Foster’s Group has posted its most significant decline in beer sales in two decades, with profits down almost 9 per cent from the previous financial year and beer sales down 6 per cent by volume.
"Last year was probably the toughest market conditions we have seen in nearly 20 years," chief executive John Pollaers said.
Foster’s reported an underlying profit of $494.9 million for the last financial year.
There are now rumblings from within the industry that the company may finally accept SABMiller’s $9.5 billion takeover bid, which it has rejected twice before.
Foster’s brewing division, CUB, had its first fall in ten years as profits fell from 38.7 per cent to 38.
"Clearly, it’s a year where more volume has gone through on promotion, but we are being very disciplined and have stayed within our own promotional guidelines," Pollaers said.
The company made heavy discounts to products in an attempt to overcome the difficult financial environment, keeping it with a large share of the market.
By volume it has a 47.8 per cent share in Australian beer sales by volume.
"Our market share in both on-premise and off-premise has declined substantially over more than five years and up to 10 years," Pollaers said, referring to the decline from 51.5 per cent four years ago.
"We are going through a period of economic uncertainty right now, but we will come through that. We have been though it before; we have seen the beer category affected in this way under these kinds of recessionary circumstances in the past, and we’re confident that we’ll come through this a hell of a lot stronger than we went into it."
As the 2011 financial year gets underway, sales are still continuing to shrink, leading many to believe takeover bids may get more consideration from companies like Foster’s.
Forster’s has previously rejected two offers from the company, saying the $4.90 per share offer undervalues the company.
But Pollaers remains optimistic, saying yesterday that he did not believe the weak resulthad strengthened SABMiller’s position.
"We’ve had great support from our shareholders," he said.
"Everybody’s fairly much in support of the Foster’s board’s decision to reject that proposal. The short-term market conditions do nothing to change the fundamentally bright future we see for the beer and cider categories.
"What we are dealing with is a temporary circumstance brought about by a downturn in consumer confidence."
Foster’s declared a final dividend of 13.25c a share, below the 15.25c limit that SABMiller has made a condition of its hostile takeover bid, The Australian reports.
The company has also pledged to return at least $500m to shareholders this financial year through either a share buyback or a capital reduction, the latter of which would require shareholder approval and breach one of the conditions of the SABMiller bid.
Image: The Age