Treasury Wine Estates has announced the abrupt exit of its chief executive, prompting more tough questioning from analysts about the group’s struggling US wine business.
David Dearie, who has been chief executive of Treasury Wine Estates (TWE) since it was formed by demerging from Foster’s Group in May 2011, has left the group with immediate effect. TWE’s share price fell by 6% on the news.
His departure comes one month after the maker of Penfolds, Lindeman’s and Beringer reported a 50% slump in annual net profits, amid a warning that its US business must destroy AUD35m of old and aged wine that it cannot sell.
There is no replacement for Dearie at present, and TWE has appointed Warwick Every-Burns, a
non-executive director, as its interim chief executive pending its recruitment process.
‘Following the write-down of excess US inventory, the board has undertaken a review and concluded that now is the right time to look for a new chief executive,’ said TWE chairman Paul Rayner.
He said the Australian winemaker needs a ‘stronger operational focus’. But, his firm stance did not save the company from another round of hard questioning from analysts over the prospects for the US.
‘Do you need the US business?’ asked Morgan Stanley’s Tom Kierath on a conference call. Merrill Lynch analyst David Errington, a long-term follower of the group’s fortunes, followed up by asking whether TWE can ever generate ‘appropriate returns’ for shareholders from its US division.
Rayner responded by saying that, while he could not say when the US business will improve, he is confident that it will.
‘I think the American management there hasn’t been there a long period of time,’ he said. ‘I think we’ve taken the necessary provisions we think to take the business forward.’
He thanked Dearie for steering TWE in its first two years as a standalone wine business. ‘The board wishes him the very best in his future endeavours.’
Written by Chris Mercer