By Andrew Starke
Foster’s Group today (Dec 18) issued an update on year to date trading with the strong Australian dollar likely to have a negative impact on overseas sales during the first half of the financial year.
While its beer business, Carlton & United Breweries (CUB), continues to perform in line with Foster’s expectations, unfavourable exchange rate movements are expected to negatively impact first half wine earnings by between $80 to $90 million.
“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,” warned the group’s trading update. “Foster’s reminds investors that exchange rate movements have both a transaction and translation impact on earnings.”
Foster’s said its new management team in Americas was implementing a new strategy but cautioned that prevailing recessionary conditions remained challenging and were resulting in lower volume and net sales revenue.
“Foster’s performance and performance of the wine market generally, in the key states of California, Texas, Illinois and Florida are below expectations. The on premise environment continues to suffer from lower patronage and lower priced purchases. US holiday season trading reflects a continuing weak consumer environment and increased price discounting across the market.”
In Australia and New Zealand Foster’s Group wine sales continue to be impacted by oversupply with volume declines in commercial wines partially offset by growth in premium wines.
Foster’s will provide further information at its first half results announcement on February 16, 2010.