Structural split for TWE?

Treasury Wine Estates CEO Michael Clarke has suggested a structural split may be on the cards for the company.

Clarke hinted to The Australian Financial Review that the company's commercial wine operations could be spun off, but was cryptic on timing. 

"A splitting off of the commercial wine operations may yet be on the cards, allowing the high-end operations to lift returns on investment and pursue more acquisitions in the luxury wine sector," the newspaper notes. 

While TWE has more than 100 wine brands, Clarke has made no secret of his preference for its 15 "power" brands, including Penfolds, Wolf Blass and Wynns, as that's where most of the big money is being made.

"I will keep walking away from the lower end," he told the AFR after Treasury's annual general meeting in November.
Clarke pointed out that TWE doesn't sell much lower-end commercial wine in China, with the major interest being the higher-end Penfolds.

"We've seen phenomenal growth in China," Clark says. "There is huge potential for increased wine consumption particularly in the rising middle class who want quality products with a strong reputation."

While Clark has predicted profit margins for TWE will hit the "high-teens" mark in 2017-18, his longer-term aim is to emulate the 30% margins being achieved by the company's Asian operations.

A splitting off of the commercial wine operations would allow the high-end operations to lift returns on investment and pursue more acquisitions in the luxury wine sector.