TWE has entered the second phase of its supply chain optimisation efforts

TWE has entered the second phase of its supply chain optimisation efforts

Treasury Wine Estates has entered the second phase of its supply chain optimisation programme that should bring in an annual saving of around AUD50m (US$36m) by fiscal-2020.

In a filing to the Australian Stock Exchange earlier this week, the company said it has completed the first phase, which was announced at the end of March. At the time, the company said it expected the first phase, which would mainly effect its operations in Australia and the US, to result in a writedown of around AUD50m.

The second phase, which will focus on TWE's global supply chain network, includes consolidating and/or selling infrastructure, removing excess overheads, simplifying logistics and warehousing and streamlining its vineyard and winery operations.

The company said this phase is expected to benefit the Americas (50%), as well as the Australia and New Zealand (ANZ) and Europe, Middle East & Africa (EMEA) regions (combined 50%).

To make the savings, TWE will see its bottom line take a hit of AUD14m in its fiscal-2016, as well as a one-off writedown of between AUD20 and AUD30m. While the company conceded that some facilities would close or be sold off, further details were not revealed.

Michael Clarke, TWE’s CEO, said: “The accelerated momentum in our business continues to be delivered across all regions, most notably Asia.

"TWE’s strategy of driving top line momentum, investing in our priority brands, enhancing both existing and new routes-to-market while reducing cost and complexity is continuing to deliver improved returns for our Company and for our shareholders.

"(The) announcement demonstrates that we are successfully transitioning TWE from an order-taking, agricultural company to a more efficient, brand-led marketing organisation. Right-sizing our production footprint, improving our Return on Capital Employed (ROCE) and optimising our global supply chain network are crucial steps on this journey."

Speculation earlier this month linked TWE with a move for Diageo's wine operations.

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To read Treasury's filing, click here.