Melbourne: Australian drinks giant Foster’s Group said it would retain its troubled wine-making division Tuesday, as the company posted a 3.2% rise in first-half net profit.
The world’s second-largest wine company said net profit for the six months to December was A$411.3 million ($267.3 million), up from 398.6 million a year earlier.
Foster’s said it would not sell off its wine assets, which have long weighed on the company’s bottom line, preferring to restructure them in the hope of turning around the ailing business.
It said the restructuring, which will involve writedowns of A$330-415 million in the second half of the financial year, was expected to reap savings of A$100 million a year from fiscal 2011.
“The performance of our wine business has been unsatisfactory,” said Foster’s chairman David Crawford, who will split the company’s Australian operations into separate wine and beer divisions under the plan.
“In large part this has been the product of poor execution in the Americas and pursuing a multi-beverage model in Australia.”
As part of the restructuring, Foster’s will sell 36 “non-core” vineyards and three wineries in Australia and California.
Foster’s spent almost A$7billion expanding its wine business with acquisitions such as Australia’s Southcorp and Beringer in the United States earlier this decade, only to see a wine glut send prices into a nosedive.
The first-half profit result was in line with market expectations. Foster’s said revenue in the first half rose 1.6% to A$2.5 billion.
Revenue from beer, cider and spirits in Australia and the Asia-Pacific rose 6.2%. Wine revenue in Australia was also up 6.2% but declined 3.5.