AUS: Beer boosts Foster's FY, wine still tough
Foster's Group has reported rises in net sales and profits for its fiscal full-year, as the firm's solid beer business helped to offset ongoing difficulties in wine.
Net sales for the 12 months to the end of June rose by 2.7% to A$4.5bn (US$3.77bn), with profits before charges up 4% to A$741.5m, Foster's said today (25 August).
"In the light of the economic conditions and challenges faced across our markets, these are very solid results," said Foster's CEO Ian Johnston in a results conference call.
Beer, cider and spirits led the performance, with beer sales revenue up 5% across the Australia, Asia and Pacific region, the Australia-based firm said.
On the domestic market, Foster's' beer, cider and spirits business has been "reborn" as Carlton & United Breweries, following the group's separation of its beer and wine divisions, and beer volumes have risen strongly, said the firm.
An overhaul of Foster's wine business is "on track", said group CEO Johnston, but he warned that wine markets remain tough around the world.
"The wine category is bearing the full brunt of a lack of consumer confidence brought on by global economic conditions," said Johnston, adding that the group has seen consumers trading down to cheaper wines and drinking more at home in many key markets, particularly the US.
"Wine returns are not where we want them to be, but it remains a profitable business, producing exceptional quality wines and continues to generate solid cash flows," said Johnston.
Foster's completed the separation of its beer and wine businesses in June, as part of its wine restructuring plan announced in February this year.
It identified more than 30 "non-core" vineyards and 37 brands to be sold off, but the group has so far only disposed of one brand, it said today. A sale process is underway for a further six brands.
Analysts have speculated that Foster's may still look to sell its entire wine division, and by doing so open up a bidding war among multinational brewers for its Australian beer business. The group made no comment on this today.
Wine restructuring costs led to a A$397.6m charge for Foster's in its full-year. After charges, net profits for the 12 months were A$438.3m, but this represented a significant gain on the previous year, when impairment charges on the firm's underperforming wine business saw profits plummet to A$111m.
In its outlook, Foster's reiterated that it expects to achieve A$100m in annual cost savings from fiscal 2011.
It said trading in wine will "remain challenging" for the next 12 months, but that the Australian beer market "remains very robust and is benefiting from strong innovation across the category".
For the full transcript of Ian Johnston's results presentation, click here.
For the full results announcement, click here.
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