Great. Well, good morning, everybody, and welcome to the 2026 Annual General Meeting of Treasury Wine Estates. My name is John Mullen, and I am really delighted to address this meeting as your Chairman. A quorum is present, and I therefore declare the meeting open. Today's meeting is being held in person at the Park Hyatt, Melbourne, and virtually via the Computershare platform, where shareholders and their proxies can ask questions and submit votes online. This meeting is also being webcast online. I will begin by introducing your Directors and management who join me here today on the stage. On my left, first is our Managing Director and Chief Executive Officer, Sam Fischer, who you will hear from shortly, Chief Financial Officer Justin Pipito, and Non-executive Directors Colleen Jay and Mark Weldon.
On my right, we have Hannah Frankel, Interim Company Secretary, Toni Korsanos, Chair of our Audit and Risk Committee, Nigel Garrard, Chair of our Human Resources Committee, Non-executive Director Judy Liu, and finally, Chair of our Wine Operations and Sustainability Committee, Garry Hounsell. Our Non-executive Director, Leslie Frank, was unfortunately unable to join us in person here today, but she is joining online. Also in attendance in Melbourne are members of our executive leadership team, as well as Penny Stragalinos, who is our lead audit partner from KPMG, and who will be retiring as our lead audit partner at the end of this meeting. Before we begin, may I ask you to make sure your mobile phone is switched to silent while the meeting is in progress. I also ask that you note where your nearest exit is in the unlikely event it becomes necessary to evacuate the building.
In the event of such an emergency, do please follow the instructions of the venue staff. I encourage shareholders to ask questions during the meeting. I will introduce each item of business and then take questions on all items of the business together at the end. If you're attending the meeting in person, only shareholders, proxies, and corporate representatives who were given a blue or pink voting card are entitled to ask questions. When I call for questions, please move to a microphone and show your admission card to the microphone attendant, who will note your name and introduce you when it's your turn to speak. In order to ensure that all shareholders are given an opportunity to be heard, I do ask that you limit your questions to one at a time.
For those attending the meeting using the online platform who wish to submit a written question, you may do so at any time during the meeting via the speech bubble icon on your screen. We encourage you to start submitting your written questions now, but please note that I will not address them until the relevant time in the meeting. Shareholders were also invited to submit questions in advance of the Annual General Meeting, and I will also address those questions during the question period. In order to be as transparent as possible in this hybrid environment, questions will only be moderated in limited circumstances. For example, where the content is offensive or if the substance of the question is repetitive of a question already asked. Today, voting will be conducted by way of a poll. To provide you with enough time to vote, the poll is now open.
For those attending the meeting using the online platform, a voting icon is now available on your screen. Selecting this icon will bring up a list of resolutions and present you with voting options, and you are free to submit your votes at any time up until the poll closes. To cast your vote, simply select one of the options. There's no need to hit submit as the vote is automatically recorded, and you may change your vote at any time up until the poll closes. For shareholders, proxy holders, and corporate representatives attending the meeting in person, you may also vote at any time up till the poll closes by completing the blue voting card that was provided to you upon admission. Before you leave the meeting, do please place your voting cards in one of the ballot boxes that you will find near the exit.
The poll will remain open for five minutes after the close of the meeting to allow you to finalize your votes. I'm also holding open proxies in my capacity as Chairman, and it is my intention to vote these proxies in favor of the resolutions that will be put to the meeting today. The final results of the polls will be available later today on the ASX website and the company's website. Should you have any difficulty in completing your voting card during the course of the meeting, Computershare staff are here to help you. Before we consider the items of business, I'd now like to reflect on the 2026 fiscal year and the decisive actions we are taking to position Treasury Wine Estates for long-term success. I will then invite our Chief Executive Officer, Sam Fischer, to address the meeting.
As everyone's aware, fiscal year 2026 was a year of significant change for our business and the global wine industry. I would summarize the impact on Treasury as being driven by three principal factors. Firstly, the macro environment for alcohol beverage remains very difficult, reflecting the combination of structural changes to consumption as well as cyclical factors, including cost of living pressures. In addition to the macro backdrop, several other factors then came together at the same time. Our largest distributor in the U.S., RNDC, went bankrupt, which impacted performance in California as we transitioned to a new distributor. Changes to large-scale banqueting in China severely impacted Penfolds sales in that country, with depletions dropping significantly. There were a number of other factors, including unauthorized parallel sales into China and our response to protect brand and channel health, that also impacted the company.
The combination of these issues resulted in excess inventory levels and a strong negative impact on our earnings. The important question, obviously, is what are we doing about it? Firstly, we welcome Sam Fischer as our new CEO as of the 27th of October last year. Sam is an outstanding leader with a deep understanding of the industry and global alcohol beverage markets, and he's already launched a number of critical initiatives to improve performance going forward. Sam has, and will continue to, reform his key executive team with the strong leaders he needs to help drive the very significant changes ahead. Secondly, following the completion of distribution changes in the U.S., our luxury depletions are again growing strongly and ahead of market, led by DAOU, Frank Family Vineyards, and Stags’ Leap.
