Full Year 2025 Treasury Wine Estates Ltd Earnings Presentation Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Craig Woolford - MST Marquee - Analyst : Now firstly, Tim, well, I'm on steering Treasury for a very turbulent time and repositioning as a luxury business, it's been a very impressive journey on that front. Obviously, still some challenges ahead for the industry, but well done on that front. I think my first question is really around the transparency of what is and isn't working in China. The businesses performed relatively well, but you are talking about some shifts in consumption habits. I think underneath the surface, we get a lot of feedback from various sources that can diverge from the performance that we're seeing within the business itself. My sense is have been for [nine] and then ranges are doing well, but some of the others are not doing well. So it would be good to get some more sort of honest assessment about what parts of the portfolio are not working in China. And you seem confident that even with the shift in consumption that you can still deliver on growth in '26. So I could understand how -- what gives you that confidence?

Question: Craig Woolford - MST Marquee - Analyst : So just to be 100% clear, like this change in consumption, you don't see it having any bearing on the guidance that you provided for '26?

Question: Craig Woolford - MST Marquee - Analyst : That's very clear. If I could just squeeze in a shorter one, just on revenue, the revenue impact you mentioned on US distribution. Just what is the $50 million exactly? Is it the difference between what RNDC had an inventory and what breakthrough will have going forward? Or how did you come up with the $50 million?

Question: Michael Simotas - Jefferies LLC - Analyst : I actually wanted to follow up on both of Craig's questions, if I can. The first one on Penfolds. I just want to understand what makes you so confident to reiterate guidance given the change in trends that you've seen in China and what you're effectively assuming happens with respect to those occasions to deliver on that guidance?

Question: Michael Simotas - Jefferies LLC - Analyst : Okay. And then on the US distributor change. Firstly, on the $50 million NSR, based on what you've said, is that actually directly resulting from the distributor change? Or is it as much about the weaker market conditions and what the new distributor is willing to commit to on the back of that versus what you'd agreed some time back with the previous distributor?

Question: Michael Simotas - Jefferies LLC - Analyst : And if you work through the inventory transition and you're confident that inventory won't find its way onto the market at discounted prices? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 13, 2025 / 12:00AM, TWE.AX - Full Year 2025 Treasury Wine Estates Ltd Earnings Presentation

Question: Thomas Kierath - Barrenjoey - Analyst : Best like Tim with the next step. Enjoyed our back and forth on these calls over the years. First question is just on DAOU. I think in the second half of my numbers, it grew about 1% in US dollar terms. And I think shipments are growing ahead of depletions. So I just might be, I guess, give us some comfort of what's going on there. Is it just the market, in which case the market's going backwards? Or is there something a bit more specific in the brand that is driving that kind of weaker growth?

Question: Thomas Kierath - Barrenjoey - Analyst : Okay. Great. And then secondly, just on pricing, like I noticed last week when the Penfolds release came out, DAOU was, I think discounting like 24% of your RRP, which is the highest it's been in like over 10 years. How are you guys thinking about pricing? Because a bunch of different wine players are cutting price you see in the spirits space. There has been a lot of price taken over the last 10 years. But do you need to reset pricing a little, I guess, in relation to some of the other prices that are in the market by some key brands? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 13, 2025 / 12:00AM, TWE.AX - Full Year 2025 Treasury Wine Estates Ltd Earnings Presentation

Question: Ben Gilbert - Jarden Group Ltd - Analyst : Maybe one for you, Stuart. Just in terms of the thinking around the buyback, cash conversion next year, it looks like it's going to be a little bit softer. Where do you think net debt is going to land for fiscal '26? And I suppose the follow-on there is how aggressive are you expecting to be around the buyback? I think you said it's going to be up to 5%, it's coming about 3%. What was the thinking around that?

Question: Ben Gilbert - Jarden Group Ltd - Analyst : Great. And just a second one for me, Tom, sorry, I'm going to ask you about pricing yet. Just you talked about Penfolds needing to adapt, and you said you've got some better quality as we sort of some of the icons that sort of the superluxury luxury within the Penfolds portfolio coming on back into this year, but -- sorry, fiscal '26. But is it the more entry-level stuff the Max's, that Koonunga Hills that are really selling at the moment? And what -- Sam's obviously got gain historically paying around with pricing, successfully and unsuccessfully markets based on what we can see. What do you do if he comes to you and says, look, on drop pricing on the luxury and the discounted a little bit to try and stimulate some demand at the back end of this year? Like how does that discussion go? And what's the ultimate goal? Is it hitting the guidance numbers you put out there at all costs? Or would you be prepared to say adapt and if the buys your product, if the French, et cetera, still more pretty interpreted your lending to that more aggressively?

