A growing taste for fine wine has helped lift Treasury Wine Estates’ full-year profit 16.4 per cent to $419.5 million following increasing global demand for its premium and mass-market prestige, or “masstige”, offerings.
Total revenue rose 15.5 per cent to $2.88 billion for the 12 months to June 30 and the world’s largest listed wine maker lifted its fully franked final dividend by 3.0 cents to 20.0 cents.
Chief executive Michael Clarke told investors on Thursday that organic growth in net revenue on a constant currency basis was the strongest it had been, saying the company was committed to prioritising long-term over short-term profits.
“Today’s results confirm the positive momentum in our business which is being delivered through our premiumisation strategy, the disciplined investments we have made in our business over recent years and importantly, exceptional execution by our global team,” Mr Clarke said.
The Australian wine giant says it will continue to expand its “premiumisation strategy”, confirming the acquisition of French production and vineyard assets in the Bordeaux region and plans for luxury winemaking infrastructure in South Australia.
Treasury Wine reported on Thursday thta net sales revenue in its luxury and masstige segments grew 27 per cent and represented 69 per cent of its overall net sales revenue.
Strong growth in Canada and Latin America helped bolster earnings before interest and tax in the Americas to $218.7 million, while increased availability of luxury and masstige offerings in Asia drove its earnings up 43 per cent to $293.5 million.
The company said its new distribution network in the US was performing well, with further benefits expected in full-year 2020 results as the new model was refined and built momentum.
Mr Clarke said the success of the new route-to-market model in the US validated the company’s decision in light of a challenging market where retailers were increasingly focused on pairing with independent brands.
Earlier this month, the Penfolds and Wolf Blass owner rejected a Hong Kong-based GMT Research report alleging Treasury’s profits were inflated up to 50 per cent during the past two years by using acquisition accounting to write down inventories.
Treasury said the research was “false and misleading” and it would refer the matter to the Australian Securities and Investments Commission.
On Thursday, Treasury chief financial officer Matt Young said rumours within the industry about the stocking and shipping of goods in the Asian market were “really frustrating” and without basis or fact.
“Think about it for a minute – nearly 50 per cent of our employees are shareholders. If we were generally engaging in unsustainable practices, would they invest so much?” Mr Young said.
He also pointed to the move away from a distributor model to working closer with retailers and large wholesalers, which have “zero interest in being overloaded.”
Mr Clarke said he was brought in several years ago to fix unsustainable practices in the business and after “cleaning up someone else’s mess”, he had no desire to go down that path again.