Treasury Wine F26 EBITS $492.3m, Statutory Loss $1.08b

Treasury Wine Estates Ltd (ASX:TWE) reported F26 earnings before interest, tax, SGARA and material items (EBITS) of $492.3 million, ahead of its $480 million to $490 million guidance range and a decline of 36.1% versus the prior corresponding period, which the company said reflects the impact of moderated category trends, initiatives to ensure brand and channel health and the cycling of elevated shipments in the prior year. Net sales revenue decreased 12.8% to $2,561.0 million on reduced shipments across all divisions, volume fell 9.9% to 19.2 million cases, gross profit margin was 45.7% of net sales revenue, down 2.9 percentage points, and the EBITS margin was 19.2%, down 7.0 percentage points. The statutory net loss after tax was $1,078.7 million, reflecting a post-tax material items loss of $1,308.7 million driven by non-cash impairment of US-based assets, including an incremental $558.4 million recognised in the second half relating to initiatives to accelerate rebalancing of the US supply chain and a further impairment of brands. Net profit after tax before material items and SGARA was $275.3 million, down 41.5%. No dividend was declared for F26, compared with 40.0 cents per share in F25.

By division, Penfolds EBITS fell 15.2% to $404.3 million at a margin of 40.5%, Treasury Americas EBITS fell 61.4% to $90.2 million at a margin of 15.7%, and Treasury Collective EBITS fell 47.8% to $68.0 million at a margin of 6.9%. Penfolds depletions, measured by value, rose globally, led by China up 34.7%, Asia excluding China up 18.1% on a basis adjusted to exclude the estimated value of depletions contributing to parallel activity, and Australia up 5.7%; Treasury Wine Estates said the transition of volumes previously parallel imported into its authorised distribution channels contributed approximately half of the depletion growth rate. Treasury Americas depletion volumes across the total US grew 4.2%. Leverage of 2.8 times is expected to be the peak ahead of a return to the below 2.0 times target by the end of F28, which the company said would be driven by free cash flow, divestment proceeds and, from F28, earnings improvement; closing net debt was $1,782.4 million and cash conversion, which TWE defines as net operating cash flows before financing costs, tax and material items divided by EBITDAS, was 81.4%. The TWE Ascent transformation program is progressing to plan, with the organisational structure being finalised ahead of transition to a regional operating model on 1 October 2026 and the $100 million per annum cost reduction target on track to be fully realised by F29, including approximately $40 million of benefit expected in F27. The company expects F27 EBITS to be at least equivalent to F26, weighted approximately 55% to the second half, and said its strategic and operational review of the Americas business is ongoing with advisors appointed.