Australia's Treasury Wine gets Asia premium boost; shares jump


By Aby Jose Koilparambil

Aug 15 (Reuters) - Australia'sTreasury Wine Estates Ltd reported a more than 16% rise in annual profit, boosted by higher Asian demand for its premium segment, sending its shares to a near seven-month intraday high.

Shares of the world's largest standalone winemaker rose as much as 4.3% to A$17.82, after it said higher sales of its Luxury and Masstige wine brands helped it achieve "stellar growth" in the Asian continent.

Wine exports to China, Australia's top market by value, rose 18% to A$1.14 billion ($818 million) in 2018, data from Wine Australia showed, although the pace of growth was the slowest in four years as the Sino-U.S. trade tensions dragged on consumer spending.

However, the profit figure came in below expectations, hurt by higher finance costs, and the company said it expects capital expenditure to increase nearly five-fold in 2020.

The Melbourne-headquartered company said it expects growth capex of up to A$135 million ($91 million) in the year, compared with A$27.7 million in 2019.

The maker of Penfolds, Beringer and Wolf Blass has been boosting production of its mid-range and luxury products, while exiting less expensive commercial wine production.

The company said it plans to invest more in its French assets and continues to focus on its Australian luxury winemaking capacity.

Net profit after tax rose 16.4% to A$419.5 million in 2019 from a year earlier, but came in below the average analyst estimate of A$436.3 million, according to Refinitiv Eikon data.

Net finance costs increased 55.7% to A$52 million, driven by higher average borrowings.

The company maintained its 2020 pretax profit guidance range of 15% to 20% and declared a final dividend of 20 cents per share, higher than the 17 cents per share declared a year ago.

The company said momentum in its U.S. brands is expected to return once the U.S.-China trade relationship improves, as it posted an about 18% rise in Americas sales.

Last week, Hong Kong-based GMT Research alleged that Treasury Wine may have improperly inflated its pretax profits by as much as 50% over the past two years following its purchase of most of Diageo's wine business in 2016. Treasury Wine rejected the research report.

($1 = 1.4815 Australian dollars)

This article appears in: Politics , Fundamental Analysis , Stocks , Earnings

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