Feb 13 (Reuters) - Penfolds wine producer Treasury Wine

Estates ( TSRYF ) pulled the sale of its cheap drinks division

after failing to find an attractive offer and cut its prediction

for annual profit, sending its shares tumbling.

The division's weak results and outlook soured an otherwise

upbeat first-half result for Australia-listed Treasury as

exports to China roared back to life after the end to three

years of crippling tariffs imposed by Beijing.

Treasury had planned to offload budget labels including

Wolf Bass and Lindeman's last year amid a global trend of young

drinkers turning away from alcohol. But "the offers received for

these brands did not represent compelling value and therefore

their retention is the best course", it said on Thursday.

Net profit excluding one-off items jumped 33% to A$239.6

million ($150 million) in the six months to end-December, just

short of the average analyst forecast from data aggregator

Visible Alpha.

That owed much to the first full reporting period of exports

to China since 2020 and the contribution of recently-bought U.S.

winery business DAOU.

But pre-tax profit from its "premium brands" unit, which

includes its cheaper wine labels, halved, partly "reflecting

softness in consumer demand for wine at lower price points".

Citing reduced expectations for the unit, the company

now expects pre-tax profit of about A$780 million for the

financial year ending in June. That compares with an earlier

estimate of A$780 million to A$810 million.

Treasury shares lost 4% by midsession, having fallen as much

as 8% at one point as analysts downgraded their forecasts in

line with the new guidance. The overall market was flat.

"With the company deciding not to sell its commercial

portfolio, (the premium brands business) might be a drag on

group earnings for some time," Citi said in a note.

UBS said the guidance downgrade was "disappointing but

somewhat reflected in share price". The stock is down 4%

compared to a year ago while the broader market has gained 12%.

Treasury declared an interim dividend of 20 Australian cents

per share, compared with 17 Australian cents last year.

($1 = 1.5929 Australian dollars)