Treasury Wine 1H25 Earnings Call Highlights

Treasury Wine (ASX: TWE) shares dipped as much as 8.5% on Thursday after the company reported a slightly weaker-than-expected first-half and downgraded its FY25 guidance.

1H25 Earnings Summary

• Revenue up 20.2% to $1.54 billion (1.3% miss)

• EBITS up 35.1% to $391.4 million (0.1% beat)

• Net profit after tax up 32.5% to $220.9 million (2.8% miss)

• FY25 EBITS guidance downgraded to $780 million compared to previous guidance of $780-810 million, driven primarily by reduced expectations for Treasury Premium Brands

• FY25 EBITS guidance represents a 1.8% miss against consensus $793.9 million

Earnings Call Highlights

The below topics have been answered by CEO Tim Ford, CFO Stuart Boxer, Managing Director of Penfolds Tom King, President of Treasury Americas Ben Dollard and Managing Director of Treasury Premium Brands Angus Lilley.

1H25 earnings: “EBIT grew 35.1% to $391.4 million, driven by the continued growth of Penfolds and the contribution of DAOU in Treasury Americas.”

Penfold’s China performance: “We’re extremely pleased to have successfully reestablished the Australian Country of Origin portfolio in China. It’s very positive sentiment towards the brand from both our consumers and our customers in that market, in particular strengthening our confidence in what we see as an incredible long-term opportunity for the Penfolds business.”

Distribution and brand health trends: “Pleasingly, we have announced today the upgrading of our cost synergies of that acquisition to a total run rate of $35 million, up from previous guidance of $20 million plus, further strengthening the business case for this acquisition.”

Penfolds pricing adjustment and outlook: “The growth rates shown on this slide do in part reflect the expected phasing and planned phasing of being an icon shipments to the first half of this year given the opportunity of rebuilding distribution in China in the first quarter.”

China performance and early indicators: “In Penfolds I guess complementing the strong delivery from Asia was the continuation of the positive momentum from previous years and a number of other key markets where despite the reallocation and the partial reallocation have been an outcome wants to China.”

eCommerce: “Excluding DAOU, NSR did decline 8%, reflecting below plan performance in the US tribe, some decline in our direct-to-consumer business as we’ve deliberately reduced discounting in that channel on luxury brands.”

Soft demand in lower price segments: “Our premium and commercial portfolios did decline approximately 5%, reflecting the continued softness in demand around the globe for wine at lower price points.”

Analyst Q&A Highlights

What has led to the positive cash realisation despite initial guidance suggesting a softer result, particularly regarding sales into China?

• "We were pretty happy with the cash generation in the half, particularly because the seasonality typically means weaker cash flow in the first half."

• "The reality... successful distribution... had a lot of volume in sales biased to the first quarter."

• "We'd expect things to revert to a bit more of a normal profile... but certainly working to reduce that impact of those late in the half sales."

Given the strong performance in China, do you think there’s room for additional price increases for Penfolds?

• "As demand continues to exceed supply... it's an opportunity we have to explore."

• "We're certainly building more confidence towards that potential market... but it’s a bit early to call."

• "It’s a nice problem to have to have two analysts put it that way."

Can you provide assurance that consumer demand for Penfolds is growing in China, not just distribution and retailer activity?

• "E-commerce is genuine demand... consumer pulls for what we would call as the heartland of our consumers in China."

• "That really gives us the confidence around the demand pull through."

• "Q1 was more distribution build... Q2 was more demand driven."

• "That’s been a pretty good proxy over the years as to what that demand pull through looks for."

• "The category is growing... that’s the one the other thing we do know when you roll that through so when the category’s growing on the back of – being back in that market, yeah above 150."

Can you explain why Treasury Americas' performance looks ordinary despite synergies and currency support, and why the result should still be considered positive

• "$15 bucks of synergies actually is $15 million of synergies... it’s a big number that we’re very, very pleased with."

• "We didn’t buy and build this luxury platform to save out of glory."

• "The consistent year-on-year growth... of Frank Family... is strong."

• "Luxury One still continues to grow 2%."

• "We don't talk about that too much... Beringer is continuing to perform well above market in that market as well."

This article was generated with the support of AI and reviewed by an editor.