Treasury Wine Estates on Tuesday confirmed a settlement with Republic National Distributing Company regarding RNDC’s closure of its California operations in September. Under the terms, Treasury Wine will repurchase portfolio inventory held by RNDC in California - covering stock designated as Treasury Americas and Treasury Collective - at the original sale price, adjusted downward by a confidential settlement amount designed to compensate RNDC for the effects of the closure.
The company also updated its first-half earnings before interest and taxes (EBIT) outlook, saying it now expects around A$236 million ($167.35 million) - a small increase above its previous guidance range of A$225 million to A$235 million.
Chief Executive Sam Fischer noted that RNDC’s exit from California had a notable effect on the company’s first-half results. Treasury Wine had previously disclosed in June of the prior year that RNDC intended to withdraw from its California operations while preserving the distribution relationship covering the remaining 24 U.S. states.
The settlement focuses on the California-held inventory and preserves Treasury Wine’s right to reclaim that stock for its original sale value, subject to the confidential deduction. The company did not disclose the size of that confidential amount.
Separately, following RNDC’s announced divestment of several markets to Reyes Beverage Group, the distribution arrangement is expected to represent less than 20% of Treasury Americas’ net sales revenue. The company has indicated that distribution in the other U.S. states covered by the RNDC partnership remains unaffected by the California closure.
Financial context and currency
Treasury Wine’s revised EBIT outlook raises its midpoint above the earlier guide. The company provided the Australian dollar figures and noted the exchange rate used in reporting - $1 equals 1.4102 Australian dollars - as a reference for the converted U.S. dollar amount of the revised outlook.
The settlement and guidance update address the consequences of RNDC’s market changes in California and the reallocation of inventory held in that jurisdiction. The confidential element of the settlement means the precise adjustment to the repurchase value is not publicly disclosed.