Australian wine industry is the fifth largest exporter globally besides being significant contributor to the country’s economy. Demand for alcohol generally remains consistent, making investments in Australian wine stocks less risky during periods of economic uncertainty.
Treasury Wine Estates Limited (ASX: TWE)
Treasury Wine Estates Limited, releasing its full-year results for 2024, concluding on 30 June 2024, reported a Statutory Net Profit After Tax (NPAT) of $98.9 million.
EBITS rose by 12.8% to $658.1 million, fuelled by robust growth in the Luxury portfolio, particularly in Penfolds and Treasury Americas, which included contributions from the DAOU acquisition in the second half of 2024. When excluding DAOU's impact, EBITS still grew by 6.4%, aligning with the company's guidance for mid to high single-digit organic EBITS growth for the fiscal year 2024.
Net Sales Revenue (NSR) increased by 13.1% to $2,739.8 million, driven by strong performance in the Luxury portfolio, particularly in Penfolds and Treasury Americas, although this was partially offset by decreased sales in Treasury Premium Brands.
The company achieved a cash conversion rate of 82.0%, which improved to 94.6% when accounting for changes in non-current Luxury and Premium inventory.
A final dividend of 19.0 cents per share was declared, with 70% franked, bringing the total annual dividend to 36.0 cents per share, equivalent to 72% of NPAT, marking a 16% increase compared to the previous year.
The company is one of the prominent ASX wine stocks, projecting continued robust growth in the demand for its Luxury portfolio throughout FY25, especially for Penfolds and Treasury Americas. Additionally, the other brands are anticipated to demonstrate considerable stability, resulting in an EBITS forecast of $780-$810 million for FY25. Furthermore, as a result of a recent strategic assessment of the operational framework for the company’s Premium brands, there are plans to establish a Global Premium division by 1 July 2025. This initiative will involve the consolidation of Treasury Premium Brands and Treasury Americas Premium brands, thereby significantly enhancing its market presence.
TWE, considered as the best wine stock to buy, is actively engaged in substantial rebranding initiatives that are anticipated to lead to considerable margin expansion for the company. At the conclusion of FY24, the company’s inventory reflected a marked increase in the proportion of Total Luxury and Total Premium inventory, positioning TWE to leverage its robust market segments effectively.
Lark Distilling Co. Limited (ASX: LRK)
Lark Distilling Co. Limited, in its financial results for the fiscal year 2024, concluding on 30 June 2024, reported net sales revenue of $14.0 million, reflecting a decrease of $3.1 million compared to FY23. This decline in sales was consistent with prior forecasts, as the fourth quarter was adversely affected by a recognized slowdown in the Chinese Indirect Export channel, challenging trading conditions in the domestic B2B market, and performance issues at Lark's hospitality venues. However, these declines were somewhat mitigated by improved results in the Direct Export, Global Travel Retail, and Ecommerce sectors.
Additionally, Spirits Platform, Australia's foremost independent spirits distributor, was appointed as Lark's domestic distribution partner, effective 1 August 2024.
The company's ongoing emphasis on cash management and capital discipline resulted in an increase in full-year operating cash flows of $1.2 million compared to FY23.
As of 30 June 2024, Lark maintained a whisky bank of 2.5 million litres, which enhances flexibility in its stock management to facilitate future growth, up from 2.4 million litres on 30 June 2023.
The cash balance stood at $2.4 million on 30 June 2024, complemented by a $15 million undrawn committed bank facility available until January 2028. Following a recent equity raise, the pro forma cash balance as of 30 June 2024 was approximately $27 million.
The company has established ambitious expansion strategies aimed at achieving substantial growth in wine stock market internationally in the forthcoming years. Over the next decade, the company intends to concentrate on both penetrating new international markets and gradually increasing its presence within these regions. Additionally, the company has enhanced its distribution strategy, with a particular emphasis on significant B2B channels to drive sales growth.
The company's strategy of pursuing substantial product expansion in conjunction with geographic growth is notably promising for revenue enhancement in the upcoming years. This trajectory is anticipated to be further supported by considerable investments and initiatives in branding, enabling the company to maximize the benefits of its expansion endeavours.
Source: Company’s Report
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