Treasury Wine to exit commercial brand division amid challenging market
Updates with background on commercial wine division, share moves, and analyst comment
By Ayushman Ojha
Aug 6 (Reuters) -Top Australian winemaker Treasury Wine Estates TWE.AX unveiled plans on Tuesday to divest its commercial brand portfolio amid challenging market conditions, and flagged a non-cash impairment charge in relation to its premium brands business.
The adverse conditions in the commercial wine business have offset the benefits from a focus to premiumise the premium brand portfolio, Treasury Wine said in a statement.
The commercial wine business contributed only 5% to total gross profit in fiscal 2024, and an assessment reflected moderated top-line expectations as a result of challenging market conditions across all markets, the wine producer said.
Last year, Treasury Wine had flagged about tough market conditions and a challenging consumption outlook for its commercial-grade wine, especially in Australia and the UK, amid high inflation.
Treasury Wine is present in three price segments — luxury (more than A$30 per bottle), premium (between A$10 and A$30) and commercial (below A$10).
Its commercial brands include Wolf Blass, Yellowglen, Lindeman's and Blossom Hill, while the priority premium segment houses Wynn's, Pepperjack, Squealing Pig and 19 Crimes.
"The market will like that TWE is looking to divest its commercial brands. Given limited demand however, we do not expect TWE to receive much in the way of proceeds for the commercial brands," said E&P Capital analyst Philip Kimber.
Shares of Melbourne-based Treasury Wines rose 1.7% in early trade, while the benchmark stock index .AXJO was up 0.3% after two sessions of sharp sell-offs.
Treasury Wine declined to comment when Reuters contacted for further details on the divestment.
The company said its fiscal 2024 results would include an impairment charge of A$290 million ($188.65 million) after tax in relation to its premium brands division, but forecast a near 13% rise in underlying earnings.
($1 = 1.5373 Australian dollars)
Reporting by Ayushman Ojha; Editing by Shilpi Majumdar and Subhranshu Sahu
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