fosters silent on writedowns suggestion

January 27, 2009 - 12:24PM
Foster's Group Ltd has declined to comment on an analyst's report that the global beverages firm could make further writedowns of up to $700 million on the value of its wine operations.

"We can't say anything about that (the analyst's report) now," a Foster's spokesman said on Tuesday.

Foster's is expected to report its half year results on February 17 and also is due to release next month the findings of a strategic review of its wine assets.

Foster's shares were six cents higher at $5.38 at 1346 AEDT on Tuesday.

In its 2008 full year results released in August last year, Foster's wrote down the value of its intangible wine assets - goodwill and brand names - by $470.8 million.

Goldman Sachs JBWere analyst Ian Abbott said Foster's wine operations were currently carrying $2.2 billion in goodwill and brand names.

"If we compare the multiples at which Foster's acquired its wine assets, after making adjustments for synergies and operational performance since each acquisition, it is arguable that Foster's wine assets could be written down," Mr Abbott said in his research note of last week.

Mr Abbott said a possible writedown could amount to up to $700 million.

He said that as long as any writedown stayed within this figure, he did not envisage any risk to Foster's dividends from impairment testing, given the significant level of retained earnings.

Mr Abbott said that despite the market's focus on Foster's wine operations, the company's key driver was its beer operations, which appeared to be performing well.

The lower value of the Australian dollar would also benefit the earnings of the wine operations.