Treasury Wine Estates profits hit by COVID and consumer habits
Treasury Wine Estates (TWE) has reported a 25 per cent drop in its net profit after tax to $315.8m, largely driven by the impacts of COVID-19 in the second half of the financial year.
TWE also reported EBITS of $533.5m, down 22 per cent on a reported currency basis and a six per cent fall in its net sales revenue to $2.6bn.
In detailing reasons for the results, the company said: “Unfavourable volume and portfolio mix during 2H20 as a result of COVID-19 impacts, driven by lower luxury sales due to the closure of key channels for higher-margin luxury wine in addition to consumer trading down in some markets, along with challenging conditions in the US wine market were the key drivers of the lower EBITS in F20.”
Speaking about the results announcement, TWE’s Chief Executive Officer Tim Ford, said: “F20 was a unique year for TWE, our industry and the markets within which we operate.
“Our ability to navigate the disruptions of the COVID-19 pandemic through 2H20 and continue to deliver profitability and strong cash flow performance is representative of the fundamental strength of our global business.
“I am incredibly proud of the way that our team, our customers and suppliers have worked together during this period.”
In its Australia and New Zealand market TWE reported a 16 per cent decline in EBITS to $133.3m. The company said that the drivers of this performance were the closure of key channels away from retail and e-commerce, along with a fall in consumer trading.
Highlighting the “challenging conditions” of the US market, the Americas reported a 37 per cent decline in EBITS to $147.3m, however TWE said its focus brand portfolio continued to perform well, delivering continued premiumisation in the region.
Looking ahead TWE said that given the continuing levels of uncertainty across its key markets, the company will not be providing earnings guidance for the 2021 financial year.
Speaking about this year’s vintage, the company said: The 2020 Australian vintage was a smaller volume, higher cost vintage for TWE, with total intake approximately 30 per cent lower than the prior year (luxury wine intake approximately 45% lower than prior year).
“In FY21, higher Australian production and sourcing costs from this vintage are expected to increase global COGS per case by approximately three per cent, or $50m. Further, TWE has put in place actions and plans to carry forward unsold wine previously allocated to 2H20 in addition to the reallocation of luxury wine that had been previously allocated to FY21 and beyond into future years in order to support sustainable, long-term earnings growth.”
On TWE’s outlook, Ford added: “While we have recently seen positive signs of recovery across a number of our key markets and channels, we are cautious on the near-term outlook given the uncertainty that remains around the pace of that recovery.
“We remain optimistic around our ability to return to sustainable profit and margin growth over the medium to long-term.
“Supporting this optimism is our comprehensive strategic agenda, which is focused on building upon what is already a very strong business and positioning it for the next phase of TWE’s growth journey and the achievement of our ambition to be the world’s most admired premium wine company.”