The Treasury Wine Estates Ltd (ASX: TWE) share price is on the move on Thursday.
In morning trade, the wine giant's shares are falling 7% to $10.31.
This follows the release of the company's half year results before the market open.
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Treasury Wine share price sinks on half year update
- Net sales revenue (NSR) up 20.2% to $1,544.2 million
- NSR per case up 16.4% to $137.5 million
- EBITS margin up 2.8 percentage points to 25.3%
- EBITS up 35.1% to $391.4 million
- Net profit after tax before material items up 31.5% to $239.6 million
- Interim dividend up 17.6% to 20 cents per share
- Guidance: Low end of EBITS range
What happened during the half?
For the six months ended 31 December, Treasury Wine reported a 20.2% increase in NSR to $1,544.2 million and a 35.1% increase in EBITS to $391.4 million. The latter is ahead of Goldman Sachs' estimate of 33.3% growth.
This was driven by strong growth from the Penfolds and Treasury Americas businesses, which offset a poor performance from the Treasury Premium Brands business.
Penfolds sales were up 24.4% over the prior corresponding period to $557.4 million and EBITS increased 33.9% to $250.2 million. Management advised that this was driven by strong Bin & Icon portfolio shipments in Asia. This was led by the re-establishment of the Australian COO portfolio in China, where there has been strong demand from customers and encouraging depletions performance.
Treasury Americas' sales were up 42.2% to $631.1 million and EBITS rose 66.9% to $155.3 million. This was driven largely the acquisition of DAOU Vineyards in December 2023.
Treasury Premium Brands reported an 8.6% decline in sales to $355.7 million and a disappointing 49.9% decrease in EBITS to $22.9 million. Management advised that this was driven by continued Commercial and Premium NSR declines, which reflects softness in consumer demand for wine at lower price points and its underperformance relative to the category. In addition, the prior corresponding period included a $9.7 million gain on sale of divested vineyard assets.
In light of its strong profit growth, the Treasury Wine board lifted its 70% franked interim dividend by 17.6% to 20 cents per share. This represents a payout ratio of 68%.
Management commentary
Commenting on the half year result, Treasury Wine's CEO, Tim Ford, said:
Our interim 2025 performance highlights the benefit to the quality of earnings and key metrics from our multiyear transformation to a Luxury-led business, with this segment of the market continuing to be healthy in our key trading regions. We are extremely pleased to have successfully re-established the Penfolds Australian country of origin portfolio in China, with positive consumer and customer sentiment and key performance signals very clear.
The progress we have made integrating DAOU and Treasury Americas to create the leading supplier of Luxury wine in the US market is also pleasing and we look forward to further capitalising on this opportunity in the year ahead. Calendar year 2024 has been a year of significant and successful change for TWE. Our team has absolute clarity on our portfolio and execution priorities, with Penfolds and the Treasury Americas Luxury businesses the clear drivers of our future growth, with our global premium business playing a critical role to power and support this growth agenda.
Guidance
Treasury Wine advised that it expects EBITS of approximately $780 million for FY 2025. This is at the low end of its previously guided range of $780 million to $810 million, driven primarily by reduced expectations for Treasury Premium Brands.
This appears to have disappointed investors and put significant pressure on the Treasury Wines share price today.
