Treasury Wine Estates (ASX:TWE) reported first-half fiscal 2026 earnings before interest, tax and material items (EBITS) of AUD 236 million, landing slightly ahead of the guidance range the company provided in mid-December. However, statutory net profit after tax swung to a loss of AUD 626 million, driven by a non-cash impairment of U.S. assets that management had previously flagged on Dec. 1.
Chief Executive Officer and Managing Director Sam Fischer told investors the “headline results” were disappointing but said they reflected “decisive action” to return the company to “long-term, sustainable, profitable growth.” Fischer highlighted what he described as positive underlying brand momentum, pointing to depletion growth across key markets, including Penfolds in China and the U.S. (outside of California) and improving execution in several other brands.
Key financial metrics and drivers
EBITS margin declined 7 percentage points to 18.2%, which management linked to sales mix changes and a higher cost of doing business under the operating model. Return on capital employed (ROCE) declined 1.7 percentage points to 9.5% due to lower EBITS. Before material items, Treasury Wine posted net profit after tax of AUD 128 million, with earnings per share of AUD 0.158.
Chief Financial and Strategy Officer Stuart Boxer said a post-tax material items loss of AUD 751 million was recognized in the half, primarily related to the U.S. impairment. He said the impairment reflected more conservative growth assumptions for the U.S. portfolio amid moderating category trends and included:
- A write-down of U.S. goodwill to zero (required to be recognized first under accounting standards)
- Write-downs of selected brands, including Sterling and Beringer
- An inventory write-down, with the largest component tied to excess bulk wine from the 2025 vintage
Boxer added that DAOU, Frank Family Vineyards, and Stag’s Leap were not written down as part of the impairment.
Divisional performance and outlook commentary
Penfolds delivered first-half EBITS of AUD 201 million. Fischer said the result reflected shipment restrictions aimed at parallel imports in China and the comparison to a prior-year period that included elevated shipments after tariffs on Australian wine were removed. He emphasized that in-market demand remained strong and said the portfolio’s “heartland” SKUs, Bin 389 and Bin 407, continued to perform well. Treasury Wine expects Penfolds FY26 EBITS of approximately AUD 400 million and an EBITS margin of about 40%.
Treasury Americas reported EBITS of AUD 44 million. Management cited moderation in the U.S. luxury wine market, disruption tied to the California distribution transition, and cycling of prior-year shipments that exceeded depletions. Fischer pointed to momentum outside California, saying key brands delivered depletions growth ahead of category trends, and said the company outperformed in on-premise channels led by DAOU, Frank Family, and Stag’s Leap. Treasury Americas FY26 EBITS is expected to be approximately AUD 90 million, excluding the impacts of the RNDC settlement.
Treasury Collective delivered EBITS of AUD 28.1 million. Boxer and Fischer attributed the result to weaker U.S. sales conditions, the California transition impact, and the reduction of customer inventory by about 200,000 cases. Management said the portfolio performed in line with expectations in Australia and EMEA, with growth and innovation gains led by Pepper Jack, Matua, and Squealing Pig. The company expects Treasury Collective second-half FY26 EBITS to be higher than the first half.
Depletions, shipment discipline, and China pricing discussion
Fischer said depletions trends were “well ahead” of reported NSR metrics and offered them as a clearer view of underlying momentum. Among the specific data points cited, combined depletions for Penfolds Bin 389 and Bin 407 rose 11%, while China depletions increased 17% in the August-to-December period. Fischer said the momentum was continuing into the Chinese New Year period and said he expected “good growth” versus the prior year.
In Q&A, Fischer addressed questions about pricing in China, saying the company had not changed wholesale pricing and had not provided “extraordinary discounts” to clear inventory. He said increased competition could be occurring as parallel import operators seek volume elsewhere, potentially affecting distributor margins, but he said he expected “more stability and elevation” in wholesale pricing as parallel imports diminish.
Fischer also said the China depletions data came directly from distributors, describing it as the “cleanest set of data” given patchy market data. He said the company cross-checks that information with e-commerce data and Nielsen, while noting limitations in those sources.
Balance sheet, cash actions, and the RNDC settlement
Management said maintaining capital structure strength is a priority. Leverage was reported at 2.4x, in line with December guidance, though Boxer said leverage is expected to be higher at full year due to lower trailing twelve-month EBITDAS and lower cash conversion. The company suspended its FY26 interim dividend, which Fischer called a temporary measure aimed at reducing balance sheet gearing toward target levels, with any resumption dependent on future financial performance and progress on leverage improvement.
Boxer said liquidity remained “healthy,” with AUD 1 billion of cash and committed undrawn debt facilities and no meaningful debt maturities until June 2027.
Cash flow also declined. Net operating cash flow before interest, tax, and material items was AUD 264.6 million, down 38.1% year over year, with cash conversion of 82.4%. Boxer said full-year cash conversion is expected to be lower than the first half due to a net inventory build after the Australian vintage, despite reduced intake plans.
On inventory, Boxer said total inventory volume fell 2% versus the prior corresponding period while value rose 2% (AUD 16 million), reflecting increased luxury inventory offset by reduced premium and commercial inventory. He said Treasury Wine had locked in initial intake reductions for the 2026 Australian vintage and remains confident supply and demand can be balanced over a 2-3 vintage period. In the U.S., he said the company will start managing intake with the 2026 vintage through initiatives including fallowing selected controlled vineyards and reducing grower intake.
Regarding U.S. distribution, management said it reached a settlement agreement with RNDC and described it as providing clarity to its route to market, with RNDC remaining a partner. Fischer said Treasury Wine also expects to partner with Reyes Beverage Group in six states once the planned transaction occurs later in the year. On the California distributor transition with BBG, Fischer said January showed “real improvement” after operational interventions, while noting the company was “not declaring victory” and expected further improvement over time.
Looking ahead, Fischer said Treasury Wine expects second-half EBITS to be higher than the first half and reiterated three near-term priorities: in-market execution, an elevated focus on cash, and accelerating the multi-year TWE Ascent transformation program. Management said it has high confidence in delivering AUD 100 million in cost savings from FY27 over a 2-3 year period and plans to share more detailed plans and targets at an Investor Day in Sydney on June 4.
About Treasury Wine Estates (ASX:TWE)
Treasury Wine Estates Limited operates as a wine company primarily in Australia, the United States, the United Kingdom, and internationally. The company engages in the viticulture and winemaking; and marketing, sale, and distribution of wine. Its wine portfolio includes luxury, premium and commercial wine brands, such as Penfolds, DAOU Vineyards, Wolf Blass, 19 Crimes, St Hubert’s The Stag, Lindeman’s, Squealing pig, Blossom Hill, Frank Family Vineyards, Pepperjack, Wynns, Matua, Seppelt, Beringer, Etude, Sterling Vineyards, Beaulieu Vineyard, Stags’ Leap, Beringer Bros, and Castello di Gabbiano.
