Treasury Wine Estates : 2022 Interim Results Announcement

INTERIM 2022 RESULTS ANNOUNCEMENT			16 FEBRUARY 2022
Execution of strategic priorities delivering strong performance globally across TWE
only
Announcement highlights
• Reported EBITS declined 7% to $262.4m1, up 28% excluding Australian COO sales to Mainland China, driven by
global distribution growth for Penfolds and growth in TWE's other Luxury and Premium portfolio brands
• New divisional model a key enabler of the strong underlying growth across all divisions and in priority markets
• Strong premiumisation trend continues, with 83% of NSR contributed by the Premium and Luxury portfolios
• Substantially completed changes in the Treasury Americas brand portfolio and asset base in 1H22, including the
acquisition of Frank Family Vineyards for US$315m and the divestment of non-priority US brands and assets
use
Group financial summary2
		% Chg.	% Chg. Constant	% Chg.
A$m (unless otherwise stated)	1H22	Reported	Currency	Organic3
Net Sales Revenue (NSR)	1,267.0	(10.1)%	(10.0)%	(3.8)%
NSR per case (A$)	95.6	16.0%	16.1%	7.3%
Earnings Before Interest, Tax, SGARA and Material items (EBITS)	262.4	(6.7)%	(3.6)%	(1.2)%
personal	20.7%	0.8ppts	1.4ppts	0.6ppts
EBITS Margin
Net Profit After Tax	109.1	(7.5) %	1.5%
Earnings Per Share (A$ cents)	15.1	(7.7)%	1.4%
Net Profit After Tax before Material Items and SGARA	163.2	(5.3)%	0.2%
Earnings Per Share before Material Items and SGARA (A$ cents)	22.6	(5.4)%	0.1%
• NSR declined 10.1% to $1,267.0m, reflecting the impact of the US Commercial portfolio divestiture4 and the
significant decline in shipments to Mainland China5, partly offset by growth in the Premium portfolio
• NSR per case improved 16.0%, with TWE's continuing focus on portfolio premiumisation increasing the
contribution of the Luxury and Premium portfolios to 83% of Group NSR, up from 75% in the pcp
• EBITS declined 6.7% to $262.4m, however excluding the contribution from Australian COO wine sold in Mainland
China6, EBITS increased by 28.3%
• EBITS margin improved 0.8ppts to 20.7%, with strong Premium portfolio performance and reduced cost of doing
business (CODB) partly offsetting the decline in NSR

• NPAT and EPS, before material items and SGARA, both declined approximately 5% to $163.2m and 22.6 cents

	per share respectively
For
•	ROCE 10.3%, a 1.0ppt improvement on the pcp
•	Cash conversion 115.1%; excluding the change in Luxury and Premium inventory, cash conversion was 94.1%

• Net Debt to EBITDAS of 1.8x7 reflects TWE's investment grade credit profile, up from 1.7x in the pcp

• Interim dividend of 15.0 cents per share declared, fully franked, representing a payout ratio of 66% NPAT, consistent with TWE's long-term dividend policy

1. Unless otherwise stated, all figures and percentage movements are stated on a reported currency basis versus the prior corresponding period, are pre-SGARA and material items and are subject to rounding
2. Prior year financials have been restated to reflect revised treatment of configuration and customisation costs in cloud computing arrangements in accordance with IFRIC agenda decision Configuration or Customisation Costs in a Cloud Computing Arrangement (IAS38 Intangible Assets), refer to Appendix 2 for further information
3. On a constant currency basis, excluding the contribution of divested portfolio brands. 1H21 US commercial brand portfolio contribution, divested in March 2021, was 2.5m cases and NSR $112.0m; 1H22 contribution of Provenance and Chateau St Jean, divested in November and December 2021 respectively, was 0.2m cases and NSR $20.1m
4. In March 2021, TWE reached an agreement to divest the majority of its US commercial brand portfolio
5. In November and December 2020, the Chinese Ministry of Commerce ("MOFCOM") announced provisional anti-dumping and countervailing measures, with a combined duty of 175.6% to be applied to the value of TWE wine in containers of two litres or less imported into Mainland China. In March 2021, MOFCOM announced its final determination, announcing that the combined duty rate of would remain in place for a minimum period of five years.
6. EBITS contribution from Australian COO wine sold in Mainland China: 1H22 $2.0m, 1H21 $78.2m
7. Includes last-twelve months EBITDAS of Frank Family Vineyards

