TWE profits drop 5.8%, Penfolds continues to show strong momentum

Treasury Wine Estate's F24 Half Year Results, published today, have revealed a 5.8% decrease in the company's profits. This brings its total earnings before interest and taxes (EBITS) to $289.8 million.

The decrease occurred mostly in TWE Treasury Americas and Treasury Premium Brands, which featured a 17.5% and 3.2% decline in EBITS respectively. These decreases were offset by Penfolds 2.9% increase to a total of $186.9 million EBITS following a strong performance in Australia and Asia.

Tim Ford, TWE’s CEO, said that the results were in line with expectations. 

“I am pleased with the ongoing underlying performance of Treasury Wine Estates this period, with strong consumer demand for our priority Luxury brand portfolio continuing around the globe.

“Penfolds continues to perform and strengthen, whilst Treasury Americas has made significant progress in reshaping its portfolio focus with continued growth of its Luxury brands now supported by the acquisition of DAOU in December.”

The DAOU acquisition involved an upfront payment of $900 million with the potential for an additional earn-out of up to $100 million, reflecting the significant value-creation opportunity of the deal. The purchase also reinforces TWE’s commitment to expanding its luxury wine portfolio globally, making it an increasingly powerful player in the international wine trade. Across 2023, DAOU reported EBITS of US $63.7 million (over $98 million) and strong growth across all price tiers. 

TWE has also indicated that it is well positioned for the anticipated removal of the tariffs currently in place on Australian wine in China. Should the tariffs be lifted, TWE plans to re-establish its Australian country-of-origin portfolio in the Chinese market, including wines such as Penfolds Max’s, Koonunga Hill, and One. It will also reallocate a portion of Penfolds Bin and Icon tiers from other global markets and implement careful price increases to accommodate the anticipated changes to global demand.

Despite the decrease in profits, TWE says it is well positioned for growth over the next half yearly reporting period.

“The business is on-track to deliver mid-high single digit earnings growth in F24 and we remain confident that our premiumisation strategy, preeminent brand portfolio and attractive market fundamentals at luxury price points will allow us to continue to deliver our long-term growth ambitions,” said Tim Ford.

“The Premium wine category, whilst resilient, is highly competitive and we continue to innovate and invest to achieve the goal of outperforming the category and importantly attracting new consumers to wine.”