Treasury Wine Estates (TWE) has released its results for the first half of the 2024 financial year, which show stable performance and a positive outlook for the latter half of the financial year.
Total group Earnings Before Interest and Tax (EBITS) were down 5.8 per cent to $289.9m, which was in line with expectations due to a planned weighting of shipments of Penfolds Bin and Icon portfolios to the second half of the financial year.
TWE CEO Tim Ford congratulated his team on its work throughout the first half of the financial year.
“There’s no question that it’s a challenging operating environment, but I’m pleased with our underlying operating performance, and particularly the way that our teams are managing this dynamic environment and evolving our business,” he said.
Despite the slight decrease in EBITS, consumer interest in luxury wines is still evident.
“Market trends in this period were broadly in line with our expectations. Consumer demand for luxury wine remained strong in our key markets. There was ongoing resilience in the premium price points and a continued shift away from commercial wine in the category. We expect these trends to continue through the remainder of this fiscal year,” Ford said.
Penfolds drove group performance, reporting a 2.9 per cent increase in EBITS to $186.9m, with strong momentum in the Australian and Asian markets. Profit was bolstered by the portfolio mix transition to 2020 and 2021 vintages, as opposed to the lower value 2019 vintage sold in the previous year.
Penfolds Managing Director Tom King said that successful activations indicate continued interest in the brand.
“We continued to leverage our deep understanding of the luxury consumer to build stronger connections with our target demographic, and rolled out new and innovative experiences such as Transcend by Penfolds and Voyage by Penfolds,” he said.
Treasury America reported a 17.5 per cent decline in EBITS to $93.1m, driven by lower shipments of the 19 Crimes Modern range. However, 19 Crimes Classics performed in line with the previous year, and the higher cost of the 2020 California vintage resulted in an increase in the Cost of Goods Sold. The company said that its purchase of DAOU Vineyards in December 2023 puts the business in a strong position for growth.
Mirroring whole group performance, Treasury Premium Brands (TPB) reported a 3.2 per cent decline in EBITS to $45.8m. Net Service Revenue (NSR) of core Premium portfolios grew 7.8 per cent, particularly for Squealing Pigs and 19 Crimes. However, double digit declines in Commercial portfolio shipments and a slight reduction in Premium shipments to Asia resulted in a 4.5 per cent NSR decline across TPB.
TPB Managing Director Peter Neilson said that activations in Australia during this period have been a success.
“In Australia, the roll out of Squealing Pig’s Summer of Love campaign has once again been a huge success. It runs through the summer across the Australian Open and Mardi Gras period, including on premise and in store activations, ensuring visibility of the brand across summer,” he said.
Ford affirmed TWE’s focus on premium wine across the brand.
“The premium wine category, whilst resilient, is highly competitive and we continue to innovate and invest to achieve the goal of outperforming the category and importantly attracting new consumers to wine,” he said.
Moving into the second half of FY24, TWE said that it expects to see growth due to the weighting of shipments in the upcoming period. Additionally, the company is preparing for a decision to be made on the China wine tariffs in March and is in a strong position to capitalise on that market if the tariffs are reduced. However, the potential reduction of tariffs is not part of the business’s H2FY24 outlook.
“The business is on-track to deliver mid-high single digit earnings growth in FY24 and we remain confident that our premiumisation strategy, preeminent brand portfolio and attractive market fundamentals at luxury price points will allow us to continue to deliver our long-term growth ambitions,” Ford said.