Australia's biggest wine company Treasury Wine Estates will invest up to $180 million to expand its luxury winemaking facilities in the Barossa Valley, as it sharpens its emphasis on prestige wines.
Increased demand for luxury wine at home and abroad helped push Treasury's net profit up 16 per cent to $419.5 million for fiscal 2019, as sales revenue surged 17 per cent to $2.83 billion.
Treasury's result sent its stock price up 2.2 per cent to close at $17.45 on a day when the S&P/ASX200 Index dropped 2.9 per cent after big falls on the US market. Treasury shares have now climbed almost 20 per cent since early June, when it was trading at around $14.50.
Treasury boss Michael Clarke said the wine company had followed a consistent strategy which delivered results, as he also rebuked critics, "naysayers" and short-sellers.
"We've told people what we're going to do, we've told people how we're going to do it and we've got on with it and we've done it and we've delivered and we've delivered every single time," he told The Age and The Sydney Morning Herald.
"This is not luck. This is strategic thinking, strategic planning and great execution, and a heavy dose of hard work by our team. Our team works bloody hard and we deliver," he said.
This is not luck. This is strategic thinking, strategic planning and great execution and a heavy dose of hard work by our team.Michael Clarke, Treasury Wine Estates chief executive
Mr Clarke described said a report from the Hong Kong-based equities research firm GMT Research was a "garbage report".
"The disappointing thing about a garbage report like that is we believe it's been requested by short-sellers who are trying to exit their short positions. And they get someone outside of Australia who's not under the jurisdiction of the Australian Stock Exchange to write the report," he said.
"I personally spoke to ASIC [Australian Securities and Investments Commission] and we've reported it and we want it investigated, we've got nothing to hide," he said.
The report claimed Treasury "may have inflated profits by up to 50 per cent over the last two years through the use of acquisition accounting to write down inventories and establish other liabilities". Treasury labelled the claims in the report as false and misleading.
Asked about the Barossa Valley investment, Mr Clarke said that given Treasury's portfolio of wines and growth plans it needed more winemaking capacity, describing it as a "once-in-a lifetime" investment.
Treasury's Australian managing director Angus McPherson said the company was "going to build the single best, most luxury, state-of-the art premium winemaking facility in Australia and potentially one of the best in the world. And that investment increases our capacity by over one-third".
All geographic regions where Treasury sells wine delivered growth in sales volumes, net sales revenue and net sales revenue per case. The biggest jump in sales was in Asia, where revenue grew 37 per cent in fiscal 2019 to $749 million, ensuring that sales in Asia overtook sales in Australia and New Zealand. In the Americas sales jumped 18 per cent to $1.13 billion.
Treasury reported EBITS (earnings before interest, tax and the agricultural accounting standard SGARA) up 25 per cent to $662.7 million, in line with guidance.
In Asia EBITS rose 43 per cent to $293.5 million, with a margin of 39.2 per cent. The Australia and New Zealand region reported EBITS growth of 15 per cent to $156.5 million.
Treasury declared a fully franked final dividend of 20 cents per share, payable on October 4 and up 18 per cent on last year.
In a note to clients, UBS analyst Ben Gilbert said Treasury had recorded a "good result, in line with UBS and guidance. Cash-conversion the highlight at about 76 per cent".
In a note to clients Morgans analyst Belinda Moore said Treasury had now delivered a five year EBITS compound annual growth rate of 30 per cent "underpinned by its premiumisation strategy. Asia was the standout and was better than we expected".