07 February 2000

Global beverage performance shapes strong Foster's results

Foster's Brewing Group today announced a 27.3% rise in net operating profit, to $243.3 million for the half year ending December 1999.

Profit growth accelerated across the company's unique global business portfolio, with beer earnings rising 15%, wine up 34% and the contribution from leisure and hospitality rising 61%. Earnings per share rose 27% to 14.1 cents.

"These excellent results are testimony to the strength of our businesses, which are consistently building better returns by growing sales revenue, expanding margins and actively managing funds employed," Foster's President and CEO, Ted Kunkel, said.

"Foster's in the third millennium is a unique, multi-product alcoholic beverage company. The breadth of our global businesses, the skills and expertise of our people and the strength of the company's cashflows, as reflected in these results, are what sets this company apart from its competitors."

Sales revenues for the half-year increased by 15.5%. The return on total funds employed rose once more, confirming the company's ability to consistently build shareholder value by generating a return in excess of the cost of capital.

Consistent with Foster's financial performance and the continuing rigour of its approach to capital management, the Board today announced a share buy-back program. The company will begin to buy, on-market, up to 3% of its outstanding shares. The Board's intention is that the initial purchase will be followed by subsequent purchases of about 1% each year, if business and market conditions are appropriate.

"The announcement of this program, alongside an 18% rise in the interim dividend to 6.5 cents a share, fully franked, underlines the importance we place on building value for our shareholders," Mr Kunkel said.

The share buy-back would raise gearing by about 15 percentage points from its current level of 41%, and would complement the company's strategic commitment to growth through acquisition, he said.

The results for the half included a number of successful examples of this acquisition strategy, including the strong profit result from the company's hotels division, now incorporating the Austotel pub estate. In the international wine club business, European clubs Pallhuber and Vin du Bourse, acquired in F99, accounted for 90% of a 44% rise in total volumes. The Australian spirits business, established during the half as a result of the acquisition of Seagrams Australia, also made a promising initial profit contribution.

The results highlighted the balance between Australian and international income sources now apparent in the Foster's business portfolio:

  • outstanding offshore wine sales eclipsed domestic sales for the first time
  • profit from the wine business rose 34.2% to $88.7 million
  • the international beer businesses, which include all activity outside Australia, achieved a profit of $4.3 million
  • volumes of Foster's sold internationally for the 1999 calendar year exceeded 100 million casesĀ 
  • profit from Australian beer increased by 7.1% (pre-tax) to $222.3 million net Australian beer sales revenue grew 2.9%, reflecting success in achieving sales of premium margin products
  • leisure and hospitality continued its upward trajectory, growing profit by 61% to $61.2 million

The first half of F00 saw the company continue its strategy of globalising brands, with the Foster's brand achieving 10% growth overseas. The company's wine was sourced from and sold in four continents, with European production reaching 1.1 million cases on an annual basis.

"Globalisation has become an engine for Foster's growth," Mr Kunkel said. "These outstanding results are evidence of our successful efforts to address the opportunities of the global marketplace. At the same time, we are building the foundations for continuing growth in our offshore operations by exporting the skills and knowledge base of our people."

Further information:

Lisa Keenan
Tel: +613 9633 2233
Mob: 0418 288 400
Email: lisa.keenan@fostersgroup.com

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