Pleasingly, the luxury wine market continues to grow, TWE's move to rebalance the portfolio towards luxury, as opposed to lower end wines where the market continues to shrink, is bearing fruit. Thirdly, with strong action taken against parallel imports and a renewed focus by management, very pleasingly, depletions in China are also again growing strongly. Fourthly, as you will hear from Sam in a minute, Sam Fischer has introduced a major transformation plan called Ascent, which is driving a fundamental realignment of brands and assets, organizational and supply changes, and a AUD 100 million cost-out program. Lastly, in the Americas region, we have announced a comprehensive strategic and operational review of the business, focused on improving shareholder returns on the capital that we have invested in that market.
This process is underway with advisors appointed to support the review of all available options across the brand portfolio, operating model, and asset base. We expect to complete the review this fiscal year, and will communicate the outcomes accordingly. Financial discipline is fundamental to our transformation, and our immediate priorities are reducing leverage and maintaining the flexibility to invest in the long-term future of the business. As you will hear from Sam Fischer, our leverage moved outside our target range due to all the impacts that I mentioned just now, but pleasingly is now declining again back towards our desired range. In that context, the board suspended the F26 dividend. We absolutely understand the importance of dividends to shareholders, and we did not make this decision lightly. The board will consider resuming dividends just as soon as our leverage moves back towards our target level.
Turning then to sustainability, we continue to make meaningful progress across our key priorities. Building a resilient business, fostering healthy and inclusive communities, and producing sustainable wine. We are directly exposed to the effects of a changing climate, but our diversified sourcing model, targeted adaptation initiatives, and long-term investment in research and development are central to managing that exposure. We draw on a range of insights to inform future strategy, footprint, and capital allocation. During the year, we maintained 100% renewable electricity across our global operations, reducing operational emissions and our exposure to energy price volatility. We secured 50% co-investment from the Australian Renewable Energy Agency for a large-scale decarbonization project at our Barossa Valley site, and we deepened our understanding of future climate risks across our viticultural assets.
We also improved our three-year rolling Serious Safety Incident Frequency Rate and achieved sustainability certification for all eligible owned and leased winery and vineyard sites. Our engagement with growers and bulk wine providers has also contributed to a significant proportion of our global sourcing being sustainably certified. Board succession planning remains a priority. In October 2025, Lauri Shanahan retired from the board after almost nine years of service, and Mark Weldon joined the board as a Non-executive Director. We thank Lauri Shanahan for her substantial contribution. Leslie Frank will also retire from the board at the conclusion of today's meeting. Leslie Frank has brought deep wine industry knowledge, brand experience, and a valuable connection to the Napa Valley community. On behalf of the board, I thank Leslie Frank sincerely for her contribution and wish her every success for the future.
With Leslie's retirement, our focus turns to appointing an additional non-executive Director to further strengthen the board's capabilities. We are looking to add a Director with deep industry experience and a proven track record in key markets, including the U.S. and Europe. We are well progressed in the process, and we look forward to announcing an appointment shortly. In summary, we look to the future with great confidence. Wine has an enduring place in celebrations, shared experiences, and everyday moments across cultures and generations. We remain very confident that consumers will continue to seek distinctive luxury wine experiences. Our focused portfolio, driven by our Power Brands and Regional Heroes, is well-placed to capitalize on this demand over the long term. On behalf of the board, I want to sincerely thank our people for their energy, resilience, and commitment during a year of significant change.
I also thank our customers, growers, suppliers, and partners for their continued support. Finally, importantly, I thank you, our shareholders, for your support. We are moving with pace, making difficult decisions where we need to, and setting the foundations for a return to sustainable, attractive returns over the long term. With that, I will now hand over to our CEO, Sam, to outline the year's performance in more detail.
Thank you, John, and good morning, everyone. It is a pleasure to join you here today at my first Treasury Wine Estates AGM. This month marks my first anniversary as CEO, and it is timely to reflect on the scale of progress we have made over the past 12 months as we build a more focused, market-centered, simpler, and financially strong Treasury Wine Estates. With that greater focus, our key brands are showing strong momentum. We have taken decisive action to strengthen our sales channels, we are progressing our Ascent transformation agenda with energy and discipline, and we are strengthening our balance sheet through disciplined capital allocation. It is a big change agenda that is founded on absolute clarity on where we are going and the decisive action we need to take to get there. I hope that days like today show the incredible energy of our team and the focus we have on delivering sustainable, high-quality returns.
