Treasury Wine plunges as new guidance marks 'significant miss' to estimates
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More news: Shares in Treasury Wine Estates tumbled in morning trade after the winemaker announced softer-than-expected earnings guidance and unveiled a new cost-cutting strategy following weakness in the US and China markets.
Treasury Wine shares were down 11.8% to $4.85 at 10:45am AEDT, having dropped 58% over the last 12 months.
RBC Capital Markets analyst Michael Toner said Treasury Wine's first-half guidance of $225 million-$235 million was a "significant miss" to expectations, coming in around 30% below consensus forecasts.
He noted that cost-outs, dividend cuts and other levers "may be insufficient" to manage the company's elevated leverage position.
Treasury Wine unveils cost-out plan amid downturn in US, China
The news: Treasury Wine Estates has announced a group-wide transformation program, named 'TWE Ascent', targeting $100 million a year in cost improvements after acknowledging ongoing weakness in its US and China markets.
The numbers: The winemaker, which previously scrapped guidance for year-on-year earnings before interest and taxes (EBITS) growth in FY26, said first-half EBITS is expected to be between $225 million and $235 million, with an improved second half. The group delivered EBITS of $770 million in FY25.
The company has also cancelled its on-market share buyback of up to $200 million, of which $30.5 million was completed in the first quarter.
The context: Treasury Wine said category dynamic have weakened in recent months, particularly in the US and China, with near-term improvement now expected to be unlikely. Depletion growth expectations are being moderated, it said.
"These dynamics have led to customer inventory holdings in China and the US being above optimal levels, while parallel import activity is causing ongoing disruption to Penfolds pricing in China," the company noted.
Treasury Wine said it will take "deliberate strategic action", including reducing customer inventory holdings in the US and China to align with moderated depletion growth expectations.
It also plans to "significantly" restrict shipments that are contributing to parallel import activity in China to "protect the strength of the Penfolds brand".
TWE Ascent, introduced following the commencement of new CEO Sam Fischer, will target $100 million in cost improvements per year, with initial benefits starting in FY27 and full realisation across a two- to three-year period.
What they said: "We are currently experiencing category weakness in the US and China, two of our key growth markets, which will impact our business performance in the near-term," said Fischer.
"Maintaining the strength of our brands and the health of their respective sales channels is of critical importance to our management team and our board as we navigate through the current environment."
The source: ASX
