Tuesday, brewer and wine maker Foster's Group Limited (FBRWY.PK) reported an 88% decline in its 2008 earnings, weighed down by write-downs to its global wine assets and competition. The Melbourne, Australia-based company, which is in search of a new chief executive officer, also announced that it conducts a strategic review of its troubled wine operations.
Foster's reported an 88.4% decline in net profit after significant items and self-generating and regenerating assets (SGARA) of A$111.7 million, down from A$966.2 million in the comparable period last year. The two impairment charges of A$437.7 million on the carrying values of wine in the Americas and A$292.7 million on its Australia, Asia and Pacific wine carrying values affected results for the year.
Net profit, before significant items and SGARA declined 0.4% to A$713.2 million. Earnings per share were up 3.4% to 36.8 cents, within the guidance range of 36.2 Australian cents and 36.9 Australian cents provided to the market on June 10, 2008.
Foster's beer business in Australia remained robust and generated solid earnings growth. Foreign exchange movements in the 12 months to 30 June 2008 cut wine earnings by about A$70 million and wine earnings growth by 14.6 percentage points.
Net debt declined A$165.9 million on solid operating cash flows and a A$337.9 million benefit from exchange rate movements, partially offset by the completion of a A$350 million share buy-back program and a A$244.5 million payment in relation to a disputed tax assessment. Cash flow after dividends advanced 52.1% to A$433.9 million.
In June Foster's Chairman David Crawford noted that the company paid too much to acquire wine assets and it did not execute the Southcorp integration as well as it expected. The company acquired Australian winemaker Southcorp in 2005 for A$3.7 billion or US$2.8 billion. The company also paid $2.6 billion in 2000 to acquire Beringer in the United States.
Foster's also announced that Chairman David Crawford is reviewing the operation, which could lead to asset sales. The review is expected to be complete before the end of calendar 2008.
Ian Johnston stepped into the acting chief executive officer roles in July after the departure of Trevor O'Hoy, who spearheaded the doubling of Foster's wine assets in his four years in charge.
Johnston in a statement said "Global trading conditions for wine continue to be competitive, but the category remains in sold growth."
The company announced a final dividend of 14.25 cents per share fully franked and did not provide a forecast for future earnings.
FBRWY.PK declined $0.02 or 0.44% and closed Monday's regular trading session at $4.50.
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