Wine glut gives Treasury a new earnings hangover

Treasury Wine Estates chief executive David Dearie doesn't believe the world's biggest pure-play winemaker has become more vulnerable to a takeover or a forced break-up of its premium wine brands despite its profit more than halving last year.

Unveiling on Thursday a 52.9 per cent slide in full-year profit to $42.3 million, Mr Dearie also said the company remained committed to its US arm, which he said would return to growth as it churned through a protracted wine glut and poor sales.

Treasury Wine Estates said pre-tax earnings for 2012-13 were $209.2 million, missing its own guidance of $216 million made just last month. It blamed the gap on $7 million unrealised loss on foreign exchange options.

Growth in Asia was met by improved growth in Australia, New Zealand, Europe and the Middle East, but this was not enough to counter dour conditions in its sizeable American business where, to the shock of investors, Treasury Wine Estates last month warned it would have to destroy $34 million of unwanted stock.

Mr Dearie said that after three years in the top job he was yet to see earnings growth across all regional divisions within the same year.

That failure to fire on all cylinders at once was on display for 2012-13. The company recorded growth in three of its four regions as, collectively, Europe, Middle East, Africa (EMEA), Asia and Australia/New Zealand pre-tax earnings were up 17 per cent.

Asia, long promised as the growth engine for the company, saw earnings leap 32.3 per cent to $54.5 million. In Australia/NZ, earnings were up 1 per cent to $110.1 million and EMEA - still a small part of the wine empire - was up 180.7 per cent to $16 million.

But the US continued to cast a pall over the group, as a wine glut, weak consumer confidence and changes to supplier arrangements forced a pre-tax expense of $154.7 million, part of which covered the cost of destroying up to 600,000 cases of poorer quality wine.

This led the Americas division to report flat sales of $704 million and a 15.4 per cent slide in earnings to $66.8 million.

It is forecasting pre-tax earnings this financial year to grow to between $230 million and $250 million. The uplift would be helped by quality, higher-priced wine created up to two years ago that is finally ready for sale in 2014 and 2015.