Foster’s Group has foreshadowed more job cuts, reporting an annual net loss and a continued drop in the Australian beer market.
However, the brewer says the decline is slowing and believes a pick-up in consumer confidence and a return to normal weather conditions should return the sector to flat to moderate growth.
Foster’s, which demerged its beer and wine operations in May, on Monday reported a full year net loss of $89 million for the 12 months to June 30.
The bottom-line result included earnings from discontinued wine operations, tax adjustments, restructuring costs, material items related to the demerger, and foreign exchange effects.
Foster’s net profit from continuing operations, and before material items, was $494.9 million, down 8.7 per cent on the prior year.
Underlying profit fell on the back of a 5.6 per cent drop in Foster’s Australian beer volumes and a six per cent market contraction.
The maker of VB and Carlton Draught said economic uncertainty, lower household disposable income and cool, wet weather had reduced beer demand.
“Foster’s expects that the rate of decline in the Australian beer category will moderate in the first half of fiscal 2012,” it said.
“The cider category is expected to remain in strong growth, and craft beer and international premium beer are likely to lead the beer category and continue positive mix trends.”
Foster’s shares were nine cents higher at $4.99.
Chief executive John Pollaers described the company’s results as solid and said Foster’s had made great progress in the last 12 months in improving its performance,
The market share of Foster’s brewing arm, Carlton United Brewers, had stabilised after a long period of decline; it had started a cost reduction program in May including axing of 145 jobs; and the group had increased promotional and advertising spending.
Furthermore, Foster’s was no longer distracted by its former struggling wine operations.
“Our focus is clearly on beer and cider for the first time in a decade,” Mr Pollaers told reporters.
“And now we’re starting to turn our mind towards how we expand our business internationally.”
Chief financial officer Stephen Matthews flagged more cost-cutting initiatives, including potential job cuts.
“We’re continuing to look at another set of initiatives, and that could possibly lead to further reduction in roles, but we’re not in a position to announce those yet,” he told reporters.
Mr Pollaers would not be drawn on whether the Foster’s result could make shareholders more likely to accept SABMiller’s $9.51 billion hostile takeover bid for Foster’s.
“The thing to do is to stand back and say: Are we doing everything that you would expect us to be doing in turning around the performance of the business?,” he said.
City Index chief market analyst Peter Esho said the Foster’s result was disappointing, with the beer business continuing to fall behind, even post-demerger.
“The outlook statement acknowledges 2012 earnings expectations will primarily be driven by consumer confidence, and we don’t see that changing anytime soon,” Mr Esho said.
Morningstar analyst Nathan Zaia said the disappointing result would be welcomed by SABMiller, but investors should look longer term and assess the potential for earnings growth as economic conditions improve.
