Treasury Wine (ASX:TWE) share price on watch after FY21 earnings beat

This wine giant had a very eventful but solid year…

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The Treasury Wine Estates Ltd (ASX: TWE) share price will be one to watch this morning.

This follows the release of its first full year results since being hit with tariffs in China.

Treasury Wine share price on watch after hitting FY 2021 guidance

  • Net sales revenue down 3% to $2,569.6 million
  • Earnings before interest, tax, SGARA and material items (EBITS) down 0.4% to $510.3 million
  • EBITS margin increased 0.6ppts to 19.9%
  • Net profit after tax up 1.8% to $250 million
  • Fully franked final dividend up 62.5% to 13 cents per share, bringing full year dividend to 28 cents per share

What happened in FY 2021 for Treasury Wine?

It was an incredibly eventful year for Treasury Wine. Despite battling COVID-19 headwinds and being effectively shut out of China, the wine giant delivered a result ahead of analyst expectations. This could bode well for the Treasury Wine share price on Thursday.

For the 12 months ended 30 June, the company's EBITS came in broadly flat at $510.3 million. This was in line with its guidance range of $495 million to $515 million and ahead of the market consensus estimate. For example, Goldman Sachs was forecasting EBITS of $508.2 million, which was 0.3% ahead of consensus.

The main driver of its growth in FY 2021 was its Americas business. It reported a 23% increase in EBITS to $168.3 million thanks to positive momentum accelerating across the retail and e-commerce channels for its Premium brand portfolio.

Also supporting its growth was the ANZ business, which reported a 10% increase in EBITS to $142.7 million. This reflects ongoing portfolio premiumisation, including growth in Penfolds Bins & Icons.

The main drag on its performance was the Asia business. It reported a 15% decline in EBITS to $205.4 million. This was driven by shipments to Mainland China significantly reducing following the implementation of import duties on Australian wine. Mainland China EBITS fell to $77.3 million for the year.

Finally, the EMEA business also dragged on its results. It reported a 6% decline in EBITS to $46.6 million. This was driven by higher costs which offset strong top-line growth during the year. Positively, some of this relates to one-off Brexit costs.

What did management say?

Treasury Wine's Chief Executive Officer, Tim Ford, was pleased with the company's result. Particularly given the significant disruption it faced during the year.

He commented: "F21 was a year of both significant change and achievement for our business, with the financial results we have announced today a testament to the commitment and strength of our global teams. Most pleasingly, despite a backdrop of significant external disruption, we have delivered on the priorities we set for ourselves at the start of the year, and therefore we remain very well placed to deliver on the long-term growth ambitions we set out in our TWE 2025 strategy."

What's next for Treasury Wine?

FY 2022 marks a new beginning for Treasury Wine, with the company transitioning to a new operating model under three brand-led portfolio divisions. These are Penfolds, Treasury Premium Brands, and Treasury Americas.

Management expects this to maximise the benefits of separate focus across its diverse brand portfolios and leverage the scale of its global business model.

However, due to the uncertain operating environment, no guidance has been offered for FY 2022. Though, management is positive on its outlook and reiterated its long term goal of delivering sustainable top-line growth and high-single digit average earnings growth.

Mr Ford commented: "In F22, we enter a new phase for TWE under our brand portfolio divisional operating model, led by Penfolds, Treasury Premium Brands and Treasury Americas. Whilst it's early days in this change program, it is already very clear to our teams that with each division focused on their unique strategic priorities and performance accountabilities, we are better positioned to take advantage of previously untapped growth opportunities across the globe. This is a truly exciting stage in our journey as we progress deliberately and at pace towards our ambitions and goals."

Treasury Wine share price performance

The Treasury Wine share price has been on form this year and hit a 52-week high of $12.79 yesterday.

This means the company's shares are up 33% this year and are thoroughly outperforming the ASX 200.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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