Treasury Wine Estates has pinned the underperformance in its US sector as a contributing reason to revise its profit forecasts for FY20, despite reporting growth in its Asia, ANZ and EMEA regions.
The Australian wine producer said changes in its Americas leadership, as well as wine market dynamics with suppliers aiming to move surplus wine across the market for a lower price, and not being able to recover or offset higher US Luxury COGS and higher Australian Commercial COGS, impacted on the company’s 1H20 results.
The company's Americas region reported a 17 per cent decline in earnings before interest, tax and the SGARA agricultural accounting standard for the first half of 2019-20, to $98.3 million.
TWE now forecasts its EBITS to be at a growth of 5 to 10 per cent in FY20, which is down from its earlier prediction of 15 to 20 per cent growth.
“The early announcement of our first half results, which remain subject to audit review, reflects the fact that we slightly missed our 1H20 EBITS versus our own expectations and based on our revised full year forecast our growth rate in F20 will be lower than previously guided,” said TWE CEO Michael Clarke.
“While we are very pleased with our performance across the Asia, ANZ and EMEA regions, our first half performance in the Americas has been a setback and is disappointing given the high expectations we have for growth in this important market.
“The fact that we have continued to deliver sustainable, margin accretive growth despite this setback in one of our key markets is testament to the fundamental strength of our global business model, which sources multi-regionally, sells multi-regionally and is the most self-distributed wine business, globally.”
TWE reported EBITS of $366.7 million, up by 6 per cent, with premiumisation continuing to drive performance across all regions.
The company states it will have a strategic review of its internal operating model to focus on “accelerating returns from premiumisation and managing the commercial wine business differently”.
It also suggests the recent drought, heat and fires in Australia will create “some likely challenges” for the cost of the 2020 Australian vintage, which is now in harvest.
Clarke said: “We remain focused on our journey of sustainably growing earnings, but for F20 and F21, at slower growth rates than previously expected as we look to re-build momentum in the US and implement key actions from our strategic review.”
TWE was listed as #5 in Australia’s Top 100 Food & Drink Companies 2019 report.
