TWE takes action on US inventory

Today Treasury Wine Estates Limited (ASX: TWE) confirmed that fiscal 2013 EBITS is expected to be in line with analysts’ consensus of $216m, before material items including this provision.

TWE announced that it is working with its major US distribution partners to address their excess, aged and deteriorating inventory. This includes action to destroy their old and aged commercial stock, ensuring that only the freshest and highest quality wines are available for brand conscious US consumers. TWE expects to raise a provision in fiscal 2013 for this initiative, with the cost expected to be up to $35m.

To further accelerate the sale of excess current vintage wines in the US distribution network, TWE expects to provide up to $40m in additional Discounts and Rebates (D&R).

As a result of significant improvements to key US distributor logistics models, which have acted as a catalyst for TWE to examine its inventory stocks in much greater detail, constant currency EBITS growth for fiscal 2014 will be impacted by a reduction of shipments in the US as TWE works with distributors to deliver an increasingly efficient supply model and inventory holdings. TWE expects the impact from lower shipments in fiscal 2014 to be up to $30m.

TWE Chief Executive, David Dearie, commented: “We have been operating at the higher end of our desired distributor inventory levels in the US and while TWE has been focussing on reducing days’ inventory organically, advances in logistics and warehousing, combined with a renewed focus on efficiency has resulted in US distributors significantly reducing their targeted inventory levels”.

For more information, download the ASX Announcement (PDF, 181 KB)

A recording of the media briefing held at 11am (AEST), 15 July 2013, may be heard here.

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