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Wednesday 22 October 2014

Treasury posts $100m loss

21st August, 2014 by Simon Howland

Beleaguered Australian producer Treasury Wine Estates has insisted it is back on track towards profitability, despite posting heavy losses and failing to meet conservative market predictions.

TWE_AUS_Logo_PMS_Horiz_OTAnnouncing a AUS$100 million (£56m) loss, TWE cited a US impairment charge of AUS$280m (£156m) incurred as a result of its destruction of excess stock.

Even without the US charges, TWE’s underlying profit of $112m (£62m) falls short of the predicted $123.2 (£69m) by analysts according to Reuters.

The timing of the results does not bode well for the Melbourne-based Fosters group spin off as it coincides with takeover bids of over $3 billion (£1.67b) by rival US investment firms KKR & Co LP and TPG Capital Management.

According to Reuters, TWE has been viewed as ripe for takeover since late 2013 when problems with its US operations and Chinese austerity measures began to take effect.

But TWE, whose brands include Wolf Blass and Penfolds, insists it will use the next 12 months as a ’reset year’ as new CEO Michael Clarke attempts to turn the company around after a number of recent hurdles.

Speaking to ABC in Australia, Clarke acknowledged the challenges he faces but insists a rise in marketing is the solution.

“Investing in our brands, taking a portfolio approach by separately focusing on the luxury and prestige and the commercial segments, and building collaborative relationships with our customers is fundamental to the turnaround and future growth of our business,” he said.

Market analyst David Thomas, from CLSA, says Mr Clarke is trying to start afresh.

He said: “In terms of being a reset year, clearly they are looking to reinvest, they’re looking to invest in branding, marketing, and this is where I guess he’s coming from in terms of being able to reset the platform for this business to hopefully grow from FY15 and beyond.”

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