Treasury Wines 1H26 EBITS had been pre-announced. The new news included a suspension of dividend payments given high gearing and clarity on its volume performance. The actions from new CEO Sam Fischer highlight a need to fix the supply-demand balance across its key markets and reduce debt. Depletions growth in Penfolds still looks encouraging. However, destocking over the next two years will result in a lack of any apparent earnings recovery.  The future growth of Penfolds is not appropriately reflected in the share price and long-term earnings upside exists once the destocking is complete.

Treasury Wines’ new CEO Sam Fischer provided an update that resets the company’s inventory position in its key Chinese and US markets. The disclosure confirms concerns that distributors hold too much inventory. The underlying earnings of Treasury Wines has been overstated in FY24/FY25 and will be understated in FY26e/FY27e. The company will need to rebuild trust and transparency with investors in order to achieve a higher multiple.

Treasury Wines FY25 result highlighted the divergent performance across its divisions. Penfolds had 17% EBITS growth and still has a good runway for growth, while the Americas was carried by DAOU acquisition synergies. Americas underlying EBITS and Treasury Premium Brands both declined. The company clearly believes its shares are under-valued with a $200 million buyback confirmed. The more interesting debate that could build is whether Treasury will consider a break-up. We value Penfolds at $7.52 per share, providing an underpinning for valuation.