Defiant Treasury Wine Estates recruits new chief executive

Treasury Wine Estates has again fended off calls to sell its US business amid a drop in sales and steep decline in operating profits for the first half of its financial year.

Net sales for the six months to the end of December fell by 7.6% versus the previous year, to A$811.9m, Treasury said, also announcing Michael Clarke – previously of Kraft Foods and Coca-Cola Co – as its new chief executive.

Operating profits slid by 37.6% to $45.8m, which did little to allay repeated calls from some analysts for the wine producer to offload its troublesome business in the US.

Excess supplies of unsold wine in the US hampered Treasury in its last fiscal year and profits in the Americas business fell by 46% for the its most recent half-year, largely because the group cut wine shipments to drain stock in the US.

China added to the firm’s woes. The group said it saw a ‘significant decline in consumer demand for premium wine in China as the impact of Government austerity measures intensified’.

However, a one-off tax gain meant that Treasury’s net profits for the half-year rose by 47% to A$106.2m.

Treasury’s share price plunged following a profits warning last month, but it clawed back some ground on this week’s announcement, rising by 3% today. Shares were still down by a fifth versus a year ago.

‘Despite a challenging first half result, the fundamentals which make our business and our industry attractive have not changed,’ said the firm’s interim chief executive, Warwick Every-Burns.

Treasury added that it should received a boost from luxury wine sales in its second-half, driven by Penfolds and also Stag’s Leap and Beringer Knights Valley in the US.

Written by Chris Mercer