Record profits for Treasury Wine Estates

Treasury Wine Estates, owner of Penfolds and Blossom Hill, enjoyed record profits in the second half of 2016 – but the company’s shares fell on lukewarm forecasts for the months ahead.

Treasury Wine Estates profits

The company was boosted by the US$600m acquisition of Diageo’s wine brands just over a year ago – including Sterling Vineyards, Beaulieu Vineyards and Blossom Hill – sending sales by volume up 19% to 18.7m cases, and boosting revenues by 20% to reach just under A$1.3bn.

All of Treasury’s regions – Australia/NZ, Europe, Asia and the Americas – delivered double-digit earnings growth, with volume growth especially strong in Europe and Asia.

However, the Diageo acquisition led to a decline in revenue per case in Europe, largely due to the low pricing of Blossom Hill, and the company warned that the post-Brexit slump in the pound had increased costs for wines imported from the US and Australia.

Warning that the impact of Brexit on consumer demand in the UK remains ‘uncertain’, Treasury said it expected its second-half results to be ‘broadly in line’ with the first half – a lukewarm forecast that led to a 5% decline in the company’s share price in early trading.

Nonetheless, company CEO Michael Clarke hailed the ‘strong’ results and announced plans to ‘co-locate’ between Australia and California over the next year, as the company continues to remodel its US operations.