Treasury Wine forecasts margin rise as China market reopens

The maker of Penfolds wine Treasury Wine Estates has issued new, higher earnings estimates for the company following its resumption of sales to China in March and a price hike timed for 1 July.

The company expects Penfolds’ earnings margin to be approximately 42 percent with the resumption of China sales, reflecting the reestablishment of entry-level luxury wines to the market.

It forecasts FY24 earnings before interest and tax of between $418 million and $421 million.

In FY25, Penfolds’ margin is expected to rise further to between 43 percent and 45 percent.

This is despite additional investment of around $20 million in brand building investment and overheads in China

In FY25 top-line growth will be driven by price increases and a modest increase in shipments for the Bin & Icon portfolio, according to data presented to a China update investor presentation.

“Penfolds will target annual EBITS growth of approximately 15 percent across both years (FY26 and FY27), driven by the significant increase in availability for the Bin & Icon portfolio from the record 2024 (year).”

However in delivering this bullish outlook Treasury pointed to risk factors related to these targets including:

• Changing conditions in the China wine market
• Changes in economic conditions which impact consumer demand
• Changes to TWE’s production cost base, including impacts of inflation
• And global difficulties in logistics and supply chains, exchange rate impacts, vintage variations, and the company’s continuing exposure to geopolitical risks.

Further reading:
Penfolds could be headed for China after March – Treasury Wine Estates

Picture: Penfolds