I am grateful to you, our shareholders, for supporting us on this journey. Now turning to our F26 financial performance, which was impacted by a number of factors, including the moderation of category trends and our deliberate initiatives to protect our brands and sales channels. These decisions are critical for the long-term health of our business, but which impacted short-term performance. NSR decreased 13% and NSR per case fell 3%, reflecting both the portfolio mix, and in particular, our actions to reduce parallel activity and customer inventory in China. EBITS margin decreased to 19%, driven by the NSR decline and a higher cost of doing business. We reported a statutory net loss after tax of AUD 1.1 billion, driven by the non-cash impairment of U.S. assets. Pre-material items, net profit after tax was AUD 275 million and EPS was AUD 0.34. ROC declined to 7.9%, driven by the decline in EBITS.
Our dividend program remains suspended. This is a temporary yet important measure as we prioritize returning leverage to target below two times. As John has said, the board will consider resuming dividends as leverage moves towards this level. Our financial performance in F26 was impacted by a number of short-term factors. At the same time, underlying consumer demand for our brands remains strong. Depletions grew strongly across our Power Brands and Regional Heroes, reflecting the fundamental strength of our business and giving us great confidence in the future. Brands like Penfolds, DAOU, and Matua are among the strongest in the global wine market. We are excited to further invest in this core portfolio to unlock its full potential. You will see on the slide that our non-priority portfolio declined, mostly driven by commercial brands, reflecting the divergent trends in our category and our portfolio.
At our Investor Day in June, we introduced our Ascent transformation program, which has four priorities. First, focusing where we will win, going after the most attractive segments of the market where we have a right to win. Significant growth opportunities continue to exist within the wine category. Luxury wine remains an attractive segment, supported by ongoing premiumization as consumers drink less but better. There is also increasing demand for lighter, more refreshing styles, and moderation and better-for-you trends are another area of opportunity where we are well positioned to compete. This sharper focus will improve capital allocation, strengthen brand building, and support improved long-term returns. The second Ascent pillar is about transforming how we operate. At the start of this month, we moved to a regional operating model structured across four regions: Greater China, the emerging markets, Australia and New Zealand and Europe, and the Americas.
The model has some clear benefits, clearer accountability, faster decision-making, less duplication, and streamlined processes. It also means we are shaping our portfolio around customers and consumers in each region. At the same time, we are increasing accountability for performance with enhanced data-led management reporting and real-time tracking of key metrics, including depletions and inventory. It gives us the tools to make decisions and intervene faster and execute with more precision. Ultimately, we are building a culture where high performance is recognized and rewarded. The third pillar is shaping a future fit supply chain that will support our portfolio and operating model objectives. The objective is straightforward: create a supply model that is more agile, more efficient, and better aligned to our long-term demand outlook. In the U.S., we are urgently addressing structural misalignment within our supply chain by reducing grower intake, fallowing vineyards, reducing wine making capacity, and divesting surplus assets.
Fourth, delivering consistent high-quality financial returns. Ascent is designed to deliver sustainable, high-quality earnings growth over the long term with improved margins, return on capital, and stronger cash flow. These principles will guide every major decision we make, all in service of delivering consistent quality returns. Turning now to our first quarter update, where we have seen a positive start to the year, with first quarter trading in line with our operating plan across all regions. Leverage reduced to 2.7 times in the quarter, driven by strong operating cash flow as we continue to prioritize reducing the metric to below 2 times. Pleasingly, the strong momentum behind our Power Brands and Regional Heroes has continued into the new financial year.
In China, Penfolds depletion growth was slightly ahead of plan, driven by ongoing strong consumer demand and improved market conditions versus the prior comparable period, and our ongoing actions to divert parallel product into authorized channels. China has always been an important market, and we remain confident about the long-term growth opportunity, with Penfolds transcending the wine category as a true luxury brand. In the U.S., depletions for our Power Brands and Regional Heroes strengthened in the quarter, led by DAOU, Frank Family Vineyards, and Matua. We have now recorded three consecutive quarters of depletions growth for the luxury portfolio in the U.S., reflecting a significant improvement in performance through this calendar year. Australian Power Brand depletions growth was led by Penfolds. A highlight was the outperformance of the portfolio in independent retail.
Improving performance in our home market is a priority, and we have made a positive start in the quarter. We also continue to progress towards our key brand and channel health priorities. Customer inventory cover reduced in both China and the U.S. through the quarter, and we are on track to meet our timeline for a return to target levels. We remain focused on minimizing parallel product entering China. Building on our work here in F26, we took further action in the first quarter. We are absolutely committed to managing this issue to keep it under tight control. In the U.S., we will transition the remaining markets from RNDC this month. The transitions are progressing well, with minimal disruption to performance. As I mentioned earlier, we have moved to a regional operating model this month, a key milestone in our Ascent transformation.
