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Sydney, Oct 30, 2008 (ABN Newswire) - Grog company Foster's Group has delayed the completion of the much talked about review of its struggling wine assets by two-and-a-half months, but says first quarter performance is in line with expectations, and that its Australia beer arm continues to do well.
Shareholders at yesterday's annual meeting in Melbourne heard that the delay would see outcome now appear with the group's first half results next February instead of the end of the year as previously announced to the market.
But from what chairman, David Crawford said to the meeting, the delay is a management decision.
But no doubt the current financial markets turmoil is the best reason for the delay: it's meant there's a shortage of anyone interested in buying some of the assets now on the market in wine, or which could be up for same as a result of the review.
Despite this, the company seems to be travelling OK, as new CEO, Ian Johnston told the meeting:
"For the quarter to September this year, I'm pleased to say performance has been in line with our expectations.
"It is perhaps too early in the year to be over confident about instant performance improvement across our company, but over the last month or so, a number of individual indicators give me encouragement that we are on the right path," he told shareholders.
"Here in Australia our beer business is performing well. Improving volume and value trends have continued through September and we have a strong innovation program which offers consumers more choice in the premium sectors, and delivers a positive price outcome.
"Excluding cask wine in Australia our global wine shipments are ahead of the last year and the first quarter plan.
"Our bottled wine sales in Australia are nicely ahead of last year and we are encouraged by the share performance since the beginning of 2008. As expected, our cask volume in Australia is below last year as we scale back our participation in the category.
"In the Americas, our first quarter wine shipments and depletions were in line with plan and ahead of the prior year.
"And it is encouraging to know that the new season launches are just beginning to gain distribution as retailers introduce these innovations to their stores and shelves.
"One issue in the US is the impact of the economic downturn on consumer spending. Forecasting consumer patterns in the US is fraught with its challenges, but at this stage of the cycle overall wine consumption seems to be holding up at trend levels.
"However, this disguises a shift from restaurant and on premise sectors, to higher levels of consumption at home. This tends to move purchasing to lower price wines and away from the luxury portfolio.
"Our short term plans are being adjusted to recognise this dynamic. Notwithstanding this, both the category and Foster's continue to see value growth ahead of volume growth in the US market.
"In the first quarter, wine volume in our Europe, the Middle East and Africa region is below prior year as we face some economic headwinds and overcome some supply issues into Europe.
"The outlook is still positive for the year, and year to date earnings for the region remain in line with our expectations.
"However, in Europe, given similar challenges for the consumer, we remain cautious over the medium term.
"As we look forward to our half year results I am certainly encouraged by some of our performance trends.
"But I should also remind you that for the year our global wine results will reflect the impact of the higher cost of goods we noted at the 2008 year results back in August.
"Recent movements in exchange rates are a positive for our business and the Australian wine industry generally. But again, we are not distracted by these short term fluctuations and we retain our focus on delivering stronger financial performance regardless of the exchange rate cycles."
In June, Foster's wrote down the value of its wine assets by $730 million, a decision that severely impacted its 2007-08 profit result.
Net profit for the year fell 88.4% to $111.7 million and CEO Trevor O'Hoy resigned and was replaced by on a temporary basis by non-executive director Ian Johnston.
He was made CEO last month by the board who were obviously pleased with what he had done since mid year.
Mr Johnston said the group's balance sheet was in good health.
"While the wine review will be a major input to medium and long term strategy for the group, we are not hesitating to make the immediate business decisions necessary to drive business growth," he said.
Foster's shares were up 34 cents, or 6.7%, to $5.42. The market faded from being up more than 3% at one stage, to a 1.3% gain at the close.
And no mention in the speeches about the 5% plus stake acquired by Deutsche Bank, but there was chat at the meeting, but no real advance in the sum of knowledge about the holding.
Some analysts said the shares firmed on hopes the delay to the wine review results might mean corporate activity was afoot.
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