Australia’s largest listed wine company Treasury Wine Estates says its net profit after tax (NPAT) for the 2020 fiscal year has dropped 25% to $315.8 million, though a Chinese sales recovery has helped lifted the company’s shares.
The company said unfavourable volume and portfolio mix during the second half of the 2020 fiscal year as a result of COVID-19 impacts, driven by lower luxury sales due to the closure of key channels such as restaurants for higher-margin luxury wine sales.
Challenging conditions in the US wine market was also a key driver of the lower earnings. TWE’s new chief executive officer Tim Ford, said it has been a unique year for TWE and the wine markets in which it operates.
“Our ability to navigate the disruptions of the COVID-19 pandemic through 2H20 and continue to deliver profitability and strong cash flow
performance is representative of the fundamental strength of our global business,” he said.
The company’s shares lifted to a seven month high after the results were announced with positive sales momentum in China, despite the COVID-19 pandemic starting in the country. Australia is the biggest importer of wine into China, and TWE the biggest seller.
TWE said Asia, and in particular China, are seeing positive signs of both consumption and sales. “While recent trends are positive, TWE remains cautious on the short to medium-term outlook with gatherings and social occasions, which drive consumption of luxury wine, yet to fully recover to previous levels.”
TWE will reportedly hold a VIP dinner for the launch of Penfolds’ Full Moon limited edition series and open a Penfolds House consumer pop-up store that will operate for three weeks.China is the only place in the world where TWE is launching its new releases with face-to-face events at the moment, with its economy continuing to grow while developed nations are experiencing COVID-19 induced recessions.
For the month of June, TWE’s wine sales in China rose by 40 per cent compared with June 2019 — with sales growth over the quarter of 13 per cent compared with the June quarter of 2019.
TWE chief Tim Ford told The Australian newspaper the company was seeing “positive signs of growth” in China, especially in the northern part of the country, which had been lagging behind the upturn in the wealthier southern and eastern regions.
“Clearly, demand is increasing and the occasions for that are increasing. It’s not quite back to normal (compared to what things were last year), but our team members have been returning to their annual business planning processes and visiting customers. Banquets and other events are starting up again.”
