Penfolds maker Treasury Wine Estates is extremely disappointed with China’s 169. 3 percent inches on its wines and plans to cut costs and focus more on other markets such as Vietnam, Thailand, and the United States in response to the shock.
The company said the Chinese tariff ruling, suddenly announced on Friday, would impact the Australian wine industry, cost jobs and harm regional communities.
Tim Ford, CEO of Treasury Wine Estates, says the company won’t cut prices to sustain its sales, given the 169 in China. 3 percent wine tariff. Photo credit: Simon Schluter
« We are extremely disappointed to find our business, the businesses of our partners and the Australian wine industry in this role, » said Tim Ford, CEO, Treasury Department.
« We will continue to work with MOFCOM (China’s Ministry of Commerce) as the investigation continues to ensure our position is understood. We ask for strong government leadership to find a way forward, « he said.
While Treasury plans to focus more on other export markets, the company also said it will continue to send its wine to China.
China is a lucrative market for Treasury Wine listed on the ASX, generating around two-thirds of its profits in fiscal year 2019-20, which corresponds to around 30 percent of total corporate profits for the reporting period. For the past fiscal year, Treasury achieved an EBITS (earnings before interest, tax and agricultural accounting standard SGARA) of $ 533. 5 million.
Mr. Ford said Monday morning that the companies had the opportunity to achieve better results in the Australian, Southeast Asian and North Asian markets. He also said Penfolds has a small presence in the US, but the company hopes to build its brand in a huge wine market there.
« In the short, medium and long term, we intend to expand our business outside of China in the near future, » he said.
Mr. Ford, who took over the helm from longtime CEO Michael Clarke mid-year, also said the Treasury Department won’t cut prices.
« We’re not going to discount the price to shift volume. We don’t think we have to do that, « he said.
China’s decision to impose a tariff on Australian wine in containers no larger than two liters is the latest in a series of measures Australia’s largest trading partner took this year that have affected Australian agricultural exports. As early as this year, Australian exports of beef, barley, wood and seafood to China were damaged by Chinese restrictions.
In its current form, the measure referred to as « provisional » can be extended to 28. August next year. Whether it will be permanent or not depends on the final outcome of the Chinese « anti-dumping » investigation into whether Australian wine was sold in China at sharply reduced prices to the detriment of Chinese winemakers.
However, Australian industry is not optimistic about the likelihood of the tariff being completely abolished and its exports to China will be severely damaged by the tariff, which will significantly increase the price of Australian wine in China.
« TWE expects the announced interim measure to remain in place, but that demand for its portfolio in China will be extremely limited, » the Treasury Department told ASX on Monday.
On Cost, Australia’s largest winemaker said it would cut its global operating costs, including overheads and delivery costs, and reduce its future vintage income.
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Treasury Wine Estates, China, Penfolds, ASX
World News – AU – Treasury Wine is « extremely disappointed » with China’s move and is moving to other markets
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