Treasury Wine Estates reaffirms its earnings guidance

The makers of Penfolds wine as well as a large portfolio of brands in Australia, China, Europe and the US says its previous earnings guidance is on track.

Treasury Wine Estates chief executive Tim Ford.

Treasury Wine Estates, the makers of Penfolds, Wolf Blass and Pepperjack, has reconfirmed earnings guidance despite cost of living pressures draining drinkers of their wine budgets.

And the company has committed to updating the market about a possible sale or demerger of its portfolio of “cheap and cheerful” brands.

The winemaker told an investor day presentation in the US that its expectations for its recently acquired Californian business, DAOU Vineyards, that it paid $US1bn ($1.57bn) for late last year, were unchanged in terms of earnings gains and growth trajectory.

Addressing analysts and investors, Treasury Wine Estates chief executive Tim Ford underlined the winemaker’s view that long-term trends for the wine industry would be driven by the continued growth in luxury and premium wine sales, consolidation of distributors and demographic changes as baby boomers make way for Gen Z and millennials.

This “premiumisation” of the wine market had helped reinforce the need for Treasury Wine Estates to push further into the higher priced end of the market – particularly the US which is the largest luxury wine market in the world – and the acquisition of DAOU Vineyards helped to give the Australian winemaker extra punch and presence there.

This could result in Treasury Wine Estates unshackling itself from its Premium Brands division which typically holds its cheaper or more affordable wine brands such as 19 Crimes, Squealing Pig, Lindeman’s and Rawson’s Retreat.

Mr Ford told analysts that work to assess the future operating model for Treasury Wine Estates’ global portfolio of premium brands was continuing, and an update would be provided in August. This would be likely at the full-year results.

Meanwhile, despite the cost of living pressures experienced by its shoppers from Shanghai to New York, Mr Ford said the winemaker continued to expect mid-high single digit earnings growth in fiscal 2024, excluding the earnings contribution from DAOU in the second half.

“We expect fiscal 2024 EBIT to be delivered in the range of $223m to $228m, reflecting luxury portfolio growth, supported by increased availability, with premium portfolio revenue broadly in line with the previous corresponding period,” he said.

He said earnings from DAOU Vineyards of approximately US$24m were in line with expectations of being in the mid to high single-digit earnings per share accretion in fiscal 2025, which is the first full year of ownership.

Over the medium term, the Californian business would average annual low double-digit net sales revenue growth.

Treasury Wine Estates is also focused on new growth opportunities for its flagship luxury wine brand Penfolds in the US.

The investor presentation was told that the company would seek to leverage the Penfolds’ Californian collection to continue building awareness with the US luxury wine consumer, and grow Bin 389 through “by the glass” in on-premise accounts, nationally.

Around three quarters of Treasury Wine Estates’ earnings are generated by Penfolds as well as other high-end wines.