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TWE reassures investors that China business is strong

TWE reassures investors that China business is strong

Treasury Wine Estates has cautioned investors not to make assumptions about its performance based on the latest Wine Australia export data.

The winemaker issued a statement to the ASX this morning following Wine Australia reporting a 5% lift in exports for the 12 months to March to $2.78 billion, but a 3% decline in export volumes.

Australian wine exports to China (including Hong Kong and Macau) increased by 7% in value to $1.11 billion and decreased by 14% in volume to 154 million litres (17 million 9-litre case equivalents).

Wine Australia CEO Andreas Clark said: “What we are seeing is a drop in volumes in the lower value categories and this places Australia well as the global consumer drinks less but more expensive wines.”

He added that the volume decline in the China market was ''confined almost exclusively'' to exports in the below-$2.50-per-litre value segment.

TWE noted: “The use of short term trade export and import data can be misleading with respect to TWE’s underlying trading performance in the Asia region as it does not consider key structural differences in the company’s business model, the premium mix of TWE’s portfolio, nor the variability in its export shipment profile.” 

It reiterated guidance for reported EBIT growth of approximately 25% for 2019, and in the range of approximately 15-20% for fiscal 2020.

The company confirmed continued positive momentum in Asia with record depletions delivered for the nine months ending March 2019, including strong trading performance across the key Chinese New Year festive period.

Despite challenging conditions in some regions, TWE said its grape intake for ''luxury'' wines would be about 10% higher than 2018. While the Barossa Valley saw volume declines, there were robust harvests in the Coonawarra and Padthaway.