Foster's Chief Executive O'Hoy Quits; Forecast Cut
Foster's Group Ltd. Chief Executive Officer Trevor O'Hoy quit as Australia's biggest beer and winemaker cut earnings forecasts and said it will write off as much as A$770 million ($730 million) at its wine unit.
Profit growth will be between 5 percent and 7 percent in the year ending June, less than the previous forecast of 10 percent, Melbourne-based Foster's said in a statement today. The company will write down the value of its wine inventory, and expects lower sales of Californian wine, it said.
Trevor O'Hoy, chief executive officer of Foster's Group Ltd., poses for a picture before a television interview at the Bloomberg offices in Sydney, Feb. 20, 2006. Photographer:Andy Shaw/Bloomberg News
O'Hoy, promoted to the role more than four years ago, led the doubling in size of Foster's wine unit in 2005 by paying A$3.2 billion for Southcorp Ltd. Since then earnings have been hit by a record Australian drought that cut output and a rising currency that lowered the value of earnings from the U.S., where the company makes 27 percent of sales.
``Industry conditions are tough at the moment and will keep going against them for some time, so it's a process they'll have to work through for a few more years,'' said Angus Gluskie, who helps oversee the equivalent of $500 million at White Funds Management in Sydney, including Foster's shares. ``I don't think it was that surprising. The writedowns were reasonably evident.''
Foster's shares rose 3.3 percent to A$5.57 at 11:03 a.m. in Sydney, after earlier dropping as much as 3.5 percent. Today's gain pares this year's decline to 15 percent. The stock has posted two annual gains since 2001.
Southcorp Integration
Annual earnings before items will be between A$700 million and A$715 million, down from A$716.1 million in 2007, the beer and winemaker said.
``We paid too much to acquire wine assets,'' Chairman David Crawford said in the statement. ``The reality is we did not execute the Southcorp integration as well as we expected and operating conditions are now more challenging.''
The company didn't name a successor. O'Hoy will stay with Foster's as it conducts an international search for a new chief executive.
O'Hoy, 53, has been with the company for 33 years after starting as a cadet executive. Before replacing Ted Kunkel in 2004, he ran the Australian brewing business and was chief financial officer.
``It's been a privilege to devote my working life to Foster's,'' O'Hoy said in the statement. ``It's now time to stand aside and allow the next generation of management to lead the business forward.''