Slide 1: 2022 Annual Results Investor and Analyst Presentation
18 August 2022 ASX ANNOUNCEMENT 2022 Annual Results Investor and Analyst Presentation Enclosed are the presentation materials for the investor and analyst webcast and conference call to be hosted by Treasury Wine Estates commencing at 10:00am (AEST) on 18 August 2022. Links to register for the confe
Slide 2: F22 Full Year Results
F22 Full Year Results 18 AUGUST 2022
Slide 3: Important information
Important information This presentation is in summary form and is not necessarily complete. It should be read together with the Company’s Annual Report and other announcements lodged with the Australian Securities Exchange, which are available at www.asx.com.au. This presentation contains informatio
Slide 4: Introduction
Introduction Tim Ford Chief Executive Officer
Slide 5: F22 Financial Highlights
F22 Financial Highlights 1,2,3 Margin accretive earnings growth delivered through premiumisation and distribution gains NSR EBITS NPAT $2.5bn (3.6)% $523.7m 2.6% $322.6m 4.2% NSR per case EBITS margin EPS $97.3 16.1% 21.1% 1.3 ppts 44.7cps 4.1% Cash conversion ROCE5 Luxury and Premium 104.3% 3.5ppts
Slide 6: F22 Divisional performance
F22 Divisional performance Each division delivered underlying earnings growth and margin accretion in F22 Penfolds Treasury Americas Metric1 F22 % F22 % % Organic2 F22 % NSR (A$m) 717.3 (9.3)% 963.4 (0.1)% 11.6% 796.0 (5.6)% Excluding Mainland China 694.7 45.1% - - - - - NSR per case (A$) 332.2 (6.0
Slide 7: F22 Sustainability performance
F22 Sustainability performance Building momentum towards our sustainability ambition of cultivating a brighter future Material topic Target Status F22 Progress2 Climate ● 100% renewable electricity by 2024 ● Renewable electricity usage ~5% in F22, with strategic Change ● Net zero by 2030 (scope 1 an
Slide 8: Financial Performance
Financial Performance Matt Young Chief Financial Officer
Slide 9: Key measures of performance
Key measures of performance 1 Group NSR (A$m) and NSR per case Group EBITS (A$m) and EBITS margin +22%2 Return on Capital Employed (ROCE) Leverage (Net Debt to EBITDAS) 2.0x Target through the cycle range 1.5x 1. All figures and calculations are subject to rounding 2. CAGR F20-22 excluding Mainland
Slide 10: Inflation and cost outlook
Inflation and cost outlook F23 mix-adjusted COGS per case expected to remain in line with F22, with improvement expected from F24 • Global supply chain, logistics and input cost inflationary pressures remain elevated – total impact approximately $25m in F22, with an additional $25m impact estimated
Slide 11: Revenue growth management
Revenue growth management The strength of our Premium and Luxury brands to support top-line growth and margin expansion in F23 • Our portfolio contains a Penfolds Treasury Premium Brands number of fast growing Premium and supply constrained Luxury brands • Targeted price increases were delivered in
Slide 12: Material items
Material items All cost programs are progressing as expected and are to be completed in 1H23 Expected one-off Total recognised Recognised in Material Items Benefits Benefits from costs to date F22 Enable prioritisation of Divestment of US brands & assets premium focus brand portfolio F21 $(100.0)m $
Slide 13: Balance sheet
Balance sheet 1,2 A$m F22 F21 Cash & cash equivalents 430.5 448.1 • Net assets increased $197.8m on a reported currency 564.4 621.3 Receivables basis in F22 Current inventories 947.9 839.7 Non-current inventories 1,063.6 1,056.8 • Adjusting for the movement in foreign exchange Property, plant & equi
Slide 14: Inventory analysis
Inventory analysis Inventory at book value split by price segment1,2 $2,011.5m $1,896.5m $947.9m $839.7m $1,063.6m $1,056.8m • Total inventory volume declined 5% versus the pcp • Total inventory value increased 6%: 36% − Excluding the impact of the weaker Australian 41% dollar, total inventory value
Slide 15: Cash flow and net debt
Cash flow and net debt1 A$m (unless otherwise stated) F22 F21 EBITDAS 672.3 661.0 Change in working capital 34.0 (60.3) Other items (5.0) 65.6 • Cash conversion of 104.3% delivered in F22, reflecting Net operating cash flows before financing costs, tax & material items 701.2 666.3 continued strong o
Slide 16: Capital expenditure
Capital expenditure A$m F22 F21 Vineyard redevelopments 22.4 13.3 • Capital expenditure (capex) $112.2m in F22, including: Wine making equipment and facilities 24.0 19.8 − Maintenance & replacement capex of $70.6m IT spend 10.4 10.7 − Growth capex of $41.6m, predominantly related to Sustainability 4
Slide 17: Capital management
Capital management • Efficient and flexible capital structure with excellent capacity to deliver continued investment and growth: - Strong investment grade credit profile retained - Net debt / EBITDAS1 1.8x at F22 (inclusive of leases) following the acquisition of Frank Family Vineyards, up from 1.6
Slide 18: Divisional Performance
Divisional Performance Tom King Managing Director, Penfolds Ben Dollard President, Treasury Americas Peter Neilson Managing Director, Treasury Premium Brands
Slide 19: Penfolds
Penfolds Attracting new consumers and growing distribution and availability; EBITS ex-Mainland China up 25% Reported Currency Constant Currency Performance summary1 A$m F22 F21 % F21 % • EBITS declined 5.4% and EBITS margin increased 1.8 ppts Volume (m 9Le) 2.2 2.2 (3.5)% 2.2 (3.5)% to 44.5%: NSR (A
Slide 20: Penfolds: attract new consumers
