SYDNEY Australia's Treasury Wine Estates Ltd (TWE.AX), the world's biggest listed stand-alone wine company, posted a record half-year profit as it catered to China's thirst for mid-range product and benefited from a United States purchase.
Net profit for the owner of the Penfolds, Wolf Blass and Rosemount wine labels more than doubled to A$136.2 million ($104.1 million) for the six months to Dec. 31, helped by an earnings contribution from the recently acquired U.S. wine business of Diageo Plc (DGE.L).
Earnings before interest, tax and accounting items specific to wineries rose 59 percent to A$226.8 million, another record, and in line with analyst forecasts. The company added that it expects similar pre-tax earnings in the second half.
"Today's result announcement demonstrates that we are executing on all the initiatives we have communicated to the market," said Chief Executive Officer Michael Clarke in a statement on Tuesday.
Since a troubled foray into the U.S. mass market made Treasury a takeover target in 2014, Clarke has been taking its portfolio away from low-end wines to widen its margins. This included the A$754 million purchase of U.S. assets in 2015, and the company's sale last year of some downmarket Diageo brands.
Treasury's previous first-half result did not include a contribution from the Diageo assets, which Treasury took over in January 2016. U.S. pre-tax profit rose 75.4 percent in the December half year.
The company said Australia-based Clarke will divide his time between the city of Melbourne and California's Napa Valley until the end of 2017 to help the company's U.S. staff "drive deeper and stronger customer partnerships in the region".
Treasury has meanwhile reported a steady pickup in sales of its mid-range bottles to Chinese millenials intent on drinking more affordable product as a regular pastime, buffering the company from a corruption crackdown in China which has quieted sales of prestige wine. Asia pre-tax profit grew 75.6 percent in the six month period.
Treasury shares have tripled since 2014, when Clarke joined to help the company fend off two takeover approaches, overhaul its approach to the U.S. market and simplify its supply chain systems.
The company announced its interim results before the start of shares trading on Tuesday.
(Reporting by Byron Kaye; editing by Andrew Roche)