By Ian Neubauer
The financial fortunes of Foster’s group have seen a dramatic turnaround in recent weeks as a result in part of the falling Australian dollar, which reached a four-year low against the US dollar yesterday (October 7).
Foster’s posted $700 million in writedowns in June attributed to its underperforming global wine business, which had been badly hit by an economic slowdown in the US and the then-soaring Australian dollar.
But the Australian dollar’s tumble from a 25-year high of US97cents in June to its current value of US71cents is making Australian wines markedly cheaper and more attractive in the US — the number one importer of Australian wine.
Each one-cent devaluation in the Australian/US dollar exchange rate bolsters profits from Foster’s wine business by $5.3million before tax and interest, according to Foster’s CFO, Angus McKay.
Foster’s shares have re-emerged as star performers in recent months, gaining more than 25 per cent in value since the writedown and subsequent resignation of former Foster’s CEO Trevor O’Hoy forced the price dangerously close to the $4 mark.
Foster’s shares have regained all lost ground and then some in defiance of the economic meltdown that has wiped hundreds of billions of dollars from global stock markets. They were trading at $5.87 when the Australian Stock Exchange opened today (October 8).
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