Question: Ben Gilbert - Jarden Group Ltd - Analyst : The comments just, I suppose, that you made around sort of the Grange 707, et cetera, have been a little bit slower towards the end of the year. I think you said publicly at the last update on Penfolds.

Question: Ben Gilbert - Jarden Group Ltd - Analyst : (inaudible) it was interesting. So that's ranked in third (inaudible) I just wonder whether if you've got more volume, how you manage that, but not fully (inaudible)

Question: David Errington - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Tim, I must admit I have really enjoyed you as the CEO. We've often not agreed on certain things. And I dare say we'll continue to not agree on them, but you've never taken them personally, and you've always handled them professionally. So from that kudos to you, and I wish you all the best going forward, and I hope your team starts winning a few games, which I can't see happening in the near term. But anyway, we won't talk about that. Following on from Ben's issue a little bit. I thought it was raising a good point because that's the concern I've got is that you've really stepped up availability in the last two years. Your inventory, your long-term inventory, particularly of luxury, is really strong, very strong, '24. Obviously, another very strong '25. So now for the first time, availability is no issue, and that's stemming obviously, a large part of growth in '26, but more so in '27 and '28, which is where my concerns are because when I look at that China update chart on page 19 that you've talked about and when you spoke about a little bit in the US where shipments are exceeding depletions. We have a DAOU slowing down, which is Tommy's point, who knows, you talk around that. But I am worried there's some structural headwinds there. You talked about headwinds, but there's structural headwinds in demand. I'm not sure it's structural. I don't know if it's structural or wherever, it's cyclical, but you're now very long supply. I know that you've got an opportunity to fill the channels that will guarantee sales, but what I'm worried about is your depletions seem to be softer than what you're expecting, and that worries me in the '27, '28, and '29 years. So can you go into a little bit as to convince us that these are cyclical moments because if it is cyclical, you'll come through this balance sheet in great shape, you were the only wine producer with luxury wine on your balance sheet, which will be fantastic. But if it's structural, you're going to be with an overhang with distributors full to the gills, and that's not good. So can you give us a bit of an update as to whether you think it's cyclical or structural? And because my worry is your margins are very high, and to Ben's question, really, which is where he's going, and I think I don't want to speak for Ben, but these high margins won't be sustainable if there are structural shifts and you've got a long supply of inventory. So if you can go into that because the margin issue, particularly in China, but also the US is which where I'm concerned. And it's more in the '27, '28, '29 years.

Question: David Errington - Bofa Merrill Lynch Asset Holdings Inc - Analyst : So you reckon you'll be able to -- it's not a structural thing that's going to damage you in your long-term margins, it's something that you're just going to have to work through, and there will be a cyclical uptick in a couple of years when luxury starts picking up when the consumer picks up. Just to summarize your words. Is that what you're basically what your prognosis is? Is that what you're saying?

Question: David Errington - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Tim, can I follow up with a question in the US then? I've covered it for a long time, as you know, and we've always come to log heads. You've never got California right. Now this is sort of like the dog ate your homework on RNDC exit. But you've never got California right, whether it be exiting, going direct yourselves. What -- if you target California right, you'll never get the US right. And my confidence in you getting California right is obviously a little bit mixed at the minute. What is the problem there? What is the issue with California? And do you need to do a strategic review of your US business? Like is there something that you need to have a play around with or something there because I just fear that if you can't get California right, you're really going to struggle in the US.

Question: David Errington - Bofa Merrill Lynch Asset Holdings Inc - Analyst : No, no, no. I just enjoyed you, Tim, and I enjoyed your answers. They've always been thorough and professional, and you don't take things personal, which is a great credit to you. And you know went to agree to disagree. And thank you very much. And I think you've been a wonderful CEO, and I wish you all the best in the future.

Question: Richard Barwick - CLSA Ltd - Analyst : We have a tough act to follow with David there.

Question: Richard Barwick - CLSA Ltd - Analyst : No, no, no. The -- I'm sort of picking around the edges a little bit here. Just digging in a bit more of this $50 million, Tim. So just want to be clear, it sounds like there is a little bit of a cyclical element to even that $50 million because you sort of indicated the breakthrough recognizing the softer market, and so they've sort of set their numbers accordingly. So -- but then implicit within that, this sounds like there's also a structural element to that. So I just want to get a sense of that. If this -- some of that $50 million sounds like it's a permanent step down. So I just want to clarify that. And then from a brand perspective, obviously, DAOU is the biggest brand. But if you think about which brands sort of over-index to California, would that be DAOU again? So it's sort of like a DAOU, by far and away, the biggest brand that's sort of hurt by this $50 million?

