Treasury Wine profit drops 50% for 2013

Treasury Wine Estates (ASX: TWE) reported full-year 2013 earnings today, edging up its top line but drastically dropping its bottom line. Revenue for the year clocked in at $1.73 billion, 2.8% above 2012’s $1.68 billion in sales.

The minor improvement in sales points to potential growth, but the Treasury Wine’s bottom line profits plummeted. While EBITS stayed steady at $209 million, profitable attributable to shareholders dropped over 50% to $42.3 million.

Cost of sales seems to be the main culprit behind the squeeze, with gross margins dropping 10 percentage points from 35% in 2012 to 25% this year. For investors, all this whittles down to adjusted EPS of $0.065 for 2013, compared to 2012’s $0.138.

Looking ahead, CEO David Dearie noted, “While fiscal 2013 was a challenging year for TWE, the fundamentals of the global wine industry have not changed. The supply and demand cycle is moving towards balance and global consumer demand for premium wine brands continues to grow. We remain focussed on investing in and supporting our portfolio of iconic brands, with planned brand building investment expected to increase significantly in fiscal 2014 as we continue to drive higher volume and sales growth.”

For 2014, the company will take a $30 million hit due to excessive U.S. inventory levels, and expects EBITS to register in the range of $230 million to $250 million.

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Motley Fool contributor Justin Loiseau has no position in any stocks mentioned in this article. You can follow him on Twitter @TMFJLo.

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