AUS: Foster's Group confirms beer, wine split
- Beer and wine divisions to be demerged
- Pre-tax non-cash impairment charge of AUD1.10bn to AUD1.30bn to the carrying value of wine assets in 2010 financial year.
- EBITS of AUD1.05bn to AUD1.08bn forecast for current fiscal year
Foster's plans to list its beer and wine divisions separately
Foster's Group has today (26 May) confirmed that it will demerge its beer and wine units.
The company said earlier this morning that it has decided to create separate stock exchange listings for beer and wine following “significant progress” with its 'Transformation Agenda', announced with the release of its 'Wine Strategy Review' in February last year.
Since the conclusion of the review, Foster's has appointed new senior management to its wine and beer businesses, implemented stand-alone organisational structures across the two units and conducted wine brand rationalisation and vineyard divestments.
“We are increasingly seeing the benefits of operationally separating the beer and wine businesses,” said Foster's CEO, Ian Johnston. “While the beer and wine businesses are market leaders, they operate in separate market segments with different strategic and operating characteristics.”
While no decision has yet been made on the structure or timing of a demerger, Foster's did say that the earliest such a move would be completed is during the first half of next year.
Foster's share price leapt markedly today following the announcement.
The news coincided with Foster's warning that it expects to take a non-cash impairment charge of between AUD1.05bn (US$868.6m) and AUD1.20bn after tax for its current financial year. The charge is due to what the company described as “a higher discount rate being applied to wine, reflecting the way the business is now being managed, and higher long term exchange rate assumptions”.
Foster’s also said today that it expects EBITS for its current fiscal year - to the end of June – to come in at between AUD1.05bn and AUD1.08bn. The forecast is “broadly in line” with consensus estimates, according to Foster's.
“The beer business is Australia’s market leader and, under new leadership, is focussed on reinvesting in its key brands to continue its track record of positive earnings growth,” said Johnston. “Foster’s wine business is showing signs of growth but continues to be impacted by oversupply in Australia, subdued consumer demand in key international markets and a strong Australian dollar during the 2010 financial year.”
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