Treasury Wine Estates (TWE) CEO Michael Clarke has again held out the possibility of splitting the company into two parts – one to handle the low margin wines and the other its premium products, such as the Penfolds reds range.
Clarke told an investor day briefing yesterday that a potential demerger of the group’s lower-priced commercial wine arm from the higher-end business, led by Penfolds, could still happen.
“Demerger is still on the cards if we do the right M&A,” Mr. Clarke told the investor briefing.
He said the trigger would be a large M&A deal where the acquired company’s commercial wine business would be meshed together with Treasury’s own lower-priced wine arm, which makes about 30 percent of overall sales.
Clarke started as CEO back in 2014 and in the early days in that role, he had talked about such a move, but now says the lower-priced wine business has seen costs fall (because of cuts) and changes in demand (with price rises helping).
“We’ve got a more profitable core commercial business,” he said.
Investors didn’t give the briefing the thumbs up – the shares fell 4.7% to $18.24.
Clarke also had something to say on the US-China trade war and the potential damage it could cause to the company and Australia.
He told the briefing that TWE wanted its brands including Penfolds to part of the “fabric of China” but that any changes to its Chinese growth had to be done in a “measured way” due to the trade war between the US and China.
“We have had to be very cautious because we have got a significant profile as an Australian company in China,” Mr. Clarke said the investor day.
“It is a very successful business in China and will continue to be a successful business. I think it is very important that we don’t become used as a pawn in a political debate.
“So we are hoping the politicians especially during this trade war between the US and China does not lead to an Australian politician putting a foot wrong.”
Mr. Clarke said Prime Minister Scott Morrison had been very adept in the past five days on the global stage in finding the right balance.
