Treasury Wine Estates Ltd. (TWE), which lost four managers and had about $143 million of writedowns last year, named a former Kraft Foods Group Inc. executive to its top job as a tax benefit increased first-half profit.
Michael Clarke, most recently chief executive officer of Premier Foods Plc and formerly president of Kraft’s European unit, will take over as CEO on March 31, Treasury Wines said. The Melbourne-based company today also reported first-half net income doubled to A$106.2 million ($95 million) because of an A$81 million tax benefit.
Clarke will be responsible for restoring confidence in the maker of A$785-a-bottle Penfolds Grange, which has lost more than a third of its market value since announcing a writedown in July and forecasting lower profits last month due to falling sales volumes in Australia and Asia. Treasury’s key operating earnings measure fell 38 percent in the half year.
Clarke “has the distribution and retail experience” needed to improve performance at Treasury, Simon Robinson, a senior wealth manager at Shaw Stockbroking Ltd., said by phone from Brisbane. The winemaker had focused on increasing margins at the expense of volume under the former CEO, he said.
Shares of Treasury Wine rose 3 percent to A$3.81 at the close in Sydney, outstripping the 0.1 percent improvement in the S&P/ASX 200 index and marking their best performance since Oct. 31. The stock has fallen about 34 percent since the company announced a A$160 million writedown on July 15 to get rid of old and out-of-date bottles in its U.S. unit, the largest by sales.
Treasury’s current market value of A$2.47 billion is 13 percent more than the A$2.18 billion value put on its property, plant, equipment and wine inventory in its 2013 annual report.
“We’re still in the midst of a wine glut,” Robinson of Shaw said. “The concept of higher-margin wine isn’t as relevant when you’ve got an oversupply of quality product.”
Clarke spent more than 12 years at the Coca-Cola Co. running divisions in Europe and Asia before moving to Kraft and St Albans, England-based Premier, according to Treasury Wine.
Shares of Premier Foods fell 17 percent between Aug. 16, 2011, when he started in that company’s top job, and the announcement of his departure in January last year. The maker of OXO-brand stock cubes made 275 million pounds ($459 million) of divestments in 2012 that failed to reduce debt ratios.
Treasury Wine Chief Financial Officer Mark Fleming resigned to take a career break, the company said in June, about six weeks before it announced the writedown. Chief Executive Officer David Dearie left in September, followed by the heads of Asian and domestic businesses in November.
“This company does not have good enough systems and processes in some instances,” Warwick Every-Burns, interim CEO, told an analyst call after today’s announcement. “We haven’t been as effective or efficient as we could.”
Treasury Wine’s Ebits, a measure of earnings before interest, taxes, and adjustments for the value of its vineyards, totaled A$45.8 million during the six months, at the upper end of the A$42 million to A$46 million range forecast in a trading update on Jan. 30.
Sales in the Americas unit fell 0.4 percent to A$361.8 million and Ebits dropped 28 percent to A$24.6 million. In Australia and New Zealand, sales dropped 3.8 percent to A$277.6 million and Ebits slumped 32 percent to A$24.4 million.
Asia is Treasury’s highest-margin market and accounted for the second-largest share of earnings last fiscal year, after the Australia and New Zealand business. Asia sales fell 19 percent to A$36.8 million and Ebits dropped 64 percent to A$4.9 million.
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