Australian Treasury Wine Shares Skid 25% After Profit Warning

Posted: Jan 29, 2020

Reuters - A profit warning by Australia's Treasury Wine Estates triggered a 25% tumble in the firm's shares on Wednesday as it announced a review of its U.S. operations amid stiff competition and changes to its Americas management team.

The owner of the Penfolds wine label slashed its earnings outlook for 2020 late on Tuesday, saying business would be affected by aggressive discounting and higher promotional spending in the U.S., which it says has been flooded with cheaper wine. The Americas region accounted for about 40% of Treasury's annual revenue in financial year 2019.

In a statement, Treasury said it now expects its core earnings to grow about 5-10% for 2020, compared with an earlier range of 15% to 20%. The shares plummeted as low as A$12.495 on Wednesday, touching their lowest level since August 2017.

At least two brokerages - JP Morgan and Credit Suisse - downgraded their ratings for Treasury, citing continuing headwinds as the company's guidance did not factor in the possibility of weaker demand due to risks from the outbreak of the new coronavirus in China.

China is one of Treasury's biggest markets, with the company's latest annual profit scaling a record in August due to robust demand for its premium wines there.

"Despite the setback in the U.S. this half ... we remain confident ... to deliver growth in this business in the foreseeable future," Tim Ford, Chief Operating Officer, and incoming Chief Executive Officer said during an analyst call. Treasury ruled out an exit from the U.S. market.

By Reuters
January 29, 2020

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