Cheers! Treasury Wine (ASX:TWE) share price jumps 13% on half year results

Treasury Wine shares are on form on Wednesday…

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A happy couple drinking red wine in a vineyard as the Treasury Wine share price rises today

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Key points

  • Treasury Wine shares are rocketing higher following the release of its half year results
  • As was widely expected, the wine giant posted a decline in earnings
  • Investors appear excited about the future as the company shifts to a growth focus

The Treasury Wine Estates Ltd (ASX: TWE) share price is racing higher today following the release of its half year results.

In morning trade, the wine giant's shares jumped 13% to $11.90.

Treasury Wine jumps on half year results

  • Net sales revenue down 10.1% to $1,267 million
  • Net sales revenue per case up 16% to $95.60
  • EBITS down 6.7% to $262.4 million
  • EBITS margin improved 0.8 percentage points to 20.7%
  • Net profit after tax down 7.5% to $109.1 million
  • Fully franked interim dividend of 15 cents per share declared

What happened during the first half?

For the six months ended 31 December, Treasury Wine reported a 10.1% decline in revenue to $1,267 million.

This reflects softer sales across all segments. Penfolds reported a 16.3% decline in revenue to $382.7 million, Treasury Americas posted an 8.5% decline in revenue to $465.9 million, and Premium Brands saw its revenue fall 5.6% to $418.4 million.

And while is Americas and Premium Brands businesses managed to record strong EBITS growth despite these sales declines, a 19% decline in EBITS from the key Penfolds business weighed on its earnings and led to a 6.7% decline in group EBITS to $262.4 million.

Management advised that the Penfolds business was unsurprisingly impacted by reduced shipments to Mainland China, which were partly offset by strong growth across global priority markets and channels.

Management commentary

Treasury Wine's Chief Executive Officer, Tim Ford, was pleased with the half.

He commented: "We are very pleased with our first half results, where we delivered comparable EBITS growth of 28% when taking into account the effective closure of the Mainland China market, while at the same time continuing with the implementation of important changes across the business."

"This performance reflects the focused execution of our plans and strategic priorities, led for the first time by Penfolds, Treasury Americas and Treasury Premium Brands. Each division is now on a clear and positive trajectory towards their respective long-term growth objectives, with the benefits of separate focus and accountability already very evident throughout TWE," he added.

"Growth and innovation"

Possibly giving the Treasury Wine share price a lift today was management's commentary on its outlook. Mr Ford revealed that the company is embarking on a new chapter following the disruption of the last two years.

He said: "Following the past two years of significant change within TWE and the markets in which we operate, we have shifted our focus from a mindset of 'recovery and restructuring' to one of 'growth and innovation'. We have great confidence that by leveraging the unique strengths of our business – our people, our brands and our asset base – we are well placed to capitalise on the significant opportunities across the global markets in which we operate."

In respect to the second half, the company expects that trading conditions will be broadly consistent with those in the first half across all key global markets and channels.

Looking further ahead, the company's "financial objective remains to deliver sustainable top-line growth and high-single digit average earnings growth over the long-term."

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 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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