Treasury Wine Estates released first half earnings yesterday. Profits fell more than 20 percent but that wasn’t unexpected: the company had less luxury wine to sell and grape costs went up. It’s no secret that Australia has been challenged by exchange rates and miserable yields. CEO David Dearie didn’t sugarcoat the results during a conference call with analysts either, saying the company, though publicly traded, is taking a long view.
It was revealed that the cost of producing wine on average across the company shot up by A$2.24 per case because of low yielding 2011 harvests in Australia and California. Dearie predicted those costs will come down because more 2012 wine is available. He also said operating costs were down nearly eight percent in the first half.
Asia is one of the bright spots, to be sure, and Dearie said the company continues to invest in its future there.
Concurrent with the earnings release, Treasury announced buying vineyards in Australia and a 52-acre vineyard in Napa Valley.
I spoke with Sandra LeDrew, managing director of the Napa-based Americas regional business unit following the earnings release. She said the main focus is on maximizing growth above $10 - balancing that with commercial brands - and focusing on core brands: “We’re really proud to talk about how we continue to invest for growth,” she said. “We’re keeping an eye on our longer-term strategy.
LeDrew shared a bit about some of the opportunities the company is pursuing here: