TWE has received word regarding removal of China tariffs

In an ASX announcement released this evening, Treasury Wine Estates (TWE) has informed that it has previewed a Chinese Ministry of Commerce proposal regarding the end of the current tariffs on Australian wine imports into China. 

“Treasury Wine Estates Ltd (ASX:TWE) has been advised that the Chinese Ministry of Commerce (MOFCOM) has released an interim draft determination outlining a proposed removal of the current tariffs on Australian wine imports into China,” said TWE in an ASX announcement.

The statement has been labeled as an “interim announcement,” and thus “is not a final determination and is subject to change by MOFCOM.” TWE anticipates that MOFCOM will have a final determination ready for release in the coming weeks. 

“We’re pleased with the intention to remove tariffs on Australian wine into China, as outlined in the China Ministry of Commerce’s interim draft determination," said Tim Ford, CEO at TWE.

"This is subject to change, however we’re optimistic that the final determination will be a positive outcome for the Australian wine industry.”

The ASX announcement proceeds to recommend that its readership reviews its F24 Interim Results announcement from 15 February in which it outlined its strong position should the China tariffs be removed. In the case of a positive outcome, TWE plans to re-establish its Australian country-of-origin portfolio in the Chinese market, including wines such as Penfolds Max’s, Koonunga Hill, and One. It will also reallocate a portion of Penfolds Bin and Icon tiers from other global markets and implement careful price increases to accommodate the anticipated changes to global demand.

The announcement suggests that, should the tariffs be lifted, profits from its reestablishment in the Chinese market will remain low for the rest of the F24 trading period. 

“In such a scenario, TWE expects that the incremental EBITS contribution from the re-establishment of its Australian country of origin portfolio in China would be minimal through the remainder of F24,” it said.