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TWE profit doubles, CEO co-locates to the US

TWE profit doubles, CEO co-locates to the US

Love is in the air for Treasury Wine Estates shareholders. The company has made a Valentine's Day announcement that its reported net profit after tax and earnings per share have more than doubled from the previous corresponding period.

Its interim 2017 financial result showed net profit after tax soared to $136.2m, while earnings per share were up to 18.5c.  

TWE reported Earnings Before Interest, Tax, SGARA and material items (EBITS) of $226.8m, up 58.8% on a reported currency basis. Leading the charge were earnings from Asia, which climbed by 76% to $79 million.

CEO Michael Clarke commented: “I am delighted to report a strong interim 2017 financial result highlighted by further margin accretion, excellent cash conversion and outstanding EPS growth, despite the higher share base. All regions delivered double digit EBITS growth and importantly, growth was delivered sustainably.”

The company also announced that Clarke will be "co-relocating" to the Napa Valley wine region in California from March 1 to December 31, 2017, while still spending time in the Melbourne office. The co-relocation may be extended, subject to review.

A press statement said: "Critical to TWE’s transition from an agricultural company to a brand-led, high performance organisation is the strengthening of TWE’s business model and brand portfolio in the US as well as building stronger partnerships with strategic distributor and retail customers in the region.

"With the ANZ, Asia and Europe regional business models now optimised and in sustainable growth, Mr Clarke’s co-location represents an exciting opportunity for him to spend more time with the team in the US and to drive deeper and stronger customer partnerships in the region.  

TWE’s Chairman, Paul Rayner, commented: “The Board and I are very pleased that our Chief Executive Officer has agreed to temporarily spend more time on the ground with the team in the US. The US is the largest contributor to TWE’s profit while also presenting the largest opportunity for both absolute profit growth and margin expansion. Our outstanding and highly collaborative Management team supporting the Chief Executive Officer will ensure that this temporary arrangement drives the best outcomes for TWE globally.”  

Clarke will be given a combined cost of living and housing allowance of $20,500 per month while he is based in the United States.

TWE also announced the appointment of Gunther Burghardt as its new Chief Financial Officer (CFO) effective today, with the role also relocating to the US. Outgoing CFO Noel Meehan will leave the company on March 14, 2017.  

Burghardt has worked at TWE, including previously the Foster’s Group, for more than seven years in various senior finance roles including CFO of every region of TWE the global marketing function and supply chain. His most recent role is CFO, Americas.

Clarke commented: "I am delighted to be working with a CFO of Gunther Burghardt’s calibre and his appointment as CFO is a very exciting change for our Company. With outstanding technical capabilities and a deep commercial understanding of our business across every region, Gunther has already demonstrated his ability to lead and collaboratively drive TWE into its growth phase."   



>> Australia & New Zealand (ANZ) reported 13.2% EBITS growth to $53.1m and an EBITS margin of 16.4%, driven by above-category volume growth in Australia (despite reallocating Luxury Australian wine to Asia), outstanding marketing and in-store activation, strengthened customer partnerships and a low cost culture 
>> Europe reported 34.3% EBITS growth to $23.1m and an EBITS margin of 12.3%, driven by strong customer partnerships, focused brand building investment on core Commercial brand tiers and the acquisition of Diageo Wine 
>> Asia reported 75.6% EBITS growth to $79.0m and an EBITS margin of 36.2%.  Reflecting continued investment in TWE’s business models, customer partnerships and brand portfolio, volume increased strongly and price increases across key brands delivered positive NSR per case growth  
>> Americas reported 75.4% EBITS growth to $90.7m and an EBITS margin of 16.0% reflecting the acquisition of Diageo Wine and portfolio premiumisation. >> During the period, TWE front-ended a 30% increase in Advertising & Promotion (A&P) per case to re-set and refresh its US brand portfolio to position it for growth in both the US and in Asia in 2H17. Also included in 1H17 EBITS was a net, oneoff $5m benefit, principally reflecting profit on asset sales 
>> TWE’s Supply Chain Optimisation initiative delivered Cost of Goods Sold (COGS) savings of $15m in 1H17 bringing the total cumulative savings to $56m, driven by realisation of cost reductions and benefits from production asset optimisation. This was partially offset by higher vintage costs from the 2014 and 2015 vintages in Australia and the 2015 vintage in the US.  
>> The acquisition of the Diageo Wine business on January 1, 2016 has already delivered positive upside to TWE, despite the significant investment in re-setting the brands as well as addressing unsustainable volume.