Foster's mulls share buyback to pressure SABMiller

The company, which owns Australia's largest brewer Carlton and United Breweries, made the announcement as it posted a full-year net loss of Aus$89 million to 30 June.

Chief executive John Pollaers said Foster's was considering a share buyback or a capital reduction, through which it could cancel shares but which would involve seeking a ruling from the Australian Tax Office.

The shareholder-friendly move helped push the stock up nine cents to a high of A$4.99 on Tuesday, a premium on SABMiller's offer of Aus$4.90 a share.

It comes after the company last week urged shareholders to reject SABMiller's US$10-billion hostile takeover bid, saying it was not enough money.

SABMiller, the world's second biggest brewer, which makes Grolsch and Miller Lite, decided to take its offer direct to shareholders after its initial approach for the same price was turned down in June.

It has proposed a conditional, off-market, cash takeover of all issued shares.

But Foster's management remains unimpressed, saying it undervalues one of the country's best known brands.

Foster's loss for the year compares to a Aus$464.4 million loss in the previous corresponding period, but the latest result reflects a Aus$1.2 billion hit from charges related to the discontinuation of its wine operations.

The company spun off its underperforming wine division into a separately listed company that debuted in May.

Its profit was down on the back of a 5.6% drop in its Australian beer volumes and a 6% market contraction, but it expects a slow turnaround.

"Foster's expects that the rate of decline in the Australian beer category will moderate in the first half of fiscal 2012," the company said.

"The cider category is expected to remain in strong growth, and craft beer and international premium beer are likely to lead the beer category and continue positive mix trends."

Chief financial officer Stephen Matthews flagged more cost-cutting initiatives, including potential job cuts, to drive growth. It follows the company announcing in May that it planned to slash 145 positions.

"We're continuing to look at another set of initiatives, and that could possibly lead to further reduction in roles, but we're not in a position to announce those yet," he said.

Source: AFP