Treasury Wine Estates in H2 2020 - results preview

On Wednesday, Treasury Wine Estates will announce its fiscal half-year results - the six months to the end of December. Back in August, the group posted a 9.3% decline in sales from fiscal-2020, as the pandemic put the brakes on the first half's flat top-line performance.

Fast forward to November, and Treasury reported a 6.4% fall in the first quarter of the current fiscal year.

Here's a look at the news that is likely to have shaped TWE's performance in the three months to the end of December.

• Two of 2020's consumer trends kicked TWE's UK division into action in mid-October: Stockpiling/pantry loading and a greater appreciation of bag-in-box were covered off by the 1.5-litre 19 Crimes pack launched in the UK near the beginning of the quarter. Hitting the country's off-premise channel with a price point of GBP18 (US$23), the pack targets younger LDA consumers, with TWE citing figures showing the bag-in-box category has recruited 40% more shoppers than it has lost, with new shoppers being much younger than those who have left
• The bomb dropped at the start of November, with news that will likely shape TWE's performance for years to come. A report in the South China Morning Post indicated that China's anti-dumping investigation into Australian wine had taken a serious turn. A subsequent stock exchange filing saw TWE say it "has not had any advice or notification from the Chinese authorities" on whether wine imports would be blocked
• Confirmation that tariffs were on their way arrived shortly afterwards, as TWE recognised a request from the China Alcoholic Drinks Association for tariffs on wine imports from Australia to be implemented retrospectively. "TWE is not in a position to provide an assessment of the financial impact of this development in fiscal-2021," the group said at the time
• just-drinks got the inside track from CEO Tim Ford, who was keen to play down the potential impact. "It's certainly a worry," Ford admitted in an exclusive interview. "We're spending a lot of time on the different scenarios of what the different outcomes might be in China. Whilst it is a significant market for us, it's important to reiterate that we're more than just a China business"
• November ended with the gaps filled in, as China's commerce ministry introduced preliminary tariffs on Australian wine imports ranging from 107% to 212%. Taking effect from 28 November, the hike was described at the time as being temporary, although this failed to reassure TWE's shareholders, prompting a halt in trading after the group's share price fell 11%

• As the month drew to a close, details were released of TWE's revised strategy for China in light of the hammer blow. Among the measures being considered are potentially sourcing grapes from Chinese vineyards for its portfolio in the country to circumvent the tariffs. The company also said it could use grapes from its French vineyards. Much as timeframe clarity is now available - The levies will be in place until 28 August at the latest - this week's half-year results will give a sense of the depth and breadth of the tariff impact on Treasury

Treasury Wine Estates Performance Trends 2016-2020 - results data

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