Treasury Wine Estates (TWE) is setting its sights on stronger growth this year, bolstered by robust demand for its premium and luxury brands. The reopening of China, following the removal of punitive levies, has significantly boosted the company's confidence.
The winemaker is actively re-establishing its portfolio of Australia-originated Penfolds wines in China, a market where consumers remain eager to acquire the iconic label after years of heavy tariffs that kept it off the shelves.
"Re-establishment of Penfolds Australian COO (country of origin) portfolio in China is on track, with strong shipment demand from customers and initial depletions in line with expectations," the winemaker reported.
This dual advantage of strong demand for luxury wines and favorable conditions in China has led TWE to forecast operating earnings between AUD 780 million (EUR 480 million) and AUD 810 million (EUR 500 million) for fiscal 2025. This is a notable increase from the AUD 658.1 million (EUR 405 million) reported in the previous financial year.
Visible Alpha consensus estimates place FY25 operating earnings at AUD 812 million (EUR 501 million).
This forecast reflects "continued strong top-line luxury portfolio growth in Penfolds and Treasury Americas, with stability expected across the remainder of TWE's global brand portfolios," according to the company's annual results report.
Treasury shares rose by 1.7% as of 0042 GMT, while the broader ASX was up 0.4%.
"Guidance is rare in the consumer space ... we think (TWE's guidance) demonstrates management's confidence and earnings certainty created by supply constraints," analysts at Jefferies wrote in a client note.
TWE is also aiming to further cement its position in the premium wine market by creating a new "Global Premium" division by July next year, combining its antipodean premium portfolio with its Americas premium labels.
Treasury's Penfolds luxury portfolio, which includes connoisseur-favorite brands such as Grange, contributed more than half of the company's operating earnings in fiscal 2024, with 15% growth driven by robust demand, particularly in Asia.
The company's underlying net profit after tax came in at AUD 407.5 million (EUR 251 million) for the fiscal year ended June 30, 2024, up 8% over the previous year and roughly in line with the Visible Alpha consensus estimate of AUD 408.9 million (EUR 252 million).
"At face value, the FY25 guidance, cash conversion, and outlook commentary might be better than expected," analysts at Citi commented in a client note.
The winemaker declared a final dividend of 19 Australian cents (EUR 0.12) per share, compared with 17 cents (EUR 0.11) per share last year.
Key Areas of Strategic Focus
TWE provided an update on its key areas of strategic focus:
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Re-establishment of Penfolds Australian COO Portfolio in China: Following the removal of tariffs on Australian wine imports into China, TWE immediately commenced re-establishment of the Penfolds Australian COO portfolio in China through Q4 2024, with strong shipment demand and initial depletions in line with expectations. Global demand for the Penfolds Bin & Icon portfolio is expected to exceed availability in the near term, leading to price increases across key wines effective from July 1, 2024. The record luxury wine intake from the 2024 Australian vintage will support a significant increase in availability of Bin & Icon portfolio wine from H2 2026, with expanded sourcing from future vintages prioritized for growth.
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Acquisition of DAOU and Integration: In December 2023, TWE completed the acquisition of DAOU for an upfront consideration of USD 900 million (EUR 828 million). Following the acquisition, Treasury Americas is now the leading luxury wine business in the United States, with a portfolio that includes DAOU, Stags’ Leap, Beaulieu Vineyard, Frank Family Vineyards, and Beringer. The DAOU acquisition contributed NSR and EBITS of USD 104.2 million (EUR 96 million) and USD 24.7 million (EUR 22.7 million) respectively in H2 2024. Business integration is underway, with material production and overhead cost synergies of USD 20 million+ (EUR 18.4 million) on track to be realized by the end of fiscal 2026.
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Future Premium Brands Operating Model and Portfolio: Effective July 1, 2024, TWE has implemented a new operating model within Treasury Americas to enable a separate sales and marketing focus between the luxury and premium portfolios. TWE plans to further evolve this model by July 2025, creating a Global Premium division, which will combine Treasury Premium Brands and Treasury Americas Premium portfolio brands. Expected benefits include a streamlined operating model, improved investment allocation, and unlocking additional shareholder value through the global portfolio of premium brands.
Future Perspectives
In fiscal 2025, TWE expects to deliver EBITS in the range of AUD 780-810 million (EUR 480-500 million), reflecting continued strong top-line luxury portfolio growth in Penfolds and Treasury Americas, with stability expected across the remainder of TWE’s global brand portfolios. Execution will focus on three clear priorities:
- Continuing Penfolds' well-established strategy of growing distribution, availability, and consumer demand in key global markets, alongside re-establishing the Australian COO portfolio and investing in China ahead of increased Bin & Icon portfolio availability from fiscal 2026.
- Driving Treasury Americas' market-leading U.S. luxury platform to maintain DAOU’s strong growth momentum and deliver growth across the remainder of the luxury portfolio brands, supported by a double-digit increase in portfolio availability.
- Improving the execution focus and operating performance of the premium brand portfolios within Treasury Premium Brands and Treasury Americas ahead of the transition to the Global Premium division in fiscal 2026.
TWE’s Chief Executive Officer, Tim Ford, commented, “Our fiscal 2024 performance reflects the excellent momentum we continue to build behind our luxury brand portfolios in Penfolds and Treasury Americas, which now represent over 75% of Group EBITS. These two outstanding luxury wine platforms have a very clear strategic direction and execution priorities, and we have great confidence in both as strong drivers of long-term growth for Treasury Wine Estates.”