Treasury Wine Estates (pic: TWE)
Asia Australia Wine

TWE withstands China tariffs

Treasury Wine Estates appears to have absorbed the shock from China’s punitive tariffs and “is positive on outlook across its key markets outside mainland China” for the year 2022, the company has announced in its latest 2021 annual report.

The Australian wine giant, Treasury Wine Estates, appears to have absorbed the shock from China’s punitive tariffs and “is positive on outlook across its key markets outside mainland China” for the year 2022, the company has announced in its latest 2021 annual report.

The wine group struck a positive note in its report as its EBITs (Earnings before interest, tax, SGARA and material items) maintained on a same level as last fiscal year at AU$ 510.3 million, a moderate 0.4% drop, despite a AU$77.3 million loss caused by the anti-dumping tariffs China posed on Australian wines.

China formally announced a 218% anti-dumping tariff on Australian wines this March, effective for five years, and TWE as the biggest Australian wine exporter to China is subject to a total of 175.6% tariffs.

The company, however, says “it maintains a long-term commitment to China,” and will focus on the promotion of its California wine collection and South Africa-made Rawson’s Retreat for the market.

China slapped 218% anti-dumping tariffs on Australian wines (pic: TWE)
Penfolds, the flagship brand from TWE, is among the most popular imported wine brand in China (pic: TWE)

The downturn in the Chinese wine market as a result also dragged down TWE’s performance across Asia.

Asia reported a 15% decline in EBITS to AU$205.4 million and an EBITS margin of 36.3% (down 2.8 ppts) with shipments to Mainland China significantly reduced following the implementation of import duties on Australian wine, says the company.

However, the group noted that impacts are partially offset by growths in key regional markets (including Hong Kong, Singapore, Malaysia and Thailand), for Penfolds Bin and Icon range.

“In F22, TWE is positive on its outlook across key markets outside of Mainland China, with its focus to be on continuing the strong momentum in its Premium portfolio in addition to executing plans to drive continued growth for Penfolds Bin and Icon ranges, with encouraging performance having been delivered in F21, and particularly the 4th quarter of F21,” TWE wrote in its annual report.

Outside of Asia, Americas reported a 23.0% increase in EBITS to AU$168.3 million and an EBITS margin of 17% (up 4.2 ppts), with positive momentum accelerating across the retail and e-commerce channels for TWE’s premium brand portfolio.

This momentum has been led by 19 Crimes, which continues to outperform the market, the company adds.

Australia and New Zealand reported a 10% increase in EBITS to AU$142.7 million and an EBITS margin of 23.7% (up 1.7 ppts) reflecting ongoing portfolio premiumisation which included growth in the Penfolds Bin and Icon portfolio.

Overall, TWE reported 3% drop in sales revenue to 2.57 billion and a 1.8% rise in net profit after tax to AU$250 million.

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