TWE - Treasury Wine Estates

[Cam019]

I hope some ASF members avoided getting hit by China's latest political salvo that has sent TWE shares plunging.

Bought yesterday, got smoked a little today. Way off my stop currently. Will hold until the system says otherwise.

 

[peter2]

TWE exec's being very diplomatic but they must be seething as China continues to play games with the Aust wine industry.

When China stops playing with the wine industry TWE is going to be a great buy. Not for me. Too much China risk.

 

[Smurf1976]

TWE exec's being very diplomatic but they must be seething as China continues to play games with the Aust wine industry.

This now seems to have blown up with the share price down 11.25% today and the company's shares placed in a trading halt.

https://www.abc.net.au/news/2020-11-27/china-puts-tariffs-on-australian-wine-trade-tensions/12886700

The Chinese Government has announced it will place tariffs on all Australian wine imports from tomorrow, striking a blow to the $1.2 billion-a-year industry.

The deposits, which effectively work like tariffs, will range from between 107 per cent to more than 200 per cent.

Anyone have thoughts on what the company's shares ought really be worth given the circumstances? I'm thinking that China isn't their only market presumably?

 

[Trav.]

This now seems to have blown up with the share price down 11.25% today and the company's shares placed in a trading halt.

I bought yesterday of course not good timing on my behalf.

No real idea of where it will drop to, but I will look to grab a few more when it gets dumped.

 

[tinhat]

This now seems to have blown up with the share price down 11.25% today and the company's shares placed in a trading halt.

https://www.abc.net.au/news/2020-11-27/china-puts-tariffs-on-australian-wine-trade-tensions/12886700





Anyone have thoughts on what the company's shares ought really be worth given the circumstances? I'm thinking that China isn't their only market presumably?

I posted my thoughts on 29 January 2020.

There might be a point at which TWE is worth buying. I'll wait for the technical indicators to think about that.

 

[frugal.rock]

With Australia running to the WTO about China, I can't see many trade conditions getting better.
In fact, if we keep being a "pestilence" to them, I don't wish to point out the consequences.
Any stocks where the product is being sold to China is off limits now to me personally.
Just recipes for disaster.

 

[Miner]

Today TWE became the best performer on ASX (ASX 200) - 17.45 % following yesterday's result declaration.
When i looked into it

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02342143-3A561373?access_token=83ff96335c2d45a094df02a206a39ff4

Headline says
EBITS down and so is EBITS margin.
NPAT down 24% and so EPS down by 24%
But price up.
Was it because 1H2 expectation is very high and market has discounted TWE price miserably low already ?
I was guessing (as always) the worst could have been over and only couple of days back or so, bought a small lot @$10. With NCM sliding down with few others, TWE helped to keep the stability.
Could the experts and TWE holders/followers please provide commentary on TWE and how market got so excited ?
Thanks

 

[galumay]

I have no idea @Miner, its not a business I have ever had any interest in, but a quick look at its metrics and its not a business I would pay $10 for, I dont have explanations for much of what goes on in the current market, but being up nearly 20% on those results is batshit crazy!

Given my lack of knowledge it will probably be up another 20% tomorrow!!

 

[Miner]

I have no idea @Miner, its not a business I have ever had any interest in, but a quick look at its metrics and its not a business I would pay $10 for, I dont have explanations for much of what goes on in the current market, but being up nearly 20% on those results is batshit crazy!

Given my lack of knowledge it will probably be up another 20% tomorrow!!

@galumay I reckon the whole night research will bring down TWE to normalcy.
I should have sold out with massive gain over two days hod even there will be a tax.
But my luck, price rises when I sell and drops down when I hold.
I do not believe TWE would go up by any percentage after reading the reports.
Only silver linings are CEO's bombardistic optimism (must have the best wine consumed) and hint of breaking the business into product base.
I noticed Motley on its free website quoted Citi's prediction of TWE value being $8.62 and SELL. I never rely on Citi nor MF.
Sharing just for fun to show how wrong the white collared instos are or could be

 

[sptrawler]

Hey miner, wine is like everything else these days, this generation doesnt give a rats what it taste like as long as they get muted.
Same with antiques and collectibles all heading to the tip bro.lol
Trying to sell $20 bottles in asia is hard and trying to sell it in Aus is harder, the ones who bought it ie older aussies, are struggling with crap interest rates.
Penfolds wont get on the gravy train for 5 to 10 years.
Just my opinion

 

[Dona Ferentes]

stumble with China; then let's make it in the US

The 19 Crimes brand, which is heavily linked in its marketing with American rapper Snoop Dogg, has been a star performer for Treasury Wines. A new 19 Crimes Cali Red and Cali Rose which features Snoop Dogg’s face on the label brought a flood of new buyers.

