Treasury Wine Estates has flagged softer near-term earnings as category conditions weaken across key markets, while outlining a broad reset of inventory, capital structure and operating costs under newly appointed CEO, Sam Fischer.
Fischer and CFO, Stuart Boxer, faced sustained analyst scrutiny over the group’s US strategy, grey market exposure in China, leverage and execution capability during its investor and analyst call today, 17 December 2025.
The call followed TWE’s ASX update outlining moderated earnings expectations, elevated leverage and the launch of a multi-year transformation program, TWE Ascent, targeting $100 million per annum in cost improvements.
TWE expects 1H26 EBITS to be in the range of $225 million to $235 million, around 30 per cent below market expectations. It anticipates second-half earnings to be stronger than the first, which has been impacted by the Californian distribution transition.
“Leverage is expected to be 2.5 times at the first half and above the 1.5 to two times target range for the next two years,” Fischer said.
Slower sales in both the US and China have caused customer inventory levels to push above optimal levels. In China, 400,000 cases worth $215 million will be held back as the group looks to protect brand equity, particularly within Penfolds.
Fischer emphasised that China remains a long-term growth opportunity for the label, despite near-term disruption from weaker luxury demand, reduced large-scale banqueting and parallel import activity.
“In China, depletions grew 21 per cent in the three months to October. This is a very strong performance given the recent trends in the China alcohol beverage market impacted by the reduced frequency of large-style banqueting,” he said.
But a key concern has been growth in the grey market for Penfolds, with the parallel import activity causing major headaches on its pricing and undermining official distributors.
“We’ve identified some areas that need to be reined in, and we need to do it quickly.
“Protecting the strength of the Penfolds brand is an absolute priority for us, and we are making a deliberate strategic decision to significantly reduce shipments that are contributing to product in this channel.”
When pressed by UBS analyst, Sean Cousins, on how TWE had allowed grey market exposure to escalate, Fischer said, “It’s very formalised, quite developed, and you need to remain diligent in relation to how you control it all the time”.
Not so much California dreaming
The US business attracted the most pointed questioning, with analysts challenging whether TWE’s issues were execution-related or structural.
Treasury Americas’ 1H26 EBITS is expected to be approximately $40 million.
While luxury wine sales in the US were positive, TWE’s performance in California was anything but, exacerbated by a messy and protracted contract transition with its distribution partners.
Bank of America analyst, David Errington, pressed Fischer on the company’s commitment to the US market.
“I’ve seen three TWE CEOs lose their job over the US. I don’t want to see a fourth. Why are you committing to the US?”
The three CEOs were David Drearie, Michael Clarke and Tim Ford.
In FY20, Treasury Americas performance surprised the market with a 17 per cent decline in earnings before interest, tax and SAGRA (EBITS). That triggered a profit downgrade from 15-20 per cent to five to 10 per cent, wiping $3 billion from its market capitalisation and 40 per cent off its share price. It also resulted in a shareholder class action.
Fischer said the US was the largest luxury wine market in the world and has been stable.
“Margins have been great. And if you’ve got a strong position that allows you to get a decent share of voice with distributors, then there’s no reason why, through great execution, you can’t see consistent returns.
“I look at the portfolio and say, gee, we’re blessed. We have got a privileged portfolio. We’re in the number one position in the US. So why can’t we deliver on that promise?”
He acknowledged structural challenges but said they would be addressed through TWE Ascent. “Do we need to invest in resource to help us to compete?” he said. “These are the kinds of things that I need just a little bit of time to look at through Ascent.”
Inventory and earnings
Jefferies analyst, Michael Samotis, asked whether the $215 million NSR inventory reduction in Penfolds and additional reductions in the US should be treated as one-off impacts.
CFO Stuart Boxer said Samotis had laid out the correct thing to focus on.
“It’s really the $100 million and $125 million that you should be thinking about when you’re trying to isolate the non-recurring components over the next couple of years,” Boxer said, referring to the US inventory adjustments.
On DAOU synergies, Boxer said, “The reduction really reflects the fact that a significant proportion of the synergies is to do with procurement, which was linked to volume. As volumes build in the future, then that synergy number will increase,” he added.
On the Ascent
Central to TWE’s reset is the company-wide transformation program, TWE Ascent, targeting $100 million per annum in cost improvements, with initial benefits expected from FY27 and full realisation over two to three years.
“I’m energised by the opportunity to accelerate a transformation agenda to reshape TWE for its next era. We are focused on simplifying the way we operate, strengthening execution and realising material cost benefits that can be reinvested in growth.”
TWE said further detail on the program will be provided at its FY26 half-year results in February, with a full update by the end of FY26.
“With these changes, and supported by strong business foundations, we are confident TWE will be well positioned to deliver sustainable, profitable growth over the long term,” Fischer said.
