TWE PAUSES PLAN TO DEMERGE PENFOLDS BRAND AMID HEADWINDS IN CHINA
By Siulan Law Mathews DipWSET
Source: Treasury Wines Estates
Australia's Treasury Wines Estates (TWE) announced today that it will pause the plan to demerge the Penfolds brand in the face of serious headwinds swirling in the China market.
"We have decided to formally pause work on a demerger to focus on key priorities including trading through COVID, the US business restructuring and most specifically the investigation in China," TWE Chief Executive Tim Ford said.
The news came one day after TWE said it is concerned that China would impose retrospective tariffs on Australian wine imports.
Penfolds is TWE’s most valuable brand and China is the top market for Penfolds wines. Analysts estimated that Penfolds could worth up to AUD10 billion (USD7.24b) when the plan was announced in April. The demerger was originally expected to complete by the end of 2021.
TWE’s share price tumbled 8.19% on the news to AUD7.96 today, reaching a near five-year low and an aggregate fall of 58% from year high of AUD19.
The company said yesterday that it had become aware that the China Alcoholic Drinks Association (CADA) had written to China’s Ministry of Commerce to ask for Beijing to impose retrospective tariffs on Australian wine.
Analysts said CADA’s request for retrospective tariffs will likely cause Chinese importers to halt further orders of Australian wines until the issue is clarified.
TWE also said yesterday that it was aware of recent reports that China could impose bans on imports of Australian products including wine, barley, sugar, timber, coal, lobster, copper ore and copper concentrates from tomorrow, but it had not been notified by Chinese authorities about such a move.
Australian exporters have been treading on thin ice in China since the two countries were caught in trade tension over Australian Prime Minister Scott Morrison’s earlier call for an investigation on China on the origin of the coronavirus.
China’s Ministry of Commerce announced anti-dumping investigation into Australian wine imports on 17 August, it later added an anti-subsidies investigation.
The investigations will last for 12 months, three Australian wineries including Treasury Wine Estates are taking part in lengthy questionnaires as part of the probe. Deadline for submission of the the finished questionnaires is 16 November.
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