PAGE 1

Divisional performance overview

						% Chg.	% Chg. Constant	% Chg.
	A$m	1H22	Reported	Currency	Organic
	NSR
	Penfolds		382.7	(16.3)%	(16.3)%	-
	Treasury Americas		465.9	(8.5)%	(7.7)%	13.6%
	Treasury Premium Brands		418.4	(5.6)%	(6.3)%	-
	Group		1,267.0	(10.1)%	(10.0)%	(3.8)%
	Luxury & Premium (%NSR)		82.7%	7.8ppts	7.9ppts	2.8ppts
	EBITS
only
	Penfolds		165.1	(19.0)%	(17.4)%	-
	Tr		asury Americas		85.2	18.8%	26.9%	46.0%
	Tr		asury Premium Brands		39.0	19.3%	20.7%	-
	Corporate		(26.9)	0.9%	0.9%	-
	Group		262.4	(6.7)%	(3.6)%	(1.2)%
	EBITS Margin (%)		20.7%	0.8ppts	1.4ppts	0.6ppts
use
	Focused execution of strategic priorities under the new divisional operating model delivered positive momentum
	throughout TWE in 1H22:
	•	Penfolds reported a 19% decline in EBITS to $165.1m and an EBITS margin of 43.1% (down 1.4ppts). Reduced
		shipments to Mainland China were partly offset by strong growth across global priority markets and channels, with
		NSR and EBITS outside of Mainland China increasing by 49.1% and 32.1% respectively on a constant currency
		basis. Penfolds growth was particularly strong in Asian markets outside of Mainland China, where NSR grew
		119%, supported by strong depletions trends. Increasing distribution in Asia, ANZ, Europe and the United States
		was a key execution highlight in 1H22.
	•	Treasury Americas reported a 19% increase in EBITS to $85.2m and an EBITS margin of 18.3% (up 4.2ppts). The
personal•	TWE priority portfolio continued its strong momentum, delivering 18.8% NSR growth, led by Luxury portfolio
performance in the on-premise and DTC channels where progressive reopening trends continued. In 1H22,
Treasury Americas substantially completed its significant asset and portfolio optimisation program with the
divestment of Provenance, Chateau St Jean and surplus supply chain assets, in addition to the acquisition of Frank
Family Vineyards, an excellent portfolio complement that supports Treasury Americas priorities for premiumisation,
growth and margin expansion.
Treasury Premium Brands reported a 19% increase in EBITS to $39.0m and an EBITS margin of 9.3% (up
		1.9ppts). NSR declined 5.6%, with the impact of reduced Commercial portfolio volumes in EMEA and ANZ
		moderated by the growth of key Premium portfolio brands, including 19 Crimes, Squealing Pig and Pepperjack.
		NSR per case increased 6.9%, reflecting strong portfolio premiumisation. Treasury Premium Brands continued its
		focus on innovation led portfolio growth, with the successful launch of the Wolf Blass Zero alcohol range and new
		multi-country of origin offerings for Rawson's Retreat and Blossom Hill key execution highlights.
	Sustainability
For

TWE continued to take considerable steps forward in 1H22 towards its sustainability ambition of cultivating a brighter future, including defining its sustainability strategy and setting a comprehensive suite of sustainability targets.

Key sustainability highlights in the period included:

• Improved reporting of progress against targets and commitments in the 2021 Sustainability Report
• Joining RE100, a global initiative bringing together the world's most influential businesses, underlining TWE's commitment to 100% renewable energy
• Refinancing $1.4bn of existing debt facilities to include the establishment of Sustainability Linked Loans, providing a direct link between TWE's sustainability performance and its cost of capital

PAGE 2

Future perspectives

TWE's financial objective remains to deliver sustainable top-line growth and high-single digit average earnings growth over the long-term8.

TWE expects that trading conditions for the remainder of F22 will be broadly consistent with those in 1H22 across all

onlykey global markets and channels.

On today's results announcement, TWE's Chief Executive Officer Tim Ford commented:

"We are very pleased with our first half results, where we delivered comparable EBITS growth of 28% when taking into account the effective closure of the Mainland China market, while at the same time continuing with the implementation of important changes across the business. This performance reflects the focused execution of our plans and strategic priorities, led for the first time by Penfolds, Treasury Americas and Treasury Premium Brands. Each division is now on a clear and positive trajectory towards their respective long-term growth objectives, with the benefits of separate focus and accountability already very evident throughout TWE.

useFollowing the past two years of significant change within TWE and the markets in which we operate, we have shifted our focus from a mindset of 'recovery and restructuring' to one of 'growth and innovation'. We have great confidence

that by leveraging the unique strengths of our business - our people, our brands and our asset base - we are well placed to capitalise on the significant opportunities across the global markets in which we operate."