 

[Dona Ferentes]

The 19 Crimes brand, which is heavily linked in its marketing with American rapper Snoop Dogg, has been a star performer for Treasury Wines. A new 19 Crimes Cali Red and Cali Rose which features Snoop Dogg’s face on the label brought a flood of new buyers.

and indeed it has.

TWE shareprice is up 50% from the dark days of Xi argy-bargy last year.

Now, 18 months after the tariffs and the insults from China TWE’s 2020-21 profit beat expectations with growth restored despite losing nearly $80 million in earnings due to China’s tariffs.

Treasury said in its profit release on Thursday net profit after tax, excluding significant items and accounting standard SGARA, grew 3% to $309.6 million for the year, slightly ahead of forecasts and an improvement on last year when earnings dropped 25% as the impact of the China lockout hit hard.

Total sales at the business fell 3% to $2.5 billion but the company managed to boost margins and earnings from other markets, especially the US and Australia.

TWE declared a 13 cents per share final dividend, up 62.5% increase on the prior year’s 8 cents a share final dividend; along with the 15 cents a share interim, total dividends for the year will equal 2019-20’s 28 cents a share.

TWE said it had lost $77.3 million in earnings in China thanks to the tariffs, but noted this was mostly offset by growth across other regions in Asia such as Hong Kong, Singapore and Thailand. Total earnings for the region fell 15%.

Treasury’s US business performed strongly, raising its earnings by 23% to $168.3 million, thanks largely to the company’s mid-priced Premium Brands division.

Australian earnings rose 10% to $142.7 million. CEO Tim Ford said the result was a testament to Treasury’s resilience in the face of a tough year.

TWE took advantage of solid cash flows to knock $376.5m million off net debt to $1.057 million at the end of June.

Looking to the current financial year, Mr Ford said the company would continue its focus outside of China and warned that costs would remain elevated due to the higher costs of last year’s premium vintages. Mr Ford said that short-term impacts of COVID remained uncertain for the company with areas such as travel retail remained severely impacted by the pandemic.

 

[Dona Ferentes]

Matthew Kidman: Welcome to Buy Hold Sell. My name is Matthew Kidman. And today, we’re going to review the profit reporting season - the best and some of the worst. And to talk about it, we’ve got Blake Henricks from Firetrail and Michelle Lopez from abrdn.

Michelle, let’s start with you. Treasury Wines, I thought it was all over. China said no more wine from Australia, but it’s done pretty well. The result was quite good. Buy, hold or sell?

Michelle Lopez (HOLD): It has done well, so it’s a hold. And to give credit where credit is due, they have done a phenomenal job in pivoting their sales from China into other parts of the market, particularly with their Penfolds brand. The issue that we see from here is that margins are going to stabilise, but they’re going to stabilise lower. And they’re facing some pretty significant cost increases. Yes, we’ve got the increases from the supply chain, which is affecting everyone, but they’ve also got fires and droughts that they’ve been battling. And then when you look at the valuation, we just don’t think that there is much upside from here. It’s trading about at a 15 per cent discount to its long term forward PE. So it’s a hold.

Matthew Kidman: Treasury was one of those ones, Blake, that there was not a lot of great expectations around. It came out, a bit better. Bang! It was up around 10 per cent on day one. Buy, hold or sell?

Blake Henricks (HOLD): It’s a hold for us as well. I mean, I’ve never been so wrong about something in my life. When they lost China I just thought, we’ll come back in five years and maybe we’ll mend fences and they can get it. But they’ve actually re-allocated 50 per cent of those China sales back into other parts of Asia. They think, in the next two years, they will have re-allocated 100 per cent. So, management has done an amazing job. I think the question is still going to be about sustainability. So you’ve got to do your work and work out how sustainable you think that’s going to be.

 

[JohnDe]

Trying to give the French a run for their money?

Treasury uncorks top shelf Barossa wine plant​

Australia’s largest listed wine company Treasury Wine Estates has unveiled its new $165 million production facility in the Barossa, which it claims to be the “largest premium winemaking site in the Southern Hemisphere”.

TWE, which produces several leading South Australian wine brands including Penfolds, Wolf Blass, Wynns and Pepperjack, says the state-of-the-art wine production facility in Nuriootpa has the capacity to produce more than 100 million litres of wine every year.

The site is adjacent to TWE’s Wolf Blass Visitor Centre and also houses the company’s largest bottling operation, packaging up to 216 million bottles per year, operating four bottling lines, and exporting to more than 70 countries.

