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Drinks

Treasury Wine Says It Is Ready To Ship Australian Bottles To China

By Reuters
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Treasury Wine Says It Is Ready To Ship Australian Bottles To China

Shares of Treasury Wine Estates shot to a three-month high after the company, one of the world's biggest wine makers, said core profit met expectations and it was ready to resume shipping Australian wine into China.

China accounted for one-third of Treasury's profit before Beijing imposed tariffs on Australian wine in 2020, effectively ending shipments.

However, relations between Canberra and Beijing have improved and the Australian government and wine industry expect the tariffs to lift in the coming weeks.

'A Path Forward'

"We expect a decision and therefore a path forward by the end of March," Treasury CEO Tim Ford said on a conference call with analysts.

"We are both well prepared and well placed to reestablish our Australian country of origin portfolio in China," he said, adding that China was a "significant growth opportunity" for Treasury's higher-priced Penfolds division.

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Melbourne-based Treasury, whose brands range from Wolf Blass and Lindeman's to Beringer and DAOU, has continued to ship wine made outside Australia to China and said it has more than 120 staff there.

Treasury produces wine mainly in Australia but also in the United States, New Zealand, France and Italy.

China Focus

If Beijing did lift tariffs, Ford said Treasury would reallocate some of its Penfolds Bin and Icon wines from other global markets to China and raise prices globally on some of its more expensive Penfolds bottles.

The company's earnings before interest and taxes (EBITS) for first-half period ended Dec. 31 were A$289.8 million (€175.45 million), in line with Visible Alpha's consensus estimate.

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Weakness in U.S. sales led to a 13% fall in profit to A$166.7 million but beat Jefferies's estimate of A$123 million.

"Some feared (the results) could have been worse than what was reported at a headline EBITS level," Citi analysts said in a note.

Growth Forecast

Treasury now expects stronger results in the second half and reiterated forecast for mid- to high-single-digit organic EBITS growth in 2024.

The company declared an interim dividend of 17 Australian cents per share, in line with consensus view, but below the 18 Australian cents it paid last year.

Treasury's shares were up nearly 3% at 0330 GMT having earlier been up more than 5% to reach their highest levels since Nov. 8.

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