A short pour
1H23 RESULT
Need To Know
- Revenue short of consensus forecast
- Lower volumes in Americas and Treasury Premium Brands
- Good Penfolds result
- Interim dividend 18cps
Treasury Wine Estates’ transition to more premium and luxury wines is attracting some negativity as sales fall even though margins remain robust.
Penfolds. A strong result as NSR (net sales revenue) increased 6.8% in constant currency terms (CC) with volume up 4.4%. Price increases helped NSR per case lift by 2.2%. Apart from lower shipments in Americas, growth in other areas was good. EBITS increased 11% (CC) and margin lifted 1.7bp to 44.3%. The ‘One by Penfolds’ launch has done well with first wine sourced and produced in China!
Treasury Americas. Volume declined 15.4% with TWE noting weakness in 19 Crimes. This is concerning as it is a major part of the US portfolio. EBITS increased 35% and margin lifted to 23.7%.
Treasury Premium Brands. Volume fell here also by -10.5% dragging revenue down -4.5% (CC). EBITS increased 15.4% on a higher margin.
Outlook. TWE is expecting 2H23f to be consistent with the first half year which could be implying lower EBITS than the market had forecast.
Vintage. A good winter and above average spring rainfall started the Australian 2023 vintage off on a good footing. A high quality harvest is expected but on smaller volume.
Investment View
The group revenue miss indicates that the market is not fully grasping the shift towards the luxury brands that is underway. The market should be anticipating a change in volumes and margins although the magnitude is not yet clear.
At the same time, TWE continues to exit the lower priced commercial wines, so the overall mix shift needs to be factored in to forecasts.
With a lower cost of goods sold building for FY24f to be considered, the equation for TWE remains positive even if earnings revisions follow this result.
Figure 1: 1H23 Result (Reported Currency)
Stock Overview
Share Price
Company Overview
Treasury Wine Estates is a premium focused, global leader in wine. Its key brand is Penfolds.
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