Treasury Wine Estates Ltd (ASX: TWE), which is the second-largest listed winemaker in the world, posted a sobering 60% drop in net profit after tax (NPAT) for the six-months ended 31 December 2014, with overall earnings being hit by higher tax and finance expenses.
A $19.8 million tax expense acted as a huge drag on the wine maker's NPAT which fell to $42.6 million. In contrast, Treasury Wines reported a $70.6 million tax benefit in the prior corresponding period, which gave it a profit of $106.2 million at the time. When interest and tax expenses were excluded however, the company's operating profit jumped 86% to $85.2 million on the back of an 8.1% lift in revenues.
However, the company warned that private label wines were selling at a faster clip than branded wines, particularly in Australia. CEO Michael Clarke said that approximately 75% of off-premise wine purchases are made through a limited number of retailers locally. Although he didn't mention them by name, he is referring to the liquor chains owned by industry giants Woolworths Limited (ASX: WOW) and Wesfarmers Ltd (ASX: WES), which are both pushing their own private label products, putting enormous pressure on branded wine makers.
Still, Clarke said that the company is making solid progress in transitioning itself from an "order-taking agricultural company to a brand-led marketing organisation." It is also benefiting from the weaker Australian dollar which should help boost international sales and the company believes this will have a positive impact on earnings in the second half.
Investors holding the stock as at 11 March 2015 will also be entitled to an unfranked 6 cent per share dividend, which is payable on 17 April 2015.
