AUS: Foster's CEO quits as earnings revised
The CEO of Foster's has quit the Australian drinks company.
Trevor O'Hoy today (10 June) tendered his resignation to the board of Foster's after 33 years with the company, the last four of which had been as CEO. O'Hoy's resignation came at the same time as Foster's revised its fiscal 2008 earnings outlook and unveiled a non-cash write down to wine asset carrying values and a strategic review of its global wine business.
The company today reduced its net profit forecast for fiscal 2008 to between 5% and 7% earnings per share, below the previous guidance of approximately 10% growth. In the second half, Foster's said, business performance has been impacted by "continuing disappointing results" from wine in the Americas and slower revenue growth in Australia.
The company also said that it expects to report a non-cash impairment charge of between A$600m and A$700m to the carrying value of its global wine assets. The charge reflects a reduction in forecast sales of Californian-sourced wines following the deterioration in performance over the past 12 months, as well as the negative impact of exchange rate movements and a reduction in forecast global sales of Australian wine. The company noted that exchange rates had moved "significantly" since the close of both fiscal 2007 and the first half of fiscal 2008.
Foster's also expects to report a A$70m non-cash write down to surplus Australian bulk wine inventories. The company's surplus Australian wine inventory reflects a higher than anticipated intake from the Australian vintage last year, lower than anticipated sales in fiscal 2008 and the impact of currency on the global demand for Australian wine.
The company also said today that its management instituted a review of its global wine strategy and operations in April. "The company recognised that its performance has not met its - or shareholders' - expectations," chairman David Crawford said. "Foster's also recognised and acknowledged problems with its execution of the Southcorp integration and that it paid too much to acquire wine assets."
Crawford added that the review will look "at all aspects of our wine business and we're going to consider all possibilities".
In tendering his resignation, O'Hoy said that that it as "time to stand aside and allow the next generation of management to lead the business forward". However, in a conference call today, Crawford said that O'Hoy took full responsibility for the company's write-downs.
O'Hoy, who was not present in the conference call, will stay with Foster's until a successor is found.
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