KEY POINTS:
SYDNEY - Foster's, Australia's biggest alcoholic drinks company, posted a 22 per cent rise in second-half profit on strong premium beer and wine sales, and shrugged off adverse currency impacts and bad weather to tip a strong year ahead.
Shares in Foster's, the world's second-largest wine company, jumped almost 6 per cent after it also announced plans to buy back shares.
The stock has fallen 11 per cent this year on concerns about the strong Australian dollar and sales strategy, having risen last year on speculation it might be a takeover target.
Foster's confirmed it had been approached by private equity buyers, but said interest had waned recently.
"The company seems to have addressed a number of the problems that have perplexed it over the last two years," Shaw Stockbroking analyst Scott Marshall said.
"Clearly it's not out of the woods yet, but there are a few industry things that are operating in its favour, such as the reduction in the wine glut in Australia," he added.
The Australian wine business has been hit by a three-year grape glut.
Net profit before one-offs for the six months to June 30 was A$353 million, compared with A$289.8 million a year ago. Estimates pointed to second-half earnings of A$334.2 million, based on a survey of nine analysts.
Foster's said it was focused on organic growth and not acquisitions, with a switch to higher-priced premium beers and wines expected to drive sales.
Global volumes this year would be similar to last year but it would focus on higher-margin products.
Analysts had expected a cautious outlook due to rising costs and volatility in the Australian dollar. The company makes around a quarter of its earnings from the United States.
Speculation that Foster's could be a takeover target drove a sharp spike in its share price last November, prompting an enquiry from the Australian Stock Exchange. At the time, Foster's said it was unaware of any reason for the moves in the share price.
Foster's chief executive Trevor O'Hoy said it had received calls from private equity predators, although interest had dried up due to the global credit squeeze.
"Probably every major private equity firm has been in touch, not only (with) us but with just about every other company in this country," O'Hoy said.
"For some strange reason those calls stopped six weeks ago. Of interest though, the calls have started again with some private equity firms that seem to have some over-geared businesses and they are looking for help."
Foster's global wine business is ranked behind only US-based Constellation Brands and includes the Rosemount, Penfolds and Lindemans brands. The company reported strong growth in international wine sales.
In Australia, beer sales were driven by a jump in sales of its new low-carbohydrate Pure Blonde label.
Boutique and mid-strength beers have been winning market share in Australia's A$5.5 billion beer industry, though Foster's 113-year old VB brand is still the country's top-selling beer.
Foster's said it planned to buy back A$250 million of capital off market and A$100 million on market.
The group also announced the retirement of its chief financial officer Pete Scott.
Foster's has struggled with a strategy to integrate its wine, beer and spirits sales teams from a previous system of specialised sales people, and this year reintroduced wine specialists to boost sales to restaurants and fine wine stores.
- Reuters
