Australia wine exports by value rise, as Treasury confirms outlook

Wine exports are rising in value, if not volume, as Treasury Wine flags a “very strong” vintage.

Some of Treasury Wine Estates’ top brands.

Treasury Wine Estates, which produces leading wines such as Penfolds, Wolf Blass and Lindemans, has confirmed its earnings outlook for fiscal 2019 and flagged a “very strong” vintage.

It follows the release of export data from Wine Australia showing a 5 per cent lift in exports for the 12 months to March to $2.78 billion, although there was a 3 per cent slide in export volumes.

Latest industry figures show total Australian wine export volumes to China - the biggest export market for Australian wine - actually fell by 14 per cent over the 12-month period, but the value of exports rose by 7 per cent.

This could be worrying to investors in Treasury as Asia now generates the biggest earnings for the company, and which has been singled out by chief executive Michael Clarke as a crucial growth engine.

Treasury said it noted the Wine Australia export data for the quarter ended March 2019 but cautioned investors against using it to make assumptions about its performance, especially in Asia.

“In recognition of historical investor interest in this data, and to ensure consistent communication to all shareholders, TWE reiterates its caution against using this data set as a direct read through to TWE’s trading performance,” the company said.

“The use of short term trade export and import data can be misleading with respect to TWE’s underlying trading performance in the Asia region as it does not consider key structural differences in the company’s business model, the premium mix of TWE’s portfolio, nor the variability in its export shipment profile.”

Treasury, which established a Shanghai warehouse in the first half of fiscal 2018, said that in China specifically selected trade export and import data do not have a direct relationship to its own sales performance.

“TWE is pleased with its operating performance across all regions for the nine months to March 2019,” it said.

The winemaker confirmed continued positive momentum in Asia with record depletions delivered for the nine months ending March 2019, including strong trading performance across the key Chinese New Year festive period.

It confirmed expectations of a very strong and high-quality luxury wine vintage for 2019. Its luxury intake is up about 10 per cent on last year due to a multi-regional sourcing strategy.

Treasury reiterated guidance for reported EBIT growth of approximately 25 per cent for 2019, and in the range of approximately 15 per cent to 20 per cent for fiscal 2020.

Earlier Wine Australia said the total value of Australian wine exports increased by 5 per cent to $2.78 billion in the 12 months to March 2019, with the average value per litre climbing to $3.41, the highest level since 2009.

Wine Australia CEO Andreas Clark said the continued growth in the value of exports was an extremely positive trend.

He said while the volume of exports had declined slightly by 3 per cent to 814 million litres (90 million 9-litre case equivalents), the increasing value overall, and on average, was overwhelmingly positive.

“What we are seeing is a drop in volumes in the lower value categories and this places Australia well as the global consumer premiumises and drinks less but more expensive wines,” Mr Clark said.

In China the wine industry has grown value again and is outperforming its competitors, with

Global Trade Atlas figures showing that in the year to February 2019, Australia had a 29 per cent share of the imported wine market – up from 26 per cent a year ago.

“We are also seeing positive trends in the USA off-trade market where sales of Australian wine grew 3 per cent in value to $US521 million in the year ended December 2018. Even more encouraging is that Australian wine priced above $US15 per bottle has also grown by 3 per cent, according to market monitor IRI Worldwide.”

Australian wine exports to China (including Hong Kong and Macau) increased by 7 per cent in value to $1.11 billion and decreased by 14 per cent in volume to 154 million litres (17 million 9-litre case equivalents) in the year ended March 2019.