Treasury Wine Estates Bullish For 2021 Profits Despite China’s Tariff Impact
Penfolds maker Treasury Wine Estates (TWE) on Thursday assured investors about its profit growth for 2021 despite headwinds caused by China’s damaging tariffs on Australian wines and the global pandemic that saw people drinking lesser wines.
The listed firm expects its earnings before interests and taxes (EBITS) to hover between A$495 million to A$515 million this year, above market expectations.
That represents a potential 33% increase in the second half of the year at the mid-point of its guidance range, according to the company.
Still, the expected range is below its 2020 EBITS of A$533.5 million. Last year, the company posted a 25% decline in after-tax net profit to A$315.8 million.
TWE has been particularly challenged by the low consumption of premium wines during the pandemic and China’s 175.6% tariff on its brands.
To stay afloat, it restructured its business to three units and sold some low priority brands to save A$300 million. Recently, the global winemaker made a turn to the United States for potential growth through its entry into more states there.
For the long-term, TWE targets “sustainable” revenue growth and “high single-digit” average earnings growth.
The company also disclosed its EBITS margin targets: 40-45% margin for Penfolds, 25% margin for Treasury Americas and a “high-teens” margin for Treasury Premium Brands.
Other long-term objectives include the expansion of its premium offerings and restoring and growing its return on capital employed.
TWE also raised its forecasted annualised benefits from its ongoing global supply chain optimisation program by 2023 to A$75 million from A$50 million previously.
Meanwhile, the company also announced its commitment to be 100% powered with renewables by 2024 and net zero emissions by 2030.
TWE holds a portfolio of more than 70 wine brands produced from over 12,600 hectares of owned and leased vineyards across the world. Its products are sold in four major continents and over 70 countries.
