Foster's weighs Courage sale deckys

Few brewing analysts were left in any doubt yesterday that Foster's Brewing in Australia was still looking to sell Courage, its subsidiary in Britain, in spite of last week's decision by the Office of Fair Trading to launch an inquiry into beer pricing.

Ted Kunkel, chief executive of Foster's, side-stepped direct questions about the possible sale of Courage, after announcing an underlying 26 per cent interim profits improvement to A$225m (£108m).

Foster's stated net profits, though, were A$7m lower at A$204m after accounting for tax and a fall in positive abnormal items from A$49m to A$2m.

Mr Kunkel said the company had started its strategic review and was "still considering" options for Courage, the second-largest brewer in Britain, which lifted operating profit contribution from £48.4m to £56.5m for the period to 31 December.

The OFT inquiry, however, will almost undoubtedly deter any potential buyer of Courage from making a move for the time being. Scottish & Newcastle Breweries and Whitbread, jointly the fourth-largest brewers in Britain, are widely viewed as the favourites to buy Courage, which is understood to be worth more than £500m.

Analysts said Mr Kunkel's upbeat comments about Courage's prospects could not necessarily mean that Foster's would not sell the business. Mr Kunkel failed to mention that Courage was recovering, and instead painted a picture of a company continuing to grow in strength.

"Courage improved its position with an excellent half-year performance which belied the difficulties of operating in a market in which production is still declining and which is further exacerbated by direct imports from continental Europe," Mr Kunkel said.

"Market share grew to 19.3 per cent with volumes up more than 2 per cent against the previous corresponding period."

Profits, however, were down 23 per cent; Courage's profits in the latest half-year are still 10 per cent shy of those in the first six months of 1992/93.

The OFT inquiry looks likely to put the block on several expected takeovers of independent pub companies by larger brewers. Frank Nicholson, joint managing director of Vaux, the Sunderland-based regional brewer, said yesterday that Vaux might be interested in buying Century Inns, which last week postponed its stock market flotation. However, if Century proposed a deal "I would not like to guess how much they are worth without seeing the OFT's findings", Mr Nicholson said.