We are on track to realize the full AUD 100 million per annum cost reduction by F29, with initiatives to deliver the benefit of AUD 40 million in F27 now actioned. We have divested brands and assets in the quarter, including Seppelt, a number of vineyards, and Rosemount this week, with approximately AUD 50 million of proceeds confirmed to date. We are also finalizing a number of additional divestments, which we expect to have signed by the end of the first half. The strategic and operational review in the U.S. business is progressing, and we are currently assessing alternatives to improve shareholder returns. in August, we announced initiatives to rebalance our U.S. supply chain, rightsizing production capacity to future growth expectations. Our supply chain has done an excellent job to reduce vintage make size, starting with lower intake for the 2026 vintage currently underway.
Finally, we are pleased to reiterate the key elements of our financial guidance to the market. We expect F27 EBITs to be at least equivalent to F26, with strong depletions-led momentum for our Power Brands and Regional Heroes offset by the continuation of channel health initiatives. We expect leverage to return to below two times, noting that this outlook excludes the benefit from brand and asset divestments. We remain focused on progressing EBITs margin expansion towards our long-term target of 25+%. In summary, we enter F27 with clear priorities and improved momentum as we make significant progress in our Ascent transformation. As I mark my first year leading this business, I am energized by the opportunity ahead. We have a portfolio of extraordinary brands, a team of talented people, and the right strategy to unlock growth. We are making significant positive change right across the business.
I look forward to updating you on our progress as we create a more focused, market-centered, simpler, and financially strong company. Thank you for joining us this morning, and thank you for your continued support.
That is great. Thanks very much, Sam. I will now move to the items of business to be considered at this meeting. The first item is to receive and consider the consolidated financial report of the company, as well as the directors' report, sustainability report, and the auditors' report for the financial year ending 30th June, 2026. This item does not require a resolution to be put to the meeting, but does provide an opportunity for discussion on these reports. KPMG, the company's auditor, is available to answer questions relevant to the audit. The next item of business then is the re-election of directors. At today's meeting, with the exception of Leslie Frank, who will be retiring from the board following today's meeting, all non-executive directors are standing for re-election in accordance with the company's policy that all non-executive directors will seek re-election annually.
Details of each of the directors' qualifications and experience are set out in the notice of meeting. The company has adopted a process whereby one-third of the board will speak to their election or re-election at each annual general meeting. This year, you will hear from me, myself, from Garry Hounsell, and Colleen Jay. Item 2A is the re-election of Nigel Garrard as a non-executive director. Item 2B is the re-election of Garry Hounsell as a non-executive director, and I will now ask Garry to briefly address the meeting.
Thanks, John. Good morning, ladies and gentlemen. As John said, my name is Garry Hounsell, and I am honored to seek your support for my re-election, as a director of Treasury Wine Estates. I currently chair the Wine Operations and Sustainability Committee, and the remit of this committee includes our strategic wine assets and long-term planning, sustainability, health and safety, and industry and regulatory matters. I am also a member of the Audit and Risk Committee, as well as the Human Resources and Nominations committees. By way of background, I am a qualified chartered accountant and commenced my career at Arthur Andersen, a global accounting firm. I went on to become the firm's Australian Chief Executive Officer and Country Managing Partner responsible for over 2,000 employees. I merged the company in early 2000 with Ernst & Young.
I have been very privileged to serve on the boards of many great companies, including Qantas, Orica, Nufarm, Dulux, Spotless, it keeps going, but I will stop there, and Helloworld Travel, and I am currently the Chairman of Helloworld Travel and Electro Optic Systems. Wine has actually been a part of my life for a long period of time. I was involved in the industry since I was 16 when I began working in the school holidays at Brown Brothers in Northeast Victoria. I should say working with wine, not drinking it. Although I did have a taste most nights after work. Don't tell my parents. in 1978, I purchased my first vineyard with friends near Beechworth, and in 1994, I purchased a property in the Yarra Valley, planting it predominantly to Chardonnay and Pinot Noir.
I was involved in all aspects of the business from planting the original vines, pruning, winemaking, sales, and marketing, both in Australia and internationally. We sold the business in 2017, but I still remain active in the industry, outside of Treasury Wine Estates, and occasionally have wine made for me in Burgundy and France. I believe that this experience, together with my broader corporate and board career, has allowed me to make a valuable contribution to the TWE board, management, and the company. Having been involved in the wine industry for many years, I know it is an industry that continually evolves. I have every confidence in our people, our brands, our management team, and our ability to focus our resources where they can create the greatest value for shareholders. TWE is a wonderful company, and I look forward to your support today. Thank you.
Thank you, Garry. Item 2C is the re-election of Colleen Jay as a Non-executive Director, and I will now ask Colleen to briefly address the meeting as well.
