When China's government officially abolished heavy tariffs on Australian wine, it was thought that Australian Wine Stocks would immediately resurge. Though stirring some hopes, dreams were short lived.
The Australian wine exports, which had nosedived following imposition of heavy tariffs by Chinese government, had created significant gap in the Chinese market. The gap no longer exists, filled quickly by other suppliers, prominently from France, followed by Chile. To add to the woes, Chinese Wine Stock Market shrunk significantly.
But not everything is lost. Good ASX Wine Stocks are hoping that brand loyalty among Chinese consumers and savvy marketing will be enough to restore their share of a once again growing market.
Treasury Wine Estates Limited (ASX: TWE)
Treasury Wine Estates Limited (ASX: TWE) releasing its full-year results for 2024, concluding on 30 June 2024 reported a Statutory Net Profit After Tax (NPAT) of $98.9 million, representing a decline of 61.1%. This decrease is attributed to a post-tax loss of $318.1 million from material items, primarily due to non-cash impairments of goodwill and commercial brands within Treasury Premium Brands. However, the NPAT, excluding material items and the impact of SGARA, increased by 8.3%.
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.
TWE remains among the Best Wine Stock to Buy, as it is 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.
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.
The company has established ambitious expansion strategies aimed at achieving substantial growth in international markets 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. This strategy of pursuing substantial product expansion in conjunction with geographic growth is notably promising for revenue enhancement in the upcoming years.
Source: Company’s Report
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