TWE –5.74%: 1H25 results for the wine business underwhelmed today, though we came off the conference call with the view there was more positive trends playing out than the numbers implied
- Revenue $1.57 billion was +20% YoY and ahead of $1.55 billion consensus
- Earnings Before Interest & Tax (Ebit) of $391.4 million was up +35% YoY, inline with consensus.
- Net profit of $220.6m up 32% YoY, though that was a miss vs the $249m expected.
- Interim dividend per share of $0.200 vs. $0.17 last year and inline with estimates.
The main issue stemmed from guidance which was lowered to be at the bottom end of the previously guided range for Ebits of $780m to $810m, driven primarily by reduced expectations for Treasury Premium Brands. The market was looking for $800m for the FY, and based on $780m that’s a downgrade of ~2.5%. They decided not to sell their commercial portfolio due to a lack of interest at the right price, and that will be a drag on earnings, however only a small downgrade suggests a strong rebound is expected Treasury Americas and Treasury Premium Brands. That was true for Penfolds in the half which was strong and they gave positive commentary on depletions and strong cash collections. Commentary on China demand was also positive, despite the challenging macro backdrop.
Not a great result clearly, and downgrades will come, however there were several in the market already positioned for weaker guidance. We agree with the sentiment put out by Citi post the call, saying they found Treasury’s conference call to be incrementally positive with respect to China (Citi are buy rated).
MM remains long TWE in the Active Growth Portfolio
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