Conference call

Treasury Wine Estates will host an investor and analyst webcast and conference call commencing at 10:00am (AEDT) on 16 February 2022. Links to register are provided below. A replay of the presentation will also be available on the website www.tweglobal.comfrom approximately 1:00pm AEDT.

Conference call registration https://apac.directeventreg.com/registration/event/5373119Webcast registration https://edge.media-server.com/mmc/p/9vceup9s

For the purposes of ASX Listing Rule 15.5, TWE confirms that this document has been authorised for elease to the market by the Board.

Contacts / further information

	Investors	Media
personal	Melissa O'Neill
	Bijan Taghian
	Tel: [phone]	Tel: [phone]
	Mob: [phone]	Mob: [phone]
For

8 Organic, pre material items and on a constant currency basis.

PAGE 3

Profit and Loss9

Reported Currency

Constant Currency

$Am (unless otherwise stated)	1H22	1H21	Change	1H21	Change
Net sales revenue	1,267.0	1,410.0	(10.1)%	1,408.2	(10.0)%
only	95.6	82.5	16.0%	82.4	16.1%
NSR per case ($)
Other Revenue	32.3	14.2	127.5%	13.8	133.3%
Cost of goods sold	(781.6)	(864.0)	9.5%	(868.4)	10.0%
Cost of goods sold per case ($)	59.0	50.6	(16.5)%	50.8	(16.1)%
Gross profit	517.7	560.3	(7.6)%	553.7	(6.5)%
Gross profit margin (% of NSR)	40.9%	39.7%	1.1ppts	39.3%	1.5ppts
Cost of doing business	(255.3)	(279.0)	8.5%	(281.3)	9.3%
use	20.2%	19.8%	(0.4)ppts	20.0%	(0.2)ppts
Cost of doing business margin (% of NSR)
EBITS (before material items)	262.4	281.2	(6.7)%	272.3	(3.6)%
EBITS margin (%)	20.7%	19.9%	0.8ppts	19.3%	1.4ppts
SGARA	(26.2)	(11.9)	(119.2)%	(12.2)	(114.1)%
EBIT (before material items)	236.2	269.3	(12.3)%	260.1	(9.2)%
Net finance costs	(34.7)	(39.8)	12.8%	(39.6)	12.3%

	Tax expense		(57.4)		(65.9)	12.8%		(66.2)	13.3%
personal		144.1		163.6	(11.9)%		154.3	(6.6)%
	Net profit after tax (before material items)
	M terial items (after tax)		(35.0)		(45.6)	23.3%		(46.8)	25.3%
	Net profit after tax		109.1		118.0	(7.5 )%		107.4	1.5%
	Reported EPS (A¢)		15.1		16.4	(7.7)%		14.9	1.4%
	Net profit after tax (before material items and SGARA)		163.2		172.4	(5.3)%		162.8	0.2%
	EPS (before material items and SGARA) (A¢)		22.6		23.9	(5.4)%		22.6	0.1%
	Average no. of shares (m)		721.4		721.2	0.1%		721.2	0.1%
	Dividend (A¢)		15.0		15.0	0.0%		15.0	0.0%
	NSR declined 10.0% reflecting the divestiture of the US	EBITS margin improved 1.4ppts to 20.7%, progress
	Commercial portfolio in March 2021, the decline in	towards TWE's Group EBITS margin target of 25% and
	shipments to Mainland China and reduced Commercial	beyond
	volumes in the UK and Australia. The decline was partly	SGARA loss of $26.2m reflects reduced intake from the
	offset by strong Luxury brand performance in Treasury
	2021 Californian vintage and lower grape pricing in
	Americas and Penfolds, as well as Premium brand
	Australia, partly offset by the unwinding of losses
	performance in Treasury Premium Brands
	associated with the 2018 and 2019 Californian vintages
For
	NSR per case improved 16.1% with TWE's continuing	Net finance costs were 12.3% favourable in 1H22,
	f	cus on portfolio premiumisation increasing the
	driven by lower average net borrowings and the benefit
	c	ntribution of the Luxury and Premium portfolios to
	of lower average interest rates
	83% of Group NSR, up from 75% in the pcp
	Tax expense declined 13.3% in 1H22, reflecting lower
	COGS per case increased 16.1% reflecting the
	earnings. The effective tax rate (before material items)
	portfolio mix shift, higher COGS from the fire and
	of 28.4% was in line with the pcp
	drought impacted 2020 Californian vintage, higher
	Material Items A post-tax net material items loss of
	COGS from the low yielding 2020 Australian vintage
	and elevated global supply chain and logistics costs	$35.0m has been recognised, and relates to costs
				associated with the divestment of US brands and

