Treasury Wine Estates harvests 55pc earnings boost

The world’s largest listed wine company, Treasury Wine Estates, has posted a 55 per cent jump in full-year profit.

Treasury Wine Estates chief executive Michael Clarke. Picture: David Geraghty.

Treasury Wine Estates chief executive Michael Clarke is reaping the rewards of dragging the winemaker’s expanding international wine portfolio up the value curve, posting a 55 per cent jump in full-year profit, and says he is keen to buy up vineyards and forge new grower contracts this year to fill his warehouses with luxury wine.

An upbeat Mr Clarke declared “this was only just the start’’, as Treasury Wine prepares to release some of its cellared premium wines to the market over the next two years.

For the first time since being spun out of brewer Foster’s in 2011, Treasury Wine is consistently recording rising profits across all key regions — North America, Australasia, Europe and Asia. And thanks to recent ­stunning vintages it has high-margin wines ready to sell to ­global consumers thirsty for premium wine brands.

Mr Clarke said yesterday he urgently needed more access to luxury and mass-produced prestige wines, also known as “masstige”, and this would see Treasury Wines buy up vineyards as well as secure longer-term contracts with growers. “Honestly, I am happy with both, so long as we have got access to more luxury fruit on a sustainable basis ... I don’t mind if we own the vineyard, I don’t mind if it is a grower contract, so long as it’s a longer-term agreement so I don’t have ups and downs in ­supply,’’ Mr Clarke said.

The world’s largest listed wine company, which owns brands such as Penfolds, Wolf Blass and Berringer, said net profit for 2017 was up 55 per cent to $269.1 million, with earnings per share up 50 per cent to 36.5c.

Net sales revenue was 7.6 per cent stronger at $2.4 billion, while pre-tax earnings were 36 per cent stronger at $455.1m. The stronger profit and sales, which saw Treasury Wine hit its target of high-teens earnings margins three years ahead of the initial plan of 2020, was driven by the acquisition of Diageo Wine’s American and European drinks arm.

Mr Clarke recently relocated to California to more closely oversee the company’s large US arm, which drives 40 per cent of sales and earnings. This was now paying dividends as North America sales rose 7.2 per cent to $1.062bn and earnings rose 43.7 per cent to $189m. Asian sales rose 34.5 per cent to $394.3m and earnings rose 47.2 per cent to $150.1m, although average revenue a case fell 18 per cent, reflecting the shortage of luxury wines.

“I’ve always said if I can get my hands on more luxury fruit, I can sell more luxury fruit,’’ Mr Clarke said on the skew to cheaper wines in Asia. “We know we can sell more wine and have been broadening the portfolio in Asia of masstige wine … because up until now, we couldn’t get our hands on more luxury fruit.”

Easing this problem would be new supply deals in France, including an exclusive deal to import and distribute the Barron Philippe de Rothschild branded wine portfolio in the region.

In Australasia, sales were up 0.1 per cent to $591.3m, with earnings 24.4 per cent stronger at $111.1m. Sales in Europe were slightly down to $354.1m while earnings were up 0.6 per cent to $48m. Treasury Wine also announced a $300m share buyback this year. A final dividend of 13c was declared, payable on October 6, bringing total dividend to 26c, a 6 per cent increase on 2016.