E-Malt.com News article: 3146

AUSTRALIA: Foster’s CEO Tim O’Hoy has called the performance of his company’s division “unacceptable” after the group registered only a 1.5% rise in normalised net profits after tax.

The Australian beer and winemaker reported a full year net profit after tax of A$799.3m, up 72.7% on last year. However, the figure includes significant items of A$329.9m after tax. Normalised net profit after tax, excluding the discontinued Australian Leisure and Hospitality (ALH) business. was only A$549.2m, a 1.5% rise.

Foster’s suffered from a large drop in performance in its wine business, which was balanced out by a strong turn from its beer portfolio.

President and CEO, Trevor O’Hoy said: “Foster’s full year results reflect the benefit of a diversified portfolio of businesses. Strong operational performances from CUB’s domestic multi-beverages portfolio, for the Asia Pacific Wine business, for the Foster’s brand internationally and Lensworth were largely offset by markedly weaker contributions from the North American Wine Trade business and from Wine Clubs and Services.

The group’s domestic beer operations CUB delivered a 9.5% jump in earnings before interest, tax, amortisation and significant items (EBITA) to A$520.1m. Normalised operating cashflow (before interest and tax), excluding ALH, was up 8.3% to A$586.1m. Operating cash flow represented 104.1% of EBITDA.

However, CUB beer volumes declined by 1%, with total alcohol volumes increasing by 0.8%.

Foster’s Brewing International (FBI) EBITA increased by 10.7% to A$43.6m, with earnings growth in the Europe, Middle East and Africa, and the Greater Asia regions, partially offset by lower earnings contributions from North America and Greater Pacific.

Foster’s Lager, currently the number seven international premium beer brand, grew volume by 8.5%, considerably outperforming estimated global beer industry growth
of around 2%.

However, the company’s wine division Beringer Blass Wine Estatessaw its EBITAS (EBITA excluding SGARA) declined 32.0% to A$291.7m, compared with the previous year. At constant exchange rates1, EBITAS declined by 23.3%.

“Earnings decline was due in large part to a 45.8% reduction in North American Trade EBITAS to A$138.2m,” the company explained. North American Trade EBITAS declined by 34.3% at constant exchange rates.

Foster’s said the lower North American Trade result was due to a combination of factors: cyclical oversupply conditions in the US, lower growth in the domestic premium category and a decision by BBWE to reduce distributor inventory levels by lowering second half shipments.

BBWE’s earnings decline was partly offset by a strong result from the Asia Pacific Trade business, delivering a 9.2% increase in EBITAS to $72.5 million.

Total Wine Trade volumes decreased by 2.9% to 15.6m cases. Total BBWE volume (including Clubs) decreased by 2.6% to 18.5m cases

O’Hoy said: “The Group has ended the year with the foundations to deliver significantly enhanced financial results for shareholders over the coming years. Importantly, at an operational level, there are grounds for confidence in strong performances in the coming years across all parts of the business.

“A higher contribution in FY05 and FY06 from cost savings and efficiency improvements deriving from the CUB operational review, provides us with confidence that earnings growth in the 6% to 8% range is achievable over the next few years.

He added that: “We recognise that the overall performance of the Beringer Blass business has been unacceptable.

“An urgent priority will be to restore the financial performance of this part of the business to ensure total Group earnings growth above 10% from FY06.”

“2005 can be expected to be a year of consolidation, with increased investment within our wine business and a focus on extracting efficiencies across the Group. As such, moderate earnings growth can be expected, prior to the planned achievement of double digit growth in FY06.”


27 August, 2004