THE surging Australian dollar wiped $12.8 million from Treasury Wine Estates' underlying earnings in the first half of the financial year, while export volumes were down as the company quit unprofitable supply deals with British supermarkets. In its first interim result since being demerged from brewing major Foster's in May last year, TWE reported a net profit of $40m, up from $25.9m in the previous corresponding period. However, given the changes in the business since the demerger, as well as $11.6m in one-off costs associated with the split, chief executive David Dearie said a truer picture of the company's performance could be observed in earnings before interest, tax and SGARA, an accounting adjustment required for the fluctuating value of agricultural assets. On this basis, TWE reported EBITS of $91.7m for the six months to the end of December, essentially flat from the $91.5m booked for the previous corresponding period, or up 16.5 per cent up when the impact of currency shifts was stripped out. "Overall, I'm reasonably pleased with the progress we've made in a short time as a stand-alone wine company," Mr Dearie said. Revenue was down 7.4 per cent to $858.1m, or 2.6 per cent lower to $881.1m on a constant-currency basis, with sales by volume down 1.1 million cases to 16.9 million as the company dropped steeply discounted sales to British supermarkets doing "three for pound stg. 10" deals, of which pound stg. 7.41 was eaten up by excise charges. "That clearly doesn't leave much room to produce, package, ship and sell and make any sort of return . . . it didn't make financial sense for Treasury Wine Estates to continue to support these sales," Mr Dearie said. Excluding this volume shortfall in Britain, sales by volume would have been flat in the first half, he said. In Australia and New Zealand, EBITS was up 7.3 per cent, which Mr Dearie said was "a great result in an increasingly competitive retail environment' as the two main supermarket chains strived to dominate the liquor sector. In the Americas, EBITS was down 17.1 per cent due to increasing competition and a number of one-off factors including Canadian retailers reducing inventory levels and TWE's decision to delay the release of key wines from its flagship Penfold's brand until March, the time they are usually released in Australia. The best-performing region was Asia, where volumes surged 22 per cent and EBITS surging 67 per cent on a constant currency basis to $7.2m. Mr Dearie said TWE was re-allocating marketing expenditure to the Asian region to take advantage of the rapid growth in demand. The company declared an interim dividend of 6c per share, 50 per cent was franked for tax purposes, payable on April 2.

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