Announced in 2019, the expansion of the Wolf Blass Bilyara site has increased the company’s premium winemaking capacity by one-third and expands TWE’s storage capacity.

Unveiled this morning, the upgrade also includes another production line, processing infrastructure and additional barrel storage facilities.

TWE says the site now employs about 400 permanent team members and up to 600 during peak vintage periods.

In February, the company reported a half-year profit of $109 million despite a 10 per cent dip in earnings.

However, TWE’s premiumisation push allowed it to increase its net sales revenue per case by 16 per cent to $95.60. More than 80 per cent of revenue is now generated by its premium and luxury portfolios.

The company was subject to China tariffs of 175.6 per cent slapped on its wine in late November 2020, which are in place for at least another four years.

This prompted TWE to split the company into three divisions – Penfolds, Treasury Premium Brands and Treasury Americas from July 1.

TWE Chief Supply Officer Kerrin Petty said the new facility demonstrated the leading premium wine company’s commitment to South Australia and its continued focus on innovation in the wine sector.

“It’s a proud moment to unveil our new Barossa wine production facility, which has been two and a half years in the making through the challenges of the pandemic,” he said.

“The new site is purpose-built for premium winemaking with the flexibility to scale up or down production depending on demand, which is crucial given the ebbs and flows of wine production.”

It site also includes a 4500 sq m Icon Cellar Building to showcase “global best practice for luxury winemaking” and provides visitors with VIP experiences and winemaking tours.

Petty said the project moved the company closer to its environmental goals.

“As our first step toward our target of being powered 100 per cent by renewable energy by 2024, we are installing solar panels to offset 22 per cent of the site’s energy consumption from the grid,” he said.

“We have also installed a purpose-built 254 megalitre dam to store treated water waste in winter and irrigate our vineyards in summer.”

The production boost follows a conscious move by TWE to shift its focus from China to the United States.

In November, TWE announced a deal to buy luxury Californian wine business Frank Family Vineyards for $432 million as part of its renewed premium focus in the United States.

The company has also expanded global sales of its 19 Crimes brand, a favourite in North America, to more than five million 9-litre cases a year.

It also last year divested several US brands, which generated cash proceeds of about $300 million.

TWE’s share price was up slightly this morning to $11.08, giving it a market capitalisation of about $8 billion.

Treasury uncorks top shelf Barossa wine plant - InDaily

Australia’s largest listed wine company Treasury Wine Estates has unveiled its new $165 million production facility in the Barossa, which it claims to be the “largest premium winemaking site in the Southern Hemisphere”.

indaily.com.au

 

[JohnDe]

I once considered holding TWE, not anymore. Too many storm clouds, but they have done an excellent job of holding the SP at a reasonable level even if it is a roller coaster.

China was once a billion dollar market for Australian wine, now it is a market the same size as Sweden

The mainland Chinese market, once a goldmine for Australian winemakers as local drinkers filled their glasses and banquet tables with more than $1bn a year in Australian wine, has been crushed to become just a tiddler $25m market following years of political tensions and punishing trade tariffs.

Year on year exports to China last financial year have collapsed by nearly 96 per cent to $24.6m – ranking it about the same size in terms of Australian wine consumed as Sweden and only slightly more than the Muslim nation of the United Arab Emirates.

The latest export figures released by Wine Australia have revealed that in the wake of tariffs slapped on Australian wine by Beijing in late 2020 of as much as 218 per cent the China market has gone from Australia’s biggest wine export destination to one of its smallest that now only buys 1 per cent of wine exports.

The average value of Australian wine sold into China now has also collapsed by 65 per cent to an average of $4.09 per litre, to totally destroy a once buoyant market that could devour as much Penfolds Grange and other luxury premium wines Australian winemakers could send off to the Asian giant.

Australian wine had enjoyed the most sought after status in China for years. In 2014, South Australia’s Chateau Tanunda scored a major coup when Chinese President Xi Jinping and then US President Barack Obama were photographed at the G20 meeting in Brisbane drinking a glass of its award-winning wines.

It was only just before Covid-19 emerged that Australia hit $1.1bn of wine sold into China and Chinese drinkers made Australian wine their favourite drop, displacing wines from France as the country’s most sought after wine.

But the damage has been done by the tariffs, introduced in late 2020, that made it almost impossible for Australian winemakers to remain competitive in China and came as tensions between Beijing and Canberra escalated which also saw Australian coal, seafood, timber and other commodities singled out for tariffs or import bans.

The collapse of the Chinese market has dragged down total exports. According to Wine Australia’s latest export data Australian wine exports declined by 10 per cent in volume to 625m litres and 19 per cent in value to $2.08bn in the year ended June 30, 2022.

