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By Byron Kaye
SYDNEY Feb 14 Australia's Treasury Wine Estates
Ltd, the world No. 1 stand-alone wine company, posted a
record half-year profit on U.S. and China sales, but its shares
came off all-time highs on worries its rapid growth may have
The owner of the Penfolds, Wolf Blass and Rosemount wine
labels said net profit more than doubled to A$136.2 million
($104.1 million) in the six months to Dec. 31, but forecast that
second half pre-tax earnings would only match the first half.
Treasury's shares have tripled since 2014 under Chief
Executive Michael Clarke as it rebuffed two takeover approaches,
rebuilt its U.S. business, simplified its supply chain network
and beefed up exports to Australian free trade partner China.
However, the rally has left the company with the most
expensive shares of any wine company outside China - the stock
trades at 48 times earnings, double the global average for
winemakers - leaving it vulnerable to fears of slowing growth.
By mid-session, the stock was down 5.2 percent, its biggest
intraday decline in two-and-a-half years, while the broader
Australian market rose 0.4 percent.
"While this is a good result, it's not a
hit-it-out-of-the-park result," said Daniel Mueller, a fund
manager and analyst at Forager Funds Management. "(At) those
high multiples, you need to grow very fast to justify them."
After a troubled foray into the U.S. mass market, Clarke has
taken the company's U.S. portfolio away from low-end wines to
widen margins. This included the A$754 million purchase of the
U.S. assets of Diageo Plc, which took effect from
The Diageo assets, which didn't contribute to the prior
first half result, helped lift Treasury's U.S. pre-tax profit
75.4 percent in the December half year.
Treasury said Australia-based Clarke now plans to split his
time between the city of Melbourne and California's Napa Valley
until the end of 2017, but denied the move was a sign of
difficulties integrating the new acquisition.
"We have good momentum in our business and this is the time
to accelerate that momentum," Clarke told analysts on a call,
adding that company-wide second-half pre-tax earnings would
match the record first-half.
Asia pre-tax profit meanwhile grew 75.6 percent. The company
has reported a pick-up in sales of its mid-range bottles to
Chinese millenials intent on drinking more affordable product on
a regular basis.
The move has helped buffer the company from a corruption
crackdown in China which has quieted sales of prestige product.
($1 = 1.3082 Australian dollars)
(Reporting by Byron Kaye; editing by Richard Pullin)