Australia's Treasury Wine settles dispute with US distributor, shares jump

By Kumar Tanishk and Rajasik Mukherjee

Feb 10 (Reuters) - Australia's Treasury Wine Estates TWE.AX said on Tuesday that it had settled a dispute with U.S. distributor Republic National Distributing Company (RNDC) over the closure of its California operations, sending its shares more than 8% higher.

The settlement comes as the luxury winemaker faces mounting challenges in key market China, where shifting drinking habits have slowed sales of its flagship Penfolds inventory.

The Melbourne-based company has been also tightening its belt after scrapping the remaining leg of its share buyback programme in December and taking a A$687.4 million ($486.27 million) non-cash writedown on its U.S. business.

Concerns about Treasury Wine's U.S. earnings grew last year after the company said in June that RNDC planned to exit its California operations, while its distribution partnership across the remaining 24 U.S. states would remain unaffected.

RNDC is one of the largest U.S. wholesale beverage alcohol distributors, specialising in wine and spirits across multiple states.

Last month, RNDC said it was considering divesting its operations in seven states in the U.S., which brokerage firm Citi said could adversely impact Treasury Wine's earnings. Out of the seven states, RNDC wholesales for Treasury Wine in at least five.

Under the settlement announced on Tuesday, Treasury Wine would buy Treasury Americas and Treasury Collective portfolio inventory held by RNDC in California for its original sale value, minus a confidential settlement amount that compensates the firm for the impact of the closure.

Shares of the winemaker rose as much as 8.12% to A$5.590 to post their biggest intraday percentage gain since September 27, 2024.

"It's primarily a relief rally given the recent weakness in the share price, as we now have the first-half headline earnings number, which was in line with consensus," said Omkar Joshi, founder and CIO at Opal Capital Management.

The company raised its forecast for first‑half earnings before interest and taxes to around A$236 million from A$225 million-A$235 million previously expected. This compared with the A$391.4 million reported a year earlier.

($1 = 1.4136 Australian dollars)