SYDNEY, May 26, 2010 (AFP) - Australian drinks giant Foster's said Wednesday it intends to split its more profitable beer division from its wine business, acknowledging the products have different markets and strategies.
Chief executive Ian Johnston said no decision had been made on the structure or timing of the demerger, which could pave the way for a takeover of either business.
"We are increasingly seeing the benefits of operationally separating the beer and wine businesses," Johnston said in a statement, three months after the company said the timing was not right to separate them.
"While the beer and wine businesses are market leaders, they operate in separate market segments with different strategic and operating characteristics."
Johnston said the wine division, while showing signs of growth, was affected by oversupply in Australia, subdued consumer demand globally and a strong Australian dollar during the 2010 financial year.
Foster's said it expected a non-cash impairment charge of between 1.1 billion dollars (910 million US) and 1.3 billion dollars before tax to the value of its wine assets in the year to June 2010.
"Wine is a profitable business with strong cash flows," Johnston said. "But financial results are being adversely affected by economic and foreign exchange headwinds."
Shares in Foster's, which owns VB and Carlton Draught beers and wine brands such as Penfolds and Wolf Blass, surged on the news, closing up 7.38 percent at 5.53 dollars.
A demerger, subject to all regulatory and statutory approvals, is unlikely to be implemented before early 2011.
Foster's Group Limited said it expects earnings of 1.05-1.08 billion dollars for year ending 30 June 2010.