After four years on the job, and nearly thirty-three years with the company, Foster’s CEO Trevor O’Hoy is stepping down. According to this report from the Advertiser, lower-than-expected international wine sales seem to be the culprit. In 2005, Foster’s paid a whopping $3.2 billion to acquire Australian winemaker, Southcorp, and unfortunately, the returns have been less than profitable.
“We must also recognise and acknowledge that we paid too much to acquire wine assets…It’s now time to stand aside and the next generation of management to lead the business forward,” Mr O’Hoy said.
Chairman David Crawford noted that Australian beer sales continued to be strong for the company, though earnings per share were expected to grow only five to seven percent over the next year, rather than the original ten percent estimation. Profits are expected to be approximately $700 million for the fiscal year – certainly not just a drop in the bucket!
“We have been very open in saying wine returns are not acceptable and the board is fully focused on delivering value for shareholders,” Mr Crawford said. “Today we have recognised the direct financial impacts through revised guidance for our 2008 financial year earnings and write downs on the carrying value of global wine assets. Our challenge is to drive improved financial returns from wine and to exploit the growth potential of our leading portfolio of global wine brands.”
The Sydney Morning Herald has more on the ‘sea of problems’ plaguing Foster’s.