Australian Vintage debt rises as $27m inventory write-down deepens loss

Inventory reset drives $66.4 million statutory loss

Australian Vintage Limited (ASX:AVG) has produced the awkward arithmetic of a turnaround: cash flow has turned positive, yet the bottom line has deteriorated badly. Revenue was almost unchanged at $257.6 million in FY26, while the group reported a statutory net loss of $66.4 million, compared with a $9.6 million loss a year earlier.

The result included a $27.0 million write-down of legacy inventory and a $10.2 million write-off of deferred tax assets. The inventory charge followed an aggressive effort to clear surplus bulk wine, particularly older red varieties, with total holdings reduced to approximately 90 million litres. Management said the reset was intended to release capital and leave future grape intake broadly in balance with sales from Vintage 2027.

Cash generation improves while debt rises

There was a more encouraging signal beneath the statutory loss. Operating cash flow reached $4.3 million, compared with an outflow of $7.7 million in FY25, while free cash flow excluding investments was approximately $2 million. Australian Vintage said the latter was its first positive result on that measure since FY22 and a $35 million improvement from FY23.

That progress came at a cost. Net debt rose to $88.8 million from $75.1 million after roughly $16 million of investment in innovation, acquisitions, distribution and restructuring. The company has secured banking facilities of $128 million through March 2028, with an option to extend for another year. The refinancing had previously been described as supporting the group's expansion plans, including Poco Vino's move into the United States, in the $128 million refinancing.

Poco Vino becomes the turnaround's central growth test

The clearest growth story is Poco Vino, whose smaller-format bottles sold more than 2.2 million units globally across six products in 11 months. Australian Vintage said the range became the fastest-growing glass-format mini brand in the UK in the latest quarter and reached, or was being shipped to, 12 markets.

Management expects annualised Poco Vino sales to exceed $20 million in FY27, supported by eight new Prosecco and flavoured spritz products scheduled for Australia in October 2026, as well as the premium Atlas Series for travel retail and on-premise channels. Lemsecco sales in Australia rose 116% during FY26, while MadFish and the Invivo distribution arrangement are expected to contribute a combined annualised net sales run rate of more than $12 million in FY27. The strategy builds on the Poco Vino growth strategy, which earlier centred on innovation, acquisitions and international expansion.

FY27 must prove the cash turnaround is durable

Australian Vintage says it expects net positive cash flow for FY27 after remaining investment payments and planned inventory sales, with debt reduction for the first time in years. That forecast depends on completing the restructuring programme, realising stock at expected values, sustaining sales growth and remaining within financing covenants. The company finished FY26 with a $60.9 million loss before tax and $95.5 million of borrowings, leaving limited room for execution missteps.

The next test is therefore less about whether the portfolio can produce a popular launch than whether those launches can outweigh the mature wine categories under pressure, fund the balance sheet and improve profitability after the inventory clean-up. A $20 million-plus Poco Vino run rate would help, but FY27 will show whether it becomes recurring cash rather than another round of investment-led promise.