1. Most Discussed
  2. Gainers & Losers
FGL $5.38

Fosters - AFR article

  1. munch

    3,567 posts.
    CUB restructures as Foster's gets tough
    Jul 8
    Simon Evans

    Carlton & United Breweries, the brewing division of Foster's Group, is set to undergo a sweeping restructuring as part of plans set by chief executive Ted Kunkel to deliver consistent earnings growth of more then 5per cent a year.

    Foster's Australian beer division has been urged to step up its performance to ensure that fresh funds being diverted to the unit produce adequate returns on investment, with the emphasis on bringing new products to market.

    Key CUB executives have been told that the division needs to be re-invigorated to counter perceptions that it is condemned to a low-growth future because the broad market outlook for mainstream beers is flat.

    Several new projects are believed to be on the drawing board - both premium beers and ready-to-drink spirits.

    The company is merging large parts of the sales functions between its previously separate Continental Spirits division and the CUB beer arm as part of the push.

    CUB's role within the alcoholic beverages group is changing from its function - over the past few years - of being a cash cow to fund the big expansion in wine, now that the Beringer Blass wine business is moving toward being self-sufficient.

    Some analysts believe there will also be a strong focus on cost-cutting at CUB in conjunction with the growth push.

    The changes come as Mr Kunkel lifts the earnings before interest and tax growth hurdle for the division to between 5 and 6per cent from the previous 3 to 5per cent band.

    advertisement

    advertisement

    ABN Amro said in a report last week that it believed there were approximately $75 million to $100million of costs which could be pulled out of the business.

    As part of the re-invigoration of CUB, Foster's is examining proposals in Western Australia to expand brewing capacity and cut transport costs, with more than 50per cent of its product having to be trucked from the eastern states because its Matilda Bay brewery at North Fremantle is at full capacity and cannot expand further.

    CUB is examining the merits of either building a new greenfields brewery in WA or sharing production capacity with rival Lion Nathan, from which it has been taking market share in WA.

    Foster's is adamant it would not sell its 130-strong hotel portfolio, which makes up the Australian Leisure and Hospitality division.

    But the group has looked at the option of putting the properties into some form of property trust to release cash.

DISCLAIMER:
Before making any financial decisions based on what you read, always consult an advisor or expert.

The HotCopper website is operated by Report Card Pty Ltd. Any information posted on the website has been prepared without taking into account your objectives, financial situation or needs and as such, you should before acting on the information or advice, consider the appropriateness of the information or advice in relation to your objectives, financial situation or needs. Please be aware that any information posted on this site should not be considered to be financial product advice.

From time to time comments aimed at manipulating other investors may appear on these forums. Posters may post overly optimistic or pessimistic comments on particular stocks, in an attempt to influence other investors. It is not possible for management to moderate all posts so some misleading and inaccurate posts may still appear on these forums. If you do have serious concerns with a post or posts you should report a Terms of Use Violation (TOU) on the link above. Unless specifically stated persons posting on this site are NOT investment advisors and do NOT hold the necessary licence, or have any formal training, to give investment advice.

Top