Thank you, Chairman, and good morning, ladies and gentlemen. I am honored to stand for re-election as a Director of Treasury Wine Estates. I am a member of the board's Human Resources Committee and the Wine Operations and Sustainability Committee. As was said earlier, Treasury Wine is operating in a challenging, and rapidly changing environment. Having spent my career leading global consumer businesses and brands, I believe that my experience is particularly relevant as TWE sharpens its focus and positions itself for the future. I have been privileged to lead brands such as Pantene, Oral-B, Tide, Febreze, Vicks, among others, during my 32 years at Procter & Gamble. That experience has shaped the perspective I bring to the TWE board in three important ways. Firstly, I am a brand builder at heart.
Throughout my career, I've built brands from the ground up, some small, and many others that are worth over AUD 1 billion globally today. Putting the consumer at the center of the decisions you make is foundational to building brands, like Penfolds, that continue to grow and endure over time. Secondly, I've led large, complex global businesses with experience in supply chains and manufacturing through to innovation, sales, and marketing. Strategic clarity, operational discipline, and accountability have been hallmarks of my experience, particularly during periods of change. Finally, I bring deep international experience. I've lived and worked in Canada, the U.S., China, and Europe, and led global brands across 150 markets. When you live with consumers in a market and see firsthand how business is done, you develop a much deeper understanding of how the consumer thinks and an expertise across the different commercialization models around the globe.
That experience is particularly relevant for a global business like Treasury Wine Estates. I believe my background in brand building and leading large global performance-driven businesses allows me to continue making a strong contribution to the TWE board. You have an exceptional CEO in Sam Fischer, supported by a strong team. I have confidence in the direction they're taking the business and look forward to continuing to support and challenge them alongside the other TWE directors to deliver high performance and long-term growth for the business and for our shareholders. Thank you.
Thank you very much, Colleen. Item 2D is a re-election of Antonia Korsanos as a non-executive Director. Item 2E is a re-election of Judy Liu as a non-executive Director. Item 2F relates to my own re-election as a non-executive Director. I'll now hand over to Toni Korsanos to chair the meeting for this item.
Good morning, ladies and gentlemen. I am delighted to chair this section of the meeting for the following resolution. Item 2F is for the re-election of Mr. John Mullen as a non-executive Director. I will now ask John to briefly address the meeting.
Thanks very much. I am obviously very pleased to stand for re-election today as a Director and also as Chairman of Treasury Wine Estates, a role that I have held now since October 23. During my career, I have lived and worked in Asia, Africa, the U.S., and Europe, as well as here in Australia. I spent most of my executive career in the logistics industry, including 10 years at TNT in Australia and in Europe. For the last four of those years, I was CEO of TNT Express Worldwide, based in Holland. I then spent 15 years at the DHL Express Group, the world's largest express logistics company, revenues of EUR 30 billion, operating in over 220 countries and territories, and we had around 140,000 employees. I held roles there, including the CEO of Asia Pacific, CEO of the Americas region, and finally, global CEO based in Europe.
I eventually returned to Australia and spent six years as CEO of Aurizon, Australia's largest rail and port logistics company. Since my executive roles, I was Chairman of Telstra for seven years, and I am currently also Chairman of Qantas and Brambles. I am aware of some observers considering that my workload is too high, and I would like to address this issue now. Firstly, I would comment that I find my workload very manageable, but I nonetheless continue to steadily reduce other obligations, including retiring from Brookfield Infrastructure this year. Secondly, I have to say that many of the critics have not made any effort to understand what actually is my workload. While some observers base their recommendations on research and merit, regrettably, some base their recommendations on predetermined academic formulae set elsewhere, with no attempt to assess the individual or the context.
Of course, this is their prerogative, but it does explain the divergency of opinion. On the board, it is my job to review the performance of my fellow Directors, just as they judge me. If one of my colleagues is doing a great job, then I believe that it is in shareholders' interests that this Director is re-elected, irrespective of how many boards he or she sits on. Conversely, if a Director is not doing a good job, then they should not be on our board, irrespective of whether this is their only board or they sit on several. I would earnestly hope that I, too, be similarly judged on performance and merit alone, but sadly, that is not always the case.
Lastly, I have had a lifelong appreciation of the culture of wine and the important role that it plays in our community as a connector of people and key industries that support regional economies. TWE possesses outstanding brands and a clear strategy, and I am confident that together with the current board, Sam Fischer and his outstanding executive team will realize the full potential of our portfolio. This is a truly wonderful company with a bright future ahead. Thank you so much for your support today. If I am re-elected, I will continue to work hard with management and my fellow Directors to steward the company through its next chapter of transformation and growth.
Thank you, John. I will now hand the meeting back to your Chairman. Thank you.
