It’s company reporting season and while it’s a ‘ho-hum’ thing for normal people, it really is a big deal and let me show you why, after revealing that China has been good to an Aussie company it was once so bad to, that it would’ve driven a lot of shareholders to the drink.

Okay, it might be a lame turn of phrase, but the company I am talking about if Treasury Wine Estates, which copped a Donald Trump Mk I backlash when former Prime Minister Scott Morrison palled up to the US President such that China wacked us with tariffs on coal, cotton, timber, barley, lobsters, and wine!

In case you forgot the trigger for this kick in the trade pants by our best customer, this is what Reuters reported in 2020: “ Australia's ties with top trade partner China soured in 2018 when it became the first country to publicly ban China's Huawei from its 5G network, and worsened after Canberra called for an enquiry into the origins of the coronavirus.”
China’s inclination to spy and Trump’s inclination to have a Beijing barney then, resulted in companies like Treasury Wine Estates (TWE) to cop a share price slump, coinciding with the tariffs.

For non-wine-lovers, TWE makes some of Australia’s most well-known wines, with its flagship product being Penfold’s Grange. Other brands include Wolf Blass, Wynns and Seppelt, to name a few of the 21 I counted on its website!

The chart below shows how Covid and then China’s tariffs have hit the share price of this company but it hasn’t been helped by the fact that younger geerations are not great fans of wine and especially red wine.

It’s nearly related to the old argument that if their parents like it, they won’t! But there’ also a wellness trend gripping the world gradually and the media is great warning us not to eat and drink a lot of stuff that used to be pretty standard for normal people.

At its peak before the China tariffs kicked in the share price was close to $19 and is now $7.72 but the good news is that the company has reported a nice profit resurgence.
This is the summary for TWE’s profit story:
1. Underlying profit was up 16% for the year ending June 30.
2. Penfolds sales in China were a big contributor.
3. Those sales were up 13% worldwide.
4. Their Treasury Americas business also did well.
5. That profit was $470 million, so you can see it is a serious company.
6. But the CEO, Tom King, says demographic developments and political decisions could challenge the company.

King says large scale banqueting is becoming less popular, especially for political groups, and these are being replaced by smaller scale occasions, which is not as rewarding for TWE’s bottom line.

Expert analysts had a positive view on this great wine business with the consensus predicting a 23% upside, according to FNArena.

Despite what King said the analysts seem to still like the company, even in the world of Trump tariffs.

So, why is this story relevant to normal people?

Try these reasons:
1. TWE would be in super funds that will look after tens of millions of Australians when they retire.
2. It’s a big job creator and taxpayer.
3. The company copped a wacking from Beijing for political get-even reasons and it forced TWE to look for other markets.
4. The TWE story with Penfolds Grange regarded as one of the best wines in the world, where a 1951 vintage sold for $157,624 in 2021!

And reminds us that we Australians can do quality, and striving for quality in business, in our work and life brings memorable and inspirational results that is great for younger generations to see and older generations to never forget.

Let’s raise a glass to TWE and China for having the good sense to take away those crazy, unfair tariffs, even if it was to annoy Donald Trump and to try and get the Albanese Government to be better Beijing buddies.