As people once again enjoy wining and dining Treasury Wine expects earnings growth will ramp up across its operating regions
-New operating structure should better reflect the brands
-Logistical challenges unlikely to be rectified soon
-Treasury Wine Americas has experienced above-market growth
The road ahead for
Treasury Wine has reiterated medium-term growth targets, expecting a sustainable top line and high single-digit earnings growth, yet provided no formal FY22 guidance. Premises have started to re-open globally and serve wine but depletions growth has been slower, because of the greater concerns regarding the Delta variant of coronavirus.
While the company provided no quantitative guidance, Jarden cuts earnings forecasts by -4% to reflect commentary regarding a slower pace to re-opening, while acknowledging this is more about timing than execution. The broker's channel checks suggest customer engagement is favourable and re-opening will drive margin accretion. Furthermore, supply/demand is the best it has been in recent years.
Morgans notes the company's new operating model, emphasising brand not region, is already showing value and should achieve "demerger type" benefits without the additional costs, as well as allow the market to properly value Penfolds.
Macquarie points out
While encouraged by comparable depletions in
Credit Suisse assumes this means the company is on the way to increasing demand for Penfolds beyond
Asian Logistics
The company has cited widespread logistics challenges, and Macquarie does not believe the issue will be resolved in the short term, although notes logistics costs are less than 10% of the total costs for the group.
Credit Suisse re-assesses the Asian earnings base and notes the logistics challenges relating to international freight, with management indicating this would become more pronounced.
In the second half, the company reinvigorated its Asian business and this required shipments and revenue to fill the distribution chain. In re-considering the impact of logistics, Credit Suisse reduces earnings estimates for FY22 from
Supply chain optimisation is well advanced and Morgans expects cost savings of at least
Macquarie remains cautious for the short term, because of higher costs and a bumper crop that may limit the ability to improve short-term pricing and margins in non-Penfolds brands. There is also the continuing uncertainty around the sustainability of re-allocated volumes from
Macquarie was surprised at how well Australian wine prices held up, as volumes increased and there was the loss of the Chinese export market. The recovery in the US was slower than the broker expected. Further asset sales in the commercial portfolio are taken into consideration, in line with company guidance. The company intends to divest its remaining non-priority brands in the US.
Credit Suisse is confident retail demand in
Meanwhile, Penfolds, led by
Treasury Wine has also stated it is committed to
The Californian Collection is also selling into
Jarden, not one of the seven stockbrokers monitored daily on the FNArena database, has a
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