Treasury Wine Estates (ASX:TWE) is undergoing a major restructuring, including a $300 million impairment of its Treasury Premium Brands (TPB) division and the proposed sale of several underperforming brands.
The company is shifting its focus towards higher-end, premium wines, with its flagship red wine range taking center stage.
TWE announced on Tuesday that it expects a $354 million non-cash impairment in its 2023-24 financial results, to be released later this month. This will result in an after-tax impact of approximately $290 million.
The impairment comprises a $115 million goodwill write-down and a $229 million write-off of commercial wine brands, which will be classified as a material item.
The write-downs primarily affect commercial brands such as Wolf Blass (acquired in 1996), Yellowglen (acquired in 1996), Lindeman’s (acquired in 2005), and Blossom Hill (acquired in 2015). These brands contributed less than 5% of TWE Group’s gross profit in the 2024 financial year.
Due to challenging market conditions for commercial wines and underperformance of TPB brands at commercial price points, TWE has decided to sell these brands. However, finding buyers in the current Australian wine industry has been difficult.
Despite these challenges, TWE’s premiumization strategy has yielded positive results, with its priority Premium brands (Wynn’s, Pepperjack, Squealing Pig, and 19 Crimes) achieving a three-year net sales revenue compound annual growth rate of 10%.
The company anticipates unaudited pre-tax earnings of $658.1 million for the fiscal year, representing a 13% increase over the previous year. The full-year results will be released on August 15.