Penfolds Progression against F22 strategic priorities Attract new consumers • The Venture Beyond thematic was launched in F22, including world-class luxury showcases and gifting execution Penfolds House, Bangkok Harrods pop-up store, London Pop-up store at Great World, Singapore Luxurious gifting fo
Slide 21: Penfolds: grow global distribution and availability
Penfolds Progression against F22 strategic priorities (continued) Grow global distribution and availability • Three phase distribution build playbook and strategy – (i) build target account universe and ideal range, (ii) sell in to grow points of distribution and availability, and (iii) drive in sto
Slide 22: Penfolds: optimise the portfolio, multi COO
Penfolds Progression against F22 strategic priorities (continued) Optimise the portfolio for long term growth, including multi COO Inaugural French release “This is modern and captures the essence showcases Penfolds enduring house style, with of Bordeaux, but does it in a Penfolds way. positive accl
Slide 23: Treasury Americas
Treasury Americas A repositioned business with a focused portfolio of fast growing Premium and Luxury brands Performance summary1 Reported Currency Constant Currency A$m F22 F21 % F21 % Organic %2 • EBITS increased 16.9% and EBITS margin improved 2.8 ppts to 19.3%: Volume (m 9Le) 8.0 11.2 (28.9)% 11
Slide 24: Treasury Americas: progression against F22 strategic priorities
Treasury Americas Progression against F22 strategic priorities Expand the Premium portfolio Drive relentless focus on premiumisation • Consumer-led brand innovation is continuing to drive strong Premium portfolio growth • 90%+ division NSR now Premium and Luxury • Priority brand portfolio grew NSR 1
Slide 25: Treasury Americas: journey to future state US wine business
Treasury Americas Our journey to deliver the future state US wine business commenced in F20 and is now complete Re-designed sales and Delivered target financial outcomes - future business with broadly half the volume, marketing model, delivering similar earnings and progress towards 25% EBITS margin
Slide 26: Treasury Premium Brands
Treasury Premium Brands Portfolio premiumisation and cost optimisation driving earnings growth and margin expansion Reported Currency Constant Currency Performance summary1 A$m F22 F21 % F21 % • EBITS increased 33.6% and EBITS margin improved 2.9 Volume (m 9Le) 15.3 17.2 (11.0)% 17.2 (11.0)% ppts to
Slide 27: Treasury Premium Brands: expand the Premium portfolio
Treasury Premium Brands Progression against F22 strategic priorities Expand the Premium portfolio • Driving portfolio growth through consumer-led innovation and partnerships Bagnums – a sustainable and Wolf Blass Zero and Squealing Pig Investing in high profile innovative pack format tapping Lighter
Slide 28: Treasury Premium Brands: accelerate in priority growth markets
Treasury Premium Brands Progression against F22 strategic priorities (continued) Accelerate in priority growth markets, channels and COOs • Asia NSR grew 8.8% underpinned by strong distribution growth on priority Premium brands • EMEA and Asia Premium portfolio NSR grew 17.1% and 13.3% respectively
Slide 29: Outlook
Outlook Tim Ford Chief Executive Officer
Slide 30: F23 Group priorities
F23 Group priorities Our priorities remain consistent and clearly focused on progression towards our TWE 2025 strategy The world’s most admired premium wine company Divisional priorities • Attract new consumers • Expand Premium portfolio • Expand Premium portfolio • Grow global distribution and • Ma
Slide 31: Global wine category conditions
Global wine category conditions Wine category fundamentals, particularly for Premium and Luxury wine, are expected to remain strong Long-term macro trends are expected to continue Global wine category growth trends1 supporting category premiumisation % TWE NSR2 The wine category has been historicall
Slide 32: Summary and outlook
Summary and outlook • In year one of our new operating model we delivered strong underlying earnings growth and margin accretion across all divisions • This performance was delivered against a backdrop that included the effective closure of the Mainland China market, significant supply chain disrupt
Slide 33: Questions
TREASURY WINE ESTATES
Slide 34: Supplementary Information
TREASURY WINE ESTATES Supplementary Information
Slide 35: Contribution of acquired and divested brands
Contribution of acquired and divested brands - Treasury Americas F21 F22 Divested US Divested US Frank Family brands1 brands2 Vineyards3 Volume (m9le) 3.2 0.2 0.1 NSR (A$m) 153.2 20.0 40.2 EBITS (A$m) 20.5 5.1 16.2 1. Includes F21 contribution of US Commercial brand portfolio (divested March 2021),
Slide 36: Impact of foreign exchange and hedging
Impact of foreign exchange and hedging F22 EBITS constant currency impact F23 EBITS sensitivity and risk management CFX Impact (A$m) Currency Primary EBITS Movement Currency Underlying Hedging 1 Total Pair Exposure Sensitivity (A$m) AUD/USD and AUD/GBP 15.0 (6.7) 8.3 AUD/USD COGS, EBITS +1% (4.0) Ne
Slide 37: Reconciliation of key performance measures
Reconciliation of key performance measures Metric (A$m unless Management calculation F22 F21 otherwise stated) Statutory net profit 263.2 250.0 Income tax expense 109.7 107.7 Net finance costs 71.4 73.5 EBITS Material items 45.5 88.5 SGARA (gain) / loss 33.9 (9.4) EBITS 523.7 510.3 EBITS 523.7 510.3
Slide 38: Definitions
Definitions Term Definition Cash conversion Net operating cash flows before financing costs, tax and material items divided by EBITDAS COO Country of origin CODB Cost of doing business. Gross profit less EBITS. Excludes non-cash items as well as tax, the cost of the Group’s capital structure and non