Treasury Wine share price sinks 7% despite solid earnings growth

Investors are not saying cheers to this wine giant on Wednesday…

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

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Treasury Wine has released its half year results this morning
  • While the wine giant reported soft revenue growth that didn't stop its earnings from jumping
  • However, its result has still fallen short of analysts expectations

The Treasury Wine Estates Ltd (ASX: TWE) share price is on the slide on Wednesday morning.

At the time of writing, the wine giant's shares are down 7% to $13.33.

This follows the release of the company's half year results.

Treasury Wine share price sinks despite solid earnings growth

  • Net sales revenue (NSR) up 1.4% to $1,284.5 million
  • NSR per case up 13.5% to $108.6
  • Earnings before interest, tax, SGARA, and material items (EBITS) up 17.2% to $307.5 million
  • Net profit after tax up 72.5% to $188.2 million
  • Interim dividend up 16.7% to fully franked 18 cents per share

What happened during the half?

For the six months ended 31 December, Treasury Wine reported a 1.4% increase (1.1% decline at constant currency) in revenue to $1,284.5 million. This reflects a 13.5% jump in NSR per case, which offset lower volumes.

The key drivers of its growth were the Penfolds and Treasury Americas businesses, which reported 7.2% and 4.1% increases in revenue, respectively, thanks to distribution growth and strong consumer demand. This offset a 7% decline in Treasury Premium Brands revenue.

Things were much better for its EBITS, which grew 17.2% to $307.5 million. This was underpinned by margin improvement across all divisions. Treasury Wine's EBITS margin increased 3.2 percentage points to 23.9%. Part of this came from its global supply chain optimisation program, which delivered incremental cost of goods sold savings of approximately $28 million for the half.

How does this compare to expectations?

As strong as this result looks on paper, it fell short of Goldman Sachs' estimates due to weaker revenues.

The broker was forecasting sales revenue of $1,410 million and EBITS of $321 million. This may explain some of the weakness in the Treasury Wine share price today.

Management commentary

Treasury Wine's CEO, Tim Ford, commented:

We are very pleased to have delivered strong progress towards our financial growth objectives in 1H23, with EBITS growth of 17% driven by improved revenue per case and EBITS margin expansion across all divisions. Our Luxury wine portfolios in particular continue to perform exceptionally well across all markets and channels, and the fundamentals of the category are expected to remain strong at these higher price points.

We consider this set of results to be an important and additional proof point of our teams' ability to navigate the changing and variable economic, consumer and market dynamics, whilst maintaining our focus on the delivery of our financial objectives.

Outlook

Management advised that the company remains on track to deliver strong EBITS growth and EBITS margin expansion in FY 2023. It expects trading conditions for the remainder of the year to be broadly consistent with those experienced in the first half.

The company's FY 2023 EBITS margin is expected to be approximately 23%, with year on year expansion driven by portfolio premiumisation and the delivery of price increases across key portfolio brands. Management also expects the benefits of the global supply chain optimisation program to mitigate the impacts of inflationary cost pressures.

The Treasury Wine share price is still up 26% over the last 12 months despite this decline.

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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Earnings Results

Doctor doing a telemedicine using laptop at a medical clinic
Earnings Results

Polynovo share price surges after 57% revenue gain in FY24

Global sales continue to grow for Polynovo.

Read more »

two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.
Earnings Results

Paladin Energy share price in focus on quarterly production data

The uranium producer had a reasonably constructive quarter.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Earnings Results

ASX 200 stock jumps 10% on strong FY24 results

How did this KFC restaurant operator perform in FY 2024?

Read more »

A male investor wearing a white shirt and blue suit jacket sits at his desk looking at his laptop with his hands to his chin, waiting in anticipation.
Consumer Staples & Discretionary Shares

Guess which ASX 200 stock just slashed its final dividend by 23%

This retailer had a tough time during the 12 months. Here's how it performed.

Read more »

Man jumps for joy in front of a background of a rising stocks graphic.
Earnings Results

Catapult shines: 20% sales growth propels ASX tech stock to new 52-week high

A strong annual result from this tech player has caught investor attention.

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Earnings Results

Xero share price leaps 8% on staggering earnings upheaval

A major turnaround in profitability is sending investors into a frenzy over Xero shares today.

Read more »

a construction worker sits pensively at his desk with his arm propping up his chin as he looks at his laptop computer while wearing a hard hat and visibility vest in a bunker style construction shed.
Materials Shares

Which ASX 200 stock just plunged 12% despite record full-year earnings?

It looks like an impressive report card but UBS doesn't like the FY25 guidance.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Earnings Results

ASX 200 tech stock lifts off on another record-setting half-year profit

Investors are bidding up the ASX 200 tech company following its half-year results.

Read more »