Treasury Wine share price on watch after FY22 earnings beat

This wine giant has released its full year results for FY 2022…

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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 has released its full year results for FY 2022
  • The wine giant announced earnings ahead of the market's expectations
  • Treasury Wine also revealed that it is targeting strong, margin accretive growth in FY 2023.

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

This follows the release of the wine giant's full year results for FY 2022.

Treasury Wine share price on watch following earnings beat

  • Net sales revenue down 3.6% year over year to $2,476.7 million
  • Net sales revenue per case up 16.1% to $97.30
  • Earnings before interest, tax, SGARA and material items (EBITS) up 2.6% to $523.7 million
  • Net profit after tax before material items and SGARA up 4.2% to $322.6 million
  • Fully franked final dividend up 23% to 16 cents per share
  • Outlook: Strong, margin accretive growth in FY 2023.

What happened during FY 2022?

For the 12 months ended 30 June, Treasury Wine reported a 3.6% decline in net sales revenue to $2,476.7 million but a 2.6% lift in EBITS to $523.7 million. The latter was driven by margin improvements across all divisions and up 4% in constant currency and up 22% when adjusting for wine sold in Mainland China a year earlier.

Treasury Wine's earnings growth was driven by its Americas and Premium Brands segments, which reported EBITS growth of 20.5% and 27%, respectively, in FY 2022 thanks to portfolio premiumisation. This helped offset a 7.8% reduction in Penfolds EBITS caused by its China exit.

On the bottom line, the company's net profit after tax before material items and SGARA was up 4.2% to $322.6 million. This allowed the Treasury Wine board to declare a final dividend of 16 cents per share, bringing its full year dividend to a fully franked 31 cents per share.

How does this compare to expectations?

The good news for the Treasury Wine share price today is that this result appears to have come in ahead of expectations.

According to a note out of Citi, it was expecting the company to deliver a net profit after tax of $314.2 million. This was broadly in line with the market consensus estimate.

Management commentary

Treasury Wine's chief executive officer, Tim Ford, was pleased with the company's performance in FY 2022. He commented:

Relentless execution of our F22 priorities resulted in strong operating and financial performance in each of our brand portfolio divisions. Pleasingly, we have returned to delivering margin accretive earnings growth in a year where we managed through the effective closure of the Mainland China market, materially reshaped our Treasury Americas division and navigated a global macroeconomic backdrop that included the global pandemic, significant supply chain disruptions and inflationary cost pressures. The results we have announced today reflect the fundamental strengths of our diversified global business, the flexibility of our operating model and the outstanding execution capability of our teams.

Outlook

Ford also spoke positively about the company's prospects in FY 2023. He added:

After two years of significant change, we enter F23 with momentum, focused on our objectives of delivering quality earnings growth, efficient capital utilisation and sustainable shareholder returns. Our recent track record of successfully adapting our business to deliver growth, despite a number of challenges, gives me great confidence in the fundamental strengths of our business and our capability to navigate future challenges and uncertainty.

The company reaffirmed that its long-term financial objective is to deliver sustainable top-line growth, high single-digit average earnings growth, and a Group EBITS margin target of 25%+.

Supporting this objective will be continued portfolio premiumisation, growth in distribution, demand and availability for its priority brands, cost optimisation, and category leading, consumer-led innovation.

All in all, through continued top-line growth across the Premium and Luxury portfolios, targeted price increases and ongoing cost management, Treasury Wine expects to deliver strong, margin accretive growth in FY 2023.

The Treasury Wine share price is up 1% in 2022.

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 Scott Phillips.

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