Treasury Wine Estates (TWE) recorded a 7.5 percent drop in net profit after tax to $109.1 million in the six months to 31 December 2021.
However, the good news for investors is the company recorded EBITS growth of 28 percent when taking into the account the effective closure of the mainland China market.
This was driven by global distribution growth for Penfolds and growth in TWE’s Luxury and Premium portfolio brands.
The company’s share price was up 12 percent in early trading today.
“We are very pleased with our first half results,” TWE CEO Tim Ford says.
“This performance reflects the focused execution of our plans and strategic priorities, led for the first time by Penfolds, Treasury Americas and Treasury Premium Brands.
“Each division is now on a clear and positive trajectory towards their respective long-term growth objectives, with the benefits of separate focus and accountability already very evident throughout TWE.
“Following the past two years of significant change within TWE and the markets in which we operate, we have shifted our focus from a mindset of ‘recovery and restructuring’ to one of ‘growth and innovation’.
“We have great confidence that by leveraging the unique strengths of our business – our people, our brands and our asset base – we are well placed to capitalise on the significant opportunities across the global markets in which we operate.”
Mr Ford says the company is investigating the detention by customs officials in Shenzen of 80 cases of luxury Penfolds wine.
“We will investigate it,” he says. “We have got to maintain vigilance… it is relatively small and relatively infrequent when it does come to our attention.
“We want to maintain brand integrity and price integrity in China.
“It is important we manage that relationship with China.”
Meanwhile TWE says vintage 2022 growing conditions have been mixed to date, with welcome early winter/spring rainfall at the start of the season followed by pockets of frost across key growing regions, in addition to hailstorms in the Barossa Valley and Adelaide Hills.
“It has been a mild and dry summer in all key viticultural regions, with current expectations for average yields in inland regions and lighter yields in cooler regions,” the company says.
“Proactive adjustments to sourcing will continue to be made in response to Commercial category volume declines and changed demand expectations for Mainland China.”