The turnaround at Treasury Wine Estates delivers double the profit

Profit at Treasury Wine Estates has more than doubled to $179.4 million, a sharp indicator that the turnaround of the once-troubled company is hitting targets.

The share price jumped 10% to $10.57 on the full year result.

The result for the owner of Penfolds, Wolf Blass and Lindeman’s was on a 20% jump in sales revenue to $2.23 billion, fueled in part by strong demand from Asia.

This was achieved on just an 11.5% rise to 33 million cases in wine volumes, an indicator that the move to more premium brands is working

Net profit after tax rose 131% from $77.6 million to $179.4 million. Earnings per share doubled to 25.1 cents.

This chart shows how earnings are rising and margins improving at the maker of Penfolds Grange:

The company declared a final dividend of 12 cents a share, bringing the total for 2016 to 20 cents, a 6 cent or 43% increase.

Michael Clarke, who became CEO in 2014, says the result demonstrates that business momentum is accelerating.

“TWE (Treasury Wine Estate) is now delivering consistent earnings growth and margin accretion on a more balanced, sustainable and quality earnings basis,” he says.

The company is getting better margins as it transitions from an order-taking, agricultural company to a brand-led, marketing group.

All geographic areas added weight to earnings, reflecting the company’s move toward premium wines and away from bulk sales.

The biggest jump was from the Americas with a 64% rise in earnings to $136.3 million. Clarke says this reflects the portfolio premiumisation, six months contribution from the Diageo Wine acquisition and favourable foreign currency movements.

And the company is finding a growing market in Asia with the appetite for the big taste of Australia’s Penfolds and Wolf Blass wines growing in China.

Asia posted a 40% growth in earnings to $102 million.

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