Treasury Wine Estates today (16 February) booked a jump in half-year losses as the Australian wine group recorded an impairment on its business in the US.
The Daou Vineyards brand owner, which has suspended a planned dividend, warned in December an impairment on its US operations was on the horizon due to its “more conservative long-term market growth assumptions” for the country.
Treasury logged a non-cash impairment charge worth A$987.6m (US$699.5m) pre tax. The company said the charge was primarily linked to a A$676.1m write-down to goodwill, a further A$257.3m related “predominantly” to its Sterling and Beringer brands and A$54.2m linked to inventory.
In the six months to the end of December, Treasury made a net loss after tax of A$649.4m, compared to one of A$394.4m in the corresponding period a year earlier.
Treasury presents an EBIT figure called “EBITS” or earnings before interest, tax, self-generating and regenerating assets, plus “material items”. The group’s first-half EBITS stood at A$236.4m, down 40.3% on a year earlier. Treasury said it had provided guidance its EBITS result would be between A$225m and A$235m.
Although higher than forecast, the company pointed to “adverse category trends” in the US and China for the decline in earnings.
It also cited the impact of parallel imports in China and the fact it was lapping its moves to build inventories last year after the country removed tariffs on Australian wine.
Net sales revenue slid 16% to just under A$1.3bn and by 16.6% on a constant-currency basis.
CEO Sam Fischer said: “Today’s results come at a time when we are already making meaningful progress with the decisive actions required to return TWE to a path of sustainable, profitable growth. Our focus is firmly on the future to strengthen execution and ensure we build a stronger, more resilient business for the long term.”
In December, Fischer announced plans to bring in a “transformation programme”, dubbed TWE Ascent, that included a review of products and cost cuts.
He said today TWE Ascent was “a disciplined, multi-year transformation programme designed to sharpen our portfolio, simplify the organisation and optimise our cost base and I am pleased with the progress we have made to date”.
Fischer added: “Encouragingly, we are seeing our key brands continue to perform in the marketplace and resonate strongly with consumers, reinforcing confidence in the strength of our portfolio and our ability to deliver improved performance as we execute the transformation of the business.”
The company’s Treasury Americas business booked a 28.4% fall in revenue to A$283m due to “softer” conditions in the US market and the problems the group has had with its distribution in California.
Last week, Treasury said it had settled a “dispute” with Republic National Distributing Company over the US distributor’s exit from California last year.
The group’s Penfolds division, its largest by sales, posted a 10.1% decrease in first-half revenue to A$501.3m.
Shares in Treasury closed down 5.15% at A$4.97 at 16:15 GMT.
