Australian Vintage has flagged a stronger second half, saying it remains on track to deliver FY26 sales growth and free cash flow neutrality (excluding investments), despite a softer first half and break-even operating earnings.
In its 1H FY26 update, the wine company said sales were largely unchanged, down 1.7 per cent on the prior corresponding period (pcp), while net debt at 25 December was $110 million, in line with previous market guidance. Reported EBITDAS was break-even, down $11 million on the prior year.
AVG said the earnings decline included several one-off impacts, with the largest linked to the accounting impact of exiting another vineyard lease as part of its inventory rebalancing strategy, as well as a foreign exchange impact from a stronger Australian dollar. Together, those items represented around $9 million of the variance.
Innovation and portfolio shift to drive 2H momentum
Management is pinning the second-half recovery on innovation, portfolio mix improvement, and recent acquisitions.
AVG said Poco Vino, its small-format wine range, is expanding rapidly across more than nine countries and is on track to add more than $15 million in additional revenue on a full-year basis. The company said the brand is currently scanning about 12,000 bottles a day globally.
The company also highlighted strong momentum in Lemsecco Spritz, with sales up 3x on the prior year and H2 launches confirmed in China and the US. In no- and low-alcohol, AVG said McGuigan Zero sales in the UK were up 20 per cent, while Not Guilty in North America was up 18 per cent.
Recent portfolio moves are also expected to contribute more meaningfully in the second half, including the global acquisition of MadFish and a new Invivo distribution partnership, which will give AVG full control and revenue benefit for the Graham Norton wine range in the UK and Europe.
Shift from heavy reds reshapes strategy
AVG said its strategy is being shaped by structural category changes, including consumer migration away from heavier red wines toward white, rosé, sparkling and no/low alcohol products. The company said these trends are intensifying global oversupply pressures in red varietals and increasing pressure on producers with fixed supply contracts.
In response, AVG said it is continuing to reduce its exposure to excess red grape supply through vineyard lease exits and contract non-renewals, while reviewing capacity optimisation opportunities at Buronga Hill Winery.
Cash and working capital key watchpoints
Cash and net debt remain central to the FY26 execution story. AVG said first-half cash outflow was about $35 million, with $11 million tied to strategic investments including the MadFish acquisition, UK distribution changes, inventory purchases, a new Poco Vino line in Australia, Poco Vino inventory build, and a vineyard lease exit.
The company said higher interest costs, operating efficiency capex, and delayed payments from major retailers also weighed on first-half cash flow. However, it expects stronger H2 inflows from working capital de-leveraging, innovation and acquisition sales growth, and lower grape payments as contracts roll off.
AVG also disclosed it had derecognised a $10 million deferred tax asset at December 2025 due to recent losses and audit rules, but said it retains more than $100 million in cumulative tax losses available to offset future profits over the medium term.
