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Treasury’s Barossa expansion to fuel Chinese wine boom

Food & Wine

The world’s largest publicly listed winemaker has announced a huge investment in a leading Barossa Valley winery in South Australia.

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Australia-based Treasury Wine Estates told investors this morning that it would spend up to $215 million at its Wolf Blass Bilyara winery site near Nuriootpa, about 70 kilometres northeast of the South Australian capital Adelaide, over the next 24 months.

The funds will be pumped into expanding production, processing and storage infrastructure at the Barossa Valley facility.

Treasury – which owns Penfolds, Wolf Blass and Rosemount Estates – also unveiled a $419.5 million full-year net profit this morning.

The figure is 16 per cent higher than last year.

In a statement to the Australian Stock Exchange, the company said the infrastructure spend at Bilyara winery would increase its winemaking capacity, drive production efficiency and expand its storage capacity.

“The investment includes an additional production line, processing infrastructure and the construction of additional barrel storage facilities,” the report says.

“Total capital investment is expected to be between $150 million and $180 million and will be incurred over the course of (financial year 2020) and (financial year 2021).

“In addition, one off costs of approximately $35 million are expected to be incurred in FY20.”

The wine giant says the investment is part of its continuing “premiumisation strategy”, which also includes buying production and vineyard assets in the Bordeaux region of France.

The company’s total revenue rose 15.5 per cent to $2.88 billion for the 12 months to June 30 and the lifted its fully franked final dividend by 3 cents to 20 cents.

Wine Australia last month released its Export Report for the 12 months to June 2019, which showed Australian wine exports to China (including Hong Kong and Macau) had reached a financial year record, increasing 7 per cent in value to $1.2 billion.

Overall, the value of Australia’s wine exports increased by 4 per cent in value to $2.86 billion over the 12 months, driven by the Chinese exports and a return to growth in the United States.

TWE’s earnings in Asia jumped 43 per cent to $293.5 million for the year.

“The results announced today demonstrate the exceptional returns we are delivering for our shareholders, and they are a direct result of the investments and structural change our team has made in our global business over the past five years,” TWE Chief Executive Michael Clarke said.

“We look to the future with confidence, knowing that we have the people, the brands, the wine, the business models and the customer partnerships to continue delivering sustainable, margin accretive growth.”

The state of South Australia produces about half of Australia’s wine and 80 per cent of its premium wine, much of which is produced in the Barossa Valley.

This story first appeared in InDaily


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