Treasury Wine shares tank as RBC flags 'high level of uncertainty'
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More news: Treasury Wine Estates was the worst performer on the ASX 200 in morning trade after the country's largest standalone winemaker withdrew its full-year earnings guidance amid uncertainty in China and California.
Treasury Wine shares were down 12.5% to $6.11 at 11:25am AEST, having dropped around 50% over the last 12 months.
RBC Capital Markets analyst Michael Toner said Treasury Wine's decision to scrap its guidance for "modest EBITS growth" in its Americas business "was not unexpected". RBC had expected -2.5% growth this year, compared to consensus estimates of -1.5% growth.
The group had already flagged soft depletion trends and disruption caused by its California distributor transition in August, Toner noted.
He also believes the market anticipated a reduction in guidance for Penfolds in FY26 and FY27, reflected in consensus estimates already "materially below" company guidance.
What they said: "However, the complete withdrawal of guidance for Penfolds in FY26 and FY27 speaks to the high level of uncertainty caused by evolving consumption dynamics in the Chinese market, exacerbated by the changes to large-scale banqueting occasions," Toner said.
"The pause on the remainder of the buyback was unexpected but is prudent in our view in the context of near-term trading uncertainty."
Treasury Wine scraps guidance, pauses buyback amid 'uncertain outlook'
The news: Treasury Wine has scrapped its full-year earnings guidance after flagging an "uncertain outlook" for its Penfolds and Americas businesses.
The winemaker has also paused its $200 million share buyback, opting to wait until there is "greater clarity around trading conditions and expectations".
The context: The winemaker said it "no longer believes it is appropriate" to retain its Penfolds guidance for "low to mid double-digit" EBITS growth in FY26 and around 15% EBITS growth in FY27.
The group said first-quarter shipments of Penfolds were in line with expectations across its key markets. However, it warned that recent depletions of stock in China "remain weak relative to plan".
"If the performance trends indicated by the preliminary data continue through FY26, Penfolds depletions targets for FY26 in China are unlikely to be achieved," the company said.
Treasury Wine confirmed that several initiatives are now being implemented to mitigate the expected impacts in China during the current financial year, including options to re-allocate product to customers in other key markets.
Meanwhile, the group said depletions in California have been impacted by the transition to a new distributor, including key account set-up activities last month.
Treasury Wine had expected "modest EBITS growth" in FY26 for Treasury Americas. The company said this morning that negotiations were ongoing with its former California distributor Republic National Distribution Company (RNDC), including over the management of remaining inventory held by RNDC.
"Treasury Wine maintains its objective of achieving a settlement that mitigates the full impact for FY26 EBITS associated with RNDC's closure in California, including any impacts associated with the treatment of the remaining inventory," the company said.
"At this time, however, there is increased uncertainty that this will occur and therefore Treasury Wine no longer believes it is appropriate to retain the guidance for modest EBITS growth in Treasury Americas in the year."
Treasury Wine has also paused its on-market share buyback of up to $200 million, announced in August. By the end of September, $30.5 million of shares had been bought back, reflecting 15% completion through the first quarter.
The source: ASX
