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Treasury Wine confident of China's growth

The company behind Penfolds and Wolf Blass wines has declared confidence in its strategy for China after investment bank Goldman Sachs said the company's expectations for growth were unrealistic.

Shares in Treasury Wine Estates jumped almost five per cent on Tuesday after the company affirmed its most recent earnings guidance and said growth prospects in China remain intact.

Treasury Wine's stable of Australian brands also includes Wynn's and Lindeman's, and it owns big US brands including Beringer.

It is the biggest supplier of imported wine in China by value, according to the alcohol industry researcher IWSR.

Treasury Wine said its volume growth in Asia has been driven by the company's significant investment and brand building, supported by favourable market conditions for imported wine in China.

The free trade agreement between China and Australia has also supported its business in China.

"Significant opportunity for continued, sustainable growth exists in China as TWE expands into new, strategically important cities and provinces," the company said in a statement.

Treasury Wine said it was also driving further growth in the cities in China in which it already has a presence, in part by reaching more sales channels such as retail, wholesale, e-commerce, on-premise, convenience and global travel retail.

The company's statement comes after Goldman Sachs analysts put a "sell" recommendation on Treasury Wine shares, warning that expectations for growth in Asia were unrealistic amid a slowdown in the Chinese market.

The Goldman Sachs analysts said growth in wine volumes in China could slow as the one-time benefits of the China-Australia free trade benefits passed, and production of Australian luxury wines becomes limited by the availability of grapes.

That report saw Treasury Wine shares drop 62 cents on Monday, but they gained 58 cents to $12.76 on Tuesday.

Treasury Wine said it expects the Asian region to deliver an earnings margin of 30-35 per cent on a sustainable basis, as the company takes a disciplined approach to driving volume growth.

Industry group Wine Australia said in July that China's thirst for Australian wine continues to grow at a faster rate than anywhere else in the world, with exports growing 44 per cent to $607 million in 2016/17.

Treasury Wine also said it still expects that its earnings in the second half of the 2016/17 financial year were in line with the first half.

The company will release its financial results on August 17.

Austrlaian Associated PressBack to Breaking News

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