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UPDATE 2-Australia's Treasury Wine sells some US brands amid portfolio revamp

Published 04/07/2016, 01:41 pm
© Reuters.  UPDATE 2-Australia's Treasury Wine sells some US brands amid portfolio revamp
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(Recasts, adds broker comment, updates shares)

By Tom Westbrook

SYDNEY, July 4 (Reuters) - Australia's Treasury Wine Estates Ltd TWE.AX on Monday said it sold some U.S brands, as the world's largest stand-alone winemaker continued to refocus on the prestige market there following the failure of its foray into the low-end segment.

The Melbourne-based company said it sold 12 U.S. wine brands and raised its annual profit guidance following its purchase of Diageo Plc DGE.L assets earlier this year.

Shares in Treasury gained as much as 4.4 percent on the news, their largest percentage gain since early April, as investors cheered signs of progress in its U.S. strategy. The stock price is nearly double the size of a takeover offer it rejected in 2014, boosted mainly by strong sales in China.

"We've been waiting with our eyes peeled for this sort of announcement. We've been expecting them to streamline their portfolio," said Ben Le Brun, an analyst at trading house OptionsXpress in Sydney.

The owner of Penfolds and Lindemans labels said in a statement that the non-core portfolio of brands comprising about 1 million cases of wine were sold at about book value, without elaborating.

"The divestment will have nil impact on earnings in F16 and beyond," the statement added.

A company spokeswoman declined to comment on a sale price or a buyer.

The sale comes as Chief Executive Michael Clarke reorganises the company's U.S. strategy following a disastrous attempt to crack the mass market there in 2013, when it was forced to pour millions of litres of wine down the drain. This led to a new focus on more upmarket brands which saw U.S. sales rebound this financial year.

Treasury also said it expected to deliver earnings before interest and tax of between A$330 million ($246.4 million) and A$340 million in FY16.

It had previously guided for earnings of A$270 million to A$290 million, although that forecast did not include profits from the acquisition of Diageo's assets.

The depreciation of the pound following the Brexit vote would not have a material impact on earnings expectations, it said.

($1 = 1.3394 Australian dollars)

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