UPDATE 1-Australia's Treasury Wines sees H1 earnings down, shares slide

Sun Oct 21, 2012 8:25pm EDT

* Full-year guidance tweaked to mid-single digit growth

* H1 seen down 20 pct, recovery in H2

* Shares slide 8 pct, broader market down 0.9 percent

By Victoria Thieberger

MELBOURNE, Oct 22 (Reuters) - Treasury Wine Estates Ltd , the world's second-largest wine company, warned on Monday its first-half earnings would slide 20 percent, as poor weather and higher corporate costs dragged, pushing its shares down eight percent.

Treasury Wine, which was spun off from brewer Foster's Group last year, had warned in August that earnings growth would slow in 2013 due to higher costs as it builds inventory of premium wines.

Investors were taken by surprise, sending shares in the maker of Penfolds, Beringer and Wolf Blass down 8.4 percent to A$5.04, its biggest one-day slide since listing.

But Treasury also said on Monday that growth in earnings before interest and tax in constant currency terms for the full year would be in the mid-single digit range, implying a sharp bounceback in the second half.

"It is the sticker shock of the first-half number," said one analyst who asked not to be named because he had yet to speak with clients.

Analysts had expected earnings to rise about 8.1 percent to A$227 million for the fiscal year to June 2013, according to Thomson Reuters data.

Treasury Wine has been moving away from unprofitable, low-end wines in the UK and Europe to target consumers developing a taste for premium wines in China and other emerging markets like India, Brazil and Russia.

"Our fiscal 2013 performance is impacted by the weather-affected 2011 vintages in Australia and California, which saw fewer wines produced and at a higher cost," the company said in a statement on Monday.

In addition, first-quarter trading was slow in Australia and the Americas, it said, pushing first-half earnings down 20 percent compared with a year earlier.

The weak first half contrasts with recent indications of an improvement in global wine supply conditions, with analysts predicting an end to a decade-long glut of grapes.

"The global backdrop has improved significantly but in terms of seeing a profit improvement for Treasury and other wine companies, it is going to take some time," said an analyst who asked not to be named because he had not yet spoken with the company.

Treasury Wine was due to hold its annual shareholders' meeting later on Monday.

Treasury Wine is second to Constellation Brands Inc in global sales. Constellation sold its Australian brands to private equity firm CHAMP last year.

Its shares have had a strong run since listing on the Australian Stock Exchange in May 2011, rising 64 percent before Monday's fall. That compares with a broader market down 4.1 percent over the same period.