Why the Treasury Wine (ASX:TWE) share price is falling

The Treasury Wine share price is falling today as the company announced its half yearly report. We take a closer look.
The post Why the Treasury Wine (ASX:TWE) share price is falling appeared first on The Motley Fool Australia. –

Spilled wine and a glass on its side, indicating a share price drop for ASX wine companies

The Treasury Wine Estates Ltd (ASX: TWE) share price is dropping lower this morning as the company announced its half-yearly results. Shares in the company are currently falling to a price of $9.78. As such, shares in the wine producer are down 1.21% since last nights close.

How did Treasury Wine perform in the first half?

Treasury Wine today announced its half-yearly report to the ASX. The company announced a sharp decline in net profit after tax (NPAT) down 24% to $175.3 million as the China conflict hurt the company’s earnings. As a result, the company’s earnings per share was also down by 24%.

The well documented ongoing impacts from the global pandemic and the disruptions to sales in China were key drivers of lower earnings in 1H21. Earnings before interest and tax (EBIT) came in at $284.1 million. Moreover, the company saw its cost of goods sold increase by 2.8%. Driven by a favourable portfolio mix shift, lower volume and higher costs.

Nonetheless, it was not all bad news for the wine producer as the company continued with the execution of its COVID-19 recovery plan. Treasury Wine stated that its plan ahead agenda is driving strong momentum towards recovery in all regions.

Furthermore, thanks to careful management the company retains a strong balance sheet. Net debt was down to $403.7 million in the first half to $1,030.5 million. With total available liquidity remaining strong with approximately $1.5 billion on hand at the end of last year.

The company will also pay an interim dividend of 15 cents per share, fully franked. Representing a payout ratio of 62% of NPAT. This is consistent with the company’s dividend policy.

Management Comments

On today’s results announcement, TWE’s Chief Executive Officer, Tim Ford commented:

Our first half fiscal 2021 results demonstrate that we are making progress against our TWE 2025 strategy, despite a period of significant disruption. Our progress is the result of disciplined execution of the plans we put in place to manage through these disruptions and highlight the strength of our business models in all regions.

Looking Forward

As Management noted, it expects the difficult current conditions to continue through the remainder of fiscal 2021.

In China, Treasury Wine expects that demand for its portfolio will remain extremely limited. However, the company is confident around its plans for reallocation of its luxury brands away from China as it continues to engage with its customer and consumer base.

Nonetheless, it does not see these benefits having effect until the end of FY21. It expects 2H21 EBIT to be below that of this report.

The Treasury Wine share price has had a difficult year, falling by 12%. This is well below the flat All Ordinaries Index (ASX: XAO) return in the same period.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why the Treasury Wine (ASX:TWE) share price is falling appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!