, with its Matua, Sledgehammer and 19 Crimes brands all enjoying strong momentum.

Treasury CEO Michael Clarke credited the recent shift of luxury wine Penfolds’ release date to the fall as boosting sales in the run-up to the holiday season, as well as new marketing initiatives behind the brand under its “Numbers can be extraordinary” campaign. “While the first half of fiscal 2015 included the benefit of the successful transition of the Penfolds release date, we’ve also progressed with our overarching strategic initiatives to reset the business by significantly increasing investment in our brands—particularly focused on Penfolds depletions during the first quarter of fiscal 2015,” Clarke observed. The recent weakening of the Australian dollar against the U.S. dollar also bodes well for the company looking ahead.

Clarke also hinted at innovations to come. “I am particularly looking forward to being able to share more detail on two exciting innovations we are working on within the Penfolds brand. We’re combining a super-premium, highly collectible proposition straight from TWE’s cellars, at the same time delivering on our promise to create an accessible luxury wine for new entrants into the Penfolds family,” he said.

TWE shares closed flat at A$5.42 ($4.23) today, above the A$5.20 a share indicative bid suggested by KKR and Rhône Capital for the business last year. In recent days, The Australian newspaper reported that KKR may again be examining a potential play for TWE, although it’s thought to be precluded from launching another bid for 12 months following its run at the group last August.

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