When Treasury Wine fell victim to the trade spat with China and the ongoing disruption from COVID last year, many investors thought about stepping away from Treasury Wine Estates. But at Elston we look to an investment horizon that is three or more years ahead. This means that if a strategy is in place that we believe can turn results around, we are more inclined to stick rather than sell.

Reporting season results are encouraging. TWE is showing solid progress in moving past its China challenges and pivoting to new markets.

Businesses in the United States and Australia are delivering robust growth. Thailand, Malaysia and Singapore are picking up some of the high-end wines that have been redirected away from China. Sales of higher-end Penfolds products have grown by 38 per cent outside of mainland China.

The result showed that despite the repositioning and the associated earnings hit from mainland China which was in the vicinity of $77 million, the business could still deliver profit growth for 2020-21.

Another positive was that this was all achieved in the face of ongoing uncertainty due to the pandemic. Like all businesses, COVID clouds are still casting uncertainty on the future outlook, but for now, TWE retail sales and e-commerce channels are still performing strongly.

TWE reported FY21 EBITS of $510.3m; towards the top end of the $495m to $515m guidance.

The Americas business generated a 23 per cent rise in earnings before interest, tax and the SGARA accounting standard applied to agricultural companies, to $168.3 million. In Australasia, EBITS increased by 10 per cent to $142.7 million.

The Asian division, previously the profit powerhouse, suffered a 15 per cent fall in EBITS to $205 million because of the China slump.

Final dividend of 13cps, fully franked was announced, an increase of 62.5% on F20 – full year payout of 28cps – consistent with long term dividend policy.

One of the key tenets of our investment philosophy is avoiding short term distractions and taking a long term approach to investment, and with TWE it seems to be bearing fruit.