CODB improved 9.3% to $255.3m, driven by lower	assets, the acquisition of Frank Family Vineyards and
overheads and brand building investment in Mainland
supply chain changes
China; CODB margin was in line with the pcp
EPS (before SGARA and material items) increased
	0.1% to 22.6 cents per share. Reported EPS increased
	1.4% to 15.1 cents per share.

9 Unless otherwise stated, all percentage movements are stated on a constant currency basis versus the prior corresponding period and are subject to rounding

PAGE 4

Divisional Performance Overview

Penfolds10

					Reported Currency	Constant currency
	A$m (unless otherwise stated)	1H22		1H21	%	1H21	%
only	1.1			1.3	(15.8)%	1.3	(15.8)%
	Volume (m 9Le)
	NSR (A$m)	382.7			457.3	(16.3)%	457.2	(16.3)%
	ANZ	114.3			108.8	5.1%	108.8	5.1%
	Asia	203.8			297.5	(31.5)%	297.4	(31.5)%
	Americas	35.4			25.7	37.9%	25.4	39.3%
	EMEA	29.2			25.3	15.4%	25.6	14.3%
	NSR per case (A$)	343.2			345.3	(0.6)%	345.2	(0.6)%
	EBITS (A$m)	165.1			203.9	(19.0)%	200.0	(17.4)%
	EBITS margin (%)	43.1%			44.6%	(1.4)ppts	43.7%	(0.6)ppts

Financial performance			Division insights
useVolume and NSR declined 15.8% and 16.3% respectively, •	Key 1H22 execution highlights include:
driven by:				-	Distribution, volume and NSR growth achieved across
- The decline in shipments to Mainland China;			all priority	markets,	reflecting	the continuing
		momentum behind Penfolds global execution strategy
- Partly offset by strong momentum across the portfolio
-	Delivery of strong growth in Asia,	where NSR in
	in priority global markets and channels, with division
		regional markets ex-Mainland China increased 119%,
	NSR outside of Mainland China increasing by 49.1% in
		supported by strong depletion trends, and inventory
	1H22
					days remain in line with the prior year
NSR per case was in line with the pcp, with Penfolds
-	Successful activation of key brand building platforms,
gl bal pricing structure retained consistently across	all
	including sponsorship of the VRC	Derby Day in
markets
				Australia, participation in the 2021 China International
COGS per case increased 3.7%, including higher cost		Import Expo	and launch	of the inaugural Penfolds
	barrel NFTs
Premium portfolio releases from the 2020 Australian
vintage				•	While retail and e-commerce channels delivered strong
CODB improved	19.2%,	driven by reduced costs	in		performance, pandemic related disruptions continued
	to impact on-premise and global travel retail channels.
Mainland China	(net of	reinvestment to other global
	Positive signs of improvement were evident in a
markets) and a temporary re-phasing of overheads and
	number of key markets across Asia late in 1H22
romotional investment that will begin to normalise in
personal					•	Penfolds is transitioning to a single global release date
2H22
EBITS declined 17.4% to $165.1m, and EBITS margin		for its multi country of origin portfolio, commencing in
	August 2022	when the	Australian,	Californian and
declined 0.6ppts	to 43.1%; excluding Mainland China,
	French country of origin wines will be released as the
EBITS increased 32.1% in 1H22
		Penfolds Collection. As a result, the Californian and
For
					French portfolio releases that were due in 2H22 will
					now be deferred to 1H23
				• F22 EBITS are expected to be slightly weighted to the

first half, by approximately 1-2%, reflecting the timing of the annual Penfolds release and key gift giving occasions in addition to the change in the northern hemisphere market release dates

10 Unless otherwise stated, all percentage or dollar movements from prior periods are pre-materialitems on a constant currency basis versus the prior corresponding period and are subject to rounding

PAGE 5