Herald Sun

BREWER and winemaker Foster's Group has posted an annual net loss, and says it remains on track for a possible demerger of its beer and wine businesses in the first half of calendar 2011.

Foster's today posted a net loss for 2009/10 of $464 million.

The result includes a non-cash impairment of $1.163 billion against the carrying value of its wine assets, the costs of the proposed demerger, and better than anticipated returns on the sale of vineyards.

Operating revenue was down 4.8 per cent at $4.461 billion.

Foster's declared no final dividend for 2009/10.

But Foster's said it remained confident in the fundamentals of the Australian beer market, after its beer business, Carlton United Breweries, delivered a solid result in a more subdued national beer market in the second half of the year.

Melbourne Foster's chief executive officer Ian Johnston said evaluation of issues, costs and benefits of a potential demerger were on schedule.
"Management, logistics and capital structure deliberations are progressing well with the process of seeking the necessary tax rulings to commence shortly,'' he said.

"While no final decision has been made, the timeline for a potential demerger remains the first half of calendar 2011."

Foster's said the operational separation of its wine and beer operations in Australia was now substantially complete.

"Cost reductions of $83 million have been included in the 2010 results with full realisation of the $100 million of benefits expected in the 2011 financial year," Mr Johnston said.

Foster's said that despite a softer consumer environment in the second half, the company was confident that the long-term fundamentals of the Australian beer category remained robust.

CUB's programs to improve sales and marketing, portfolio realignment initiatives, and increasing production efficiency would drive future performance.

"Market conditions in the wine category remain mixed with oversupply in the Australian market, a subdued consumer environment in key international markets, and the strength of the Australian dollar expected to have an ongoing impact," Foster's said.

"However, enhanced route to market capability in all regions, portfolio premiumisation, and the benefit of efficiency initiatives will continue to drive business performance improvement."

Foster's said that in 2010, its wine business, now called Treasury Wine Estates, had generated stronger earnings in the second half on the back of improving sales focus and benefits from efficiency programs.

On a constant currency basis, earnings rose 20.5 per cent to $221.3 million.

But unfavourable exchange rate movements reduced earnings by $123 million.

"An increasing focus on premium wines, route-to-market changes in all regions, product innovation and brand investment were highlights for the wine business," Foster's said.

"Against this, the continuation of subdued consumer sentiment in key international markets and ongoing structural oversupply in Australian wine continue to impact business performance."

Foster's said Carlton & United Breweries delivered a solid result in a more subdued beer market in the second half.

CUB earnings lifted five per cent to $904.1 million and included $34 million of benefits from efficiency programs.

"In Australia, CUB's off-premise value share in beer remained stable, with net sales revenue per case increasing just over 5.4 per cent," Foster's said.

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