Treasury Wine Estates (TWE) has flagged a significant drop in earnings in 2020 as Covid-19 and related travel restrictions continue to hurt the business globally.
The Penfolds wine owner said it expects earnings before interest and taxes (EBITS) of between A$530 million and A$540 million, a decline of about 21 per cent on the year prior.
Earnings declined by about 14 per cent in Asia, 37 per cent in the Americas and 16 per cent in Australia and New Zealand.
Tim Ford, who commenced the role of chief executive on July 1, said “it is right to remain cautious” on the near-term outlook, given uncertainty around the timing and pace of recovery in key markets.
“The second half of fiscal 2020 has been a unique period for the industry and all of the communities in which we operate. I am proud of the way that our people, customers and suppliers have managed through the disruptive impacts of the COVID-19 pandemic giving me continued confidence in our team, brands and operating models and their combined strength,” he said.
“We remain optimistic around our return to both margin and profit growth.”
Ford said a restructure of the US business had been completed and would save the business at least $35 million in the 2021 financial year.
The wine business is also started exploring the sale of some of its brands and assets in the US, while a potential demerger of Penfolds could happen by the end of the 2021 calendar year.
In April, the wine company raised the prospect of a demerger to allow the business to focus on premiumisation and accelerating the separate focus of its luxury and commercial portfolios.
TWE said that work completed since the market announcement in April “continues to validate the expectation that value will be created through a separate focus for both Penfolds and TWE’s other brands, globally.”
“TWE will continue to explore the best option that will drive long-term growth and value creation.”
Treasury Wine Estates is set to release its full-year results on August 13.