Has Foster’s neglected its beer division CUB?
Mr Errington said the Foster’s Group would need to take a number of steps to reassure its investors that value could be restored.
Mr Errington, who has been a fierce critic of Foster’s wine investments, said that the beer+wine company, which had taken AUD 3.53 billion (EUR 2.6 billion) in writedowns on its wine assets over the past decade, would need to review its decision to invest more than AUD 8 billion (EUR 5.8 billion) in wine, which now had a book value of just over AUD 3 billion (EUR 2.2 billion).
The company would also need to review “how and why its valuable beer business could have been neglected as it has been”, direct more money into its beer business and spend more time on business development, Mr Errington told Australian media.
He called on Foster’s to review its customer service operations.
“The bottom line is, it is untenable that Foster’s could destroy over AUD 5 billion of shareholder value, maybe more, in questionable investment decisions,” Mr Errington said.
He added that “it is untenable that Foster’s could neglect its powerhouse CUB business to the extent that CUB is now poorly positioned and needs remedial management processes. And it is untenable that Foster’s as a customer-facing business has got wrong its customer service practices.”
Wet weather and the strong Australian dollar prompted Merrill Lynch to cut its net profit guidance for the company from AUD 825 million in 2010 to AUD 710 million for 2011, with EBIT forecasts at CUB dropping by AUD 90 million and EBIT from the wine business expected to be down AUD 70 million.
