Treasury Wine Estates Ltd [ASX:TWE] have seen a rise in their share price after a jump in profits by 34%, with annual profits of $360.3 million.
At time of writing, TWE’s share price rose by 4.79% after an earlier slump. They have announced that they will increase dividend payments to 17 cents a share, up 4 cents from last year’s 13.
Why the sudden turnaround?
Treasury Wines, who owns premium brands such as Penfold’s and Wolf Blass, have consolidated their standing as the world’s biggest winemaker by announcing a record profit, driven by new investments and product development (including luxury wines) throughout Asia, Europe and the US.
Although TW’s performance was handed a set-back in the American market, earnings in Asia rose by 37% ($205.2 million), helped in large part by a rising demand in China for premium Australian and New Zealand wines.
What is the outlook for Treasury Wines?
CEO Michael Clarke is resolute about the company’s outlook for FY2019:
‘FY19 is set to be an exciting year for TWE. We have the wine, the brands, the business models and the organisational talent to propel our Company into its next phase of growth that will see TWE become the world’s most celebrated wine company and deliver a 5yr EBITS CAGR of 25%.’
While the result is probably a welcome sigh of relief for investors, TWE’s future success will likely come down to how well they are able to transform their ‘premiumisation’ operations in the US and in Asia.
There are also existing concerns over whether regulations will make it harder to meet the growing demand in China, although Clarke is signalling that previous delays will have no effect on growth.
Investors will likely have to wait and see if TWE’s shift toward luxury wines will pay off.
For Money Morning
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