Great. Thank you. Item 2G is the re-election of Mark Weldon as a Non-executive Director. That covers all of the resolutions regarding the re-election of our Directors, and the Board, with each Director abstaining as to their own re-election, of course, recommends the re-election of each of the Non-executive Directors. Item three on the agenda today is a non-binding advisory vote for the adoption of the remuneration report for the financial year ended 30th of June 2026. The remuneration report is contained within the annual report, which is available on the company's website. It includes details of the company's policy on the remuneration of Directors and executives, a discussion of the relationship between that policy and company performance, and details of the performance conditions associated with the remuneration of the Chief Executive Officer and key management personnel.
The resolution on this item of business is advisory and does not bind the company, although the Board's Human Resources Committee will take the result of the vote and the discussion on this resolution into account when considering the future remuneration arrangements of the company. The Directors recommend that shareholders vote in favor of the resolution. I will now move on to item four, which is for the grant of performance rights under the company's long-term incentive plan to our Chief Executive, Sam Fischer. A summary of the proposed grant is set out in the notice of meeting, and the Directors recommend that shareholders vote in favor of the resolution. Details of the proxies received on each of the resolutions are now displayed on the screen. Based on the proxy results, it appears that the resolutions will pass. I will now take questions on each of the items of business.
I will first take questions from those physically present at the meeting, followed by audio questions from participants who have joined the meeting online, and finally, written questions submitted in advance of the meeting and from online shareholders. For those shareholders present in person today, if you would like to ask a question, please move to a microphone and show your admission card to the microphone attendant, who will note your name and introduce you when it is your turn to speak. Please limit yourself to one question at a time, if you can, to give other shareholders a chance to ask questions, too. For those attending the meeting online and who would like to submit a written question but have not yet done so, please submit your question now via the speech bubble icon on your screen.
A reminder again that the poll will remain open for five minutes after the conclusion of the meeting to allow you the opportunity to hear responses to the questions asked before finalizing your voting. I will now take questions from the floor.
Mr. Chairman, we have a question from Peter Aird from the ASA.
Good morning, Mr. Chairman. At the recent Investor Day presentation, you indicated that you would reduce the number of brands under the TWE banner from 76 to less than 30, as Sam Fischer has mentioned. You provided details of how this reduction would proceed. Given the difficulty you have had in the last two years of divesting brands, but noting that you have been successful in divesting Seppelt and Rosemount recently, can I ask what has changed, and do you have a timeline for completing this process?
Nothing has changed. Obviously, the market is not easy, but we believe that the strength of the brands that we are divesting is strong, and therefore, there will be, and there already is, a number of brands that we are marketing at the moment. There is strong interest for them. We are confident we will be able to continue the process that Sam Fischer outlined. I would say, though, we are not going to just sell brands for AUD 1 to get rid of them. If they do not fit the portfolio, we will seek to sell them, but we certainly will not sell them for unrealistic amounts.
No timeline?
No timeline, no. Obviously, it's work in progress. You don't know how long it takes to get buyers' interest. It takes a while, but the process is well underway. It's being managed by Sam and his team, and we're very confident it will continue.
Thank you. You'll forgive me for a second one, if you don't mind. Shareholders will watch with interest the progress of the Ascent transformation. What measures should shareholders watch over the next six to 12 months to assess its success?
I think the measures of the remuneration for Sam are in the notice of meeting. You can see there. On the Ascent program, there's AUD 100 million cost saving target. That will be the main metric that Sam has measured and the team have measured against. There are also, of course, it's much more than just cost reductions. It's also realignment of brands and all of the things we've just been talking about. At the end of the year, we will give a more fulsome update on how the company performed against those Ascent targets.
Thank you.
Pleasure. Uncharacteristically quiet.
You have got some more? Well, there is a surprise.
We don't want to be too boring. The company policy indicates that Non-executive Directors should have skin in the game. The annual report and my recent inquiries show that Mrs. Liu does not hold any shares in the company after more than 20 months as a Director. Does this show that she lacks confidence in the future of the company?
Most definitely not. Judy is an excellent Director, and we're very lucky to have her. You will note also from the various publications on the website, she has a number of years to achieve the target number of shares, which I'm absolutely confident she will do.
Okay. Lastly, we've been asking for some years that you publish key executives' actual take-home pay in addition to the rather confusing statutory remuneration. It's a simple way of showing that executives' pay actually aligns with the business performance. Given that both Qantas and Brambles, that you chair, have published this data for some time, would you commit to doing so in 2027?
We're continuing to look at it. The problem is it sounds simple, but it isn't. Because if you look at the pay actually received by an executive in a given year, it will have a component that relates to the activity in that year, but it also could have an LTI component from a three-year period that happens to vest in that year. That could've been a good year or a bad year, but overall, that has vested. That then distorts the income from that year and makes it hard to say, well, what is actually this year versus last year? For that reason, we've stuck to the Corporations Act requirements. But I hear you, and we are doing it in other places, I know. We'll have one more look at that.
