Australian market performs well in strong TWE result

17 August, 2018 by Andy Young

Treasury Wine Estate (TWE) has reported its 2018 financial result, with a reported net profit after tax of $360.3m, up 34 per cent on the previous year.

The result has come as the company continues its focus on luxury and masstige wine, bringing a shift in focus for TWE in what Chief Executive, Michael Clarke, has termed a “foundation year” for the company.

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“I am delighted to report another stellar financial result for Fiscal 18; a year we have coined a ‘foundation year’ for our Company,” Clarke said.

“The momentum in our business, together with the strength of our organisational talent, brand portfolios, operating models and customer partnerships, enabled us to execute transformational changes to our operating model in the US and still deliver strong profit growth. Over the past four years, we have delivered an EBITS CAGR of 25 per cent whilst embedding meaningful changes that will drive continued long term, sustainable growth and value accretion for our shareholders.”

Speaking during the results presentation, Clarke expanded on the foundation year term, saying: “This is a year where we have enhanced our focus on our organisational assets, our people, as well as our business models and our brands. All while continuing to invest in our strategic partnerships.”

PERFORMANCE IN AUSTRALIA

TWE’s Managing Director ANZ and Europe, Angus McPherson, spoke about the company’s performance in Australia and New Zealand, and he said: “ANZ has delivered another strong result in Fiscal 18, with EBITS of $136m up 26 per cent on the prior year, and EBITS margin of 22.7 per cent, up 4.4 percentage points.

“In Australia we outpaced wine category growth in both the first and second half of the year, and our own market share growth strategy, that is anchored in masstige price points and varietals where TWE under-indexes, is driving both the wine category itself and our performance.

He added: “Wolf Blass is now the second-largest brand in Australia by sales and by brand health, undoubtedly driven by our now global ‘Here’s to the Chase’ media campaign and our year-round in-store activations.

“Strong masstige portfolio growth, price realisation across a number of our supply-constrained luxury brands delivered underlined NSR per case growth of four per cent in Australia. Headline NSR per case, however, was broadly in-line with the prior year, due to the move to a distributor model in New Zealand.”

McPherson also looked forward to the 2019 financial year, saying: “We expect to grow volume and NSR per case. Our strategy of delivering best brands, best marketing and best sales campaigns and the best partnerships continues to see the ANZ business deliver three-way value: we win, our customers win and our consumers win.”

A TRULY GROWTH BUSINESS

In looking forward to the next year for the whole company, Clarke added: “Under the stewardship of my leadership team, TWE is managed for the long-term and our current and future earnings presentations will demonstrate this.

“We are and will continue to be a truly growth business and one that is focused on sustainable long-term objectives, not short-term tactics. There is still plenty of work to do, opportunities to capture and further value to be delivered off our new foundation, especially bedding down our new business model in the United States.

“Remember that we have been on a journey optimising our operating models in Australia and New Zealand, Europe, Canada and Asia for a while now and they are still getting stronger with every year that goes by, and we have only just put the US business model in place.

“We are constantly raising the bar on organisational talent and execution. We are entering new and exciting frontiers with our trust marks, our brands and our marketing campaigns. We are driving revenue growth initiatives that are incremental to our existing five-year plans and we have now stepped up our vintage conversion rates going forward.

“We are confident that we have the wines, the brands, the talent and the cost discipline to deliver EBITS growth of approximately 25 per cent in Fiscal 19 and by doing so extend our 25 per cent EBITS CAGR to a fifth year. We are also confident that we are now entering our next phase of growth that will see us recognised as the world’s most celebrated wine company.”

Clarke also spoke about the 2018 vintage in Australia, saying that while it was lower yielding it “was outstanding quality and we have delivered very impressive conversion rates of our A and B grade fruit. Our winemaking processes, investments and discipline over the last four years have delivered a significant increase in conversion of our highest grades of wine. Meaning our luxury wine quantities from the 2018 vintage are very, very strong.”