Treasury Wine Estates Posts 20% Revenue Growth Led by Penfolds and DAOU

Luxury-Led Growth Accelerates

Treasury Wine Estates (TWE) has delivered a compelling first half for fiscal 2025, with net sales revenue (NSR) climbing 20.2% to A$1.54 billion and earnings before interest, tax, SGARA, and material items (EBITS) surging 35.1% to A$391.4 million. This performance underscores the success of TWE’s strategic pivot towards a luxury-led portfolio, where premium brands like Penfolds and the recently acquired DAOU have been the primary growth engines.

Penfolds, TWE’s flagship luxury brand, posted a 33.9% increase in EBITS to A$250.2 million, buoyed by strong shipments in Asia, particularly China, where the re-establishment of the Australian Country of Origin (COO) portfolio has reignited demand. Encouragingly, Penfolds’ brand health metrics in China have strengthened, with double-digit growth in e-commerce sales and a return to pre-tariff depletions levels, signaling robust consumer acceptance.

DAOU Integration and Synergies

The integration of DAOU Vineyards into TWE’s Treasury Americas division is progressing smoothly, contributing an 11.2% increase in NSR for DAOU itself. The acquisition has expanded TWE’s footprint in the US luxury wine market, with DAOU Discovery becoming the number one luxury Cabernet in the US. TWE has upgraded its synergy expectations from the DAOU acquisition to approximately US$35 million, up from the initial US$20 million guidance, with most synergies anticipated to materialize in fiscal 2026.

Challenges in Premium and Commercial Segments

Despite the strong luxury performance, TWE’s Treasury Premium Brands division experienced a 49.9% decline in EBITS to A$22.9 million, reflecting ongoing softness in consumer demand for wines at lower price points. The segment’s net sales revenue dropped 8.6%, impacted by underperformance relative to the category and inventory realignment in key markets like Canada. TWE’s exploration of divesting its Commercial portfolio concluded with the decision to retain these brands, citing insufficient value in offers received.

Financial Health and Outlook

Cash flow remains strong, with net operating cash flow up 56% and a cash conversion ratio of 90.4%, supported by favourable shipment phasing. Net debt to EBITDAS remains stable at 2.0x, within TWE’s target range. The company declared an interim dividend of 20 cents per share, a 17.6% increase year-on-year, reflecting confidence in ongoing cash generation.

However, TWE has tempered its full-year EBITS guidance to approximately A$780 million, at the lower end of its prior range, primarily due to subdued expectations for Treasury Premium Brands. The company is preparing to transition to a Global Premium division by July 2025, consolidating premium portfolios to enhance operational efficiency and market focus.

Strategic Focus and Market Positioning

CEO Tim Ford highlighted the transformative progress made in 2024, emphasizing the clarity of portfolio priorities and the central role of Penfolds and Treasury Americas Luxury brands in driving future growth. The company’s commitment to the Chinese market is reinforced by the recent acquisition of Ningxia Stone & Moon Winery, aimed at securing scalable production for the Penfolds China COO portfolio.

While the luxury segment’s momentum is encouraging, TWE remains cautious about macroeconomic and geopolitical risks, including fluctuating consumer demand, supply chain challenges, and currency volatility. The company’s ability to navigate these factors will be critical as it seeks to sustain growth and margin expansion in a competitive global wine market.