Penfolds wines in Covid profit slump

Major premium and commercial wine exporter Treasury Wine Estates has confirmed a likely 21 per cent fall in earnings for the 2020 financial year following trading upset by the impact of the Covid-19 pandemic and a poor harvest.

The maker of Penfolds, Grant Burge and Lindemans wines among a host of others told investors that profits were hardest hit in the Americas where they are likely to have fallen 37 per cent.

Asian earnings before interest and tax are down 14 per cent and Australia and New Zealand 16 per cent.

Covid severely disrupted markets such as on premises consumption, cellar door sales and global retail and travel, and saw consumers trade down to cheaper wines.

However retail wine sales in Australia remain at elevated levels above last financial year.

Meanwhile the hot Australian summer produced ‘extreme heat’ resulted in smaller grape volumes and a higher cost to this year’s vintage.

The company expects wine costs globally to be up three per cent, a $50 million impost on the company for the vintage.

The company has responded by managing costs, halting performance pay and reallocating wine maturing in stock for sale in later years.

Treasury expects continuing difficult trading conditions.

The company has trimmed the size and scope of its US business to reflect smaller sales volumes and foreshadowed divestiture of some US wine brands.

The company has been considering the splitting of its Penfolds and other luxury wines from its mass brands and its analysis suggests value can be created by the different focus of two new firms.

The company said it was considering a demerger option before the end of the calendar year.

TWE CEO Tim Ford said: “While it is right to remain cautious on the near-term outlook, given uncertainty remains around the timing and pace of recovery in our key markets, we remain optimistic around our return to both margin and profit growth.”


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