The Treasury Wine Estates Ltd (ASX: TWE) share price will be on watch this morning following the release of the global wine company's half year results.
For the six months ended December 31, the company posted a 16% increase in net sales revenue to $1,507.7 million. On a constant currency basis net sales revenue lifted 13%, representing the strongest organic growth rate in the company's history.
First half earnings before interest, tax, SGARA and material items (EBITS) came in 19% higher than the prior corresponding period at $338.3 million. This was the result of growth in all regions, driven by volume growth, portfolio premiumisation, and price realisation.
On the bottom line net profit after tax was up 17% to $219.2 million, with earnings per share climbing 19% to 30.5 cents. The company's board declared an 18 cents per share interim dividend, up 20% on this time last year.
What were the drivers of the strong result?
The company's strong performance in the Asia market was a key driver of this record performance.
Management advised that its competitively advantaged business model, brand portfolio, and outstanding sales execution helped drive Asia EBITS growth of 31% to $153.1 million and an EBITS margin of 38.9%.
Over in the Americas the company reported 12% EBITS growth to $112.1 million and an EBITS margin of 18.5%. Net sales revenue grew 20% in the region thanks to its new route-to-market model combined with underlying premiumisation, offset by higher costs of doing business.
In Europe the company reported 10% EBITS growth to $26.3 million and an EBITS margin of 15%. Net sales revenue increased 10% thanks to its Masstige-led premiumisation as well as continued focus on the strengthening of strategic customer partnerships.
And finally, the company's ANZ segment was a solid performer. The ANZ segment reported 13% EBITS growth to $77.4 million and an EBITS margin of 23.2%. Masstige-led premiumisation delivered 4% net sales revenue growth in Australia, which was offset by impacts of cycling the New Zealand distributor model transition.
The company's Chief Executive Officer, Michael Clarke, was deservedly pleased with the half.
He said: "I am very proud to see the foundation established in the previous years continuing to deliver sustainable growth, as shown by yet another strong set of financial results for the Group. Like in previous years, we've delivered on expectations while continuing to implement significant changes to the business and investing for future growth."
He also confirmed that the company still expects to achieve its guidance of approximately 25% EBITS growth in FY 2019 and expects reported EBITS growth in FY 2020 in the range of approximately 15% to 20%.
Should you invest?
I was very impressed with the company's performance in the first half and expect the market to respond positively to this release.
As a result, I continue to believe it would be a great long term investment option along with the likes of A2 Milk Company Ltd (ASX: A2M) and CSL Limited (ASX: CSL).
