Treasury Wine Estates flags heavy pandemic hit, updates on Penfolds demerger – Sydney Morning Herald

The global winemaker and seller came under pressure again from highly regarded Bank of Amercia Merrill Lynch analyst David Errington over its US performance.
“The dog always eats your homework in the US. There comes a time when you end up shooting the dog,” said Mr Errington who has previously questioned the group’s US strategy when it revealed earlier this year that a slew of departures from its US business had impacted earnings.
“Why are you sticking with having a strategy in the US when the numbers are really pretty poor. Because today was good, the numbers are good, but the US numbers are really not that good.”
Treasury Wine chief executive Tim Ford, who stepped into the top job at the start of this month following the departure of long-time boss Mike Clarke, defended the US business. “I have a very clear vision and picture of what I believe the shape of our US business needs to be. I have a very strong belief that once we achieve that shape that we have a growth platform in a market that continues to grow.”
Mr Ford said in the future Treasury’s US business would be lower volume than it was today but with similar earnings before interest tax and the agricultural accounting standard SGARA (EBITS) level, which was part of its ambition to improve margins in the US. He pointed to Treasury’s expectations to achieve $35 million in annualised cost savings in 2021 as a step towards improving its US business.
Treasury’s troubled American business is expected to record a 37 per cent decline in earnings for the year, while earnings in its Asia business are forecast to decline 14 per cent and its Australian/New Zealand business recorded a 16 per cent earnings decline in part due to “extreme heat” during the bushfire ravaged summer months. Luxury sales were impacted in all markets.
After withdrawing guidance of EBITS growth in 2020 of between 5 per cent and 10 per cent in February, Treasury said it now expects it to fall up to 21 per cent to between $530 million and $540 million.
Treasury said it could not give any guidance on its 2021 earnings due to the pandemic.
Mr Ford said fiscal 2020 had been a unique period but he was hopeful Treasury would recover strongly.
“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,” he said.
“We will continue to remain agile and opportunistic, diverting resources and focus appropriatelyto markets and sales channels as consumer and shopper behaviour adjusts and governmentmandated restrictions change.”

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