Treasury Wine Estates Ltd Business Performance Update Transcript

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

Question: Ben Gilbert - Jarden - Analyst : Just interested in terms of the luxury side of things on Penfolds, what are the views around pricing? You look at now, et cetera, now that's looking at pricing in China, you've got some of your total competitors in that needs to take price down. Is there any thinking about needing to readjust the pricing structure or strategy within market, potentially pushing some of the loyalties to drive engagement and bring your luxury side down?

Question: Ben Gilbert - Jarden - Analyst : And just a second one for me. Just in terms of incremental profitability as the Treasury Collective portfolio, how are you thinking of, obviously, those incremental margins have been coming back a little bit. In terms of the ability to sort of expand margin there looking forward, it's obviously REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 24, 2025 / 12:00AM, TWE.AX - Treasury Wine Estates Ltd Business Performance Update sort of pretty much sort of starting to wash and maybe a little bit more than the corporate costs. Do you expect you can actually lift profitability in that looking forward?

Question: Michael Simotas - Jefferies - Analyst : First one for me is on Penfolds. Could you just make some comments on inventory in the channel in China, particularly for some of those ultra luxury tiers? And then just picking up on your comment around some of the markets around the world sitting on lighter inventories, is there a plan when the increased availability comes through to reallocate some more Penfolds back to those markets? And is that different to what you were originally planning? Or was that always the plan to do that?

Question: Michael Simotas - Jefferies - Analyst : Second one for me is on the US. Yeah. No, I think you did. On the US, just how we should think about the potential impact from the US or the California distributor transition. And in particular, how you manage the inventory through that transition given demand has been pretty soft and you've called out shipments being ahead of depletions for some of the brands.

Question: Tom Kierath - Barrenjoey - Analyst : Just a couple for me. First one is the DAOU synergies. I suppose the simple way to ask is where do they go? And how are they going to be executed in '26? And if they are -- like why is the, I guess, the base business going backwards so much? I think it was USD35 million is what you're guiding to?

Question: Tom Kierath - Barrenjoey - Analyst : Okay. Great. And then secondly, just on the Penfolds downgrade. It's just interesting that you're saying it from sales and marketing expense rather than demand. Can you just maybe clarify exactly where the sales and marketing expense is going to? And yeah, I just would have thought maybe demand has been a bit weaker, given what's going on in the market.

Question: Richard Barwick - CLSA Australia Pty Ltd. - Analyst : Can you just clarify a little bit more around the DAOU synergies, just following on from Tom's question. I think you'd said at the half year that about USD30 million of the synergies would be captured or realized within FY26. And so therefore, lever a residual [five] coming into FY27. Is there any change to that sort of time tail on those quantum? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 24, 2025 / 12:00AM, TWE.AX - Treasury Wine Estates Ltd Business Performance Update

Question: Richard Barwick - CLSA Australia Pty Ltd. - Analyst : Okay. Can you be a bit more specific there, Stuart, in terms of how much would be dropping into the Collective?

Question: Richard Barwick - CLSA Australia Pty Ltd. - Analyst : Okay. And then just another one for me. We talked about -- I think you used the phrase re-establishment of Penfolds in China continues. And so can you just give us a sense there, what exactly do you mean by -- or I guess maybe how far through the process of re-establishing? Because where I'm going with that is obviously, you've got more volumes available to sell at the back end of FY26. So when you talk about reestablishment, is that actually about widening the number of distributors you're using, widening sort of distribution points, et cetera? And at what point is that process done? So I'm just trying to get a sense of adding more points -- sale points as opposed to where

Question: Richard Barwick - CLSA Australia Pty Ltd. - Analyst : So just to be clear on that, does that mean that sort of build out of the distribution, do you see that being in place by the back end of '26? Or is that still into an FY27? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 24, 2025 / 12:00AM, TWE.AX - Treasury Wine Estates Ltd Business Performance Update

Question: David Errington - BofA Global Research - Analyst : Firstly, Tom and Richard were pretty polite on the synergies with DAOU. You got $35 million coming in '26, and you're a bit evasive. Where the question is coming from is DAOU is a business that looks to be going backwards big time in '26, where you're saying that Treasury Americas luxury is going to only do modest growth in '26, and that's dependent upon your distributor situation, and that's with a huge pickup in synergies, $35 million in synergies. So the question is, why is that luxury market going backwards so fast? Is it structural? Is it just your brand portfolio? What's going on? Because at the moment, Tim, the question, where I'm coming from, is that DAOU acquisition looks to be a very disappointing one for Treasury Wine. It looks like it's proving to be not a great decision. So can you talk about why you still believe DAOU is a good acquisition when the underlying business is going backwards so much?

