Treasury Wine hits 11-year low as buyback axed, earnings outlook disappoints

By Shivangi Lahiri

Dec 17 (Reuters) - Shares of Australia's Treasury Wine Estates TWE.AX slumped to their lowest in nearly 11 years as the firm cancelled the remaining portion of its share buyback and forecast sharply lower operating earnings for the first half of fiscal 2026.

The luxury winemaker's shares fell as much as 16.8% to A$4.57 by 2314 GMT, putting them on track for their weakest intraday performance since August 18, 2020.

Treasury now expects earnings before interest, tax, SGARA and material items (EBITS) of A$225 million to A$235 million ($149.20 million to $155.83 million), down sharply from A$391.4 million a year earlier.

The guidance represents a 31% downgrade to Visible Alpha consensus estimate at the midpoint, according to analysts at Citi.

The company also scrapped the balance of its A$200 million buyback, which had been paused in October, citing the need for "greater clarity around trading conditions and expectations" after about A$30.5 million of shares were repurchased by the end of September.

Earlier this month, Treasury flagged a A$687.4 million non-cash writedown on its U.S. assets as it adopted more cautious long-term assumptions amid slowing wine consumption in the United States.

Treasury, Australia's most internationally exposed listed winemaker, said it will cut customer inventory in the U.S. and China to align with moderated depletion growth expectations, and significantly restrict shipments driving parallel imports in China to protect its Penfolds label.

Chief Executive Sam Fischer said the company has begun identifying ways to simplify operations, sharpen execution and deliver "significant" cost savings.

RBC Capital Markets analyst Michael Toner warned that cost cuts, dividend reductions and other measures flagged by management "may be insufficient to manage the elevated leverage position", with Treasury guiding leverage to remain above its 1.5–2.0x target range for about two years.

Analysts at Citi said the new CEO's plan to cut customer inventories is "sensible", but will weigh on Treasury's balance sheet.

($1 = 1.5081 Australian dollars)