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UPDATE 3-Australia's Treasury Wine to overhaul business, sell assets as Chinese tariffs bite

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Arpit Nayak and Paulina Duran
·2 min read
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(Recasts and writes through)

By Arpit Nayak and Paulina Duran

Feb 17 (Reuters) - Treasury Wine Estates plans amajor overhaul of its business that includes the likely sale oflow priority brands and other assets, aiming to gain at leastA$300 million ($230 million) as it reels from the impact ofsteep Chinese tariffs on Australian wine.

The restructuring was unveiled on Wednesday as the world'slargest listed winemaker reported a 43% slump in first-half netprofit to A$120.9 million ($94 million) and cut its interimdividend by a quarter to 15 Australian cents per share.

Second-half earnings are expected to come in belowfirst-half earnings, it added.

Treasury Wine will reorganise into three new divisions:Penfolds, Treasury Premium Brands and Treasury Americas.

In addition to exploring the divestment of non-prioritybrands, the company will also look at the sale of operatingassets and exit certain leases to cut costs across vineyard,winemaking, and packaging operations.

These moves would come on top of progress made in plans towithdraw from a significant portion of its U.S. commercial brandportfolio.

Until China imposed anti-dumping and other measures thathave resulted in tariffs of up to 175.6% on Treasury Wine'sproducts, the Chinese market accounted for about a third of thecompany's profit. Canberra views the moves as part of punitivetrade measures since Australia called for an independent inquiryinto the origins of the coronavirus pandemic.

"In China, specifically, we are expecting minimal earningscontribution," Chief Executive Officer Tim Ford told investorsin a call.

Ford said, however, the company had become more confidentabout its plans to reroute its Penfolds Bins and Icon luxuryranges from China to other markets.

The company plans to retain a presence in China and willcontinue to work with regulators there to protect its brands.

"It's a cost, but we're going to continue to wear that costto ensure that we continue to work with authorities in China ...to try and put..counterfeit wines and the counterfeit labels ...out of business," Ford said.

Shares of the company were up 1% at A$10.00 in afternoontrade.

($1 = 1.2890 Australian dollars)

(Reporting by Arpit Nayak in Bengaluru and Paulina Duran inSydney; Editing by Maju Samuel and Edwina Gibbs)