Treasury Wine Estates expects Asian markets to be its biggest contributor to profit in 18 months, surpassing Australia and the Americas.
Asia was TWE’s strongest market in fiscal 2015, lifting earnings by 54.5 per cent to $73.1 million.
In comparison, the Australia and New Zealand market grew earnings by 15 per cent to $84.4 million, and the Americas reported steady earnings at $93.2 million.
“I feel very comfortable that this growth (in Asia) is sustainable which is why we believe that within the next 18-month period Asia will be the biggest profit contributor to our company,” TWE chief executive Michael Clarke said on Wednesday.
TWE said its growth in Asia was outstanding, driven by growing consumer awareness, increased marketing, better routes to market, and ensuring that the market was not overstocked.
Volumes of wine sold in China grew 36 per cent, and in southeast Asia, volumes were up 13 per cent.
Mr Clarke said the big opportunity lay in north Asia – China, Hong Kong, Japan and Korea – where TWE’s business was underdeveloped.
“This is a region that I would say has probably been scary for Treasury Wine in the past,” Mr Clarke said.
He said TWE’s business in China was small, so it had not been greatly affected by the austerity measures and crackdown on corruption amongst officials that had hurt more-established French wine companies.
Retailers in China were attracted to TWE because it was seen as a growing business, and TWE was stepping up its marketing campaign to excite consumers.
Mr Clarke said there was a strong following for US wines in Japan and Korea, so there was an opportunity for TWE to promote its US brands such as Beringer, Chateau St Jean and Stags’ Leap.
TWE also said it had started to reduce its portfolio of labels by 30 per cent so that it can focus on priority labels.
TWE had a plethora of labels that were not great-quality wine and were just sitting in inventory.
TWE, with brands including Penfolds, Wolf Blass, Lindeman’s and Rosemount Estate, made a net profit of $77.6 million for the year to June 30, up from a $101 million loss a year ago when it was hit with more than $280 million in writedowns.
TWE was boosted by a lower Australian dollar, stronger sales from its core brands and reduced costs.
Mr Clarke said fiscal 2015 was a re-set year for the company, during which substantial strategic, operational and cultural changes were made.
TWE has completed the destruction of excess and old wine stocks in the US.
Shares in Treasury Wine closed 74 cents, or 13.43 per cent, higher at $6.25.
CORE BRANDS HELP RETURN TREASURY WINE TO PROFIT
* Annual net profit of $77.6m, up from loss of $100.9m
* Revenue of $1.85b, up 8.4 pct
* Unfranked final dividend of eight cents per share, up one cent