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.
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