The decline in volume and value was not unexpected, as it was largely the result of the continued impact of the significant reduction in exports to mainland China, driven by high deposit tariffs imposed in November 2020. This is expected to remain a significant influence on the moving annual total data of Australian wine exports until late 2022.

Wine Australia manager for market Insights, Peter Bailey, said that while the total data showed declines, there were some encouraging signs in key and emerging markets.

“When mainland China is excluded from the data, exports increased by 5 per cent in value to $2.06bn, an increase of $105m – the highest value since 2009–2010.

“This is despite volume declining by 3 per cent to 619m litres. The value growth for these markets was driven by a 9 per cent increase in average value to $3.32 FOB per litre,” he said.

“The key contributors to the value growth included Singapore, the US, Malaysia, Thailand, India and New Zealand.”

Red wine accounted for 92 per cent of the value of exports at $10 or more per litre.

“This is critical as the reduction in exports to mainland China was predominantly still red wine. Off much smaller bases, still white wine and rosé also grew strongly in this price segment,” Mr Bailey said.

The top five markets in terms of value for exported Australian wine were the US, up 9 per cent to $436m, Britain, down 10 per cent to $421m, Canada, down 5 per cent to $174m, Hong Kong, down 9 per cent to $170m and Singapore, up 49 per cent to $169m.

ELI GREENBLAT SENIOR BUSINESS REPORTER

 

[Dona Ferentes]

Next vintage of Grange has a $1000 rrp

 

[JohnDe]

Justice prevails.

Treasury Wine Estates scores rare victory in Chinese court against Rush Rich over Penfolds copycat

Treasury Wine Estates has received a landmark win in the Supreme People’s Court of China against Chinese-Australian company Rush Rich which it alleges has been copycatting its Penfolds wine in China.

After a long standing battle in courts in Australia and China, TWE announced on Wednesday that China’s highest court had found the registration of the Chinese characters by Rush Rich was invalid.

The characters it has been trying to register for its wine use the words for “Ben Fu” which sounds similar to Penfolds in Chinese.

Rush Rich has been moving to register trademarks which are similar to a large number of luxury brands selling in China including Penfolds and car company Bentley.

“The decision was made on the grounds of bad faith and Rush Rich’s illicit conduct in registering a large amount of trademarks for a range of renowned global luxury brands including Penfolds and Bentley,” TWE said in a statement on Wednesday.

Penfolds managing director Tom King who is based in Shanghai, said the judgement “highlighted China’s unwavering commitment to protecting intellectual property rights.”

“We welcome the judgement by the Supreme People’s Court of China and thank the Chinese authorities for their continued support in protecting the rights of luxury brand operators,” he said.

“Penfolds has a long and proud heritage in China that’s been protected and nurtured since the first bottle of wine was exported from South Australia to Shanghai in 1893.”

“Our long term commitment to China, together with international legal protections to prevent infringement of our trademarks, gives our consumers the confidence to continue to enjoy award-winning quality wine from the Penfolds collection.”

The judgement comes after six years of litigation and enforcement against the Rush Rich group of companies in China and Australia which TWE alleges was attempting to exploit the Penfolds brand.

The upmarket Penfolds brand has been regularly subject to fakes and copycatting in China with operators using labels similar to that it uses on Penfolds bottles.

Once the largest exporter of wine from Australia, TWE was hit by moves by the Chinese government to impose tariffs of more than 200 per cent on Australian wine imports in March 2021 in the wake of increasing political tension between China and Australia.

But the company has remained committed to the China market, particularly for its upmarket Penfolds brand, revamping its strategy to sell Penfolds wine made in the US and France into China.

Anna Olsen, TWE’s global director of intellectual property, said the company would “spare no effort” to protect its brands and would pursue its rights “to the highest courts where necessary.”

“This case shows we wont tolerate attempts to exploit and infringe intellectual property rights and the reputation of brands in the Treasury Wine Estates’ portfolio,” she said.

GLENDA KORPORAAL
ASSOCIATE EDITOR (BUSINESS)

 

[JohnDe]

Management at TWE have decided to produce and wines in China and sell it under the Penfolds name. Disgraceful, I say.

China hit them with a huge tax, so TWE decide to show China how to grow and produce our best.

Penfold's founders will be turning in their graves. There has been a bit of a backlash from Aussie customers. I wonder how far this will go.

Penfolds’ Chinese made wine hits shelves​

The luxury drinks group may consider exporting its new Chinese made wine in the future as it expands its foothold in the fledgling Chinese wine industry.

