Foster’s boss Trevor O’Hoy looks first and foremost like a CEO already fighting a takeover battle. Just as any target board’s “independent” expert puts the rosiest glow on a company’s figures, so too did Trevor’s outlook with yesterday’s profit report.
Yesterday’s share price jump seemed to be all about the Sunday Times takeover rumour repeated in the Smage, rather than the rosy results and Trevor’s optimistic outlook – but one suspects they’re all connected. (The ASX officially asked Fosters if it knew of any takeover approaches etc, the company replying this morning that it does not).
How else could anyone be less than somewhat depressed about the international wine business? Trevor is promising a magical wine industry turnaround in a couple of years – which is rather hard to understand given the nature of all rural commodities, continuing South American and African investment, improvement and expansion, the European wine lake and continuing Australian and American plantings. Let me guess, if everyone in China will drink one more bottle a year… but Chinese wine production is growing and improving in quality too.
Foster’s managed to lift wine sales just one percent last year and it certainly didn’t improve prices. The increase in the wine division’s claimed pre-tax profit came entirely from Southcorp rationalisations and cost cutting. There’s a limit to the latter and no limit yet to the industry competition, let alone the on-going domestic margin squeeze by Woolworths and Coles.
And then there’s the beer success, which is all about a genuine triumph in lifting prices. CUB beer volume increased only 1% but sales revenue improved by 7%. That is an extraordinary achievement as Foster’s beer margins are already among the world’s highest – and Coles and Woolworths intend to take a bite out of them.
The trend among the trendy to drink premium beer is making a difference – marvelous what a bit of gold foil around the top of a stretched stubby will do. Given that the beer success was achieved under John Murphy’s stewardship of CUB, his resignation and CUB’s restructuring as of this month looks like a brave decision, minister.
But when you might be being stalked by private equiteers and Big Beer, it’s important for all of a CEO’s geese to be swans.
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