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Foster's Celebrates Profits

Foster’s Group is targeting 10 percent annual earnings growth as it begins to reap the rewards from its takeover of Southcorp in its first year as a pure beverage play, according to a report in The Australian.

It delivered a 17 percent increase in net profit for fiscal 2005 of $936.1 million, after booking gains from the sale of the Lensworth property portfolio and the last of its shares in Australian Leisure & Hospitality.

The international beer and wine group is expected to rely more on its so-called multi-beverage strategy as the beer market continues to decline. while the former brewing arm, now known as Carlton & United Beverages (CUB), continued to be the steady earnings driver for the company lifting earnings from price increases and cost cuts on flat sales, ready-to-drink (RTD) mixes and wine are expected to become the main drivers of earnings growth, the report said.

As the group reincarnates itself, Foster's is targeting ongoing earnings-per-share growth of 10 per cent as it beds down the $3.2 billion acquisition of Southcorp.
While CUB earnings rose 11 percent to $577.3 million, beer volumes fell 1.2 percent in line with the overall beer market, where premium brands were the only bright spot.

Total volumes for the division were also slightly down, but largely offset by a 25 per cent rise in the growth of RTDs and sales of wine such as Half Mile Creek.

"In a declining (beer) market, CUB is successfully reinventing its portfolio to maximize earnings growth," Foster's chief executive officer Trevor O'Hoy said. "Favourable beer pricing will be less of a factor as we drive performance going forward."

The group's main focus for the next fiscal year will undoubtedly be wine as it aims to meet synergy targets from the Southcorp purchase.

Foster's North American wine division returned to grace, with earnings up 10 per cent to $152 million. O'Hoy said good on-premise sales signified a turnaround and he was also more confident that grape supply was back in balance following the Californian glut.

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