The Treasury Wine Estates Ltd (ASX: TWE) share price has been on a bit of a rollercoaster ride on Thursday following the release of the wine company’s full-year results.
Its shares fell as much as 5% in early trade before recovering to be 3.5% higher at $19.25 at the time of writing.
For the 12 months ended June 30, Treasury Wine Estates posted a reported net profit after tax of $360.3 million on net sales revenue of $2,429 billion. This was an increase of 33.9% and 1.1%, respectively, on the prior corresponding period. Net profit after tax (before material items and SGARA) was 28.2% higher year-on-year at $376 million.
Earnings per share came in at 49.7 cents on a reported basis and 51.8 cents before material items and SGARA. This was an increase of 36.2% and 30.2%, respectively. The average number of shares was reduced by 1.5% during the period to 725.7 million thanks to the company’s share buyback program.
The strong performance allowed the board to declare a final dividend of 17 cents per share. This lifted its full-year dividend to a fully franked 32 cents per share, up from 26 cents in FY 2017.
The star of the show was the company’s Asia segment. The combination of a 23.2% increase in volume and a 12.7% rise in net sales revenue per case led to net sales revenue jumping 38.9% to $547.6 million. A slightly softer margin led to segment EBITS (Earnings before interest, tax, material items and SGARA) of $205.2 million, up 36.7% year-on-year.
Not far behind was the Australia and New Zealand segment which achieved a 22.5% increase in EBITS to $136.1 million despite net sales revenue rising just 1.3% to $598.7 million. An increase in volume and supply chain savings helped lift its EBITS margin by 3.9 percentage points to 22.7%.
Treasury Wine Estates’ Europe segment also performed reasonably well. Although a decline in volume led to net sales revenue falling 3.4% to $320.9 million, the company’s premiumisation strategy lifted EBITS by 20.7% to $49.5 million.
This helped to offset a soft performance from its Americas segment. A 13.3% reduction in volume led to an 11.3% decline in net sales revenue to $961.8 million and a 1.5% decline in EBITS to $193 million.
Management reiterated its FY 2019 guidance for EBITS growth of 25% in FY 2019. So, with EBITS coming in 17% higher at $530.2 million in FY 2018, it means EBITS of approximately $663 million this year.
It also expects its new U.S. operating model to be embedded by the second-half of FY 2019.
Should you invest?
While its shares are by no means cheap at 38x full-year earnings, I do feel that it is a good option for investors prepared to hold on for the long-term. Especially given the size of the opportunity in China and the hard work it is putting in to reignite growth in the Americas segment.
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Returns as of 6th October 2020
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia 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.