Treasury Wine Estates (TWE), the company behind labels such as Penfolds, DAOU and Frank Family Vineyards, says it expects to take a major accounting hit on its U.S. business as wine consumption continues to soften in America.
In an announcement to the Australian Securities Exchange on Monday, the company said it will record a “non-cash impairment”—an accounting term meaning a reduction in the paper value of its assets—on its U.S. operations. TWE said the final charge will be determined early next year, but it expects to wipe out all A$687 million of goodwill tied to its U.S. business and warned that other assets may also need to be written down.
The move reflects a slowdown in the U.S. wine market, which has been struggling with weaker demand and shifting drinking habits. TWE said it is now using more conservative expectations for future growth in the U.S., meaning its U.S. business is no longer worth what it was previously estimated on paper.
Some of TWE’s biggest U.S. brands—such as DAOU and Frank Family Vineyards—are still performing better than the broader market, but the company said that overall trends have continued to weaken, forcing a reset of its long-term outlook.
The company emphasised that the impairment is non-cash, meaning it does not affect day-to-day operations or current cash flow. Instead, it reflects the reduced long-term earnings potential of the business.
TWE also said new CEO Sam Fischer will host an investor briefing in mid-December to discuss the company’s performance in its key markets, including the U.S. and China, and to share his early observations since taking the helm.
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