* FY loss A$100.9 mln vs A$47.2 mln profit
* Underlying profit A$112.8 mln vs A$123.2 mln analysts'
* Unfazed by U.S. woes, eyeing expansion
* KKR & Co and TPG Capital in rival $3.1 bln takeover bids
(Recasts to focus on U.S. takeover plans, adds analyst and CEO
By Byron Kaye
SYDNEY, Aug 21 Australia's Treasury Wine Estates
Ltd, the world's No. 2 winemaker, on Thursday said it
wants to expand its high-end offerings in the United States,
ignoring calls to quit the U.S. market altogether after posting
its first annual loss.
New chief executive officer Mike Clarke promised 2015 would
be a "reset" year for the struggling Melbourne-based company and
takeover target, as he outlined a change of strategy in North
America and a restructuring of its Australian operations.
The maker of Penfolds, Lindemans and Wolf Blass wines
destroyed some 240,000 cases of unsold mass-market wine in the
United States over the past two years. Writedowns largely
related to the company's United States operations contributed to
its A$100.9 million ($93.32 million) annual net loss.
But Clarke told a teleconference that instead of pulling out
of the United States altogether, Treasury planned to grow its
mass-prestige and luxury portfolios by acquisition or
partnership to tap the country's growing appetite for high-end
"In the U.S. they tend to be skewed to the low-end
commercial end where they've got very few competitive
advantages," Morningstar analyst Daniel Mueller said. "If they
can acquire some higher-end brands it might be in a better
The net loss for the year to June 30, from a net profit of
A$47.2 million the previous year, included a A$280.6 million
impairment largely for cuts to asset values of its cheaper
brands, particularly in the United States.
Even without significant items, net profit fell to A$112.8
million from A$141.7 million the previous year, below the
A$123.2 million average forecast of analysts polled by Thomson
Reuters I/B/E/S, as an unexpectedly weak Australian arm shrank
earnings by a third.
PROBLEMS AT HOME
While earnings in most markets fell, Treasury surprised with
a 31.5 percent decline in Australia and New Zealand earnings
before interest, tax and vineyard revaluations to A$75.1
million, as promotions instigated by previous management failed
to generate sales.
Clarke, who started on March 31, blamed a weaker retail
environment, tough competition and "entanglement" in the
company's promotions of commercial and high-end brands in
Australia. He plans to split the marketing and supply chains of
those brands in 2015 to give them "separate focus".
U.S. earnings fell 7 percent to A$74.9 million and Asia
earnings dropped 12.3 percent to A$47.7 million, as a crackdown
in China on gifts to government officials hit sales.
Globally, the company that was spun off from Foster's Group
in 2011 missed its own guidance with earnings of A$184.6 million
compared with A$216.2 million the previous year.
In January, the company said it expected earnings between
A$190 million and A$210 million for the year. On Thursday, the
company said it hit its guidance if it adjusted earnings for
foreign exchange rates, to A$193 million.
The company declined to give further guidance but Clarke,
asked if net profit would improve in the current financial year,
said 2015 would be a "reset year".
"I would hope that there's upside from here," he said.
Treasury, viewed as ripe for a takeover since late 2013 when
it first warned of U.S. problems, currently has its books opened
to U.S. private equity giant KKR & Co LP and another
private equity player, reported to be TPG Capital Management
, for rival $3.1 billion takeover bids.
Clarke, who is leading the due diligence process, wouldn't
discuss conversations with the potential buyers.
Treasury shares fell 2.5 percent to A$5.20 by late trading,
on par with the two indicative offers from the private equity
players, as investors weren't prepared to bet against a takeover
bid despite the net loss.
"It has absolutely zero impact on the takeover bids," said
CLSA analyst David Thomas, noting Treasury's balance sheet and
cashflow appear consistent with last year.
(1 US dollar = 1.0812 Australian dollar)
(Reporting by Byron Kaye; Editing by Lisa Shumaker and Stephen