Foster's suffers third successive huge loss

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The Independent Online
FOSTER'S Brewing, Australia's biggest brewer, yesterday announced its third successive big loss, shored up its balance sheet with a Adollars 1bn ( pounds 400m) rights issue and welcomed a new major shareholder to the board.

The loss of Adollars 950m in the year to 30 June resulted from further write-downs, this time for Adollars 1.3bn against its non-brewing assets.

Australia's biggest company, the mining and industrial giant BHP, reluctantly became Foster's biggest shareholder yesterday. It bought the 32 per cent stake controlled by John Elliott's International Brewing Holdings, in an effort to protect the Adollars 1bn owed to it by IBH. BHP bought the stake for Adollars 1.5bn in cash and preference shares from IBH, which went into receivership in June.

Mr Elliott resigned from the board on Monday, severing his final link with the company he transformed from a small jam company to a brewing, finance and agricultural conglomerate.

The write-offs wiped out a 42 per cent rise in operating profit for Foster's and followed a Adollars 43m loss last year and what was then an Australian corporate record loss of Adollars 1.3bn in 1990.

Foster's recently-appointed chief executive, Ted Kunkel, said the loss would be the last disaster after the review of assets begun in March 1990, and that Foster's would be profitable next year as it moved closer to its goal of becoming a single-purpose brewer.

In the past three years, Foster's has sold or written down its non- brewing assets by Adollars 7.3bn, with brewing assets now making up 69 per cent of total assets, compared with 19 per cent in 1989.

Loans made by the company's finance arm, Elders Finance, accounted for half this year's write-downs. The value of Foster's investment in Inntrepeneur Estates, the UK pub holding company, was written down by Adollars 228m. There was also an unexpected Adollars 73m provision to cover a deficiency in the pension fund of the British brewer Courage.

Total brewing profit rose 13 per cent to Adollars 552m. Most of the gain came from Courage, where sales were boosted by the inclusion of the full-year result of the Grand Metropolitan breweries for the first time. Courage improved its profit by 44 per cent to Adollars 242.4m while the Molson joint venture in Canada lifted profits 36 per cent to Adollars 119.9m.

The flagship Carlton & United business, operating mainly in Foster's home state of Victoria, did less well. Profits fell 19 per cent to Adollars 189.5m on sales 14 per cent lower as the New Zealand-controlled Lion Nathan won large slabs of market share.

The announcements were the focus of wide speculation and came after a week of tense negotiations. Mr Elliott is believed to have faxed his resignation to Mr Kunkel's home at 4am on Monday, hours before he was due to sign the rights issue prospectus. BHP received acceptance for its offer for the IBH stake only hours before the result was announced.

Foster's dynamic growth under Mr Elliott in the 1980s had been driven by its investment, asset trading and finance divisions. The 1988 profit of Adollars 795m - Foster's zenith - included Adollars 63m from Elders Finance and Adollars 236m in net abnormal gains, mainly from restructurings of Elders Resources, Courage UK pubs and BHP shares.

In 1990, however, Foster's lost Adollars 500m on the sale of shares owned by Elders Resources, Adollars 206m on the sale of Scottish & Newcastle shares and Adollars 245m in its agricultural business, while Elders Finance needed provisions of Adollars 475m.

Over the past 10 years, total losses have outweighed profits for the comglomerate, with much of the losses coming from bad Elders Finance loans.

(Photograph omitted)