For its tenth birthday, Treasury forecasts a return to growth

May 13, 2021
By Ioni Doherty

Ahead of today’s Investor Day, Treasury Wine Estates announced its expectation that earnings for the business will be between $495 million to $515 million for the full year and that it was targeting high single-digit earnings growth with a group-wide earnings margin of 25 per cent.

These projections exceed market expectations and represent growth of 33 per cent in the second half of FY21, when compared to the first, easing concerns about the impact of the tariffs from China and revealing a business well along its diversification journey as it targets growing and new emerging luxury markets around the world.

CEO Tim Ford suggested that diversification has been at the heart of TWE’s strategy for some time and that this is evident in the business’ multi-regional vineyards, sales teams, geography and various price points.

TWE’s share price lifted four per cent to $10.30 on the back of the morning’s news.

It is ten years since TWE de-merged from Foster’s, a decade described by Ford “of significant change and achievement”.

Ford said there were global celebrations taking place this month as the business moved forward to an “enhanced consumer-led approach brand model”.

“Our people are our most important asset,” he said and that the company continued to find ways to improve its people’s engagement, supported them to evolve, to be bold, to find ways for them to improve their connection with each other and consumers.

Ford re-stated the business’ intention to capitalise on the premiumisation taking place across world markets, particularly in the US where Ben Dollard, head of Treasury Americas, said the states of California, New York, Texas, Florida and Illinois were priorities.

The company has entered a long-term distribution agreement with Republic National Distributing Company (RNDC). In a previous statement, Dollard said: “Our decision to partner with RNDC presents us a terrific opportunity to cultivate our trade partnership, to fast track growth, execute our plans, and build long-term value.”

Given the disappearance of the China market – where TWE was exporting $1.3 billion of wine annually, and the new reserves of stock now available, TWE also intends to drive bigger business in Australia, particularly in the on-premise space.

From July 1, TWE will split into three divisions: Penfolds (led by Tom King), Treasury Americas with aforementioned Dollard at the helm and Treasury Premium Brands including Wolf Blass and Saltram, led by Peter Neilson.

TWE is currently undertaking a global supply-chain optimisation program expected to deliver annualised benefits of at least $75m by FY23.

Sustainability ambitions

 TWE also announced its new its new sustainability ambition and goals, including a commitment to net zero emissions by 2030 as well as 100 per cent renewable electricity by 2024.

Chief Corporate Services Officer, Kirsten Gray, said, “Our ambition is to cultivate a brighter future for everyone who touches our business and products and we want to achieve this through three focus areas – building a more resilient business, fostering healthy and inclusive communities, and producing sustainable wine.

“This includes our commitment to be part of the journey towards a zero-carbon economy whilst responsibly managing and planning for the impacts of climate change.”

TWE’s state-of-the-art luxury wine making facility in the Barossa has been designed with long-term sustainability at front of mind with initiatives to reduce energy usage, increase water security at the site through to recycling and minimising waste to landfill.

“Today we’ve announced a new agreement to purchase renewable electricity which will reduce emissions at our Barossa site by more than 2,000 tonnes per year and deliver up to 50 per cent of the site’s electricity needs – an important step in achieving our renewable electricity target,” she  said. 

The company also plans review its water footprint and usage at catchment level and enhance its water strategy, remains committed to sustainable packaging and circular economy targets, to health, safety, and wellbeing as well as inclusion and diversity.

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