AUS: Wine turns Foster's profit sour
Australian drinks giant Foster's has blamed a disappointing performance from its wine division for a drop in full-year profit and sales.
Underlying net profit fell 0.4% to A$713m (US$607m) for the 12 months to the end of June, Foster's announced yesterday (25 August). Revenue dipped 0.1% to A$4.4bn at constant currency rates, but fell 4% on a reported basis.
Net profit after one-off charges plunged 88% to $111.7m, following a $602m write-down on the group's global wine business.
A profit warning and revised earnings guidance from Foster's in June, accompanied by the abrupt resignation of CEO Trevor O'Hoy, meant many analysts had been expecting bad news.
"Foreign exchange movements in the 12 months to 30 June 2008 cut wine earnings by approximately $70m and wine growth by 14.6 percentage points," said acting CEO Ian Johnston. "Put simply, financial returns from wine have not met our expectations."
Speculation continued to surface this week that Foster's intended to sell its ailing wine division, which saw sales to the Americas drop 9% during the year.
Johnston said no announcement would be made until Foster's had completed a strategic review of the business, due to be finished by the end of the year.
Beer provided the firm with some reason to be cheerful. Johnston said beer earnings were up 8% across its Australia, Asia and Pacific business, adding: "Some very deliberate pricing decisions have slowed beer volume growth but strong value growth continues."
In a statement to re-assure investors, Foster's said it had "significant liquidity". The firm refused to produce earnings predictions for the coming year, due to the uncertain future of its wine business.
Last week, we reported on the recommendation by the UK's chief medical officer that parents should not give their children any alcohol until they were at least 15 years old. The story prompted us to q...
Heineken subsidiary Scottish & Newcastle UK allowed volumes of Foster's beer to slide in 2008 because the group refused to take part in deep discounting on lager brands by multiple retailers, just-dri...
The top ten stories published on just-drinks this week....
Foster's has said that it intends to keep its struggling wine business, but will separate its wine and beer divisions and dispose of more than 30 "non-core" vineyards, as well as 37 brands....
Speculation is growing that Foster's may attempt to hold fire on a sale of its wine assets, but analysts say the group needs to show that it is addressing its problems....
The top ten stories published on just-drinks this week:...
Coca-Cola Amatil's joint venture with SABMiller, Pacific Beverages, is set to launch a low-carbohydrate version of Italy's Peroni lager into the Australian market....
Drinks giant Diageo is considering cutting jobs as part of a cost savings programme designed to save up to GBP100m (US$142m) annually....
- Interview - Bernstein analyst Trevor Stirling
- Trump, local spirits and the IR role - The Analyst
- Is Irish whiskey ready to recognise its potential?
- Diageo NA head on Trump, Millennials, Bourbon
- Cannabis – A clear and present danger to alcohol
- Beam Suntory opens global headquarters in Chicago
- Pernod Ricard offloads Domecq brandies, wines
- Diageo strike threat postponed with fresh vote
- Diageo appoints first programmatic marketing head
- TWE renames Blossom Hill fruit wine range