Treasury Wine Estates (OTCPK:TSRY.Y) Update / Briefing Transcript

Treasury Wine Estates (TWE) Conference Call Summary Company Overview - Company: Treasury Wine Estates (OTCPK:TSRY.Y) - CEO: Sam Fisher, who assumed the role on October 27, 2025 - Key Brands: Penfolds, DAOU, Frank Family Vineyards, Matua Industry Context - The global alcohol category, particularly the wine industry, is facing challenges - Economic and category dynamics are weak, especially in the U.S. and China - Inventory levels in these markets are above optimal levels, necessitating strategic adjustments Core Points and Arguments 1. Strategic Actions for Growth: TWE is taking deliberate strategic actions to ensure sustainable growth, including right-sizing inventory and reducing shipments contributing to parallel imports in China [2][4][5] 2. Performance Expectations: First half 2026 EBITS is expected to be between AUD 225 million and AUD 235 million, with a higher second half expected [6][11] 3. Inventory Management: TWE will reduce customer inventory holdings in the U.S. and China, particularly for ultra-luxury tiers, by approximately 400,000 cases over two years [5][13][14] 4. TWE Ascent Program: A multi-year transformation program targeting AUD 100 million in annual cost improvements over two to three years, focusing on portfolio evolution, operating model simplification, and execution excellence [6][21][23] 5. Market Dynamics: Depletions growth in China for Penfolds was 21% in the three months to October, but growth expectations have been moderated due to market dynamics [12][14] 6. Luxury Market Position: The U.S. is the largest luxury wine market, and TWE has a strong portfolio, but execution needs to improve to realize full potential [9][15][41] 7. Challenges in the U.S.: Recent performance in California has been weak, impacting near-term depletions growth expectations for Treasury Americas [15][16] 8. Parallel Import Issues: Parallel import activity is disrupting Penfolds' pricing, prompting TWE to take significant action to protect the brand [5][14][31] Additional Important Insights 1. Long-term Opportunities: Asia, particularly China, remains a significant long-term opportunity for TWE, with Penfolds well-positioned [9][10] 2. Operational Complexity: TWE's current operating model is complex, with opportunities for simplification to enhance efficiency and accountability [10][22] 3. Financial Health: Leverage is expected to be 2.5 times in the first half of 2026, above the target range of 1.5-2 times for approximately two years [6][19] 4. Cost Management: The company is focused on retaining the strength and flexibility of its capital structure while managing inventory and operational costs [19][20] 5. Brand Strength: Despite challenges, TWE's brands remain strong, and there is confidence in their future potential [3][23] Conclusion - TWE is navigating a challenging environment with strategic actions aimed at ensuring long-term growth and brand strength. The focus on inventory management, operational simplification, and execution excellence is critical for overcoming current market dynamics and positioning the company for future success.