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Treasury Profits, Share Price Hit By Plan To Cut U.S. Inventory, Take A$160M Writedown

July 15, 2013

Treasury Wine Estates’ plan to slash its inventory in the U.S. market and take an A$160 million ($145.7m) writedown sent its share price spiraling downward earlier today. After TWE announced that it would work with U.S. distributors to eliminate its old stock, the company’s share price on the Australian Stock Exchange closed down by 12.2% at A$5.11 ($4.65).

TWE’s plan will not only sharply reduce its profits from fiscal 2013, but also for fiscal 2014, when the company says lower shipments resulting from the inventory reduction should cut profits by around A$30 million ($27.3m). Still, TWE chief executive David Dearie feels the move is a necessity for reversing the company’s decline in the U.S. market. “TWE’s leadership team in the Americas believes old and obsolete product is limiting the company’s growth ambitions,” he said. “As such, decisive action must be taken to address these barriers to growth, and I am confident that the steps we are taking support our long term growth agenda.”

TWE’s U.S. depletions have dropped markedly since 2009, when they were at roughly 16.5 million cases, according to Impact Databank. Last year, the company’s U.S. depletions dipped below 13 million cases. Each of TWE’s top five brands in the U.S. market—Beringer, Lindemans, Stone Cellars, The Little Penguin and Meridian—has lost ground over the past three years. However, in 2012, both Beringer and Lindemans managed to post modest growth over the previous year.

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