Fosters Group has "neglected" beer business - analyst

Foster's Group has "neglected" beer business - analyst

Currency winds and floods across Australia have caused analyst group Merrill Lynch to cut its profits forecast for Foster's Group by 14%.

Merrill Lynch analyst David Errington, a long-time tracker of Foster's fortunes, has cut his full-year profits forecast for the beer and wine group to AUD710m (US$700m), from an expected AUD825m previously.

Both the firm's Australian beer arm, Carlton & United Breweries (CUB), and its wine business, Treasury Wine Estates, are expected to report falls in earnings before interest and tax for the year, Errington said in a note cited by The Australian newspaper today (21 January).

Treasury Wine Estates has struggled to cope with the rise of the Australian dollar, which appreciated by 15% against the US$ to near-parity last year. This is expected to damage earnings for the group's US wine business, which, according to Nielsen data, has also struggled to regain sales momentum.

Compared to wine, CUB has been a relatively solid performer in the last couple of years, even though it has leaked market share to competitors. But, weaker demand for beer in Australia and the recent flooding across large swathes of Queensland are thought to have hampered the group.

Errington said that Foster's has "neglected" CUB. He added that the group needs to show that it has a turnaround plan for both businesses following its planned demerger, which is expected within the next six months.