Treasury Wine Estates lifts profit 132.4pc, hails US and China growth

Treasury Wine Estates more than doubled earnings in the first half thanks to strong growth in the US and China.

Treasury Australia & New Zealand managing director Angus McPherson. Pic: Simon Cross

Treasury Wine Estates has more than doubled earnings in the first half thanks to strong growth in the US and China.

For the six months to December 31, the wine producer and distributor (TWE) booked net profit of $136.2 million, up 132.4 per cent on the prior corresponding period.

The group’s revenues rose a more modest 20.2 per cent to $1.37 billion, while its pre-tax earnings (EBITS) jumped 58.8 per cent to $226.8m.

Margins improved 4.3 percentage points to 17.5 per cent, putting it already in the ballpark of its high-teens target by fiscal 2018.

That target was accelerated by two years just six months ago in a sign of better-than-expected progress on its plans.

“I am delighted to report a strong interim 2017 financial result highlighted by further margin accretion, excellent cash conversion and outstanding EPS growth, despite the higher share base,” chief executive Michael Clarke said.

“All regions delivered double digit EBITS growth and importantly, growth was delivered sustainably.”

On a sector-by-sector basis, Treasury’s Australia and New Zealand arm delivered pre-tax earnings up 13.2 per cent to $53.1m, while the Americas and Asia logged growth of around 75 per cent.

Europe also performed well, with pre-tax profit climbing 34.3 per cent.

The company anticipates growth slowing through the back half, with second-half pre-tax earnings tipped to be “broadly in line” with the first-half number of $226.8m.

“Today’s result announcement demonstrates that we are executing on all the initiatives we have communicated to the market,” Mr Clarke added.

The result was also tied with news the group had appointed Gunther Burghardt to the role of chief financial officer, while it has been agreed Mr Clarke will split his time between the group’s home base in Southbank, Victoria and its US base in the Napa Valley, California.

“With a global and highly collaborative management team, I am pleased our chief executive officer is able to spend more time in the US; one of TWE’s regions with the most potential,” chairman Paul Rayner said.

The group also hinted at further acquisitions after the successful purchase of Diageo Wine a year ago.

“TWE’s balance sheet continues to provide the company with the flexibility to pursue value accretive opportunities for shareholders,” the company said.

Treasury booked an interim dividend of 13c a share, up 63 per cent — or 5c a share — on last year.