Treasury Wine outlines fresh cost cuts

Treasury Wine Estates has outlined a fresh round of cost cuts that it says will take out $30 million in annual costs from its supply chain by fiscal year 2020.

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The winemaker says it will either consolidate or divest some supply chain infrastructure, consolidate underperforming vineyards, and simplify logistics, warehousing and freight arrangements, to reduce overheads.

The group has been cutting costs, streamlining the company’s operations and brands, and increasing its focus on Asia as part of an overhaul of its business model.

TWE, whose brands include Penfolds, Wolf Blass, Lindeman’s and Rosemount Estate, also has offloaded a number of assets in a continued bid to improve its supply chain and focus on its upmarket brands.

The efforts have paid off, with the company posting $78 million annual profit in the 2014/15 financial year, up from the previous year’s $101 million loss.

The winemaker expects Asian markets to be its biggest contributor to profit, surpassing Australia and the Americas.

The new round of supply chain cost cuts will mainly impact operations in the America’s, with benefits also expected in the Australia and New Zealand, and Europe, Middle East and Africa regions, the company said.

It will also provide write-downs for up to $44 million in fiscal 2016.

These include cash cost writedowns of $14 million, and non-cash provision of between $20 to $30 million relating to production assets that are being closed or sold.

The company had previously outlined around $40 million in overhead reductions at the time of its full year result in August.

In March, Treasury Wine said it would book $50 million in writedowns and cut an unspecified number of jobs after idling wineries and production facilities.