Australia’s Treasury Wine says will operate under three divisions as profit plunges

(Reuters) – Treasury Wine Estates will reorganise into three new divisions, the company said on Wednesday after its half-yearly profit plunged due to heavy Chinese tariffs on Australian wine imports.

The world’s largest listed winemaker said it would operate under Penfolds, Treasury Premium Brands and Treasury Americas starting from fiscal 2022.

Treasury Wine will also look into divestments of non-priority brands and operating assets in the United States, and exit certain leases to cut costs across vineyard, winemaking, and packaging operations.

The company has had plans to spin off its high-end Penfolds label and shrink its low-end U.S. “commercial” division since April but put them on hold amid mounting concerns over tariffs imposed on Australian wine imports by China, its biggest market.

“It’s certainly setting itself up for the possibility of carving out bits in the future,” said Henry Jennings, senior analyst at Marcus Today financial newsletter.

It will take a while to pivot the products away from China and cost the vintner marketing dollars while it happens, added Jennings.

The company said it was growing confident that it could reroute its Penfolds Bins and Icon luxury ranges from China to other markets.

Demand for Treasury Wine’s portfolio in China will remain “extremely limited” if the tariffs remain in place, the company said, adding that it would brace for minimal earnings contribution from the country in the second half of the year.

Shares of the company were down 1% at A$9.8 at 2338 GMT.

The winemaker said net profit attributable in the half year ended Dec. 31 tumbled 43% to A$120.9 million ($93.79 million) from last year.