Treasury Wine expects strong Penfolds earnings
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The news: Australia’s top winemaker Treasury Wine Estates says the reopening of its key China market is set to boost earnings for its luxury Penfolds brand.
The numbers: Treasury Wine says it expects Penfolds’ earnings margin to be approximately 42%, reflecting the reestablishment of entry-level Australian COO Luxury tiers in China, with FY24 earnings before interest and tax between $418 million and $421 million.
In FY25, Penfolds’ earnings margin is expected to improve to 43% to 45% despite a step-up in brand building investment and overheads in China of approximately $20 million, thanks to price increases from 1 July.
The context: Treasury Wine said it restarted shipments of Australian wine to China at the end of March, and has seen strong demand from its distribution partners. It will increase prices on Penfolds Bin and Icon products by approximately 6% from July and will also consider future price increases as part of Penfolds' long-term pricing roadmap.
The winemaker, which gets three-quarters of its earnings from high-end wines like Penfolds, has pushed deeper into the premium segment with the acquisition of California-based DAOU late last year. It re-entered the key Chinese market earlier this year following the end of the tariffs on Australian wine.
The source: ASX announcement
