Treasury Wine Estates Ltd (ASX: TWE) has been one of the best mid-cap ASX growth stocks to have owned over the past 5 years. Since 2013, TWE shares have more than tripled in value, giving its lucky investors a return of over 275% (and that's not even including dividends).
But according to a report in the Australian Financial Review (AFR), the ongoing Brexit train wreck could be a major threat to this wine giant.
The AFR article featured the managing director of one of Australia's largest privately-owned wine groups, Taylors Wines. Mitchell Taylor says he's factoring in an extended downturn in sales to the United Kingdom (UK) (which represents around 10% of Taylors' sales) because of Brexit uncertainty, which shows no sign of abating.
"A lot of the supermarkets are a bit unsure as to whether they need to order more," Mr Taylor is quoted to have said. "They seem to be as uncertain as they have ever been in the past… we're extremely cautious there."
I'm sure Treasury's management (and incoming CEO) would agree.
Why Brexit is creating uncertainty
The UK still remains within the European Union until a withdrawal agreement can be hammered out or the UK decides to leave without a deal. This leaves the thousands of EU regulations and trade deals that operate within the Single Market in place in the UK. Even after Brexit eventually happens, it will likely take years until Australian exporters have the ongoing certainty of a Free Trade Agreement between the UK and Australia.
Throw in the currency gyrations between the pound sterling and the Aussie dollar that the Brexit process keeps throwing up and there is a lot of uncertainty there for Treasury Wines and others.
However, the AFR also notes that Australian wine exports to China has reached a record $1.25 billion, so Treasury and its peers are no doubt hoping China's strong appetite for our wine is enough to offset the bedevilling uncertainties of Brexit.
