Market Herald logo

Subscribe

Be the first with the news that moves the market
  • Treasury Wine Estates (TWE) shares were rocky this morning following the company’s half-yearly financial report for the six months to the end of 2020
  • While the Penfolds maker generated more revenue and earnings than the first half of 2020, figures were still lower than the second half of 2019
  • This suggests the worst of the COVID-19 woes are passed, but the company has not yet fully recovered from the blow dealt by the pandemic
  • However, Treasury Wine is expecting earnings to fall even further in the current half-yearly period due to China’s recently introduced tariffs on Australian wine
  • The Chinese tariffs were only introduced in late-November 2020, meaning the true impact of China’s move is not yet known
  • Treasury Wine Estates shares are trading 0.71 per cent higher this afternoon at $9.97 per share

Treasury Wine Estates (TWE) shares were rocky this morning following the company’s half-yearly financial report for the six months to the end of 2020.

Across the board, key performance metrics for the Penfolds maker have improved compared to the first half of 2020, suggesting the worst of the COVID-19 pandemic has passed.

However, earnings and profits are still below where they were over the same period in 2019. On top of this, Treasury Wine is facing new challenges in light of China’s devastating tariffs on Australian wine imports.

TWE made $1.4 billion in revenue for the half-year, which is an 8.2 per cent fall on the same time in 2019. This translated to softer net profit after tax and SGARA, which came in 23.5 per cent lower than the previous corresponding period at $175.3 million.

In this context, SGARA refers to the difference between the fair value of harvested grapes and the cost of TWE’s harvested grapes.

Treasury Wine’s earnings before interest, tax, SGARA, and material items was $284 million for the half-year — 22.5 per cent lower than the second half of 2019.

TWE has still declared an interim dividend of 15 cents per share, fully franked, though this is 25 per cent lower than last year’s interim dividend.

What’s next?

While, encouragingly, TWE still made $333.7 million in revenue from its Asian segment, the Chinese wine tariffs were only introduced in late-November — meaning TWE’s bottom line was only impacted for one month of the half-year.

Consequently, the true impact of China’s actions is not yet known, with earnings over the remainder of the 2021 financial year likely to be telling of how heavy the blow to Australia’s wine industry from China will be.

As such, TWE admitted to investors that it expects earnings during the second half of the 2021 financial year to be lower than the first half despite its ongoing recovery from coronavirus woes.

On the brighter side of things, TWE said it is building momentum for its TWE 2025 Strategy, which is designed to lay foundations for future business growth.

Specifically, the company said it has outlined a new operating model for its three divisions — namely Penfolds, Treasury Premium Brands, and Treasury Americas. Company management also said it has progressed some key initiatives to deliver a future premium wine business in the U.S.

Following a rocky first half of the day, company shares have taken back some lost ground this afternoon to trade 0.71 per cent higher at $9.97 per share.

TWE by the numbers
More From The Market Herald

" Appen (ASX:APX) positioned to weather pandemic, reaffirms guidance

Data annotation and artificial intelligence company Appen (ASX:APX) has today reaffirmed its guidance for the 2020…

" Appen (ASX:APX) beats earnings guidance, outperforms a weak market

Data annotation and artificial intelligence specialist Appen (APX) has soared today after beating its earnings guidance…
Appen (ASX:APX) - CEO, Mark Brayan

" Appen’s (ASX:APX) shares rise on business restructure

Machine intelligence company Appen (ASX:APX) has made some changes to the structure of its business.
The Market Herald Video

" Appen (ASX:APX) receives $1.17b takeover bid from Canadian tech giant

Appen (ASX:APX) has received an unsolicited $1.17 billion takeover bid from Canadian telco giant Telus International.