Have investors forgiven Treasury Wine Estates (TWE) after the poor updates and other headwinds in the first six months of 2020?
The surge in the share price yesterday in the wake of the 2019-20 annual results suggest it might now be returning to the market’s good books, especially with hints of an upturn in demand in China.
After a volatile six months of pandemic, bushfires, weak marketing, stock problems and a change in senior management Treasury Wine Estates has reported a 25% slide in net profit to $315.8 million for the 12 months ending June 30.
The company said the second half of the 2020 financial year was riddled with unfavourable volumes and portfolio mixes as a result of COVID-19, which had reduced the demand for luxury wine sales, especially in markets like Australia, China, and the US.
Like so many other companies the online performance improved because of the lockdowns.
TWE said its E-commerce sales across its global distributions had accelerated in the second half of the year, as a result of lockdown measures imposed across the world.
It also noted the challenging wine market conditions in the US had also impacted sales within its key wine channels, with overall North American earnings before tax and interest slumping 37% to $147.3 million.
Earnings before interest and tax from Asian exports fell 14% to $243.7 million, while Australian and New Zealand EBIT declined 16% to $133.3 million.
However, the company said on Thursday that it had noticed an upturn in Asian consumption and sales in the final quarter of the financial year 2020.
TWE said volumes sold in the Chinese market had risen 40% in June compared to the previous corresponding month.
The suggestions of an upturn in Asian and especially sales into China sparked a 12% plus surge in the TWE share price yesterday and it ended at $12.85.
That’s the highest the shares have been since late January when a poor trading update triggered doubts about the company’s ability to match 2018-19’s performance and sent the shares plunging.
Treasury Wine Estates said the ongoing uncertainty induced by the pandemic had made it unable to provide earnings outlooks for the 2021 financial year – it’s not alone in that respect.
The company will pay a final dividend of 8 cents a share, down from 20 cents a share for the final half of 2018-19.
That brought the total dividend payout for the 2020 financial year to 28 cents a share, down from 38 cents a share the year before.