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Treasury Wine Estates delivers more strong profit growth in FY 2019

James Mickleboro
Friends celebrating with wine

The Treasury Wine Estates Ltd (ASX: TWE) share price could be on the move today following the release of the global wine company’s full year results.

How did Treasury Wine Estates perform in FY 2019?

For the 12 months ended June 30, Treasury Wine Estates reported a 17% increase in net sales revenue to $2,831.6 million. In constant currency net sales revenue lifted 12% on the prior corresponding period, representing the strongest organic growth rate in the company’s history.

Key drivers of this growth were a 2.7% increase in volume and 9.5% growth in net sales revenue per case. Management advised that this reflected portfolio premiumisation and price realisation within the Luxury and Masstige portfolio.

Full year EBITS increased 25% to $662.7 million thanks to 1.6 percentage points of EBITS margin accretion during the period. This was in line with the company’s guidance.

How did the company’s segments perform?

Pleasingly, the company reported net sales revenue, net sales revenue per case, and EBITS growth across all regions.

The strongest performer was once again the Asia segment. It reported 43% EBITS growth to $293.5 million and an improved EBITS margin of 39.2%. This was driven by increased availability of Luxury and Masstige wine, growing demand for its portfolio of brands, and outstanding execution.

The Americas segment reported 13% EBITS growth to $218.7 million and a slightly softer EBITS margin of 19.3%. Management explained that Premiumisation continues to be a key driver of performance, with increased Luxury and Masstige volumes complemented by growth in Canada and Latin America.

The Australia & New Zealand (ANZ) segment reported 15% EBITS growth to $156.5 million and a slightly wider EBITS margin of 26%. This was driven by growth across the Masstige and lower Luxury portfolios, improving performance in the on-premise channel, and an ongoing focus on managing costs.

Finally, the Europe segment was the laggard in the group. It reported 4% EBITS growth to $51.4 million and a slightly softer EBITS margin of 14.9%. Its growth was driven by targeted investment behind priority brands in focus markets throughout the region.

Outlook.

The company’s CEO, Michael Clarke, spoke positively about the company’s future.

He said: “The results announced today demonstrate the exceptional returns we are delivering for our shareholders, and they are a direct result of the investments and structural change our team has made in our global business over the past five years. Sustainability is at the heart of everything we do at TWE, and we will continue to pursue opportunities to enhance the fundamentals of our business with a mindset of prioritising long-term success over short-term outcomes. We look to the future with confidence, knowing that we have the people, the brands, the wine, the business models and the customer partnerships to continue delivering sustainable, margin accretive growth.”

Its reported EBITS growth rate guidance of approximately 15% to 20% has been reiterated for FY 2020.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019