Treasury Wine more than doubles first half profit

Treasury Wine Estates, maker of well-known brands like Penfolds, Wolf Blass and Wynns, has more than doubled its first half profit.

Announcing its interim 2017 financial result yesterday, the company said reported Net Profit After Tax (NPAT) for the period was $136.2m and Earnings Per Share (EPS) was 18.5 cents per share.

The good result reflects treasury’s purchase of Diageo assets in the US last year.

“I am delighted to report a strong interim 2017 financial result highlighted by further margin accretion, excellent cash conversion and outstanding EPS growth, despite the higher share base. All regions delivered double digit EBITS growth and importantly, growth was delivered sustainably,” commented TWE’s Chief Executive Officer, Michael Clarke.

The company’s EBITS margin accretion was up 4.3ppts to 17.5% in 1H17 and up 2.5ppts relative to TWE’s F163 EBITS margin of 15.0%, which included 6 months of the Diageo Wine contribution.

The outlook for Treasury remains positive, with the company continuing to deliver against its strategy of transitioning from an agricultural to a brand-led, high performance organisation.

“Today’s result announcement demonstrates that we are executing on all the initiatives we have communicated to the market and importantly, that TWE is continuing to deliver sustainable value to its shareholders,” said Clarke.

Coca-Cola shakes up the Beverage market with 2015 financial results

Increased efficiency, improved execution and a diversified product base: that was the message Coca-Cola Amatil (CCA) pushed for its investors and consumers at its full year result briefing. 

Promises of profit growth by the company had been delivered for the first time in three years, with $100 million in cost savings potentially becoming invested to ensure long-term gains.

After a 33 per cent slump in profits during the previous two years, CCA’s underlying net profit rose 4.8 per cent to $393.4 million in 2015, assisted by a lower interest bill after selling 30 per cent of its Indonesian business to its US parent, the Coca-Cola Company.

One of the major themes of the result briefing was a shift towards meeting consumer expectations; with a new version of the reduced-kilojoule Coke Life hitting the shelves at a 50 per cent price gap with its rival Schweppes-Pepsi.

The Coca-Cola Life launch was the biggest beverage launch within the last eight years, with 60 per cent of households having some Coca-Cola trademarked product within their walls.

In an interview with Food & Beverage Magazine, CCA Group Chief Financial Officer Martyn Roberts says a personal highlight of the 2015 full year results was the amount of leverage gained in their large-scale, low-cost manufacturing sales capabilities.

“Our major focus in 2016 should be on the maintaining momentum in all of our respective markets in the face of changing consumer preferences and a challenging global market,” Roberts said.

Earnings before interest and tax rose a more modest 1.4 per cent to $660.6 million. CCA stabilised its Australian operations, earnings growth in Papua New Guinea, New Zealand and Fiji offset declines in Indonesia, and profits grew strongly in alcoholic beverages and coffee, countering a sharp drop in food and services.

According to CCA managing director Alison Watkins, CCA was aiming to be on track to return to mid-single-digit earnings per share growth "over the next few years".

"We don't want to achieve earnings-per-share growth only through doing clever things on our finance or tax line – we want to achieve it throughout our business," the former GrainCorp and Berri chief said.

""When you're relying on investing as we are in our brands, in innovation, in our sales capabilities, you'd expect those investments would pay, but it's impossible to be too scientific about when."

In Australia, non-alcoholic beverage volumes returned to growth for the first time since 2012, although volumes fell 1.5 per cent in the second half, in line with broker reports of tough trading in October and November.

CCA facing flat reception from Indonesia

Despite the consistent results between the 2014-15 financial years and placing itself ahead of the market through its reshaping and reinvention of costs for production, CCA faced some resistance from the Indonesian market.

This was largely due to a challenging environment in which economic growth was at its lowest level in five years, which placed a significant impact on which the speed of volume increased.

Although he would not comment specifically on the Indonesian government and their level of mandate, Roberts says strong revenue management and cost initiatives offset lower growth volume.

“There’s been a significant depreciation of the rupiah against the US dollar, which resulted in the increased cost of goods sold,” Roberts said.

“The entire beverage industry in Indonesia has had a bit of a set back over the past year or so. We’ve been sticking to implementing our strategies to include TCCC’s 29.4 per cent shareholding in the Indonesian business in addition to injecting equity.”

Since capital expenditure had been reduced by $29M to $256M due to deferral of spending on projects, Indonesia saw the installation of three new production lines in addition to the continued rollout of coolers.

If there was one positive note left from the Indonesian market, net debt had decreased by $725M to $1,146M reflecting the receipt of the equity injection by TCCC in CCA’s Indonesian business which equated to $647M in Australian dollars.

As 2016 continues to present opportunities for CCA to reinforce their strategy, the Indonesian market may still persist as a challenging area for profitability and growth due to the tough economic conditions.