Treasury Wine Estates 'not yet firing on all cylinders': David Dearie

TREASURY Wine Estates, the former wine division of brewing major Foster's, has reported a 7 per cent fall in annual pre-tax earnings as the strong Australian dollar reduced the value of export sales.

TWE, which was demerged from Foster's in May, reported a net profit of $64.1 million for the 12 months to the end of June, compared to a $901m loss in the previous financial year when asset writedowns dragged the bottom line into the red.

Proforma results compiled to adjust for the demerger showed earnings before interest and tax were $171.1m, down 7.3 per cent and in line with market expectations. By early afternoon, shares in TWE were flat at $3.17 in a slightly positive broader market.

Managing director David Dearie said the strength of the Australian dollar cut reported earnings by around $30m, however earnings continued to grow on a constant-currency basis.

“Excluding the impact of currency, net sales revenue per case increased in all regions,” he said.

Reported revenue was $1.475 billion, up 2 per cent, however when adjusted for the addition of businesses not previously counted as part of the Foster's wine division, revenue was down 7.3 per cent to $1.797bn.

“Overall, our results for the 2011 fiscal year were solid ... but we're not yet firing on all cylinders and some aspects of performance were disappointing,” Mr Dearie said.

However, growth prospects in the wine market remained strong, particularly in new markets such as China, which he said TWE would target for export sales.

Chief financial officer Mark Fleming said the company also planned to institute a currency hedging policy to cover around 50 per cent of its exposure to exchange rate fluctuations.

Meanwhile, Mr Dearie said the company had embarked on a cost-cutting drive which had already identified annual savings of $30m, more than offsetting the additional corporate costs resulting from the demerger.

TWE declared a final dividend of 6c per share, of which 3c was franked for taxation purposes.