Foster’s reports pain of exchange rate movements as wine division lags

Posted by Isobel Drake on 18th December 2009

Foster’s, Australia’s largest brewer, has announced their trading update today, again highlighting the struggles confronting their wine division as the Australian Dollar surges and the US remains mired in recession.

“Unfavourable exchange rate movements are expected to negatively impact first half wine earnings by between $80 to $90 million,” the company said in a statement. “The major currency impacts are expected to be an approximate 9 cent increase in the average $US dollar and an 8 pence increase in the average pound sterling exchange rates compared to the prior period.”

Foster’s added that they believed many analyst forecasts were out of step with reality given the current prevailing exchange rates. Despite this, they remain confident in the future of the business.

“The new management team in Americas is implementing the new strategy, however prevailing recessionary conditions remain challenging and are resulting in lower volume and net sales revenue,” the company said. “Foster’s performance and performance of the wine market generally, in the key states of California, Texas, Illinois and Florida are below expectations. In Australia and New Zealand wine sales continue to be impacted by oversupply with volume declines in commercial wines partially offset by growth in premium wines.”

“Overall wine performance in the first half will be below Foster’s expectations given the significant impact of exchange rate movements and US market conditions.”

On a positive note, their beer division – Carlton & United Breweries (CUB) – continues to track in line with expectations.