Treasury Wines takes $160m hit to earnings Reputation ... Treasury says it will destroy old stock to maintain quality. Treasury Wine Estates will take a $160 million before tax hit to its earnings to help rid the key US market of aged and excess wine stock. The move will also help the winemaker cope with a restructure of its distribution system into America which will lead it to carry extra wine and onerous grape contracts on its balance sheet. A string of non-cash write offs linked to the Americas region will see some wines destroyed after overly ambitious forecasts for new product launches left too much wine sitting in warehouses. Shares in Treasury fell as much as 10 per cent on news of the surprise write-off. They are down 7 per cent at $5.41 in early trade. Treasury, which owns a portfolio of iconic wines including Penfolds, Wolf Blass, Rosemount and Beringer, also confirmed this morning that it expected its pre-tax earnings for fiscal 2013 to be in line with analysts" consensus of $216 million, before material items including the new provision linked to its US business Treasury said in an announcement this morning 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. Treasury expects to raise a provision in fiscal 2013 for this initiative, with the cost expected to be up to $35 million. To further accelerate the sale of excess current vintage wines in the US distribution network, Treasury said it also expected to provide up to $40 million in additional discounts and rebates. As a result of significant improvements to key US distributor logistics models, which have acted as a catalyst for Treasury to examine its inventory stocks in much greater detail, constant currency EBITS growth for fiscal 2014 would be impacted by a reduction of shipments in the US as Treasury works with distributors to deliver an increasingly efficient supply model and inventory holdings, the company said. Treasury expects the impact from lower shipments in fiscal 2014 to be up to $30 million. The company warned that the reduction in US shipments would result in it carrying excess bulk and finished wine and some onerous grape contracts. Treasury estimates the cost of this provision to be $85 million in fiscal 2013. Treasury chief executive, David Dearie, said: "We have been operating at the higher end of our desired distributor inventory levels in the US and while Treasury has been focusing 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." Mr Dearie said Treasury made the decision to destroy old and out-of-date product in the US distribution network in order to maintain brand reputation. Excess inventory affecting Treasury's US supply chain has arisen as a result of three elements: over ambitious forecasting of new commercial product launches, improved distributor logistics, and old and out-of-date stock which both Treasury and our distribution partners would prefer to destroy.