TWE profits rise 16% as it announces big spend on Wolf Blass winery

Treasury Wine Estates (TWE) has announced that its profits after tax have risen 16% to AU$419.5m in the year to June 2019, with the group planning a $215m spend on its Wolf Blass Bilyara winery.

In the year to 30 June 2019, Treasury reported earnings before interest and taxes (EBIT) were up by 25% to hit AU$662.7m, which was “in line with guidance”, with earnings per share (EPS) up 18% to 58.4 cents per share.

The Penfolds owner said “premiumisation” helped to drive its performance, with the Asian market, in particular, reporting marked growth with EBITs up 43% to $293.5m. The Americas reported 13% EBITS growth to $218.7m; Australia and New Zealand were up 15% to $156.5m and Europe reported a rise of 4% to $51.4m.

The group is predicting overall EBIT growth of between 15% and 20% for the 2020 financial year.

TWE’s chief executive officer, Michael Clarke, called the results “high-quality” and said that they confirm the “positive momentum” of the business being achieved “through our premiumisation strategy, the disciplined investments we have made in our business over recent years, and importantly, exceptional execution by our global team”.

He added: “The results…are a direct result of the investments and structural change our team has made in our global business over the past five years. Sustainability is at the heart of everything we do at TWE, and we will continue to pursue opportunities to enhance the fundamentals of our business with a mindset of prioritising long-term success over short-term outcomes. We look to the future with confidence.”

Australian expansion

In a statement to the Australian Stock Exchange dated 15 August, the group announced that it would be expanding its “luxury winemaking assets in Australia” by making a “significant investment” in its Bilyara winery in Barossa, South Australia.

TWE said that it would invest between $150m and $180m in the project over the 2020 and 2021 financial years, as well as spending an additional one-off amount of $35m in FY20.

The wine group noted that the investment would increase its Australian luxury portfolio, increase winemaking capacity, improve efficiency and augment its storage facilities. The money will be spent on another production line, “processing infrastructure”, and the construction of barrel storage facilities.

French investment

TWE also announced that on 27 July this year, it had acquired production facilities and “vineyard assets” in Bordeaux in order to expands its country of origin portfolio which is comprised of its Penfolds, Beaulieu Vineyard and Maison de Grande Esprit brands.

The wine group had previously announced its intention to acquire such facilities back in February of this year following the release of its 2019 interim results. It launched its Maison de Grande Esprit label in 2017 which include three tiers of wines, including reds from Bordeaux, Burgundy and Châteauneuf du Pape, and a rosé from Provence.

Penfolds first announced it was developing a Champagne last summer, but in May this year it confirmed it would release three wines from the “spectacular” 2012 vintage – a Chardonnay Pinot Noir Cuvée, and two single vineyard wines, a Blanc de Blancs from Avize Grand Cru, and a Blanc de Noirs from Aÿ Grand Cru.