Penfolds winemaker Treaury Wine Estates has seen its share price slide by 20% on the Australian stock exchange after weakening consumer demand in China forced it to cut profits forecasts.
Treasury‘s share price sank back to its lowest level for more than a year today (30 January) after the firm resumed stock exchange trading following a two-day, self imposed freeze.
It said half-year operating profits for the six months to the end of December would be between AUD42m and AUD46m, versus AUD73.4m in the same period of the previous year. Operating profits equate to earnings before interest, tax, currency swings and one-off items.
Weakening demand for wine in China has exacerbated Treasury’s problems, after net profits plunged by 50% in the firm’s last fiscal year due to excess wine supplies in the US.
The group had originally warned of a slowdown in China last October, related to government austerity measures. ‘The impact on TWE has since intensified, resulting in a reduction in volume,’ it said this week.
It added that it ‘does not expect to recover the first-half shortfall’ over the course of its current financial year. Full-year operating profits are set to total between AUD190m and AUD210m, versus an earlier forecast of up to AUD250m.
Separately, a group of wine grape growers in Australia has launched formal complaint proceedings against Treasury and two of its rivals, Pernod Ricard and Accolade, over grape price cuts.
Written by Chris Mercer