Sydney - Australian brewing giant Foster's on Tuesday announced it would write down another A$300 million (R1.36 billion) on its struggling wine operations which will be restructured to drive earnings.
Foster's Group said it would write down its US wine business, Beringer Blass Wine Estates, to between A$270 million and A$300 million in the year ending June 2004, adding to the A$144-million write-down announced in February.
Beringer has weighed on Foster's earnings and share price in the past couple of years on the back of a wine glut in California that cut revenues.
Foster's bought Beringer in 2000 for A$2.9 billion.
The group said in February it was reviewing its wine operations and on Tuesday announced a major restructuring of the the business, which will see substantial investment in brands and marketing as well as a series of cost cutting measures.
New chief executive Trevor O'Hoy said a reorganisation of Foster's wine operations would see savings of A$60 million a year from 2006, climbing to A$85 million by 2009.
Capital expenditure will be cut by A$150 million a year to about A$100 million in the year to June 2005.
"By establishing a business model that is more flexible and responsive to consumer trends, Beringer Blass Wine Estates will be better able to meet supply and demand requirements through market cycles," O'Hoy said.
"A renewed focus on brand investment, new product development and innovation will further underpin BBWE's ability to produce exceptional quality wine at all price points."
Foster's shares were one cent lower at A$4.56 in mid-afternoon trade, having sunk as low at A$4.47 in a firmer Australian market.
The group will invest in marketing of its Beringer and Wolf Blass labels in the United States, Britain and Australia, as well as secondary labels Saltram, Yellowglen, Chateau St Jean and Meridian.
It also plans to develop some new products.
Foster's also said it would work to make its supply chain more efficient which could lead to the closure or consolidation of some plants.
The group has set a margin target for earnings before interest, tax and amortisation for the total wine trade business of more than 20 percent for 2005 to increase to the mid-20 percent range by 2009. - AFP