Treasury Wine Estates (ASX:TWE) provided an investor update for the first half of FY26, reflecting weaker-than-expected market conditions in the US and China and outlining strategic measures to support long-term growth.
The company reported that category dynamics in key markets have moderated, leading to elevated distributor inventory levels and parallel import pressures, particularly affecting Penfolds pricing in China.
In response, TWE plans to reduce inventory holdings in China and the US over a two-year period and restrict shipments contributing to parallel imports, safeguarding brand strength.
The company expects H1 FY26 EBITS to range between $225 million and $235 million, with H2 FY26 EBITS anticipated to be higher, partly due to the California distribution transition, excluding any potential settlement with RNDC.
Penfolds H1 FY26 EBITS is forecast at around $200 million, Treasury Americas at $40 million, and Treasury Collective at $25 million, with the latter impacted by US tariffs and the ongoing California distribution changes.
Leverage is expected to be approximately 2.5x at H1 FY26, above the 1.5-2.0x target range for around two years, as TWE implements operational and strategic measures to strengthen its capital structure.
Newly appointed CEO Sam Fischer has launched the company-wide transformation program, TWE Ascent, targeting $100 million in annual cost improvements from FY27.
Fischer emphasised the focus on protecting brand equity, simplifying operations, and driving sustainable, profitable growth, leveraging TWE's robust portfolio, market positions, and supply chain capabilities in the face of near-term market headwinds.