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Penfolds wine producer Treasury Wine Estates (ASX: TWE) is taking a $687.4 million hit on its Americas operations after writing down the entire carrying value of goodwill for the business despite some of its larger brands growing ahead of market in the region.
The impairment could be just the start of a boarder assessment of the value of the Treasury Wine businesses after the group revealed significant challenges in its two key international markets, including China.
Treasury Wine says the non-cash impairment of its US-based assets could be at the lower end of writedowns planned by the group for the current half-year.
The company says the Americas impairment follows its disclosure in August that should future cash flows in the Americas business fall by 11 per cent per annum it would “reduce impairment headroom to nil”.
The announcement pushed Treasury Wine Estate’s shares down more than 6 per cent in early trade to a low of $5.45 – representing a fall of more than 51 per cent since the beginning of this year.
The company says that while a number of its larger brands continue to grow ahead of market, including DAOU, Frank Family Vineyards and Matua, the impairments are in response to “further moderation in US wine category trends”.
The impairments reflect a more conservative long-term market growth assumption by the group, resulting in reduced long-term earnings growth rates.
“The final impairment amount and allocation to assets will be concluded as part of the 2026 interim results, however it is expected that the impairment will result in at least all goodwill currently carried in the Americas being written off, with potential to impact other assets,” says the group.
The move follows a challenging year for Treasury Wine Estates, including changes to consumer wine consumption in China which has led to a softening of stock depletions in the company’s key Asian market.
This led Treasury Wine to abandon its guidance for the company’s performance of the Penfolds brand in FY26 and FY27.
Treasury Wine’s brands, which include Penfolds, 19 Crimes, Wolf Blass, Lindeman's, Wynns, Beringer and DAOU Vineyards, are sold in about 100 countries, with the portfolio dominated by the luxury and premium price segments.
The group has vineyard and production assets in the Barossa Valley and Coonawarra in Australia, Napa Valley and Paso Robles in the US, Marlborough in New Zealand, Bordeaux in France, Tuscany in Italy and Ningxia in China.
Treasury Wine Estates chairman John Mullen told shareholders in October that the luxury brand portfolio in the Americas was performing well outside of California.
However, the company noted in its FY25 full-year results that first-quarter depletions in California were hit by the closure of RNDC, its state-wide distributor. The company at the time was transitioning to a new distributor, although a deal had yet to be struck.
As the negotiations were still ongoing, the company said it was unable to determine the full impact on its pre-tax earnings and abandoned its guidance of “modest growth” for the Treasury Americas division in FY26.
“While near-term our business has been impacted by disruptions in two of our key markets, we are taking the appropriate actions to mitigate their impact,” Mullen told shareholders at the AGM in October.
“Importantly, against a backdrop of difficult economic conditions in the wine industry, TWE’s long-term fundamentals remain strong: we have a strong balance sheet, world-class brands and assets, exceptional people and a clear long-term strategy built around luxury leadership and disciplined execution which underpins our confidence in our future.”
Treasury Wine Estates’ incoming CEO Sam Fischer plans to host an investor and analyst conference call in the next couple of weeks to update the market further, including any other potential impairments the company is planning.
Fischer, the former boss of Kirin Group subsidiary Lion, has succeeded long-time CEO Tim Ford who left the company in October after 14 years with the group.
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