Question: David Errington - BofA Global Research - Analyst : Okay. Now good answers team, as always, good answers. The second one is the logic of doing a buyback. Now I like buybacks, but only when the company has done something like sold the division or got excess franking credits. You seem to have made that this is not you, but the Board has made a decision just because the Board thinks the stock is cheap. Now okay, let's go into that. What really took me back a little bit today was the fact that you've got excess inventory of range. That never happens. That one used to always be on allocation. You've got huge troubles ahead of you in the US that you've got to work through, and you've got plans by the sounds of it. With so much uncertainty at the moment, I just wonder why what -- can you give us some confidence as to why you believe your cash flow is going to be that good next year that you can allow yourself to do a buyback by pushing your balance sheet out? Firstly, your cash flow, you're not going to factorize debtors. Hopefully, you don't do that trick. We saw that 10 years ago. And secondly, I hope you don't have to buy back a lot of inventory that we saw 10 years ago because distributors are locked up. So can you give us a bit of confidence that your cash flow is that steady that you can do this without basically doing some funny tricks on the side. Now I don't want to be disrespectful, but I've seen this. I've covered Treasury a long time. I have seen debt factorization. I have seen distributors where you've got to buy inventory back. Can you give us some confidence that this is not the case and that this is a really bona fide good share buyback that's going to add value to shareholders? Can you do that for us? That would be great.

Question: David Errington - BofA Global Research - Analyst : But you're not going to debt or factorize and you're not going to have to buy back inventory from distributors? They were the two issues that worried me because I saw them 10 years ago. And the outlook -- when that happens, it's not good. So can you categorically say to the market that you're not going to do those sorts of things?

Question: Shaun Cousins - UBS - Analyst : Maybe just another question on the Americas and just the growth guidance there. It looks like the data you've highlighted the sort of the last 26 weeks was reasonable, but then it slowed quite a lot in the last 13 weeks. And we actually believe that actually may be in decline in the last four weeks, recognized four-week periods are difficult. But is your modest growth guidance for the Americas, is that predicated on the luxury market in the US growing? Or is it predicated on the luxury market in the US declining?

Question: Shaun Cousins - UBS - Analyst : Okay. All right. Might be different deal in the last four weeks, but that's fine. And then maybe just on Penfolds, you downgraded your '26 guidance. Where does the 15% EBITS growth guidance for fiscal '27 stand? Is that still in place? Is that removed at this time? Could you just clarify that, please?

Question: Shaun Cousins - UBS - Analyst : So the fact you haven't removed it means it's still in place. Is that -- sorry, is that what your saying? What we're saying change guidance. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 24, 2025 / 12:00AM, TWE.AX - Treasury Wine Estates Ltd Business Performance Update

Question: Bryan Raymond - JP Morgan Securities Australia Ltd. - Analyst : Tim, just following on from Shaun's question on the US. Given you're factoring in NSR growth for luxury pre-RNDC impacts, which is obviously uncertain, and the synergy profile that you've outlined. Just, wanted to understand the sort of the solving piece there on the cost lines, whether there's something going on in terms of production costs or if this is an investment that you're looking to make in the US, similar to what you've described in China with that ultra luxury portfolio? Are you looking to invest in sales and distribution? Or is there something because it feels like it feels like the numbers aren't quite reconciling. And then if you got top line growth and synergies, you still only have modest growth, which I'm interpreting is low single digit. I just want to understand if there's something I'm missing there in the P&L for the Luxury Americas, please.

Question: Bryan Raymond - JP Morgan Securities Australia Ltd. - Analyst : Okay. And then just on the historical inventories for Penfolds outside of China. I just want to understand the period of time you sort of are looking at there in a historical context. Is this during the period of the China tariffs? Or is that prior to that period, given there's some concern around the market right or wrongly that inventory in those markets could have been a bit elevated to facilitate the gray market into China? I just want to get clarification on which reference period you're looking at there for it to say that inventory is low outside of China within Asia.

Question: Sam Teeger - Citi - Analyst : I just wanted to talk about China. For the Penfolds' FY26 guidance and beyond, what are you assuming for the impact from the growth of Chinese? Why is there a lot of feedback up there about its increasing popularity with the consumers and also the impact for the Penfolds portfolio from the outperformance of white wines, given it seems that Chinese consumers are increasingly buying what they can afford and what pairs well with the food.

Question: Sam Teeger - Citi - Analyst : Okay. Great. And then on Slide 14, there's a reference to increased profitability for Penfolds direct customers, which is good to hear. But any color you can provide around how important are second and third tiers of distributors for Penfolds. The ones who don't directly have accounts with you? And how do you see their profitability evolving?

Question: Sam Teeger - Citi - Analyst : All right. That's -- yes, that's good. And just lastly, in terms of your FY26 Penfolds guidance, are you assuming any improvement in the underlying consumer from where it is now? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 24, 2025 / 12:00AM, TWE.AX - Treasury Wine Estates Ltd Business Performance Update

Question: Jason Palmer - Taylor Collison - Analyst : Just going back to the Americas business. Like everyone, I'm trying to work out the underlying decline that you're kind of forecasting for FY26 on a like-for-like basis after we strip out the DAOU synergies. I know you talked about some investment in sales in A&P to support the division. I'm wondering where you can unpack that a little bit more, please, Stuart. In particular, what provisioning you put in place around the distributor changes in California? And if you are assuming that there are some reductions in profitability across some of those other brands that sit within the BV, Stags' and the like?

Question: Jason Palmer - Taylor Collison - Analyst : I get that. But I guess where that leaves us is where do we, as a group of analysts, get to -- when we go out 12 months from that is you're saying that there's $30 million to $40 million of EBITS, which is just disappearing out of the business on a like-for-like basis, and there's no impact on the distributor changes. So it kind of -- you're telling us that this business can grow, but the statements kind of contradict each other in terms of what the outlook statement says. I'm thinking about it from a '27 perspective as well.