Foster’s Group says it sees increasing support for the demerger of its beer and wine businesses.
The company’s AGM was told yesterday in Melbourne that research into the proposed split had confirmed the assumptions behind it, although a final decision has not yet been taken on the proposal.
Foster’s chairman David Crawford told the meeting;
"The (research) work so far has given the Board comfort that the underlying assumptions are robust.
"Since the announcement, the Foster’s share price has also risen to its highest point in almost two years, reflecting strong investor support for this initiative."
That high of $6.44 was driven more by the speculation about the approach by a private equity group than a vote of confidence in the idea of the split.
Fosters shares closed up 3c yesterday at $6.16
"If a demerger proposal is recommended by the Board and approved by shareholders, it can be achieved in the first half of calendar 2011," the chairman told the meeting.
Mr Crawford said a demerger would see shareholders receiving shares in both new businesses.
The meeting approved a change
to the company’s dividends policy.
It means the company will now pay a dividend of 15.25c, after being unable to pay a dividend at the end of 2009/10.
The changes were made necessary by the mostly non-cash loss for the year after write-downs and asset impairment charges on the wine division and to cover the impact of the stronger Australian dollar.
Foster’s constitution requires dividends to be paid out of company profits and the impairment and the net loss limited the ability for directors to declare a final dividend. That was changed yesterday.
Foster’s CEO Ian Johnston said the company was on track to achieve efficiency savings of $100 million in 2010/11, following $83 million in 2009/10.
Mr Johnston said Foster’s expected its wine business to improve over coming months.
He said the beer market had seen "strong volume growth’’ over the past two years, driven by one-off factors such as the federal government’s stimulus program.
"As we cycle that growth, it’s proving impossible for the overall market to continue to grow at the higher rate, and we are seeing some corrections and total market volume declines,’’ Mr Johnston said.
"Market volumes will remain soft for the next few months before we see the beer category return in the new calendar year to the historic long term modest growth trend.’’
Fosters open day for investors late last week was told that the company’s performance in beer would be ‘soft’ for most of 2011 financial year with market share ending the financial year lower than it started.
Fosters will continue to lose share in bulk beers and packaged full strength and light beers, while it was under-represented in the faster growing premium, super premium, craft and other newer categories.
No update on trading conditions was given in the speeches to the meeting.