Thank you.
If you've got any more, you might as well stay on your feet because there's that. No?
We've forgiven your workload issues as a government, so that's fine.
Shame. I was looking forward to a sparring session on that one. Well, no, it looks like there are no further questions from the floor, so I'll now take any audio questions. Operator, are there any audio questions?
Mr. Chairman, there appear to be no audio questions on the line.
Okay. Thank you. As there are no further audio questions, I'll now take written questions. To start with, we do have a number of questions submitted in advance of the meeting, which I'll address first. I will then respond to questions submitted live during the meeting from online shareholders. Please proceed with the first question received in advance of the meeting.
Mr. Chairman, the first question is from shareholder Mr. Martin Wren. Can someone explain to the shareholders how this company, that once was a desirable company, now has become a rundown has-been company? A second shareholder, Mr. Ian Fergus McWhirter, asked, "Why has such a great Australian company fallen so far?
Well, of course, no one's happy with the year that has just passed. As I think I mentioned in my speech, a backdrop of reduced alcohol consumption globally, one-off events in both China and the U.S. materially impacted the company's results in FY 2026. However, TWE was and remains a great company and is far from rundown. We have introduced a wide range of measures to restore the company's performance, as you've heard from Sam Fischer, and we're very pleased to see that these are bearing fruit with markedly improved results now in both China and in the U.S. Thank you.
Our next question is from DL Sunshine Nominees Proprietary Limited. As TWE at one stage was the most shorted stock but with the highest insider buying, could it not be reasonable to include even a modest dividend as a show of confidence to the market?
A good question. Look, suspension of the dividend is a temporary but we think really important measure, as the most important thing is to prioritize the return of leverage to a target below two times. We will, of course, consider resuming the payment of the dividends just as soon as we can see progress towards that target.
Our next question is from shareholder Mr. Andrew Fitzsimons. The company is struggling. Why not pay a reasonable wage and get rid of performance rights? If these are required to motivate, we have the wrong person.
I'm sorry, I have to disagree there. We have a clear philosophy that executive remuneration should be aligned with company and individual performance, and importantly, shareholder experience. The company's remuneration framework, which includes base pay and short and long-term incentives, is consistent with that philosophy.
Our next question is from shareholders Mr. William Holmes and Mrs. Lynette Holmes. During the tenure of the Chairman, we have made several investments in the U.S. totaling more than AUD 2 billion. Does the Chairman accept responsibility for these investments? If not, why not? On a similar note, shareholder Mr. Robert James Merrick asked, "Given the significant deterioration in TWE's U.S. business over the past 12 to 24 months, the substantial impairment of the Americas assets, the suspension of the interim dividend, and the need to reduce inventory and restructure the business, what specifically did the board get wrong in its assessment of the U.S. market and its capital allocation decisions, particularly around the DAOU acquisition? What changes have been made to the board's investment, risk, and governance processes to ensure shareholders are not exposed to a similar level of value destruction again?
Okay. As a board, we all take responsibility for the issues impacting the company, whether we were on the board at the time or not, and we are not satisfied with the returns that we are delivering in the U.S. relative to the amount of capital that we have invested there. This has been the case for some years now. For this reason, we have commissioned a strategic review, as we mentioned earlier, to consider all options available to us to ensure that we can get an appropriate return for shareholders from the Americas going forward.
I would stress, however, that while temporary excess inventory and the mismatch of capacity within our supply chain is depressing current performance, the underlying luxury brands in the U.S. are all actually performing very well, with depletions currently, again, ahead of plan and market. Our underlying U.S. business remains a strong and valuable asset.
The next question is from shareholder Mr. Andrew Fitzsimons. What more can we do to engage with addressing climate change?
As a company, we focus on two main areas in relation to climate change. Firstly, playing our part by reducing our impacts. We achieved 100% renewable electricity across our global operations, and we continue to work towards our commitment of net zero Scope one and two emissions by 2030. We are also investing in packaging improvements, energy efficiency, and supply chain initiatives to reduce emissions. Secondly, by adapting our business to build resilience. We are investing in water security, vineyard adaptation, climate science, new technologies, and other measures designed to help our business remain resilient over the long term.
The next question is from shareholder Mr. Anthony John Cox. What percentage of the losses are due to customers' changing desires and due to climate change factors, and how long do you expect it to take to return to profitability after these reductions in brands occur?
Look, there is no doubt that consumer spending is being impacted by a number of dynamics at the moment, a significant portion of which we believe to be cyclical, but not related directly to climate change. And through the Ascent program, we are focused on progressively improving the quality and sustainability of financial performance, whilst strengthening the balance sheet and improving shareholder returns at the same time.
