Subscribe Login
DE4CC0DE-5FC3-4494-BCBF-4D50B00366B5
A-Brands

Australia's Treasury Wine Issues Profit Warning As Virus Hits Demand

Treasury Wine Estates Ltd flagged a plunge in core earnings for fiscal 2020 and withheld guidance for the year to June 2021, as coronavirus-related curbs on travel and social gatherings hurt demand for its high-margin luxury wines.

This underlines the challenging outlook for the world's biggest standalone winemaker, which has said it may spin off its prestigious Penfolds label and shrink its low-end US commercial division to shore up profits and navigate the upheaval brought by the crisis.

Treasury said its core earnings in fiscal 2020 likely fell about 21% from adjusted year-ago figures, with profits down about 14% in Asia, 37% in the Americas and 16% in Australia and New Zealand. It will unveil its final annual numbers on 13 August.

Earnings before interest, tax, self-generating and regenerating assets (EBITS) is expected to be between A$530 million and A$540 million ($370-377 million), CEO Tim Ford said in his first market update since taking the top job last week.

Treasury had said it would not meet its lowered annual EBITS growth forecast of 5% to 10% issued in January.

Growth In Retail Sales

While Treasury's retail wine sales have risen about 15% since the start of the pandemic in the United States, its non-retail channels that include bar, restaurants, cellars and travel-related venues in Latin America have been hit hard.

"Sales in these channels are weighted towards higher-margin luxury wine, and their closure in recent months has certainly had an adverse impact on our portfolio mix in the half, particularly in the US," Ford said in a call with analysts.

The winemaker noted some green-shoots in China as the country reopened, but said it remains cautious about its Asia unit as gatherings and social occasions, the driver of luxury wine consumption, are yet to fully recover.

Shares of Treasury, which gets most of its revenue from Asia, fell almost 6% early on Thursday and were down about 1% at mid-session, versus a broader market that was up 1%.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

Stay Connected With Our Weekly Newsletter

Processing your request...

Thanks! please check your email to confirm your subscription.

By signing up you are agreeing to our Terms & Conditions and Privacy Policy
Enjoy unlimited digital access for 30 days
Get exclusive access to the latest grocery retail & FMCG news, interviews with industry leading executives, and expert analysis on the trends shaping the sector today
Enjoy unlimited digital access for 30 days
Enjoy unlimited digital access for 30 days
Get exclusive access to the latest grocery retail & FMCG news, interviews with industry leading executives, and expert analysis on the trends shaping the sector today
Enjoy unlimited digital access for 30 days