Penfolds could consider exporting its Chinese made wine in the future as it expands its foothold in the fledgling Chinese wine industry, according to its Shanghai-based chief executive Tom King.

In an interview with The Australian, on the launch of its first Chinese made wine, Mr King said Chinese made wine had the potential to become one of the company’s export brands.

“We are strong believers in the potential for the Chinese wine industry, and we would like to take an active role in its development,” he said.

“We have seen a real increase in the quality of the wine being produced in China in recent years.”

“Our ambition is to be selling Penfolds’ China wine in other markets around the world and bringing the experience of Chinese wine to consumers on a global basis.”

Penfolds boss Tom King Mr King said Chinese made wine had the potential to become one of the company’s export brands.

Mr King said global wine houses were already producing premium wines made in China, such as LVMH’s Ao Yun and Chateau Lafite’s Long Dai, which were “earning global acclaim.”

TWE, which owns Penfolds, has had a long focus on the potential of the Chinese wine market, which is set to become the world’s second largest by 2023, with an estimated 52 million regular wine drinkers.

Chinese drinkers consumed more than a billion litres of wine last year, making it the 7th leading wine consumer worldwide.

TWE was the largest single offshore supplier of wine to China until it was hit by steep tariffs imposed by China on Australian wine in November 2020, a move which reflected increasing political tensions between the two countries.

This has seen the company step up its focus on wine making in other regions, including France, the US and now China.

Mr King said demand for Penfolds wine in China has continued to be strong despite the slowdown in the Chinese economy.

The cession of export of bottled wine from Australia has prompted the company to export Penfolds’ wine made in California and France into the Chinese market.

Its pitch for the Chinese market is being underwritten by a strong support for the development of the local Chinese wine making industry.

Ningxia has been identified as a pilot zone for the development of the Chinese wine industry by the Chinese central government, with the region being visited by President Xi Jinping just before the Covid lockdowns.

TWE has continued to base its up-market Penfolds operations in Shanghai despite the tariffs and travel restrictions in the wake of Covid.

TWE chief executive Tim Ford said the release of a Penfolds wine made in China was the result of the company’s long term commitment to the market.

After the initial announcement in November 2020, China stepped up its action against Australian wine in March 2021, announcing the imposition of levies on wine of more than 200 per cent for some companies for the next five years.

The Federal Government lodged a complaint to the World Trade Organisation against the Chinese tariffs in June last year.

The China launch comes as Penfolds announced plans to market wine made in France, America, and China under a new brand of One by Penfolds.

The brand will be launched in mid 2023 with four wines from three wine making regions, all selling at a cost of around $50 a bottle.

The new brand will seek to highlight TWE’s diversification strategy, making a feature of the specifics of each production region, with Penfolds also working with local communities in each production area.

In China, it is partnering with the China Agricultural University to establish a student fund and an academic exchange program which supports winemaking and viticultural studies for local winemakers.

This follows a partnership announced earlier this year between the company and the China Alcoholic Drinks Association.

“Developing talent and sharing viticulture and wine making expertise underscores the partnership between the China Agricultural University and Penfolds,” Tianhong Li, dean of the college at the university, said on Thursday.

He said the financial assistance with tuition and access to wine samples around the world would assist students and help develop talent in the local wine making industry.

One by Penfolds will be available in China from October, with the brand launching next year in the other regions.

Penfolds’ links with China date back to 1893 when the first wine with a Penfolds label was exported from South Australia to Shanghai.

The launch of the China wine comes as Australia and China are set to mark 50 years of official ties between Beijing and Canberra in December.

Mr Ford presented China’s ambassador to Australia, Xiao Qian, with a bottle of the Chinese made wine at a reception at the embassy in Canberra earlier this month.

GLENDA KORPORAAL
ASSOCIATE EDITOR (BUSINESS)

 

[peter2]

Recent talk that China may resume buying Aussie coal had me buying some wine. Not by the bottle but the company (TWE). Unfortunately there is no rock lobster listed company so I just have to buy them to eat them immediately. Washed down with some wine naturally.

If the China wine tariffs are removed TWE will be rapidly revalued possibly back to ~$19 (old highs).
I think their mgt team have done a remarkable job since the tariffs were imposed.

 

[Sean K]

Recent talk that China may resume buying Aussie coal had me buying some wine. Not by the bottle but the company (TWE). Unfortunately there is no rock lobster listed company so I just have to buy them to eat them immediately. Washed down with some wine naturally.

If the China wine tariffs are removed TWE will be rapidly revalued possibly back to ~$19 (old highs).
I think their mgt team have done a remarkable job since the tariffs were imposed.

View attachment 151695

Yep. This looks like a really good trade to me.