By Archishma Iyer
(Reuters) -Australia’s Treasury Wine Estates said on Monday it is well placed to rebuild its business in China, sending its shares up more than 5%, should Beijing’s tariffs on Australian wine be removed as signalled by the two countries on the weekend.
The Australian government, which is repairing economic ties with Asia’s largest economy after a number of disputes, said on Sunday China had agreed to an expedited review of tariffs on Australian wine, expected to take up to five months.
“Should tariffs be removed, these measures will be implemented sustainably and with the aim of growing the business in China,” Treasury Wine, the world’s biggest standalone winemaker, said in a statement.
Treasury Wine used to make one-third of its profit in China but lost most of that business when Beijing imposed tariffs on Australian wine in 2021, after Canberra called for an inquiry into the origins of COVID-19.
“If the tariffs are removed, we see this as a significant positive for the Australian wine export industry and specifically Treasury Wine,” Goldman Sachs analysts said in a research note.
Measures for reviving its China business would include shifting a portion of Penfolds Luxury from other markets back to China and rebuilding distribution for the Penfolds Australian entry-level luxury portfolios, the company said.
Treasury’s shares rose as much as 5.3%, one of the highest gainers on the Australian stock exchange on Monday, and last traded up 2% against a broader market that was down 0.9%.
Treasury recently said it expected its operating profit in the year to June 2024 to be weighted towards the second half, reflecting the planned phasing of Penfolds shipments to retain flexibility given a potential future review of tariffs.
($1 = 1.5835 Australian dollars)
(Reporting by Archishma Iyer in Bengaluru; Editing by Lisa Shumaker, Diane Craft and Sonali Paul)