Luxury wines come good for Penfolds restructure

Treasury Wine Estates, the maker of Penfolds, has reported strong earnings growth and margin expansion as the company’s restructure of its wine portfolio towards luxury brands pays off for the company.

EBITS for the first half FY23 grew 17 percent to $307.5 million driven by growth in its luxury portfolio of brands, price increases achieved across several brands and cost savings from the company’s global supply chain optimisation programme.

Precipitated by the destruction of its China market in the face of punitive import tariffs, the company’s reorganisation paid off with big increases in results across the board reported on sales up only 1.4 percent in the half to $1.28 billion.

EBITS margins were up 3.2ppts to 23.9 percent, net profit after tax was up 72.5 percent to $188.2 million and earnings per share were up 72.5 percent .

Shareholders were rewarded with an interim dividend of 18 cents per share fully franked, an increase of 16.7 percent on the previous corresponding period.

CEO Tim Ford said the company made strong progress towards its financial growth objectives in the half year.

Ford said: “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.”

The Penfolds brand reported a 10 percent increase in EBITS to $181.6 million, partly built on the brand’s new multi-country origin wines including those produced in France and in China.

Ford foreshadowed further premiumisation of the company’s wine brand portfolio and growth in distribution, demand and availability of TWE’s priority brands.

Penfolds: Magill Estate, the home of Grange Hermitage