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Treasury Wine Estates issues another profit warning as coronavirus hits sales

By Wednesday 26 February 2020April 21st, 2021No Comments

Treasury Wine Estates has issued its third profit warning in as many months as the coronavirus in China takes its toll on wine sales in Asia.

The company’s share price slumped almost four percent to $11.17 yesterday. It was trading at $19 in November.

“While the full operating and financial impacts of the outbreak are yet to be fully determined, TWE now has sufficient information in its possession that would indicate consumption across discretionary categories in China has been significantly impacted through February, and that this impact on consumption is expected to be sustained to at least through March,” TWE said in a statement.

“TWE no longer believes that it will achieve the previously provided guidance for F20 reported EBITS growth of between five percent and 10 percent.”

TWE says its staff have not yet returned to the office and continue to work from home.

“The same situation is being experienced by TWE’s partnership network, including wholesalers, retailers and logistics providers,” the company says.

TWE says depletions performance leading into Chinese New Year continued to be strong and in line with TWE’s plans, reflecting strong marketing and pull-through programs across TWE’s brand portfolio prior to impacts from the outbreak.

“Post Chinese New Year consumption across discretionary categories has been significantly adversely impacted,” the company says.

“TWE will however remain vigilant in ensuring its shipments into the market are appropriately calibrated to the rate of depletions once consumption normalises.

“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 TWE 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 F20, TWE does not expect its F21 plans to be impacted.

“TWE remains committed to the health and safety of its employees and to being a supportive long-term partner to its customers in China, and will actively support them through this period,” TWE says.

“TWE’s advantaged business model and strong portfolio of brands means it is well placed to capitalise on the long-term opportunities in the Asia region, and globally.”

CEO Michael Clarke is due to hand the reins to Tim Ford on 1 July.

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