Treasury Wine Estates to Recognize $290M Impairment and Divest Commercial Brands
TWE (TWE) Share Update August 2024 Monday 5th
Treasury Wine Estates Announces $290M Impairment and Plans to Divest Commercial Brands
Treasury Wine Estates Ltd (ASX: TWE) has announced a significant $290 million post-tax impairment charge and its intention to divest its Commercial brand portfolio, as part of its F24 full-year results.
Instant Summary:
- $290 million post-tax impairment charge recognized.
- Intention to divest the Commercial brand portfolio.
- Unaudited F24 Group EBITS expected to be $658.1 million, a 12.8% increase.
- Impairment primarily affects brands like Wolf Blass, Yellowglen, Lindeman’s, and Blossom Hill.
- Full year results to be released on 15 August 2024.
Impairment Charge Details
Treasury Wine Estates Ltd (ASX: TWE) has announced that it will recognize a non-cash impairment charge of $290 million after tax in its F24 full-year results. This charge will be treated as a material item related to the Treasury Premium Brands (TPB) division.
The impairment is primarily due to a write-down of goodwill and brands, including well-known names like Wolf Blass, Yellowglen, Lindeman’s, and Blossom Hill. These brands have been underperforming relative to the category at Commercial price points.
Divestment of Commercial Brands
As part of its strategic review of its global portfolio of Premium Brands, TWE has decided to divest its Commercial brand portfolio. This decision follows a challenging market environment for Commercial wine across all markets.
The divestment is aimed at focusing on the company's priority Premium brands, which have shown a three-year NSR CAGR of 10%, including Wynn’s, Pepperjack, Squealing Pig, and 19 Crimes.
F24 Group EBITS
TWE’s unaudited EBITS before material items for F24 are expected to be $658.1 million, an increase of 12.8% compared to the previous corresponding period. Further details on trading performance will be provided in the full year results announcement.
The F24 full-year results, which include the impairment, are subject to review by TWE’s external auditors and the TWE Board. The results will be released on 15 August 2024.
The $290 million impairment charge and the divestment of the Commercial brand portfolio are significant moves for Treasury Wine Estates. The impairment reflects the challenging market conditions for Commercial wine and the underperformance of certain brands. This may lead to a short-term negative impact on the stock price as investors digest the news.
However, the focus on Premium brands, which have shown strong growth, could be a positive long-term strategy. The increase in unaudited EBITS by 12.8% indicates robust performance in other areas of the business.
Investor Reaction:
Analysts are likely to have mixed reactions to this announcement. While the impairment charge is a significant negative, the strategic focus on Premium brands and the increase in EBITS could be seen as positive steps for the company's future. Investors may initially react negatively to the impairment news but could be optimistic about the long-term strategy.
Conclusion:
Investors should closely monitor the full-year results release on 15 August 2024 for more details on the company's performance and strategic plans. The divestment of the Commercial brand portfolio and the focus on Premium brands could be crucial for the company's future growth.