22 Feb 2010

Foster's selling non-essential wine assets

9:33 am on 22 February 2010

Foster's Group chief executive says the company is selling some wine assets to help increase the troubled division's profits.

The first half profit of Australia's biggest brewer fell 14% to $A355 million due to poor performance from its wine business.

The company's wine assets have been a weight on its profitability following the $A2.6 billion acquisition of Beringer in the US in 2000 and the $A3.2 billion acquisition of Southcorp in Australia in 2005. Foster's has since said it paid too much.

Foster's chief executive Ian Johnston says it would be tough to turn the wine division around, because of a global grape glut that was hurting the whole industry.

The company is selling non-essential vineyards and wineries and non-core brands during what Mr Johnston called a painful period for growers and wine companies.

He estimates that between 30,000 and 40,000 hectares of vineyards in Australia, equivalent to a quarter of the total, probably need to be ripped up to get rid of the wine glut.

Mr Johnston says Fosters has had no takeover approaches, and he could only speculate behind recent movements in its share price.