Wine giant, Treasury Wine Estates (TWE) has downgraded its profit forecasts following weaker sales in Australia and China.
TWE, which makes Penfolds, Wolf Blass, Rosemount, Saltram, Coldstream Hills and T’Gallant wines, has lowered its full year earnings forecast for the 2013/ 14 financial year to between $190 million and $210 million, down from between $230 million and $250 million.
The company also said its first half earnings would be between $42 million and $46 million, down from the $73.4 million it made in the previous corresponding half.
TWE, which is one of Australia's largest wine producers, has pointed to higher than expected volume declines following its decision to increase prices on some of its commercial portfolio and to reduce its participation in deep promotion initiatives across the portfolio over the Christmas period, combined with significant competitive activity.
The company also said that the well documented government austerity measures in China were impacting consumer demand for premium wine.
“TWE does not expect to recover the first half shortfall and expects these challenges to continue in the second half,” the company said.
Last July, TWE announced a $154.3 million provision that included the $34 million cost of destroying up to 600,000 cases of old and unsold wine in the US, which, the company said, could have been avoided if TWE had had better reporting systems in place.
The company's CEO David Dearie, left soon after the announcement and has yet to be replaced.
