Treasury facing legal action over dumping stock

Global wine giant Treasury Wine Estates is facing legal action from Australian shareholders after it was forced to write off six million bottles of wine in July due to oversupply.

According to AFP, law firm Maurice Blackburn and class action funder IMF Australia are preparing a shareholder lawsuit against Treasury Wine Estates, which owns Penfolds and Wolf Blass among other wine brands.

This July, the company announced an AU$160m loss in the US market and the destruction of AU$35m worth of “old and aged commercial stock” in America due to oversupply issues.

As a result, in August the company reported a 53% profit slump in its full-year results, with profits down from AU$89.9m in 2012 to AU$42.3m, leading in part to the stepping down of Treasury’s CEO, David Dearie in September.

AFP reports that the class-action lawsuit, which has yet to be formally filed, will allege that TWE failed to adequately inform shareholders of the overstocking of its US distributors and the potential financial impact of its actions, which led shareholders to lose millions of dollars.

“By not disclosing the possibility of a material write-down when we allege it should have, the company caused shareholders to suffer financial loss,” IMF investment manager, Simon Dluzniak, told AFP.

According to Maurice Blackburn principal Ben Slade, Treasury “knew or should have known” that large financial losses were inevitable as early as August 2012 – a year before it disclosed the write-downs, but chose to “project earnings growth when it must have been able to work out that massive write-downs were on the horizon,” Slade said.

In a statement to the Australian stock exchange, Treasury said: “TWE strongly denies any allegations of wrongdoing and will defend any class action proceedings vigorously.”