Why the Treasury Wine Estates (ASX:TWE) share price is down 7%

The Treasury Wine Estates Ltd (ASX:TWE) share price has fallen 7% in reaction to news of the departure of a member of the management team.

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The Treasury Wine Estates Ltd (ASX: TWE) share price is currently down around 7% on news of a resignation of a key member of the management team, if it isn’t being influenced profit-taking by some investors. 

According to reporting by the Australian Financial Review, the managing director of the Treasury Wine Europe, Middle East and Africa (EMEA) business has resigned and will be leaving in the next few months.

What’s going on with Treasury Wine?

The newspaper said that the cause of the resignation was the restructure that Treasury Wine Estates business is about to go through.

Michelle Brampton, the managing director in question, wasn’t chosen for any of the main three roles despite being in the business for around two decades and having held various important roles across the company.

What did TWE say about the restructure?

A couple of days ago, the business announced a new divisional operating model, aimed at maximising the benefits of a separate focus across its brand portfolios, rather than regions. From FY22, Treasury Wine Estates will operate under three new internal divisions being Penfolds, Treasury premium brands and Treasury Americas.

Treasury Wine Estates said that each division will have unique strategic, geographic and consumer characteristics with distinct growth opportunities. These three businesses will be serviced by centralised businesses, supply and corporate functions. Management said that the establishment of the new operating model will maximise the benefits of the separate focus across the company’s brand portfolios.

The company said it has progressed on key initiatives to deliver a future state premium wine business in the US, including the planned exit of other non-priority brands, operating assets and leases as it continues to prioritise the growth of its focus premium brand portfolio to drive future performance in the region.

TWE’s outlook for the future

After a decline of 24% of underlying profit to $175.3 million in the first half of FY21, Treasury Wine Estates said that it’s planning for the continuation of conditions consistent with recent trading in the Americas, Australia and New Zealand, Europe, the Middle East, Africa and Asian markets outside of China.

In China, TWE expects that demand for its portfolio will remain extremely limited while the provisional (or similar) Chinese measures remain in place and that’s why the company is expecting minimal profit from China over the rest of the year.

However, the company is becoming increasingly confident around its plans for reallocation of product from China to other markets as it continues to engage with its customer and consumer base, with modest benefits to commence towards the end of FY21.

TWE is expecting that underlying earnings before interest and tax (EBIT) will be below what was generated in the first half of FY21.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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