Global beverages firm Foster’s Group says its first quarter results are in line with expectations, but warns it has some clear challenges to meet in 2009/10, most notably the soaring value of the Aussie dollar, up 47% from the lows of February against the greenback.
Fosters shareholders were told at yesterday’s AGM in Brisbane that after adjusting for currency impacts, its performance in the first quarter of the new financial year was line with expectations.
It said beer sales in Australia were continuing to benefit from positive market conditions and "earnings momentum remains strong".
In the wine market, Fosters said the performance in key international markets continued to reflect challenging financial conditions.
In the wine market in Australia, Foster’s said the oversupply situation was impacting its commercial wine volume, but this was being partially offset by solid performance in more premium price points and overall net sales revenue was only slightly behind the prior year.
"Looking ahead to the 2010 financial year, there are some clear challenges to meet, and opportunities to grasp," Foster’s chief executive Ian Johnston told shareholders at AGM
"The rising Australian dollar, up over the 90 US cent level against the weakening US greenback, and over 55 pence against the pound, present challenges in terms of earnings and competitiveness in export markets – as does increasing competition from cleanskin and private label wines in the Australian market," he said.
"In wine, performance in key international markets continues to reflect challenging financial conditions with consumers maintaining their preference for commercial wines and to eat out less.
"In Australia, the oversupply situation is impacting our commercial wine volume but this is being partially offset by solid performance in more premium price points and overall net sales revenue is only slightly behind the prior year.
"From a global perspective, we are addressing head-on the image challenges facing Australian wine and, in particular, the image of core traditional varietals such as chardonnay. We are working hard at building our reputation for outstanding quality and repositioning our portfolio for diversity and terroir.
"We’ve also begun a major program behind VB and we have new campaigns for Pure Blonde, Carlton Draught, Carlton Dry and Cascade in the pipeline. And there are more innovations to come, extending consumer favourites and breaking the mould with some new concepts.
"Finally, our transformation agenda will continue at pace, continuing the cultural change amongst our people while we aggressively drive efficiency and productivity improvements – delivering the promised $100 million of annual cost savings," he said.
Mr Johnston said the business environment over the past 12 months had not been easy.
"But we are building a stronger, more focused business with a refreshed management team, and a new organisational structure and culture."
In August, Foster’s revealed a 2008-09 net profit of $438.3 million, up from $111.7 million in the prior year. The prior result included negative significant items of $730.4 million.
In 2009 financial year Foster’s booked write-downs before tax of $397.6 million associated with its business transformation program.
Net profit before significant items and SGARA (an accounting adjustment that measures grape vines at net market value) in 2008-09 was up 4% at $741.5 million due to higher beer sales in Australia.
Chairman David Crawford earlier told the meeting that in "a year of significant global financial upheaval and substantial business change, Foster’s has maintained a position of strong financial health.
"We are well funded, producing solid operating results, with excellent cash flows and higher dividends paid to shareholders."
Fosters shares closed steady on $5.56.
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And Qantas shares closed steady at $2.99 after the annual meeting in Perth that was light on information about the airline’s trading outlook, and long on criticism over the retirement package for former CEO, Geoff Dixon.
Chairman Leigh Clifford told the 150 or so people there that "The global economic outlook remains uncertain. We are seeing some encouraging signs and certainly no further deterioration."
