Fosters edges nearer demerger

Foster’s chairman David Crawford has given his strongest indication yet that a demerger of the company’s wine and beer division is highly likely, though the board is yet to formally ratify such a move.

Speaking at the company’s annual general meeting yesterday, Crawford said a final decision on the split should be made by March or April 2011.

“We’re significantly well advanced,” he told the AGM. “The board believes there are potential shareholder benefits of a demerger including increased transparency, greater investment choice and improved strategy and capital flexibility for separated beer and wine businesses.”

Crawford also said, however, that there is still a chance the board could reject the plan.

“This decision is still subject to completion of a detailed evaluation of the issues, costs and benefits to Foster’s shareholders, and an ongoing assessment of prevailing economic and capital market conditions,” he said.

Meanwhile chief executive Ian Johnston said the company is on track to cut A$100 million in costs from its bottom line to help transform the struggling group into a “pure play” wine and beer business that is better-placed to compete with its rivals.

Johnston confirmed the company is on track to hit A$100m in cost reductions in the 2011 financial year, with benefits of A$83m realised in 2010, which included A$48m in the second half.

He also said the wine business has shown signs of improvement, while the company’s share of the Australian packaged beer market looked to have stabilised at 51%.

Alan Lodge, 27.10.2010