Treasury Wine Estates (TWE) yesterday revealed a further revamp of its winemaking and distribution facilities across Australia and the US.
The company said it would take $50 million in write-downs and cut an unspecified number of jobs in closing wineries and production facilities in both countries.
TWE also said it had put certain assets including vineyards and wineries up for sale as part of a previously announced attempt to focus on a smaller number of brands.
Treasury also reaffirmed it remained on track to deliver $35 million in cost savings in the year to June 2015, as part of the cost-cutting program previously announced to the market
But the group also flagged a further $15 million in overhead cost savings as a result of the restructuring, expected in the 2015-16 financial year.
Treasury chief executive Michael Clarke said in yesterday’s statement,“Not only are the cost reductions funding the 50 per cent uplift in consumer marketing in fiscal 2015, the savings are also supporting actions to improve the quality of TWE’s base earnings, while delivering profit growth for shareholders”.
In Australia, TWE said the packaging and warehousing of wines previously processed at Karadoc near Mildura in north west Victoria, will be moved to the company’s Wolf Blass facility in the Barossa Valley in South Australia.
"The phased closure of packaging and warehouse operations at Karadoc is due to be completed during fiscal 2016. As a result, the utilisation of the Wolf Blass packaging and warehousing facility will be significantly enhanced.
“Furthermore, Commercial wine currently processed at TWE’s Great Western and Wynn’s Coonawarra facilities will be transferred to the Karadoc site, with Karadoc to become exclusively focused on the production of TWE’s Australian Commercial wine portfolio,” the company said yesterday.
TWE 1Y – More job cuts, writedowns at Treasury Wine Estates
At the same time, the processing of Masstige wine (brand extensions of existing upmarket brands) at Great Western (Western Victoria) and Wynns at Coonawarra in South Australia, will be transferred to the Wolf Blass facility. “This will, in turn, result in increased Luxury wine processing and warehousing capacity at these sites,” TWE said.
"As part of TWE’s strategy to focus on fewer brands, TWE will also commence a sale process for excess assets in Australia including the Ryecroft winery, T’Gallant and Bailey’s properties. The outcomes and any financial implications will be announced to the market at the appropriate time,” the company added.
Looking at the US the company says it will consolidate its production facilities, meaning that its Asti winery in Sonoma County, California will become surplus to the Company’s production needs.
“Asti’s wine production will be transferred to other wineries within TWE’s network to increase utilisation, with the majority of Commercial and Masstige wine production transferred to Paso Robles and Luxury wine transferred to Beringer.
"These actions will increase utilisation at both facilities. Collectively, these steps will further facilitate TWE’s separate focus on the Luxury & Masstige versus Commercial portfolios in the region. Finally, packaging lines at TWE’s Napa Bottling Centre (NBC) are being consolidated to further optimise production efficiency," TWE said.
TWE shares eased 0.7% to $5.12, after rising in morning trading.
