The Treasury Wine Estates Ltd (ASX: TWE) share price is dropping despite reporting growth in its FY21 report.
If readers didn't catch the result, these are the highlights:
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FY21 result
Treasury Wine Estates revealed that its net sales revenue fell 3% to $2.57 billion. But that represented 1.3% growth in constant currency growth and 4.4% organic growth after excluding the US commercial portfolio brands divested in March 2021.
There was a similar story with its earnings before interest, tax, SGARA and material items (EBITS). FY21 EBITS fell 0.4% to $510.3 million, with constant currency growth of 2.8% and organic growth of 3.5%.
The EBITS margin was 19.9%, an increase of 0.6 percentage points.
But the Treasury Wine Estates bottom line improved. Net profit after tax increased 1.8% to $250 million and grew 5.5% in constant currency. Earnings per share (EPS) was 34.7 cents, which saw the same growth rates as net profit.
Net profit after tax, before material items and SGARA was $309.6 million, an increase of 3% (and 6.4% growth in constant currency).
Treasury Wine Estates reported that net sales revenue increased all regions, driven by continued 'premiumisation' and consumer-led portfolio expansion, with the luxury and premium portfolios now contributing 77% of global net sales revenue, up from 71%.
However, it did say that Asia reported a 15% decline in EBITS to $205.4 million and an EBITS margin of 36.3% (a decline of 2.8 percentage points). Shipments to mainland China significantly reduced after the implementation of import duties on Australian wine. Mainland China EBITS declined $77.3 million in FY21. This impact was partially offset by continued growth across the rest of the region.
Shareholder payout
The Treasury Wine Estates board declared a final dividend of 13 cents per share, an increase of 62.5% on the final dividend. The full year payout was 28 cents per share. This represented 65% of net profit, consistent with its long-term dividend policy.
TWE Long-term perspective
Investors take the outlook and long-term into consideration when deciding what to value the TWE share price (or any business).
The company points to several factors that could drive growth and help it achieve a long-term EBITS margin target of 25%. For example, it says there are attractive premium wine category fundamentals, with growing premium wine consumption continuing to drive category volume. It also says that it has an unrivalled portfolio of premium wine brands spanning consumer tastes, consumption occasions and price points.
In FY22, TWE said it's positive on its outlook across key markets outside of China. But the short-term impact of COVID-19 continues to affect trading conditions which remain uncertain. Retail and e-commerce channels continue to perform "strongly".
Cost of goods per case are expected to remain elevated in FY22.
The TWE CEO Tim Ford said:
In FY22, we enter a new phase for TWE under our brand portfolio divisional operating model, led by Penfolds, Treasury Premium Brands and Treasury Americas. Whilst it's early days in the change program, it is already very clear to our teams that with each division focused on their unique strategic priorities and performance accountabilities, we are better positioned to take advantage of previously untapped growth opportunities across the globe. This is a truly exciting stage in our journey as we progress deliberately at pace towards our ambitions and goals.