The next question is from shareholder Mr. David Timothy Bryce. Is the intention of TWE to continue its separate listing of the Penfolds brand from TWE?
It's easily answered. We have no intention to pursue a separate listing for Penfolds at the moment.
That concludes the written questions we received in advance of the meeting.
Okay. Can you proceed with the written questions received live?
The first question is from Mr. Ronald Guy. From the Regional Trade Union's Human Rights Shareholder Group. Modern-day slavery in supply chain is a great concern. How active has Treasury Wine Estates been to make sure that through the tiers of the supply chain that no modern-day slavery is happening? And have there been any examples of this in the supply chain that have been identified? With the push by conservative governments to reduce Pacific Australia Labour Mobility workers and backpackers, do you think that this will have an impact on supply to Treasury Wine Estates?
Okay. Firstly, I'm not aware of any incident of modern slavery in the company, as far as I know. Certainly not in my time that I've been here have we seen that. We take that responsibility very seriously. We're very diligent. One of the issues considered by the Audit and Risk Committee, and rolled up to the board every year. I can never say never, that something would happen somewhere in the supply chain, but I think our supply chain management is exemplary. Extremely strong team, and I'd be very surprised if they didn't ferret out any of those things and fix them very quickly going forward. Specifically, your comment on Pacific, no, I don't see that having any impact.
The next question is from Mr. Gregory Barresi. Can you please explain how you measure the performance of board members considering the number of roles they hold?
Yeah. We actually have a very rigorous performance process. So, when I look at board members' performance and they look at mine, I have eight or nine colleagues, including our senior management team, who provide an opinion on performance each year. We also have an independent review conducted by an independent expert in the field who sits through board and committee meetings, and then interviews, meets with each director in turn. From that, formulates a report on everybody's performance on a very objective and qualified way. I then provide my fellow directors with the feedback on their performance, and the Chair of the Audit Committee provides me with the feedback on my performance. So it's actually a very thorough and detailed process. It's definitely not ticking a box.
The next question is from Mr. John Alexander. Apparently, younger people are drinking considerably less. This will have a significant impact on the consumption of wine. Do you have a strategy for containing the impact of this on TWE? If so, can you briefly explain that strategy?
Yes. Look, I think we mentioned earlier that if you look at the range of wines in price brackets and types and styles, they all do actually vary. Luxury wine, as you heard before, is still, by that we mean probably sort of AUD 30, AUD 40 a bottle up, is still growing as a market. The cheaper commercial brands, which is what younger people tended to drink, certainly I did when I was that age, those are in decline. But we've had a conscious program to move out of commercial brands and into luxury brands so that our focus and effort and investment is in the segment of the market that continues to grow. We've still got some commercial wines, as you heard from Sam, that we will try to exit, going forward, but we've already shifted the balance of the portfolio materially towards luxury.
Thank you, Chair. The next question is from Mr. John Maher. Could you please elaborate on the divestments and the to-date financial amounts for the sales? Are these divestments going to reduce the leverage?
I think you heard from Sam the two that we've already divested, and our leverage target does not include the funds received from these sales. So, that should actually improve or accelerate our progress back towards our target range. It's not a complete, is it?
The next question was from Mr. Gregory Barresi. Considering the share price has dropped from a high of AUD 19 to what it is today, can you explain this?
Well, I'm not sure how long we have. I think everyone's aware of all the issues surrounding the industry, and also surrounding the one-off events that we have had, as explained earlier, both in China and in the U.S. It's no consolation, I know, but the decline has been in line with most other luxury businesses around the world and other wine and alcohol groups. There's certainly a bit of a malaise across the whole sector. But we're very confident that we can outperform the sector as we get back on our feet with the measures that Sam Fischer's taking. I'm not sure we'll get back to $19, but I'm pretty sure we'll get a lot better than today.
Thank you, Chairman. There are no further questions online.
Great. Okay. As there are no further questions, that actually concludes our discussion on the items of business. Thank you for your questions. Voting will close shortly. If you have not done so already, please cast your vote on all resolutions now. That now covers the business before the annual general meeting. Thank you for your attendance and your participation, and I hope this has been an opportunity for you to learn a little more about Treasury Wine Estates and its exciting future. As mentioned earlier, the final outcome of the polls- Sorry? As mentioned earlier, the final outcome of the polls will be announced by notice to the ASX later today and placed on the company's website.
For shareholders attending in Melbourne, refreshments will now be served in the foyer, and our directors, members of our executive leadership team, and senior management will be available to introduce themselves to you. Although the business of the meeting is finished, there will now be a five minute period during which you may finalize your voting, and the meeting will close at the end of that period. Looks like I'm going to get run over in the rush for the refreshments. Thank you for your attendance. And that closes the meeting there.