Join our daily newsletter At The Bell to receive exclusive market insights
Treasury Wine Estates (ASX:TWE) Chairman John Mullen has issued an address to the market ahead of its AGM at 10am AEDT today outlining ongoing difficulties in the ‘macro environment for alcoholic beverages’ to which he pointed at the cost of living.
However, Mullen also outlined that demand for luxury brands in China and the Americas appears to be rising with depletions in both regions rising. All in all, TWE appears set to gear itself towards higher-end consumers where, in Mullen’s words, the cheap wine end of things is a decreasing market.
“Pleasingly, the luxury wine market continues to grow and so TWE’s move to rebalance the portfolio towards luxury as opposed to lower end wines where the market continues to shrink, is bearing fruit,” Mullen said.
“Financial discipline is fundamental to our transformation … in that context, the Board suspended the F26 dividend. We understand the importance of dividends to shareholders and did not make this decision lightly. The Board will consider resuming dividends as leverage moves towards our target level.”
However, John Mullen left CEO Sam Fischer to deliver the less-than-glossy news to investors pre-AGM.
Earnings before tax margins fell -19% in FY2026 which coincided with a net loss of -A$1.1B for TWE which it blamed on losses across US assets. NPAT was $275M.
Still, the Penfolds brand which TWE is perhaps best known for remains a ‘strong’ brand globally alongside DAOU and Matua. TWE’s pivot to a luxury consumer base is part of its ‘Ascent’ strategic transformation program.
It’s made up of several steps: target luxury consumers better able to handle economic shock, pushing out new health-focused wine brands; market more dynamically depending on what country it’s in; fix supply chain issues (predominantly in the US where TWE’s largest distro went bankrupt recently), and finally – shareholder value.
So, really, it’s only three steps, but that’s neither here nor there.
As for FY27? TWE expects earnings-before-tax margins to be equitable to FY126, suggesting there’s more trouble ahead for the company.
What will most likely determine shareholder reaction is the response to TWE’s vagueness around when the stock may pay dividends again.
Join the discussion: See what’s trending right now on HotCopper, Australia’s largest stock forum, and be part of the conversations that move the markets.
The material provided in this article is for information only and should not be treated as investment advice. Viewers are encouraged to conduct their own research and consult with a certified financial advisor before making any investment decisions. For full disclaimer information, please click here.
