Treasury Wine Estates issues new profit warning

Treasury Wine Estates has unveiled its third profit warning in as many months.

The TWE portfolio of brands includes the famous Penfolds Grange Hermitage. Picture Matt Turner.

Treasury Wine Estates has unveiled its third profit warning in as many months, conceding that the outbreak and spread of the coronavirus in China had dented sales of its wines into the Asia region.

The winemaker said on Tuesday it had been forced to abandon its already watered down earnings target of 5 to 10 per cent growth for fiscal 2020.

Many of Treasury Wine’s staff in China have not been able to go into work and have been forced to work from home. Its key liquor sector partners in the country, such as retailers and wholesalers, are in a similar position, further disrupting operations.

The latest profit warning comes as successful chief executive Michael Clarke prepares to hand over to a new CEO from July 1, having more than quadrupled the company’s share price since taking the reins six years ago.

At the end of January, Treasury Wine revised down its profit guidance for fiscal 2020 and just two weeks later announced the early departure of CEO Mr Clarke and warned again that the coronavirus could have a detrimental impact to its profits this year.

Since the first profit warning, Treasury Wine shares have fallen back by more than one third in value.

Treasury, which makes brands such as Penfolds, Wolf Blass and Beringer, said while the full operating and financial effects of the outbreak were yet to be fully determined, it now had information indicating consumption in China had been significantly affected during February.

Treasury Wine sources around 25 per cent of its earnings from China, Hong Kong and Macau.

It said that this impact on consumption was expected to continue during March at least.

The company said that as a result, no longer believed that it could achieve the previous guidance for EBIT growth of between 5 per cent and 10 per cent for 2020.

It said the COVID-19 outbreak may impact performance in markets outside of China, however at this stage this is not expected to have a material impact.

“Asia is a predominantly luxury wine sales region, and Treasury Wine has the flexibility to allocate luxury wines to later fiscal periods or other geographies in order to deliver sustainable earnings growth. Should the impacts of COVID-19 be resolved in fiscal 2020, it does not expect its fiscal 2021 plans to be impacted,” the company said.