A further deterioration in demand in US and Chinese markets is set to spark a 40 per cent plunge in Penfolds producer Treasury Wine Estates’ profit for the first half of the financial year, with the company now conceding any improvement in the near term is “unlikely”.
In an announcement on Wednesday morning, the winemaker said it would significantly cut its inventory in both countries and curtail imports to boost sales and improve the perception of its upmarket Penfolds brand, something chief executive Sam Fischer said was “critical”.
“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,” he said.
Treasury said its first-half earnings were now expected to come in at between $225 million to $235 million, a 40 per cent decline on the $391 million in the first half of the 2025 financial year.
The news comes after Treasury earlier this month wrote off over $687 million in value for its Americas business, which it had grown extensively under former CEO Tim Ford.
The winemaker will also undergo a full re-assessment of its portfolio and operating model, dubbed “TWE Ascent”, with the goal of cutting $100 million in costs over the next two to three years.
TWE Ascent will analyse the company’s position in key markets and its structure, with Fischer saying management hoped to see the first cost savings in the 2027 financial year.
“We have commenced work to identify opportunities to simplify the way we operate, to strengthen our execution focus right across the business and to realise significant cost benefits,” he said.
“I’m energised by the opportunity to accelerate a transformation agenda to reshape TWE for its next era, leveraging these strong foundations. I look forward to providing our investors with updates on our progress over coming months.”
Penfolds, which makes up 60 per cent of Treasury’s earnings, has seen poor sales growth for its “ultra-luxury” division, with sales in China especially coming in below expectations. As a result, Treasury will reduce its inventory in the country by 400,000 cases, valued at $215 million.
In the company’s Americas division, depletions – which measure wine sold to consumers, rather than just distributors – have been even more sluggish, falling 4.6 per cent for the year-to-date, with Treasury cutting 300,000 cases from its inventory.
Treasury has been looking for a new distributor in the US after a key player, Republic National Distributing Company, in June said it would stop operations in California from September. The company said negotiations were still ongoing.
