Treasury Wine Estates Ltd has slumped after announcing an anticipated $160 million hit to pre-tax earnings in fiscal 2013 as it offers discounts to move excess stock and destroys aged inventory.
Treasury dived by 7.6% to $5.38 at 1012 AEST following its statement to the Australian Securities Exchange that it expects earnings before material items – including the $160 million provision – to be in line with analysts' consensus of $216 million (see Tim Treadgold's In vino, value?).
Treasury has allowed $35 million for plans to destroy old stock and $40 million for discounts and rebates to accelerate the sale of excess wines in the United States distribution network.
The company will have excess bulk and finished wine and onerous grape contracts after reducing US shipments, estimated at $85 million.
In fiscal 2014 the business will allow $30 million for a reduction of shipments in the US.
"We have been operating at the higher end of our desired distributor inventory levels in the US," TWE chief executive David Dearie said.
Excess inventory arose because of over-ambitious forecasting of new commercial product launches, improved distributor logistics and out-of-date stock, he said.
"TWE's leadership team in the Americas believes old and obsolete product is limiting the company's growth ambitions. As such, decisive action must be taken to address these barriers to growth," Mr Dearie said.