Treasury Wine CEO to Leave After A$160 Million Writedown

Treasury Wine Estates Ltd., the world’s second-largest publicly traded wine maker, fell to its lowest level in more than a year after saying Chief Executive Officer David Dearie was leaving the company immediately.

Treasury “needs a leader with a stronger operational focus to deliver the company’s growth ambitions” after A$160 million ($150 million) of writedowns on out-of-date inventory, Chairman Paul Rayner said in a regulatory statement today. The shares fell 6.3 percent to close at A$4.45 in Sydney, their lowest level since Aug. 16, 2012 and the worst performer in the S&P/ASX 200 consumer staples index.

Dearie had tried to increase profit margins on labels including Penfolds and Beringer by improving branding at a time when years of oversupply in the global wine industry appeared to be ebbing, giving an opportunity to raise prices. That didn’t stop writedowns announced July 15 to destroy and discount bottles and pay out onerous grape-buying contracts.

“You can do what you want with Penfolds, but unless they can get the story straight on the commercial wines there’s just no way to make money,” Dan Hurren, an analyst at UBS AG in Sydney, said by phone. “Wine isn’t just about brands, it’s about managing costs through the entire range of products.”

Dearie’s departure follows Chief Financial Officer Mark Fleming, who quit about six weeks before the company announced the U.S. writedown. Warwick Every-Burns, a director of the Melbourne-based company, will become interim CEO.

Business Split

The company held an an excess of low-valued bulk wine because of lower sales in the U.S., which will reduce earnings by as much as A$30 million in the year ending June 2014, it said in July.

“The losses we had in the U.S. were significant and quite disappointing,” Rayner said in an investor call after the announcement today. “Having someone with a better balance of skills, or the right balance of skills, will hopefully put us in a better place.”

Shares of the Melbourne-based company have fallen 31 percent since a peak on May 17, while the S&P/ASX 200 index has gained 1.4 percent in the same period.

Dearie, a former managing director of Jack Daniels owner Brown-Forman Corp.’s Asian distribution business, joined Fosters Group Ltd.’s wine division in 2009 before it was spun off as Treasury Wine in 2011. Fosters was itself bought for A$10.5 billion by SABMiller Plc later that year.

(Updates with closing share price in second paragraph.)
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