Question: Richard Barwick - CLSA Ltd - Analyst : Well, that sort of goes to the next question, Tim. Obviously, you're talking about what you might be able to do around mitigating the earnings impact. And I understand, obviously, if you're negotiating with RNDC, then there's a whole bunch that you can't talk to. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 13, 2025 / 12:00AM, TWE.AX - Full Year 2025 Treasury Wine Estates Ltd Earnings Presentation But outside of that sort of negotiation with RNDC, are there other actions you can take as well? I mean what other things are you talking about if you can to actually mitigate the earnings impact? Because all else being equal, I would have thought you'd go $50 million times the GP that you would make on those sales, and that would relate to an earnings impact. But I'm not certain I'm thinking about it the right way.

Question: Richard Barwick - CLSA Ltd - Analyst : Okay. All right. And then just a question for Ben.

Question: Richard Barwick - CLSA Ltd - Analyst : Well, it's all the related. The -- I'm taking it less time there, you've got to admit that. The -- if you look at the other US brands, so you sort of called out Stags' Leap and BV. You got NSR down 10%. Clearly, they're underperforming the market because you talk about the luxury market being up a bit over 2%. What's going wrong with those brands as a collective? They are about a third of the US luxury market. We all get lots of focus on DAOU, lots of focus on Frank Family, and they're sort of doing okay. But the other brands is a collective. Yes. What can you tell us there? And why are they performing so badly?

Question: Bryan Raymond - JPMorgan Chase & Co - Analyst : Just ones back on -- just on the US just to clarify. Is there any material change to distribution reach your terms in California as part of the change contributing to that NSR and EBITS impact? And also, is there any other sort of broad disruption or dislocation impact as you do the transition. Given that $50 million sounds like a bit of a rebase -- in what you stated clear it's a rebased down. Is there anything over and above that we should be thinking about for '26 specifically as transition?

Question: Bryan Raymond - JPMorgan Chase & Co - Analyst : And sorry, just on the first part, just on distribution rates and terms, is there any different -- material difference there between Breakthrough and RNDC?

Question: Bryan Raymond - JPMorgan Chase & Co - Analyst : Well, capability, but also obviously RNDC, I think, had a bigger starting star in the California market. And is -- are you reaching as many accounts as you were before? And is the distributor terms that you're -- that you've agreed to broadly similar. Could we expect any sort of margin impact or sales impact from that as part of the -- either as part of the $50 million? Or is it more just the market as you've said around California in a bit of a rebase down? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 13, 2025 / 12:00AM, TWE.AX - Full Year 2025 Treasury Wine Estates Ltd Earnings Presentation

Question: Bryan Raymond - JPMorgan Chase & Co - Analyst : Great. If I could have one just on China, if possible. Just on the 15% Penfolds growth, just whether there's any -- I know you've been confident around pricing in the -- certainly in the near term. Given the uplift in volume, the softness in depletion -- sorry, the softness in consumption patterns and the e-com situation with parallel imports, do you -- have you built in any -- in a (inaudible) case declines or any pricing -- underlying pricing softness into that 15% growth expectation in '27, please?

Question: Caleb Wheatley - Macquarie Group Ltd - Analyst : And Tim, (inaudible) comment on your tenure, and all the best for the future. Just a half on the China Penfolds situation too much, but I guess create concern is that a very important release in 4Q '26 and you've got shifting consumption as it stands today. Just on our side, I think there was a comment earlier that you still have some other levers to pull. Just there was a scenario where -- progressing throughout the year and perhaps those consumption habits are still impacting completion or demand, particularly shifting into '27. Can you just give us a flavor kind of what means you might look to pull to shore up sales or earnings over the medium term? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 13, 2025 / 12:00AM, TWE.AX - Full Year 2025 Treasury Wine Estates Ltd Earnings Presentation

Question: Phillip Kimber - E&P Capital - Analyst : Just a question around the customer inventory holdings below historical levels, sorry, outside of China. Can you give any sense of magnitude of that? Are they 10% below? 50% below? Just to pick some sort of hypothetical numbers there? And also how that fits in with a world where there has been destocking in alcoholic beverages. So just if we can explore that a little bit only because that's one of the leads you talk about. Should these initial trends turn out to be a little in -- banqueting turn to out to be a little bit more sustained?

Question: Phillip Kimber - E&P Capital - Analyst : Great. And can I ask another glass half full question on slide 21, the demand power of Penfolds. What jumps off the chart there is UK and USA. Much, much lower than the other regions. I mean, why do you think that is the case as to why it's so low? And then obviously, it's a massive opportunity if you can improve it.

Question: Sam Teeger - Citibank Cameroon SA - Analyst : From reading the materials and listening to the call today, it does seem that the company is incrementally more concerned with China e-commerce below market pricing. But a year ago, the company said it was taking the necessary steps to address it, and it was only 5% of volumes. So we're encouraged not to focus on it too much, but perhaps it's harder than expected to control. Can you help us understand, please, how the initiatives that you're flagging today around allocation and revenue management compared to what you've done previously? And do you think you can ever nip this issue in the bud?