TWE grilled over ambitious earnings forecast
By James Atkinson
Treasury Wine Estates (TWE) maintains it can hit its revised full-year earnings forecast, despite widespread scepticism among analysts.
TWE last month revised its full year EBITS guidance down to $190-210 million from $230-250 million, citing challenging conditions in Asia and a number of problems in the Australian market.
At yesterday’s interim results presentation, acting CEO Warwick Every-Burns acknowledged the revised numbers remained ambitious, but said: “I can assure you we’ve spent a lot of time on this guidance and we’re absolutely sticking by it.”
However, the overall consensus among analysts was that even this revised guidance will be very difficult for the company to achieve.
“I can understand the frustration of a lot of the analysts,” commented the Commonwealth Bank’s Andrew McLennan.
“It’s hard to stack all of this up given there is such a significant excess inventory across Asia. You’re cycling 19 per cent growth in volume in Australia in the fourth quarter, it just seems like it’s a bridge too far to hit this guidance.”
JP Morgan executive director Stuart Jackson said he felt the guidance was “optimistic even at the bottom end of the range”.
In his note to investors, Citi’s Gino Rossi said the company will likely meet its guidance, “but the quality may be questionable”.
Retailers’ destocking hits result
Stricter inventory controls by its key Australian retail customers hit TWE’s first half figures, chief financial officer Tony Reeves said yesterday.
“What we’ve found in a number of areas is that the retailers are starting to take more of what I would call a ‘grocery philosophy’ to inventory control,” he said.
“Historically liquor stocks have tended to be a higher number of days held.”
Reeves said that the new approach taken by the retailers has not impacted TWE’s in-store facings, “it’s purely the amount of inventory that they hold in their own distribution centres”.
First half earnings down 38 per cent
TWE reported EBITS of $45.8 million for the half year ended December 31, 2014, a 38 per cent decrease on the previous corresponding period.
The company said the result reflects “increased investment in marketing and distribution, challenging conditions in Asia and a number of factors in Australia”.
Net profit after tax for the half was $106.2 million, including one-off $80.5 million tax benefit.