Maurice Blackburn and litigation funder IMF Bentham are pursuing a class action against ASX listed global wine merchant, Treasury Wine Estates Ltd. The claim was filed in the Federal Court of Australia on 2 July 2014.
Treasury Wine Estates Limited (TWE) is listed on the Australian Securities Exchange (ASX: TWE) and trades as a wine producer and supplier in Australia, the United States (US) and other world markets.
On 17 August 2012 TWE provided market guidance that its FY13 EBITS* result would be more than $210 million. The company stated that its earnings would exhibit growth on a constant currency basis while it worked with its US distributor partners "to reduce inventory levels". TWE provided the market with positive guidance for FY14 by stating that FY14 EBITS growth would be greater than the average growth in the previous two years.
On 22 October 2012 TWE provided further positive guidance for FY13 and FY14 stating "we expect constant currency EBITS growth for the full year to be in the mid-single digit range before rebounding to a growth rate of greater than the 15.8% average of the past two years".
On 28 February 2013 the company acknowledged that its US distributor inventory levels would not reduce during FY13 because of "underperformance of tactical brands and non-repeated promotional activities in large strategic accounts". However TWE confirmed the FY13 EBITS growth forecast and stated that there were: "Plans in place for a strong second half".
Alleged corrective disclosures and share price reaction
On 15 July 2013, TWE announced write-downs of $190 million that were associated with the excess US distributor inventory arising in TWE's Americas segment.
TWE stated that three material items amounting to approximately $160 million would be provisioned in its FY13 accounts. It said that the expected impact on FY14 earnings from lower shipments to the US would be up to $30 million.
TWE's share price fell by a total of 17% by the end of the second trading day after the 15 July announcement.
On 22 August 2013 TWE confirmed the write downs and stated its US distribution partners were carrying inventory which was 10 to 11 weeks in excess of targets; equivalent to approximately 3 million cases in excess stock. TWE also announced FY13 EBITS of $209 million and that its statutory net profit was $42.3 million compared to $89.9 million in FY12. The company also announced FY13 cash conversion of 54.8% compared to 96.4% in FY12.
TWE's share price fell a further 5% in the two days following the 22 August 2013 results announcement.
TWE is an ASX a listed disclosing entity. As such, it is required to comply with the "continuous disclosure" regime under ASX Listing Rule 3.1 and section 674 of the Corporations Act. Under these provisions, TWE is required to advise the market of all information of which it was, or ought to have been, aware which might materially affect its share price. Information is likely to have a material effect on the share price if the information would be likely to influence persons who commonly invest in shares in deciding whether to buy, sell or retain shares.
The class action alleges that the information released on 15 July 2013 had a material impact on the company's share price and, as TWE knew or ought to have known that the write downs were inevitable, the market should have been told earlier.
The Corporations Act also proscribes misleading conduct. A company that tells the market that its prospects are materially better than they in fact are misleads the market. The claim alleges that TWE withheld material information from the market about its US distributor network and financial impacts on the company.
The Claim Period
The claim alleges that TWE's misleading statements and its failure to disclose information about its US distributor network caused investors who bought TWE shares from 17 August 2012 to 14 July 2013 to pay too much for the shares only to suffer substantial loss when the market was told the truth on 15 July 2013.
The claim was filed on behalf of investors who had signed a funding agreement with IMF Bentham before 2 July 2014.
To find out more about the action visit www.imf.com.au or call 1800 016 464.
Please note that the Maurice Blackburn class action against TWE is proceeding well and is proceeding as planned.
Group members may have seen media reports about class action litigation against TWE that was commenced by Mark Elliott and Melbourne City Investments (MCI). Neither Maurice Blackburn nor IMF Bentham is involved in that litigation.
Important update: On 10 February 2015, the Federal Court of Australia made orders for the class in the Maurice Blackburn class action to be opened and therefore the claim is now brought on behalf of all investors who bought shares during the claim period, not just investors who had signed a funding agreement with IMF Bentham. If this affects you, to find out more please contact us on 02 9261 1488.