Brewery and Wine: ASX Stocks that Need Some Attention - GRB, TWE, AVG

Summary

  • A variation in drinking behaviour of Aussies has been noted during COVID-19 induced lockdown, with ~85.6% drinking responsibly.
  • On 11 August 2020, GRB, a leading craft brewery unveiled that it has been secured the rights to lease A Shed at Fremantle’s Victoria Quay to advance a substantial hospitality and brewery venue, representing confidence in the hospitality industry amid COVID-19, while creating of jobs at the construction and operation stage.
  • Owing to the COVID-19 pandemic, TWE witnessed considerable impact on the business performance across all geographies in 2H FY20. The Company further expects FY20 EBITS in the range of AU$530 million-AU$540 million.
  • AVG witnessed a y-o-y growth of 22% in grapes crushed in Vintage 2020 to 101,400 tonnes at the end of 31 March 2020, while expecting robust growth in FY20 net profit after tax in the range of 25% - 30%, fortified by an upsurge in SGARA and favourable exchange rates.

So far, the year 2020 has been difficult for the world and numerous Australian sectors, as coronavirus turned everything upside down, and the Australian wine and beer sector also faced its share of challenges.

Owing to pandemic induced stringent lockdown and unprecedented uncertainty, numerous bars and restaurants had closed their doors.

As per data underlined in the latest report by Alcohol Beverages Australia, which is mainly in line with ABS recent statistics noted that ~85.6% of Australians were responsibly drinking during the lockdown period, along with over 30% abstaining or not consuming alcohol.

Lately, the industry also received Export and Regional Wine Support Package worth AU$50 million by the federal government for growing the Australian grape and wine industry by demonstrating the country's wine tourism offering and increasing the demand for wine exports.

Furthermore, Alcohol Beverages Australia’s report released in July divulged that, “Beer, wine and spirit producers and retailers have invested heavily on a range of initiatives aimed at improving Australia’s drinking culture and it is pleasing that these programs are having a positive impact.”

Did you read: Breweries to Explore Around Australia

With this backdrop, let us now have a look at some of the leading ASX listed beer and wine stocks.

Gage Roads Brewing Co Limited (ASX:GRB)

A leading Australian craft brewery, Gage Roads rose 6.522% closing at AU$0.049 on 11 August 2020. The soared share price was buoyed by an announcement of the Company securing the rights to lease A Shed at Fremantle’s Victoria Quay in Western Australia.

Also, on 12 August, GRB was trading flat at AU$0.049 (1:27 PM).

Gage Roads would establish this flagship venue to advance a substantial hospitality and brewery venue, demonstrating confidence in the WA hospitality industry and generating jobs during the construction, as well as operational phase.

Additionally, Gage Roads’ first WA venue at the momentous Victoria Quay site would be developed as the spiritual home for the Company.

GRB anticipates the finalisation of its due diligence and other conditions by December this year, if satisfactory, the Company would enter into the lease and begin construction to commence operations in summer 2022.

Notably, on 29 July 2020, the Company completed the Employee Share Scheme Buy-Back and cancelled 25,456,746 employee shares. This buy-back was notified previously on 14 July.

Furthermore, on 6 July 2020, the Company unveiled that it successfully raised AU$5.2 million via an Institutional Placement at an issue price of AU$0.052/new share. The proceeds would be utilised to boost its balance sheet, capitalise on growth opportunities and financial flexibility to undertake cautious movement towards COVID-19 recovery and FY21.

Financial Performance:

On 18 June 2020, through its business update, the Company unveiled that it had outperformed the market, while witnessing robust sales recovery in May and June. Further, GRB mentioned that it was anticipating carrying over the momentum to FY21 and bolster sales growth.

Did you read: A Toast For You! How are Australian Wine Exporters Placed Amid Pandemic?

Treasury Wine Estates Limited (ASX:TWE)

One of the largest wine companies in the world known for its superior winemaking and brand marketing noted a marginal increase of 0.723% in its share price and closed at AU$11.140 on 11 August 2020.

On 12 August, TWE was trading at AU$11.34, up by 1.795% (at AEST 1:53 PM)

TWE’s business update amid pandemic

On 9 July 2020, TWE gave an update on its business, comprising both preliminary performance outcomes for FY2020, as well as progress of the business on key strategic initiatives.

For FY20, TWE anticipates its EBITS in the range of AU$530 million - AU$540 million, demonstrating the impact of the COVID-19 pandemic and a decrease of ~21% as compared to pcp.

Additionally, the Company anticipates global COGS per case to surge by 3% in FY21 in comparison with FY19.

Notably, COVID-19 had a considerable impact on the Company’s trading performance covering all geographies in H2 FY20. TWE adopted cost management initiatives during this period, resulting in a decrease in the costs of doing business.

Australian Vintage Update:

2020 Australian Vintage (V20) was noted to be impacted by extreme temperature during the crucial stages of the growing season, resulting in a smaller volume and higher cost vintage for the Company, with the total uptake of ~ 30% less than FY19.

Stay tuned for TWE’s full-year earnings update on 13 August 2020.

Did you read; Growth-Driven and Tailored Approaches in Wine Industry - Accolade Wines vs Treasury Wine Estates

Australian Vintage Limited (ASX:AVG)

Australian wine player, AVG’s shares experienced a decline of 1.087% and closed at AU$0.455 on 11 August 2020.

On 12 August, AVG was trading at AU$0.47, moving up by 3.297% (at AEST 1:56 PM).

In July, AVG notified the market on Ms Alicia Morris (Kinlay) being hired as Company Secretary, with effect from 1 July.

On 22 April 2020, the Company disclosed its trading and vintage update for the period ending 31 March 2020. It reported a y-o-y surge of 22%, with 101,400 tonnes of grapes crushed in Vintage 2020. Grape yields from owned and leased vineyards also noted a y-o-y increment of 29%.

Moreover, the Company added that the improved yield from the vineyards had not only enhanced SGARA (Self Generating and Regenerating Assets) by AU$2.7 million (after-tax) y-o-y, it further reduced the requirement of purchasing substantial amounts of bulk wine across the upcoming 12 months period. Also, it would aid in the enhancement of the cash flow during FY21.

It is worth noting that the quality of the Vintage was exceptional in 2020.

Furthermore, AVG anticipated the growth of Net Profit after Tax (NPAT) in the range of 25%-30% for FY20.

Did you read; COVID Diary: Strategies that helped these 100 Companies create History

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