Foster's to spin off beer, wine

Brewer Foster's Group Ltd says it will spin off its beer and wine assets into a new listed company, as it signalled a $1.3 billion impairment in its fiscal 2010 results against the wine business.

Foster's said it expected earnings in fiscal 2010 to come in at $1.05 billion-$1.08 billion, in line with consensus estimates, the company said in a statement on Wednesday.

It warned the impairment against the carrying value of the wine assets would "change ... the timing and payment of dividends over the next 12 months."

The brewer said the structural separation would create separate stock exchange listings for its Beer and Wine business.

The demerger was subject to a "detailed evaluation of the issues, costs and benefits to Fosters shareholders and ongoing assessment of prevailing economic and capital market conditions", the company said in its statement.

Foster's is being advised by Gresham Advisory Partners and Corrs Chambers Westgarth.

Foster's chief executive Ian Johnston said the company was "increasingly seeing the benefits of operationally separating the beer and wine business".

"While the beer and wine businesses are market leaders, they operate in separate market segments with different strategic and operating characteristics, Mr Johnston said in a statement.

"We will proceed as quickly as possible, but priority will be given to ensuring that all relevant matters are carefully and rigorously examined with the intention of continuing to grow our businesses and minimising disruption to our customers, employees, suppliers and other stakeholders."

Foster's said no decision had been made on the structure of timing of the demerger, which would depend upon "among other things, prevailing economic and capital market conditions".

But the brewer said it was unlikely to be implemented until the first half of calendar 2011 at the earliest.

Foster's said potential benefits of the demerger included increased transparency, allowing investors to more appropriately value each business over time.

It also would provide greater investment choice and flexibility for separate boards and management of Beer and Wine to develop their own corporate strategies and implement capital structures and financial policies appropriate to their businesses.

Potential issues associated with the demerger may include financing costs, corporate and other costs and one-off implementation costs, the brewer said.

Foster's also said it expected earnings before interest, tax, SGARA (self generating and regenerating assets) and significant items (EBITS) for the year ending June 30, 2010, to come in between $1.05 billion and $1.08 billion.

The brewer said the forecast was "broadly in line with consensus estimates".

Foster's reported EBITS of $1.165 billion in 2008/09.

The company said it expected to take a non-cash impairment charge between $1.1 billion and $1.3 billion (pre-tax) to the carrying value of its wine assets in 2009/10.

Foster's said the charge was due to a higher discount rate being applied to wine, reflecting the way the business was now being managed, and higher long-term exchange rate assumptions.

It would not have any adverse implications under Foster's various banking facilities, the Melbourne-based company said.

Mr Johnston said Foster's wine business was showing signs of growth.

But he said wine continued to be affected by oversupply in Australia, subdued consumer demand in key international markets and a strong Australian dollar.

Meanwhile, the beer business was reinvesting in its key brands to continue positive earnings growth.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

• Bookmark this page
• Share this article
  •  
  • facebook
  • slashdot
  • digg
  • Reddit
  • stumbleupon
  • linkedin
  • twitter
• Got more on this story? Email CIO
• Follow CIO on twitter

• Share
  Share this article

  •  google+
  • facebookfacebook
  • slashdotslashdot
  • diggdigg
  • RedditReddit
  • stumbleuponstumbleupon
  • linkedinlinkedin
  • twittertwitter
• print
• email
• Bookmark