August 8, 2019 / 2:46 AM / 3 months ago

Australia's Treasury Wine rejects report alleging it inflated profit

Aug 8 (Reuters) - Treasury Wine Estates Ltd on Thursday rejected a research report that alleged the Australian winemaker had inflated its profits.

Hong Kong-based GMT Research said Treasury’s profits may have been inflated by as much as 50% over the past two years.

It alleged that the world’s largest standalone winemaker used acquisition accounting to write down inventories, and raised concerns about the difference between operating cash flow and profit.

Treasury Wines said in a statement to the Australian Securities Exchange the report was “false and misleading”, and that it would respond specifically to the claims when it announced its preliminary annual results on Aug. 15.

Treasury shares quickly recovered from a 7.7% drop in morning trade after the company’s rejection of the claims, climbing as much as 1.8% to A$16.85. The benchmark was up 0.2%.

Reuters has not seen the full report, except for a brief of its content on the Hong Kong-based company’s website.

In May, the owner of the Penfolds, Beringer and Wolf Blass labels faced a short call from a U.S.-based hedge fund manager. Its stock price tumbled after the company revealed that Chief Executive Michael Clarke had sold some of his shares a week before the short scare.

In Thursday’s ASX release, Treasury also reaffirmed its guidance for the year.

Reporting by Nikhil Kurian Nainan in Bengaluru; Editing by Stephen Coates

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