Winemaker Treasury Wine Estates will take a $160 million hit as it attempts to address a glut of stock in the United States.
Treasury will destroy more than $35 million of aged and excess stock in the US and offer major discounts after admitting it overestimated the amount of wine needed to supply its US market.
It says it will destroy commercial wine which is designed to be drunk when it is fresh and new, rather than higher-grade products designed for ageing.
The company will also slash the amount of wine it plans to ship to the US, which would cost it up to $30 million.
The reduction in its shipments to the US will also leave the company carrying excess bulk and finished wine and some onerous grape contracts, which Treasury says could cost it up to $85 million.
Treasury said the measures would cost $160 million in 2012/13.
It said its earnings before tax prior to the writedowns was expected to be around $216 million, in line with analysts' exceptions.
CEO David Dearie said over-ambitious forecasting had contributed to the glut of stock in the US.
He said the move to destroy inferior stock would help protect the company's reputation.
"TWE's leadership team in the Americas believes old and obsolete product is limiting the company's growth ambitions," he said in a statement to the Australian Securities Exchange on Monday.
"As such, decisive action must be taken to address these barriers to growth, and I am confident that the steps we are taking support our long term growth agenda."
Treasury is Australia's largest wine producer and owns a string of brands, including Penfolds, Wolf Blass and Rosemount.
At the close of trade on Monday, the company's share price had dropped 71 cents, or 12.2 per cent, to $5.11.
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